New Foreign Subsidies Regulation

New Foreign Subsidies Regulation

The European Union’s Foreign Subsidies Regulation (the FSR) is now in full force.


On 12 July 2023, the FSR became applicable across the European Union. The new rules give the European Commission the power to investigate “financial contributions” granted by non-EU countries to companies engaging in an economic activity in the European Union and redress, if needed, their distortive effects. Under the FSR, the notion of financial contribution is very broad and includes, injections, grants, loans, tax exemptions, fiscal incentives, and others.

The scope of the FSR covers all economic activities within the European Union, in particular mergers and acquisitions (“concentrations” – a notion already found under EU competition law), public procurements, but also any other economic activity. The FSR grants the European Commission (i) an ex-ante review tool enabling it to review concentrations and public procurements where certain thresholds are met and (ii) ex-officio investigation powers for all other market situations, as well as “concentrations” and public procurements that do not meet the notification thresholds. As of 12 October 2023, the notification obligation has started to apply.

Companies (EU and non-EU companies) active in M&A transactions or public procurement procedures in the European Union, involving a financial contribution from non-EU countries, are required to notify their foreign financial contribution to the European Commission if they meet the suspensory notification thresholds set out below. Failure to notify a reportable transaction of public tender may result in a fine of up to 10% of the aggregate worldwide turnovers.


1.Notification thresholds for M&A transactions


Concentrations must be notified to the European Commission if the following thresholds are met: (i) the target, one of the merging parties or the joint venture generates an EU turnover of at least €500 million and (ii) the foreign financial contribution involved is more than €50 million in the three years prior to the signing of the transaction.

The notification obligation applies to all transactions signed on or after 12 July 2023 and not completed before 12 October 2023.


2.Notification thresholds for EU public procurement procedures


Companies participating in public procurement procedures are required to notify the foreign financial contributions to the European Commission if the following thresholds are met: (i) the estimated contract value is at least €250 million and (ii) the foreign financial contribution involved is at least €4 million per non-EU country and was granted in the three years prior to participation.


3.The European Commission’s review process


The FSR review procedure is similar to the EU Merger Regulation process: The procedure starts with an initial “Phase I” review lasting up to 25 working days from the date of formal notification, which can be followed by an in-depth “Phase II” 90 working day review period, with a possible extension by 15 working days if commitments are offered.

For public procurement procedures, the European Commission’s “Phase I” review may last up to 20 working days, extendable by 10 working days in “duly justified cases”, while the “Phase II” review will not last more than 110 working days, extendable by 20 working days in “duly exceptional cases”.

The FSR is significant in an M&A context as it adds new regulatory considerations for businesses (e.g., condition preceding to closing) on top of merger control and foreign investment clearance.


For further information on the new regime and how it could impact your business, please do not hesitate to get in touch with us!