Can the Industrial Accelerator Act strengthen strategic industries without stifling investment? A look at the IAA’s FDI provisions

Introduction and background 

On 4 March 2026, the European Commission published its legislative proposal for an Industrial Accelerator Act (“IAA”).

The EU’s initiative aims to address vulnerabilities in the EU's resilience, competitiveness, economic security, and strategic autonomy. These vulnerabilities have been exposed and exacerbated by the evolving geopolitical landscape, the increasing weaponisation of economic tools, and intensified global competition. 

The IAA's primary objective is therefore to enhance the functioning of the internal market by establishing a robust framework that supports the development, competitiveness, and resilience of the Union's manufacturing sector. 

It specifically targets the acceleration of industrial capacity and decarbonisation in specific sectors, ultimately seeking to strengthen the EU's long-term economic resilience, prosperity, and strategic autonomy.

To achieve its overarching goals, the IAA proposes the following measures:

• Establishing "Union Origin" and "low-carbon" criteria: These criteria will be integral to public procurement and support schemes, incentivising domestic and sustainable production.
• Implementing rigorous conditions for Foreign Direct Investments (FDI): Strict conditions will apply to FDI in critical emerging industries to ensure investments contribute genuine added value to the EU economy.
• Streamlining permitting procedures: It aims to simplify and accelerate the permit-granting processes for industrial projects.

Ultimately, these measures are designed to reverse the decline in the EU's manufacturing share of GDP, targeting at least 20% by 2035. 

In this blog, we take a deep-dive into the conditions on foreign direct investments of the IAA.

The introduction of EU origin criteria marks a significant shift towards bolstering resilience in the EU’s trade and industrial policy. The implications of this change for the openness of the EU’s economy and for internationalised value chains will be further explored in a separate blog post, to be published shortly. It will focus on how the IAA defines ‘EU origin’ (a concept that extends to some other countries as well).

Provisions on foreign direct investments

The draft IAA contains a set of limitations for certain foreign investments. They apply where three conditions are met. We look at each of the conditions in more detail below. But in short, in order for the rules to apply, the investment must:

1. constitute a foreign direct investment within the scope of the IAA,
2. have a value exceeding €100m, and
3. target manufacturing in an emerging strategic sector in which more than 40% of global manufacturing capacity is held by the third country of the investor.

Where these conditions are met, the investment is subject to a mandatory notification requirement and may not be implemented without approval by the competent investment authority (which Member States will need to designate) or the Commission. Approval shall only be granted if certain conditions safeguarding added-value creation in the Union are fulfilled.

The IAA expressly applies "notwithstanding" the existing EU FDI Screening Regulation, meaning both regimes can apply in parallel. Both regimes use similar concepts but are not aligned because they had been developed in parallel.

This dual application will add complexity for foreign investors, who may need to navigate two separate review processes simultaneously, though the IAA is expected to have a much more limited scope in practice than the EU FDI Screening Regulation. 

The conditions and requirements set out in the draft IAA raise a number of questions.

Foreign direct investment within the scope of the IAA

The IAA only applies to certain kinds of foreign investments, namely investments:

• in a Union target or asset, including greenfield investments,
• by foreign investors — i.e. natural persons or undertakings of a third country — or companies ultimately controlled by foreign investors, even where those companies are established in the EU,
• except by investors whose ultimate controlling shareholders are from a country with which the EU has concluded a relevant free trade agreement. While it is not entirely clear which agreements would be covered, this exemption would likely (at least) apply to investors from Canada, Japan, UK, South Korea, Singapore, Vietnam, New Zealand.

Internal restructurings within a corporate group are excluded, provided they are conducted solely for the purpose of an internal restructuring and do not result in changes to beneficial ownership or control by foreign investors.

The IAA will only apply if an investment leads to foreign investors (collectively) having “control” over the Union target or asset. But the definition of "control" is unusually broad. Foreign investors shall be considered to have control where the investment reaches either of the following thresholds:

• 30% or more of the share capital or voting rights in a Union target; or
• 30% or more of ownership of a Union asset, leasehold or other rights conferring control over a Union asset.

This does not seem to require any individual investor to hold 30% of ownership or voting rights – instead the ownership and voting rights of all foreign investors are aggregated and any investor whose foreign direct investment would cause this threshold to be reached would need to notify the investment. While this is not clear in the draft, it seems possible that this should also apply to any new foreign direct investment in the Union target or asset where the threshold is already fulfilled. 

The only apparent restriction is that the investment needs to be a direct investment, and not just a portfolio investment, i.e. it must include some sort of influence on the management and not just be made for financial purposes. However, in comparable legal acts, investments of as little as 5% have already been considered a direct investment. Given that the definition of control also refers to the stake in the share capital, it seems that even passive investors are intended to be captured by the provision. 

Value exceeding €100m

Only investments exceeding €100m are subject to the IAA. The IAA provides that investments by the same foreign investor in the same Union target or Union asset made after the entry into force of the IAA shall be aggregated for the purposes of reaching this threshold. 

This raises a number of unresolved questions:

Emerging strategic sectors

The IAA would according to the current draft applies only to foreign direct investment in manufacturing in four emerging strategic sectors:

• battery technologies and the associated value chain for battery energy storage systems;
• pure electric vehicles, off-vehicle charging hybrid electric vehicles and fuel-cell electric vehicles, including components related to electrification and digitalisation;
• solar PV technologies; and
• extraction, processing and recycling of critical raw materials.

Investments targeted at providing services are expressly excluded.

As an additional requirement — which appears to have been introduced in the latest draft before publication and was not part of previous leaks — the IAA will only apply where the foreign investor belongs to a country that holds more than 40% of global manufacturing capacity in the relevant sector. The Commission is required to monitor global manufacturing capacity and publish updated data for each sector.

De facto, this means that the IAA will likely exclusively apply to Chinese investors. It is common practice for the EU and many states to enact investment laws that — likely for diplomatic reasons — purport to be "country-neutral" yet are de facto targeted at China. But the intention to single out China is particularly clear in the IAA.

The Commission will have the authority to extend the list of emerging strategic sectors by means of delegated acts. The IAA explicitly identifies net-zero technologies (listed in the Net Zero Industry Act), nuclear fuel cycle technologies and electric propulsion technologies for transport as potential candidates for such an extension; however, the delegated authority does not appear to be limited to that list. The draft explicitly excludes digital technologies, artificial intelligence, quantum technologies and semiconductors from future extension. The Commission will also have the power to set different investment value thresholds for these additional sectors.

The draft IAA does not provide for any role of the Member States or other EU institutions in the adoption of these delegated acts. This would give the Commission an unprecedented power to unilaterally shape industrial policy. It appears questionable whether the Member States will accept this.

Value-added foreign direct investment criteria

Where a foreign direct investment fulfils all of the conditions set out above, it may only be implemented after prior approval by the competent investment authority. Approval shall be granted if at least four of the following six conditions are fulfilled: 

Previous leaked draft required all six or later five of these conditions to be fulfilled.

Jurisdictional questions and review periods

The IAA envisages a considerably more significant role for the Commission than previous legal acts such as the EU FDI Screening Regulation:

• A notifiable foreign direct investment must be notified to the national authorities of the Member State where the Union targets or assets are located; however, those authorities must seek the opinion of the Commission before deciding on the notification. The investment authority decides on admissibility within 30 days — extendable by 15 days — and must issue its final decision within 60 days (or 75 days if the admissibility deadline is extended). The deadline for issuing the reasoned decision may itself be extended by a further 30 days where the circumstances justify it, potentially extending the maximum timeline to 105 days.
• The Commission has the right to assume sole authority to decide a case where the investment value exceeds €1bn, or where the investment otherwise has the potential to significantly impact added-value creation in the Union market. In such cases, the national investment authority must implement the Commission's decision. The IAA sets out criteria for assessing "significant impact", including the investment's strategic importance, cross-border economic impact, potential to disrupt supply security, environmental effects and relative value compared to other investments in the sector.
• Where the Commission does not assume authority over a case, the Member State may deviate from the Commission's recommendation, but only after an additional two-month period during which the investment authority must assess the investment in greater detail and justify in its reasoned decision how the Commission's opinion was taken into account.
• Where two or more national investment authorities with jurisdiction to review an investment disagree as to the decision to be taken, the Commission shall make the decision.
• The Commission shall adopt an implementing act to specify detailed rules for verifying compliance with the conditions. The national investment authorities shall be responsible for ensuring compliance. The penalty regime is notably stringent: failure to notify triggers penalty payments of at least 5% of the average daily aggregate turnover of the foreign investor undertaking, or at least 5% of investment value for natural person investors. Additional penalties apply for violations of the conditions themselves and monitoring obligations.

Conclusion

The draft IAA's foreign direct investment provisions mark a paradigm shift in EU investment policy. For decades, the EU's approach to foreign investment has been guided by the principle of openness — screening mechanisms like the FDI Screening Regulation were limited to protecting security and public order. The draft IAA abandons this premise. For the first time, the EU would condition market access on the transfer of technology, know-how, intellectual property and local value creation — borrowing directly from the industrial policy playbook of the very country whose dominance it seeks to counter.

This shift carries an implicit admission: in the emerging strategic sectors covered by the IAA, the EU can no longer compete on its own terms. It lacks the manufacturing scale, the cost advantages and — in some cases — the technological edge. The IAA is, at its core, an attempt to acquire what the EU does not have, by leveraging its most valuable asset: access to the world's largest single market.

Whether this strategy will succeed is far from certain. The risk of deterrence is real. Investors faced with mandatory joint ventures, 49% ownership caps, workforce quotas, IP licensing obligations and a review process of up to 105 days may simply choose to invest elsewhere. If that happens, the IAA would achieve the opposite of its stated objective: the EU would become more dependent on imports from the very countries whose market dominance the Regulation seeks to counterbalance.

Equally concerning is the Regulation's built-in capacity for expansion. The Commission has broad authority to extend the list of emerging strategic sectors by delegated act — a mechanism that, while formally subject to Parliamentary and Council oversight, allows for incremental extension without full legislative debate. What begins as a targeted instrument for four narrowly defined sectors could, over time, evolve into a comprehensive industrial policy regime governing foreign investment across large parts of the EU economy. 

The draft itself appears to be a compromise between conflicting internal positions, resulting in provisions that frequently seem disjointed, contradictory and unclear. Key concepts — such as "investment value", the interplay between different aggregation rules, and the practical mechanics of the approval conditions — remain insufficiently defined. It remains questionable whether the investment conditions will be practical to implement (how should a minority investor determine composition of the workforce or the sourcing of inputs?) The parallel application alongside the existing FDI Screening Regulation adds a further layer of complexity.

The legislative proposal is now undergoing the EU’s Ordinary Legislative Procedure with the involvement of the European Parliament and the Member States. It is anticipated the legislative procedure will take between 12 and 18 months due to the high level of politicisation of the proposal. Consequently, the Commission’s proposal is expected to undergo substantial changes during this procedure.

The co-legislators face a fundamental choice. If the EU is serious about using investment conditionality as an industrial policy tool, the IAA needs to be clear, predictable and proportionate enough to attract the very investment it seeks to shape. In its current form, it risks falling between two stools: too intrusive to be welcoming, too vague to be effective.