Increased Foreign Investments in Cyprus Face Intensified Examination

Increased Foreign Investments in Cyprus Face Intensified Examination

In a significant move towards enhancing national security and public order, the Republic of Cyprus has approved a bill to establish a National Foreign Direct Investment Screening Mechanism. This mechanism aligns with European Union regulations and aims to regulate foreign investments that could potentially affect the country's strategic assets and sectors.

The Ministry of Finance has been designated as the competent authority under the bill, empowered to approve, prohibit, or reverse investments that may pose risks to public order or national security. The bill does not specify any exceptions or conditions for the application of its provisions.

A foreign investor is defined as any natural or legal person from a country outside the EU, the European Economic Area, or Switzerland. This includes companies based in the EU in which third-country investors hold at least a 25% stake.

The bill's focus is on foreign direct investments (FDI) that involve stable and substantial participation influencing the management of enterprises of strategic importance in Cyprus. These enterprises operate in particularly sensitive sectors, such as energy, tourism, transport, health, communications, defence, financial services, and dual-use technologies.

Foreign investors must notify authorities when their investment exceeds 25% of a company’s share capital or if an existing stake crosses the 25% or 50% thresholds. The competent authority has the right to examine any direct foreign investment, regardless of whether it falls under the mandatory notification framework, if there are reasonable grounds to believe that the investment may affect the security or public order of the Republic of Cyprus.

To assist in the evaluation of investments, an inter-ministerial Advisory Committee has been established. This committee includes representatives from ministries of finance, defence, energy and commerce, foreign affairs, interior, justice and public order, and transport and communications.

The bill responds to pressure from the European Commission to harmonize Cyprus's FDI oversight with EU best practices. Previously, oversight was fragmented across various institutions. This new framework centralizes control, enhancing the country’s ability to protect strategic national assets and sectors crucial to public order and security.

The bill also defines timelines for investment review and evaluation criteria, and decisions of the competent authority may be appealed before the Administrative Court. The proposed bill aims to implement Regulation (EU) 2019/452, which sets out a framework for the screening of direct foreign investments in the European Union for reasons of national security or public order.

The bill was approved by the Council of Ministers on July 2nd, 2025, and will be submitted to the House of Representatives for a vote. If passed, it marks a significant institutional reform to ensure that foreign investments in sensitive sectors do not threaten Cyprus’s national interests, requiring transparency and government approval for major stakes by foreign investors, reinforcing national security protections consistent with EU standards.

1. The Republic of Cyprus's new bill, aimed at regulating foreign investments that could impact strategic assets and sectors, aligns with European Union regulations.
2. The Ministry of Finance, designated as the competent authority under the bill, is empowered to approve, prohibit, or reverse investments that may pose risks to public order or national security.
3. Foreign investors, defined as any natural or legal persons from countries outside the EU, EEA, or Switzerland, are required to notify authorities when their investment exceeds 25% of a company’s share capital or if an existing stake crosses the 25% or 50% thresholds.
4. The bill focuses on foreign direct investments (FDI) in strategic sectors such as energy, tourism, transport, health, communications, defence, financial services, and dual-use technologies.
5. The proposed bill aims to implement Regulation (EU) 2019/452, which sets out a framework for the screening of direct foreign investments in the European Union for reasons of national security or public order.

Read also: