Why the EU is scrutinising foreign subsidies
Inside the EU, state aid to companies is tightly controlled to keep competition fair. But that control historically stopped at the EU’s border: a company backed by subsidies from a non-EU government could buy a European business or win a public contract with an advantage its rivals could not match. The Foreign Subsidies Regulation (FSR), Regulation (EU) 2022/2560, closes that gap. In force since 12 January 2023 and applicable since 13 July 2023, it lets the European Commission investigate and act against distortive foreign financial contributions – and, above certain thresholds, requires companies to notify deals and bids in advance.
Mandatory notification for large deals
Since 12 October 2023, certain acquisitions and mergers must be notified to the Commission before closing. Notification is required where the EU target (in an acquisition), the joint venture, or a merging party generated at least €500 million in EU turnover, and the parties received more than €50 million in foreign financial contributions in the preceding three years. Until the Commission clears the transaction, the parties may not close – a standstill obligation familiar from merger control.
Notification in public procurement
The FSR also reaches large public tenders. Bidders must notify where the contract value is at least €250 million (or, for tenders split into lots, at least €125 million for the lots applied for) and the bidder received foreign financial contributions of at least €4 million per non-EU country in the preceding three years. The contracting authority cannot award the contract to a notifying bidder until the Commission has completed its review.
The Commission’s wider powers
Beyond these notification regimes, the Commission can open investigations on its own initiative into any market situation where foreign subsidies may be distorting the internal market. It can request information, and where it finds a distortion it can impose redressive measures or accept commitments. In January 2026 the Commission adopted guidelines clarifying how it assesses distortions, the balancing test and its enforcement approach – useful reading for any company with significant non-EU financial ties.
Practical example
A group planning to acquire a large European manufacturer checks whether the target’s EU turnover and the group’s foreign financial contributions cross the FSR thresholds. Finding that they do, it prepares an FSR notification alongside its merger-control filing, gathering three years of data on contributions from non-EU governments and state-owned entities. Building this into the deal timetable from the start avoids a last-minute standstill that could derail the transaction.
Common mistakes companies make
The most common is defining “foreign financial contribution” too narrowly. It is far broader than a cash grant – it can include loans, guarantees, tax advantages, capital injections and the provision of goods or services by a foreign state or state-owned entity. A second mistake is leaving FSR analysis until late in a deal, when the data-gathering can take weeks. A third is forgetting procurement: bid teams often overlook that the FSR applies to tenders as well as M&A.
Recommended actions
Build a system to track foreign financial contributions across your group on a rolling three-year basis, so the data is ready when a deal or bid arises. Screen every significant acquisition and large public tender against the FSR thresholds early. Factor the notification and standstill periods into transaction timetables. And review the Commission’s guidelines to understand how it assesses and balances potential distortions.
Frequently asked questions
When does the FSR require a notification?
For concentrations, where EU target turnover is at least €500 million and foreign financial contributions exceed €50 million; for procurement, where the contract is at least €250 million and contributions are at least €4 million per third country.
What counts as a foreign financial contribution?
Any financial support from a non-EU government or state-linked entity – grants, loans, guarantees, tax benefits, capital and even goods or services – not just direct subsidies.
Can the Commission act without a notification?
Yes. It can investigate any market situation on its own initiative and impose redressive measures where it finds a distortion.
Conclusion
The Foreign Subsidies Regulation extends the EU’s level-playing-field philosophy to money coming from outside the Union, and it now shapes how large deals and bids are planned. Companies with international financial ties should track their foreign contributions and screen transactions early to avoid costly standstills. Lawgent helps businesses assess FSR exposure, prepare notifications and integrate the rules into deal and bid planning. Contact us before your next acquisition or major tender.
