In brief
On 4 March 2026, the European Commission published its proposal for the Industrial Accelerator Act (IAA), a wide-ranging regulation aimed at strengthening the EU’s industrial base, accelerating decarbonization, and reducing strategic dependencies in critical value chains. The IAA is a core pillar of the EU’s Clean Industrial Deal and builds on the recommendations of the Draghi Report on European Competitiveness. Its central quantitative ambition is to increase manufacturing’s share of EU gross domestic product (GDP) from 14.3% to 20% by 2035.
The proposal pursues this goal through three instruments. Demand-side measures introducing “Made in EU” and low-carbon requirements in public procurement and public support schemes, accelerated permitting and the designation of industrial manufacturing acceleration areas and, a new framework of conditions for major foreign direct investments in strategic sectors.
This new framework would primarily affect the planning of investments by foreign investors. They would now need to align their planning not only with foreign direct investment (FDI) regulations designed to protect public security and order, but would also face the challenges of an entirely new FDI framework.
In more detail
The foreign investment contribution framework
Position within the EU’s investment control architecture
The IAA’s FDI provisions would add a layer to the existing architecture of EU investment control. That architecture currently comprises national FDI screening regimes and the EU FDI Screening Regulation (Regulation (EU) 2019/452), which establishes requirements for a screening on grounds of security and public order.
The FDI regime proposed by the IAA would be distinct from these instruments in a fundamental respect It is not framed as a security or public order measure. Instead, the proposal is explicitly justified as an industrial policy and economic security instrument, designed to ensure that foreign investment in strategic sectors delivers value to the EU economy, creates employment, and supports the EU’s decarbonization and competitiveness objectives. This different framing has significant practical consequences.
The proposal also operates alongside the Foreign Subsidies Regulation, meaning that qualifying investments may be subject to concurrent review under multiple EU-level frameworks.
Scope
The scope of the IAA FDI regime includes two cumulative thresholds. The investment value 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.
This dual threshold substantially narrows the scope and signals that the regime is targeted rather than economy wide, with a practical focus on investors from countries with dominant global production shares.
The sectors covered are described as “emerging strategic manufacturing sectors” and currently comprise four areas: battery technologies and their value chains 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 photovoltaic technologies and the extraction, processing and recycling of critical raw materials. The EU Commission may extend this list to additional sectors by delegated act, though digital technologies, artificial intelligence, quantum technologies and semiconductors are expressly excluded from this power.
Certain transactions are excluded from the scope. Portfolio investments fall outside the regime, as do investments targeted at providing services. Also, investments by investors from countries with which the EU has concluded a free trade agreement benefit from an exemption to the extent of the Union’s commitments under those agreements.
The FDI criteria: a four-out-of-six mechanism
At the heart of the IAA's proposed FDI framework is a mandatory pre-approval requirement. Accordingly, investment Authorities shall only approve foreign direct investments that fulfil at least four of the following six conditions:
- First, foreign investors do not acquire, hold, or exercise ownership interests representing more than 49% of the share capital, voting rights, or equivalent ownership interests in any EU target, or equivalent ownership, leasehold or other rights conferring control over an EU asset.
- Second, the foreign investor undertakes the direct investment through a joint venture with one or more EU entities, with the foreign investor holding no more than 49% of the share capital, voting rights, or equivalent ownership interests or other rights conferring control in any of the EU entities participating in the joint venture.
- Third, foreign investors have entered into agreements providing for the licensing of their intellectual property rights and of their know-how to the benefit of EU targets or EU assets.
- Fourth, the foreign investor annually directs an amount equivalent to at least 1% of the gross annual revenue of the EU target or asset to research and development spending in the EU.
- Fifth, at least 50% of the workforce employed in the context of the foreign direct investment consists of EU employees across all categories of the workforce.
- Sixth, the foreign investor prepares and publishes a strategy for prioritizing the sourcing of inputs from within the EU and commits to sourcing at least 30% of the inputs used in products placed on the EU markets from EU suppliers.
The fifth condition is the only non-negotiable requirement: the foreign direct investment must be compliant with this requirement in order to be approved, irrespective of how many of the other conditions are met.
The published proposal represents a material softening compared to earlier leaked drafts, which required compliance with all six conditions simultaneously. The 49% ownership cap has not been removed, but its status has changed and it now functions as one condition within a flexible contribution test rather than a standalone structural prohibition.
Procedural features
Foreign investors would have to notify the competent investment authority of the Member State in which the EU target or asset is located before implementing any qualifying investment, and the investment would not proceed until explicit approval had been granted. The investment authority would determine the admissibility of the notification within 30 days, after which the EU Commission would further have 30 days to issue a written opinion on whether the investment falls within the scope of the regime and whether the conditions under Article 18 of the IAA are fulfilled. The investment authority would then issue its final reasoned decision within 60 days of receiving the notification, subject to possible extensions which may result in a maximum review period of 105 days. The investment authority would then be required to explain in that decision how the EU Commission's opinion was taken into account.
Assessment and implications for investors
From a deal-making perspective, the IAA would significantly reshape investment planning in the covered sectors. Foreign investors would need to assess early whether the EUR 100 million and 40% capacity thresholds are met, structure transactions to address the governance, employment, and technology transfer conditions and anticipate parallel filings under FDI screening and foreign subsidy rules. Moreover, it would be important to factor industrial policy considerations directly into valuation and transaction timelines.
The IAA would mark a qualitative shift in EU investment policy. While maintaining formal openness to foreign direct investment, it would introduce explicit conditions ensuring that major investments in strategic sectors advance the EU’s industrial, employment, and decarbonisation objectives. In doing so, the IAA would complement but not replace existing FDI screening mechanisms, embedding economic security and industrial value creation in the EU investment regulation.