The “Investment Contribution” under the Industrial Accelerator Act: What foreign investors need to know

The Industrial Accelerator Act (IAA), presented as a legislative proposal by the European Commission on 4 March 2026, aims to strengthen the competitiveness and resilience of the European industry. The IAA aims to ensure that manufacturing once again accounts for 20% of European gross domestic product by 2035. The scope covers energy-intensive industries, 
net-zero technologies and the automotive industry, which together account for around 15% of European industrial production and thus also play a strategic role in downstream processes in the construction, mobility, energy and defence sectors.

In pursuit of this goal, foreign direct investments (FDI) also operate under a new framework: according to the legislative proposal under the heading "Foreign Direct Investment Contribution", FDI in the aforementioned sectors must generate added value for the Union's economy and society and create high-quality jobs for Union workers. This is to be achieved through new investment control mechanisms, both in terms of the scope of application and in terms of the procedure and eligibility for approval of FDI. In practice, these mechanisms are likely to be directed primarily at direct investment from the People's Republic of China, thereby placing a clear regulatory focus on Chinese investors.

Investment Authority

Compliance and verification are to be ensured by Investment Authorities, which each Member State must establish and equip with the necessary resources and means. In Germany, as with general investment control — which is supplemented by the "investment contribution" under the IAA — the Federal Ministry for Economic Affairs and Energy is likely to be the competent authority.

Affected Companies and Sectors

The material scope of investment control under the IAA covers strategic growth sectors, namely battery technologies and their value chains, pure electric vehicles, plug-in hybrids and fuel cell vehicles, solar energy technology (photovoltaics), and the extraction, processing and recycling of critical raw materials.

The investment control mechanism affects foreign investors who are nationals of a third country or undertakings of a third country, provided that such third country holds more than 40% of global manufacturing capacity in the relevant sectors. This means that not all foreign investors are affected, but only those backed by a third country that holds a dominant position in global production. The regulation is therefore effectively directed at investors from countries that possess dominant global production capacity in these sectors. For the purposes of verification, the Commission is to monitor global production capacity and publish annual reports. China is likely to be the only country to exceed this threshold in several sectors.

In addition, there must be an investment with a minimum volume of EUR 100 million through which the investor would acquire or establish control over a Union company or Union asset. An investment is deemed to establish control if it confers a direct or indirect shareholding of at least 30% of the subscribed capital or voting rights in a Union company, or 30% of the ownership of a Union asset.

However, investors and investments covered by free trade agreements concluded with the Union, investments falling within the scope of the General Agreement on Trade in Services (GATS), and portfolio investments are excluded.

Eligibility for Approval

FDI shall only be eligible for approval if at least four of the following six conditions are met:

Maximum participation: Foreign investors may not directly or indirectly acquire, hold or exercise more than 49% of the subscribed capital, voting rights or equivalent participation rights in a Union company or Union asset.

Joint venture requirement: Within the maximum participation limit, FDI must be carried out within the framework of a joint venture with one or more companies established in the Union. Such joint ventures must be structured to ensure the effective participation of Union partners in management, technology transfer and capacity building.

Intellectual property: Foreign investors must enter into agreements that ensure the licensing of intellectual property rights and the transfer of know-how to the Union company or joint venture. All intellectual property rights developed by the Union company in the course of the investment shall, under these agreements, be owned exclusively by the Union company.

Research and development: Each year, the investor must invest at least 1% of the Union company's annual gross turnover, proportional to the foreign investor's share, in research and development within the Union.

Union employees: 50% of the workforce of the Union company, joint venture or owner of the Union asset must consist of permanent Union employees. Such employees must be engaged at all levels of the organisation and offered appropriate training opportunities. When acquiring a Union company or Union asset that is already in production — including following insolvency — priority must be given to retaining or reinstating the existing workforce. If public subsidies are used, the number of Union employees must not be reduced for five years; otherwise, the subsidy may be reclaimed.

As noted above, this condition is mandatory and must be fulfilled without exception.

Inputs of Union origin: Products offered on the Union market by the Union company must source at least 30% of their inputs used for the product placed on the Union market from within the Union.

Registration and Review by the Investment Authority

The procedure for reviewing FDI proceeds as follows:

1. Any planned FDI falling within the scope of the IAA must be notified in advance to the relevant Investment Authority of the Member State in which the Union company or Union asset is located. All information and documents necessary to enable the Investment Authority to assess eligibility for approval must be provided.

2. The Investment Authority shall decide within 30 days whether the FDI falls within the scope of the IAA. This period may be extended by 15 days.

3. If the Investment Authority considers that the FDI falls within the scope of the IAA, it shall immediately forward the notification, together with all information and documents, to the Commission.

4. The Commission then reviews, within a further 30 days, whether the FDI falls within the scope of the IAA and whether it considers the FDI eligible for approval and issues a written opinion accordingly. The Commission then transmits the opinion to the Investment Authority and publishes it.

5. If the Commission's opinion is negative, the Investment Authority shall examine the notification in greater detail for a further two months

6. The Investment Authority shall issue a reasoned decision on the approval or rejection of the FDI no later than 60 days after receipt of the opinion. An extension of 30 days is possible.

Any party affected by the decision has the right to appeal against it.

In addition, the Commission holds an independent review competence in certain cases. This applies in particular where the value of the planned investment exceeds EUR 1 billion. In such cases, the Commission is not limited to an advisory or confirmatory role, but may assume full responsibility for the review procedure and, as part of its decision, independently determine which of the proposed investment conditions apply in the specific case.

Monitoring and Sanctions

The Investment Authority continues to monitor whether the requirements of the IAA are still being met. To this end, the foreign investor must submit regular reports. The Commission also holds an independent right of control: upon request, the Investment Authority must transmit the reports together with its own assessment to the Commission.

In order to impose sanctions, each Investment Authority must also establish penalty mechanisms that apply in the event of violations such as missing or incorrect notifications, non-compliance with the requirements, or breach of monitoring and reporting obligations, and must inform the Commission immediately of any violations.

The penalties for violations in the form of fines amount to at least 5% of the average daily total turnover of the foreign investor, or 5% of the investment value where the investor is a natural person.

Conclusion

Investment control under the IAA pursues laudable goals and is also suited to promoting them. However, it appears doubtful whether this can be achieved within the ambitious deadline of 2035.

The approval process will take place in close communication with the competent authorities, which will require specialist advice, particularly for Chinese investors. In particular, the possibility of seeking legal redress after each decision in the control procedure may cause significant delays, depending on how this avenue of redress is ultimately configured, and it remains to be seen which parties will be entitled to bring such challenges.

The proposed regulation will be negotiated by the European Parliament and the Council of the European Union before it is adopted and enters into force. The precise content of the final legislation will therefore ultimately be decisive for assessing the practical impact on foreign investors.

Written by Stephan Kübler, LL.M. und Philipp Stöckert.