The Foreign Subsidies Regulation (FSR) in Public Procurement Practice

Foreign state-owned enterprises winning European public tenders with subsidies — undercutting fair competitors? This is precisely what the EU seeks to prevent. Regulation (EU) 2022/2560 on foreign subsidies distorting the internal market — the "Foreign Subsidies Regulation" or "FSR" — has served for over two years as the European Commission's ("Commission") principal tool for detecting and eliminating such competitive distortions.

A foreign subsidy is any financial contribution granted by a non-EU state (e.g., China or the United States) to an undertaking — whether through direct payments, tax advantages, or below-market loans. The concern arises when such subsidies enable a bidder to submit a tender that would not be economically viable without that support.

The European Commission Takes Action

In April 2025, the Commission concluded an in-depth investigation concerning a public procurement for light rail vehicles in Portugal (see here). The case centered on Chinese rolling stock manufacturer CRRC Tangshan Rolling Stock Unipessoal ("CRRC"), which participated as a subcontractor within a bidding consortium for a new light rail line in Lisbon.

The Commission concluded that the foreign subsidies had conferred an unfair competitive advantage — to the detriment of other bidders and the EU single market. As a result, the consortium was required to replace CRRC with Polish manufacturer Pojazdy Szynowe PESA Bydgoszcz Spółka Akcyjna ("PESA"). Only after this commitment did the Commission allow the contracting authority (Metropolitano de Lisboa) to continue the procurement — provided the modified bid met all technical requirements.

This was not the first Commission investigation involving CRRC. In February 2024, the Commission launched its first-ever FSR in-depth investigation after CRRC participated in a procurement for electric push-pull trainsets in Bulgaria (see here). However, the company withdrew its bid, and the investigation was closed (see here).

The FSR in Public Procurement

A notifiable foreign financial contribution in public procurement arises under Article 28(1) FSR where:

• The estimated net contract value (or framework agreement/dynamic purchasing system award) is at least EUR 250 million; and

• The economic operator — including subsidiaries, affiliates, and main subcontractors/suppliers in the same bid — has received aggregate financial contributions of at least EUR 4 million per non-EU country in the three years preceding notification.

Lot-splitting rule: A notification obligation arises where the total contract value is at least EUR 250 million and the lot value reaches at least EUR 125 million — provided the EUR 4 million threshold is also met.

Where thresholds are not reached, a declaration suffices instead of formal notification.

Public Procurement Below the FSR Thresholds

Below these thresholds, the FSR generally does not apply. However, the Commission has two instruments to examine smaller procurement procedures:

• Before contract award: Where the Commission suspects that a participant benefited from foreign subsidies in the three years preceding the bid (Article 29(8) FSR), it may declare the contributions notifiable. This triggers a review process identical to ordinary notifications.

• After contract award: The Commission may initiate an ex officio review (Article 9(2) FSR). This cannot annul the award or terminate the contract, but the Commission may impose remedial measures (Article 7(4) FSR).

The message is clear: contracting authorities and bidders should not disregard the FSR even below its thresholds.

Key Considerations for Contracting Authorities and Bidders

For Contracting Authorities

Contracting authorities should familiarize themselves with FSR rules before conducting any procurement with an estimated net contract value of at least EUR 250 million. The contract notice — or, in procedures without prior publication, the procurement documents — must state that bidders are subject to notification or declaration obligations. If this statement is omitted, the FSR remains applicable regardless.

Practical tips:

• Build sufficient time into the procurement timeline for Commission review phases, guided by Article 30(2) and (5) FSR deadlines. During preliminary review and in-depth investigation, all procedural steps may continue except contract award.

• Once a notification or declaration is submitted, transmit it to the Commission without delay. Familiarize yourself with the Commission's data transmission interface during procurement preparation.

   

For Bidders

Bidders intending to participate in high-value procurements should collect and prepare Article 29 FSR notification/declaration information well in advance, covering all foreign financial contributions received over the preceding three years.

Practical tips:

• Implementing Regulation (EU) 2023/1441 sets out detailed rules on notification/declaration form and content. Annex II contains Form FS-PP for public procurement notifications. Submit the notification or declaration to the contracting authority.

• In open procedures, submit the notification/declaration once with the bid. In multi-phase procedures, submit twice: first with the request to participate, then as an updated version with the final bid. Verify accuracy at each stage.

   

Outlook

The proceedings above demonstrate that the FSR is being enforced vigorously — not only in M&A but also in public procurement (for further case studies, see this publication by Pomana et al., December 22, 2024).

The numbers are striking: the Commission anticipated fewer than 40 notifications per year — in practice, over 2,000 have been received. In response, a dedicated FSR unit was established within DG GROW (see also the summary of an FSR conference organized in 2024 by Dr. Andrea Pomana and Ass. Prof. Lena Hornkohl with DG GROW and DG COMP).

Contracting authorities and bidders need to assess the Commission's decisional practice with certainty. The FSR Guidelines published in January 2026 are a first step toward transparency — though their general content does not allow for reliable predictions.

Key date: By July 2026, the Commission must present a report on its FSR enforcement practice. This report will clarify the FSR’s future significance for public procurement.