The European Commission published its first report on the operation of the Foreign Subsidies Regulation (FSR) in mid-July. The report covered the three years since the FSR was implemented in July 2023 to address distortions to the internal market caused by subsidies granted by third countries to undertakings engaging in economic activities in the European Union (EU). In its review, the Commission found that the FSR “is fit for purpose and contributes to its objective of preserving the level playing field in the internal market.” This post looks at the Commission’s assessment as it relates to public procurement in the EU and its appraisal of how key jurisdictions, including China and the United States address subsidies.

The FSR requires notifications in public procurements with an estimated contract value exceeding €250 million and the economic operator has received aggregate foreign financial contributions of at least €4 million per third country in the preceding three years. (The FSR also applies to concentrations: mergers and acquisitons.) 

From the start of the notification obligation on October 13, 2023 until May 31, 2026, the Commission reviewed 5,150 submissions from economic operators in 863 public procurements. Of the submissions, more than 80% (4,293) were declarations that the operators had not received any foreign financial contributions; 14% (733) were notifications of receipt of foreign contributions; and 2% (124) were pre-notifications intended to assist in determining whehter a notification was required. Of these submissions, the Commission opened only four in-depth investigations, three of which were closed after the economic operator withdrew from the procurement. In just one case did the Commission issue a final decision. All four cases involved Chinese firms.

During the review period, the Commission declared two tenders irregular due to incomplete notifications. One involved a tender in the construction of a long-distance tunnel in Poland, and the other a tender for the supply of computers and workstations in France. In both cases, the contracting authorities rejected the irregular tenders and excluded the economic operators from the procurement. 

The EU executive also exercised its ‘call-in power’ to request a prior notification in a public procurement below the FSR thresholds where, based on suspicions that foreign subsidies had been granted, it requested an economic operator to submit a prior notification in two public procurements for the construction of sections of a motorway in Croatia. When the operator failed to comply with the request, the contracting authority considered the tender “inadmissible, inappropriate, and technically unacceptable” and excluded the operator from the procurement.

In addition to these actions, the Commission observed the FSR’s deterrent effect in cases where economic operators, reluctant to share information on their foreign financial contributions, withdrew from the procurement, “thereby fostering fairer competition.”

The Commission concluded that the FSR is effectively addressing distortive foreign subsidies and does not require structural changes. However, it recognized concerns about complexity and administrative burdens on economic operators. As a result, it plans to propose adjustments to the FSR procedural framework to reduce the administrative burden and facilitate compliance. For public procurement, the proposed adjustments may include:

• Simplifying and clarifying the forms used for notifications and declarations;
• Revising the framework for companies to request waivers to limit the disclosure of information of certain foreign financial contributions;
• Clarifying and limiting the reporting of foreign financial contributions not categorized as foreign subsidies most likely to distort the internal market; and
• Clarifying the rights and obligations of companies and the contracting authority, including for processing of confidential information, in the context of access to files.

The Commission plans to submit the draft adjustments for stakeholder comments later in 2026 and adopt the adjustments in 2027. Although it has the authority to increase the notification threshold, it decided there was not a sufficient basis to revise it at this time.

As part of its review, the EU executive examined developments in third countries’ subsidy control systems and found no material developments since the adoption of the FSR. The key jurisidictions that it examined were Canada, China, Japan, Switzerland, Türkiye, the United Arab Emirates, the United Kingdom, and the US. Due to their significant economic engagement with the EU, it determined “their subsidy practices are particularly relevant for assessing potential distortions of competition within the EU internal market.” The EU observed that neither the US nor China have a subsidy control regime comparable to the EU State aid framework. Citing the 2026 OECD MAGIC Database of Industrial Subsidies, it pointed out that “China continues to pursue an active industrial policy with large-scale subsidisation representing one of its core components.”

A Commission Staff Working Document contains details on the review.

Jean Heilman Grier

September 8, 2026

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