One year after its entry into force on July 12, 2023, the Foreign Subsidies Regulation (FSR) continues to make headlines. The FSR allows he European Commission (EC) to investigate financial contributions granted by non-EU governments to companies active in the European Union and to impose measures to redress any uncovered distortive effects.

Contrary to expectations, the EC was quick to implement this new investigative tool to remedy the distortions caused by the allocation of foreign subsidies on the internal market. Read more in our previous post here.

In addition, it is highly likely that FSR-based controls will be strengthened in the coming years as national protectionism increases. For example, the Inflation Reduction Act (IRA), adopted by the USA in 2022 and introducing a nationwide support plan including production subsidies and tax incentives, is likely to subject US companies to FSR notification obligations and possibly to reinforced ex officio investigations by the EC.

Although the recent examples of FSR implementation have provided a better understanding of the EC’s priorities, many questions remain for economic operators, and even more so for private equity (PE) investors.

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