The EU Foreign Subsidies Regulation (“FSR”), which creates a new screening mechanism for non-EU subsidies granted to companies doing business and engaging in certain activities in the EU, took effect on 12 July 2023, with notification obligations starting on 12 October 2023. This post looks back at the FSR’s first six months and attempts to provide an outlook of what companies active in the EU can expect in 2024.
Based on the reported enforcement activity of the European Commission (“Commission”) to date, we see three main takeaways that businesses could expect from FSR enforcement in 2024:
- In the first eight weeks of the FSR’s implementation, the Commission received 38 (pre-) notifications of transactions. This number already surpasses the 30 notifications that the Commission had anticipated to receive per year. At the same time the number of Commission staff has remained very small, well below the 145 employees it initially estimated it would require to enforce the FSR. The Commission has, however, remained confident that it would be able to deal with this higher-than-expected workload; and we do not believe that companies should expect less diligent screening of their notifications. That said, the Commission could make use of the flexibility provided by certain mechanisms in the FSR Implementing Regulation (e.g., waivers) to reduce the level of detail it requires in individual notifications. We anticipate that the extent to which it uses such flexibility will very much depend on the notifying parties’ ability to convince the Commission of the transparency and robustness of a lighter notification.
- Businesses should be aware that the Commission will not publish details of any preliminary review decision that clears a foreign subsidy. Guidance on the interpretation of key concepts contained in the FSR (e.g., the criteria used to assess the distortive potential of a foreign subsidy) is not expected before 2026. Although the Commission publishes and updates questions and answers, there will be few insights on these key issues for some time. Engagement with the Commission’s teams might offer means to bridge this information gap in the context of a particular transaction or tender.
- Finally, the Commission has opened a number of anti-subsidy investigations into certain Chinese exports into the EU, showing that it will continue to enforce its trade instruments, (in this case the EU Anti-Subsidy Regulation), and also providing insights about its interplay with the FSR.