Three-year review of the Foreign Subsidies Regulation: simplifications on the horizon

On 14 July 2026, the European Commission (“Commission”) published its first report reviewing the application of the Foreign Subsidies Regulation (Regulation (EU) 2022/2560, “FSR”). The FSR, which has been in force since July 2023, is intended to ensure a level playing field for all companies in the EU internal market by enabling the review of subsidies from non-EU countries.

The report now published evaluates the first three years of the FSR and covers cases from 13 October 2023 to 31 May 2026; it highlights the significant administrative burden it places on companies.

The Commission had originally anticipated 30 to 40 FSR notifications of concentrations per year, whereas in reality just over three times as many (273) were received over the past three years. Around 97 per cent of the concentrations notified were cleared during the preliminary review phase. The median duration of the informal consultation required prior to formal submission fell from 36 to 24 working days, meaning that the total time taken until clearance can be estimated at just under 50 working days. To date, the Commission has not exercised its right to request the prior notification of a concentration below the notification threshold (call-in) in the context of M&A.

In the context of public procurement procedures, the Commission received 5,150 submissions. Of these, 672 came from the same 40 companies. 58% of the submitting companies have owners based in the EU. On average, the Commission issued almost two requests for information per submission, which took companies an average of four days to respond to.

The figures clearly demonstrate a high level of administrative burden for cases that ultimately prove to be unproblematic. The Commission is aware of the sometimes disproportionate burdens on companies and is examining ways to simplify the process. In addition to raising the first notification threshold to €600 million, the Commission is considering simplifying the information required to be submitted regarding foreign financial contributions (“FFCs”).

I. Concentrations: investment funds and private equity funds

To date, the Commission has initiated an in-depth investigation in only three cases:

• the (partial) acquisition of the PPF Telecom Group by the Emirates Telecommunications Group (e&/PPF), which was approved subject to conditions on 24 September 2024 (more on this at Noerr Insights (in German only));
• the acquisition of Covestro AG by the Abu Dhabi National Oil Company PJSC (ADNOC/Covestro), which was approved subject to conditions on 14 November 2025 (more on this at Noerr Insights); and
• the acquisition of CECONOMY AG by JD.com, Inc. (JD.com/CECONOMY), for which the Commission’s review period expires on 2 October 2026.

In the first two cases, the acquirers were based in the United Arab Emirates; in the last case, the acquirer is a Chinese company. The number of cases is still too small to draw any meaningful conclusions about which countries are primarily affected.

Special provisions apply to investment funds and private equity funds, whose proposed acquisitions account for almost a third of all approved cases.

In 69 per cent of the cases examined where the acquirer was a fund, there were FFCs in the form of capital contributions from limited partners that could be attributed to a non-EU country. Such FFCs were initially regarded as the basis for foreign subsidies that were most likely to distort the internal market (known as “Article 5 FFCs”). However, it was established in all cases that the investments were made on pari passu terms – that is, corresponding to the contribution of a private investor and thus not constituting a foreign subsidy. Since September 2025, a procedural simplification has therefore been in force: capital contributions from limited partners attributable to a non-EU country are no longer regarded as Article 5 FFCs provided they constitute passive pari passu investments. This change will reduce the number of cases in which an acquiring fund may have received Article 5 FFCs by approximately 80 per cent.

Furthermore, the Commission notes that FFCs received not by the acquiring fund itself but by portfolio companies or other funds managed by the same investment company are in principle not passed on to the acquiring fund, meaning that no cross-subsidisation takes place. One way of reducing bureaucratic hurdles for the parties (and the Commission) would be to exempt such FFCs from the obligation to report if it is ruled out that they could lead to cross-subsidisation of the acquiring fund.

II. Public procurement: industrial companies

The 5,150 submissions to the Commission relate to 863 public procurement procedures, four of which were subject to an in-depth review. Three of these procedures each ended with the companies withdrawing from the procurement process without a final decision having been taken. The Commission explicitly regards this as evidence of the FSR’s deterrent effect, as companies companies unwilling to disclose information about FFCs preferred to withdraw from the procurement procedures. The fourth procedure resulted in conditional approval, with the consortium concerned undertaking to replace a subcontractor.

The report also documents a new level of severity in penalties for breaching reporting requirements. In two cases, the Commission declared tenders to be irregular due to incomplete submissions; both bidders were subsequently excluded from the procurement procedures. In November 2025, the Commission also exercised its power for the first time to request prior notification below the reporting thresholds.

The Commission was able to meet the tight 20-working-day deadlines for preliminary reviews across the board, which was viewed positively by stakeholders. Nevertheless, stakeholders have criticised the extensive reporting requirements, complex notification forms and the lack of a “stop-the-clock” mechanism that would allow review deadlines to be suspended in complex cases.

The results to date deserve a nuanced assessment. Although there have been only four in-depth investigations into public procurement up to now, the FSR is already having a significant impact. The deterrent effect alone, which brought three in-depth investigations to an end after the bidders withdrew, is remarkable. It is striking that all four investigations concerned Chinese companies; two of these – a Bulgarian railway project and the Lisbon Metro – relate to rail vehicles involving the CRRC Group, i.e. precisely the segment that was the focus of the European legislator when the FSR was established.The fact that submission were made in over 800 procurement procedures also shows that the FSR has been taken on board by contracting authorities – although the declining compliance rate serves as a reminder that practical implementation still requires attention.

III. Ex officio and judicial review

The third pillar of the FSR, alongside the two notification procedures, is ex officio review. Under Article 9 of the FSR, the Commission may examine information from any source concerning suspected foreign subsidies that allegedly distort the internal market. This applies without any notification requirement, without thresholds and in any market situation.

For companies, this entails two key implications. On the one hand, there is a latent risk of investigation, as the Commission can intervene retrospectively in transactions that have already been concluded or in ongoing procurement procedures. On the other hand, the instrument offers strategic opportunities: companies can informally report competitors receiving subsidies from non-EU countries to the Commission and thus trigger investigations.

In procedural terms, the investigation is a two-stage process. Unlike in concentrations and public procurement procedures, the FSR does not set a statutory time limit for the preliminary review. The Commission may issue requests for information and carry out unannounced inspections (dawn raids) both within the EU and, with the consent of the state concerned, outside the EU. Where there are sufficient grounds, the Commission opens an in-depth investigation. Once this is completed, it may accept commitments, impose redressive measures or close the proceedings without raising objections. The FSR merely obliges the Commission to endeavour to close the case within 18 months.

The report addresses the two proceedings against Chinese companies: Nuctech (detection systems, initiated in April 2024 with the first on-site inspections under the FSR) and Goldwind (wind turbines, also initiated in April 2024). The report therefore provides only an incomplete picture of the actual course of the investigations. Ongoing preliminary reviews remain unmentioned – such as the investigation into an e-commerce company that came to light in December 2025.

The Commission expressly sees no need for action regarding ex officio procedures – unlike in notification procedures. Instead, it has announced that it will continue to make unrestricted use of this instrument. For companies, this means that existing guidelines for official searches (dawn raid guidelines) must be supplemented with FSR-specific provisions.

Judicial review of investigative powers is also beginning to take shape – applications for interim relief have failed on two occasions so far. Nuctech challenged the investigation order and failed to meet all the necessary conditions in both instances (T-284/24 R; confirmed by C-720/24 P(R)). The courts essentially argued that:

• anyone who chooses to engage in economic activity within the single market is subject to EU rules;
• companies cannot evade the obligation to disclose data by invoking the law of a non-EU country – otherwise, companies controlled by such countries would be given procedural privileges over EU companies;
• the threat of Chinese administrative sanctions in the event of data disclosure does not constitute serious, irreparable harm. Such sanctions are purely financial in nature and lack the stigma of a criminal conviction.

Goldwind also objected to a wide-ranging request for information dated March 2026; the President of the General Court dismissed the application for interim relief on 20 July 2026 solely on the grounds of lack of urgency (T-335/26 R). The General Court made it clear that:

• the 18-month deadline for concluding the investigation was merely indicative and, in the present case, would not expire until August 2027 anyway;
• Goldwind had itself contributed to the length of the procedure through repeated applications for extensions and restrictions. During the preliminary review, the group had provided information on only 98 of its approximately 800 companies;
• suspending the request for information would prolong rather than end the period of uncertainty for the company.

IV. Outlook and recommendations for action

The Commission is already working on the simplified rules described above. Public consultations on the drafts are planned for this autumn. The consultations offer affected companies, in particular funds and industrial firms, the opportunity to contribute their experiences and interests. We will keep you informed here about the start of the consultations.

The report shows that the FSR has now become an integral part of the EU’s regulatory system. Companies should continue to ensure that the FSR analysis is integrated at an early stage into deal and tender planning, that an ongoing process for FFC data collection is established and that when submitting a notification they actively make use of the option to apply to the Commission for waivers regarding specific information.

The Noerr specialist team comprises experienced experts in the fields of the FSR, EU state aid law and merger control. They will be happy to help you with any queries or requests for assistance.

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