On 24 January 2024, the European Commission approved five initiatives to strengthen the economic security of the European Union, including one related to foreign investment in the European Union. Specifically, a Proposal for a Regulation on the control of foreign investments was made, which would introduce significant innovations in the control mechanisms of the Member States of the European Union and in the intra-Community cooperation mechanism.

The objective pursued by the European Commission with this Proposal for a Regulation is to promote the constant review of foreign investment control mechanisms, with a view to reinforcing the national economic security of countries in the face of investments from third countries in sectors that they consider to be strategic.

The main features of the possible future Regulation are as follows:

• As a first step, to strengthen the system for monitoring foreign direct investment in the European Union.
• Secondly, to unify the criteria, deadlines and procedures in the control mechanisms of the EU member states.
• Finally, to intensify the cooperation mechanism to analyse possible risks that could affect security and public order, as well as to strengthen the ‘comply or justify’ principle.

For its part, the control procedure must meet a number of minimum requirements:

• Establish a procedure for an initial review of applications for investment authorisations to determine whether they could affect security or public order.
• Member States should have the power to initiate ex officio reviews of foreign investments that have not been subject to authorisation, at least up to fifteen months after the transaction has been closed, if there are indications that they could compromise security or public order.
• Before imposing conditions on the authorisation or prohibiting an investment, the investor should be notified in advance and be given the opportunity to present arguments before a decision is taken.
• The possibility of imposing conditions, prohibiting or even cancelling foreign investments subject to authorisation that have not been notified or have been notified late after the closing of the transaction should be expressly provided for.
• In certain specific cases, investments will have to be authorised on a compulsory basis.

Given the importance that this investment control procedure would acquire if the Regulation in question were to be approved, we must closely follow the possible advances that are expected to be made in this area during the year 2025. Thus, it is expected that by 2025 controls at Community level will be intensified, with no signs of a possible relaxation of the regime that would allow the exclusion of the notification of operations of lesser relevance, a measure that has been demanded by some foreign investors.

Finally, it should be noted that the foreign direct investment (FDI) regime is particularly important in mergers and acquisitions (M&A) transactions, including direct and indirect sales and purchases of Spanish companies, asset transactions, issuance of equity or debt instruments, and even financing transactions. Their consideration is key when drafting transaction documentation and affects the timeline from signing to closing. The increasing complexity of these regulations will continue to drive the dynamics of the coming years, and 2025 will be no exception to this constant trend of change.