(Somewhat) Strengthening The EU’s Industrial Base Through The IAA’s Screening Of Foreign Investment

The Commission’s proposed Industrial Accelerator Act (IAA), published on 4 March 2026, aims at strengthening the competitiveness and resilience of the EU manufacturing base by targeting strategic sectors, would introduce EU‑origin requirements in public procurement as well as foreign investment controls (see dedicated client alert).

The introduction of requirements linking foreign investments to the EU is intended to support EU manufacturing by increasing demand, strengthening capacity, and encouraging the development of lead markets for key industrial products and technologies. The IAA forms part of a broader set of measures that apply conditions on public procurement to guide foreign investment in line with EU industrial and trade policy objectives.

PURPOSE OF THE INDUSTRIAL ACCELERATOR ACT (IAA)

The proposed IAA sets out a priority focus on several strategic sectors and technologies deemed essential in the current geopolitical landscape:

• Energy-intensive industries (“Ells”), including in particular steel, cement, chemicals, aluminium, non-metallic minerals and pulp and paper ;
• Net-zero technologies, including in particular batteries and battery energy storage systems, solar PV technologies (incl. inverters), heat pumps, geothermal technologies, on- and offshore wind technologies, carbon capture technologies (incl. CO₂ transport and storage), electrolysers and nuclear fission energy technologies;
• Automotive industry including vehicle manufacturing and key vehicle components such as batteries, power electronics and main electronic systems.
• Notably, the IAA proposal would lay down a derogatory regime for the screening of foreign direct investments (FDI) against a backdrop of:
  • Risks to EU economic security and security of supply, as large investments from third countries with global dominant positions can disrupt supply chains, externalise value creation and weaken EU technological and defence capabilities if not ensuring EU production, technology transfer or employment.
  • The need to prevent internal market fragmentation, since divergent national conditions are viewed as a source of creating unequal treatment of investors and encourage regulatory arbitrage.
  • The need for harmonised EU conditions when reviewing foreign investments, if the investor comes from a third country controlling a sizeable share of global production capacity in the relevant manufacturing sector.

In the alert below, we first set out conditions under which investments would be captured under the IAA’s FDI framework, triggering notification requirements. We then provide an overview of the procedural aspects, with particular attention to the Commission’s proposed extended powers and key risk items for foreign investors. Finally, we assess which types of investments are likely to be cleared, and under what conditions, before concluding with some practical implications and the next steps in for the adoption of the proposed regulation.

SCOPE OF INVESTMENTS TARGETED BY THE IAA FDI FRAMEWORK

The instrument thus aims at ensuring that investments generate EU value, support technological progress, and strengthen local capabilities. It also supplements existing tools, which do not currently – at least at EU-level – impose value-added requirements, despite concerns about state-backed investors and potential loss of technology and IP.

1. SCOPE OF ACTIVITIES UNDER THE IAA PROPOSAL

• The IAA would establish a FDI framework for major investments strategic to the EU’s economic security, supply chain resilience, and technological development.
• The IAA FDI regime targets investments by third-country investors, including through subsidiaries established in the EU, in manufacturing activities such as (i) batteries and their components; (ii) EVs (pure, plug-in hybrid, fuel cell) and related electrification and digitalisation components; (iii) PV solar technologies; or (iv) extraction, processing, and recycling of critical raw materials^[1].

2. INVESTMENT THRESHOLDS TRIGGERING FDI SCREENING AND EX ANTE NOTIFICATION

• The IAA’s FDI regime would apply to (i) foreign direct investments exceeding EUR 100 million in identified strategic manufacturing sectors, (ii) contemplated by investors based in a jurisdiction where more than 40% of global manufacturing capacity in the relevant sector is held.^[2]
• Where the investment is directed to an in-scope sector and exceeds the threshold value of 100M€, prior notification will be required if the investment would result in the acquisition of control over a Union target or asset.
• Control is deemed to be acquired when the investment reaches at least 30% of the share capital or voting rights in a Union target, or 30% ownership or other rights conferring control over a Union asset.
  • All interests are aggregated for this assessment, including those held directly or indirectly, through affiliates, chains of ownership, or investors acting in concert.
  • Where several foreign investors collectively exceed the 30% threshold, they would have to must notify the acquisition jointly.

3. EXEMPTIONS TO NOTIFICATION UNDER THE IAA PROPOSAL

• Several exception grounds may, however, exempt the investment from prior notification. This would be the case where:
  • Investors and investments covered by EU economic partnership or FTAs, where relevant commitments have been made, including via EU-based subsidiaries (see Annex). Under many recent free trade agreements (e.g. EU – Mercosur Partnership Agreement [EMPA] and the Interim Trade Agreement [ITA] signed on 17 January 2026), the EU generally grants foreign investors in manufacturing and energy sectors broad market access and national treatment. The IAA excludes investors from countries with such agreements, or from jurisdictions which can rely on exemptions under international obligations, from notification requirements under the IAA FDI Proposal.
  • Investments solely aimed at providing services, including through subsidiaries. The IAA’s FDI regime’s focus is on manufacturing activities in the identified strategic sectors, not service‑oriented operations, which are exempted from notification requirements under the IAA FDI Proposal.
  • Portfolio investments, understood as purely financial acquisitions without intent to influence the management or control of the target. This exception would cover passive financial holdings that do not involve management or control of the Union target. By contrast, the IAA FDI implies a lasting link and the ability to exercise influence or control.Intra-group restructurings and certain resolution transactions would be excluded where they do not result in a new foreign investor acquiring ownership or control, or in an increase in foreign investors’ effective participation in management or control. This tracks with the aim of reducing dependencies, unlikely absent involvement in decision-making.

CONTROL OF FOREIGN INVESTMENTS BY COMPETENT AUTHORITIES UNDER THE IAA

1. FROM NOTIFICATION TO APPROVAL: THE REVIEW PROCESS

• If an FDI is within the scope of the IAA and no exclusion grounds apply, foreign investors would have to notify the investment to the competent national Investment Authority (designated by each Member State).
  • This will be the authority of the Member State where the Union target or asset is located. It is however uncertain this will be the same national authority as the one in charge of “general” FDI scrutiny. If the relevant Union targets or assets are located in several Member State, notification will have to made in each Member State on the same day, as well as to the Commission, cross‑referring the notifications^[3].
    • The Member States will have to coordinate their review and, with the Commission, agree on the conditions to be imposed. In case no agreement is reached among the Member States, the Commission would determine the conditions.
• Upon receipt, the Investment Authority will first determine whether the investment is in-scope of the IAA and the notification is complete^[4]. It would then immediately communicate the file to the Commission.
• From that moment, the investment is subject to a two‑level review:
  • At EU level, the Commission provides a written opinion assessing whether^[5]:
    • the transaction is covered by the regime ;
    • it appears to meet the value‑added conditions, and ;
    • it considers that the investment should be approved.
    • This opinion can be shared with other Member States and may be made public, subject to confidential treatment.
  • At national level, the Investment Authority must reach a determination within a prescribed timeline of two months, in principle. If it departs from the Commission’s opinion on compliance with value-added conditions, it must conduct an additional review and explain its reasoning, which may extend the standstill period and increase scrutiny of the transaction^[6].
• The investment cannot be implemented until explicitly approved or the applicable procedural deadlines have expired – in any event, only once the relevant conditions (see below) have been fully complied with.
• Any party affected by a decision of the Investment Authority may seek judicial review. As under the current FDI screening system, challenges to national decisions are brought before national courts. If the decision is adopted by the Commission, an action for annulment must be brought before the Court of Justice of the European Union.

Monitoring and enforcement powers at both national and EU level are also provided for to ensure compliance:

• Investment Authorities would have to monitor approved AAI FDI, require regular reporting from investors, and impose financial penalties in case of non-compliance with notification obligations and conditions attached to the investment or monitoring duties. They would have to inform the Commission of breaches and sanctions applied.
• At EU level, the Commission would monitor global manufacturing capacity in emerging strategic sectors, could review specific FDI and impose penalties where investors provide false or misleading information or fail to supply required information.

2. PROPOSED RUPTURE IN THE FDI SCREENING FRAMEWORK THROUGH COMMISSION SCREENING POWERS

Once a notification has been filed, the Commission would be able to step in and conduct its own assessment:

• On its own initiative if the investment is likely to have a significant impact on value creation in the internal market or exceeds EUR 1 billion in value ;
• At the request of the Investment Authority handling the notification or at the request of another Member State’s Investment Authority if the investment is considered to significantly affect its territory.

Once the Commission intervenes, it could issue opinions, set binding conditions for cross-border cases where Member States cannot agree, and impose fines for incorrect or misleading information^[7].

This new EU-level screening would introduce a substantial shift in how FDI is controlled:

• The Commission would have its own powers of review of proposed FDI (if eligible to IAA scrutiny – not for all FDI), where this is still within the exclusive remit of Members States.
• The Commission would have broad discretion to determine whether investments would have ‘significant impact on value creation’. Certain criteria are set out, such as that it has a strategic dimension. These criteria are, however, not clear-cut or objective.
• This could lead to scope expansion, where the Commission effectively gains the ability to review and influence a wide range of investments in strategic sectors.
• Member States are likely to resist any system giving the Commission overriding control over strategic investments, making the adoption of this part of the proposed IAA uncertain, at least in its current form.

At any rate, investors should be aware that high-value or strategically sensitive deals are under increased EU-wide scrutiny and may trigger EU-level review, in addition to national FDI screening. Planning should account for additional scrutiny, potential conditions, and timing implications.

3. SUBSTANTIVE CONDITIONS FOR FDI APPROVAL

The approval of notified investments would be conditioned to the satisfaction of at least four of six conditions set out in the proposed regulation, from twelve months onward after the entry into force of the regulation:

• Ownership limits. Foreign investors may not hold more than 49% of ownership or voting rights in a Union Target or Asset to limit foreign control in emerging strategic sectors.
• Joint ventures. Investments through joint ventures must ensure effective participation of Union partners in management, technology transfer, and capacity building.
• IP rights. Foreign investors must license their intellectual property and know-how to the Union Target or Asset, with pre-existing Union IP remaining under Union control and jointly developed IP shared under specific conditions.
• R&D investment. Investors must allocate at least 1% of the gross annual revenue of the Union Target or Asset to research and development within the Union, proportional to their share of control.
• Workforce. At least 50% of the workforce involved in the investment must be Union-based, with adequate training. Where public funding is received, the investor must commit to maintaining this workforce for five years.
• Union value chains. Investors must develop and publish a strategy to strengthen Union value chains and prioritize local sourcing, aiming to source at least thirty percent of inputs for products placed on the Union market.

Clearance will, in any event, be conditioned to the preservation of at least 50% of Union workforce where applicable

Investment Authorities may extend conditions to direct investments by a foreign investor’s subsidiary within the EU when necessary to prevent circumvention of the rules or when no less restrictive measures would achieve the IAA’s objectives. The aim is to ensure consistent treatment of FDI in strategic sectors and avoid complex structures that bypass EU conditions.

If the Commission decides to assess a notified foreign investment, it may require the Investment Authority to adjust or waive some of the conditions on a proportionate basis, allowing for stricter or more targeted measures where risks of circumvention or significant impacts on the internal market are identified.

FUTURE EXTENSION AND INTERPLAY WITH OTHER EU ECONOMIC SECURITY TOOLS

• The scope of sectors covered by the screening mechanism can be extended by the Commission through delegated acts, allowing the Commission to add emerging strategic sectors based on their impact on foreign investment, security of supply, and value creation. Any extension must balance security needs and investment openness.
  • The IAA sets out that, if needed, the scope should be extended to introduce an ‘enhanced’ FDI review on aeronautical products and parts.
  • Some sectors, such as space and advanced semiconductor technologies, alongside biotechnologies and AI and quantum technologies, were identified as “sectors critical to the Union’s economic security” in an earlier, leaked, version of the IAA and points to sectors that could be included in the scope by priority.
• The Commission’s Impact Assessment of 3 March 2026 highlights that conditionalities on foreign investment in strategic manufacturing sectors reinforce competitiveness and resilience while remaining consistent with international commitments.
• The Economic Security Communication of 3 December 2025 emphasizes the role of FDI screening in complementing existing instruments to protect supply chains, technological capacity, and industrial resilience. This Communication further identified high risk dependencies in critical raw, processed and advanced materials, clean tech, semiconductors, financial services, pharmaceuticals, aeronautics, and digital and space technologies, highlighting an increasingly transversal approach to these industries.
• The Foreign Subsidies Regulation ensures that the IAA FDI framework works alongside other tools to maintain an open investment environment while protecting strategic interests and several of the same critical sectors are also identified for enhanced scrutiny in the FSR.
• The RESourceEU Action Plan of 3 December 2025 identifies dependencies in critical raw materials, clean technologies, and advanced industrial ecosystems, suggesting potential future extensions of FDI scrutiny in upstream and midstream segments.
• The IAA includes review clauses to periodically assess the need for further measures. Overall, the framework is progressive and adaptable, enabling the Union to respond to evolving geopolitical and industrial risks.

NEXT STEPS

• The IAA would establish a binding and harmonised screening regime for major FDIs in emerging strategic sectors, potentially combining a ‘one-stop’ mechanism at the Commission level for investments of particular value or strategic importance, and a decentralised review by national Investment Authorities for other operations, all subject to common conditions of significant added value for the internal market.
• This hybrid model seeks to ensure that large FDIs from third countries holding a dominant position in global capacity can only be implemented on the condition that they effectively contribute to value creation within the Union, while preserving the attractiveness of the internal market and avoiding regulatory fragmentation between Member States.
• The Commission’s proposal will now be negotiated in the Parliament and the Council, with the European Council calling for fast adoption (by end‑2026). Divergences voiced from within the Commission before the adoption of the proposal are expected to emerge in the course of the legislative procedure. While certain Member States such as France have been supportive of a strict European preference, others such as Germany or the Netherlands prefer a more lenient and flexible “Made with the EU”-approach.
• In September 2025, the Parliament adopted a report advocating for European preference to be included in public procurement. The competent committees are yet to be announced, but the ITRE, IMCO and INTA committees might jointly be leading the negotiations, with the ENVI and BUDG committees issuing opinions.
• A public consultation is open until 26 May 2026 (available here), with regular extensions to the deadline provided. Businesses are invited to share their feedback to ensure that the IAA effectively strengthens the EU’s industry and thus its resilience and economic security.
• Companies active in the relevant value chains need to map out exposure and to assess regulatory risks and opportunities.

Gide’s International Trade, EU Regulatory & FDI teams in Brussels and Paris continue monitoring the next steps of the proposed IAA.
Our teams will gladly assist in case of any questions or need for legal assistance in assessing potential impacts of the instrument or in advocacy actions throughout the legislative process.

[1] The FDI Regulation 2019/452 sets a horizontal framework for screening foreign investments on security and public order grounds. The IAA applies additionally to qualifying investments in emerging strategic sectors, without replacing existing screening rules.
[2] To assess the EUR 100 million value threshold, only prior investments by the same foreign investor in the same target or asset made after the entry into force of the regulation are aggregated. The FDI Regulation 2019/452 does not contain an equivalent aggregation rule for value thresholds.
[3] By contrast, Under FDI Regulation 2019/452, there is no single coordinated notification or EU decision on conditions; each Member State screens investments independently, and the Commission can only issue non-binding opinions. This will nonetheless be introduced by the upcoming EU FDI Regulation.
[4] The Investment Authority has up to 30 days to declare the notification admissible, extendable by 15 days if justified. The Proposal of the European Parliament and of the Council on the screening of foreign investments in the Union and repealing Regulation (EU) 2019/452 of the European Parliament and of the Council, introduces harmonised and coordinated timelines for national screening procedures and for the EU cooperation mechanism, thereby limiting the overall review period for notifiable foreign investments.
[5] The Commission has 30 days to issue its opinion, subject to adjustments if additional information is requested. Under the FDI Regulation 2019/452, Member State comments and Commission opinions are issued within 35 days, with adjustments if more information is needed, making the IAA’s 30 days Commission review broadly aligned but slightly shorter.
[6] The Investment Authority must decide within 60 days, extendable to 75 days if admissibility is extended, and by an additional 30 days for complex cases. A further 2 months review applies if departing from the Commission’s opinion on value-added conditions.
[7] This contrasts with Regulation 2019/452, under which the Commission’s role is limited to issuing non‑binding opinions within a cooperation framework, while screening decisions and any conditions remain the exclusive responsibility of the Member State where the investment takes place.