Cyprus Adopts New Law on the Screening of Foreign Direct Investments

Purpose and Scope

Cyprus has just enacted the Law on the Establishment of a Framework for the Screening of Foreign Direct Investments, Law of 2025 (“Law”), which implements EU Regulation 2019/452. The Law, which was published on 14 November 2025 and and will come into force on 2 April 2026, establishes a national framework for the screening of foreign direct investments that may affect the security or public order of the Republic of Cyprus, thereby aligning the national system with EU standards.

A foreign direct investment (“FDI”) refers to any investment made by a foreign investor with the aim of establishing or maintaining lasting and direct links with an entrepreneur or undertaking receiving capital to carry out an economic activity. It includes investments that give the foreign investor effective participation in the management or control of such undertaking.

A foreign investor (“Investor”) is defined as either:

1. an individual who is not a national of an EU or EEA Member State, nor of Switzerland, and who intends to make or has already made a FDI in Cyprus;

or

• a legal entity established in a third country (outside the EU, EEA, or Switzerland) that makes or plans to make such a FDI.

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Competent Authority

The Ministry of Finance is designated as the competent authority for receiving notifications, conducting reviews, and coordinating with other government departments and the European Commission under the EU’s FDI cooperation framework (“Competent Authority”).

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Key Features of the Law

1. Notification Requirement
   Investors must notify the Competent Authority in writing before completing a FDI. Prior approval is mandatory for the transaction to proceed.
2. Thresholds and Criteria
   The notification obligation arises when all of the following conditions are met:

• Value: The FDI equals or exceeds €2 million, individually or cumulatively within a 12-month period;
• Sector: The target undertaking operates in a strategic sector as defined by the Law.

• Ownership/Control – One of the following conditions are met:

– Acquisition of 25% or more of the share capital or voting rights of the undertaking.

– Increase of an existing Investor’s shareholding or voting rights to 25% or more, or from below 50% to 50% or more.

– The Investor is a company in which at least 25% of ownership or voting rights are held by another Investor, or whose ultimate beneficial owner is an Investor.

• Review Factors
  In assessing notified FDIs, the Competent Authority may take into account:
  • Possible effects on security, public order or essential services;
  • The ownership structure of the Investor and any other Member State links;
  • The Investor’s track record in other jurisdictions; and
  • Compliance with EU sanctions, data protection, and export-control rules.
• Exemptions
  Transactions relating solely to ships under construction or sale, excluding Floating Storage and Regasification Units (FSRUs), are exempt from notification.
• Post-Completion Review
  • FDIs not requiring notification may be reviewed within 15 months of completion if there are reasonable grounds to believe they could affect national security or public order.

• FDIs subject to mandatory notification which was not submitted, may be reviewed within 5 years of completion.

• Penalties
  The Competent Authority may impose administrative penalties, primarily fines, on an Investor or any person directly or indirectly controlling an FDI for non-compliance. Penalties must be imposed through a reasoned decision, and the affected party must be given an opportunity to be heard.

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Strategic Sectors

Strategic sectors include Cypriot undertakings operating in the following areas:

• Energy (generation, storage, transmission and distribution of electricity, oil, and gas);
• Transport and logistics;
• Water supply and food security;
• Education and tourism;
• Telecommunications and digital infrastructure;
• Data processing, cloud computing, cybersecurity and artificial intelligence;
• Defence, aerospace and dual-use technologies;
• Health, pharmaceuticals and biotechnology;
• Financial market and payment infrastructure;
• Land and real estate of critical importance for the use of these infrastructures.

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Screening Procedure and Timelines

Upon receipt of a complete notification, the Competent Authority must:

1. Decide within 20 working days whether the FDI is subject to review (period suspended if additional information is requested);
2. Notify the Investor within 5 working days whether the FDI is subject to review;
3. If subject to review, complete the assessment within 65 working days to determine whether it could affect security or public order (period suspended if additional information is requested);
4. If the FDI could affect security or public order, the Competent Authority may impose conditions, prohibit, or unwind it; otherwise, notify the Investor within 5 working days.

FDI approval is only considered granted, upon written confirmation from the Competent Authority.

In assessing whether an FDI affects public order or security, the Competent Authority shall consult an Advisory Committee as provided for under the Law.

Nothing in the Law limits the European Commission’s jurisdiction to issue an opinion or the right of other EU Member States to submit comments in accordance with Regulation (EU) 2019/452.

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Entry into Force

The Law has not yet been published in the Official Gazette. It is scheduled to enter into force on 2 April 2026. Implementing regulations, including application forms and detailed procedural guidance, are expected to be issued by the Competent Authority before the Law becomes operational.

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Significance

This new framework aligns Cyprus with the EU-wide FDI screening system, reinforcing national safeguards while maintaining the country’s openness to FDIs.
By introducing clear procedures, transparency, and defined timelines, Cyprus strengthens Investor confidence, legal certainty, and the protection of its strategic assets.