Three years into the applicability of the Foreign Subsidies Regulation (“FSR”), businesses now have a clearer basis for navigating the regime, but not all questions are answered.
This alert shares key practical lessons from our experience with FSR since summer 2023: where execution risk arises, what the filing record tells us, how FSR interacts with foreign direct investment (“FDI”) screening and merger control, and what businesses can do now to make future reviews faster and more predictable.
Three Takeaways at a Glance
- Plan for the process. Incorporating FSR review early supports efficient and timely signing, closing, tender submission, and contract award, and reduces the risk of errors caused by unnecessary time pressure.
- Build a reliable data foundation. Companies need to comprehensively identify, collect, and explain foreign financial contributions (“FFCs”) across jurisdictions, business units, and group structures on tight timelines and well-founded legal positions. Incorrect responses could lead to fines and loss of business opportunities.
- Treat FSR as part of the overall regulatory strategy. For strategic transactions and major tenders, it belongs alongside FDI screening, merger control and procurement planning from the outset.
Why FSR Is Now Part of the Deal Landscape
The FSR fills a gap left by EU State aid, FDI screening, merger control, antitrust, and trade defence rules by addressing non-EU state support that may distort competition in acquisitions, public procurement competition, and other market situations. It gives the European Commission three routes of discovery: suspensory review of qualifying concentrations, notifications or declarations in large public procurement procedures, and ex officio investigations. Where notification thresholds are met, a transaction cannot close and a public contract cannot be awarded until review is complete.
Lessons from Three Years of Practice
The filing record and our experience point to five practical lessons. Together, they show how early preparation can make notifications, declarations, and responses to Commission requests more efficient and reliable.
- 1. A complete picture of the data enables a swift review: FSR reviews run in two stages. In a preliminary review, the Commission determines, based on the notified FFCs, whether there are sufficient indications of a distortive foreign subsidy. Only if such indications exist does the Commission open an in-depth investigation, in which it fully assesses whether the subsidy distorts the internal market and whether any positive effects outweigh the distortion. Most cases close at the first stage, and data quality largely determines how quickly they do so. Review periods begin only once the notification is complete, and well-documented FFCs enable the Commission to rely on company-provided facts rather than its own benchmarks. Businesses should therefore identify all relevant non-EU financial contributions (FFCs) across the group at an early stage. These contributions include public-sector sales, tax measures, state-bank financing, and contributions received by controlled entities. This information is often spread across multiple systems and business functions. This may include public-sector sales, tax measures, state-bank financing, and contributions received by controlled entities, often held across several systems and functions.
- 2. Early analysis improves predictability. The Commission applies a two-step test: is a foreign subsidy likely to improve the company’s competitive position in the EU, and, if so, does it actually or potentially harm competition there? To answer this, the FSR points to non-exhaustive indicators such as the amount and nature of the subsidy, the size and situation of the company and the markets concerned, the level and evolution of its EU activity, and the subsidy’s purpose, conditions and use. These indicators are not a checklist: the Commission weighs them together, case by case. Companies can strengthen their position through an early factual narrative explaining why support is not targeted at EU activities, cross-subsidization is unlikely, and market impact is limited. Particular attention is warranted for the categories the FSR treats as most likely distortive, such as unlimited guarantees and support directly facilitating an acquisition or an unduly advantageous tender, where no detailed indicator-based assessment is required.
- 3. Public procurement requires operational readiness: Tight deadlines, consortium structures, subcontractor data, the complexity (and: imperfections) of the public procurement notification template (“Form FS-PP”), and requests for information make FSR an integral part of tender management, not just subsidy-control analysis.
- 4. A credible response must be evidence-led: Businesses should be ready to support market terms, group ring-fencing, lack of cross-subsidization, commercial tender rationale, and any concrete positive effects linked to the relevant support. The Commission’s first in-depth FSR review of an acquisition, e&/PPF Telecom (2024), illustrates the point: the Commission identified concerns around an unlimited state guarantee and financing from state-controlled banks but cleared the acquisition subject to commitments that removed the guarantee, restricted financing of the target’s EU activities, required market terms for intra-group dealings, and introduced reporting obligations for future acquisitions. Each commitment addressed a specific channel through which state support could reach the EU business – precisely where early evidence matters.
- 5. Coordination across regulatory workstreams creates efficiencies: FSR information may overlap with aspects of FDI and merger control filings, although the legal tests differ. Aligning these workstreams harnesses efficiencies and supports a coherent transaction strategy.
The Numbers Behind FSR
The numbers provide useful perspective on how the regime operates in practice.
- By May 31, 2026, the Commission had received 273 formal concentration notifications; 247 closed after preliminary review and only three led to in-depth investigations.
- Public procurement generated 5,150 submissions across 863 procedures (including 4,293 declarations, 733 notifications, and 124 pre-notifications) but only four in-depth investigations.
The Commission’s records confirm that most cases close after preliminary review without an in-depth investigation. That outcome, however, is not automatic: efficient preliminary review depends on thorough pre-notification engagement, well-prepared FFC submissions, focused follow-up responses, and realistic transaction timetables. In public procurement, two publicly reported investigations ended after the bidders withdrew from the procedures, underscoring the importance of assessing review implications as part of the commercial tender strategy. Current reform discussions focus on making the framework more workable through calibration of forms, thresholds, waiver practice, reporting exceptions, and recurrent submissions, while preserving the FSR’s substantive mandate.
One Deal, Three Regimes: Getting the Strategy Right
In strategic transactions, FSR may run alongside national FDI screening and merger control. The regimes apply different tests but may draw on overlapping information, including ownership, financing, internal documents, business plans, and the target’s strategic role. Deal teams should coordinate workstreams from the outset, align factual descriptions and pre-notification contacts, and set a long-stop date that accommodates the review most likely to drive timing. Transaction documents should allocate responsibility for FFC data, requests for information, potential commitments, and delayed or conditional clearance
For our clients, we therefore ensure to:
- Identify dealings with public authorities, state-owned entities, tax authorities, and public-sector customers, tracking the legal basis for each contribution rather than actual payments only.
- Coordinate FDI screening and merger control; for tenders, anticipate Form FS-PP, consortium and subcontractor data, requests for information, and award timing.
- Document market terms, ring-fencing, absence of cross-subsidization, tender pricing, and relevant positive effects.
- Consider strategic assets, state-linked investors, and significant third-country support.
- Draft and maintain reusable FFC tracking and evidence processes for regular bidders, acquirers, and groups with non-EU public-sector dealings.
What Comes Next
The direction of travel is clear: more streamlined processes, with continued scrutiny. Whatever procedural adjustments follow, the FSR will remain central to M&A, public procurement, and state-linked commercial relationships. Businesses that screen early, map FFC exposure, coordinate filings, and prepare the evidence can approach the regime with greater predictability and integrate it effectively into wider transaction and tender planning.
Our cross-jurisdictional team brings FSR, FDI, merger control, public procurement, and related workstreams together in one coordinated strategy, helping clients align local requirements, parallel timelines, and regulatory engagement.
