23 December 2022, the European Union introduced a regulatory game-changer applicable in particular to M&A transactions and public procurement proceedings: the FSR.
The main objective of the FSR, formally Regulation (EU) 2022/2560 of 14 December 2022 on foreign subsidies distorting the internal market, is to level the European playing field by dealing with distortions in the EU caused by undertakings engaged in economic activities within the EU that have received, directly or indirectly, subsidies from non-EU member states (“Third Countries”).
The FSR applies to any economic activity in the internal market, but provides specific regulation on M&A transactions (“concentrations”) and public procurement proceedings in that it imposes a notification and stand-still obligation with respect to “notifiable” M&A transactions and “notifiable” foreign financial contributions in any public procurement procedure.
The FSR comes into force 12 July 2022. It will not apply to M&A transactions or public procurement contracts that have been concluded or awarded before this date. The notification and stand-still obligations will apply from 12 October 2022. Going forward, however, for the purpose of assessing whether an M&A transaction or foreign financial contribution in the context of a public procurement procedure would be in-scope, the FSR will embrace foreign subsidies granted 3 years
prior to 12 July 2023.
The European Commission will be the sole (administrative) authority competent to ensure application of the FSR. The Commission has far-reaching tools, and non-compliance with the FSR may result in severe consequences. The Commission may, inter alia, order the dissolution of the M&A transaction concerned and/or impose significant fines on the undertakings involved in the transaction, as the case may be. However, the Commission's decisions under the FSR must be made in accordance with the procedures provided by the FSR and subject to judicial review by the Union courts.
The FSR provides not only a new regulatory hurdle for in-scope M&A transactions and public procurement procedures, for which corporates and other stakeholders are well-advised to start planning already now. It also provides a new prism for strategic complaints and litigation from third parties, which stakeholders would be equally prudent to take thoroughly into account in relation to their future dealings.
We are very pleased that the esteemed Nordic Journal of Company Law (
Nordisk Tidsskrift for Selskabsret) has decided to publish our article
The EU Foreign Subsidies Regulation – A new vehicle for strategic complaints and litigation in the context of M&A transactions? prepared by Thomas Mygind and Henrik Ringgaard Diget. The article provides an introduction to the FSR as well as an analysis of the different dispute avenues opened by the FSR.
