The EU's long-awaited Foreign Subsidies Regulation (FSR) will come into full effect by mid-2023.

The FSR is expected to have a major impact on companies that have received financial contributions from non-EU countries and that engage in M&A in the EU. The new regime adds another layer of potential scrutiny for M&A deals, next to the merger control and FDI screenings. The EC will even have powers to request notification of non-notifiable transactions, investigate completed transactions ex-officio, and order their unwinding.

The FSR will capture a broad range of financial contributions—the interpretation of which we expect to be uncertain for the first couple of years of the FSR's application. The FSR applies to private and public companies, including sovereign wealth funds. It catches not only foreign companies operating in the EU, but also EU-based multinational companies that have received foreign financial contributions.

The US has taken parallel action.

On December 29, 2022, President Biden signed into law new antitrust legislation, which will add a foreign subsidy disclosure requirement to the HSR notification process that parties provide information regarding subsidies received from "foreign entities of concern." This includes entities controlled by China, Iran, North Korea and Russia, and entities included on the Specially Designated Nationals list. Rulemaking defining the scope of these disclosures is expected in 2023.

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