Consequences from application of the Foreign Subsidies Regulation

Regulation (EU) 2022/2560 on the control of foreign subsidies (Foreign Subsidies Regulation – “FSR”) has now been in force for more than two years. The aim of the FSR is to prevent distortions of competition on the European internal market due to foreign subsidies. To achieve this, the FSR sets out notification requirements for M&A transactions and public procurement procedures as well as the possibility of ex-officio proceedings. You can check whether a notification requirement applies to your M&A transaction by using our “FSR Checker”.

Decision-making practice

With more than 200 reported M&A transactions and over 2,000 declarations and notifications in connection with public procurement procedures, the FSR has increased the regulatory requirements for far more companies (including European ones) than what was assumed during the legislative process. Despite the large number of cases, only two transactions have been subject to an in-depth investigation in phase 2 to date: Emirates Telecommunications Group/PPF Telekom Group and ADNOC/Covestro. Both cases were cleared subject to conditions. However, three M&A transactions and several bids in tender procedures were abandoned during the investigation. In addition, the European Commission has opened an in-depth investigation on its own initiative against the Chinese state-controlled enterprise Nuctech.

In the only decision published up to now, Emirates Telecommunications Group/PPF Telekom Group (see our Noerr Insights), the orientation of the FSR to EU state aid law became apparent: the European Commission regarded exemptions from the general insolvency law of the United Arab Emirates as an unlimited state guarantee, referring to its communication on state aid. The investigation of ADNOC/ Covestro also reportedly referred primarily to exemptions from national insolvency law – they had to be abandoned in each case. While Emirates Telecommunications Group was additionally banned from providing any financing for its European activities in the future, ADNOC had to undertake to grant competitors access to Covestro’s patents.

Practical clarifications and first review of the FSR

The Directorate-General for Competition updates the Q&As on its website on an ongoing basis to include questions of practical relevance. The European Commission has now also published its FSR guidelines, which constitute a form of “soft law” and provide important clarifications for the practical application of the FSR. While this is welcome, legal uncertainty remains for companies, in particular in light of the European Commissionʼs broad call-in powers and rules on cross-subsidisation (see our Noerr Insights).

Besides this, how the FSR is applied in practice is to be scrutinised for the first time by July 2026 and after that every three years. One of the findings during a public consultation was that the material standard of review is not sufficiently clear and predictable. The results of the review will be presented to the EU’s legislative bodies, meaning that the FSR could subsequently be revised.

There would also be a need to adapt the formal criteria: To ensure their own M&A readiness, companies have to set up comprehensive systems for reporting all third-country contributions and transactions with state-controlled companies. The bureaucratic effort associated with this is at odds with the very few problematic transactions for many businesses, especially private equity companies.

This article is part of the Competition Outlook 2026. You can find all Competition Outlook articles here.