This LawFlash provides an overview of recent developments in foreign direct investment regulation and enforcement in the European Union and the United Kingdom for the second quarter of 2025.
In the EU, every member state (except for Croatia) has a foreign direct investment (FDI) regime that must be considered when contemplating a merger and acquisition transaction. The past three months have seen major policy proposals by the EU on an enhanced role for the European Commission (EC) with respect to FDI enforcement. At the member state level, new FDI rules are in force in Greece and Bulgaria. Hungary has adopted significant changes to its FDI rules, and the FDI bill in Cyprus is in the final stages of adoption.
On May 8, 2025, the European Parliament approved a revised text of the proposed new Foreign Direct Investment Screening Regulation (Regulation), which would grant the EC powers to act on acquisitions by non-EU investors. This would occur in cases where the EC or a member state disagrees with the clearance decision of the host member state. The revised text broadens the types of security and public order risks considered in national FDI screening reviews and expands the scope of sensitive sectors subject to mandatory filing obligations.
The Regulation would allow the EC to block deals or impose remedies if there is disagreement with the host member state's decision. This process could add up to 95 calendar days to the clearance timetable for such deals. The EC would also have the power to gather information on the impact of an investment to assess its cross-border impact.
While using these powers, the EC can suspend the cooperation procedure (i.e., the consultation between member states and the EC on transactions) timetable for up to 30 calendar days. Under the current review system, the EC cannot suspend the cooperation procedure and may only issue an opinion following comments from other member states.[1]
The revised text addresses new perceived risks arising from global economic integration and geopolitical tensions. Economic security is now considered a core aspect of national security within the Regulation. The list of factors for FDI screening has been expanded to include impacts on supply chain resilience, technology security, food security, and the EU's financial stability, among others. The types of foreign investors considered risky have been expanded to include, for example, those who have previously had a negative FDI decision from a non-EU country; are in a country without sufficient anti-money laundering or counter-terrorism financing systems; or support a third country’s violations of international law. The list of sensitive sectors requiring mandatory filing has been broadened to include areas like data storage, transport technologies, and large agricultural farms.
Qualifying greenfield investments, defined as new facilities or undertakings by foreign investors in the EU, would be subject to mandatory screening. FDI approval obligations would apply to greenfield investments over €250 million in sensitive sectors or projects of EU interest, especially if the investor has links to a foreign government or has been subject to sanctions.
The revised text of the Regulation is subject to negotiation with the member states, and the final version could differ significantly. The Regulation may not be enacted until 2026. Once adopted, it would apply 12 months and 20 days after publication in the EU Official Journal.
Greece
On May 22, 2025, Greece enacted its first FDI Screening Law (Law 5202/2025).[2] It requires preclosing filing and approval for investments in Greek entities, in “Sensitive” and “Highly Sensitive” sectors, with thresholds set at a 25% participating interest for Sensitive Sectors and 10% for Highly Sensitive Sectors. Sensitive Sectors include energy, transport, healthcare, information and telecommunication technology, and digital infrastructure. Highly Sensitive Sectors include defence, cybersecurity, AI, and certain port, underwater and tourism infrastructure.
The law applies to non-EU investors and may also capture EU investors controlled by third-country entities. Subsequent increases in participating interests may also require new filings. The Greek authorities have the power ex officio to review transactions falling outside the scope of the regime but might raise national security concerns. The initial review period is 30 calendar days (Phase 1), and a potential in-depth review (Phase 2) could take a further 140 calendar days. Failure to notify a reportable transaction may result in a fine of up to €1,000,000 and result in the unwinding of a completed transaction.
Cyprus
On July 2, 2025, the Council of Ministers of Cyprus formally approved the FDI Screening Bill, which is expected to enter into force in Q1 2026.[3] The Cyprus FDI regime will require preclosing notification for non-EEA/Swiss investors (including EU/EEA/Swiss entities controlled by such investors) acquiring at least 25% of the shares or voting rights, or decisive influence, in “strategic” Cypriot entities, where the investment value is at least €2 million.
Strategic sectors include critical infrastructure in energy, transport, water, health, education, tourism, communications, media, data, defence, electoral and financial services, sensitive real estate, dual-use goods, and critical technologies (e.g., AI, robotics, semiconductors, cybersecurity, space, quantum, nuclear, nano- and biotech), as well as suppliers of critical inputs (energy, raw materials, food).
Preclosing approval is also required for subsequent increases from below 25% to ≥25% or from below 50% to ≥50%, regardless of value. The Cypriot authorities may review non-notifiable deals within 15 months of closing. Phase 1 reviews must be completed within 25 working days, with a possible Phase 2 of up to 95 working days, which may be extended if additional information is requested. Failure to notify may result in fines of €5,000–€50,000 and an order to unwind the transaction.
Hungary
On June 24, 2025, Hungary implemented several significant amendments to its FDI regime.[4] The preemption right now applies to all business segments which are covered by the FDI regime. If the Minister of National Economy prohibits a transaction, the state has the right to acquire the target assets on the same terms as agreed between the parties, through the state-owned holding company MNV Zrt. The review period has increased from 30 business days to 45 business days, and can be extended three times, by an additional 30 business days each time, potentially lasting up to 135 business days. These changes are expected to remain in force until 31 December 2026 but may be amended prior to this date.
Bulgaria
On July 22, 2025, the FDI screening regime came into force in Bulgaria.[5] The scope of the law is broad, and mandatory screening includes foreign investments in the following sectors: critical infrastructure, critical technologies and dual-use items, supply of critical inputs, access to sensitive information, and the freedom and pluralism of the media.
The relevant thresholds are low: an acquisition of 10% shareholding or investments exceeding €2 million. In addition, there are no thresholds for certain transactions, including oil and petroleum products; investments in which the investors are from Russia or Belarus; investments that may affect national security and public order; and investments where a non-EU state holds a stake in the investor or has provided financing. The review period is 45 days once a complete filing has been submitted, unless the period is extended or suspended subject to a review by the EC.
United Kingdom
On July 22, 2025, the UK government announced a series of plans to update the National Security and Investment Act (NSIA). These changes include amending the regime to exclude low-risk transactions in order to “ease the burden on businesses,” launching a consultation on updating the sectors which trigger a mandatory notification and publishing its fourth annual report on the functioning of the NSIA.
New laws and/or changes to existing rules inevitably create more uncertainly for transactions. Businesses should anticipate increased scrutiny, broader sector coverage, and potentially longer review timelines for cross-border investments in the EU, UK, and EEA in sensitive sectors. Investors must carefully assess deal structures, including indirect and/or opaque ownership, and should expect a more intrusive due diligence process to assess FDI requirements for M&A transactions. Prudent planning will require up-front strategies to resolve any potential FDI concerns and ensure a transaction is approved with minimal disruption.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following:
[1] After the initial notification that an FDI filing is undergoing screening, the EC and member states have 15 calendar days to inform the member state concerned that they will be providing comments or an opinion and can request additional information. Opinions and comments should be delivered within 35 calendar days of the original notice, or 20 calendar days from receipt of any additional information requested. The EC may issue an opinion following member states no later than 40 calendar days from the original notification.
[2] Law 5202/2025 (the Law), which established a national foreign direct investment screening regime, aligns Greece’s approach with Regulation (EU) 2019/452. The Law was published in Government Gazette on May 23, 2025 (Government Gazette 84/A/05.23.2025).
[3] The bill is currently scheduled to be discussed by the House of Representatives in September
[4] Gov. Decree 163/2025. (VI. 23.)
[5] Investment Promotion Act, in accordance with the EU FDI Screening Regulation 2019/452.