The EU Foreign Subsidies Regulation (FSR) entered into force on 13 January 2023, with the mandatory notification requirements for M&A transactions and public procurement procedures taking effect on 13 October 2023. On 14 July 2026 - three years after the regime became fully operational - the European Commission (EC) published its first review of the FSR, accompanied by a Staff Working Document (SWD).

The EC’s review concludes that the FSR is “fit for purpose”, having filled a regulatory gap by addressing distortions in the EU internal market caused by foreign subsidies. The EC considers the FSR is achieving its objectives and is here to stay. It acknowledges, however, the significant administrative burden of FSR compliance and has committed to targeted adjustments to the procedural framework. Draft proposals are expected in autumn 2026, with formal adoption anticipated in 2027, following a stakeholder consultation. Potential adjustments include higher notification thresholds, streamlined filing requirements, broader reporting exemptions, and simplified public procurement forms.

What this means for businesses 

• Expect more ex-officio investigations. The EC intends to use its ex officio powers more actively. Companies receiving foreign financial contributions (FFCs), particularly in strategically important sectors, should be prepared for increased scrutiny and able to respond quickly to information requests and inspections. Now is the time to review internal compliance and response protocols.
• FFC reporting remains a major burden – but simplification is coming. Collecting and reporting FFCs remains one of the most resource-intensive aspects of FSR compliance. Planned procedural changes, including higher reporting thresholds and broader exemptions, should ease that burden. Until then, businesses should invest in robust group-wide systems for tracking and categorising FFCs to meet current obligations.
• Build FSR into deal planning from day one. With around 100 notifications annually and 97 percent cleared in Phase I, FSR filings are becoming a standard part of M&A execution. Deal teams should assess filing requirements early, identify reportable FFCs across the group, and consider waivers to reduce the reporting burden. Early engagement with the EC during pre-notification is increasingly effective and can help resolve issues before filing.
• Public procurement bidders need ongoing FSR readiness. High-filing volumes demonstrate the EC’s active enforcement in public procurement. Bidders should maintain up-to-date FFC records, stay on top of evolving filing requirements, and be ready to comply with demanding procedural deadlines. They should also watch for inconsistencies in how contracting authorities apply FSR obligations across Member States and procurement procedures.
• Participate in the upcoming consultation. The EC’s commitment to stakeholder engagement before proposing amendments gives businesses an opportunity to shape the regime. Companies and industry groups should participate actively in the autumn 2026 consultation, advocating for further simplification and sharing practical experience on FFC definitions, reporting thresholds, exemptions and other aspects of the regime that continue to create compliance challenges.

A closer look at the first FSR review 

Under Article 52(2) FSR, the EC must review the FSR’s implementation and enforcement every three years and report to the European Parliament and Council. The first review concludes that the FSR remains fit for purpose, while identifying scope for targeted procedural adjustments to reduce administrative burden.

M&A transactions: High number of filings, limited Phase II activity and no call-ins 

Between October 2023 and May 2026, the EC received 273 formal notifications under the FSR M&A (concentrations) module – approximately 100 per year, around three times its original estimate of 30-40. Approximately 97 percent of notified transactions were cleared during Phase I, with only three cases progressing to in-depth investigation (Phase II). Of those, two cases were cleared subject to commitments, while the third remains under review. Notably, in 20 percent of Phase I clearances no FFCs were reported – predominantly where FFCs fell within existing reporting exemptions, most often the exemption for provision or purchase of goods or services at market terms in the ordinary course of business.

Despite the high Phase I clearance rate, stakeholders have raised proportionality concerns. According to the SWD and the FSR Review Study, 72 percent of surveyed legal practitioners and contracting authorities identified the broad FFC definition as an “extremely significant” challenge, while 81 percent considered the €50 million FFC threshold too low and supported an increase. The FSR Study further suggests that the EC could exempt FFCs received by funds unable to cross-subsidise the acquiring fund, as well as FFCs given to portfolio companies where agreements prevent absorption of those contributions by the acquiring fund.

The review also indicates that pre-notification contacts are becoming more workable. Waivers were requested in around 39 percent of cases, while the median pre-notification duration decreased by 33 percent, from 36 to 24 working days.

Importantly, although stakeholders highlighted uncertainty around the EC’s call-in powers, DG COMP has not to date exercised its powers under Article 21(5) FSR to call in a transaction below the jurisdictional thresholds.

Public procurement procedures: Significant enforcement, ongoing compliance challenges 

Between October 2023 and May 2026, the EC received 5,150 submissions across 863 public procurement procedures, comprising 4,293 declarations, 733 notifications and 124 pre-notifications – demonstrating significant FSR enforcement on the public procurement front.

The EC opened four in-depth investigations during this period. One resulted in a commitments decision (see NRF Publication), while the remaining three were closed following bidder withdrawal. According to the EC, this illustrates the FSR’s deterrent effect, as certain bidders may withdraw, thereby helping to preserve a level playing field. The EC also declared two tenders irregular due to incomplete submissions, concerning the construction of a long-distance tunnel in Poland and the supply of computers and workstations in France.

A notable finding is the uneven application of the FSR by contracting authorities. While the proportion of procedures notified under the FSR rose from approximately 40 percent to 70 percent during the first two years, it subsequently fell to 45 percent in late 2025. To address this, the EC intends to strengthen outreach, compliance efforts, and transparency around its enforcement practice, including through the dedicated FSR Public Procurement Expert Group.

The review also highlights the cumulative burden on companies with recurring reporting obligations. The 40 most active submitters filed an average of 16.8 FS-PP forms each during the approximately two-year reference period (October 2023 to January 2026). Introducing a single submission updated twice yearly, or broader use of waivers, could have reduced submissions by approximately 76 percent.

Ex officio investigations: Limited cases, but importance guidance expected 

During the review period, the EC opened two ex officio in-depth investigations, both involving Chinese companies – one in the threat detection systems sector and one in the wind turbines sector. These cases have generated significant litigation before EU courts. In March 2025, the Vice-President of the Court of Justice upheld the EC’s inspection powers and rejected the Chinese threat detection systems manufacturer’s request for interim relief. The action seeking annulment of the EC’s inspection decision remains pending before the General Court. In May 2026, the wind turbines manufacturer challenged an EC request for information, with proceedings ongoing. Together, these cases are expected to provide important guidance on the scope of the EC’s investigative powers and the procedural safeguards available to companies under the FSR.

The EC does not consider any immediate changes to the ex officio regime necessary but expects to make greater use of these powers, noting that investigation duration largely depends on case complexity and any related court proceedings.

Upcoming adjustments to the FSR framework: What to expect 

The review confirms that the FSR is “fit for purpose” and that no fundamental reform is envisaged. Instead, the EC intends to introduce targeted adjustments, with formal adoption anticipated in 2027. Potential measures include:

M&A transactions 

• Increasing the turnover notification threshold via delegated act. Raising it to EUR 600 million could reduce notifications by approximately 16 percent without unduly restricting the EC’s ability to identify potentially distortive foreign subsidies;
• Introducing simplified notification possibilities for certain categories of transactions or FFCs;
• Moderately increasing FFC reporting thresholds. The EC’s analysis indicates that the current thresholds (EUR 1 million per individual FFC and EUR 45 million per third country) capture substantial information often of limited relevance to the substantive assessment; and
• Expanding exemptions from reporting requirements for categories of FFCs that are not among the most likely to distort the internal market (listed in Article 5 FSR).

Public procurement procedures 

• Introducing simplifications and clarifications in the forms used for notifications and declarations;
• Revising the waiver framework;
• Clarifying and limiting reporting of FFCs not categorised as foreign subsidies most likely to distort the internal market; and
• Providing greater clarity on the rights and obligations of economic operators and contracting authorities, including regarding confidential information in the context of access to file.

The proposed adjustments have already received cautious support. Notably, China’s Chamber of Commerce to the EU reportedly welcomed them as “positive steps”, while noting they “do not yet go far enough”.