The EU establishes a new regulatory framework on the control of foreign investments with a direct impact on Spanish domestic law
Published on 25th June 2026
On 8 June 2026, the Council of the European Union formally adopted the new Regulation on the screening of foreign investments in the Union. At the time of writing, its publication in the Official Gazette of the European Union (DOUE) is pending. It will enter into force twenty days after that publication and will be directly applicable in all Member States, without the need for transposition, eighteen months after its entry into force.
The framework established under Regulation (EU) 2019/452 had fulfilled its objective of providing a formal mechanism for the exchange of information, but a new legislative instrument was needed to enhance the efficiency and effectiveness of investment screening and to ensure a greater degree of harmonization across the European Union.
To this end, the new Regulation repeals Regulation (EU) 2019/452 in its entirety and introduces a transitional regime under which Regulation (EU) 2019/452 will continue to apply to investments that are undergoing scrutiny, or that have already been made, on the date of application of the new Regulation.
Fundamental structural change: from a ‘voluntary’ regime to a general obligation
The main structural change is that each Member State is now obliged to establish a screening mechanism in accordance with the new Regulation, thereby removing the discretion that characterized the previous regime.
Until now, Member States could, but were not obliged to, establish a national control mechanism. The new Regulation requires each Member State to have a control mechanism in place that complies with the minimum requirements set out therein.
Closing the ‘subsidiary loophole’: a new mechanism for screening intra-European investments by foreign investors
Regulation (EU) 2019/452 applied only to foreign direct investments made directly by foreign investors, without covering investments made through a company established in a Member State and controlled, directly or indirectly, by a foreign investor, which entail the same risks to security or public order. To this end, the new Regulation also includes within the definition of foreign investment those made through a “subsidiary of a foreign investor in the Union”, defined as a company established in a Member State and controlled, directly or indirectly, by a foreign investor (the Regulation does not set thresholds for voting rights at European level; Member States may specify these in their national legislation).
Introduction of new sectors subject to mandatory control
The new Regulation introduces a minimum common scope of sectors and assets in respect of which all Member States are obliged to require prior authorization. In Spain, Royal Decree 571/2023 already provided for the control of investments in the energy, defense, critical raw materials, digital infrastructure and artificial intelligence sectors. These sectors remain relevant under the new Regulation, albeit with important nuances detailed below:
- Systemically important financial market infrastructures: authorization shall be required where the investee is, amongst others, a central counterparty, a central securities depository, a market operator or a payment system operator other than a central bank.
- Artificial intelligence: the scope is limited to general-purpose AI models suitable for the development of space or defense applications, and to general-purpose AI models posing ‘systemic risk’ within the meaning of the AI Regulation (Regulation (EU) 2024/1689 of the European Parliament and of the Council of 13 June 2024, laying down harmonized rules on artificial intelligence).
- Transport, energy or digital infrastructure: these are subject to mandatory authorization only to the extent that they are deemed essential following a specific risk-based assessment carried out by the Member State. That assessment must take into account, in particular, criteria relating to national security and functions vital to the Member State in question.
- Management of electoral processes: as a new development, authorization will be required where the company subject to the investment is, amongst others, a company that owns, develops or manages voter registration databases, voting systems and other information systems specifically designed to manage electoral operations.
Procedural harmonization: two-stage structure and new time limits
As regards the procedure, Spain will have to adapt its regulations to incorporate the two-stage structure: (i) an initial assessment, which may not take longer than forty-five calendar days from the date on which the application is deemed complete; and (ii) where necessary, an in-depth assessment, the duration of which is at the discretion of the Member State.
Strengthening the cooperation mechanism
With regard to the ‘comply or explain’ principle, the cooperation mechanism already in place under Regulation 2019/452 – which required the host Member State to take due account of the observations of other Member States and the Commission’s opinion – is significantly strengthened. Where the Member State receiving an investment receives comments from other Member States or an opinion from the Commission, it must notify them in return, within a maximum of seven calendar days from the entry into force of its decision, of the operative part of that decision and a summary of its main reasons, including the extent to which it has duly taken those comments or that opinion into account and, where applicable, the reason for its disagreement. In practice, the competent ministry in Spain will have to document and formally justify its supervisory decisions to the European institutions with a significantly higher level of procedural rigor than has been required to date.
For operations affecting more than one Member State, the Regulation also provides that the file must be submitted on the same day in all the Member States concerned so that they may endeavour to notify the cooperation mechanism on the same date and coordinate both the timetable and the compatibility of their decisions.
Review of operations already carried out
The Regulation introduces a ‘call-in’ mechanism under which supervisory authorities may, on their own initiative, review investments that have already been made. The minimum time limits required are (i) from fifteen months up to a maximum of five years for investments not subject to prior authorization; and (ii) twenty-four months for those which, whilst subject to prior authorization, have not been notified. There is no retroactive effect under any circumstances: the mechanism applies exclusively to investments completed after the date on which the new Regulation comes into force.
In light of the new regulatory framework, M&A transactions with a foreign component affecting Spain or Spanish assets should be subject to a reinforced regulatory due diligence procedure in order to (i) verify whether the target company operates in any of the sectors falling within the Regulation’s mandatory minimum scope, including the new categories (systemic financial markets, electoral systems); (ii) map out a proper chain of control for the investor to identify any intra-European transactions ultimately controlled by a foreign investor; (iii) plan for the new deadlines set out in the envisaged two-phase structure; and (iv) make voluntary notifications in the case of sensitive transactions not subject to mandatory authorization, thereby obtaining a formal decision with full legal certainty against any potential subsequent review through the new ‘call-in’ mechanism.
Finally, the Regulation does not mark the end of the European economic security agenda: the Commission is working on potential regulation of outbound investments, with an initial analysis of all Member States due before the end of June 2026, and will be required to assess the effectiveness of the new framework four years and six months after its entry into force.
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