A Chinese group buying a European business now negotiates two agreements at once. One is with the seller, and it looks like any other purchase agreement. The other is with a set of authorities that were not in the room, cannot be negotiated with, and whose timetable does not accommodate a signing date agreed in Shanghai.
The regulatory picture has also stopped being stable. The European framework in force since 2020 is being replaced by a considerably wider one, national mechanisms have hardened, and a separate regime on foreign subsidies now asks a question that has nothing to do with security and everything to do with how the buyer was funded. A group that plans a transaction against the rules as it understood them three years ago is planning against rules that are already scheduled to disappear.
The screen is not one screen
There is no single European authorization. Screening of foreign investment remains a national competence, exercised by national authorities under national law, with a European layer that coordinates rather than decides. That means a transaction touching three member states can face three filings, three timetables and three sets of conditions, and the Union mechanism will not consolidate them.
What the European layer does is force information to circulate. A member state assessing an investment tells the others and the Commission; they may comment; the Commission may issue an opinion; the deciding state must give the matter due consideration but keeps the final say. In practice the coordination changes outcomes less by overruling than by making a national authority aware of a concern raised elsewhere about the same buyer.
For a Chinese acquirer the practical consequence is that the group’s profile travels. A structure examined once is a structure other authorities can be told about, and a set of answers given in one member state has to be the same set of answers given in the next.
What the current framework does, and until when
Regulation (EU) 2019/452 established the framework and has applied since 11 October 2020. It covers foreign direct investment, meaning investment by a foreign investor establishing or maintaining lasting and direct links with an undertaking carrying on an economic activity in a member state, including investment enabling effective participation in management or control.
Its cooperation mechanism runs on short periods. A member state or the Commission wishing to comment on an investment under screening elsewhere signals that intention within 15 calendar days, and comments or an opinion follow within 35 calendar days of receiving the information. Where an investment is not undergoing screening in the host state, comments and opinions can still be provided for up to 15 months after the investment has been completed. That retrospective window is the provision most often overlooked by buyers who conclude that no filing was required.
This regime has a defined end. Regulation (EU) 2026/1386 of 17 June 2026 repeals it with effect from 17 January 2028. Transactions closing before that date are governed by the current rules, transactions after it by the new ones, and transactions in between will be planned under one and completed under the other.
What replaces it, and what changes
The new Regulation applies from 17 January 2028, with a limited group of articles applying from 16 July 2026, and the Commission is to have a secure database of notified investments and screening outcomes available to member states by 17 July 2027. Three features change the position materially.
First, screening ceases to be optional. Each member state must establish a screening mechanism, and a common minimum scope obliges all of them to screen investments in defined sensitive areas. That scope covers targets developing, producing or commercializing dual use items or military goods and technologies; targets producing, researching or developing semiconductor or quantum technologies, or researching or developing certain artificial intelligence technologies; targets carrying out exploration, extraction, processing, recycling, recovery or stockpiling of listed strategic raw materials; targets operating voter registration databases, voting systems and related information systems; and certain financial market infrastructure and systemically important financial entities.
Second, the procedure is harmonized. National mechanisms must include an initial review of no more than 45 calendar days from the date the filing is deemed complete. Notification through the cooperation mechanism follows within 15 calendar days of the filing for the higher risk categories and within 45 calendar days for the others. A member state signals an intention to comment within 15 calendar days of the notification and the Commission an intention to issue an opinion within 20; comments then follow within 20 calendar days and a Commission opinion within 30, or within 15 and 25 calendar days respectively where additional information was requested. The deadlines can be extended once, by up to 20 calendar days.
Third, the notification triggers are written around exactly the profile most Chinese acquirers present. A member state must notify an investment within the minimum scope where the foreign investor, or its subsidiary in the Union, is directly or indirectly controlled by the government of a third country, whether through ownership structure, significant funding, special rights or state appointed directors or managers.
Two changes a Chinese group should read closely
The first is that the European subsidiary route closes. The current Regulation reaches only investments made directly by foreign investors. The new one extends to investments carried out through an undertaking established in a member state that is controlled, directly or indirectly, by a foreign investor. The reasoning is stated plainly: the risk is the same because the controlling investor has power over the target whether or not the acquiring entity is European. Buying through an established Dutch or German subsidiary will no longer place a transaction outside the framework.
The second concerns group reorganizations. Restructurings conducted solely for internal reorganization, without any change in the beneficial ownership of the target, without a new foreign investor acquiring ownership or control, without an increase in shares held by foreign investors and without conferring additional rights, fall outside the scope. That carve out is narrower than it sounds. Where the restructuring introduces a new legal entity established in a third country that is not already present in the upstream ownership chain, it comes back within scope, on the express reasoning that such an entity may be subject to a law requiring it to share information for intelligence purposes.
Greenfield investment is also defined and brought into the picture, as investment carried out by establishing new facilities or an undertaking in the Union. A group that assumed the framework applied only to acquisitions has assumed too much.
The Dutch mechanism as it stands today
The Netherlands screens under the Wet veiligheidstoets investeringen, fusies en overnames, in force since 1 June 2023. It applies to acquisition activities involving vital providers, managers of business campuses and undertakings active in the field of sensitive technology. Notification precedes the transaction, and the acquisition activity may not be carried out until the Minister has communicated that no review decision is required or has taken one.
The timetable is defined and long. The Minister communicates within eight weeks of receiving a notification whether a review decision will be required, and where further investigation is needed that period may be extended by a reasonable term of at most six months. Where a review decision is then applied for, it is taken within eight weeks of the application, again extendable by a reasonable term of at most six months. A transaction that meets a sensitive technology definition should be planned on the assumption that the outside case, not the base case, may apply.
For sensitive technology targets the trigger is not confined to control. Acquiring or increasing significant influence arises where a person can cast at least one tenth, one fifth or one quarter of the votes at the general meeting, with the applicable threshold set by decree for each category of target. A minority position taken as a strategic investment rather than an acquisition can therefore require a filing. The Act also carried a transitional power over acquisition activities that took place after 8 September 2020 but before it came into force, which is a useful reminder that these regimes are written to reach backwards where the legislature wants them to.
The other filing nobody plans for
Separate from security screening, Regulation (EU) 2022/2560 on foreign subsidies distorting the internal market has applied since 12 July 2023, with the notification obligations for concentrations and public procurement applying since 12 October 2023. It asks a different question: not whether the buyer is a risk, but whether it was funded in a way that distorts competition in the internal market.
A concentration must be notified where the acquired undertaking has an aggregate turnover in the Union of at least 500 million euro in the preceding financial year and the parties received aggregate foreign financial contributions of at least 50 million euro over the three preceding years. In public procurement, notification is required where the estimated contract value exceeds 250 million euro.
The difficulty for Chinese groups is definitional rather than numerical. A foreign financial contribution is not limited to what a European lawyer would call a subsidy. Capital contributions, loans on preferential terms, tax measures and support from state owned entities can all count, and much of it is ordinary commercial history rather than anything the group regarded as aid. Assembling three years of it across a large group takes months, and the exercise cannot begin after signing.
Sequencing is the constraint
The technical answers to these regimes are usually available. What defeats transactions is order. A purchase agreement negotiated with a fixed long stop date, signed before anyone has mapped which member states screen the target’s activities, produces a period in which the buyer is contractually committed and regulatorily exposed at the same time.
The work that changes outcomes is done before signature. Establishing which entities in the group are controlled, directly or indirectly, by a state body and documenting it accurately rather than defensively. Identifying the beneficial owner as the new Regulation defines it, reaching through trusts and, where no natural person can be identified, to the highest identifiable level of the ownership chain. Recording the funding history that the foreign subsidies regime will ask about. Deciding which member states will require a filing, and building the condition precedent and the long stop date around the slowest of them.
A Chinese group that arrives with that file is treated as a buyer with a complicated ownership structure, which is what it is. A group that assembles it under deadline pressure, in response to a request for information, is treated as a buyer that did not expect to be asked. The two are not the same transaction, even when the underlying facts are identical.