Blog: Final Approval of the Foreign Subsidies Regulation | Morgan Lewis … – JD Supra

The European Union’s Foreign Subsidies Regulation (FSR), published on December 23, 2022, entered into force on January 12, 2023. The FSR will apply with most of its provisions six months after its entry into force—i.e., on July 12, 2023. The FSR will grant the European Commission (EC) new enforcement powers to address subsidies received by companies from third-country governments or public entities. In yet another game-changing move towards ex ante regulation by the EC, the FSR will require companies operating in the EU to report their M&A transactions as well as their participation in public procurement tenders if backed by foreign subsidies. The FSR will also allow the EC to investigate ex officio any economic activity carried out in the EU in such cases.

The objective of the FSR is to fill regulatory gaps identified by the EC in existing legislation that does not allow the EC to tackle distortions in the EU’s internal market caused by foreign government subsidies. Under the current EU state aid rules, the EC can only challenge subsidies when these are from EU member state governments. EU public procurement rules or sectoral legislation at the EC’s disposal have also proven to be insufficient to tackle unfair behavior of foreign state–backed companies active in the EU. Antitrust and merger rules do not specifically address the impact of foreign subsidies either, and trade defense instruments, World Trade Organization (WTO) rules, and Free Trade Agreement (FTAs) rules do not cover trade in services, investment, or other financial flows in relation to the establishment or operation of companies in the EU.

Please see full Publication below for more information.

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