Still foreign – FSR stakeholder feedback shows a rift between theory and practice

Distortion under Article 4 and the Article 5 “most likely” categories

To start, there is a complaint among respondents that the FSR's substantive triggers remain easier to recite than to apply. On Article 4 FSR, 28 of 54 respondents say the distortion framework is not sufficiently clear or predictable, and they point to the Article 4(1) indicators being drafted at a high level of generality. Clarity is wanted as to how the Commission will weigh indicators against one another, what evidentiary rules apply, and what significance to attach to each indicator in the overall analysis. A related unease sits underneath: some respondents perceive the intervention threshold as rather low (while ten respondents take the opposite view and consider the framework clear and predictable, with three of them expressly expecting decisional practice to supply the missing certainty over time).

Notably, Article 5 FSR, meant to do some of that predictive work by identifying categories of subsidies “most likely” to distort, does not currently calm nerves. While 17 respondents consider the criteria sufficiently clear and appropriate, 27 do not. 18 describe the criteria as too broad, calling out the concepts of subsidies “directly facilitating” concentrations and subsidies enabling “unduly advantageous” tenders as examples of breadth that is hard to apply in real life. Five respondents go one step further and question why these categories are presumed “most likely” to distort at all, at least absent more objective criteria explaining the presumption.

The balancing test under Article 6

The balancing test of Article 6 FSR is where ambition meets credibility: only if positive and negative effects can be weighed effectively, will the playing field truly be leveled.

24 respondents consider the test to lack transparency and proportionality, focusing on how it is applied procedurally and what level of substantiation is expected from parties. 23 stakeholders call for clarification on the definition of positive and negative effects, the legal framework for assessing them, and how the assessment works in practice. They also highlight that the Commission is granted a considerable margin of discretion and argue that standards of proof should be consistent across the negative and positive sides of the ledger, including as regards the respective burden to substantiate those effects. Only seven respondents perceive the balancing test as transparent and proportional.

On the ex officio tool in Article 9 FSR, respondents are broadly supportive on paper. 25 consider it an adequate instrument to contribute to ensuring a level playing field, and 17 see significant potential in enforcing the Regulation's objectives. Yet eleven respondents emphasize that application should be effective without prejudicing predictability and legal certainty for businesses – a recurring theme across the consultation. Five respondents add a capacity point: effective enforcement requires sufficient Commission resources. Several respondents also call for clearer procedural guidance. At the other end of the spectrum, nine consider the tool insufficient to contribute to a level playing field, while 20 do not express an opinion.

In other words: Stakeholders appear comfortable with the existence of a backstop power, but less comfortable with uncertainty about how the backstop is actually applied. When asked whether ex officio enforcement has already affected – or could affect – non-EU economic operators' participation in internal market activities (including greenfield investments), respondents are, however, largely cautious. 21 respondents consider it too early to assess whether effects are material; ten expect an impact; two do not perceive any change; and 21 do not have an opinion. Eight respondents nonetheless use the question to return to first principles: greater predictability and clarity in enforcement would be needed to ensure sufficient legal certainty for non-EU operators making commercial and investment decisions in the EU.

Article 20 thresholds

On jurisdictional design, respondents do not merely debate calibration in the abstract. 23 of the 54 say the Article 20 FSR notification thresholds are too low, stressing that “too many irrelevant cases are caught” and that notified transactions have far exceeded pre-entry-into-force estimates, increasing administrative burden for both undertakings and the Commission. Eight respondents regard the thresholds as appropriate proxies for capturing the most relevant cases, though even within that camp some see a case for an increase to reduce burden for unproblematic deals. A mere two respondents go the other way and consider the thresholds too high.

Form FS-CO and the foreign financial contribution headache

Perhaps even more important than the threshold critique is what respondents have to say about the way the Commission conducts the actual proceedings. The prevailing view, in a nutshell: scrutiny is tolerable; indiscriminate data extraction is not.

25 respondents consider the information required by Form FS-CO and the Implementing Regulation neither proportionate nor reasonable, “in particular for SMEs,” and they add that, in certain cases, Commission requests for information are excessive or unnecessary for the assessment. Only two consider the information requirements acceptable; the rest express no opinion. And Section 5 of Form FS-CO attracts an even sharper, more concrete objection. 27 respondents, primarily businesses and business associations, consider the reporting of foreign financial contributions neither clear nor proportionate. They describe completion of the Form as burdensome due to breadth, argue that the notion of “foreign financial contribution” is too widely defined (and captures ordinary commercial transactions with no apparent link to distortions), and point to the practical difficulty of retrieving historical, decentralized information across large corporate groups.

Timelines, overlaps with EUMR and FDI, and deal mechanics under strain

Process concerns are framed in two ways: absolute burden and duplication. On Article 25 FSR timelines and costs, eleven respondents consider preliminary review timelines too long, and 13 consider the associated costs disproportionate. Four view timelines and costs as adequate and manageable.

Overlap between regimes compounds that baseline. 24 respondents have occasionally or frequently experienced situations where the same concentration is subject to notification requirements under the FSR and (regular) merger control and/or foreign direct investment screening. They report additional administrative burden, uncertainty, and delays, driven by limited alignment of information requirements and, again, the “broad and demanding” scope of Form FS-CO. And when respondents translate that into deal planning language, the numbers get even more pointed. 28 consider notification obligations capable of leading to moderate or significant delay and uncertainty. Among those, 20 also report significant additional costs, explaining that a filing can involve all business units within a corporate group and require internal training and external legal advice that is both time-consuming and expensive.

On market participation effects, respondents stay a bit more cautious, however: two perceive no change; ten consider it too early to assess whether the FSR has affected non-EU participation in concentrations. Only seven expect or perceive reduced participation and cite the broad definition of foreign financial contributions, lack of decisional practice, lack of a simplified procedure, narrow reporting exemptions, and extensive information gathering requirements.

Article 28 thresholds

For the procurement thresholds of Article 28 FSR, there is the same over-inclusiveness critique that appears in concentrations. In procurement, however, it appears to be met by a counter-argument about strategic sensitivity and the risk of leaving smaller but high-impact tenders outside the net. 20 respondents advocate increasing the thresholds to reduce administrative burden, while eight argue for lowering them (focusing on the significance of smaller contracts in strategic sectors, expressly including green technologies, digital infrastructure, and defense-related supplies) and ten respondents consider the Article 28 FSR thresholds appropriate proxies for the most relevant cases.

Timelines and costs

Unlike for concentrations, however, reported experience on whether the FSR is affecting procurement timetables and cost skews heavily toward disruption. Only three respondents reported no impact, while 30 reported at least minimal impact on costs and/or time – with significant delays or uncertainty and significant additional costs each reported by 22 respondents. And when asked specifically about the adequacy of Article 30 FSR timelines for the overall procedure, only two respondents consider them adequate and proportionate. 18 say adequacy depends on case complexity, while 16 consider the timelines too long in general.

Predictability for contracting authorities and bidders

A procurement tool that relies on contracting authorities to administer obligations will be judged on whether those authorities can apply it consistently. But only six respondents consider the FSR and its Implementing Regulation clear and precise enough for contracting authorities to understand their obligations. Ten disagree with these provisions, criticizing their opaqueness, while 23 describe the texts as only partially clear, pointing to different levels of expertise and ambiguous implementation details.

The most emphatic predictability critique concerns the scope of the notification obligation. Merely eight respondents find it clear and predictable, acknowledging that a framework instrument must leave space for practical application. 31, in contrast, do not, citing ambiguous key definitions and inconsistent application across Member States and tenders (e.g., because of uncertainty over which entities fall under the obligation and how to treat “main” subcontractors). While not stated expressly in the summary, this suggests are severe risk of fragmented tender practice in the Internal Market, with bidders and authorities taking different approaches to the same regulatory question.

Forms, transparency, and participation effects

Respondents are also divided on whether Form FS-PP and the Implementing Regulation are workable. Only four support the view that the structure and information requirements are proportionate, and eight consider them (at least) “understandable”. By contrast, 20 do not consider the structure and information requirements proportionate, and twelve do not find them understandable.

Next to proportionality, transparency is the other procurement theme where concerns are expressed very clearly. Four respondents are satisfied and eight partially satisfied with transparency and accessibility of outcomes. But 19 disagree, raising two issues: a lack of transparency regarding outcomes of concluded investigations and the need for publication of findings with comprehensive information, and limited visibility on progress during ongoing proceedings.

On participation, the summary again reflects caution rather than a clear empirical claim – evidence that while the criticism is stark at times, it is not made without reflection. 22 respondents report a lack of knowledge or opinion. 14 consider it too early to draw conclusions. Four say participation has not been affected. That said, a sizable group of fourteen respondents did notice reduced participation by non-EU companies, and not necessarily with a positive outcome; they consider that the framework may discourage participation of both non-EU and EU companies. An empty playing field instead of a leveled one?