European Parliament to Vote on New Law Shielding Strategic Sectors from Risky Foreign Investments
MEPs are set to vote on a substantially revised legal framework aimed at protecting strategic sectors of the European economy from potentially risky foreign investments. The legislation, which has spent the past year working its way through inter-institutional negotiations, represents one of the most substantial upgrades to the bloc’s economic security apparatus in recent memory.
The proposed regulation reforms the existing foreign direct investment screening mechanism that has been operational since 2020. Under the revised rules, all 27 member states would be obliged to maintain a national screening regime, addressing the patchwork approach that critics contend has enabled third-country acquirers to forum-shop amongst jurisdictions with more lenient oversight.
Sectors classified as strategic include critical raw materials, advanced semiconductors, artificial intelligence, biotechnology, defence-related technologies, critical infrastructure such as ports and energy networks, and certain financial market infrastructures. Transactions concerning these sectors would activate a mandatory notification requirement and a co-operation mechanism with the European Commission.
Negotiators from the Parliament and the Council are understood to have reached a compromise that preserves national sovereignty over final screening decisions whilst affording the Commission a more robust consultative role. A new mechanism would permit Brussels to issue opinions that member states must take into the utmost account, with public reporting obligations when such opinions are disregarded.
Industry reaction has been divided. European technology firms have broadly welcomed the harmonisation, regarding it as a means to prevent forced sales of strategic know-how to non-EU competitors. Trade associations representing global investors, however, caution that excessively broad sector definitions risk deterring legitimate capital flows and undermining Europe’s attractiveness as an investment destination.
The geopolitical backdrop has intensified the debate. With the European Commission’s strategic autonomy agenda gathering political momentum, and amidst concerns regarding Chinese state-backed acquisitions in sensitive areas, parliamentarians across the political spectrum have indicated support for a more rigorous screening regime. The Greens-EFA group has advocated for additional safeguards on labour and environmental criteria, whilst the European People’s Party has emphasised the necessity of preserving openness to allied investment.
Should it be adopted in the forthcoming plenary, the regulation would enter into force following formal Council approval and publication in the Official Journal, with member states granted a transposition window to align their national legislation. The vote is being closely monitored as a gauge of the Parliament’s appetite for assertive economic security measures.
