Legal development

European Commission publishes FSR Implementing Regulation

European Commission publishes Foreign Subsidies Regulation Implementing Regulation

    On 10 July 2023, the European Commission adopted and published on its website the EU Foreign Subsidies Regulation ("FSR") Implementing Regulation ("IR") and annexes, including the notification forms for concentrations (M&A) and public procurement. The IR will be published in the Official Journal of the European Union shortly. 

    On 6 February 2023, the European Commission published the draft IR, laying out the procedural framework and formalities of the FSR. The reporting requirements in the final IR are less onerous than those contained in the draft IR. However, the FSR still imposes new and potentially burdensome administrative obligations on companies. 

    Key takeaways

    • Under the FSR, companies with activities in the EU will need to monitor foreign financial contributions and subsidies that they receive. The notion of financial contribution is broad: it may include tax breaks, public support in the context of Covid-19 or the Ukraine war, the provision of loans or guarantees by the State and the supply of goods/services to the public sector.
    • Companies will need to notify foreign financial contributions received in the context of M&A and public procurement procedures where certain monetary thresholds are met.
    • The new regime will apply from 12 July 2023 and notification requirements will apply from 12 October 2023.
    • The IR clarifies the information which parties must include in the notification form.


    In June 2023, the European Commission published a Q&A which clarified that parties are not required to notify transactions if:

    • the SPA was signed before 12 July 2023; or
    • closing takes place before 12 October 2023.

    For deals signed after 12 July 2023 which are expected to close after 12 October 2023, notifying parties are encouraged to start engaging in pre-notification discussions with the European Commission in order to be ready to formally file after 12 October 2023. 

    Notification thresholds

    The IR does not change the notification thresholds set out in the FSR (see our February 2023 briefing for further details). Notification requirements apply where:

    • M&A deals: (i) one of the target, the merging companies or the joint venture has turnover of at least EUR 500 million in the EU and (ii) all companies involved have been granted a total of more than EUR 50 million in financial contributions from third countries ("FFC") in the three years before the agreement, announcement of the public bid or the acquisition of a controlling interest.
    • EU public procurement procedures: (i) the estimated contract value is at least EUR 250 million (or if the tender is divided into lots, the aggregate value of the lots the bidder is tendering for is at least EUR 125 million) and (ii) the bidder and its subcontractors have received FFC of more than EUR 4 million per third country in the three years prior to notification.

    All FFC are taken into account in determining whether the M&A and public procurement notification thresholds are met (including e.g. Covid-19 aid). 

    In relation to joint ventures, the European Commission has also clarified that the EUR 500 million turnover thresholds must be satisfied by the joint venture itself (and not its controlling shareholders). In other words, greenfield joint ventures with no turnover do not need to be notified.

    Who needs to notify?

    For an M&A transaction, the parties to the merger or the sole / joint acquirer(s) are required to submit the notification. 

    In a public procurement process, the bidder is responsible for submitting the notification form to the contracting authority, which will then transfer the notification to the European Commission.

    What information needs to be included in the notification?

    The notification form does not require details of all FFC which are taken into account when assessing whether the notification thresholds are met. The European Commission distinguishes between (i) FFC that are likely to distort competition and (ii) other FFC, meaning different rules and exemptions apply. 

    Article 5 of the FSR provides a list of FFC that are likely to distort competition: for example, FFC granted to an ailing undertaking or unlimited guarantees. For these types of FFC, notifying parties will need to provide a detailed description of any FFC of at least EUR 1 million received by the notifying party(ies) and the target in the preceding three years.

    For FFC which do not fall into the categories set out in Article 5 of the FSR, notifying parties will only need to complete a table providing an overview of FFC that they have received over the previous three years. However, the below categories of FFC do not need to be included in the table:

    • certain types of contributions: deferrals of payment of taxes and/or of social security contributions, tax amnesties, tax holidays, normal depreciation and loss-carry forward rules that are of general application, application of tax reliefs pursuant to a bilateral or multilateral agreement for avoidance of double taxation (with certain exceptions) and agreements for the supply/purchase of goods/services at market terms;
    • FFC below the individual amount of EUR 1 million; and
    • in an M&A context, if the acquirer is an investment fund, FFC granted to other investment funds managed by the same investment company (subject to conditions, such as no or limited transactions between the funds).
    • in an M&A context, FFC granted to the target.

    The table should only include countries where the aggregate amount of FFC for this country exceeds EUR 45 million in an M&A context and EUR 4 million in a public procurement context. In calculating the aggregate amount, parties should take into account FFC falling within the categories set out in Article 5 of the FSR. FFC which do not need to be included in the table should also be excluded from the calculation of the aggregate amount. Where the relevant threshold is met, notifying parties are required to complete the table and indicate the range of the aggregate amount of FFC per third country: the notification form provides a list of ranges for this purpose.

    The European Commission reserves the right to require additional information on any FFC received by the notifying parties.

    Notifying parties will need to provide a brief description of each FFC, including the type of FFC (e.g. loan, direct grant), its purpose and the name of the granting entity.

    For M&A transactions, notifying parties will also need to provide information on the parties and the transaction. Some of this information may be taken from the EU merger control notification (Form CO) if the transaction also meets the EU merger control thresholds. However, the FSR notification requirements are more onerous and require additional information (such as, information on the bidding process and due diligence reports or any documents where the value of the transaction is assessed or discussed). 

    For public procurement processes, if the notification thresholds are not met then the bidder is required to provide a short declaration concerning any FFC received in the previous three years. For any FFC between EUR 200,000 and EUR 1 million, the declaration can be made as aggregate and there is no requirement to provide the individual amounts.

    Next steps

    • Companies need to collect FFC data covering the last three years on a rolling basis to enable a risk assessment to be carried out before engaging in M&A activity or public procurement processes. Having the relevant information readily available will be crucial in due diligence processes. In this context, we can offer a matrix which companies can use to collate FFC data: please contact us if we can be of assistance.
    • Parties are already able to engage with in pre-notification discussions with the European Commission to allow sufficient time prior to notification requirements coming into force on 12 October 2023. This is a good opportunity to discuss any waiver requests with the case team in advance.
    • Transactions documents will need to include FSR clearance as a condition precedent to closing, alongside merger and FDI clearances. The FSR review period will also need to be factored into deal timelines.
    • The European Commission has indicated that it will start clarifying the concepts of distortion and balancing test within one year of FSR entering into force. Furthermore, the European Commission will publish guidance in the next three years to clarify the functioning of the FSR based on its experience. In the meantime, the decisions, or summaries thereof, will be published by the European Commission.

    The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
    Readers should take legal advice before applying it to specific issues or transactions.


    Stay ahead with our business insights, updates and podcasts

    Sign-up to select your areas of interest