New direction? EU Foreign Subsidies Regulation burden may ease

Low intervention rates 

To date, the EC has not blocked any deals under the FSR. There have been only two in-depth investigations, both of which related to alleged foreign subsidies granted by the UAE and ended in commitments.  

The second of these remedy decisions came in 2025, when the EC gave the conditional green light to ADNOC’s acquisition of Covestro.  

The authority had concerns that alleged subsidies granted by the UAE might have led to negative effects on competition in the acquisition process and a post-transaction distortion of competition in the EU. To address these, ADNOC agreed to adapt its articles of association (to state that ADNOC is subject to UAE insolvency legislation) and to share Covestro’s sustainability patents with certain market players.  

But administrative burden remains high  

Given the EC’s limited intervention record, critics of the FSR have raised concerns that the additional burden created by the regime is disproportionate.  

Notification thresholds are low, triggered where the target’s EU turnover is at least EUR500 million, and the parties received combined “financial contributions” from non-EU countries of more than EUR50m in the three years prior to the transaction. These have led to large numbers of filings—more than three times the EC’s initial estimates.  

Businesses face significant internal costs to gather the information needed to apply the thresholds and, if a filing is required, to prepare the disclosures required by the notification form.  

This burden is felt particularly acutely by private equity and investment funds, whose acquisitions account for a significant proportion of all FSR cases. The EC has simplified some disclosure requirements for PE acquirers, but not enough to alleviate their reporting challenges. 

No improvement in timing

The FSR is having an impact on deal timetables.

Pre-notification remains lengthy in many cases, with the EC often issuing numerous and wide-ranging requests for information. 

The authority has powers to stop the clock during the formal review period and is using these. Both in-depth investigations were suspended. Initial review periods have been paused in some cases.

And, significantly, parties to straightforward cases must always wait out the initial review period of 25 working days—there is no fast-track procedure or possibility of early termination.

There is guidance, but is it useful? 

In January 2026, the EC published its first set of formal FSR guidance.  

It sets out how the EC will assess whether a foreign subsidy distorts competition and, if so, how it will balance any positive effects against that distortion.  

The guidance also explains when the EC may require notification of a transaction that falls below the filing thresholds, providing a list of non-exhaustive (and arguably open-ended) factors that the EC may consider.  

These include whether the deal involves strategic activities, sectors or assets (such as critical infrastructure or innovative technologies). The EC will also look at the competitive impact of the deal, patterns in investments or acquisitions that build up influence or economic presence in a sector, any previous FSR interventions involving the parties, and any information indicating a distortion.  

There is a safe harbor: the EC will not call in a transaction where it can determine with sufficient certainty (without the need for a notification) that the aggregate foreign subsidies granted in the previous three years do not exceed EUR4m.  

Overall, the guidance provides some helpful clarifications for merging parties. But with only two decisions in practice, and a lack of comprehensive guidelines on the procedural aspects of the regime, gaps remain. 

A reset is needed and may be coming  

These issues have led many stakeholders to call for a wholesale overhaul. 

In September, the EC launched a consultation on how the FSR is working. It is gathering views on key aspects, including notification thresholds, reporting requirements, and review periods. Responses will feed into a “review report” to be published in summer 2026.  

So far, respondents are not holding back. Germany, for example, has urged the EC to replace the current regime with a call-in system and significantly higher thresholds, saying the authority’s powers should be cut to what is “strictly necessary.”  

In good news, the EC appears to be serious about the potential for changing the rules. It notes that the review report could be accompanied by legislative proposals, with the possibility of amendments to the notification thresholds or timelines.