What is it?

The FSR grants the European Commission powers to address distortive effects of non-EU subsidies on the EU market. The key aim is to ensure a level playing field by considering the impact that such foreign subsidies may have on competition in the EU. To achieve this, the FSR introduces three tools:

• M&A: A mandatory notification for deals where the EU turnover of the target (for acquisitions), the joint venture or one of the merging parties (for mergers) is €500m or more and the companies involved have received at least €50m in combined financial contributions from non-EU countries.

• Public procurement: A mandatory notification for tenders where the estimated contract value is €250m or more and the bid involves financial contributions of at least €4m per non-EU country.

• A catch-all tool: A general power for the Commission to investigate all other market situations (including M&A and public tenders falling below the thresholds) where there may have been foreign subsidies from non-EU countries.

Companies and businesses with operations outside the EU need to understand the extent of “financial contributions” they have received from non-EU countries, and whether these could amount to a “subsidy”. This will be critical to determine: (i) whether a notification will be required; and (ii) whether those filings will be of a technical nature (if no element of subsidy is involved) or will require an assessment of the impact of the subsidy on the EU internal market. This could lead to delayed deal timetables, additional red tape and reduced deal certainty. The FSR is also likely to affect the attractiveness of certain bidders.