THE EU FOREIGN SUBSIDIES REGULATION: WHAT THE NEW GUIDELINES MEAN IN PRACTICE
The European Union (EU) Foreign Subsidies Regulation (FSR) grants the European Commission (EC) powers to address distortions of the EU internal market caused by foreign (non-EU) subsidies through a review of notified transactions and public procurement procedures, as well as through investigations launched on its own initiative into any economic activity. Since the regime entered into force in mid-2023, the EC has steadily increased enforcement efforts in this area. Building on this early experience, the EC issued formal guidelines on 9 January 2026, which clarify several aspects of its approach in the application of the FSR.
Key points of the FSR guidelines
The guidelines provide clarifications and methodologies on how the EC will assess distortions, balance any distortions against positive effects, and exercise its call-in powers for M&A transactions and public tenders that fall below the FSR filing thresholds. However, the guidelines are not intended as a mechanical checklist; the EC will interpret its FSR powers broadly, assessments will remain case-specific, and the guidelines will evolve as case law develops. This is not surprising, as the FSR is still a relatively new regime and there has been limited enforcement so far.
A foreign subsidy distorts the internal market if it is liable to improve the beneficiary’s competitive position in the EU and this improvement distorts competition in the EU. An important clarification in the guidelines is how the EC will connect a foreign subsidy to the recipient’s activities in the EU in the first step of the distortion test.
Apr-Jun 2026 issue
Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates