FDI regulations on the rise – what do businesses need to know?

Following TerraLex's recent publication of a global guide on FDI regulations – to which Maja Kristiansson-Gran, associate at Lindahl, contributed the Swedish section – she comments on the developments and what companies should bear in mind in particular.

What are FDI rules and why do they matter?

FDI stands for foreign direct investment and refers to systems for reviewing foreign direct investment in businesses of strategic interest. Historically, the trend has been to facilitate and simplify international trade – but in recent years we have seen a clear shift towards stricter regulation. Driven by the geopolitical situation and a broad political debate on strategic dependencies within critical infrastructure and raw materials, an increasing number of countries are choosing to establish screening systems or tighten their existing regulations.

Sweden has long had an open investment climate, but joined the trend a couple of years ago and introduced a new system for screening investments in certain strategically important activities, known as "activities worthy of protection".

The Swedish system – broader than you might think

The Swedish FDI rules are set out in the Act on the Review of Foreign Direct Investment (the FDI Act), which came into force in December 2023 and is one of the most far-reaching pieces of legislation within the EU.

A common misconception is that the rules only apply to foreign investors. This is not the case. The FDI Act applies to all investments that trigger a notification requirement – regardless of whether the investor is Swedish or foreign.

In short, the FDI Act means that investments in or acquisitions of Swedish businesses deemed worthy of protection must be notified to and approved by the Inspectorate for Strategic Products (ISP) before they can be carried out. The definition of a business of national security interest is broad and includes, amongst other things, activities of societal importance in the broadest sense, research activities, businesses dealing with military equipment and dual-use products, or AI and other emerging technologies. Other examples include businesses handling sensitive personal data, location data or critical raw materials. The definition of activities worthy of protection is very broad, so an analysis of whether the investment target is covered by the Act is almost always required.

Not all investments are covered by the Act; rather, it applies where the investor gains a certain level of influence over the investment target. Examples of investment forms that may trigger a notification requirement are:

• Company acquisitions and transfers of assets

• Acquisitions of voting rights reaching the thresholds of 10, 20, 30, 50, 65 or 90 per cent (and each time such a threshold is reached)

• Other types of agreed influence, such as the right to appoint board members under a shareholders' agreement

• Cooperation agreements, particularly within the research sector and in the development of dual-use or military equipment

It is also important to be aware that the FDI Act may apply to internal restructuring, such as transfers within a group or to a wholly-owned holding company. Indirect investments are also covered, which may be relevant if there are subsidiaries within the group engaged in activities worthy of protection.

What should companies bear in mind?

The most important thing is to act early. An FDI notification inevitably involves a certain processing time, and approval must generally be granted before the investment is carried out. Identifying the notification requirement late in the process can have consequences for the transaction's timetable. Furthermore, penalty fees may be imposed if the regulations are not complied with – something that can easily be avoided by acting correctly from the outset.

Some other particularly important aspects to bear in mind:

• Cross-border structures may trigger Swedish regulations. An investment in a foreign company may give rise to a notification requirement in Sweden if the company – directly or indirectly – has subsidiaries conducting activities worthy of protection here. In other words, an investment in a foreign parent company may be regarded as an indirect investment in the Swedish subsidiary. This is something many investors overlook, and it underlines the importance of always analysing the entire group structure early in the transaction process.

• Every country has its own rules. A thorough analysis of the relevant country's rules is always necessary. A common misconception is that every EU country has similar regulations, and although the new EU regulation – the proposal for which was presented in December 2025 and which is expected to be adopted in spring 2026 – will entail a degree of harmonisation and make it mandatory for all Member States to have a screening system, each country retains the option to adopt more far-reaching rules.

• FDI rules are often linked to other regulatory requirements. If the investment target operates within the defence industry or in the dual-use sector, additional licensing requirements may arise, which are often only discovered during the FDI analysis. The regulatory analysis should therefore be integrated early on in the due diligence process and in the subsequent structuring of the transaction.

A global perspective with local roots

As FDI rules differ between jurisdictions, access to local expertise is crucial in cross-border transactions. Through Lindahl's membership of TerraLex – where we are the only Swedish member firm – we can quickly coordinate advice across multiple jurisdictions and ensure that FDI issues are handled effectively even in complex, international contexts.

TerraLex's global FDI guide provides a good starting point for quickly forming an opinion on whether a transaction triggers FDI rules in one or more countries.

A development to monitor closely

FDI screening has become a priority policy tool in many countries, and the geopolitical situation continues to influence regulatory developments. At the same time, there are growing calls that the current regulatory framework is too far-reaching and places disproportionate demands on affected parties; among other things, the Implementation Council has recommended that the Swedish FDI rules be reviewed. This highlights a broader political balancing act – on the one hand, the need to protect interests vital to society; on the other, the importance of Sweden offering an attractive investment climate.

It is difficult to assess whether the Implementation Council's recommendation will lead to any relaxation of the rules, but there are indications to the contrary; recently, the Swedish Civil Contingencies Agency (MCF) has proposed new regulations on what constitutes activities worthy of protection, which would mean that further areas of activity would be covered.

There is therefore some uncertainty regarding how the regulatory framework will develop, but one thing is clear: for companies planning investments or transactions, it is essential to work proactively and stay up to date.

Do you have questions about what FDI rules mean for your business? Please feel free to contact us – we will help you navigate the right path.