As of October 12, 2023, the notification obligations for transactions and public tenders under the EU Foreign Subsidies Regulation are fully applicable.

On January 12, 2023, the Foreign Subsidies Regulation of the European Parliament and the European Council (the FSR) had entered into force (cf. Homburger Bulletin of January 12, 2023). On July 10, 2023, the European Commission (the Commission) had adopted the corresponding Implementing Regulation, right before the FSR started to apply with regard to ex officio reviews by the Commission as of July 12, 2023. As of today, October 12, 2023, the notification obligations for mergers and public procurement proceedings involving financial contributions from foreign (non-EU member) states (including Switzerland) under the FSR apply, and the regulation is hence fully applicable.

As compared to an earlier draft, the final Implementing Regulation in several regards limits the administrative burden for such notifications. As set out below, it nevertheless remains considerable.

1.        Notification requirements – Concentrations

Under the FSR, companies must notify the Commission of a concentration if (i) at least one of the undertakings concerned (one of the merging parties, the target or the joint venture) is established in the EU and generates annual turnover in the EU of more than EUR 500 million and (ii) the combined aggregate financial contributions of any of the undertakings concerned received from non-EU countries exceed EUR 50 million in the three years prior to notification. Undertakings may request pre-notification consultations with the Commission as to whether the thresholds for notification are met. The Commission may, however, request that concentrations that do not meet the thresholds must nevertheless be notified.

The notifying parties must provide the following information if the above thresholds are met:

• In the case of financial contributions from foreign (non-EU) countries most likely to distort the internal market, as defined in the FSR (Article 5, in particular subsidies to ailing companies, support directly facilitating a merger or unlimited guarantees; also referred to as «Article 5 support»): details of all financial contributions of an individual amount of at least EUR 1 million granted to the undertakings involved in the transaction over the last three years.
• In the case of all other non-EU financial contributions: an overview of the financial contributions granted to the notifying party/parties in the last three years of an individual amount of at least EUR 1 million and only in relation to those countries that have granted contributions of at least EUR 45 million to the undertakings concerned by the concentration in the three years preceding the concentration, subject to a number of exceptions.

2.        Notification requirements – Public Procurement

In the case of financial contributions from non-EU countries in the context of public procurement procedures, undertakings must notify the Commission if (i) the contract value exceeds EUR 250 million and (ii) the tenderer received subsidies of more than EUR 4 million from non-EU countries in the three years prior to the tender.

Undertakings must provide the following information:

• In the case of foreign (non-EU financial) contributions in the form of Article 5 support: details of all individual relevant contributions of at least EUR 1 million received by the notifying undertaking(s) in the three years preceding the notification.
• In the case of all other non-EU financial contributions: an overview of the financial contributions granted to the notifying undertaking(s) in the three years preceding the notification, of an individual amount of at least EUR 1 million and only in relation to those countries that have granted at least EUR 4 million to each of the notifying undertaking(s) in the three years preceding the notification.

3.        Analysis and Takeaways

As set out above, an important simplification compared to the previous draft of the Implementing Regulation is that the de minimis threshold for reportable financial contributions per country has been significantly increased from EUR 4 million to EUR 45 million. This means that if the total amount of such contributions is below EUR 45 million in the previous three years, they do not have to be reported.

Nevertheless, undertakings involved in mergers and public procurement proceedings that are likely to exceed the relevant turnover and value thresholds are recommended to extensively gather information on potential non-EU financial contributions, especially in the area of taxes. In addition, it is advisable to include relevant clauses into merger agreements, comparable to existing merger control clauses.

The FSR will directly affect Swiss companies with business activities in the EU, in particular if they engage in M&A activities or submit public tenders in the EU, as the FSR defines foreign subsidies broadly to include any direct or indirect financial contribution from a non-EU country (including e.g. Switzerland) which confers a benefit on or more undertakings.