Commission publishes Foreign Subsidies Regulation Guidelines
The European Commission has published Guidelines under the Foreign Subsidies Regulation (FSR) to bring further predictability and ensure transparency for companies. They clarify several concepts, such as how the Commission concludes whether there is a distortion of competition caused by a foreign subsidy, how distortive effects are balanced against any positive effects of a foreign subsidy, and the Commission’s power to request prior notification of below-threshold cases.
Main elements of the Guidelines
The Guidelines clarify several aspects of the FSR:
The assessment of distortions (Article 4(1) FSR). The Guidelines clarify that once the Commission has found that a company pursuing an economic activity within the internal market has benefitted from a foreign subsidy, it will assess whether there is a distortion through two steps. First, the Commission will examine if the foreign subsidy strengthens the company’s competitive position in the EU. For subsidies not targeted at economic activities in the EU a more detailed analysis will be conducted to assess the risk that they are used to cross-subsidise economic activities in the EU. Second, the Commission will consider the impact on competition by analysing whether the subsidy is liable to alter the company’s competitive behaviour and market dynamics to the detriment of other operators. The Guidelines provide a non-exhaustive list of examples of subsidies that may be considered distortive.
The assessment of distortions specifically in public procurement procedures (Article 27 FSR). If an economic operator participates in a public procurement procedure in the internal market and the Commission has information that a foreign subsidy may have affected the terms of the tender, it will assess whether there has been a distortion. First, the Commission will assess whether the economic operator may have used the foreign subsidy in designing the terms of its bid. If so, the Commission will assess whether the submitted bid is unduly advantageous by comparing it with the other submitted bids in the procedure and the contracting authority’s estimates. If the bid is unduly advantageous, the Commission will assess whether the advantage stems to an appreciable extent from the foreign subsidy or from other justifiable factors.
The balancing test (Article 6 FSR). The Guidelines explain the Commission’s process of weighing the negative effects of a distortive foreign subsidy against any possible positive effects. The Commission will only take into consideration positive effects that are specific to the foreign subsidy under assessment. The balancing will take into account the severity of the distortion and whether the positive effects can be achieved without the distortion. If the positive effects outweigh the negative ones, the Commission will not object. If not, the Commission may accept commitments or impose redressive measures. The Guidelines provide examples of the relevant evidence that can be submitted and illustrate how the Commission would carry out the balancing test.
Use of call-in mechanism for concentrations and public procurement procedures (Articles 21(5) and 29(8) FSR). The Commission can request the prior notification of non-notifiable concentrations, as well as foreign financial contributions in public procurement procedures when certain conditions are met, in particular where it suspects that foreign subsidies have been granted to relevant undertakings in the last three years. The Commission evaluates whether an ex-ante review is warranted based on factors such as the competitive impact of the concentration or public procurement procedure, whether it concerns a strategic economic activity, and the possibility of a distortion. The Guidelines include new safe harbours: low-value public procurement procedures, subsidies below pound 4 million, and subsidies addressing certain extraordinary circumstances are exempt from a call-in. In any event, the Commission must act before the concentrations have been fully implemented or contracts awarded.
Background
Before adopting the Guidelines, the Commission held several consultations to ensure the views of all stakeholders were taken into account. A call for evidence was launched in March 2025 on the scope of the Guidelines. In parallel, the Commission held targeted consultations with Member States and selected stakeholders from business; legal and economic professionals; academia; and consumers. Between July and September 2025, the Commission conducted a public consultation on the draft Guidelines, during which it received feedback from interested stakeholders.
The Foreign Subsidies Regulation entered into force on 13 July 2023. The FSR enables the Commission to address distortions caused by foreign subsidies in the internal market. It allows the EU to ensure a level playing field for all companies, while remaining open to trade and investment. Foreign subsidies can reach the internal market through participation in any economic activity and in any sector. This includes acquisitions of control, participation in public procurement and other forms of direct investments.
Pursuant to Article 46 of the FSR, the Commission is required to publish the Guidelines by 13 January 2026. The FSR also requires the Commission to present a report to the European Parliament and the Council with a review of its practice of implementing and enforcing the Regulation, by 14 July 2026. That report may be accompanied, if appropriate, by relevant legislative proposals.
For more information
More information will be available on the Commission’s competition website and on the website of DG GROW.