FSR consultation reveals need for reform

The European Commission (“Commission”) has published the results of its public consultation on the review of the EU regulation on foreign subsidies (Foreign Subsidies Regulation, “FSR”). The responses to the consultation indicate a need to review and simplify the FSR. For companies, this provides initial clues as to possible amendments to the relatively new regime.

Importance acknowledged, clarity requested

Under Article 52(2) FSR, the Commission is required to review its practice of implementing and enforcing the FSR by 13 July 2026 and every three years thereafter. The consultation is part of this first review, scheduled for 13 July 2026. A total of 54 responses were received from industry, government, and consulting firms in the European Union and third countries. The vast majority recognise the important role of the regulation in countering distortions in the EU internal market caused by foreign subsidies. At the same time, many responses call for more detailed guidelines and greater legal certainty in its practical application.

Particular criticism is aimed at the design of the substantive assessment criteria. More than half of the responses consider the framework for determining distortions in the EU internal market under Article 4 FSR to be too vague and too generally phrased. In particular, there is a lack of comprehensible criteria for how individual indicators within the meaning of Article 4(1) FSR are weighted when determining a possible distortion of the EU internal market and what evidence is required.

The balancing test under Article 6 FSR, which weighs the negative effects of a foreign subsidy against any positive effects, is also criticised by many as being non-transparent and unpredictable. Companies criticise the Commission’s broad discretion when applying the test and the lack of clarity regarding the requirements for demonstrating positive effects. With regard to proving positive effects, the guidelines on the FSR published by the Commission in January 2026 already provide some clarification (for more information, see our Noerr Insight dated 19 January 2026).

High administrative burden for M&A transactions and public procurement procedures

Practical challenges are particularly evident in the notification regimes for M&A transactions and public procurement.

Many respondents view the notification thresholds for M&A transactions as too low, capturing numerous unproblematic transactions and creating substantial administrative burden. The obligation to report all “foreign financial contributions” is seen as especially burdensome. The concept “foreign financial contributions” is considered overly broad, covering ordinary commercial transactions with no apparent link to a potential distortion of the EU internal market. In practice, compiling the relevant data across international corporate structures is proving to be challenging.

Similar concerns arise in public procurement. Stakeholders report considerable delays, increased costs and legal uncertainty. In some cases, there has been a decline in participation by both EU and non-EU bidders.

Outlook for a potential first reform

The consultation results will feed into the Commission’s official review report, which the Commission has to present in July 2026. There are early indications that the Commission is likely to focus on simplifications, clearer guidelines and potentially higher thresholds. The aim is to achieve a balanced regulation that effectively addresses distortions in the EU internal market without placing a disproportionate burden on M&A transactions and participation in public procurement procedures. Fundamental revisions, such as raising the notification thresholds, require an amendment to the FSR itself by the European Parliament and the Council. The Commission may also submit legislative proposals to the European Parliament and the Council in connection with the review report.

For companies, the FSR therefore remains a strategic compliance factor, particularly in M&A transactions and public procurement procedures in the European Union. In order to avoid delays in M&A transaction and public procurement procedures, it is advisable to carry out an early risk analysis of notification requirements and, in particular, an analysis of foreign subsidies received in the last three financial years.

Our Noerr competence team consists of experienced experts in the fields of FSR, EU State aid law and merger control and is available to answer questions and assist you. You can also register here to receive all our FSR news alerts or click here to access our new FSR Checker and find out if your M&A transaction is notifiable.