Introduction

The current Luxembourg national screening mechanism was introduced through a law dated July 14, 2023, applying to FDIs that may affect security or public order and implementing the EU Regulation on FDI Screening. The FDI Law entered into force on September 1, 2023. This marked the first time that a national screening mechanism for FDI was established in Luxembourg.

Summary of major changes in 2025

Following the entry into force of the FDI Law during the third quarter of 2023, the first notification filings were submitted, resulting in the first review processes with the Luxembourg Ministry of Economy, the competent authority for reviewing FDI filings. With 2025 proving to be a dynamic year for mergers and acquisitions in the Luxembourg market, multiple FDI filings were submitted to the Luxembourg Ministry of Economy. A notable trend is that an increasing number of market participants are submitting filings on a precautionary basis, mindful of the broad interpretations that may arise from the current definitions of critical activities under the FDI Law.

Who files?

Foreign investors are required to notify the Luxembourg Ministry of Economy prior to making an FDI in Luxembourg.

A foreign investor is defined as an individual or a legal entity who is not a national of either an EU Member State or a state party to the Agreement on the European Economic Area (“EEA”).

Types of deals reviewed

The screening mechanism applies to FDIs made by foreign investors.

An FDI is an investment of any kind made by a foreign investor that aims to create or maintain long-term and direct relationships between the foreign investor and the Luxembourg target entity, thereby allowing the foreign investor to effectively participate, alone, in concert or through interposition, in the control of the entity carrying out a critical activity in Luxembourg.

The notification requirement applies to FDIs, other than portfolio investments, that are likely to be detrimental to security or public order in an entity incorporated under Luxembourg law and carrying out critical activities in Luxembourg.

The following activities are deemed critical: dual-use goods, energy, transport, water, healthcare, telecommunications, data processing and storage, aerospace, defense, finance, media and agrifood.

Research and production activities directly connected to the above, ancillary activities that may grant access to sensitive information directly connected to the above, and access to places where the activities listed above are carried out are also deemed critical.

The FDI Law does not provide for a minimum investment threshold, meaning that all investments, irrespective of size, may be subject to screening. The law also does not provide for exemptions in the case of intragroup reorganization.

Scope of the review

The foreign investor must notify the ministry of the ownership structure of the foreign investor, the approximate value of the FDI, the operations of the foreign investor and the Luxembourg entity, the countries in which both conduct business, the financing of the FDI and its source, and the date on which the FDI is planned or has been made.

The ministry will then decide whether a screening is required. The decision to proceed with a screening is notified to the foreign investor within two months.

If the ministry decides to proceed with a screening, it will consider the integrity, security and continuity of supply of critical infrastructure, whether physical or virtual, linked to a critical activity; the sustainability of activities related to critical technologies and dual-use goods; the supply of essential inputs, including raw materials and food safety; access to sensitive information, including personal data, or the ability to control such information; and freedom and pluralism of the media.

The ministry may also take into account whether the foreign investor is directly or indirectly controlled by the government of a third country; whether the foreign investor has already been involved in activities that undermine security or public order in a Member State; and whether there is a serious risk that the foreign investor is engaged in illegal or criminal activities.

In addition to the FDI Law, the Luxembourg Ministry of Economy has published a set of frequently asked questions providing practical clarifications for the market. Key highlights include the following:

It is confirmed that notification is not suspensive. While preparatory steps may proceed pending the Ministry of Economy’s decision, closing cannot occur before the decision is issued.
Notification is required only if the target entity is established in Luxembourg, even if it operates abroad.
Financial and insurance activities are not generally deemed critical. Only central bank functions, as well as financial market infrastructure and related systems, fall within the scope of critical activities.

Review process timeline

As a matter of principle, the review process must not exceed two months from submission. If a screening is initiated, the process must not exceed 60 calendar days. The ministry may request additional information during the screening procedure, and the review period will be suspended until that information is provided.

Following the screening process, the ministry will notify its decision to the foreign investor. If the FDI is authorized, the authorization may be subject to conditions set by the ministry.

Ministry decisions regarding FDIs may be appealed to the Administrative Court. The appeal must be lodged within one month of notification of the decision, after which it will be time-barred.

How foreign investors can protect themselves

Foreign investors must carefully assess in advance whether the FDI is likely to be subject to the Luxembourg screening mechanism. At an early stage of the contemplated transaction, it is critical to adjust transaction documentation and timing for completion accordingly and to be assisted by local counsel in the notification process with the Luxembourg Ministry of Economy.

Investors may also seek to restructure their investments so that they qualify for the portfolio investment exemption. Under the FDI Law, a portfolio investment is an acquisition of securities made with the intention of completing a financial investment that does not enable the foreign investor to exercise, directly or indirectly, control of the entity governed by Luxembourg law. Investing in an investment fund managed by an asset manager alongside other investors should therefore exempt investors from the requirements of the FDI Law.

Alternatively, a foreign investor may seek to ensure that it does not control the relevant entity, as control is one of the triggers for FDI notification.

Looking ahead: Likely developments in the next year

As the Ministry of Economy’s supervisory practice continues to evolve, the coming years are expected to bring further clarity on the scope of critical activities under the FDI Law. The frequently asked questions issued by the ministry help refine this scope, most notably by confirming that the majority of financial and insurance activities fall outside the regime, thereby narrowing the interpretation of the law. Nonetheless, given the streamlined notification process and limited administrative requirements, foreign investors often choose, as a precaution, to submit an FDI filing even when there are arguments that the transaction does not involve critical activities.

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This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.

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