EU Foreign Subsidies Regulation: Ex-ante Notification Obligations Came Into Force and Should Be Complied With at All Costs

5 minute read | October.19.2023

On 12 October, the next chapter of the EU’s fight against distortive subsidies opened, with ex-ante notification obligations for concentrations and bids in public procurement procedures involving subsidies by non-EU countries entering into force (please see our recent update here).

Companies should comply with these obligations at all costs, as severe fines may be imposed in the event of a violation.


On 12 July 2023, Regulation (EU) 2022/2560 on foreign subsidies distorting the internal market, the so-called Foreign Subsidies Regulation (“FSR”) started applying, after it entered into force on 12 January 2023.

With this Regulation, the EU aims to close what it sees as a regulatory “gap”. While subsidies granted by EU Member States are regulated under the EU State Aid regime, those supplied by non-EU countries are now also subject to strict regulatory rules to prevent distortions of the EU internal market. 

Since July this year, the European Commission has the powers to conduct ex-officio investigations into market situations where it suspects the occurrence of distortive foreign subsidies. This applies to subsidies granted up to ten years in the past from the moment of the start of the review or investigation, with the exception of subsidies granted more than five years prior to 12 July 2023.  From now on, two notification-based tools will complement the Commission’s enforcement.


A foreign subsidy is a direct or indirect financial contribution by a third country (including the EEA and EFTA countries), which is limited to one or more companies or industries, and which confers a benefit on a company active in the internal market. Covered are, for instance, capital injections, exemptions from ordinary tax regimes, zero-interest loans, other below-cost financing etc.

The FSR potentially covers all market situations, with special instruments for concentrations and public procurement procedures.

  1. Notification Obligation for Concentrations

    Companies are obliged to notify ex-ante concentrations where (i) the acquired company, one of the merging parties or the joint venture is established in the Union and generates an aggregate EU turnover of at least EUR 500m and (ii) financial contributions of (combined) more than EUR 50m were granted to the parties by non-EU countries up to three years prior to signing or the acquisition of a controlling interest.

    The turnover threshold essentially excludes greenfield joint ventures from the scope of the FSR as they cannot have had turnover on their own in the preceding financial year.

  2. Notification Obligation for Foreign Financial Contributions in Public Procurement Procedures

    The second obligation to notify ex-ante foreign subsidies is in the context of public procurement procedures where (i) the estimated contract value amounts to at least EUR 250m and (ii) an aggregate financial contribution by a non-EU country of at least EUR 4m per non-EU country was granted to the economic operator up to three years prior to the notification.

Procedure and Assessment by the Commission

After the notification, the Commission may start a preliminary review (25 working days for concentrations, 20 working days for public procurement) and open an in-depth investigation (90 working days for concentrations, 110 working days for public procurement). The latter periods are extendable in case the company offers commitments or in other duly justified cases. In case of an ex-officio review, the period for adopting a decision comes to 18 months from the opening of the in-depth investigation.

Fines up to 10% of the company’s annual aggregated turnover may be imposed in case of failure to notify or if the standstill obligation is breached, e.g., if a notified concentration is completed.

For its assessment, the Commission has certain investigative powers, including information requests, fact-finding missions with on-site inspections and market investigations. It will carry out a so-called “balancing test”, assessing the negative and positive effects of the foreign subsidy on the internal market and the development of the relevant subsidised economic activity, as well as its effects on other (Union) policy objectives.

The FSR also contains a list of categories of foreign subsidies most likely to form a distortion, which includes, inter alia, foreign subsidies granted to an ailing undertaking without a restructuring plan and foreign subsidies directly facilitating a concentration or enabling an undertaking to submit an unduly advantageous tender.

Subsidies amounting to less than EUR 4m over any consecutive period of three years are considered unlikely to be distortive, while subsidies with an amount below the de-minimis thresholds under the EU State aid rules will be considered non-distortive.

As an outcome, the Commission may prohibit the completion of a concentration or the award of a public procurement contract. It may also impose structural and non-structural redressive measures or accept such as commitments (e.g., divestment of assets, repayment of the subsidy etc.).


On 10 July 2023, the Commission adopted Implementing Regulation (EU) 2023/1441, introducing procedural aspects and notification forms for companies. Within the Commission, as regards foreign subsidies in public procurement procedures, DG GROW is the responsible unit. DG COMP enforces the FSR in terms of concentrations and ex officio procedures outside of public procurement.

The Commission has announced to publish guidelines within the next three years. The concept of a distortion and the balancing test will be clarified until July 2024. Until then, receiving foreign subsidies will bear a high and potentially expensive risk for companies, which they should not underestimate. Currently, the new regulation appears to be a reality for many companies already as, according to the EU Commission, pre notification discussions have started with respect to 17 M&A deals in parallel to merger control proceedings. Further, it appears that the Commission is not yet fully staffed but appears to be optimistic that they will manage future filings and pre notifications in an efficient manner without putting unduly burden on the companies involved.

While the general perception appears to focus on Chinese investors, the FSR is not limited to China but applies much broader, including U.S. investors.

Our EU team will be happy to stand by your side and guide you through the process of complying with the new rules.