Notification obligations under EU Foreign Subsidies Regulation in force

The obligation to notify M&A and similar transactions under the EU Foreign Subsidies Regulation (FSR) applies from 12 October 2023.

The FSR aims to level the playing field between EU entities and competitors from non-EU Member States that are not subject to the same kind of strict rules against state subsidies as EU entities are under the EU State Aid rules. Consequently, the FSR impacts non-EU entities, including UK entities. The obligation to notify is not solely triggered where an entity involved in a transaction has received state subsidies.

Although the aim of the FSR is to address foreign subsidies that distort competition, the notification obligations are triggered where undertakings have received foreign “financial contributions”, a much wider concept. A foreign financial contribution could, for example, include payment by a non-EU government or public authority for goods and services, even where those payments were made on arm’s length market terms (so there is no subsidy).

M&A transactions and joint ventures will have to be notified to the European Commission, and clearance obtained prior to completion, if:

• the undertaking to be acquired, one of the merging undertakings or the joint venture is established in the EU and has aggregate EU turnover of €500 million or more (including via one or more subsidiaries); and
• the aggregate amount of the foreign financial contributions received by the undertakings concerned is more than €50 million over the three years prior to notification.

Failure to notify when required could result in significant fines being imposed on companies by the European Commission, as well as a risk that the transaction could subsequently be investigated and ultimately unwound if the Commission concludes that it distorts the EU internal market.

Read more about the new EU foreign subsidies regime on our competition team’s blog here.