The FSR in Public Procurement

The FSR in public procurement: the short answer

The Foreign Subsidies Regulation (EU) 2022/2560 (FSR) adds a subsidy check to large public tenders in the EU, and applying the FSR in public procurement has become routine for contracting authorities running major projects. Where the estimated value of a contract or framework agreement is at least EUR 250 million and a bidder, together with its relevant group companies and main subcontractors and suppliers, received at least EUR 4 million in financial contributions from a single non-EU country in the last three years, the bidder must notify those contributions with its tender. All other bidders in such procedures must submit a declaration confirming that no notification is required.

The contracting authority transfers the documents to the European Commission, which can investigate and, in the end, prohibit the award to a bidder whose tender was made possible by distortive foreign subsidies.

For German contracting authorities and bidders, the Regulation applies directly alongside Part 4 of the Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen, GWB) and the procurement ordinances. It matters in sectors such as rail, energy infrastructure, construction, healthcare and IT, where large tenders attract bidders from outside the EU or EU bidders with state-owned customers abroad.

Thresholds and scope

Article 28 of the FSR defines when a notification is required.

"Main" subcontractors and suppliers are those whose participation ensures key elements of the contract performance and, in any case, those whose economic share exceeds 20 per cent of the value of the tender. Bidders should therefore collect data not only from their own group but also from key partners in a consortium or supply chain.

The concept of a foreign financial contribution is very broad: it includes grants, loans, guarantees, tax benefits and the provision or purchase of goods and services by public authorities or attributable entities in non-EU countries. A bidder with significant revenue from state-owned customers in Asia, the Middle East or the Americas can therefore cross the EUR 4 million threshold without receiving any classic subsidy.

Notification or declaration with the tender

Under Article 29 FSR, every economic operator participating in a procedure that meets the contract value threshold must submit either a notification of its foreign financial contributions or a declaration that it received none that are notifiable. In an open procedure, the document is submitted once with the tender. In a multi-stage procedure, it is submitted with the request to participate and again, as an update, with the final tender. The contracting authority forwards the documents to the Commission without delay.

If a notification or declaration is missing, the contracting authority may request it within 10 working days. If the bidder still fails to provide it, the tender or request to participate must be declared irregular and rejected (Article 29(3)). This makes the FSR in public procurement a formal admissibility requirement as well as a substantive control.

Commission review periods and award

The Commission conducts a preliminary review within 20 working days of receiving a complete notification, extendable once by 10 working days in justified cases (Article 30(2)). If it opens an in-depth investigation, it may adopt a final decision no later than 110 working days after receipt of the complete notification, extendable once by 20 working days in exceptional cases (Article 30(5)). Shorter periods apply to the review of the notification submitted with the request to participate in multi-stage procedures.

During the review, the procurement procedure continues, but the contract cannot be awarded to the notifying bidder until the Commission has decided or the time limits have expired (Article 32). Where the most economically advantageous tender was submitted by a bidder that filed only a declaration and no review was opened, the award to that bidder can proceed. If the Commission does not adopt a decision within the deadline, the contract may be awarded to any bidder, including the notifying one.

Possible outcomes

• No objection decision: the bidder remains eligible (Article 31(3)).
• Decision with commitments: the bidder offers commitments that fully and effectively remedy the distortion (Article 31(1)).
• Prohibition of award: the Commission prohibits the award to the bidder; the contracting authority must reject the tender (Article 31(2)).

What the Commission looks for

In public procurement, a distortion is understood as a foreign subsidy that enables an economic operator to submit an unduly advantageous tender for the relevant works, supplies or services (Article 27 FSR). Subsidies enabling an unduly advantageous tender are among the categories most likely to distort the internal market (Article 5(1)(e) FSR). The Commission considers whether the tender is unduly advantageous compared with the market and with other tenders, and gives the bidder the possibility to justify its price, for example by pointing to cost advantages unrelated to subsidies.

The assessment does not lead to modification of the tender (Article 31(4)). Either the tender stands, with or without commitments, or the award to that bidder is prohibited.

Early experience

The first in-depth investigations under the FSR in public procurement, opened in 2024, concerned non-EU state-linked bidders in tenders for rolling stock and a solar park in other Member States. In those cases the bidders withdrew before a final decision. The deterrent effect of the procedure is therefore significant: bidders that expect an in-depth investigation may decide not to bid or to restructure their consortium.

Beyond the notification: ex officio reviews

The notification system covers only large tenders, but the Commission's ex officio powers under Articles 9 to 11 FSR apply to all economic activities in the internal market, including smaller procurement procedures and contracts already awarded. The Commission can request information, carry out inspections inside and outside the EU and, if it finds a distortive foreign subsidy, impose redressive measures such as repayment of the subsidy with interest, behavioural commitments or structural remedies. Where an economic operator has failed to notify in a procedure where notification was required, the Commission may review the contribution ex officio and impose fines.

The Commission has also used market information requests to understand sectors where state-backed bidders are active, such as wind turbines, security equipment and rail. Bidders active in these sectors should assume that their tender behaviour in Europe is being monitored even below the EUR 250 million threshold.

Relationship with EU procurement directives

The FSR operates alongside the abnormally low tender rules of the EU procurement directives, transposed in Germany in § 60 of the Public Procurement Ordinance (Vergabeverordnung, VgV). A contracting authority can still investigate and reject an abnormally low tender under national law. The FSR adds a Commission-level check focused on foreign subsidies, and the two procedures can run in parallel. In addition, the International Procurement Instrument (Regulation (EU) 2022/1031) allows the EU to restrict access of bidders from countries that do not grant reciprocal access to their procurement markets.

Practice for German contracting authorities

German contracting authorities must integrate the FSR in public procurement into their tender documents for contracts at or above EUR 250 million. In practice, this means:

• announcing in the contract notice and tender documents that FSR notifications or declarations are required;
• providing the forms or links and setting submission instructions;
• forwarding notifications and declarations to the Commission without delay;
• building the review periods into the timetable, so that the award is not delayed unnecessarily;
• documenting decisions to reject tenders for missing documents after the 10-working-day request.

The FSR does not replace national review procedures. Unsuccessful bidders can still challenge the award before the public procurement chambers (Vergabekammern) under §§ 155 ff. GWB, for example where the contracting authority failed to reject a tender lacking an FSR declaration. Commission decisions themselves are challenged before the EU courts.

Bidder strategy under the FSR

For bidders, the FSR in public procurement affects strategy as well as paperwork. Points to consider:

1. Early assessment. Determine at the bid/no-bid stage whether the group and main partners exceed EUR 4 million per third country.
2. Consortium choice. Partners with large state-linked contributions can expose the whole consortium to review and delay.
3. Price justification. Prepare evidence that the tender price reflects costs, efficiencies and market conditions, not subsidies.
4. Timetable. Factor in possible in-depth investigations when committing to bid validity periods.
5. Accuracy. Incorrect or misleading information can be fined up to 1 per cent and failure to notify up to 10 per cent of aggregate turnover (Article 33).

Groups that bid regularly for large contracts in several Member States benefit from maintaining a central register of foreign financial contributions, updated quarterly, which can be reused across tenders and for FSR notifications in M&A. Competitors can also use the FSR. A bidder that suspects a rival's tender is subsidised can provide information to the Commission and raise the issue in procurement review proceedings.

Illustration: a hypothetical German municipal transport company tenders a framework agreement for trams worth EUR 400 million. A non-EU manufacturer bids with a German assembly partner. The manufacturer's group has received state-backed export credits and tax benefits above EUR 4 million from its home country, so it notifies. The Commission opens an in-depth investigation. The transport company continues evaluating all tenders, but cannot award to the notifying bidder until the Commission decides or the deadline expires.

How TRW & Co helps with the FSR in public procurement

We advise contracting authorities and bidders on the FSR in public procurement. For authorities, we draft tender documents and procedural instructions, manage the transmission to the Commission and plan timetables around the review periods. For bidders, we assess notification obligations, organise data collection across groups and consortia, prepare notifications and declarations, support price justifications in Commission reviews and act in procurement review proceedings. Our work connects with our state aid and FSR and public procurement practices. Read also about FSR notifications in M&A and procurement review proceedings. To discuss a tender, contact us.