FDI screening

FDI screening

What is FDI screening?

FDI screening is a legal and regulatory review of foreign direct investment carried out to assess whether a planned transaction may affect security or public order in a given state. In the European context, the term is usually linked to Regulation (EU) 2019/452, which created a framework for cooperation between Member States and the European Commission in relation to foreign direct investments into the Union. The Regulation does not establish one uniform EU approval system. Instead, it allows Member States to maintain or adopt their own national screening mechanisms and sets rules for information exchange and cooperation.

In practice, FDI screening most often concerns investments made by foreign investors in companies operating in sensitive sectors. Depending on the jurisdiction, this may include areas such as critical infrastructure, energy, defence, transport, data processing, media, healthcare, advanced technologies, semiconductors, artificial intelligence, robotics, cybersecurity or food security. The scope of review, the sectors covered and the triggering thresholds differ from country to country, which means that the same transaction may require notification in one state but not in another.

From a legal and transactional perspective, FDI screening is an additional layer of deal control alongside merger control, sectoral licensing and corporate approvals. It may apply to acquisitions of shares, assets or control rights, as well as to certain minority investments if they provide access to sensitive information or influence over strategic decisions. Where the rules apply, the investor may need to notify the transaction before closing and wait for clearance. Completing the deal without the required approval can lead to administrative sanctions, invalidity risks or an order to unwind the transaction, depending on the applicable national law.

How does FDI screening work in practice?

The screening process usually begins with an assessment of three main issues: who the investor is, what the target does and what level of influence the investor will obtain. Authorities commonly examine the ownership structure of the investor, including any links to foreign governments or state-controlled entities, the target’s business activities and the transaction structure. A review may also cover whether the investor has previously been involved in activities affecting security or public order.

National rules often distinguish between mandatory filings and voluntary notifications. In some systems, a filing is required only if a transaction concerns a protected sector and exceeds specified voting rights or control thresholds. In others, the rules are broader and may capture any transaction involving a strategic business. Review periods also vary. The EU Regulation itself sets cooperation timelines between Member States and the Commission, but the final timeline depends on domestic procedural rules. As a result, transaction planning should take into account both local filing obligations and the possibility of comments from other Member States or the Commission.

A practical difficulty is that the meaning of concepts such as “security”, “public order”, “critical infrastructure” or “sensitive technology” is not always identical across jurisdictions. Some states apply a relatively narrow interpretation focused on defence or infrastructure. Others take a wider view and include technology, supply chains, access to data or resilience of essential services. For that reason, legal analysis should not be limited to the transaction documents alone. It should also consider the target’s actual operations, customers, licences, data holdings and role in regulated markets.

When should FDI screening be considered?

FDI screening should be analysed at an early stage of any cross-border transaction, especially where the investor is based outside the target’s home jurisdiction or where the target operates in a regulated or strategic sector. It is relevant not only for acquisitions of control, but also for investments that grant board representation, veto rights, access to know-how or influence over commercially sensitive assets. Early review helps determine whether notification is mandatory, whether the deal timetable is realistic and whether conditions precedent should address clearance risk.

For private investors and corporate groups, timely advice can reduce the risk of signing a transaction that cannot close on the expected date. For sellers, it can help identify filing issues before launching an auction or negotiating exclusivity. For entrepreneurs and companies seeking external capital, it can clarify whether a proposed investment structure may trigger regulatory review in Poland or in another jurisdiction connected to the transaction.

Fast consultation with a lawyer can help avoid filing errors, delays, disputes with the counterparty, exposure to administrative liability or financial loss resulting from an improperly structured transaction. This is particularly important in multi-jurisdictional deals, where FDI screening may overlap with merger control, sectoral approvals and foreign ownership restrictions.

What support can a law firm provide in FDI screening matters?

Legal support in FDI screening matters usually includes both risk assessment and transaction execution. The aim is to determine whether a filing is required, prepare a defensible notification strategy and align the investment process with the applicable regulatory framework.

Support of a law firm in the field of FDI screening may include in particular:

• assessment of whether a planned investment falls within a national FDI screening regime,
• analysis of investor status, ownership structure and possible state links,
• review of the target’s activity in sensitive or protected sectors,
• verification of notification thresholds, control tests and filing triggers,
• preparation of FDI notifications and supporting documentation,
• representation in proceedings before competent authorities,
• coordination of FDI analysis with merger control and sector-specific approvals,
• drafting transaction documents that address regulatory conditions and closing risk,
• advice on transaction structuring where FDI concerns are identified,
• support in cross-border deals involving parallel reviews in several jurisdictions.

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See also

• Business acquisition
• Commercial Law
• Holding company
• Share transfer