European Union (“EU”) Foreign Subsidies Regulation (“FSR”), a new state aid instrument adopted at the end of 2022, will have a significant impact on transactions in the EU. The FSR impacts any company that is present in or wants the enter the EU, and has received financial support in any form from non-EU governments.
The FSR is game-changing — it imposes notification obligations on companies on subsidies received from non-EU countries and, when those subsidies are considered to distort the internal market in the EU, the European Commission (“EC”) can impose remedies.
Companies will now have notification obligations if they have received foreign financial contributions above a certain amount and are:
(1) acquiring a company that has a turnover of at least EUR 500 million in the EU, or
(2) participating in a public tender with a value of EUR 250 million.
These notification obligations will start to apply on 12 October 2023.
Earlier this week, the EC published the FSR’s Draft Implementing Regulation which provides more detail on the notification requirements and process. In summary, the Draft Implementing Regulation sets out a notification process that is inspired by the Merger Regulation.
In addition to the notification obligations, the EC will be able to conduct ex officio investigations, or request a notification (even when such is not mandatory), when it has concerns that distorting subsidies may have been granted.
Covington’s competition law team has in-depth knowledge and combines all the necessary capabilities to help you address your obligations under the FSR, including strong State aid and merger control expertise. We have a number of former officials from the EC’s State aid enforcement units as part of our team. We have also participated in discussions with the EC on the FSR and will continue to do so regarding the coming EC implementing acts and guidance.
We have put together a brief overview for your reference. We would be happy to facilitate a discussion with our team to review what this regulation could mean for your company.