EU seeks greater control over foreign investment under new industrial legislation

The European Union continues to tighten its regulation of foreign investment, viewing it not only as a source of capital but also as a factor in economic security. Under new industrial legislation, Brussels intends to secure additional tools to monitor investment from third countries in strategic sectors of the economy. These changes will directly affect companies using international services to enter the European market, as well as foreign investors planning projects in the EU. ELI Swiss is already seeing an increase in the number of enquiries relating to the assessment of new regulatory risks and the structuring of investments in line with the changing requirements of European legislation.

A new phase in European industrial policy

In March 2026, the European Commission presented the draft Industrial Accelerator Act, which is set to become one of the key elements of the EU’s industrial strategy. The document is aimed at supporting European manufacturing, developing low-carbon technologies and reducing dependence on suppliers from third countries. At the same time, the proposed legislation introduces additional mechanisms for screening foreign investment in sensitive sectors of the economy.  In effect, the EU is shifting from a policy of open markets to a model of selective access for foreign capital in strategic sectors. In Brussels, there is open talk of the need to protect Europe’s industrial base against competition from China and the US, as well as rising geopolitical risks.

Which investments will be subject to stricter controls?

The main areas covered by these rules are battery manufacturing, chip development, AI, quantum innovation, essential natural resources, power supply, transport networks, and financial services. European regulators believe that control over such assets could be exploited by foreign states for political purposes. The new rules provide for mandatory screening mechanisms across all EU countries. Until now, some Member States have used their own screening procedures, whilst others have carried out virtually no screening of investors. The approach will now be standardised across the entire Union. Particular attention is being paid to investments made through European companies that are effectively controlled by owners from third countries. This arrangement previously allowed national screening mechanisms to be circumvented. Once the new rules come into force, such arrangements will also be scrutinised by regulators.

Why is the EU changing its approach?

The main reason cited is Europe’s dependence on external suppliers of technology and industrial equipment. Following the energy crisis and disruptions to global supply chains, the European authorities have concluded that an open market does not guarantee economic stability. An additional factor has been the rapid expansion of Chinese manufacturers into the European electric vehicle, battery and solar energy sectors. The new legislation is intended to ensure that European manufacturers are given priority in public procurement and the allocation of subsidies. At the same time, foreign investors will be required to demonstrate the economic benefits of their projects for the European Union. In certain cases, requirements are being considered regarding the localisation of production, the creation of jobs within the EU and the transfer of technology to European companies.

Implications for international business

For foreign investors, it is becoming increasingly important to carry out a preliminary assessment of regulatory risks before a transaction begins. Acquiring stakes in European technology companies, purchasing industrial assets or participating in infrastructure projects may require additional approval from national authorities and the European Commission. This is precisely why issues relating to international corporate structuring and the choice of jurisdiction are becoming an integral part of investment strategy, rather than merely a matter of legal support for a project. ELI Swiss notes that investors are increasingly seeking to put in place structures that take into account both the requirements of the national legislation of individual EU countries and pan-European mechanisms for the control of foreign investment. The expansion of the EU’s powers in the area of foreign investment control signifies a shift towards a more complex model of international business regulation. For companies dealing with European assets, the importance of preliminary legal and regulatory analysis of transactions is increasing.

ELI Swiss provides advisory, legal and corporate services to international investors, assisting with company formation, licensing, liaising with financial regulators and structuring international projects. The firm’s specialists help assess the risks associated with new foreign investment control regulations, prepare corporate structures and ensure compliance with European legislation. If you require further information or assistance with such projects, ELI Swiss’s specialists are ready to provide the necessary support and practical solutions for operating in the European market.

FAQ

Can the EU block foreign investment in a European company?

Yes. When a foreign deal involves critical industries or could threaten national security and public safety, government bodies or the European Commission can propose limiting the investment or preventing it from going ahead.

Which sectors are under the closest scrutiny from European regulators?

The main areas concerned are chip manufacturing, AI, power generation, essential minerals, military production, online infrastructure, life sciences, and quantum-based technologies.