New EU regulation brings stricter oversight
Foreign investment screening across the European Union is set to become even stricter under a new regulation approved by EU institutions, just weeks after Cyprus began implementing its own foreign investment screening mechanism for the first time.
On June 8, 2026, the Council of the European Union, under the Presidency of Cyprus, published the final text of a new regulation on foreign investment screening. The legislation will replace the existing 2019 framework and is designed to strengthen the EU’s ability to assess investments that may affect security or public order.
The regulation was approved by the European Parliament on May 19 with 508 votes in favour, 64 against and 90 abstentions.
According to Pantelis Christofides, Head of European and Regulatory Law at L. Papaphilippou & Co LLC, the regulation is expected to be published in the Official Journal of the European Union within days. It will enter into force 20 days later, although most provisions will only apply 18 months after that.
Cyprus has already moved in this direction
Cyprus introduced its own foreign investment screening framework earlier this year, with legislation coming into force on April 2, 2026.
Christofides says the law already incorporates many elements that were included in the new EU regulation.
The Cypriot framework covers investments in critical sectors such as energy, transport, water supply, healthcare, education, tourism, communications, media, data processing and storage, aerospace, defence and financial services.
It also applies to land and property considered essential to the operation of critical infrastructure, as well as sensitive technologies, dual-use goods and access to sensitive information, including personal data.
Investments can be reviewed years later
One of the more significant powers already available under Cypriot law allows the Ministry of Finance to review investments even when they do not fall under mandatory notification requirements, provided there are reasonable grounds to believe they could affect security or public order.
Authorities can exercise that power up to 15 months after an investment has been completed.
Where an investment should have been reported but was not, the review period can extend to five years.
In practical terms, this means the Ministry of Finance may still investigate a transaction years after it took place if reporting obligations were not met.
Geopolitical tensions driving tougher controls
A notable feature of the new regulation is its explicit reference to geopolitical risks.
According to Christofides, the regulation links stronger screening mechanisms not only to increasing global economic integration but also to wars, geopolitical tensions and growing security concerns that are reshaping the investment landscape.
The EU argues that these developments require closer scrutiny of foreign investments in strategic sectors.
New rules for cross-border investments
The regulation also introduces specific requirements for investments involving more than one EU member state.
Investors will be expected to make every effort to submit notifications on the same day in all affected countries and clearly reference corresponding filings elsewhere.
The changes are intended to improve coordination between national authorities and create a more streamlined review process across the bloc.
European Commission gains greater powers
The European Commission will also play a larger role under the new framework.
It will be able to issue opinions to member states recommending measures to reduce risks associated with particular investments.
The Commission will also have the authority to issue formal opinions where it believes that two or more foreign investments could negatively affect the security or public order of the European Union as a whole.
Opaque ownership structures face greater scrutiny
Another important change is the regulation’s focus on so-called “opaque ownership structures”.
These are arrangements where the true beneficial owner of a company is difficult to identify because of complex corporate structures, multiple layers of ownership or the use of nominee shareholders.
Under the new rules, the existence of such structures will be considered when assessing whether an investment could pose risks to security or public order.
For investors, this means transparency around ownership and control is likely to become increasingly important as regulators intensify scrutiny of foreign investment across the EU.
Also read: EU mobilises up to €25bn for renewable energy in the Mediterranean
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