Two years with FDI screening in an uncertain geopolitical environment – how did it actually turn out?

In a continued volatile geopolitical environment with high activity in, among other areas, the defence sector, AI and dual-use products, the screening of foreign direct investments, commonly referred to as FDI, has emerged as one of the most prominent issues in Nordic transaction processes. In Sweden, the Act on the Screening of Foreign Direct Investments entered into force on 1 December 2023, as a complement to the existing legislation concerning security‑sensitive activities.  The purpose of the legislation was, and still is, to gain insight into and control over foreign interests in Swedish companies that conduct so-called “protection-worthy activities”, and to prevent foreign investments that could be harmful to Swedish interests. So, what does it look like now, almost two years later?

What do the statistics show?

During the period from the Swedish FDI legislation’s entry into force up to and including 30 September 2025, 2,710 notifications of investments in protection-worthy activities have been submitted to the Inspectorate of Strategic Products (ISP). As of 30 September 2025, ISP has left 2,417 of these without action. In other words, just under two percent of all notified investments led to further review by the ISP. During the same period, 42 cases, i.e. just under 2 % of all notifications received, led to further review, and so far only two investments have been prohibited (although there are likely additional cases where a prohibition decision was contemplated but the notification was withdrawn before such a decision was taken). Sweden also stands out internationally. According to information from the European Commission, Sweden accounted for approximately 40 % of all notified foreign direct investments in the EU in 2024. In addition, the number of notifications is increasing – in the third quarter of 2025 the number of notifications increased by as much as 92 % compared with the third quarter of 2024.

What are the causes?

The main reason is that the Swedish FDI legislation has been given a very broad scope. Below are some illustrative examples:

• The investor’s nationality is irrelevant, Swedish companies with Swedish owners are also subject to the notification requirement – meaning that the Swedish FDI act is, despite its name and purpose, not limited to foreign direct investments.
• Investments by an existing owner are subject to the notification requirement, even if the investor has previously notified investments in the company and was then approved as an investor.
• Intra-group transfers and restructurings are subject to the notification requirement – meaning that the Swedish FDI act would cover also a transfer of a business conducting protection-worthy activities from a company to another company within the same group, again regardless of the companies’ nationality.
• Acquisitions of shelf companies and the incorporation of new companies are subject to the notification requirement, even if the purchaser/incorporator already conducts protection-worthy activities.
• Investments in listed companies are subject to the notification requirement.
• There is no monetary threshold. Even minor investments can be subject to the notification requirement.
• The notification requirement is triggered as soon as the investor obtains control over 10 % of the votes in a company, or if a certain degree of influence arises as a result of, for example, rights in a shareholders’ agreement. Holdings of related parties are taken into account in the calculation, which means that investments in relatively small minority stakes may trigger the notification requirement.
• In transactions carried out in multiple steps, such as an initial internal carve-out followed by external investments, or a divestment combined with reinvestment by the sellers, the notification requirement may be triggered in relation to each step, which may result in several notifications having to be made within the framework of a single transaction.
• The Swedish FDI act’s definition of what constitutes the so-called protection-worthy activities is broad, and its scope is unclear in a number of respects.

Taken together with the risk of significant administrative fines for failure to notify an investment, the above indicates that there may be a reason to take extra caution and, in borderline situations, opt to report investments rather than risk a sanction.

Concluding reflections

It is clear that, at present, there is a need for an FDI screening regime to review foreign investments in sensitive activities. The downside is of course that it means longer, more expensive, and more complex transaction processes, or even that important investments never materialise.

In the longer term, the system we have today will likely need to be reformed to strike the right balance between the public interest in oversight and the private sector’s need for access to capital. Until such reform, it is important that investors, founders, sellers, buyers, target companies and advisors (i) bear in mind that the notification requirement is broader than many intuitively believe, (ii) ensure that the issue is raised early in the process, iii) continuously assess opportunities to use legal AI tools such as Harvey and Legora to facilitate processes, and (iv) collaborate pragmatically to minimise the negative effects of the notification requirement.