The EU's proposed Industrial Accelerator Act (IAA): "Made in EU" requirements and new foreign investment restrictions

The IAA was announced by Commission President Ursula von der Leyen in her 2025 State of the Union Address and was initially expected to be published on 25 February 2026. Its delayed adoption reflects the controversial nature of the measures, both among stakeholders and within the Commission itself. A range of differing positions has emerged among both Members of the European Parliament and the Member States, suggesting that the proposal may evolve substantially over the course of the legislative process.

The IAA seeks to strengthen the resilience and competitiveness of the EU’s industrial base, boost demand for clean and EU‑manufactured products, and support decarbonisation. A central policy objective is to reduce strategic dependencies and supply‑chain vulnerabilities, with the stated aim of raising manufacturing to 20% of EU GDP by 2035.

The IAA does not operate in isolation, but rather builds on and expands a number of existing and parallel EU initiatives that already incorporate origin‑based or Union‑origin requirements. In particular, the Net‑Zero Industry Act (“NZIA”), adopted in 2024, already introduced restrictions in public procurement, auctions and certain public support schemes with respect to products originating in third countries on which the EU was found to have significant dependencies. Also, as regards the automotive sector, the Commission has recently proposed additional measures under its Automotive Package, including the proposal on clean corporate vehicles and the proposal amending the CO₂ emission performance standards. Both proposals condition access to certain incentives or regulatory benefits on vehicles being “made in the EU”.

Beyond these sector‑specific instruments, the Commission has also announced a revision of the Public Procurement Directives, expected in Q2 2026, for which a public consultation was conducted in late 2025 and early 2026. According to the Commission, the revision would “enable preference to be given to European products in public procurement”, suggesting that further “Made in EU” requirements may be introduced for public procurement. This direction is consistent with the approach outlined by Commission President Ursula von der Leyen in her aforementioned 2025 State of the Union Address, in which she explicitly called for the introduction of “Made in Europe” criteria in public procurement.

Sectors covered

The IAA introduces origin‑based requirements for three groups of strategic sectors:

• Energy‑intensive industries, defined by reference to NACE codes C17, C19, C20, C22, C23 and C24. In practice, Union‑origin requirements are currently limited to concrete, mortar and aluminium (and certain downstream products the performance of which depends mainly on these inputs), while steel is subject only to low‑carbon requirements. The Commission may extend or amend these requirements by delegated acts.
• Net‑zero technologies, as defined in the NZIA, including battery energy storage systems, solar, hydronic heat pumps, wind technologies and nuclear fission. The IAA significantly expands the existing NZIA framework by introducing explicit “Made in EU” requirements across public procurement, auctions and certain public support schemes.
• Automotive industry (NACE C29), with detailed Union‑origin requirements for new pure electric vehicles (PEVs), off‑vehicle charging hybrid electric vehicles (OVC‑HEVs) and fuel‑cell vehicles (FCVs), applicable in public procurement and public support schemes including financial support for corporate vehicles as well as eligibility for super credits.

Types of origin based measures

The Proposal introduces two distinct mechanisms:

(a) Exclusion of certain third country operators from public procurement

Contracting authorities must exclude tenders submitted by economic operators that are owned or controlled by entities established in third countries that do not benefit from EU public procurement market access under an FTA or the WTO Government Procurement Agreement (“GPA”).

This exclusion applies, subject to sector‑specific timelines, to public procurement procedures involving:

• products from energy‑intensive industries;
• net‑zero technologies covered by the IAA; and
• zero‑emission vehicles and related service contracts.

The Proposal does not define “ownership” or “control”, creating legal uncertainty and potentially broad application, including EU established companies with even indirect but substantial links to non-covered third countries. Unlike the Union‑origin requirements (see below), no explicit derogations or flexibilities apply to this exclusion mechanism.

(b) Union origin (“Made in EU”) requirements

Union‑origin content is determined under the EU’s non‑preferential rules of origin. Certain third‑country content may be treated as equivalent where the EU has concluded an FTA (and, for procurement, the GPA), subject to the Commission’s power to withdraw equivalence by delegated act.

Of note, the equivalence system as set out in the IAA refers specifically to “content originating in” the relevant third countries. As such, it appears designed to apply to provisions that impose origin based content requirements. However, certain IAA provisions do not focus on the origin of content, but rather on a specific stage of production. For example, in the context of electric vehicles, the IAA requires that vehicles be “assembled within the Union.” Based on the current wording, the equivalence regime would thus not appear to extend to such requirements, i.e. assembly carried out in covered third countries would not necessarily be treated as equivalent.

(c) Sector specific application

• Energy‑intensive industries:
  From 1 January 2029, relevant public procurement and public support schemes must ensure minimum Union‑origin content for concrete and mortar (5%) and aluminium (25%) used in buildings, infrastructure or vehicles. Steel is currently excluded from Union‑origin requirements but remains subject to low‑carbon criteria.
• Net‑zero technologies:
  Amendments to the NZIA introduce differentiated Union‑origin requirements across public procurement, auctions and demand‑side support schemes, with thresholds and timelines varying by technology. These requirements apply to a minimum share of Member States’ auctioned volumes and are complemented by limitations relating to “high‑risk suppliers” for certain digital and control systems.
• Automotive sector:
  From six months after entry into force, public procurement and support schemes for the purchase, lease, rental or hire purchase new PEVs, OVC‑HEVs and FCVs will be conditional on compliance with detailed Union‑origin requirements, including EU assembly, minimum EU content thresholds for components, and specific battery sourcing rules. The same requirements apply in public procurement procedures where such vehicles are used to provide services. More stringent requirements will apply three years after entry into force of the IAA.

(d) Derogations

The IAA provides for general derogations where application of Union‑origin requirements would result in a lack of competition, disproportionate costs, technical incompatibility or significant delays. The scope and availability of specific derogations vary depending on the sector and the type of public intervention.

Sector‑specific derogations apply for vehicles. In particular, flexibilities are introduced for small electric vehicles (subcategory M1E), which must comply with less strict Union origin requirements. There is also a 12-month fleet level compliance mechanism, allowing manufacturers to be deemed compliant where at least 85% of their EU registered vehicles assembled in the previous year meet the Union origin requirements, and a transitional exemption for vehicles already registered in the EU, which are deemed compliant for public service contracts until 31 December 2035.

The IAA introduces a targeted screening framework for certain large foreign investments into strategic industrial sectors. The rules apply only where two cumulative thresholds are met. First, the investment must exceed EUR 100 million. Second, the investor must originate from a country that accounts for at least 40% of global production of the relevant technology or input, which is targeted in particular at Chinese investors as the regime is limited to four sectors identified as strategically sensitive and in which China has a strong economic footprint:

1. battery technologies and the value chain for battery energy storage systems;
2. pure electric vehicles, off-vehicle charging hybrid electric vehicles and fuel-cell electric vehicles, including components related to electrification and digitalisation;
3. solar photovoltaic (PV) technologies; and
4. the extraction, processing and recycling of critical raw materials.

Importantly, the Proposal also covers greenfield investments, meaning the establishment of new facilities in the EU may fall within its scope if the thresholds are met. However, there are three important exemptions. In simplified terms, the mechanism does not apply to (i) investments from countries that with an EU free trade or economic partnership agreements, (ii) investments aimed primarily at providing services (as opposed to manufacturing or industrial production); and (iii) portfolio investments, i.e. passive financial investments without management rights.

In the substantive assessment, authorities must examine six value added criteria, and intervention requires that at least four of these six criteria are fulfilled. In essence, they require that: (i) the foreign investor remains in a minority position, generally holding no more than 49% of shares, voting rights, or equivalent control rights in the EU target or assets; (ii) where the investment takes place through a joint venture, the foreign investor also remains below 49%, with governance arrangements ensuring meaningful participation of EU partners; (iii) the foreign investor licenses relevant intellectual property and know-how to the EU target, while pre-existing EU IP remains fully owned by the EU entity and jointly developed IP is shared; (iv) the investor commits to R&D spending in the Union, amounting to at least 1% of the EU target’s annual revenue, proportionate to its share; (v) the investment maintains a substantial EU workforce, with at least 50% EU workers and accompanying training measures; and (vi) the investor supports EU value chains, including by publishing a strategy to prioritise sourcing inputs from within the Union.

Where the mechanism applies, notifications are submitted to Member State authorities, which remain responsible for the final decision. The proposed regime would operate in parallel to the existing framework under the EU FDI Screening Regulation and to national FDI regulations, but its scope is considerably narrower than the initial concept discussed in policy circles. In practice, the structure suggests that the mechanism is primarily aimed at addressing economic security concerns related to Chinese industrial dominance, rather than creating a broad new investment control regime.

In particular, three structural differences distinguish the IAA’s proposed mechanism from traditional FDI screenings:

• First, its policy objective is economic security rather than national security. While the FDI framework focuses on risks to security or public order, for instance by investments in critical infrastructure or affecting supplies to government and military, the IAA targets situations where foreign investments could reinforce structural dependencies in strategically important industrial ecosystems.
• Second, the procedural logic differs markedly from standard FDI screening. Under the EU FDI system, roughly 95% of transactions receive unconditional clearance and only a few a reviewed in depth and trigger intervention. Under the IAA, however, if a filing is required it will automatically result in intervention as four out of six value added criteria need to be met, meaning that the cases entering the procedure are by definition considered as problematic.
• Third, the proposal assigns the European Commission a stronger coordinating role than under the current FDI framework. Member States remain the formal decision-makers, but the Commission can issue an opinion and, where a Member State chooses not to align with it, the procedure is automatically extended by two months. In addition, the Commission may take over cases that affect several Member States, and a new referral mechanism allows Member States to request Commission involvement under Article 21.

This creates an interesting institutional parallel with merger control under the EU Merger Regulation. For years, practitioners debated the expanding use of Article 22 referrals to the Commission. Under the IAA, the relevant provision is Article 21, but the Commission appears to have learned from the merger control experience: rather than relying solely on Member State referrals, it would also have the power to directly take jurisdiction over certain cross-border cases.