A new chapter for industrial Europe: the Industrial Accelerator Act

On 4 March 2026, the European Commission published the draft Industrial Accelerator Act (IAA) which is a wide-ranging legislative initiative designed to strengthen Europe's industrial base and accelerate its transition to a low-carbon economy. The proposal marks a meaningful shift in how the EU frames access to its industrial market. In addition to maintaining investment screening for security concerns, the IAA conditions market access on structural alignment with EU industrial policy objectives, embeds co-investment expectations, and ties public support to "Made in EU" and low-carbon criteria.

The IAA aims to bring manufacturing back up to 20% of the EU's GDP by 2035. Its proposed measures (if enacted) would have far-reaching implications for energy-intensive industries, net-zero technology manufacturers, automotive original equipment manufacturers (OEMs) and suppliers, as well as non-EU investors contemplating manufacturing projects in the EU.

The European Council has called on the co-legislators (the European Parliament and the Council of the EU) to agree on the IAA by end of 2026, signalling strong political momentum and an accelerated legislative timeline.

What you need to know

• The IAA introduces "Made in EU" and low-carbon preferences in public procurement and public support schemes to boost demand for European-made products.
• The Act also establishes a new, harmonised framework for regulating foreign direct investments in "emerging strategic sectors", distinct from the existing security-focused foreign direct investment screening regime.
• It streamlines and digitalises permitting for industrial projects by introducing a single digital access point and a single permit-granting procedure with clear time limits.
• Finally, the IAA proposes Industrial Manufacturing Acceleration Areas to enable industrial symbiosis and encourage the creation of clean manufacturing project clusters.

Open for business, on new terms

Over the past two decades, European manufacturing has steadily lost ground to global competitors. The manufacturing sector's share of EU GDP has declined from 17.4% in 2000 to 14.3% today, a trajectory that the European Commission has described as "a strategic warning signal with potentially structural impacts to the EU's prosperity and social cohesion".

On 4 March 2026, the European Commission introduced the IAA which is a sweeping legislative proposal designed to revive the continent’s industrial base and reduce its dependence on foreign technology. The proposal delivers on observations from the 2024 Draghi Report on the future of European competitiveness, which called for a coherent industrial strategy combining demand-side measures with conditions on foreign direct investment. The IAA also fulfils Commission President von der Leyen’s pledge in her 2025 State of the Union Address to boost demand for “Made in EU” products in strategic sectors. The clear ambition is to reverse the decline and grow manufacturing’s share of EU economic output to 20% by 2035. The IAA aims to strengthen the EU's long-term economic resilience and strategic autonomy by supporting industrial production and accelerating decarbonisation. It pursues this through four main action points: (i) creating lead markets for European products, (ii) setting conditions on foreign direct investments (FDI) in emerging strategic sectors, (iii) speeding up permits for manufacturing projects, and (iv) designating Industrial Manufacturing Acceleration Areas (IMAAs). The IAA focuses on sectors that play a disproportionately important strategic role as upstream suppliers or enablers of downstream industrial ecosystems: energy-intensive industries such as steel, cement, aluminium and chemicals, net-zero technologies, and the automotive industry and its supply chain.

New conditions on foreign direct investments in emerging strategic sectors

FDI remains essential for the EU's industrial competitiveness, but the IAA highlights that such investment should genuinely generate tangible benefits for the Union's economy and society. To this end, it introduces a new framework establishing common conditions for FDI in emerging strategic manufacturing sectors to ensure that investment contributes meaningfully to European value creation through technology transfer, local employment, and integration into Union value chains.

Scope of the new FDI provisions

FDI will require approval under the IAA provisions where three criteria are met: (i) the investment is made in an emerging strategic sector; (ii) the investor is from a country which holds more than 40% of the global manufacturing capacity in that relevant sector and (iii) the investment exceeds EUR 100 million.

• Emerging strategic sector: The investment is made in one of the following manufacturing sectors: (i) battery technologies and their value chain for battery energy storage systems; (ii) pure electric vehicles, off-vehicle charging hybrid electric vehicles (plug-in hybrids), and fuel-cell electric vehicles (including electrification and digitalisation components); (iii) solar PV technologies; and (iv) extraction, processing, and recycling of critical raw materials. The European Commission may add additional sectors in the future, such as net-zero technologies, nuclear fuel cycle technologies, electric propulsion technologies for transport, based on an assessment of criteria including the risk of deterring investment, market conditions, supply chain dependence, and technological developments.
• Investor origin: The foreign investor must originate from a third country that holds more than 40% of global manufacturing capacity in the relevant sector. The European Commission is required to monitor and publish this data.
• Investment threshold: The investment value must exceed EUR 100 million (noting that previous investments made by the same investor in the same Union target or asset must be taken into account insofar as they are made after the entry into force of the Regulation).

Greenfield investments expressly fall within the scope of the IAA, while three categories of investment are excluded: (i) investments covered by economic partnership or free trade agreements in force or provisionally applied by the Union (to the extent relevant commitments have been made under those agreements); (ii) investments targeted at providing services (rather than at manufacturing activities); and (iii) portfolio investments (which are defined by the IAA as investments intended purely for financial return without any intention to influence management or control). Internal corporate restructurings are also excluded, provided they do not result in a new foreign investor acquiring ownership or control.

Notification and review process

Investments meeting these criteria will need to be notified to, and cleared by, Member State Investment Authorities where they would result in the acquisition of “control” over a Union target or asset. Control is defined as 30% or more of share capital or voting rights in a Union target, or 30% or more ownership of a Union asset (or leasehold or other rights conferring control). The proposed clearance requirement will be suspensory, meaning investments may not take effect until approved. Notification obligations will apply from 12 months after the IAA comes into force.

Each Member State will be required to designate an Investment Authority within one month of the IAA entering into force. Approval will primarily be granted by the national Investment Authority, and we expect that this new approval procedure will be built into existing FDI regimes.

The European Commission may intervene in the review process by a national Investment Authority in the following circumstances: (i) on its own initiative, where the investment has potential to significantly impact Union value creation in the internal market; (ii) on request of an Investment Authority handling a notification, or an Investment Authority of another Member State significantly impacted by the investment; or (iii) on its own initiative, where the investment value exceeds EUR 1 billion.

Mandatory conditions for approval

In order to be cleared, in-scope investments will need to fulfil at least four of six conditions. Importantly, one requirement must be met in all cases: the employment of EU workers. This requires at least 50% of the workforce to consist of EU nationals or residents (Union workers) across all categories (operational, technical, supervisory, and managerial) with adequate training and capacity-building measures in place. Where public funding is received, investors will also need to commit to maintaining these employment levels for five years, on penalty of recovery of the funding awarded (this is in line with how public funding is often already structured). Local job creation, in short, is the price of admission.

Beyond this mandatory threshold, investors will need to satisfy three of the following five conditions:

• Ownership cap: foreign investors may not acquire, hold, or exercise ownership interests exceeding 49% of share capital, voting rights, or equivalent ownership interests in any Union target or asset.
• Joint venture requirement: investors must undertake the investment through a joint venture with one or more Union entities, with the foreign investor holding no more than 49% of the share capital, voting rights, or control rights. The parties should structure joint ventures to ensure effective participation of Union partners in management, technology transfer, and capacity building.
• IP licensing: foreign investors must enter into agreements to license their intellectual property rights and know-how to the Union target or asset. Pre-existing IP of the EU entity remains fully and exclusively owned by that entity; jointly developed IP is co-owned.
• R&D investment: the foreign investor must annually allocate an amount to R&D spending in the EU equivalent to at least 1% of the gross annual revenue of the Union target (or the gross annual revenue generated by the Union asset, proportional to the foreign investor's share of control).
• Union value chain integration: the foreign investor must prepare and publish a strategy for enhancing Union value chains and prioritising the sourcing of inputs from the EU, endeavouring to source at least 30% of inputs used for products placed on the Union market.

The above conditions can also apply to investments made through a foreign investor's subsidiary. However, Investment Authorities may only impose these requirements where necessary to achieve the Regulation's objectives: specifically, to prevent circumvention by the foreign investor, or where no less restrictive alternative measures (including commitments offered by the investor or its subsidiary) are reasonably available. In practice, we expect this to cover most indirect foreign ownership structures.

Enforcement and penalties

As proposed, the IAA has real teeth. Investors that proceed without the required notification or in breach of imposed conditions may be subject to financial penalties. The IAA provides that penalty payments shall not amount to less than 5% of the average daily aggregate turnover of the foreign investor undertaking in the case of a violation of the notification requirements. Where the foreign investor is a private individual, the penalty shall be at least 5% of the investment value.

The IAA also provides authorities with remedial powers where an investment proceeds outside the approved framework. In such cases, the Investment Authority may require corrective measures, including divestiture, to bring the investment into compliance. These provisions reinforce the importance of engaging with the process at an early stage-companies that plan carefully and work constructively with the relevant authorities are well-positioned to navigate the framework successfully.

Relationship with existing FDI screening

The proposed framework operates as a complement to the existing FDI Screening Regulation (EU) 2019/452 (which is itself set to be strengthened following a political agreement reached in December 2025) which focuses on national security and public order. The distinction is important: whereas the existing regime asks whether an investment should proceed at all based on security concerns, the IAA framework asks on what terms a permitted investment should be structured. Its aim is to maximise the economic benefits for the EU through conditions designed to ensure technology transfer, job creation, and value chain integration. The two regimes will apply in parallel: an investment may be subject to both a security screening under the existing regulation and the new conditions framework under the IAA. That said, existing national FDI authorities are expected to administer both regimes, which should help ensure that the two procedures are integrated as smoothly and efficiently as possible, thereby minimising the burden on companies caused by multiple notifications.

Made in EU: Europe buys European

The IAA introduces mandatory "Union origin" and "low-carbon" requirements for public procurement and public support schemes, transforming government purchasing into a tool of industrial strategy. Chapter III of the IAA requires contracting authorities and entities to apply "Union origin" and/or "low-carbon" requirements when procuring certain products from energy-intensive industries and net-zero technology sectors. These requirements also extend to public support schemes: Member States must ensure that at least 45% of their total national budget for Annex II-covered support schemes (energy-intensive industries) and 100% of the total national budget allocated to the public support schemes covered by Annex III (vehicles).

The IAA defines "Union origin" by reference to the non-preferential rules of origin under the Union Customs Code (Regulation (EU) No 952/2013): in essence, the standard EU customs rules for determining where a product comes from. It further clarifies how origin operates across different forms of public intervention. For public procurement, content from third countries with which the Union has concluded a free trade agreement or customs union, or that are parties to the WTO Agreement on Government Procurement (where relevant Union obligations exist), shall be deemed to be of Union origin. In other words, products from key trading partners can qualify as “European” for procurement purposes. For public support schemes, the equivalence baseline is narrower: only free trade agreement and customs-union countries qualify, with no GPA equivalence. Under both articles, the Commission may adopt delegated acts to exclude specific third countries from equivalence.

Specific rules for energy-intensive industries

From 1 January 2029, all public procurement procedures for products from energy-intensive industries would need to include minimum percentages of products meeting "Union origin" and/or "low-carbon" criteria. The specific minimum shares vary by product category. For example, for steel products, at least 25% would need to meet low-carbon criteria; for concrete and mortar, at least 5% would need to meet both Union origin and low-carbon criteria; for aluminium, at least 25% would need to meet both low-carbon and Union origin. These minimum shares are set to increase over time, with revised thresholds applying from 2032 and 2035.

For net-zero technologies, the IAA amends the Net-Zero Industry Act (NZIA, Regulation (EU) 2024/1735) to introduce Union origin requirements covering battery energy storage systems, solar PV technologies, heat pumps, onshore and offshore wind technologies, electrolysers, and nuclear fission technologies, with compliance thresholds that phase in progressively (see our July 2024 update for an overview of the NZIA).

In addition, the European Commission is empowered to adopt delegated acts laying down Union-level demand-side measures for products from the chemicals industry, in order to promote the production, sale, and use of substances and mixtures of Union origin derived from sustainable carbon sources.

Expected delegated acts to exclude third countries

As noted above, the IAA empowers the European Commission to adopt delegated acts excluding specific third countries from equivalence based on any of the following criteria: (i) the third country has failed to provide national treatment to Union products or entities under the relevant agreements; (ii) the exclusion is justified to avoid dependencies or any other developments that may threaten the security of supply in the Union of the products in question; or (iii) the exclusion is justified under any other applicable exception under the relevant agreement. The recitals confirm that the European Commission will "regularly assess" whether exclusion conditions are met and "will take appropriate action". The same mechanism applies to net-zero technologies under parallel provisions inserted into the NZIA.

Derogations and safeguards

The IAA builds in practical safeguards. Contracting authorities may derogate from the requirements where any of the following conditions are fulfilled: (i) the required products can only be supplied by one specific economic operator and no reasonable alternative exists; (ii) no suitable tenders or requests to participate were submitted; or (iii) their application would require disproportionate costs or result in technical incompatibility. Estimated cost differences exceeding 25% may be presumed to be disproportionate. For public support schemes, the cost threshold is 30%, and delays exceeding seven months may be presumed significant. Member States may also request temporary exemptions for entire product categories where supply cannot meet demand.

Accelerating projects

Streamlined permits

Building on the EU’s existing single points of contact for businesses, the IAA seeks to further streamline fragmented approval processes spanning multiple authorities. The solution: one door, one application. Each Member State would be required to establish a "single access point" where applicants submit one comprehensive application covering all required permits. The competent authority must acknowledge that an application is complete or request missing information within 45 days. If information remains incomplete after submission, a second request may be made within 30 days. The IAA requires this process to be fully digital: all permit applications, communications with authorities, and decisions would be handled through a single platform, eliminating paper-based and fragmented administrative procedures. This digitalisation is intended to increase transparency, reduce administrative burden, and enable real-time tracking of application status.

Industrial manufacturing acceleration areas

A notable feature of the IAA is the concept of Industrial Manufacturing Acceleration Areas which are designated zones identified by Member States as particularly suitable for industrial development due to existing infrastructure, industrial clustering potential, or strategic location. Member States shall designate at least one such area within 12 months of the IAA entering into force. Within these areas, authorities may conduct environmental, planning, and other administrative assessments at an area level rather than on a project-by-project basis, through an aggregated baseline permit. For individual projects, this could significantly compress approval timelines and reduce the front-end regulatory burden. IMAAs are also designed to enable industrial symbiosis-arrangements where the waste, by-products, or energy of one industrial process serve as inputs for another-encouraging the creation of clean manufacturing clusters.

Maximum time limits

The IAA applies the streamlined permitting provisions of the NZIA to all energy-intensive industry decarbonisation projects (i.e. projects that significantly and permanently reduce CO2-equivalent emissions from facilities in energy-intensive industries such as steel, cement, chemicals, and aluminium). According to the NZIA, the permit-granting process must not exceed 18 months (or 12 months for projects with a yearly manufacturing output capacity of less than 1 GW). All energy-intensive industry decarbonisation projects, as well as all industrial manufacturing projects located within designated acceleration areas, shall be considered strategic projects under the proposed Regulation 2025/984 on speeding-up environmental assessments, entitling them to a dedicated acceleration toolbox to be established by that instrument.

Clean tech in focus: net-zero technologies

The IAA treats decarbonisation as both an environmental objective and an industrial policy tool. The net-zero technologies receiving enhanced support under the IAA amendments to the NZIA include: battery energy storage systems, solar PV technologies, heat pumps, onshore and offshore wind technologies, electrolysers, and nuclear fission technologies.

Beyond listing priorities, the IAA reshapes how these technologies compete for public support. When Member States auction support for renewable energy projects, the IAA requires them to include pre-qualification and award criteria based on the Union origin of the net-zero technology products and their key components, as laid down in the new Annex II to the NZIA. At least 40% of the volume auctioned annually, or 8 gigawatts per year per Member State, whichever is higher, would need to include such qualitative elements.

The IAA also introduces cybersecurity pre-qualification requirements for certain net-zero technology auctions and support schemes. Where auctions or support schemes involve control systems, supervisory control and data acquisition systems, or firewalls, suppliers identified as high-risk suppliers under EU cybersecurity legislation must be excluded from the supply, design, production, and operation of those products and systems. These cybersecurity provisions complement the existing NIS2 framework under Directive (EU) 2022/2555, which imposes baseline cybersecurity requirements on operators of essential services in critical sectors including energy.

Institutional momentum

The IAA does not exist in isolation. At their March 2026 summit, EU heads of state and government considered the IAA proposal directly. The conclusions of the European Council explicitly call on co-legislators to finalise the IAA by the end of 2026, based on the European Commission's proposal of 4 March 2026, framing the objective as establishing a "targeted and proportionate 'European preference' in strategic sectors and technologies", in line with the EU's relevant international obligations.

The same conclusions situate the IAA within a broader "One Europe, One Market" agenda launched at the summit, to be implemented where possible in 2026 and by the end of 2027 at the latest. They also call for a review of EU merger guidelines to help companies achieve the scale to compete globally, and for all pending omnibus simplification packages (including measures to streamline permitting procedures) to be agreed before year-end 2026. Taken together, these measures form a coordinated competitiveness agenda of which the IAA is a significant component.

The proposal also includes built-in review mechanisms. The European Commission is required to carry out an evaluation of the Regulation two years after entry into force and every three years thereafter, assessing its contribution to the internal market, economic security, and industrial decarbonisation. A separate review clause requires the European Commission to assess whether the lead market and FDI provisions in Chapters III and IV remain necessary and proportionate three years after the IAA comes into force (and then every three years).

Positioning for what comes next

The IAA is ambitious, but it is not yet in force. The European Commission's proposal will now enter the ordinary legislative procedure, which requires the agreement of both the European Parliament and the Council. Given the political sensitivity and technical complexity of the proposal, this process may take considerable time, and stakeholders should monitor the legislative journey closely. While adjustments are likely, the overall direction is clear.

Even at this early stage, the IAA carries practical implications across a range of business positions:

• Non-EU investors in emerging strategic sectors should assess whether planned or contemplated investments in the EU could fall within the scope of the new FDI conditions framework. In particular, this concerns investments exceeding EUR 100 million in batteries, electric / hybrid vehicles, solar PV, or critical raw materials (but may affect other sectors in the future). Where the framework applies, investors need to plan for ownership caps, joint venture structures, IP licensing commitments, and local employment thresholds. The notification requirement will apply from 12 months after the IAA comes into force and only investments made after the IAA is in force will count towards the threshold. Early engagement with Member State Investment Authorities will be important.
• EU-based manufacturers of energy-intensive materials, net-zero technologies, and automotive products stand to benefit from the "Union origin" procurement preferences and public support requirements. Companies should evaluate whether their products meet the applicable Union origin and low-carbon criteria and consider adjustments to production processes or sourcing where necessary to maximise eligibility.
• Non-EU suppliers to European public buyers may face a structural disadvantage if their products do not meet the "Union origin" and "low-carbon" criteria. These companies may wish to explore options to localise production, establish partnerships with EU firms, or adjust supply chains to meet the new eligibility thresholds.
• Project developers planning industrial manufacturing facilities in the EU should monitor the transposition of streamlined permitting provisions, including the establishment of "single access points" and the designation of IMAAs, which could materially reduce project approval timelines.
• Companies active in net-zero technology sectors should track the implementation of non-price criteria in renewable energy auctions and the progressive introduction of European content requirements in public support schemes.

The IAA signals a meaningful shift in how Europe approaches industrial policy. For two decades, the prevailing doctrine has favoured open markets and minimal intervention. The IAA suggests that a more structured framework is emerging: one that ties market access to technology transfer, local employment, and procurement aligned with strategic autonomy. The final text may evolve through the legislative process, but the direction of travel is set. Businesses (whether already active in the EU or considering entry) should start to assess their exposure now. Partnership structures are emerging as one way to navigate the new environment, though the right approach will depend on each company's sector, footprint, and strategic objectives. Early analysis is more valuable than a wait-and-see approach.

Other authors: Dimitra Karakioulaki, Associate; Sarah Schaible, Transaction Lawyer; Aamir Hajjout, Research Assistant