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The European Commission has launched its first review of the Foreign Subsidies Regulation, FSR. As a first step of this review, the Commission is seeking feedback from interested parties, with a deadline of 18 November 2025.
Background
Foreign subsidies can often not only distort the EU-wide internal market but also undermine the level playing field for socio-economic development in the member states. As soon as these subsidies particularly occur in situations with the foreign “concentrations entailing a change of control over Union’s undertakings”, i.e. situations in which “concentrations are fully or partially financed through foreign subsidies, and/or where economic operators benefit from foreign subsidies” through awarded contracts.
However, there are no presently the EU-wide legal instruments addressing distortions caused by foreign subsidies; existing so-called trade defence instruments can enable the Commission to act when subsidised goods are imported into the EU, “but not when foreign subsidies take the form of subsidised investments, or when services and financial flows are concerned”, notes the Regulation 2022/2560 adopted at the end of 2022 and is applying gradually during 2023-24. Under the WTO Agreement on Subsidies and Countervailing Measures, the EU has the possibility to initiate State-to-State dispute settlement against certain foreign subsidies granted by WTO members and limited to goods.
It is therefore necessary to complement existing EU rules and “instruments” with new tools to effectively deal with distortions in the European internal market caused by foreign subsidies in order to ensure a level playing field. In particular, the new tool shall complement the Union’s state aid rules which deal with distortions in the internal market caused by the member states’ subsidies.
It is also important that rules and procedures to investigate foreign subsidies that actually or potentially distort the internal market be specifically “laid down” and the distortions shall be redressed.
Therefore, a proper application and enforcement of the existing regulation shall contribute to the resilience of the internal market against distortions caused by foreign subsidies and thereby contribute to the Union’s open strategic autonomy. The regulation already has established rules for all undertakings (including public entities which are directly or indirectly state-controlled) that are engaged in the states’ economic activity, but special attention shall be given to the regulation’s impact on SMEs due to their significance in the economic activities pursued by their contribution to the fulfilment of the Union’s main political guidance.
Source and citations from: https://eur-lex.europa.eu/eli/reg/2022/2560/oj
The review
The review report is expected to focus on the following main issues:
= assessment of foreign subsidies that distort the internal market,
= application of the balancing test (i.e. whether positive effects of the foreign subsidy counterbalance its distortive effects),
= analysis of foreign subsidies with a possible distortive effect in the internal market on the Commission’s own initiative,
= the notification thresholds and, finally,
= more generally, the level of complexity of the rules and the costs incurred by businesses.
The EU states and other public/private entities interested in the matter can submit their views on the Call for Evidence and respond to the questionnaire in any official EU language on the Commission “Have your say” portal until 18 November 2025.
Reference to the portal at: https://ec.europa.eu/info/law/better-regulation/have-your-say_en
The Commission will use this feedback in the FSR review report that will be presented to the European Parliament and the Council.
The review is aimed at collecting feedback through:
a) public consultation to gather views on specific elements of the implementation and enforcement of the FSR from all interested parties, like companies, law firms, the states’ governance bodies, business associations, individuals and/or research community, and
b) evidences on more general feedback from all interested parties on the main aims of the FSR review report, its scope and context.
The link to register: https://ec.europa.eu/eusurvey/runner/FSR_ReviewReport2026
Then, by 13 July 2026 and every three years thereafter, the Commission shall review its practice of implementing and enforcing the Regulation.
Commission’s opinion
= “The first review report will be due in July 2026, three years after the Foreign Subsidies Regulation started applying. It will be an opportunity to take stock of the implementation and enforcement of the Regulation so far, and to envisage possible improvements. With today’s public consultation and call for evidence, Member States and stakeholders can submit their views and help the Commission review its FSR practice, so that it can best address distortions caused by foreign subsidies in the internal market, while minimising the regulatory burden”.
Teresa Ribera, Executive Vice-President for Clean, Just and Competitive Transition
= “Public procurement accounts for roughly 15% of the EU’s gross national product. Given the scale of this figure, Europeans expect that the selection process is fair and not distorted by subsidies coming from third countries. However, monitoring of this objective should be as unbureaucratic and transparent as possible. I invite you, as a stakeholder, to take advantage of this opportunity to submit your comments regarding the complexity of the rules, the costs incurred as a result and to share your ideas for a possible simplification”.
Stéphane Séjourné, Executive Vice-President for Prosperity and Industrial Strategy
Citations from: https://ec.europa.eu/commission/presscorner/detail/en/ip_25_1954