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The Foreign Subsidies Regulation (Regulation) introduces a notification obligation for certain transactions and public tenders in all economic sectors. It also introduces a market investigation tool which allows the European Commission (Commission) to investigate financial contributions granted by non-EU countries to companies active in the EU.

An Implementing Regulation, published on 10 July 2023, clarifies procedural aspects of the Regulation. It is accompanied by draft notification forms and guidance notes.

What foreign financial contributions are caught by the Regulation?

A ‘foreign financial contribution’ is defined broadly and can include:

  • The transfer of funds or liabilities, for example capital injections, grants, loans, guarantees, debt waivers, debt to equity swaps or rescheduling
  • The foregoing of revenue, such as tax exemptions
  • The provision or purchase of goods or services

Which M&A transactions are caught?

From 12 October 2023, a merger, acquisition or full-function joint venture (JV) must be notified to the Commission if:

  • One of the merging entities, the target or the JV generates an EU turnover of at least €500m, and
  • The entities involved in the transaction have received aggregate financial contributions from non-EU countries in the 3 years prior to the transaction of more than €50 million

The notification requirement is separate to EU/national merger control systems but the process is very similar.

Which public tenders are affected?

The Regulation also introduces a notification requirement from 12 October 2023 for bidders in a public procurement procedure where:

  1. The contract has an estimated value of at least €250m and, where the procedure is divided into lots, where the total value of the lots for which the bidder is bidding is at least €125m, and
  2. The aggregate foreign financial contributions received by the bidder, including its parent and certain subsidiaries, and main sub-contractors/suppliers were at least €4m per non-EU country in the three-year period prior to notification

Bidders must submit a single notification in standard form to the contracting authority. Bidders who do not meet (1) and (2) above must make a declaration to that effect, together with a list of all foreign financial contributions received. Contracting authorities must transfer notifications and declarations to the Commission without delay.

In the open procedure, the notification/declaration must be submitted as part of the bidder’s tender submission. In a multi-stage procedure, for example the restricted procedure, it must be submitted twice - with the request to participate and as part of the final tender submission. For framework agreements, reporting obligations only apply during the procedure to establish the framework agreement.

Bidders that fail to submit a notification or declaration, including in response to a request from the contracting authority, must be excluded from the procurement process.

Some limited exemptions apply in relation to defence and security contracts and the award of contracts via the negotiated procedure without prior publication on grounds of extreme urgency.

What is the review process?

For procurement procedures, the European Commission has 20 working days, which can be extended by a further 10 working days, from receipt of a complete notification to undertake an initial Phase 1 review of the transaction. It can either clear the transaction or refer it for an in-depth Phase 2 review if it identifies sufficient indications that a distortive subsidy has been received.

During Phase 2, it has an additional 90 working days, which can be extended by 20 working days, to either approve with or without commitments or prohibit the transaction or public tender. The assessment of the Commission, including any commitments, must not result in a modification of the tender which is in breach of the EU procurement directives.

For M&A transactions, the review periods are broadly aligned to the EU merger control process, ie 25 working days for Phase 1 reviews and 90 working days for Phase 2 reviews, both extendable by 15 working days where commitments are offered.

A notifiable concentration cannot be completed, and a public contract cannot be awarded, unless and until it has been approved by the Commission.

The Commission has the power to prohibit the award of contracts in such procedures to companies benefitting from distortive subsidies. In such circumstances, authorities can award the contract to the next placed tender. In addition, the Commission has the power to impose fines of up to 10% of world-wide aggregate turnover for failure to make a notification and fines for supplying incorrect information.

Investigative powers

The European Commission can also start investigations of EU procurement procedures that are not subject to the reporting obligations on its own initiative, so-called ‘ex officio investigations’.


It is important that companies are aware of these additional regulatory requirements and build them into any transaction timeline.

The Regulation also poses an additional burden on contracting authorities and contracting entities who need to familiarise themselves with the new rules and incorporate them into the procurement documents and tender timelines.

While the Regulation is to be welcomed in that it levels the playing field vis-à-vis third country bidders who may be in receipt of significant State subsidies, it also imposes onerous obligations on bidders. Bidders should prepare themselves by starting to track and record the foreign financial contributions they receive from non-EU countries. Bidders also need to be aware of the new requirements when choosing sub-contractors and suppliers.

The Regulation supplements the EU International Procurement Instrument (IPI) Regulation which aims to promote reciprocity in access to international public procurement markets and allows the Commission to restrict access to EU public procurement procedures for businesses from non-EU countries.

For more information or an initial consultation, contact a member of our Procurement team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

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