Cabinet approves national FDI screening mechanism

Cyprus has formally approved the creation of a national mechanism for the control of foreign direct investments (FDI), following a cabinet decision on Wednesday.

The move aims to strengthen the country’s protective framework, align with European Union standards on national security and transparency, and safeguard strategic infrastructure.

President Nikos Christodoulides had earlier described the initiative as a key institutional reform that would contribute to the strategic upgrade of Cyprus’ credibility and international reputation.

Following the cabinet meeting, Finance Minister Makis Keravnos confirmed the decision, stating that “this is a very important development directly linked to the safeguarding of national interests”.

The approved legislation establishes the Finance Ministry as the competent authority, empowered to approve, prohibit or reverse FDI transactions for reasons of public order or national security.

The law defines a foreign investor as any individual or legal entity from outside the EU, EEA or Switzerland.

Moreover, a foreign direct investment is considered any investment aimed at gaining lasting participation and significant influence in the management of a business of strategic importance within the Republic of Cyprus.

Sectors classified as strategically significant include energy, tourism, transport, health, communications, defence, financial services, and dual-use technologies, among others listed in the annex of the legislation.

Investors are required to notify authorities when their direct investment exceeds 25 per cent of a company’s share capital, or when an existing stake increases from below to above the 25 or 50 per cent thresholds.

Exceptions apply to FDI related to vessels under construction or being transferred, excluding floating storage and regasification units for natural gas.

The screening mechanism also establishes an inter-ministerial advisory committee.

The committee is comprised of representatives from the ministries of finance, defence, energy and commerce, foreign affairs, interior, justice and public order, and transport and communications.

Keravnos explained that the updated legislation incorporates feedback from consultations with stakeholders and reflects best practices from other EU member states.

He also stressed that the move comes at the urging of the European Commission, which has encouraged Cyprus to adopt a framework in line with those already in place across the EU.

The minister further clarified that the law covers investments by EU-based companies in which third-country investors hold at least a 25 per cent stake.

Until now, oversight of foreign investments was distributed across institutions such as the Finance Ministry, the Cyprus Securities and Exchange Commission, and the Central Bank of Cyprus (CBC).

“This law now establishes a clear and centralised process, with specific powers and designated bodies to enforce and monitor compliance,” the minister concluded.