EU Industrial Accelerator Act: A new layer of investment control, industrial policy and strategic autonomy

On March 4, 2026, the European Commission formally presented the IAA, a proposed Regulation establishing a comprehensive framework to accelerate industrial capacity and decarbonisation in designated strategic sectors (COM(2026)100).

The proposal forms part of the EU’s broader industrial resilience and strategic autonomy agenda. Importantly, the IAA creates an additional layer of review that will apply concurrently with existing national FDI screening mechanisms, potentially requiring parallel filings and compliance assessments.

If adopted in its current form, the IAA will introduce a significant new layer of constraints and obligations affecting foreign investment, joint ventures, public procurement, subsidy schemes and supply chains in several key industries.

The proposal will follow the ordinary legislative procedure and is expected to prompt substantial debate, including on scope, proportionality, and compatibility with international trade rules, particularly WTO obligations and bilateral investment treaties.

A new foreign investment control architecture targeting four core sectors

One of the most consequential aspects of the IAA is the introduction of a dedicated foreign ownership regime applicable to the covered sectors 12 months after entry into force of this Regulation. This new control will apply to foreign direct investments in manufacturing worth more than €100 million, where the third country of which the foreign investor is a national or in which the investing undertaking is established holds more than 40% of the global manufacturing capacity in the relevant sector.

The IAA identifies four emerging strategic sectors that are considered critical to the Union’s economic security and defence resilience:

• Battery technologies and their 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
• Extraction, processing and recycling of critical raw materials
• Solar photovoltaic technologies
• Extraction, processing and recycling of critical raw materials.

Competent national authorities may approve a foreign direct investment only if the foreign investor satisfies at least four of the following six conditions:

• Ownership limits: The foreign investor holds no more than 49% of shares, voting rights, or control in a Union company or asset. This applies not only to direct shareholdings but also to indirect holdings and coordinated minority participations. governance rights may be treated as conferring effective influence even below 50%
• Joint venture: Investment is made through a joint venture with EU partners, with the foreign investor limited to 49%, and with EU partners effectively involved in management, technology transfer, and capacity building. This mechanism will require careful structuring of joint ventures and industrial partnerships involving EU manufacturing assets from the outset
• IP and know-how licensing: The foreign investor licenses intellectual property and know-how to the EU target. IP created before the investment remains fully owned by the EU entity, while IP developed jointly is jointly owned
• R&D commitment: The foreign investor commits to annual R&D spending in the EU of at least 1% of the EU target’s or asset’s gross annual revenue, proportionate to its level of control
• Workforce requirement: At least 50% of employees linked to the investment must be Union workers at all levels, supported by training and capacity-building. If an existing EU manufacturing business is acquired (including after bankruptcy), the current or former workforce should be maintained or rehired in line with national law and collective agreements. Where public funding is granted, the investor must not reduce the number of Union workers for five years, failing which the funding may be recovered
• EU sourcing strategy: The foreign investor must publish a strategy to strengthen EU value chains, prioritize sourcing inputs from the EU, and aim to source at least 30% of inputs from the Union for products placed on the EU market.

These requirements mark a notable shift toward embedding technological sovereignty considerations directly into transaction structuring.

In addition to the conditions that could result in the investment being refused, each investment in a strategic sector must be notified to the competent national authority when the threshold of 30% is reached.

This obligation arises when a non-EU investor acquires 30% or more of the equity or voting rights in a covered entity or 30% or more ownership of a Union asset, including leasehold or other rights that confer control over that asset.

When determining whether these thresholds have been met, all aggregated interests held directly or indirectly must be taken into account, including those held through affiliates, ownership chains or foreign investors acting in concert.

Failure to notify may result in the suspension of voting rights and significant financial penalties, calculated at a minimum of 5% of the foreign investor’s average daily aggregate turnover. Non-compliant transactions may also be subject to unwinding orders requiring divestiture of the investment.

The investment authority has 30 days (extendable by 15 days) to decide whether a notification is admissible and, if so, must immediately send the full notification to the Commission. The Commission then has 30 days to issue a written opinion on whether the investment falls within scope, meets the required conditions, and should be approved. If approved, monitoring obligations will follow. The proposal does not currently specify a formal appeals mechanism, though judicial review before the Court of Justice of the European Union would likely be available under general EU law principles.

Taken together, these elements create a parallel screening system that goes beyond traditional FDI control and introduces structural limits on ownership and influence.

The proposal does not establish detailed transitional provisions for investments completed before entry into force. Existing investments that subsequently undergo material changes (such as increases in ownership thresholds or changes to governance arrangements) may, however, trigger notification requirements. Investors with existing positions in those covered sectors should assess whether planned changes could bring them within scope.

Beyond investment control, the Act combines demand-side measures, regulatory simplification, investment support and strategic planning tools.

Its ambition is explicit: to strengthen the European Union’s industrial base and reverse the decline in manufacturing’s share of EU GDP, targeting a 20% contribution by 2035.

The proposal establishes a framework for the application of Union origin and low-carbon requirements to products and services from strategic sectors in the context of public procurement and public support schemes, in order to create lead markets for European low-carbon and Union-made products and strengthen EU industrial value chains.

EU-origin requirements in public procurement and subsidies

The IAA introduces mandatory Union-origin requirements in public procurement and support schemes in strategic sectors, including nuclear technologies.

The Proposal sets out EU-origin thresholds for strategic materials directly or indirectly used in defence-related manufacturing. EU-origin content requirements will apply to supported nuclear manufacturing projects, and public procurement for new nuclear plants and small modular reactors must include a minimum number of EU-origin components.

These rules will affect companies supplying into public procurement chains, participating in EU or national subsidy schemes, or competing with EU-based manufacturers in the listed sectors.

The impact is not limited to manufacturers. Upstream and downstream operators in relevant supply chains may also be affected.

Exclusion of high-risk suppliers

The proposal introduces explicit restrictions on high-risk suppliers across public procurement, auctions, and public support schemes. Suppliers identified as “high-risk suppliers” under designated criteria may not supply critical components for renewable energy auctions, public procurement procedures, or final products supported by government intervention. The determination of high-risk supplier status is expected to be coordinated at EU level, though Member States may have discretion in implementation.

These measures align industrial policy with cybersecurity and national security considerations, particularly in infrastructure-heavy sectors.

Practical implications for businesses by stakeholder category

If adopted, the IAA will materially affect how transactions, joint ventures, and supply arrangements are structured in strategic industrial sectors. The following considerations apply to different stakeholder groups:

• Foreign investors: Foreign investors will need to assess ownership caps, notification triggers, and technology transfer obligations at an early stage of transaction planning. The requirement to satisfy at least four of six conditions introduces significant structuring complexity, particularly for investors from countries holding more than 40% of global manufacturing capacity in covered sectors. Joint venture structures with EU partners may become the preferred approach for market entry.
• EU companies in covered sectors: EU-based companies operating in covered sectors will need to review governance arrangements, workforce composition, IP allocation and sourcing strategies. Companies receiving investments from non-EU parties should ensure transaction documents address the six conditions framework and include appropriate representations and covenants.
• Supply chain participants and government contractors: Companies participating in public procurement or subsidy schemes should prepare for EU-origin content requirements and enhanced cybersecurity scrutiny. Upstream suppliers may need to demonstrate origin credentials to remain in procurement supply chains. Companies should also monitor high-risk supplier designations that could affect their market access.

The legislative process is only beginning. Amendments are likely, and key debates will centre on scope, proportionality, and international trade compatibility. Companies should conduct early legal analysis covering proportionality assessments, potential discrimination risks, and compatibility with EU procurement law and international obligations.

Nonetheless, the direction of travel is clear: the EU is embedding technological sovereignty, supply chain resilience and security considerations directly into industrial regulation.

*Trainee Marie Vitoux also contributed to this client alert.