Successful cross-border transactions no longer depend solely on financing, commercial negotiations or merger control clearance. Under the EU Foreign Subsidies Regulation (hereinafter: “FSR”), foreign financial contributions may also determine whether an acquisition, a public procurement bid, or another strategic investment proceeds as planned. As the European Commission develops its enforcement practice, understanding the FSR is becoming essential for businesses and investors operating in the European Union.
The FSR adds a distinct layer of EU regulatory scrutiny to transactions and public procurement involving foreign financial contributions. While it operates alongside merger control, antitrust rules, and foreign direct investment screening, it addresses a different question: whether financial support by non-EU countries may distort competition in the EU internal market. As a result, the FSR is particularly relevant for corporate groups and investors that have received financing, guarantees, grants, tax advantages, capital injections, preferential loans, or other forms of support from non-EU public authorities.
Its practical importance lies in the fact that FSR issues can affect both the timetable and the certainty of a transaction. In certain mergers and public procurement procedures, foreign financial contributions may trigger notification obligations and standstill requirements. This means that a transaction may not be completed, or a public contract may not be awarded, before the Commission has completed its review. Even where no mandatory notification is required, the Commission may still examine foreign subsidies on its own initiative. As a result, FSR considerations can affect deal timelines, participation in public tenders, regulatory planning, and the overall certainty of transaction completion.
The Commission’s initial enforcement activity demonstrates that the FSR is now an active regulatory tool. Cases such as e& / PPF Telecom and ADNOC / Covestro illustrate the Commission’s readiness to scrutinise foreign financial contributions in major transactions and to accept commitments where they can address potential distortions. These cases indicate that the FSR should not be viewed solely as a tool of prohibition. In appropriate cases, commitments may allow a transaction to proceed while addressing concerns relating to fair competition in the internal market.
A key challenge for businesses and investors is practical implementation. FSR assessment goes beyond traditional competition law analysis of markets, market shares and competitive effects, and requires identifying, classifying, and evaluating foreign financial contributions across the wider corporate group. This process is often information-intensive, particularly when support spans multiple jurisdictions, group entities, and forms over several years. Information that may previously have been treated as purely financial, tax or treasury-related can therefore become relevant to regulatory review.
FSR compliance should begin early, before a transaction or procurement process is already advanced. Businesses should map foreign financial contributions at group level, incorporate FSR considerations into due diligence, and assess notification requirements from the outset. This is especially important for investors involved in competitive sale processes or public tenders, where delays or uncertainty may affect commercial credibility and negotiating position.
The key lesson is clear: the FSR is now part of transaction risk management. Businesses that identify foreign financial contributions early, understand their potential regulatory relevance, and prepare a coherent FSR strategy will be better placed to reduce uncertainty, avoid unnecessary delays, and engage effectively with the Commission where required.
As the Commission continues to refine its enforcement practice, businesses that incorporate the FSR into transaction planning, rather than treating it as a late-stage compliance issue, will be better positioned to manage regulatory risk in an increasingly complex EU investment environment.
This article was prepared by Eleana Polydorou during her summer 2026 internship at Trojan Economics.
To learn how these regulatory shifts impact your specific portfolio or upcoming transactions, explore the detailed Executive Guide to the FSR.
