Foreign Subsidies Regulation

The Regulation will allow the EU to remain open to trade and investment, while ensuring a level playing field for all companies operating in the Single Market. It was proposed by the Commission in May 2021 and agreed by the European Parliament and the Council in record-time, in June 2022. The Foreign Subsidies Regulation (FSR) applies to all economic activities in the EU: it covers concentrations (mergers and acquisitions), public procurement procedures and all other market situations. The new rules give the Commission the power to investigate financial contributions granted by non-EU countries to companies engaging in an economic activity in the EU and redress, if needed, their distortive effects.

The FSR consists of three tools, which will be enforced by the Commission:

  • An obligation for companies to notify to the Commission concentrations involving a financial contribution by a non-EU government where (i) the acquired company, one of the merging parties or the joint venture generates an EU turnover of at least €500 million and (ii) the foreign financial contribution involved is at least €50 million;
  • An obligation for companies to notify to the Commission participation in public procurement procedures, where (i) the estimated contract value is at least €250 million and (ii) the foreign financial contribution involved is at least €4 million per non-EU country; the Commission may prohibit award of contracts in such procedures to companies benefiting from distortive subsidies.
  • For all other market situations, the Commission can start investigations on its own initiative (ex-officio) if it suspects that distortive foreign subsidies may be involved. This includes the possibility to request ad-hoc notifications for public procurement procedures and smaller concentrations. 

A notified concentration cannot be completed and an investigated bidder cannot be awarded the public procurement contract while under investigation by the Commission. In case of breach of this obligation, the Commission can impose fines, which may reach up to 10% of the company's annual aggregated turnover.

With its entry into force, the FSR will move into its crucial implementation phase and start to apply in six months, as of 12 July 2023. As of this date, the Commission will be able to launch ex-officio investigations. The notification obligation for companies will be effective as of 12 October 2023. 

In the coming weeks, the Commission will present a draft Implementing Regulation which will clarify the applicable rules and procedures, including the notification forms for concentrations and public procurement procedures, the calculation of time limits, access to file procedures and confidentiality of information. 

Mikuláš Nozar
section European Union