EU Tightens Foreign Investment Rules in Critical Industries
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The European Union has approved new rules aimed at tightening the screening of foreign investments in strategic sectors, marking a major shift in Europe’s approach towards economic security and protection of critical industries. The legislation, approved by the European Parliament, will make foreign investment screening mandatory across all member states in sectors considered sensitive, including defence, semiconductors, artificial intelligence, critical raw materials and financial services.
The move comes amid growing concerns within Europe over geopolitical tensions, supply chain vulnerabilities and foreign influence over key industries. EU institutions have increasingly pushed for stronger safeguards following the COVID-19 pandemic and Russia’s invasion of Ukraine. Under the new framework, member states will be required to assess whether foreign investments could pose risks to security or public order, while cooperation between national authorities and the European Commission will also be strengthened.
The legislation additionally expands screening requirements to transactions carried out within the EU where the investor is ultimately controlled by non-EU entities, closing loopholes that could previously be used through European subsidiaries. The package achieved substantial cross-party agreement, with 508 votes in favour, 64 against and 90 abstentions.
The EU stressed that the objective is not to deter foreign investment, but to create a more coordinated and predictable system across the bloc while safeguarding strategic assets. Malta has already introduced its own foreign direct investment screening framework in recent years as part of the implementation of the EU’s original FDI Screening Regulation.
This regulation allows authorities to review foreign investments that may affect security or public order, particularly in sectors regarded as critical to national interests. These include financial services, telecommunications, energy, transport, healthcare and digital infrastructure. The Maltese framework is overseen by the National Foreign Direct Investment Screening Office, which may impose conditions on investments or, in certain cases, recommend restrictions where risks are identified.
The new EU rules are expected to have implications for Malta’s financial services sector, with investments involving banks, fintech firms and other regulated entities likely to face increased scrutiny under the harmonised framework. The regulation must still receive formal approval from the Council before entering into force. Once adopted, member states will have 18 months to implement the new rules.
