The Foreign Subsidies Regulation (FSR) came into force on January 12, 2023. It is important for companies involved in mergers and public bids in the EU, as it grants the Commission the authority to regulate foreign subsidies from non-EU governments.
Starting from July 12, 2023, the FSR will be applicable, allowing the Commission to initiate investigations on its own.
On October 12, 2023, the notification requirement for mergers and public procurement exceeding certain thresholds will begin.
The FSR combines elements of current merger control and foreign investment control mechanisms under EU legislation.
The FSR provides the Commission with three control mechanisms based on notifications in the following cases:
- Concentrations involving a financial contribution from a non-EU government, where the acquired company, one of the merging parties, or the joint venture generates an EU turnover of at least €500 million, and the transaction involves a foreign financial contribution of over €50 million.
- Bids in public procurements involving a financial contribution from a non-EU government, where the estimated contract value is at least €250 million, and the bid involves a foreign financial contribution of at least €4 million per third country.
- Other market situations, where the Commission can initiate a review on its own or request ad-hoc notification for smaller concentrations and public procurement procedures.
On February 6, 2023, the European Commission published a draft implementing regulation to guide entities required to submit notifications or declarations. The regulation outlines the information to be provided in the templates.
However, there are concerns about certain definitions and exceptions in the proposed regulation, such as the broad definition of "financial contribution." It can encompass both arms-length investments with market expectations and transactions that don't meet market conditions.
Unlike in merger control or foreign direct investment (FDI), information needs to be collected internally on an ongoing basis, not just annually, to demonstrate the required financial contributions before finalizing agreements, announcing bids, or acquiring controlling interests.
There are de minimis exemptions, but all financial contributions must still be monitored and collected internally to determine jurisdiction thresholds.
Companies should closely monitor future developments and seek legal advice to ensure compliance with the new regulations.
Autorka: Edyta Niemyska – radczyni prawna, LL.M.
T: +48 602 350 922”