The FSR turns three: European Commission confirms fitness for purpose but sets course for simplification

Alert

16 July 2026

9 min read

The European Commission has published its first review of the EU Foreign Subsidies Regulation (FSR), concluding that the instrument is meeting its objective of preserving a level playing field in the EU internal market against distortive third-country subsidies. However, the review also identified areas for improvement, most notably the significant administrative burden imposed on businesses through foreign financial contribution ("FFC") data collection, the complexity of notification procedures and residual legal uncertainty over key substantive concepts. In response, the Commission has committed to publishing draft targeted adjustments to the FSR’s procedural framework in autumn 2026 for stakeholder consultation, with formal adoption expected in 2027.

At a glance

FSR declared "fit for purpose" and not in need of fundamental reform. After three years of enforcement, the Commission confirms the FSR is meeting its objective of preserving a level playing field in the EU internal market.
Concerns identified. In the executive quotes accompanying the press release concerning the review. Executive Vice-President Teresa Ribera stresses that "Europe remains open to investment", and that the Commission will "continue listening to calls for simplification". The report sets out significant areas for improvement identified by stakeholders to ease administrative burden and reduce legal uncertainty.
- FFC data collection. The broad FFC definition requires businesses to gather and report subsidy information across multiple jurisdictions, with 72% of legal practitioners surveyed rating this a significant compliance challenge.
- Complex forms and deadlines. Notification forms are lengthy and incomplete filings are common. In public procurement cases, the absence of a "stop-the-clock" mechanism compounds the pressure of tight review windows.
- Legal certainty. Stakeholders report difficulty predicting how the distortion test under Article 4, the Article 5 categories, and the balancing test under Article 6 will be applied in individual cases, given the still-limited body of decisional practice.
- Call-in powers. The Commission’s unexercised power to call in below-threshold concentrations continues to create uncertainty for transaction planning, notwithstanding the guidance provided by the FSR Guidelines published in January 2026.¹
High notification volumes. The volume of notifications has significantly exceeded expectations, creating a substantial administrative burden for both businesses and the Commission. High clearance rates at preliminary review raise questions about the proportionality of these notification burdens.
Targeted amendments forthcoming. The Commission will publish draft targeted adjustments in autumn 2026 for public consultation. These will potentially include raised notification thresholds, simplified notification procedures, additional reporting exemptions, and streamlined public procurement forms. Formal adoption of the adjustments is expected in 2027.

The FSR and the review obligation

The FSR entered into force on 13 January 2023 and has applied since 13 July 2023, with ex ante notification obligations for mergers and public procurement becoming applicable from 13 October 2023. The FSR was designed to address distortions in the EU’s internal market caused by subsidies granted by third-country governments to undertakings operating in the EU.

Under Article 52(2) FSR, the Commission is required to review its implementation and enforcement every three years and report to the European Parliament and Council. The first such report was published on 14 July 2026 and covers the initial three-year enforcement period. The review drew on 103 stakeholder contributions, an independent external study and the Commission’s own internal assessment.

Key findings: The FSR is working — but simplification is needed

Overall assessment

The Commission’s headline conclusion is unequivocal: no fundamental changes are needed. At the same time, the Commission has signalled that it may consider targeted adjustments to the FSR’s procedural framework to reduce administrative burden and facilitate compliance, while being explicit that these will not come at the cost of the Regulation's effectiveness or enforcement ambition.

Merger notifications

By 31 May 2026, the Commission had received 273 merger notifications, averaging approximately 100 per year and far exceeding initial projections of 30 to 40 annually. Around 97% of cases were closed after preliminary review without an in-depth investigation. Three in-depth investigations have been opened: e&/PPF Telecom (FS.100011), ADNOC/Covestro (FS.100156), and JD.COM/CECONOMY (FS.100253).

In 20% of cases closed after preliminary review no FFCs were reported at all, as the relevant contributions fell within existing reporting exemptions.

Stakeholders raised significant challenges associated with the notification procedure. The most recurrent concern relates to FFC identification, collection and reporting, with half of public consultation respondents considering the reporting obligation too broad. The open-ended FFC concept under Article 3 FSR requires data-gathering exercises across multiple entities, jurisdictions and time periods. The cumulative burden of parallel procedures was also flagged, with 80% of FSR notifications also subject to EUMR review and 28% subject to national FDI screening. Finally, uncertainty over the Commission’s unexercised call-in powers for below-threshold concentrations continues to disrupt transaction planning and risk assessment.

Pre-notification discussions are widely used and broadly supported by notifying parties. The review suggests that pre-notification procedures are becoming more efficient in practice. The median number of working days in the pre-notification phase fell from 36 working days for cases notified between September 2023 and March 2024, to 24 working days for cases notified between October 2024 and April 2025, a reduction of approximately 33%.

Waivers were requested in approximately 39% of cases. The most common waiver sought related to FFCs considered not necessary for the Commission’s assessment (27.9% of all waivers), followed by information not being readily available (21.3%), no link to the transaction (9.8%), and confidentiality (9.8%).

Approximately 32% of all notified cases involved a private equity or investment fund acquirer. The Commission observes that in cases involving investment fund/private equity acquirers, FFCs taking the form of capital contributions were consistently found to have been made on pari passu term (that is, on conditions equivalent to those available to private investors operating in normal market conditions), such that no benefit was conferred on the recipient undertaking. Accordingly, these contributions did not constitute foreign subsidies capable of distorting the internal market, and the relevant cases were closed at the preliminary review stage without further investigation.

The review found that raising the threshold to EUR 600 million would lead to a 16% decrease in the number of notified cases. According to the Commission’s analysis, an increase to the turnover threshold would not unduly restrict its ability to detect potentially problematic subsidies. The Commission’s analysis also suggests that the current reporting threshold of EUR 1 million per individual FFC and EUR 45 million per third country may be capturing a substantial amount of information that has, in the majority of cases, turned out to be of limited relevance in identifying a risk of distortion. These findings signal areas in which targeted adjustments are likely to follow.

Public procurement

The Commission reviewed more than 5,150 submissions across 863 public procurement procedures between October 2023 and May 2026. Despite the high volume of submissions, only four in-depth investigations have been opened, with three of them closing after the relevant operators withdrew from the procurement procedure. The report notes that while these figures may raise questions about the FSR’s proportionality, it is important to interpret them in the light of the FSR’s deterrent effect. Operators may be refraining from participating in certain tenders if they are unwilling to disclose information on received FFCs.

The review identifies a concerning trend in compliance rates within the public procurement module. Having risen sharply from 40% to 70% of qualifying procedures in the first two years of enforcement, the share of procurement procedures attracting an FSR submission fell back to 45% by late 2025. The Commission attributes this decline in part to insufficient awareness among contracting authorities of their obligations under the FSR, and has signalled that targeted outreach and enhanced guidance will form part of its response.

The Commission observes that economic operators subject to FSR reporting obligations on a recurrent basis face a disproportionate cumulative burden. It notes that the 40 most active submitters averaged 16.8 Form FS-PP submissions each during the approximately two-year reference period (October 2023 to January 2026), equivalent to around 8.4 submissions per year. The Commission calculates that introducing a single periodic submission updated twice a year, or systematically using waivers for this purpose, could have reduced the total number of submissions among that group from 672 to 160, a decrease of approximately 76%.

Ex Officio investigations

The Commission has opened two ex officio in-depth investigations during the review period, both involving Chinese entities: Nuctech in the threat detection systems sector (FS.100068) and Goldwind in the EU wind turbine sector (FS.100143). Nuctech has challenged the inspection decision and Goldwind has challenged a request for information, and the judgments in these cases should clarify the dawn raid and information gathering powers of the Commission under the FSR.

Stakeholders raised two principal concerns regarding the ex officio procedure. The first relates to uncertainty over investigation timelines, which the Commission attributes to case complexity, the degree of cooperation of the undertaking under investigation, and proceedings before the EU Courts. The second is the need for greater transparency and clearer guidance on the circumstances in which ex officio investigations are initiated and how prioritisation decisions are taken.

Upcoming targeted adjustments: What to expect

The Commission has confirmed it will introduce targeted procedural adjustments, with draft amendments to be published for consultation in autumn 2026 and formal adoption planned for 2027. The Commission has been explicit that these changes are designed to reduce administrative burden and improve legal certainty while preserving the effectiveness of the FSR as an enforcement tool. The review does not signal any rollback of substantive enforcement ambition.

The anticipated changes that the Commission is considering include the following:

Mergers

Increasing the EU turnover notification threshold via delegated act;
Introducing a simplified notification possibility for specific cases or FFCs;
Moderately increasing the reporting thresholds for FFCs; and
Introducing additional exemptions from reporting requirements for FFCs not categorised as foreign subsidies most likely to distort the internal market.

Public Procurement

Simplification and clarifications to the forms used for notifications and declarations;
A revised waiver framework;
Clarification and limitation of the reporting of FFCs not categorised as foreign subsidies most likely to distort the internal market; and
Greater clarity on the rights and obligations of companies and the contracting authority, including for processing of confidential information, in the context of access to files.

Implications for business

The first FSR review sends a number of important signals for businesses with EU operations or that are active in EU procurement markets:

The FSR is here to stay and enforcement is intensifying. The Commission’s fit-for-purpose verdict, combined with active ex officio investigations and commitments in high-profile merger and procurement cases, confirms that the FSR is a permanent and increasingly active feature of the EU regulatory landscape;
FFC data collection remains the central compliance challenge. Businesses should maintain robust systems for tracking and reporting FFCs;
Pre-notification engagement is strongly encouraged. The review endorses pre-notification dialogue with Commission case teams as a practical means to manage the notification process efficiently. Businesses planning notifiable transactions should factor in pre-notification timelines; and
Monitor the autumn 2026 consultation closely. The draft targeted adjustments to be published in autumn 2026 will provide the first concrete indication of revised thresholds and simplified procedures. Stakeholders should engage in the consultation process to shape the final package.

_{1 See White & Case alert,}_{The FSR Guidelines are out: what business needs to know}_{, 19 January 2026.}

_{White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.}

_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}