.jpg)
Stricter foreign direct investment screening
24 Jun 2026
The cumulative strengthening of FDI screening and geopolitical protectionism has fractured global capital markets. In the ?rst of a two-part series, Tahlia Kraefft explore how against this backdrop of greater complexity for investors managing cross-border guidelines, custodians have evolved into regulatory intermediaries enforcing multi-jurisdictional compliance before transactions
Image: sxcd/stock.adobe.com
Governments across major markets have been heightening their regulation of investment flows, in and out of their borders, since 2018. Geopolitical tensions, national security concerns, supplychain resilience policies, and strategic technology rivalry have driven the significant expansion of foreign investment screening. Regulators have actively shifted from liberalising trade to asset protection and security. Investment controls are being employed by governments as a tool to further economic growth and to protect national interests along with export controls, tariffs, and industrial incentives.
Cross-border transactions are experiencing greater regulatory scrutiny and fragmentation across large economies, as governments change the intent of these evaluations from procedural customs to integral parts of transaction risk assessment. This is leading to an ongoing increase in statutory restrictions across economies. Custodians are finding themselves at the centre of these changes, having to monitor ownership thresholds, track beneficial ownership, manage increasingly complex reporting obligations, and advise clients on marketaccess constraints. Wider screening scopes, mandatory filing obligations, and greater scrutiny of complex ownership structures, are resulting from stricter foreign direct investment (FDI) regulations worldwide. As the world order becomes increasingly multipolar, the regulation overseeing this capital transition is continually changing and increasing in complication.
Era of free-flowing capital ends
Advanced economies predominately lifted capital account restrictions in the late 20th/early 21st century (1980–2009) in the interest of economic integration, resulting in a period largely characterised by unregulated, free-flowing cross-border capital. Amid mounting concern over foreign state control and key technology from governments the approach transitioned from economic liberalism, to economic protectionism in the midto-late 2010s. Increased scrutiny amid geopolitical concerns such as US-China relations, Ukraine conflict escalated with the implementation of compulsory FDI controls including the US’s Foreign Investment Risk Review Modernisation Act (FIRRMA) regulation, the EU’s FDI Screening Cooperation Framework launched in 2020. This was followed by the UK’s enactment of the National Security and Investment Act in 2022, and Cyprus’ FDI screening law in 2026 marking the final EU state to be covered under the screening net. Custodians have assumed a key position as regulatory infrastructure facilitators, as successive FDI regulations have led to the fracturing of global capital markets.
From years of increased liberalisation — the shift to stricter foreign investment guidelines is a significant development, Tom Platts, partner at Stephenson Harwood says. Geopolitical trends have seen an expansion in foreign investment restrictions combined with an increase in the number of jurisdictions implementing them, he says. A wider number of different transaction structures such as share purchase, asset deals, certain insolvency scenarios, and certain internal restructuring, depending on the jurisdictions, are now covered under the rules. Asset servicing is majorly impacted according to Platts and it is especially complex where a number of divergent FDI regimes are implicated.
Modern growth of FDI screening regimes
With more than 100 jurisdictions mandating FDI reviews, the global landscape national security-based of FDI screening has grown rapidly. Governments progressively view stringent national security-based screening as a crucial regulatory response to geopolitical shocks along with heightened US-China competition, supply-chain resilience anxiety, and to ensure security of private data and technologies. Regulators have moved from rigid screening of inward-facing investment to surveilling outbound investments in geopolitically susceptible or competing markets to avoid the transmission of key technologies. Supervisory bodies have widened the range of sectors considered strategic to include data-intensive businesses, technology, critical infrastructure, defence, semiconductors, and energy. They have increased the guidelines around foreign control, and enhanced surveillance of cross-border transactions.
Chris Rowland, executive vice president and head of Custody, Digital and Fund Services Product, at State Street explains: “FDI rules have moved from the margins to the mainstream, with screening regimes expanding beyond defence and critical infrastructure into areas such as financial market infrastructure, technology, data, payments and other core services. Recent developments, including the EU’s FDI Screening Overhaul, US CFIUS and outbound investment controls, and AIFMD II, showcase this trend.”
Europe and UK heighten screening controls
The EU FDI Screening Regulation enforced in 2020 was the catalyst for a wave of new or expanded national regimes, according to Platts. This included well-established regimes such as France, Italy, and Germany in addition to nascent regulation being implemented in 2025 (for example in Croatia, Cyprus, and Greece).
The scale and proliferation of FDI screening regimes has been the most impactful development in FDI rules, according to Christine Graham, in the global Antitrust and International Trade team at Bryan Cave Leighton Paisner. The increase from only 12 EU Member States having a form of FDI screening mechanism from almost 10 years ago to now all 27 demonstrates this, Graham comments. She says this pattern is being replicated to a large extent across the globe.
“The starting point is that the compliance universe has expanded dramatically in a relatively short period of time. But the more consequential problem for asset servicing is not the proliferation itself, rather it is the divergence that comes with it.”
In 2022 the UK’s National Security and Investment Act (NSIA) came into full force which majorly expanded the types of transactions requiring national security reviews included beyond mergers and acquisitions to involve categories such as minority investments and acquisitions of voting rights. It gave the UK government the authority to review, enforce conditions on or block FDIs or mergers that threatened national security across a broad range of sectors.
Graham says the NSIA stands apart from many other FDI screening regimes, in that it is country-agnostic, meaning that the regime captures both UK and non-UK investors. She says the NSIA has been a significant investment screening development through its introduction of mandatory notifications across 17 sensitive sectors.
“In terms of asset classes, emerging technologies, such as artificial intelligence and semiconductors, alongside critical infrastructure, critical raw materials, and businesses having access to sensitive data, remain the central preoccupations of screening authorities. These are sectors that are genuinely central to economic growth and competitiveness, but they are also the sectors where a hostile actor could gain strategic leverage and exploit them for military or geopolitical purposes.
According to Platts, the NSIA has matured into a highly active regime: “With the UK government reporting 1,143 notifications between 1 April 2024 and 31 March 2025 In the last annual report on the NSIA — being approximately 26 per cent more notifications under the NSIA as compared to the previous reporting period.”
The NSIA mandatory notification regime is being expanded to include three new standalone sectors: critical minerals, semiconductors, and water, and is planning to issue more comprehensive guidance on major changes to current sector definitions.
Platts explains: ”For custodians and fund administrators, this means that a growing number of portfolio transactions in UK-based companies may require regulatory clearance before completion, directly affecting transaction timelines and the ability to execute trades without delay. It also remains to be seen whether the scope of the NSIA will be reduced to exclude transactions such as internal reorganisations and certain insolvency matters.”
Each regime has separate thresholds, individual procedural obligations, and own timelines, he says:
“There is no common template. And when you are dealing with a multi-jurisdictional transaction, that means managing parallel filing obligations across regimes that do not speak to each other, with inconsistent timelines and meaningfully different substantive tests. That creates real deal execution risk, and it is a risk that sits squarely with the asset servicer to manage.
“The look-through requirements that many of these regimes impose have also added a layer of operational complexity. For funds with complex, multi-layered investor structures, identifying the ultimate beneficial owner to the satisfaction of multiple screening authorities simultaneously is not straightforward and often results in delays to notifications.”
According to Graham, the current landscape is particularly complicated due to the tension governments are navigating between remaining open and staying attractive to foreign investment — which is essential for growth — while simultaneously protecting strategic assets from hostile acquisition.
She explains: “Recent geopolitical events have sharpened that tension considerably. The dangers of over-reliance on a single supplier for critical technologies are now well understood at a policy level, and governments are responding by scrutinising not just individual transactions but the broader implications for supply chain resilience and domestic industrial capacity.”
Platts notes that at the EU level the revised FDI Screening Regulation, updated in December 2025, will mandate all of the 27 Member States to engage a national screening mechanism and build a minimum scope of mandatory screening mechanisms including the screening of specific categories of financial service providers, such as central counterparties, central securities depositories, and operators of regulated markets.
He comments: “The explicit inclusion of financial market infrastructure entities within the minimum scope of the EU’s mandatory screening mechanism is a direct signal to entities active in the asset servicing chain that ownership changes in central securities depositories, central counterparty clearing houses, and payment system operators will face heightened regulatory hurdles within the EU.”
He emphasises that FDI screening no longer being a niche issue marks a core shift. “It is now part of transaction execution and operational risk management, alongside multiple regulatory requirements, including merger control, foreign subsidies, sanctions and export control regimes.”
Global capital markets fragmentation
The growth of FDI regimes has accelerated the geo-economic fragmentation of global capital markets. It has changed investments from a profit-driven model to a bloc-based model leading to the divergence of cross-border capital flows and fracturing of global value chains. Capital market fragmentation is being pushed by the widening of screening mechanisms including large economic blocs strengthening and lowering intervention thresholds for FDI. Not just outward flows are the targets of these controls but internal restructurings that implicate foreign parent firms. Cross-border mergers and acquisitions and greenfield investments are predominantly concentrated along political alliances, especially in strategic fields such as data infrastructure, critical minerals, and semiconductors. Furthermore, lags and disjointedness between regions in enforcing global standards are generating friction for crossborder banking operations.
The macroeconomic consequence is reduced investment volumes with global FDI being highly volatile and recent productive investment being subdued out of localised conduit flows.
Emerging markets and developing economies that lack deep capital markets are experiencing the largest GDP contraction risks. Rising trade policy uncertainty and sanctions are broadening the dispersion of investment results, leading to increased debt rollover and funding uncertainty.
Rowland comments: “FDI screening is no longer a specialist mergers and acquisitions issue; it is becoming part of the operating fabric of global investing. Asset owners and asset managers increasingly need to consider how they can move capital with confidence through a more fragmented and securityconscious market environment.”
Marta Garcia, partner, at Stephenson Harwood conveys that the absence of a uniform FDI regulation across jurisdictions significantly adds to the hurdles custodians experience managing cross-border operations and generates operational and regulatory complexity.
“Despite broad convergence on the principle that strategic sectors require protection, the implementation details continue to operate as a patchwork of national regimes and could vary substantially across jurisdictions in terms of notification triggers, sector definitions, review timelines, ownership thresholds, and remedies.
She explains that the absence of a single compliance framework that can be applied globally means that where multiple jurisdictions are implicated, the FDI regime in each relevant jurisdiction must be considered.
“What may be classified as critical national infrastructure subject to FDI review — and indeed, which may be restricted — in one jurisdiction, may not trigger another jurisdiction’s regime. As a result, each jurisdiction requires a detailed filing requirement analysis and this process may be time-consuming and resourceintensive for the parties.”
Additionally, the filing obligations and timing demands vary between regimes, increasing complexity to the management logistics of the deal timeline and raising costs, Garcia comments.
“This growing divergence reflects a broader trend toward regulatory fragmentation and localisation, which can result in certain jurisdictions needing to be carved out of the proposed transaction or operations. It is increasingly important to consider any potential FDI/other regulatory requirements early to avoid any issues later on in the deal timetable, and to ensure that parties are adequately protected in the transaction documents.
Divergence is the most underappreciated challenge in this area, Graham states, leading to genuine headaches in practice.
“The fundamental issue is that whilst most governments are broadly trying to achieve the same thing — protect critical infrastructure, ensure resilient supply chains and technological sovereignty — the way they go about it differs quite significantly.”
She explains that regimes frequently possess different thresholds, different sectors in scope, different timelines, and different criteria for what makes up a national security or public order concern.
“Europe is a good illustration of both the problem and the attempts to address it. With 27 Member States each setting their own rules, gaps inevitably emerge — and gaps can be exploited by foreign actors seeking to acquire control of sensitive assets through the path of least resistance. That tension between national competence and the need for EU-wide coherence is what drove the adoption of the original FDI Screening Regulation in March 2019, which created a cooperation mechanism enabling the Commission and Member States to exchange information on investments that may present national security or public order risks.
“The difficulty is that the world moved very quickly after that. Covid, the Russia-Ukraine war, and escalating geopolitical tensions meant that a framework designed in a more benign environment very quickly started to feel inadequate. So in January 2024, the Commission brought forward a revisedproposal as part of a broader package of economic security initiatives. That went through the full interinstitutional process, with a draft text published in February 2026, and formal Council approval this month.
The revised framework is expected to come into force in early 2028, bringing meaningful changes, Graham comments: “For the first time, mandatory screening will be required across all Member States. There will be a common minimum sectoral scope, an expanded framework to capture non-EU investors, greater information sharing between Member States and the Commission, and more harmonised procedures. It is a significant step towards coherence, though it is worth being clear-eyed about this — meaningful differences will remain, and navigating those differences will continue to be one of the central challenges for investors operating across the EU.
“And that points to a broader practical reality. Because these regimes are often opaque and the penalties for failing to notify can be severe — including transaction avoidance in some jurisdictions — investors inevitably err on the side of caution and file even where the obligation is uncertain. Ireland provides a striking illustration of this: since the regime came into force in January 2025, approximately 65 per cent of the transactions notified were considered by the Department not to meet the mandatory notification criteria.
“That is a significant proportion of filings that, on the government’s own assessment, need not have been made — and it reflects just how difficult it can be in practice to draw the line with confidence.
“That uncertainty and unpredictability has a real cost. It adds time, it adds expense, and in some cases it becomes a factor in whether a deal proceeds at all.”
Conclusion
As governments move to increase supervision of foreign capital, custodians are acting as regulatory intermediaries in a less unified global financial ecosystem with greater oversight. Stricter FDI controls have not stopped global investing, however the rules of engagement have shifted.
Capital is flowing through an increasingly fractured regulatory environment where national security, market access, and geopolitical alignment are playing a greater role in investment choices.
Cross-border transactions are experiencing greater regulatory scrutiny and fragmentation across large economies, as governments change the intent of these evaluations from procedural customs to integral parts of transaction risk assessment. This is leading to an ongoing increase in statutory restrictions across economies. Custodians are finding themselves at the centre of these changes, having to monitor ownership thresholds, track beneficial ownership, manage increasingly complex reporting obligations, and advise clients on marketaccess constraints. Wider screening scopes, mandatory filing obligations, and greater scrutiny of complex ownership structures, are resulting from stricter foreign direct investment (FDI) regulations worldwide. As the world order becomes increasingly multipolar, the regulation overseeing this capital transition is continually changing and increasing in complication.
Era of free-flowing capital ends
Advanced economies predominately lifted capital account restrictions in the late 20th/early 21st century (1980–2009) in the interest of economic integration, resulting in a period largely characterised by unregulated, free-flowing cross-border capital. Amid mounting concern over foreign state control and key technology from governments the approach transitioned from economic liberalism, to economic protectionism in the midto-late 2010s. Increased scrutiny amid geopolitical concerns such as US-China relations, Ukraine conflict escalated with the implementation of compulsory FDI controls including the US’s Foreign Investment Risk Review Modernisation Act (FIRRMA) regulation, the EU’s FDI Screening Cooperation Framework launched in 2020. This was followed by the UK’s enactment of the National Security and Investment Act in 2022, and Cyprus’ FDI screening law in 2026 marking the final EU state to be covered under the screening net. Custodians have assumed a key position as regulatory infrastructure facilitators, as successive FDI regulations have led to the fracturing of global capital markets.
From years of increased liberalisation — the shift to stricter foreign investment guidelines is a significant development, Tom Platts, partner at Stephenson Harwood says. Geopolitical trends have seen an expansion in foreign investment restrictions combined with an increase in the number of jurisdictions implementing them, he says. A wider number of different transaction structures such as share purchase, asset deals, certain insolvency scenarios, and certain internal restructuring, depending on the jurisdictions, are now covered under the rules. Asset servicing is majorly impacted according to Platts and it is especially complex where a number of divergent FDI regimes are implicated.
Modern growth of FDI screening regimes
With more than 100 jurisdictions mandating FDI reviews, the global landscape national security-based of FDI screening has grown rapidly. Governments progressively view stringent national security-based screening as a crucial regulatory response to geopolitical shocks along with heightened US-China competition, supply-chain resilience anxiety, and to ensure security of private data and technologies. Regulators have moved from rigid screening of inward-facing investment to surveilling outbound investments in geopolitically susceptible or competing markets to avoid the transmission of key technologies. Supervisory bodies have widened the range of sectors considered strategic to include data-intensive businesses, technology, critical infrastructure, defence, semiconductors, and energy. They have increased the guidelines around foreign control, and enhanced surveillance of cross-border transactions.
Chris Rowland, executive vice president and head of Custody, Digital and Fund Services Product, at State Street explains: “FDI rules have moved from the margins to the mainstream, with screening regimes expanding beyond defence and critical infrastructure into areas such as financial market infrastructure, technology, data, payments and other core services. Recent developments, including the EU’s FDI Screening Overhaul, US CFIUS and outbound investment controls, and AIFMD II, showcase this trend.”
Europe and UK heighten screening controls
The EU FDI Screening Regulation enforced in 2020 was the catalyst for a wave of new or expanded national regimes, according to Platts. This included well-established regimes such as France, Italy, and Germany in addition to nascent regulation being implemented in 2025 (for example in Croatia, Cyprus, and Greece).
The scale and proliferation of FDI screening regimes has been the most impactful development in FDI rules, according to Christine Graham, in the global Antitrust and International Trade team at Bryan Cave Leighton Paisner. The increase from only 12 EU Member States having a form of FDI screening mechanism from almost 10 years ago to now all 27 demonstrates this, Graham comments. She says this pattern is being replicated to a large extent across the globe.
“The starting point is that the compliance universe has expanded dramatically in a relatively short period of time. But the more consequential problem for asset servicing is not the proliferation itself, rather it is the divergence that comes with it.”
In 2022 the UK’s National Security and Investment Act (NSIA) came into full force which majorly expanded the types of transactions requiring national security reviews included beyond mergers and acquisitions to involve categories such as minority investments and acquisitions of voting rights. It gave the UK government the authority to review, enforce conditions on or block FDIs or mergers that threatened national security across a broad range of sectors.
Graham says the NSIA stands apart from many other FDI screening regimes, in that it is country-agnostic, meaning that the regime captures both UK and non-UK investors. She says the NSIA has been a significant investment screening development through its introduction of mandatory notifications across 17 sensitive sectors.
“In terms of asset classes, emerging technologies, such as artificial intelligence and semiconductors, alongside critical infrastructure, critical raw materials, and businesses having access to sensitive data, remain the central preoccupations of screening authorities. These are sectors that are genuinely central to economic growth and competitiveness, but they are also the sectors where a hostile actor could gain strategic leverage and exploit them for military or geopolitical purposes.
According to Platts, the NSIA has matured into a highly active regime: “With the UK government reporting 1,143 notifications between 1 April 2024 and 31 March 2025 In the last annual report on the NSIA — being approximately 26 per cent more notifications under the NSIA as compared to the previous reporting period.”
The NSIA mandatory notification regime is being expanded to include three new standalone sectors: critical minerals, semiconductors, and water, and is planning to issue more comprehensive guidance on major changes to current sector definitions.
Platts explains: ”For custodians and fund administrators, this means that a growing number of portfolio transactions in UK-based companies may require regulatory clearance before completion, directly affecting transaction timelines and the ability to execute trades without delay. It also remains to be seen whether the scope of the NSIA will be reduced to exclude transactions such as internal reorganisations and certain insolvency matters.”
Each regime has separate thresholds, individual procedural obligations, and own timelines, he says:
“There is no common template. And when you are dealing with a multi-jurisdictional transaction, that means managing parallel filing obligations across regimes that do not speak to each other, with inconsistent timelines and meaningfully different substantive tests. That creates real deal execution risk, and it is a risk that sits squarely with the asset servicer to manage.
“The look-through requirements that many of these regimes impose have also added a layer of operational complexity. For funds with complex, multi-layered investor structures, identifying the ultimate beneficial owner to the satisfaction of multiple screening authorities simultaneously is not straightforward and often results in delays to notifications.”
According to Graham, the current landscape is particularly complicated due to the tension governments are navigating between remaining open and staying attractive to foreign investment — which is essential for growth — while simultaneously protecting strategic assets from hostile acquisition.
She explains: “Recent geopolitical events have sharpened that tension considerably. The dangers of over-reliance on a single supplier for critical technologies are now well understood at a policy level, and governments are responding by scrutinising not just individual transactions but the broader implications for supply chain resilience and domestic industrial capacity.”
Platts notes that at the EU level the revised FDI Screening Regulation, updated in December 2025, will mandate all of the 27 Member States to engage a national screening mechanism and build a minimum scope of mandatory screening mechanisms including the screening of specific categories of financial service providers, such as central counterparties, central securities depositories, and operators of regulated markets.
He comments: “The explicit inclusion of financial market infrastructure entities within the minimum scope of the EU’s mandatory screening mechanism is a direct signal to entities active in the asset servicing chain that ownership changes in central securities depositories, central counterparty clearing houses, and payment system operators will face heightened regulatory hurdles within the EU.”
He emphasises that FDI screening no longer being a niche issue marks a core shift. “It is now part of transaction execution and operational risk management, alongside multiple regulatory requirements, including merger control, foreign subsidies, sanctions and export control regimes.”
Global capital markets fragmentation
The growth of FDI regimes has accelerated the geo-economic fragmentation of global capital markets. It has changed investments from a profit-driven model to a bloc-based model leading to the divergence of cross-border capital flows and fracturing of global value chains. Capital market fragmentation is being pushed by the widening of screening mechanisms including large economic blocs strengthening and lowering intervention thresholds for FDI. Not just outward flows are the targets of these controls but internal restructurings that implicate foreign parent firms. Cross-border mergers and acquisitions and greenfield investments are predominantly concentrated along political alliances, especially in strategic fields such as data infrastructure, critical minerals, and semiconductors. Furthermore, lags and disjointedness between regions in enforcing global standards are generating friction for crossborder banking operations.
The macroeconomic consequence is reduced investment volumes with global FDI being highly volatile and recent productive investment being subdued out of localised conduit flows.
Emerging markets and developing economies that lack deep capital markets are experiencing the largest GDP contraction risks. Rising trade policy uncertainty and sanctions are broadening the dispersion of investment results, leading to increased debt rollover and funding uncertainty.
Rowland comments: “FDI screening is no longer a specialist mergers and acquisitions issue; it is becoming part of the operating fabric of global investing. Asset owners and asset managers increasingly need to consider how they can move capital with confidence through a more fragmented and securityconscious market environment.”
Marta Garcia, partner, at Stephenson Harwood conveys that the absence of a uniform FDI regulation across jurisdictions significantly adds to the hurdles custodians experience managing cross-border operations and generates operational and regulatory complexity.
“Despite broad convergence on the principle that strategic sectors require protection, the implementation details continue to operate as a patchwork of national regimes and could vary substantially across jurisdictions in terms of notification triggers, sector definitions, review timelines, ownership thresholds, and remedies.
She explains that the absence of a single compliance framework that can be applied globally means that where multiple jurisdictions are implicated, the FDI regime in each relevant jurisdiction must be considered.
“What may be classified as critical national infrastructure subject to FDI review — and indeed, which may be restricted — in one jurisdiction, may not trigger another jurisdiction’s regime. As a result, each jurisdiction requires a detailed filing requirement analysis and this process may be time-consuming and resourceintensive for the parties.”
Additionally, the filing obligations and timing demands vary between regimes, increasing complexity to the management logistics of the deal timeline and raising costs, Garcia comments.
“This growing divergence reflects a broader trend toward regulatory fragmentation and localisation, which can result in certain jurisdictions needing to be carved out of the proposed transaction or operations. It is increasingly important to consider any potential FDI/other regulatory requirements early to avoid any issues later on in the deal timetable, and to ensure that parties are adequately protected in the transaction documents.
Divergence is the most underappreciated challenge in this area, Graham states, leading to genuine headaches in practice.
“The fundamental issue is that whilst most governments are broadly trying to achieve the same thing — protect critical infrastructure, ensure resilient supply chains and technological sovereignty — the way they go about it differs quite significantly.”
She explains that regimes frequently possess different thresholds, different sectors in scope, different timelines, and different criteria for what makes up a national security or public order concern.
“Europe is a good illustration of both the problem and the attempts to address it. With 27 Member States each setting their own rules, gaps inevitably emerge — and gaps can be exploited by foreign actors seeking to acquire control of sensitive assets through the path of least resistance. That tension between national competence and the need for EU-wide coherence is what drove the adoption of the original FDI Screening Regulation in March 2019, which created a cooperation mechanism enabling the Commission and Member States to exchange information on investments that may present national security or public order risks.
“The difficulty is that the world moved very quickly after that. Covid, the Russia-Ukraine war, and escalating geopolitical tensions meant that a framework designed in a more benign environment very quickly started to feel inadequate. So in January 2024, the Commission brought forward a revisedproposal as part of a broader package of economic security initiatives. That went through the full interinstitutional process, with a draft text published in February 2026, and formal Council approval this month.
The revised framework is expected to come into force in early 2028, bringing meaningful changes, Graham comments: “For the first time, mandatory screening will be required across all Member States. There will be a common minimum sectoral scope, an expanded framework to capture non-EU investors, greater information sharing between Member States and the Commission, and more harmonised procedures. It is a significant step towards coherence, though it is worth being clear-eyed about this — meaningful differences will remain, and navigating those differences will continue to be one of the central challenges for investors operating across the EU.
“And that points to a broader practical reality. Because these regimes are often opaque and the penalties for failing to notify can be severe — including transaction avoidance in some jurisdictions — investors inevitably err on the side of caution and file even where the obligation is uncertain. Ireland provides a striking illustration of this: since the regime came into force in January 2025, approximately 65 per cent of the transactions notified were considered by the Department not to meet the mandatory notification criteria.
“That is a significant proportion of filings that, on the government’s own assessment, need not have been made — and it reflects just how difficult it can be in practice to draw the line with confidence.
“That uncertainty and unpredictability has a real cost. It adds time, it adds expense, and in some cases it becomes a factor in whether a deal proceeds at all.”
Conclusion
As governments move to increase supervision of foreign capital, custodians are acting as regulatory intermediaries in a less unified global financial ecosystem with greater oversight. Stricter FDI controls have not stopped global investing, however the rules of engagement have shifted.
Capital is flowing through an increasingly fractured regulatory environment where national security, market access, and geopolitical alignment are playing a greater role in investment choices.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one asset servicing news source this year, make sure it is your free subscription to Asset Servicing Times
100% ON RETURNS If you invest in only one asset servicing news source this year, make sure it is your free subscription to Asset Servicing Times
