What is the FSR and why it is relevant?

The FSR allows the European Commission (EC) to address market distortions caused by subsidies from non-EU countries. All companies, including companies from the EU, are subject to the FSR. Companies need to make notifications under the FSR in two situations:  

• ‍Public Procurement: Tenders valued at €250M+ must be notified, provided the company received at least €4M in government support (“financial contribution”) from a non-EU country in the last three years. ‍
• M&A: M&A deals must be notified under the FSR if:
  1. The merging parties, target or joint venture has over €500M+ in EU turnover and has a base of operations in the EU.
  2. The involved parties have received over €50M in non-EU financial contributions in the last three years.

‍Broad Definition of Financial Contributions

‍The FSR broadly defines foreign financial contributions to cover nearly all financial exchanges with non-EU state entities, and is not limited to subsidies.

FSR Review Timelines

FSR reviews are suspensory, meaning transactions cannot be completed until approval is granted. The timelines below exclude preparation time / pre-notification discussions.

How to get ready for the FSR

Avoid delays by mapping key financial and operational touchpoints with governments, and record support received from each.

High-level mapping:  ‍

• Countries where company’s group generates sales / purchases supplies
• Subsidiaries through which the company operates in each country
• Company functions that interface with government entities / record support & benefits from governments (e.g., Finance, R&D, Tax, HR, Country Managers)

Identify key reporting items:  

• Types of government support the group typically receives (e.g., R&D tax incentives, research grants, export subsidies)
• Government customers*  
• Company shareholders with state links*
• Banks with state links (if any)*

^{* check whether relationships are at arm’s length}

Collection process:

• Identify and brief data custodians on requirements
• Use reporting system that allows for easy retrieval & updating by various data custodians; facilitates uploading of internal documents
• For each reportable item, record amount, duration, purpose, government entity, receiving entity
• Sanity-check internal reporting against publicly available information
• Update dataset regularly and after new business are added to the group (e.g., as a result of M&A)

M&A: Potential Outcomes of an FSR Review