On October 12, 2023, the notification obligations under the EU Foreign Subsidies Regulation (FSR) took effect. Businesses must notify all M&A deals (if signed on or after July 12 and not yet implemented by October 12) and public procurement tenders (for offers submitted on or after October 12) meeting the relevant thresholds.
The FSR enables the European Commission (Commission) to scrutinize distortive subsidies granted by non-EU countries to companies active in the EU. It seeks to fill a perceived regulatory gap concerning foreign subsidies that is not addressed by the EU State aid, merger control, antitrust, trade defense, and public procurement regimes.
The FSR consists of three modules:
- Ex officio review of foreign subsidies. As of July 12, 2023, the Commission can proactively investigate foreign subsidies distorting the internal market.
- Ex ante notification regime for mergers. The FSR imposes a filing obligation for concentrations where (i) the acquired undertaking, one of the merging undertakings, or the joint venture has an EU turnover of at least €500 million in the preceding year, and (ii) the parties received foreign subsidies exceeding € 50 million in the last three years preceding the transaction.
- Ex ante notification regime for public procurement procedures. The FSR imposes a filing obligation for public procurement tenders in the EU where: (i) the overall contract value of the tender is at least €250 million (or the aggregate value of the various lots of a tender is at least €125 million), and (ii) the bidding party and any main subcontractors and suppliers involved in the same tender received at least €4 million in financial contributions from a single non-EU country in the last three years prior to notification.
Companies participating in large M&A deals or procurement projects in the EU and having exposure to financial contributions from non-EU countries should start preparing for possible filings under the FSR. Detailed information on the notification thresholds, notification form requirements, and review procedures can be found in our previous memo.