Estonia’s FDI Screening: What the First Two Years Mean for Dealmakers

Estonia has joined the growing club of EU Member States with a fullyfledged foreign direct investment (FDI) screening regime. Since 1 September 2023, certain investments by nonEU investors into strategically important Estonian businesses can no longer close without prior approval from the authorities. 

After a “pilot” start in late 2023 and the first full year of practice in 2024, there is now more data to say what this means in real life for M&A, private equity and strategic investors. 

This post walks through the framework, the early statistics and the key deal-planning takeaways for investors looking at Estonia – either as a target jurisdiction or as part of a wider Baltic/European transaction.

1. The legal framework in a nutshell

Estonia’s FDI screening rules are set out in the Foreign Investment Reliability Assessment Act (Välisinvesteeringu usaldusväärsuse hindamise seadus). 

The Act: 

• implements the EU FDI Regulation (Regulation (EU) 2019/452) cooperation framework at Estonian level; 

• introduces a mandatory preclosing approval regime for certain investments by “foreign investors” into defined strategic sectors; and 

• aims to protect national security and public order while maintaining Estonia’s reputation as an open, investmentfriendly economy.  

The competent authority is the Consumer Protection and Technical Regulatory Authority (Tarbijakaitse ja Tehnilise Järelevalve Amet, TTJA), which: 

• runs the authorisation procedure; 

• coordinates the work of the Foreign Investment Committee (an interagency body involving several ministries and security services); and 

• acts as Estonia’s contact point in the EU FDI cooperation mechanism.  

 2. Who and what is caught?

2.1. Who is a “foreign investor”? 

The regime is thirdcountry focused. In broad terms, a “foreign investor” is:  

• a natural person who is a national of a nonEU country (including dual nationals where at least one nationality is from a third country), or a stateless person; 

• an undertaking established under the laws of a third country; or 

• any undertaking, wherever incorporated, that is controlled by such a thirdcountry person or undertaking (including EUincorporated holding or SPV structures). 

In practice, this means that even an EU or Estonian company may be treated as a “foreign investor” if a nonEU person ultimately controls it. The regime is specifically designed to catch indirect structures and specialpurpose vehicles, not just obvious direct investors.  

2.2. What kind of transactions are in scope? 

Approval is required where a foreign investor:  

• acquires a direct or indirect “significant holding” (generally ≥10% or otherwise conferring significant influence); 

• acquires control (positive or negative) over the target; or 

• acquires a business unit, plant or key assets of the target that are critical for its activities. 

The law looks not only at single transactions but also at series of linked transactions which, taken together, result in a significant holding or control. 

2.3. Which targets are “strategic”? 

The regime does not apply to every Estonian company. It focuses on defined categories of “target undertakings” active in sectors that matter for national and economic security, including in particular:  

• Providers of “vital services” (elutähtsad teenused) – e.g. electricity, gas and fuel supply, water, telecoms, certain payment services, critical transport and other essential infrastructure; 

• Companies with significant state ownership; 

• Producers and suppliers of military and dualuse goods to the state; 

• Media undertakings – nationwide TV and radio services, ondemand audiovisual media services, and print/online news publishers with annual turnover above a specified threshold; 

• Holders of mining or exploration rights for oil shale and certain EUcritical raw materials in Estonia; 

• Entities holding state emergency stockpiles under “state reserve” arrangements; 

• Owners of permanent national defence objects; 

• Owners/operators of certain critical communications and broadcasting infrastructure, including tall mast infrastructure; 

• Railway infrastructure operators managing public rail infrastructure; and 

• Operators of international airports, heliports and key seaports, and air navigation service providers. 

With the rise of significance of defence related investments, usually the issue of supply of military or dual-use goods has to be studied diligently. Overall, f your deal involves one of these categories and a nonEU investor, you should assume FDI screening is likely to be relevant.

3. How the procedure works in practice

Procedurally, the regime works like a classic suspensory approval system:  

• The investor must file an application with TTJA before closing. 

• TTJA coordinates an assessment with the Foreign Investment Committee, and – where relevant – with other EU Member States and the European Commission through the EU FDI cooperation mechanism. 

• The statutory review period is 30 calendar days, with the possibility of extensions (for complex cases and EU consultations). 

In 2024 practice, TTJA claims it has been faster than the statutory outer limit: 

• Average review time: 24 days; 

• Excluding one more complex case where the deadline was extended, the average was around 20 days – roughly onethird faster than the 30day default.  

For deal teams, this means FDI screening is an extra workstream, but not (so far) a systematic transaction “killer” or a monthslong bottleneck. 

4. 2024 in numbers: Estonia’s first full year of FDI screening

TTJA’s 2024 report gives the first fullyear snapshot of how the regime works in practice:  

Authorisations 

• TTJA issued five FDI authorisations in 2024. 

• The investments originated from the United States, Switzerland, the Cayman Islands, Japan and Guernsey. 

• Across these cases, the aggregate transaction value exceeded EUR 300 million. Roughly one third of that value related to Estonian target undertakings – in other words, Estonia screened around EUR 100 million of investments into sectors considered strategic for economic security. 

The assessed transactions involved potential impacts on: 

• the provision of vital services; 

• state emergency reserves; 

• media freedom and media pluralism; and 

• undertakings with state participation.  

Awareness and compliance 

• TTJA conducted 15 supervision proceedings in 2024 to check compliance with the approval obligation; 

• No violations of the Foreign Investment Reliability Assessment Act were identified; 

• TTJA provided 24 advisory consultations and focused actively on guidance and uptodate FAQs and materials on its website.  

Taken together, this suggests that market participants – including foreign investors and their advisors – have quickly internalised FDI screening as a standard part of the Estonian regulatory landscape. 

EU cooperation dimension 

Through the EU FDI cooperation mechanism, Estonia is not just screening inbound deals but also actively participating in the assessment of investments in other Member States:  

• In 2024 TTJA received on average 39 notifications per month from other EU Member States about initiated FDI screening procedures. 

• The largest investing countries in these crossborder cases included the US, the UK, China, Japan, Canada and the Cayman Islands. 

• The main target sectors were IT and telecoms, manufacturing and technology, energy, healthcare and pharmaceuticals, and retail and wholesale trade. 

• Investors from Russia and Belarus accounted for around 1% of the notified transactions, typically small in size and often related to winding up operations or asset restructurings in those countries. 

More than one third of the EUscreened transactions in which Estonia was notified had a Baltic dimension – either the investor or the target group had direct or indirect operations in Estonia, Latvia or Lithuania.  

For multijurisdictional deals, this means Estonia is often one of several relevant FDI regulators, and coordination across the Baltics and wider EU is increasingly important.

5. Trends from the first two years

Looking at the period from entry into force in September 2023 through the end of 2025, several patterns are emerging: 

1. Screening has become a normal deal workstream 

FDI clearance is now being treated alongside merger control and sectoral licences as a standard condition precedent in Estonian and Baltic M&A involving nonEU investors and strategic assets.  

2. The approach is riskbased rather than protectionist 

The legal basis is firmly anchored in national security and public order, not in general industrial policy. The focus is on investments that could affect critical infrastructure, essential services, defencerelated activities, sensitive data, or media pluralism – and most reviewed investments have been cleared once risks are understood and, where needed, mitigated.  

3. The regulator is relatively fast and pragmatic 

The average review time of 20–24 days (in 2024 practice) suggests TTJA and the Foreign Investment Committee are capable of handling cases efficiently, even accounting for EUlevel consultation.  

4. Baltic and EU dimensions are significant 

Given the strong integration of Baltic markets and crossborder corporate groups, many investments screened in other Member States have a Baltic component – which in turn can trigger Estonian screening or at least require Estonia’s input in the EU cooperation mechanism.  

5. Awareness and compliance are high 

The absence of detected breaches in 2024, despite active supervision, indicates that foreign investors and local targets are largely aware of the new regime and are building it into their transactions from the outset. 

6. Practical takeaways for investors and deal teams

For nonEU investors – including funds and strategic buyers – as well as for Estonian sellers and targets, there are a few practical points to keep in mind. 

6.1. Build FDI analysis into early deal scoping 

At term sheet / NDA stage, you should: 

• map the ultimate ownership and control structure of the investor (including any thirdcountry control); 

• check whether the target qualifies as a “target undertaking” (vital services, defence/dualuse, media, energy/raw materials, statelinked, critical infrastructure, etc.); and 

• assess whether the transaction will confer a ≥10% stake, significant influence, control or acquisition of key assets of the target.  

If the answers lean towards “yes”, assume that a TTJA filing and approval will be required before closing. 

6.2. Reflect FDI screening explicitly in transaction documentation 

Sale and investment agreements should, as a matter of course: 

• list FDI approval among the conditions precedent, alongside merger control and sectoral authorisations; 

• include a clear cooperation and informationsharing clause with respect to the filing; 

• address longstop dates in light of potential extensions of the review period; and 

• allocate risk of nonapproval (e.g. termination rights, remedies obligations, break fees where appropriate). 

6.3. Align Estonian, Baltic and EUlevel workstreams 

Given the strong Baltic and EU interplay: 

• consider early which other Member States’ FDI regimes may be triggered by the same transaction; 

• align the narrative and data across filings, especially regarding ownership, funding sources, target activities and securityrelevant features; and 

• anticipate questions that may arise through the EU FDI cooperation mechanism and ensure consistent responses. 

7. Looking ahead

At EU level, work is ongoing on updating and strengthening the FDI framework, with a trend towards more harmonised and more widespread screening across Member States. Estonia should be wellpositioned in that discussion: it already has a functioning regime, practical experience and an active role in EU cooperation. The issue might by quite thin local resources for efficient scrutiny of more complex structures. 

For investors, the key message is that Estonia remains open to foreign investment, including from third countries – but strategic deals into critical sectors must now pass through a structured, securityfocused screening process. So far, the experience from 2023–2025 suggests that: 

• wellprepared, transparent investors; 

• clear transaction rationales; and 

• early engagement with the FDI aspects 

can expect a predictable and reasonably swift process, rather than a roadblock. 

Bottom line: Estonia welcomes foreign investment. As long as you’re transparent and prepared, FDI screening is just another box to tick—not a dealbreaker. 

If you are planning an investment into Estonia – or a wider Baltic/European transaction with an Estonian angle – our team can help you: 

• assess whether the FDI regime is triggered, 

• structure and time your transaction accordingly, and 

• prepare and steer the TTJA filing and any multijurisdictional strategy.