Pursuant to Article 46 of the FSR, the Commission published the Foreign Subsidies Regulation Guidelines (hereafter referred to as: Guidelines) on 9 January 2026. According to the Commission’s press release, the Guidelines are intended to foster predictability and ensure transparency for companies under the FSR. The Guidelines were adopted following a call for evidence in March 2025 and targeted consultations with Member States and selected stakeholders from business including legal and economic professionals, academia and consumers.
The Foreign Subsidies Regulation
The FSR establishes a harmonised framework for investigating and redressing distortions in the internal market caused by foreign subsidies. It seeks to ensure a level playing field for all undertakings operating in the Union, while preserving the EU’s openness to trade and investment. A foreign subsidy is defined as a financial contribution by a third country that confers a benefit on an undertaking engaged in economic activity in the internal market and is limited to certain undertakings or sectors. Importantly, foreign subsidies are not per se prohibited, the Commission will assess on a case-by-case basis whether a given subsidy distorts the internal market.
The FSR establishes three procedural mechanisms through which the Commission may examine foreign subsidies (i) ex officio review of foreign subsidies (Article 9 FSR), (ii) mandatory notification of certain concentrations (Articles 19–26 FSR), and (iii) mandatory notification of certain foreign financial contributions in public procurement procedures (Articles 27–33 FSR). These mechanisms apply to foreign financial contributions that meet specific thresholds or, in certain cases, where the Commission suspects a distortion even below those thresholds.
Key clarifications of the Guidelines
The Commission emphasises that in light of the early stage of the implementation of the FSR and the wide range of the market contexts to which it may apply, the Guidelines do not constitute a checklist to be applied mechanically, rather the Commission’s aim with the Guidelines is to enhance legal certainty.
The Guidelines clarify several key aspects of the FSR, including:
- the assessment of distortions under Article 4(1) FSR;
- distortions in public procurement procedures under Article 27 FSR;
- the application of the balancing test under Article 6 FSR: and
- the Commission’s power to request prior notification of non-notifiable concentrations and foreign financial contributions in public procurement procedures under Articles 21(5) and 29(8) FSR.
Criteria for determining the existence of a distortion (Article 4(1) FSR)
The Guidelines confirm that a distortion in the internal market is deemed to exist (i) where a foreign subsidy is liable to improve the competitive position of the undertaking in the internal market and, (ii) actually or potentially negatively affects competition. These two cumulative conditions form the basis of the Commission’s assessment once the Commission has found that a company pursuing an economic activity within the internal market has benefitted from a foreign subsidy.
To operationalise this framework, the Commission clarifies in the Guidelines that it applies a two-step approach. First, it examines whether the foreign subsidy strengthens the beneficiary’s competitive position in the EU. This assessment is relatively straightforward for subsidies that are targeted at economic activities in the internal market, such as direct support for an EU-based subsidiary or financing for a specific transaction. For non-targeted subsidie (those granted without an explicit link to EU activities) the Commission conducts a more detailed analysis to determine whether the subsidy can be used to cross-subsidise operations in the EU. Second, the Commission assesses the impact on competition by considering whether the subsidy is liable to alter the beneficiary’s competitive behaviour or market dynamics to the detriment of other operators.
The Guidelines provide a non-exhaustive list of examples of subsidies that may be considered distortive, including subsidies to ailing undertakings, unlimited guarantees and subsidies facilitating concentrations or enabling unduly advantageous tenders.
Distortions in public procurement procedures (Article 27 FSR)
In the context of public procurement, the Guidelines provide a structured methodology for assessing whether a foreign subsidy enables an economic operator to submit a tender that is unduly advantageous in relation to the works, supplies or services concerned. The Commission’s assessment comprises three steps. First, the Commission assesses the advantageous nature of the tender in relation to the works, supplies or services concerned, by examining whether the foreign subsidy enabled the operator to offer more attractive terms (for example, price, quality, delivery and lead times, warranties, payment terms, service levels, innovation or sustainability). To do so, the Commission may compare the tender with other tenders in the same procedure, with the contracting authority’s estimates and preparatory materials, or contrast the tender with a counterfactual tender absent the subsidy. Second, if a tender is advantageous, the Commission tests whether the advantage is undue, i.e., whether it stems to an appreciable extent from a foreign subsidy, or whether it is due to other plausible factors unrelated to the subsidy, such as cost‑effective production processes, innovations, novel technical solutions, or exceptionally favourable supply conditions. Third, where an unduly advantageous tender is established, the Commission assesses the actual or potential negative effect on the procurement outcome in question.
The application of the balancing test (article 6 FSR)
Pursuant to the FSR, the Commission may balance negative effects of a foreign subsidy in terms of distortion in the internal market against the positive effects on the development of the relevant subsidised economic activity on the internal market, while considering other positive effects of the foreign subsidy such as the broader positive effects in relation to the relevant policy objectives in particular those of the Union. This balancing test is only applied once the Commission has identified a distortion under Article 4(1) FSR. This test is applied on a case-by-case basis that takes into account the specific circumstances of the case. The Guidelines clarify that it is not possible to determine in advance that a foreign subsidy of a certain type and meeting certain conditions would necessarily have positive effects that outweigh the distortion of the internal market resulting from that foreign subsidy.
The Guidelines clarify that positive effects should be assessed by taking into account, amongst others (i) the nature of the positive effects on the development of the relevant subsidised economic activity on the internal market, or their relation to the relevant policy objectives; (ii) the intensity of the positive effects; and (iii) the timing of the positive effects.
In the case of categories of foreign subsidies that are most likely deemed to distort the internal market, positive effects are less likely to outweigh negative effects. If the negative effects prevail, the balancing test can help to determine the appropriate nature and level of the commitments or redressive measures. Conversely, if the positive effects outweigh the negative effects, the Commission may decide not to impose any redressive measures. Where the Commission carries out a balancing test on the basis of the information received, it will set out its reasoning in the decision closing an in-depth investigation.
Call-in powers for non-notifiable cases (Articles 21(5) and 29(8) FSR)
The FSR grants the Commission the power to request prior notification of (i) concentrations that are not notifiable under the FSR and which have not yet been fully implemented, and (ii) foreign financial contributions in a public procurement procedure that are not notifiable under the FSR and where the contract has not been awarded yet.
This power may be exercised where the Commission suspects that foreign subsidies were granted in the three years preceding the concentration or the submission of the tender. The Commission assesses whether the case merits ex ante review based on its impact in the Union, which may include actual or potential effects such as the production of goods or services, access to technology or intellectual property rights, or the availability of services.
The Guidelines also set out safe harbours: low-value public procurement procedures, foreign subsidies not exceeding EUR 4 million in the relevant three-year period, and subsidies granted to address certain extraordinary circumstances are generally not subject to a call-in request.
Conclusion
The Guidelines provide detailed interpretative guidance on the application of the FSR, clarifying how the Commission intends to assess foreign subsidies and their potential effects on the internal market. By outlining the Commission’s approach to distortions, public procurement, the balancing of effects, and the use of call-in powers, the Guidelines offer a structured framework for understanding the FSR’s practical operation. As enforcement practice develops, the Guidelines are expected to play a central role in shaping the application of the FSR and informing the compliance strategies of undertakings active in the EU.
*The Foreign Subsidies Regulation (Regulation (EU) 2022/2560
