Position of BE to the Foreign Subsidies Regulation (FSR)

BusinessEurope position on tackling of foreign subsidies.

  • We support the instrument and believe it has great potential to level the playing field.
  • Yet, the instrument needs to be effective while keeping the administrative burden as low as possible.

Currently, the EU regulatory framework only sets rules and limits for state aid granted by EU Member States. BusinessEurope has therefore long called for also tackling distortive foreign subsidies. After an exceptionally fast legislative procedure, the EU Foreign Subsidies Regulation (FSR) entered into force on 12 January 2023. It will apply from 12 July 2023. Under the regulation, the Commission will have the power to investigate financial contributions granted by a non-EU country which benefit companies engaging in an economic activity in the EU and redress their distortive effects. For public procurement procedures and mergers and acquisitions above certain thresholds, companies will need to notify foreign financial contributions they received from 12 October 2023.

FSR Implementing Regulation

On 6 February 2023, the European Commission published the draft implementing regulation that sets out the procedural details of the FSR, including:

  • Procedures for notifications, along with draft notification forms for concentrations and public procurement bids;
  • Pules for calculating time limits;
  • Procedural rules on preliminary reviews and in-depth investigations in cases of suspected distortive foreign subsidies.

Interested parties could submit their views on the draft documents in a 4-week online public consultation, which closed on 6 March. The Commission will consider the input received from stakeholders and adopt the final implementing regulation in the second quarter of this year.

The position of BusinessEurope

We have been highly supportive of the FSR and many of its recommendations are reflected in the final text of the regulation. However, we are concerned that the draft implementing regulation does not allow for a proportionate and effective implementation of the FSR. By creating excessive red tape for companies, it risks overwhelming the European Commission with irrelevant information. In our contribution to the public consultation, we made several recommendations on how to improve the procedures. Two main concerns stand out in this regard:

  • The term “foreign financial contribution” is still not clearly defined, creating major uncertainties for companies.
  • The procedural rules regarding public procurement procedures oblige companies that claim that they did not receive notifiable foreign financial contributions to provide a list of all foreign financial contributions they received, anyway. In this way, the workload risks to be higher for those companies that did not receive any notifiable foreign financial contributions than for those that did.

In order to keep the instrument manageable, the implementing regulation thus needs to be accompanied by waivers that exclude specific types of foreign financial contributions (of a certain type or below a certain value) from both notification and declaration requirements.

Action for members

BusinessEurope submitted its contribution to the online public consultation with suggestions for improvements on technical level. However, there is also a need for business to stress at a higher political level that in their current form, the notification requirements under the FSR would create an excessive bureaucratic burden for European companies. Thus, the instrument could become an additional factor that negatively impacts European competitiveness and the attractiveness of the EU for foreign investors at a time when companies already struggle with high energy prices.

We invite members to pass this message in their contacts with relevant representatives of national governments and the EU Institutions. Overall, it is important to pass the following points:

  • We support the instrument and believe it has great potential to level the playing field.
  • Yet, the instrument needs to be effective while keeping the administrative burden as low as possible.
  • The draft implementing regulation does not meet this requirement as the unclear definition of the concept “foreign financial contributions” imposes excessive reporting requirements on companies.
  • A more clearly defined concept of “foreign financial contributions” or general waivers that exclude less relevant types of foreign financial contributions are necessary to keep the FSR manageable for companies and the Commission.

Full comments of BE can be found here

Mikuláš Nozar
section Aktuálně