Foreign subsidy authorization regime becomes effective

European Union

The FSR (Foreign Subsidies Regulation) has come into force

Foreign subsidy authorization regime becomes effective
October 11, 2023

On 23 December, 2022, Regulation (EU) 2022/2560 of the European Parliament and of the Council of 14 December 2022 on foreign subsidies distorting the internal market (Foreign Subsidies Regulation or FSR”) was published in the Official Journal, but entered into force on 12 January 2023 and is effective since 12 July 2023. This regulation authorizes the European Commission to investigate subsidies granted from third countries to undertakings operating in the EU that may cause distortions in the internal market and undermine competition.

As we have previously discussed, the progressive roll-out of the FSR has allowed operators and the European Commission to prepare for the new regime. As of October 12, pre-notification and pre-authorization will be required for concentrations and public procurement bids that meet certain thresholds.


Specifically, concentrations that cumulatively meet the following requirements must be notified:

At least one of the merging undertakings, the acquired undertaking or the joint venture is established in the Union and generates an aggregate turnover in the Union of at least EUR 500 million; and

The following undertakings were granted combined aggregate financial contributions of more than EUR 50 million from third countries in the three years preceding the agreement, the announcement of the public bid, or the acquisition of a controlling interest: (i) in the case of an acquisition, the acquirer(s) and the acquired undertaking; (ii) in the case of a merger, the merging undertakings; (iii) in the case of a joint venture, the undertakings creating a joint venture and the joint venture itself.

As a prior authorization is required, the implementation of concentrations that meet the thresholds will be subject to the condition precedent of obtaining the authorization.

Public tender bids

Foreign financial contributions received by companies bidding in public procurement procedures are notifiable when:

the estimated value of that public procurement or framework agreement net of VAT, is equal to or greater than EUR 250 million; and

the operator, including its subsidiary companies without commercial autonomy, its holding companies, and, where applicable, its main subcontractors and suppliers involved in the same tender in the public procurement procedure were granted aggregate financial contributions in the three years prior to notification equal to or greater than EUR 4 million per third country.

As in the case of concentrations, the contract award will be suspended pending authorization.

Ex officio investigations and complaints

Since July 12, the European Commission is empowered to investigate, ex officio, any subsidies that distort the internal market, even with respect to procurement proceedings that do not meet the notification requirements. From now on, the Commission may exercise these powers in parallel to the prior notification system.

The progressive implementation of the FSR has already led to the first complaints in the field of sport. In particular, there have been two complaints against professional football teams in France and Belgium, both of which are owned by entities in the Middle East, for financial contributions that could potentially distort their competitive position.

In addition to these investigations, the European Commission has confirmed that to date 17 companies subject to ongoing merger control procedures have also initiated pre-notification under the FSR.


With the Commission already exercising its investigation powers and the pre-notification system already in place, it is essential to remember that:

The mandatory FSR notification comes on top of the existing merger control and foreign direct investment notifications (for more information, click here and here), which should be borne in mind when planning transactions (costs and deadlines).

When participating in public tenders in the European Union valued at more than EUR 250 million, economic operators (including their subsidiaries without commercial autonomy and holding companies) and, where applicable, their main subcontractors and suppliers having received potentially distorting subsidies from third countries must record all contributions received and evaluate whether they would facilitate the submission of an unduly advantageous tender.

In addition, even if the foreign subsidies received do not reach the threshold of EUR 4 million, bidders must submit an affidavit listing all foreign financial contributions received and confirming that they are not subject to notification.

It is therefore advisable, in order to minimize the impact of these new regulatory obligations, to plan and prepare internal processes in advance.

October 11, 2023