EU Foreign Subsidies Regulation Faces First Formal Review by European Commission, with Recalibration Expected

The European Commission is preparing its first formal review of the EU Foreign Subsidies Regulation (FSR) — the legal framework that allows the Commission to investigate and, where necessary, block or impose remedies on transactions and public procurement bids involving companies that have received foreign state support. The review is due by 13 July 2026, creating a defined window in which the Commission will assess how the regime has operated in practice, where it has succeeded, and where recalibration may be warranted. The FSR, which came into force in 2023, introduced notification obligations for M&A transactions and public procurement bids above specified thresholds where one or more parties have received financial contributions from non-EU governments. Since its introduction, the regime has added a new layer of regulatory complexity to cross-border M&A and public sector procurement processes, particularly for transactions involving parties with significant Chinese state-linked financing or Middle Eastern sovereign wealth involvement. Commentary published today highlights this review as a timely opportunity to assess whether the FSR's procedural requirements are proportionate and to consider whether the thresholds, timelines, or substantive tests should be adjusted. No specific reform proposals are named in the available source material, but the review deadline itself sets an imminent regulatory calendar event for transactions counsel and in-house teams managing deal timetables.