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FDI Heat Map: The Seven Sectors Now Requiring Mandatory Prior Authorisation
FDI Heat Map: The Seven Sectors Now Requiring Mandatory Prior Authorisation
23 July 2026
Series
Blogs
23 July 2026
Authors: Christoph Barth, Erasmia Petousi, Elisha Kemp, Stephanie Coleman
The new EU FDI Screening Regulation (EU 2026/1386) entered into force on 16 July 2026. In our first post in this series, we looked at what the final text changed and where it went further than earlier coverage suggested. This post turns to the question that matters most for deal teams working across sensitive industries: which sectors now fall within the mandatory prior authorisation scope and what does that mean for investors and targets in practice?
For the first time, Member States are not merely encouraged to screen inbound investment — they are required to do so, and must cover a defined minimum set of sectors. The Regulation transforms what was fundamentally a coordination mechanism into a firm, harmonised obligation — with mandatory prior authorisation and standstill requirements which must now be reflected in Member States’ national regimes.
The backdrop is a familiar one, but it is worth stating plainly. Over the past decade, European policymakers have watched a wave of Chinese acquisitions sweep through the continent’s semiconductor and technology industries — Silex in Sweden, Okmetic in Finland, LFoundry in Italy, and Nexperia in the Netherlands, among others — giving Beijing footholds in technology with both commercial and military applications. The Centre for European Reform described the 2010s as a European ‘garage sale of high-tech firms to China’, enabling Chinese investors to acquire intellectual property, know-how and supply chain leverage. Germany, Italy, the Netherlands, and the UK have all since intervened to block or unwind Chinese acquisitions of sensitive semiconductor assets. Add to that the Draghi Report’s warning of an ‘existential threat’ to European competitiveness, and the policy logic of a common minimum scope becomes clear. The Regulation, alongside the Industrial Accelerator Act, Critical Raw Materials Act, and Chips Act, is the legislative response: an attempt to ensure that, from now on, no equivalent deal slips through a lighter-touch jurisdiction unchallenged. As we explain below, it does not entirely close that door, but it narrows it considerably.
From 17 January 2028, Member States’ regimes must include prior authorisation for investments where the target falls within one or more of the seven categories defined in Article 4(15) and Annex I. The list is broad, and deliberately so: taken together, it covers the sectors where foreign control poses the clearest strategic risks. The assessment criteria in Article 4 also provide soft guidance on what the EU legislature considers ‘critical’ — criteria that may shape how national authorities interpret each category’s boundaries and that may prompt some Member States to screen additional sectors beyond the minimum floor.
Greenfield investments are excluded from mandatory prior authorisation, even where a target falls within one of the specified sectors. Member States retain discretion to screen them under national law — and some already do — but there is no EU-level obligation to do so. Investors should not treat this as a safe route around scrutiny without checking national rules. The carve-out also matters more than it might seem: in 2023-24, ICT was the only sector beyond automotive to attract meaningful Chinese greenfield investment in Europe, driven in part by Nexperia’s €185 million expansion of its Hamburg plant and Okmetic’s €400 million silicon wafer facility in Finland — both investments that, by definition, avoided M&A-based screening. The greenfield carve-out is therefore expected to become the central battleground in the IAA negotiations, with the IAA’s proposed FDI mechanism squarely aimed at closing that gap.
The IAA specifically targets investments exceeding €100 million in strategic manufacturing sectors — battery technologies, electric vehicles, solar PV technologies, and critical raw materials — but only where more than 40% of global manufacturing capacity in the relevant sector is controlled by a third country. The IAA remains in the legislative process: the Irish Presidency has made it a Council priority, with trilogues expected in Q4 2026 or Q1 2027 and a Parliament plenary vote targeted for December 2026. The Council has already moved on the conditions framework — shifting from a minimum of four of six conditions to one mandatory condition (a Union workforce share of at least 50%) plus at least three further conditions from the remaining list. The local sourcing commitment (30% of inputs from the EU) has also been softened to a ‘shall endeavour’ obligation. Investors in emerging net-zero technologies and critical raw materials who thought they had read the final rules should check again: the IAA text is still being written. And the direction of travel does not stop at inbound investment: in January 2025, the Commission issued a Recommendation calling on Member States to assess the case for screening outbound investment — EU capital and know-how flowing into third countries — in semiconductors, AI, and quantum technologies. Whether binding outbound controls follow is expected to become clearer before the end of 2026.
In practice, qualifying investors in sectors captured by both the FDI Screening Regulation and the IAA will face two separate authorisation procedures, with no one-stop-shop — the Commission has confirmed this. Add EU merger control and the Foreign Subsidies Regulation (FSR) for transactions meeting those thresholds, and some deal teams will be running four parallel regulatory processes simultaneously. Early, integrated regulatory planning is not optional — it is essential.
The Regulation entered into force on 16 July 2026 and will start applying on 17 January 2028, giving Member States 18 months to bring their national regimes into line with the mandatory minimum scope. Some Member States will make targeted additions to existing frameworks; others face more fundamental restructuring. Change may come sooner in some jurisdictions: national authorities can start applying new mandatory sector definitions ahead of the 2028 deadline where their current regime already permits it. The sectors in the Regulation are also a floor, not a ceiling — Member States are free to go further, and many will, particularly as technology continues to outpace legislative definitions. For investors in any of the seven categories, the time to build EU FDI risk assessment into transaction planning and due diligence is now.
On 16 July 2026, the same day the Regulation entered into force, the Commission opened a public consultation on a draft delegated act that would substantially expand the Annex II list of EU projects and programmes of Union interest. The consultation closes on 13 August 2026. If adopted, the delegated act would grow the list from 18 to 24 entries, adding 11 new programmes and removing five legacy items whose legal bases have been repealed or consolidated. Nothing is in force yet, but the direction of travel is clear.
The proposed additions cluster around three themes:
The underlying logic is layering: the Commission is aligning the Annex II programme list with the mandatory sectors in Annex I, so that where national screening applies, the Commission also has the tools to weigh in at EU level. For deal teams, inclusion on the Annex II list does not itself trigger mandatory prior authorisation, that is the function of Annex I, but it materially increases the likelihood of Commission involvement. One to watch as the consultation period runs.