The European Union Foreign Subsidies Regulation (FSR) has been at the European Commission’s disposal for a little over a year. It is a tool that allows the Commission to review foreign subsidies granted to EU or non-EU undertakings which could or might distort the internal market.
Foreign subsidies are overseen through ex-officio investigations (commenced on the basis of information granted by any source), as well as through the notification obligation imposed on undertakings involved in concentrations or public procurement procedures, provided certain thresholds defined in the FSR are met. Failure to comply with the notification requirement may lead to a fine of up to 10% of the annual turnover of the undertaking.
In order to ensure compliance with the FSR, the European Commission may make requests for information to undertakings, associations of undertakings and third countries; it may conduct interviews with natural or legal persons who consent; and it can also carry out dawn raids (including in third countries if the government doesn’t object).
In the case that European Commission concludes that a foreign subsidy has a negative effect on the internal market it can impose redressive measures from the list provided in the Regulation.
Finally, the FSR Guidelines will be published by the 13th of January 2026, and they will address the following:
– Further clarification of the concept of “distortion“;
– Further information on the balancing test – do positive effects of the subsidy outweigh the negative;
– Assessment of a distortion in a public procurement procedure.
Prepared by,
Daniel Vujacic, LL.M. (UW)