In brief

Foreign investment regimes across major Western economies are entering a new phase. National security, economic resilience and political sensitivity are reshaping the rules — and the scrutiny. While Canada and Ireland introduce new mandatory regimes and expand their reach, the European Union is caught in a legislative battle over how much to centralize oversight and sharpen its collective response. These moves reflect a shared policy direction: more proactive enforcement, broader definitions of sensitive sectors, and a growing willingness to challenge deals that might once have sailed through. The sections that follow explore these developments in the EU, Canada and Ireland in more detail.

European Parliament and Council move in opposite directions on revamped EU FDI regime

In May and June 2025, the European Parliament (Parliament) and the Council each adopted their respective position on the European Commission’s (Commission) proposal for a new FDI Screening Regulation (Regulation), introducing a series of proposed amendments. The proposal, first unveiled by the Commission in January 2024, aims to further harmonize and strengthen the screening of foreign investment across the EU. The Parliament’s position focuses on reinforcing the Commission’s role in EU-wide foreign investment screening vis-à-vis the Member States and expanding the scope of the regime. Meanwhile, the Council wants to strengthen the position of the Member States in foreign investment screening and cut back on obligations for them.

The main points of contention are the following:

Granting more powers to the Commission vs strengthening sovereign decision-making by the Member States.

Under the Commission’s proposal, Member States would retain the sovereign right to decide on foreign investment screenings, with an obligation only to give “utmost consideration” – rather than follow – any diverging opinions from other Member States or the Commission, and to justify their decisions.

By contrast, the Parliament has proposed giving the Commission the authority to take over screening proceedings and adopt its own decision – either authorizing or prohibiting an investment – where there is disagreement between the host Member State and another Member State or the Commission.

Meanwhile, the Council not only rejects any idea of granting own decision-making powers to the Commission, but wants to further strengthen the position of Member States through a number of changes limiting the weight of the comments by the Commission or other Member States.

Expanding the list of sensitive sectors vs restricting mandatory screening.

The Commission has proposed to introduce a mandatory investment screening for foreign investments into companies participating in projects and programs of Union interest listed in Annex I of its proposal) or active in certain sensitive sectors (listed in Annex II of its proposal).

The Parliament proposes further expanding the Commission’s already extensive list of sensitive sectors in Annex II. New additions include semiconductor manufacturing equipment and software components, data storage and processing, technologies and infrastructure for the transport sector, media services, electoral infrastructure, critical raw materials, and agricultural land exceeding 10,000 hectares. The Parliament has also added a substantial number of illustrative examples to clarify the scope of covered products.

The Council wants to introduce mandatory screening only for European companies developing, producing or commercializing goods listed on the EU’s List of Dual Use Goods or the EU Common Military List. Activities in other sectors mentioned in Annex I or II would play a less significant role, as Member States would only have to consider the potential effects of a transaction on these sectors in their regular review.

Introducing mandatory screening for greenfield investments vs leaving it to the Member States.

The Commission draft left it to Member States to decide whether greenfield investments should be reviewable.

The Parliament’s position would require screening where such investments fall within the list of sensitive activities – provided the transaction value exceeds €250m and the investor is deemed “high-risk” (e.g. government-controlled, sanctioned or previously subject to restrictive conditions). Notably, this would create a minimum notification threshold but would not prevent Member States from imposing broader notification requirements.

The Council supports the proposal to leave the decision to the Member States.

Harmonizing Phase 1 timeframes. All proposals would harmonize the length of a Phase I case. The Commission is suggesting 60 calendar days, the Parliament 35 and the Council 45. Both the Parliament and the Council propose easing requirements for applicants in multi-country transactions; rather than submitting applications to all relevant Member States on the same day, applicants would have a three-day window to do so under the Parliament’s proposal and shall only “endeavor” to submit applications on the same day under the Council’s proposal.

Limiting post-closing review. The possibility for Member States to initiate investment screening post-closing would be limited to 15 months after closing under the Parliament’s proposal– marking a shift from the Commission’s draft, which proposed 15 months as a minimum review period. However, the Parliament also proposes granting the Commission the power to initiate post-closing screenings on its own initiative. The Council wants to maintain the Commission’s initial position.

Tightening scrutiny of foreign government links. Both the Parliament and the Council propose scrutinizing the links of investors to foreign governments more intensely. The Parliament’s focus is on funding, governance rights and opaque structures, while the Council wants to increase scrutiny of informal means by which a foreign government or a non-state actor could gain influence on a European company like leveraging personal relationships, applying personal or political pressure and employing threats and other manipulative or deceptive practices.

Council refines FDI reform proposal

The proposal of the Council would also fix some key weakness of the Commission’s initial proposal: First, where the Commission suggested seeing any investor who had been subject to prohibitions or mitigating measures in earlier foreign investment screening cases as a “high risk” investor (even when the mitigating measures were standard supply assurance commitments), the new Council wants to limit this to cases where mitigating measures had not been complied with. Second, the Council wants to introduce a clear exception from the reporting obligation for internal restructuring which is currently lacking in many Member States.

Representatives of the Commission, the Parliament and the Council will now meet in the so-called Trilogue to negotiate a common legislative proposal. Given the contrary positions of the Parliament and the Council, the negotiations could take time to conclude – and in the end, the Commission’s original proposal may be viewed as a middle ground. The legislative process is expected to take several months – but some hope that it will be concluded by the end of the year.

If the three institutions agree on a final text, the Member States would have at least 12 months to implement the Regulation. The Regulation will undoubtedly only harmonize minimum requirements and the Member States will continue to have discretion in many aspects. It will therefore be key to see how the Member States implement the Regulation.

Ireland’s new investment rules: Ticking the box, raising the bar

Why did Ireland implement an FDI regime?

Ireland implemented the Screening of Third Country Transactions Act 2023 (Irish Act) so as to meet its obligations as an EU Member State to implement the EU FDI Screening Regulation (Regulation (EU) 2019/1452). However, while the intention in introducing the regime was to 'tick the box' required by EU law, the Irish regime was ultimately drafted quite broadly. Therefore some transactions not caught by the EU FDI regulation will nevertheless be mandatorily notifiable in Ireland.

Inward investment and attracting FDI into Ireland has been – and remains – a key focus of Irish political and industrial strategy. Successive Irish governments have made it clear that having a practical, commercially focused and efficient FDI screening regime is needed to implement EU policy, but that FDI will continue to form an important part of the Irish economy – recent estimates indicate that 20% of all private sector employment is attributable to FDI.

What are its key features?

The Irish Act is designed to ensure that Ireland is equipped with the necessary legal powers to screen certain investments by third country (i.e., non-EU, EEA and Switzerland) undertakings and individuals that relate to particular critical sectors, inputs or technologies with an Irish nexus.

A notification to the Minister for Enterprise, Trade and Employment (Minister) is required where the below cumulative thresholds have been met. If a transaction is below threshold for any one of the below requirements, no filing is required:

• Non-EU/EFTA investor: A third country undertaking or a connected person is a party to the transaction;
• Low transaction value: The value of the transaction is at least €2m (or the cumulative value of the transactions between the parties in the 12 months prior to the relevant transaction is at least €2m);
• Relevant transaction: A transaction involves (i) a ‘change of control’ of an asset or undertaking in the state (linked to established merger control principles of ‘control’ or ‘decisive influence’) or (ii) a defined change in the percentage of shares or voting rights held in an undertaking in the state; and
• Relevant matter/sector: The transaction relates to, or impacts on, critical infrastructure, critical technologies or dual-use items, critical inputs including natural resources, access to sensitive data; and media (some of which are defined in Irish guidance).

What are the most important factors investors should consider before investing in Ireland?

Broad impact: Investors should be aware of the low jurisdictional thresholds, as well as the broad range of sectors covered by the Irish regime (with only limited guidance currently available making it difficult to exclude many transactions). This means that a large number of international transactions with an Irish nexus could require pre-completion approval in Ireland.

Transaction timelines: Transaction closings may be impacted by the relatively long clearance timeframe of 90 days (extendable to 135 days for more complex transactions).

Irish ministerial focus and powers The Minister’s primary focus in government is to develop industry/the economy and increase employment and this Department is seen as business-friendly. Any intervention, including the Minister’s call in power which has a 15 month look back period from completion is only likely in clear cases that raise national security concerns.

Other regulatory regimes: The new Irish regime needs to be considered in parallel with other foreign investment regimes, as well as Irish and international merger control and media merger rules, in order to determine necessary approvals and deal timings.

How, if at all, will trade turmoil affect Ireland’s use of its FDI regime?

Trade turmoil and geopolitical issues are not expected to influence Ireland’s implementation of its nascent FDI regime with Ireland remaining very FDI focused. However, Ireland will follow, as with other EU Member States, the EU’s recommendations and focus areas for screening, should these develop over the coming years.

Foreign investment in Canada: Elections and economic security

Recent changes to the Investment Canada Act (ICA) bolster the Canadian government’s ability to review foreign investments before implementation. These changes signal that the national security regime will be increasingly used as a tool for the Canadian government amidst broader uncertainty around tariffs and trade tensions. In this context, and in the wake of a general election, which saw the re-election of Mark Carney’s Liberal government, foreign investors should be aware of key recent and upcoming developments including:

• the impending introduction of enhanced enforcement tools, in particular pre-closing filing obligations for investments in sensitive technologies;
• the recent addition of “economic security” as a factor in whether an investment could be injurious to Canada’s national security; and
• the possibility that investments in Canadian businesses will be viewed as predatory in the context of market fluctuations and economic uncertainty across the North American borders.

The most significant change will be the introduction of a pre-closing notification requirement for foreign investments in sensitive sectors, to allow a national security review of such investments prior to closing. This change will apply to all non-Canadian investors, regardless of whether they come from a country aligned with Canada. Currently notifications can be filed post-closing, and notifications are not required for minority investments.

Sharpening of investment review tools

Once in force, investments, including minority investments, in prescribed sectors will require a mandatory and suspensory pre-closing filing and be subject to a minimum 45 day waiting period. The prescribed sectors are yet to be defined, but are expected to track the Canadian Government’s Sensitive Technology List outlined in the Guidelines on the National Security Review of Investments.

Furthermore, on March 5, 2025 Canada updated these guidelines to indicate that economic security is a factor in the assessment of whether a proposed investment is injurious to Canada’s national security. This change was announced in the heat of tariffs being introduced. In his statement the Minister of Innovation, Science and Industry indicated that revisions to the guidelines were motivated “[a]s a result of a rapidly shifting trade environment, some Canadian businesses could see their valuations decline, making them susceptible to opportunistic or predatory investment behavior by non-Canadians.”

As mentioned, Mark Carney’s incumbent Liberal party was re-elected on April 28, 2025. The campaign was focused on Canadian autonomy and independence and the imposition of tariffs. The Liberals included commitments in their policy platform about “strengthening the Investment Canada Act” and to “make more transactions reviewable.” Given this focus, the ICA must be seen as a tool in the government’s toolbox, which may be used during ongoing trade tensions.

Within this overall context and the recent developments, foreign investors should be aware of the potential for heightened scrutiny of investments in Canada including from countries traditionally considered to be Canadian allies. There will also be greater focus on critical and sensitive technologies, through the upcoming pre-closing filing obligations. Engagement with the Canadian government may be required, even for post-closing filings, to ensure that investments do not appear opportunistic or predatory.

Key takeaways

• The EU is debating more centralized control– but friction with Member States remains. The European Parliament’s proposal to expand the Commission’s authority may not pass against the Council’s objection, but it signals intent to tighten oversight across borders and broaden the definition of sensitive sectors.
• Ireland’s new regime casts a wide net. Low thresholds and broad sector definitions mean many international deals with an Irish nexus may require pre-approval – even if they fall outside EU-level rules.
• Canada is pivoting to economic security. Recent reforms add a pre-closing filing requirement for investments in sensitive sectors and explicitly introduce economic security as a factor in national security assessments.
• Mandatory filings are on the rise. Across all three jurisdictions, previously voluntary or post-closing filings are being replaced by mandatory, suspensory pre-closing reviews – reshaping timelines and deal strategy.
• Even trusted allies are under the microscope. Investors from historically friendly jurisdictions can no longer assume a smoother path – regulators are increasingly concerned about supply chain resilience, economic and technological independence, and political optics.

With thanks to Freshfields Uwe Salaschek and Matthias Wahls for the EU update; Kate McKenna, Simon Shinkwin, Laura McDonnell and Harry Healy (Matheson LLP, part of our StrongerTogether network) for the Ireland update; and Julie Soloway, Fraser Malcolm and Isaac Bushwesky (Blakes, Cassels & Graydon LLP, also part of our StrongerTogether network) for the Canada update.