Regulation (EU) 2026/1386 introduces a comprehensive overhaul of the EU foreign direct investment screening framework by requiring Member States to establish mandatory national screening mechanisms, including prior notification and approval for investments in sensitive sectors, enhanced call-in powers, broader risk assessment criteria, and strengthened cooperation with the European Commission and other Member States. In Portugal, the Regulation will require a far-reaching reform of the existing FDI screening regime, including the establishment of a dedicated national screening authority, the introduction of mandatory notification procedures, and the alignment of national rules with the new EU framework before the Regulation becomes fully applicable on 17 January 2028.
Regulation (EU) 2026/1386 of the European Parliament and of the Council on the screening of foreign direct investments in the European Union (the “New Regulation”) was finally published on 26 June 2026.1
Further to the Commission proposal of January 2024, the New Regulation introduces significant changes compared to the current framework under Regulation (EU) 2019/452 which it replaces. Member States are now to amend national screening in light of the New Regulation.
Portugal has a national screening mechanism since 2014. However, the “regime for the safeguarding of strategic assets”, set out in Decree-Law No. 138/2014, has a very limited scope of application due to the specific context in which it was adopted,2 and has seldom been applied in practice. The New Regulation will therefore require a comprehensive revision of the Portuguese Foreign Direct Investment (“FDI”) screening framework.
Mandatory notification in sensitive sectors
Under the New Regulation, Member States are required to establish a national screening mechanism which must, at a minimum, include a mandatory prior notification requirement for transactions in the following sensitive sectors: (i) defence and dual-use items; (ii) critical technologies (including AI); (iii) quantum technologies and semiconductors; (iv) critical raw materials; (v) critical infrastructure (energy, transport and digital infrastructure); (vi) electoral infrastructure; and (vii) certain financial system entities forming part of the financial markets infrastructure.3
Investments in these sectors are subject to a standstill obligation, meaning that transactions cannot be completed prior to notification and clearance by the competent national authority.
This contrasts with the current Portuguese model, under which government intervention is limited to strategic assets in defence and security, energy, transport and communications, and only provides for voluntary notification.
The New Regulation will therefore require the introduction in Portugal of a mandatory notification and prior approval mechanism covering at least the sensitive sectors listed above, although Member States remain free to extend the scope to additional sectors.
This revision will require not only an extension of the substantive scope of the regime, but also the definition of clear notification thresholds, procedural rules and standstill obligations, ensuring that transactions cannot be completed before clearance. It will further necessitate the creation of enforcement mechanisms to address breaches of notification obligations, marking a shift towards a more preventive screening system aligned with European Union (“EU”) standards.
Call-in powers
In case of investments not subject to mandatory notification, the New Regulation requires that national authorities have the power to initiate a review on their own initiative (so-called call-in powers) within a period of at least 15 months and up to five years following completion of the investment.
Here again, the current Portuguese regime – highly restrictive, as it limits intervention to a 30-day period following completion or public disclosure – will need to be amended.
Portugal will therefore need to substantially extend both the temporal scope and practical effectiveness of its intervention powers, introducing a longer ex officio review period aligned with EU requirements.
This will also require the establishment of internal monitoring mechanisms capable of identifying non-notified transactions, as well as clearer procedural rules governing the exercise of call-in powers, thereby moving towards a more proactive and systematic screening framework.
Foreign investments and foreign investors
The concept of “foreign investment” under the New Regulation is very broad and encompasses any investment in an undertaking established under the laws of a Member State which aims to establish or maintain lasting and direct links enabling effective participation in the management of the target entity. This differs from the Portuguese regime, which currently applies only to acquisitions of control within the meaning of competition law.
Greenfield investments, even in the sensitive sectors listed above, are not subject to mandatory notification under the New Regulation, although Member States may decide to include them in their national regimes.
As regards the origin of investors, in addition to investments made directly by non-EU persons, the New Regulation also covers investments carried out by EU-established entities controlled by third-country investors, thus addressing a gap identified in the Xella Magyarország judgment (C‑106/22), where the Court of Justice held that the previous Regulation applied only to investments made directly by third-country entities.
In this regard, the Portuguese regime already captures indirect acquisitions of control by entities outside the EU or European Economic Area (“EEA”) and therefore does not require amendment.
Risk assessment factors
While Member States retain exclusive competence to decide whether an investment should be authorised (with or without conditions) or prohibited, the New Regulation establishes a detailed set of mandatory risk assessment criteria for determining whether an investment is likely to affect security or public order.
- As regards the potential impact of the investment, authorities must consider, in particular: availability of critical technologies, security of critical infrastructure and military assets, continuity of supply of essential goods and services, protection of fundamental rights (including media pluralism), electoral processes, protection of sensitive information, public health, and food security.
- The assessment must also take into account investor-related factors, including: (i) links to third-country governments, especially in military or international humanitarian law contexts; (ii) previous decisions by Member States regarding similar investments; (iii) subjection to EU restrictive measures; (iv) prior involvement in illegal activities or activities affecting security or public order; (v) opaque ownership structures hindering identification of the beneficial owner.
By comparison, the criteria under Decree-Law No. 138/2014 relies on significantly narrower and less detailed criteria, primarily focused on the protection of strategic assets in limited sectors and largely shaped by the constraints of the Golden Shares case law.4
As a result, Portugal will need to substantially broaden and systematise its risk assessment framework, incorporating the full range of factors required under EU law and ensuring that these are consistently applied in all screening decisions. This will likely require moving from a relatively open-ended and discretionary assessment model to a more structured and criteria-driven approach.
Enhanced EU cooperation
Decision-making remains with the Member State where the investment takes place or has effects. However, the Regulation strengthens cooperation with the Commission and other Member States. For transactions affecting multiple Member States, investors “shall endeavour” to notify all relevant authorities simultaneously, which must coordinate during the review process.
To harmonise timelines and streamline cross-border reviews, the New Regulation establishes that the initial screening phase (Phase 1) must be completed within 45 working days, while leaving the duration of in-depth investigations (Phase 2) to the discretion of Member States, which should, where possible, coordinate the timing of their final decisions.
It also clarifies when national authorities must notify the Commission and other Member States, notably in cases involving sensitive sectors, foreign state-controlled investors or EU restrictive measures, and introduces enhanced cooperation tools, including coordination mechanisms and information-sharing platforms.
By contrast, the Portuguese regime currently lacks any structured cooperation framework with the Commission or other Member States (which in reality has represented a failure to implement Regulation (EU) 2019/452 since its entry into force).
Accordingly, Portugal will need to introduce formal cooperation procedures, including mechanisms to exchange information, participate in coordinated multi-jurisdictional screenings, and engage with EU-level tools such as common notification systems and shared databases. These changes will require legal and targeted administrative adjustments.
More broadly, the reform will entail a shift towards a more structured and EU-integrated screening system, with defined cooperation obligations and clearer procedural rules.
New competent authority and transparency
Under the current Portuguese regime, screening is carried out by the member of Government responsible for the relevant sector, and any prohibition decision must be adopted by the Council of Ministers.
With the new Regulation, Portugal will be required to establish a national foreign investment screening authority and endow it with the necessary powers and resources to carry out its assigned tasks, in particular to ensure compliance with mandatory notification obligations, prevent and address potential breaches, assess notified transactions, adopt screening decisions, and fulfil its cooperation obligations with other national authorities and the European Commission.
Unlike the current regime – under which no reports, guidelines, or decisions have ever been published – the designated national authority will be required to submit an annual report to the Commission in line with the New Regulation. Member States must also publish and regularly update detailed guidance on the scope of their screening mechanisms, notification thresholds, criteria, and procedural rules.
Next steps
The New Regulation enters into force on 16 July 2026 (20 days after publication) and will apply fully from 17 January 2028.
By that date, Member States must adapt their national regimes accordingly. In Portugal, the required changes will be far-reaching, and developments will need to be closely monitored.
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1 Regulation (EU) 2026/1386 of the European Parliament and of the Council of 17 June 2026 on the screening of foreign investments in the Union and repealing Regulation (EU) 2019/452, OJ L, 2026/1386, 26.6.2026.
2 Decree-Law No. 138/2014, of 15 September 2014, was adopted following the judgments of the Court of Justice in the so-called Golden Shares cases, in particular cases C‑543/08, Commission v Portugal (special rights in EDP), and C‑212/09, Commission v Portugal (special rights in Galp), and the commitments undertaken by Portugal vis-à-vis the European Commission, the European Central Bank and the International Monetary Fund (the so-called “Troika”) under the 2011 Economic and Financial Adjustment Programme.
3 Central counterparties, central securities depositories, operators of regulated markets, payment system operators, and systemically important institutions.
4 See, in particular, the judgments of the Court of Justice in Cases C‑543/08, Commission v Portugal (special rights in EDP) and C‑212/09, Commission v Portugal (special rights in Galp).
