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Posted 20 April 2026
Bringing forth the Foreign Direct Investment Screening (FDIS) Exercise: What does it mean for the Information & Technology Sector?
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  • By Pantelis Christofides, Advocate – Director, Head EU & Regulatory Law Department, L. PAPAPHILIPPOU & CO LLC

  • This post is addressed solely to the TechIsland Members for background information purposes only and cannot be utilised, or relied upon, for any other purposes. Nothing in this post constitutes or can be construed as legal advice, which can only be obtained as a result of specific legal consultation.

The Republic of Cyprus’ Establishment of Framework for the Direct Foreign Investment Screening Law of 2025 (Law no. 194(I)/2025), also known as the FDIS Law, entered into legal effect on 02 April 2026. 

The FDIS Law, amongst other, established the FDIS Competent Authority, a pivotal vole which is undertaken by the Ministry of Finance, and carries out the functions stipulated in the longstanding Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union, also known as the EU FDIS Regulation. 

As far as the Information & Technology Sector is concerned, the following could be recognised as key FDIS Law features: 

The FDIS Law notes that, in determining whether an FDI is likely to affect the national security or public order of the Republic of Cyprus, the Competent Authority takes into account, amongst other, the following factors:

  • whether the undertaking in which the FDI is envisaged to be materialised is active in a particularly sensitive sector which concerns critical infrastructure, whether physical or virtual, including, amongst other, infrastructure in the fields of communications, media, data processing or storage, aerospace, defence, sensitive facilities, as well as land and immovable property crucial for the use of the said infrastructure;
  • the likely consequences of the FDI concerning access to sensitive information, including personal data, or the ability to control such information, 
  • the freedom and pluralism of the media,
  • critical technologies and dual use items as defined in point 1 of Article 2 of Council Regulation (EC) No 428/2009, including the technologies in the fields of artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defence, energy storage, quantum and nuclear technologies as well as nanotechnologies and biotechnologies, and 
  • the supply of critical inputs, including energy or raw materials. 

The Foreign Investor’s obligation to file before the Competent Authority a written Application before the materialisation (implementation) of the prospective FDI, and obtain the Competent Authority’s written approval before proceeding to such as materialisation arises, including an FDI which will be materialised after 02/04/2026 despite earlier execution of related FDI documents such as an Share Purchase Agreement (SPA), in the following circumstances: 

Firstly, where: 

  • the FDI results in the acquisition of Special Participation, as defined in the FDIS Law;
  • the FDI concerns an Undertaking of Strategic Importance, as also defined in the FDIS Law; and 
  • the FDI value, whether in isolation, or in combination, with other transactions between the same parties within the time period of 12 months as of the date in which the FDI is scheduled to be materialised, equals or exceeds the sum of €2.000.000. 

Secondly, in the event that an internal increase of Special Participation is envisaged, irrespective of FDI value, which would result in the analogy of the share capital and/or the voting rights possessed by the Foreign Investor to vary from: 

  • less than 25% to 25% or more, or 
  • less than 50% to 50% or more. 

‘Foreign Investor’ refers to:

  • a natural person who is not a citizen of a Member State of either the EU or the European Economic Area, or Switzerland, who intends to materialise or has materialised an FDI,  or
  • an undertaking of a third country, that intends to materialise or has materialised an FDI.

‘Special Participation’ means the acquisition, whether directly or indirectly, in isolation or in concert with other persons, of a percentage which corresponds to at least 25% of the share capital and/or the voting rights or corresponding possibility of exercising decisive influence over the undertaking’s activities.

The Competent Authority retains the right to screen any FDI, irrespective of whether or not it falls within the framework of obligatory notification, in cases where there are valid reasons to consider that the FDI could affect the security or public order of the Republic of Cyprus, and from a time perspective, in the event that the FDI:

  • is not subject to obligatory notification, the Competent Authority could exercise the abovementioned jurisdiction within 15 months as of the date of the FDI materialisation, or 
  • is subject to obligatory notification and it had not been notified, the Competent Authority could exercise the abovementioned jurisdiction within 5 years as of the date of the FDI materialisation. 

The Phase I and Phase II Screening timeframes in relation to the work to be undertaken by the Competent Authority, aided by the Advisory Committee’s respective written opinion, ought to be taken into account by the Foreign Investor and the advisors thereof. 

The respective jurisdiction, and related timeframes, of the European Commission to issue an Opinion, and each of the EU Member States to provide Comments, as to the FDI, under the EU FDIS Regulation’s provisions, has been expressly recognised in the FDIS Law. 

 

For further information, reference could be made to the following: