European Union member states are moving to soften proposed rules intended to scrutinize foreign investment in sensitive technologies, including semiconductors and Artificial Intelligence, according to a new draft of the foreign direct investment (FDI) screening regulations. This shift, revealed in a draft compromise text, marks a retreat from initial European Commission ambitions to make FDI screenings mandatory in key strategic sectors. The original proposal, part of Commission President Ursula von der Leyen’s economic security agenda, aimed to prevent foreign—particularly Chinese—takeovers of critical European firms.
The revised Council text narrows the list of sectors subject to mandatory checks, removing the obligation for national authorities to act and instead merely recommending that governments consider security risks in industries like chips, quantum technology, energy, and critical medicines. Although the draft explicitly details items such as ‘core components or software of semiconductor manufacturing equipment’ and microprocessors, the new language only urges voluntary scrutiny. Meanwhile, the European Parliament’s position remains more robust, proposing additional industries like automotive, aerospace, and rail transport for mandatory monitoring. Diplomats anticipate ongoing negotiations, with the scope of sectors to be screened expected to be a major sticking point.
Policy debate has also shifted focus from China toward growing apprehensions over U.S. corporate takeovers, especially in the context of Donald Trump’s presidency and recent American acquisitions within Europe. A key disagreement centers on whether ‘greenfield’ projects—foreign firms establishing new operations rather than acquiring existing ones—should undergo mandatory screening. The current Council draft exempts these from minimum scrutiny requirements, while Parliament’s proposal seeks tighter controls. The European Commission also wants greater adjudicatory powers in investment disputes, which EU capitals have not endorsed. The text remains subject to change as legislative discussions continue.
