EU's Foreign Subsidies Regulation – the European Commission seeks feedback on a draft implementing regulation

9 min read

On 6 February 2023, the European Commission launched a four-week public consultation on the draft Implementing Regulation on proceedings under the Foreign Subsidies Regulation (FSR). Whilst the Commission has made an effort to limit the scope of notifiable foreign financial contributions, the notification requirements and document disclosure remain substantial. 

Key takeaways:

  • The draft implementing package clarifies procedural rules and includes forms for the notification of foreign financial contributions ("FFCs") in the context of concentrations and public procurement.
  • The forms require the listing of FFCs received in the last three years, except, (i) in relation to concentrations, for individual FFCs below € 200,000 or if on aggregate they do not exceed € 4 million per third country on a yearly basis, and (ii) in relation to public procurement, if they do not exceed € 4 million per third country in the three years prior to notification (and only if they fall into the categories of FFCs considered likely to be distortive).
  • For those notifiable FFCs likely to be distortive, detailed information is required, including an analysis of whether the FFC provides a benefit to its recipient, and of its impact on the internal market.
  • The review time line is clarified, with pre-notification the phase I and phase II period is broadly aligned with that of merger control proceedings. 
  • Procedural rights are curtailed compared to merger control, with no oral hearing and a two-tiered access to file regime. 


The purpose of the FSR is to address distortions of the EU's internal market caused by foreign subsidies given to companies active in the EU. As explained in our alert here, the FSR is expected to have a major impact on companies that have received FFCs and that engage in M&A and public tenders in the EU, in particular, through the introduction of ex-ante filing obligations to the Commission for companies engaging in certain M&A deals and EU public tenders. This obligation comes on top of the merger clearance proceedings and FDI proceedings, and will further complicate deal execution. 

The Commission also has the powers to investigate, on its own initiative (or following information received by Member States, or a complainant), all potentially distortive foreign subsidies, including, but not limited to, M&A deals and public tenders that have already been concluded. 

The FSR applies to private and public companies, including sovereign wealth funds. It captures not only foreign companies operating in the EU, but also EU-based multinational companies that have received FFCs. 

The new package clarifies procedural rules and notification forms, as explained below. 

The draft Implementing Regulation

The draft Implementing Regulation contains clarifications on: 

  • The submission of notifications concerning (i) concentrations; and (ii) public procurement procedures, which is furthered detailed in the draft notification forms for concentrations (Annex 1) and public tenders (Annex 2); 
  • The investigatory powers of the Commission in ex officio proceedings;
  • Offering commitments and powers of the Commission to impose redressive measures to address potential distortions of the internal market; 
  • Access to file, and rights of defence generally; and
  • The calculation of deadlines. 

Notifications of M&A deals and EU public tenders

a)    What information needs to be provided?

Notifications for both M&A deals and public tenders must provide a summary description of the deal or the tender, information about the (notifying) parties, detailed information about FFCs received in the past three years, and relevant supporting documentation specified in each of the notification forms (including detailed documents on the provision of the FFCs).

For concentrations, notifying parties will also have to provide extensive information on the bidding process (if applicable), including information on the profiles of other bidders, how many letters of intent and non-binding offers were received and from whom, which bidders withdrew and at what stage etc. Such information may prove difficult to provide for the notifying parties, as this is typically information available to the seller(s) only. The form also requires disclosure of due diligence reports or any equivalent documents prepared by external parties assessing the transaction from a strategic, legal, economic or tax point of view including documents discussing the value of the transaction. Parties also need to explain in detail the due diligence carried out.

Notifying parties can request waivers during the pre-notification phase, if certain information is not available or not necessary for the examination of the case. It will, however, be within the Commission's discretion to accept or reject such requests. 

b)    Which FFCs need to be reported and what details should be provided?

The reporting requirements for FFCs differ slightly for concentrations and public procurement. 

For concentrations, notifying parties will have to provide a detailed list (in a format provided in the form) of all FFCs received, by country, for the last three years, except for individual FFCs below € 200,000 or if on aggregate they do not exceed € 4 million per third country on a yearly basis. The notifying parties will also have to explain if any of the notifiable FFCs have links to the specific concentration. 

Furthermore, the notifying parties will need to identify if the FFCs: 

(i)    support failing business (and, if so, present a viable long-term plan to restructure); 

(ii)    provide for an unlimited guarantee;

(iii)    finance export into the EU (and whether it is in line with the OECD Arrangement on officially supported export credits); or 

(iv)    directly facilitate a concentration. 

For those FFCs that are presumed to have distortive effects, notifying parties will need to provide information on their form (e.g., loans, tax exemptions, capital injections, fiscal incentives or contributions in kind), the identity of a grantor, the purpose and economic rationale of the contribution, as well as conditions that were attached to the use thereof and whether the contribution is limited (in law or in fact) to certain undertakings or industries. 

The draft notification forms also require the parties to indicate whether such likely distortive FFCs conferred a benefit to their business in the EU, e.g., if they were granted on market terms. This analysis can be complex, as it requires comparing the FFC with benchmark transactions, and needs to be anticipated (possibly with the involvement of accounting firms or economists). If the FFCs constitute a subsidy that could have distortive effects, notifying parties have an option, but not an obligation, to demonstrate the subsidies' positive effects on the internal market. 

For public tenders, notifying parties must only list (in a format provided in the form) FFCs if they equal or exceed € 4 million per third country in the three years prior to notification, and if they: 

(i)    support failing business (and, if so, present a viable long-term plan to restructure); 

(ii)    provide for an unlimited guarantee;

(iii)    finance export into the EU (and whether it is in line with the OECD Arrangement on officially supported export credits); 

(iv)    enable the submission of a unduly advantageous tender; or

(v)    relate to operating costs. 

For such FFCs, notifying parties must provide detailed information similar to what needs to be provided for concentrations (see above). Detailed information is requested, in particular, for FFCs covering operating expenditures or facilitating participation in the public procurement procedure. 

c)    Procedural rules

Similarly to merger control proceedings, the Commission encourages notifying parties to participate in voluntary pre-notification discussions in cases of both M&A deals and public procurement. The clock in the proceedings will only start ticking once the Commission receives a complete notification with all required information. As in merger control, this rule makes the pre-notification phase particularly important, and avoids situations where a filing is made and the clock re-started if ever the Commission considers the file to be incomplete. 

As regards procedural rights, the notifying parties will have a chance to provide observations at two stages of the procedure: first, upon the opening of an in-depth investigation, they will have one month to provide observations; second, before the Commission adopts a decision (e.g., a decision to block a concentration, prohibit an award, or impose redressive measures), the undertaking under investigation will be able to provide observations within a time limit set by the Commission. As regards concentrations, this is very much in line with merger control rules with one noticeable difference: the draft rules do not provide for the possibility of an oral hearing, unlike in merger control. 

Before submitting observations, the undertakings under investigation will have access to the file. Here, the Commission introduces a novel (compared to merger control) two-tier system: the undertaking will have access to the non-confidential version only of the documents on which the Commission relies, while the legal, economic and technical advisers will have access to the entire file upon terms of disclosure decided by the Commission. 

Notifications for concentrations must be submitted in one of the official languages of the EU, with supporting documents in their original language, unless the language is non-EU, in which case, it must be translated. Notifiable public tenders and declarations (in relation to tenders falling below relevant thresholds)1 must be notified in the language of the public procurement procedure to which they relate. The draft implementing regulation explicitly encourages parties to submit the notifications through email, thereby easing the administrative burden of the notifying parties. 

Next steps and practical takeaways:

  • Following the public consultation, the European Commission will adopt a final implementing regulation before the FSR starts applying on 12 July 2023. 
  • The FSR will not apply to: (i) M&A deals for which the agreement was concluded, the public bid announced, or a controlling interest acquired before 12 July 2023; or (ii) for public tender contracts awarded or initiated before 12 July 2023.
  • The notification obligations for the companies will be effective as of 12 October 2023. In the period between 12 July and 12 October 2023, there is no notification obligation. However, the Commission may already make use of its ex officio powers to investigate deals that were signed or announced, or public tenders that were initiated after 12 July 2023. 
  • Given the FSR's broad scope, and the extent of information required under the proposed notification forms (if unchanged), companies should start preparing now for the application of the FSR and gather information on the FFCs they have received in the last three years.

1 In case of all received foreign financial contributions that do not fall within a relevant threshold as per Article 29 (1) of the FSR.

This publication is provided for your convenience and does not constitute legal advice. This publication is protected by copyright.
© 2023 White & Case LLP