The Industrial Accelerator Act, a proposed new FDI framework for key industrial sectors

Introduction

On 4th March 2026 the European Commission (the “Commission”) put forward the Industrial Accelerator Act (“IAA”), an ambitious and complex piece of legislation aimed at increasing demand for low-carbon, European-made technologies and products.

In response to increasing global uncertainty, the IAA aims to reinforce the European Union (“EU”)’s manufacturing sector by prioritizing strategic industries. The proposal aims to further advance the EU’s climate objectives, foster economic security, and support the development, retention, and transition of high-quality employment opportunities.

As part of the package of new rules aimed at achieving this, the IAA proposes the introduction of a dedicated foreign direct investment (“FDI”) framework for investments in certain designated emerging strategic manufacturing sectors. This FDI framework endeavours to introduce certain mandatory criteria which are designed to secure high added-value investments in these sectors.

Restrictions on FDI in strategic manufacturing sectors

The IAA seeks to introduce FDI control for investments in key emerging sectors such as batteries, electric vehicles, solar PV technologies and the extraction, processing or recycling of critical raw materials. The Commission will be able to extent the scope of these sectors should the need arise.

Two cumulative conditions must be met for FDI to fall within the IAA’s scope. The investment being made must exceed EUR 100 million and the foreign investor must be a national or undertaking of a third country that holds more than 40% of global manufacturing capacity in the relevant sector.

Not all types of investments will be subject to the IAA. In this respect, the IAA proposes that investments which are covered by a current or provisional economic partnership or free trade agreement or are directed at providing services do not fall within its scope.

An exemption is also available for investments which are framed as portfolio investments. This exemption aligns with the existing exemption under Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union (the “FDI Regulation”) which specifically excludes from notification and screening investments made in the form of portfolio investments as long as such investments are made solely with the intention of making a financial investment without any intention to influence the management and control of the target.

FDI under the IAA shall be eligible for approval if it meets a minimum of four of the following six value added FDI criteria:

• Foreign investors are prohibited from directly or indirectly acquiring, holding, or exercising more than 49% of the subscribed capital, voting rights, or equivalent participation interests in a Union company or asset;
• Within this prescribed maximum participation limit, FDI must be carried out within the framework of a joint venture with one or more companies established in the Union. Joint ventures should enable Union partners to effectively participate in management, technology transfer, and capacity building;
• Foreign investors must sign agreements for licensing intellectual property rights and transferring know-how to the Union company or joint venture. All intellectual property developed during the investment will be owned solely by the Union company;
• Each year, the foreign investor must invest at least 1% of the Union company’s annual gross turnover, proportional to the foreign investor’s share, in research and development within the EU;
• At least 50% of the workforce of the Union company, joint venture or owner of the Union asset must consist of permanent Union employees. Such employees must be engaged at all levels of the organisation and offered appropriate training opportunities;
• Products offered on the Union market by the Union company must source at least 30% of their inputs used for the product placed on the Union market from within the Union.

Whilst the foreign investor has overall flexibility in terms of which of these conditions may be satisfied, the condition relating to the workforce is non-negotiable and must always be met.

This FDI control is independent from the FDI framework which is set up by the FDI Regulation. Whilst current FDI frameworks across the EU focus their review on national public security risks, the IAA will introduce another layer of screening which deals with the economic impact of major investments including security of supply and seeks to ensure that investment into the EU brings with it tangible benefits, including a stronger workforce and supply chain resilience within the EU.

Review Process

The responsibility of screening FDI caught by the IAA falls within the Member State’s designated investment authority or in certain instances, the Commission’s.

The FDI will be subject to a standstill obligation and cannot be implemented without prior explicit approval.

The foreign investor is required to submit the necessary notification to the investment authority of the relevant EU member state which would in turn, screen the investment and share it with the Commission for its views. The Commission can issue non-binding written opinion to the investment authority where it finds this appropriate. Whilst this opinion is only advisory, where the investment authority does not agree with the Commission’s opinion, it must assess the notification in greater detail and is also bound to justify how the opinion of the Commission was taken into account.

Following its review process, the investment authority must issue a reasoned decision approving or blocking the FDI. As part of the approval decision, the investment authority may impose reporting obligations on the investor concerned to ensure that the conditions as stipulated above are satisfied.

Stronger Commission involvement in FDI screening

Whilst FDI under the IAA must in the first instance be notified to the Member States’ investment authority, the Commission also holds an independent review competence in certain cases. The Commission comes in either where the value of the planned investments exceeds EUR 1 billion, on the Commission’s own initiative where the proposed FDI has the potential to significantly impact added value creation in the EU market or on the request of an investment authority. In such cases, the role of the Commission stops being merely an advisory one. Rather, in such instances, the Commission will be empowered to assume full responsibility over the investment’s review.

On a local scene, FDI screening currently falls within the remit of the National Foreign Direct Investment Screening Office (“NFDIS”). Should the IAA be implemented, it may be the case that NFDIS will also be tasked with conducting the screening and review for FDI which falls within its scope.

Conclusion

The IAA signals a more interventionist EU approach to industrial policy, combining climate objectives with economic security through a dedicated FDI control regime. If adopted, it will have material implications for foreign investors active in strategic manufacturing sectors, particularly given that the conditions that must be fulfilled may prove to be quite cumbersome and are bound to have a direct impact on the transaction value.

Should the IAA be eventually enacted, it will add a further layer to an increasingly complex regulatory landscape, requiring careful deal structuring of investments alongside a review of existing FDI frameworks, the Foreign Subsidies Regulation and existing merger control frameworks.

Disclaimer: Ganado Advocates is responsible for contributing this law report but was not in any way involved as legal advisor for the parties in the judgement being covered in this law report. This article was first published in ‘the Independent’ on 26/05/2026.