Foreign Subsidies Regulation: review may affect practice The Foreign Subsidies Regulation is

The Foreign Subsidies Regulation has been applied in the EU from 2023, as we already reported in our previous article. The Regulation’s main purpose is to ensure a level playing field in the EU's internal market by preventing distortions of competition through foreign subsidies, i.e., direct or indirect financial contributions from outside the EU. These can take many forms, e.g. interest-free loans, guarantees, capital injections, tax relief, etc.

Under the Regulation, companies in certain cases have a notification obligation. The European Commission must be notified in advance of a merger, an acquisition of a controlling interest in another undertaking, or a creation of a joint venture where (i) one of the undertakings involved in the merger, the undertaking being acquired, or the joint venture is established in the EU and has a turnover of at least EUR 500 million; and (ii) the undertakings concerned have received over the last three years foreign subsidies exceeding EUR 50 million. In such a case, the business combination cannot be implemented before such notification.

In addition, the notification obligation also applies when bidding for public contracts. If the value of the public contract is EUR 250 million and the foreign subsidies granted to the tenderer (including its subsidiaries and parent companies as well as main suppliers and subcontractors involved in the same tender in the public procurement procedure) have amounted to at least EUR 4 million in the last three years, this must be reported to the contracting authority when submitting the tender or a request to participate in the public procurement procedure. Failure to comply with these obligations can result in a fine of up to 10% of the total turnover of the undertakings.

The Regulation requires the Commission to review the Regulation by July 2026 (and every three years thereafter). The aim is to see how it works in practice and what could be improved. The Commission has therefore launched a review, focusing specifically on:

1. the assessment of foreign subsidies that distort the internal market
2. the application of the balancing test, i.e., whether the positive effects of a foreign subsidy outweigh its distortive effects
3. the review of potentially distorting foreign subsidies on the Commission's own initiative
4. notification thresholds
5. in general, the level of complexity of the rules and the costs incurred by businesses.

The Commission is now seeking feedback from stakeholders through public consultation (gathering views on specific elements of the implementation of the Foreign Subsidies Regulation from member states, businesses, individuals, etc.) and a call for evidence (more general feedback on the objectives of the review report, its scope and context).

Anyone interested in engaging in the review can comment or fill in the questionnaire on the Commission's portal until 18 November 2025. The Commission will then use the input in its review report, which may be complemented by proposals for legislative changes.

It is important for businesses to know that the results of the review, or the legislation subsequently adopted, may be directly translated into practice – participation in public procurement procedures, and transactions. We are monitoring the developments closely and will keep you informed of any changes.