The EU proposed the Foreign Subsidies Regulation (FSR) in 2021 to address foreign subsidies distorting the Single Market. Operating as a screening instrument behind merger control, it requires companies to notify the European Commission of foreign financial contributions (FFCs) they may receive when participating in public procurement or mergers and acquisitions activity. Preventing FFCs from distorting the Single Market is an important goal – and one that must be achieved without creating its own disruptions.
FSR compliance: complexity undermining competitiveness
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How did we get here
When the Commission proposed the FSR, it predicted that the additional administrative burdens would be ‘relatively small because it would be largely limited to gathering information on foreign financial contributions received’.
More than two years after the FSR’s notification obligations entered into force, this is far from the reality. FSR filings are the most resource-intensive transaction filings globally, requiring company-wide engagement to gather and notify data used for no other purpose.
Now, as the Commission reviews the FSR and considers legislative amendments, it must examine the FSR’s immense impact on companies and see if its current design is fit for purpose.
3,000+
notifications
4
in-depth investigations
2
decisions
How complicated is compliance
The FSR has proven itself unnecessarily broad, unpredictable and disproportionate in relation to its objectives and enforcement resources, with the Commission regularly requesting information far beyond what appears necessary for its assessments, including information on FCs lacking an EU nexus or granted after a notification.
Compliance requires company-wide engagement to design and implement entirely new tracking systems, accounting practices and audit mechanisms, demanding significant investments of both human and technical resources across global teams.
One company estimates that FSR compliance globally requires the regular engagement of over 100 division managers alone, not counting the engagement of other relevant employees and the cost of employing external advisers and dedicated project managers.
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What else must companies do
These costs do not exist in isolation. Foreign investments in general are subject to more scrutiny and unpredictability than ever, with merger control, foreign subsidies screening and foreign investment screening in multiple Member States often operating in parallel.
These cumulative costs and complexities make it more difficult for companies to bring value to the EU through investment, at a moment when Europe needs investment and innovation the most.
To comply with the FSR, a company must:
01. Initial mapping
Create an FSR database with FFCs
Map all relevant entities
Identify global staff relevant for FSR compliance
Train staff across all entities and countries in FSR compliance
02. Data gathering
Contract or dedicate resources for internal accounting and auditing
Track the FCs in scope globally and constantly update data for submissions or RFIs
Invest in dedicated IT resources for data tracking and consolidation
Hire or appoint a project manager for FSR
03. Notification and review
Complete notification forms with extensive coordination between external counsel and global teams
Respond to lengthy and highly technical RFIs with granular data and substantial documentation
04. Continuous compliance
Repeat the process as long as the company invests and remains active in Europe
Engage the whole company in responding to RFIs and ensuring consistency between filings
Frequently update FSR database to comply with unique, real-time data requirements
Abbreviations and definitions:
FCs – financial contributions, which are financial contributions (broadly defined) from non-EU countries
RFI – Request for Information from DG COMP and DG GROW
Learn more
Check out AmCham EU's position paper to learn more about how a proportionate
FSR can support a stronger, more predictable business environment in Europe.
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