The European Commission (“EC”) has published the report (the “Report”) of its first three-year review into the operation of the Foreign Subsidies Regulation (Regulation 2022/2560 (“FSR”)). The Report provides a useful overview of the EC’s activities in FSR enforcement over the first three years of the regime’s operation, highlighting some key concerns from stakeholders that it plans to address in the new year. The Report also serves as a timely reminder of the proactive steps Irish businesses can take to enhance compliance with the FSR and safeguard their operations.
Background
Under the FSR, the EC is empowered to investigate foreign financial contributions (“FFCs”) granted by third country (ie, non-EU) governments to companies active in the EU, and to impose remedies in respect of any FFCs that amount to foreign subsidies that cause distortions in the EU’s internal market.
Overall, the EC’s first review concluded that the FSR is fit for purpose and highlighted significant activity in reviews and enforcement in the regime’s first three years. However, the EC acknowledged stakeholder concerns regarding high administrative burdens (particularly around the identification and reporting of FFCs) and lack of certainty (eg, around the exercise of call-in powers), and the EC indicated that it plans to propose targeted simplifications to the framework, with changes expected in 2027.
Key Findings of the Report
The Report examines the operation of the FSR across three areas: (i) concentrations (mergers and acquisitions), (ii) public procurement, and (iii) ex officio investigations. In each case, the EC found the FSR fit for purpose, and its tools useful for ensuring a level playing field in the EU’s internal market.
Key findings in each area include:
- Concentrations:
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- 273 formal notifications were made for the period 13 October 2023 – 31 May 2026, of which 247 were closed after preliminary review, four were withdrawn during preliminary review, and three were subject to in-depth investigation. The remaining 19 cases are ongoing.
- Of three cases subject to in-depth investigation, two resulted in commitments removing the distorting foreign subsidy, and the third case is ongoing.
- Overall, the volume of cases exceeded the EC’s initial projections (30-40 cases per year). However, the proportion of cases closed during preliminary review (c. 97%) is consistent with the proportion of cases reviewed and cleared in Phase I under the EU’s merger review rules.
- Public procurement:
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- The EC received 5,150 submissions to 31 May 2026 (4,293 declarations and 733 notifications, plus 124 pre-notifications).
- Of these cases, the EC opened four in-depth investigations into public tenders. One case resulted in a commitment to replace a main subcontractor. The other three cases were closed after the economic operators chose to withdraw their bids rather than undergo scrutiny of their FFCs.
- Two submissions were declared irregular by the EC for incompleteness, resulting in the exclusion of the relevant economic operators from the procurement procedures.
- The EC exercised its call-in power to require a notification in one below-threshold case. The economic operator did not comply with its notification obligations and was excluded from the procedure.
- The EC views withdrawals by economic operators where it has called in a procurement or opened an in-depth investigation as underscoring the deterrent effect of the FSR.
- Ex Officio investigations: The EC has opened in-depth investigations in two cases, both ongoing, concerning companies active in the production and sale of threat detection systems and of wind turbines, respectively. These investigations are subject to ongoing litigation in the EU Courts[1]. While the investigations are ongoing, the EC considers its ex officio powers have enabled it to act to investigate on the basis of sufficient indications of foreign subsidies distortions of the internal market where it otherwise would be unable to.
While in general, the FSR was found to work well in practice, the Report also highlighted the following areas of concern:
- Uncertainty over call-in powers: the EC’s power to request notifications for below-threshold concentrations continues to create uncertainty.
- Administrative burden caused by FFC data collection: Companies report a disproportionate burden associated with identifying, collecting, and reporting FFCs, leading to lengthy filings.
- Length of investigations: Stakeholders highlighted the lack of predictability caused by lengthy ex officio investigations with no clear timelines.
- Lack of clarity and transparency: Business have expressed the need for more transparent enforcement practices and enhanced clarity regarding reporting obligations.
Targeted adjustments and recommendations
In light of its findings, the EC plans to implement targeted simplifications to the FSR framework. Though specific measures were not explored in the Report itself, the EC has indicated on its website that these adjustments may include:
- Concentrations: an increase in the turnover notification threshold, a new simplified notification for specific cases or FFCs, increased reporting thresholds for FFCs, and new exemptions for FFCs not in the categories most likely to distort the market.
- Public procurement: simplifications and clarifications of the notification and declaration forms, a revised disclosure waiver framework, reduced reporting obligations for cases unlikely to raise concerns, and clarity regarding the rights and obligations of companies and the contracting authority in relation to access to files and the processing of confidential information regarding access to files.
- Ex Officio investigations: the EC concluded that no immediate adjustments are required, as concerns over lengthy investigations are largely explained by the level of complexity in individual cases, and timelines vary on a case-by-case basis.
The EC has commenced work on the targeted adjustments, with the aim of publishing a draft of these in autumn 2026. Following feedback from stakeholders and the gathering of further evidence, the EC plans to adopt the targeted adjustments in 2027.
Conclusion
The Report highlights the significant activity in FSR reviews and enforcement by the EC in the first three years of the regime. While the EC is confident that the FSR is fit for purpose in ensuring a level playing field in the EU’s internal market, the Report engages with some key concerns raised by stakeholders that have also been felt by Irish stakeholders – primarily around complexity and reporting burdens. While we await the detail on the EC’s proposed adjustments, addressing these concerns should reduce the burdens on stakeholders without weakening the EC’s tools to protect the internal market.
In the meantime, Irish businesses can take the following proactive steps to enhance compliance with the FSR and safeguard their operations:
- Prepare for dawn raids: Ex officio (own initiative) investigations are a strong tool within the FSR enforcement framework, including inspection and document gathering powers. For example, the EC carried out a dawn raid of Temu’s offices in Dublin in December 2025. Companies potentially in receipt of third country subsidies should ensure they are prepared for unannounced inspections of their office premises.
- Prepare for potential FSR submissions: Where businesses expect to be engaged in significant M&A activity or public procurement tenders over the next few months, early engagement with potential FSR obligations and FFC data collection exercises is recommended.
- Engage with the draft targeted adjustments: Companies should take advantage of the opportunity to shape the revised FSR framework when the draft adjustments are published this coming autumn.
Contact us
Matheson’s Competition and Regulation group regularly advise on all aspects of FSR and are on hand to provide any support as needed.
[1] Case T-284/84 Nuctech, regarding an action for annulment of the EC’s inspection decision, and Case T-335/26 Goldwind, regarding a challenge to the EC’s request for information and to the imposition of interim measures.
