Foreign Subsidies Regulation – Summary
Subsidies granted by EU Member States to companies are regulated by State aid rules,[1] however subsidies from third countries are not subject to this regulation and their activities may have a negative impact on the internal market. For example, beneficiaries of subsidies from third countries may be more successful in acquiring companies operating in the EU or more successful in winning public contracts in the internal market than other companies.
Regulation (EU) 2022/2560 of the European Parliament and of the Council of 14 December 2022 on foreign subsidies distorting the internal market ("the Regulation") should limit this unequal environment. The Regulation provides the Commission with tools to assess the detrimental effect of foreign subsidies and to remedy the damages that these subsidies may have on the EU internal market. The Regulation targets undertakings operating in the internal market. Thus, it can be either a third country undertaking or an undertaking established within the EU. The decisive factor for the application of the Regulation is whether an undertaking operating in the internal market has received a subsidy from a third country. Such a subsidy may be granted by a third country either directly or indirectly, for example through private entities controlled by a third country. The Regulation combines aspects of State aid rules, public procurement and merger issues. According to the Regulation, the European Commission is the sole decision-making authority, with Member States having only a limited advisory role.
To assess the harmful effects of foreign subsidies, the Commission mainly uses the following three tools:
1. Obligation for undertakings to notify the Commission of a concentration between undertakings where at least one of them has a turnover in the EU of at least EUR 500 million and has also received an aggregate foreign subsidy of more than EUR 50 million in the reference period.
2. Obligation for undertakings (including major subcontractors through a supplier) to notify the Commission of subsidies received through the contracting authority when participating in a public procurement procedure and when bidding for a public contract awarded under a dynamic purchasing system where the estimated value of the public contract or framework agreement is at least EUR 250 million excluding VAT and at the same time the aggregate subsidy from a third country was at least EUR 4 million in the reference period.
3. In other situations, the Commission may initiate an ex officio investigation without prior notification, or may request a notification also for mergers and tenders below the above thresholds (EUR 500 million and EUR 250 million).
Until the Commission has assessed the notified case, there can be no merger or award of a public contract to the undertaking concerned.
In the course of its investigation, the Commission may, for example, request additional information from undertakings and other entities or carry out on-site inspections. The investigation of the case is concluded by a decision of the Commission, which either raises no objections or declares the subsidy to be distorting the internal market. In the latter case, the Commission may, for example, impose a remedy or prohibit a concentration of undertakings or the award of a public contract to the undertaking concerned.
The regulation aims to monitor in particular the most serious market distortions and therefore states that foreign subsidies of less than EUR 4 million over three consecutive years are unlikely to distort the internal market. It also provides that the internal market is unlikely to be distorted by foreign subsidies that do not exceed the de minimis aid limit[2] (in the version of the de minimis Regulation No 1407/2013 applicable in 2023, this amount is EUR 200,000).
The Regulation entered into force on 12 January 2023 and most of its provisions is effective from 12 July 2023. The obligation for undertakings in the cases described above to notify the Commission of information on the possible receipt of a foreign subsidy will apply from 12 October 2023.
More detailed rules on the procedures for e.g. notification of mergers, financial contributions, Commission investigations and their conduct, submission of comments, treatment of confidential information, calculation of time limits are provided by Commission Implementing Regulation (EU) 2023/1441 of 10 July 2023 on detailed arrangements for the conduct of proceedings by the Commission pursuant to Regulation (EU) 2022/2560 of the European Parliament and of the Council on foreign subsidies distorting the internal market which is valid from 13 July 2023. The Implementing Regulation contains in its annexe’s notification forms for the notification of foreign financial contributions in the case of notifiable mergers or participation in a public procurement procedure. Further information on notifications relating to mergers is available on the European Commission's website here: https://competitionpolicy.ec.europa.eu/foreign-subsidies-regulation/practical-information_en.
Relevant links:
2) Website of the Commission on Foreign Subsidies: https://competition-policy.ec.europa.eu/foreign-subsidies-regulation_en
3) Press Release of the Commission on the Regulation entering into force https://ec.europa.eu/commission/presscorner/detail/cs/ip_23_129
4) Press Release of the Commission on adoption of rules for implementing the Foreign Subsidies Regulation is available here: https://ec.europa.eu/commission/presscorner/detail/en/ip_23_3747
5) Commission Implementing Regulation (EU) 2023/1441 of 10 July 2023 on detailed arrangements for the conduct of proceedings by the Commission pursuant to Regulation (EU) 2022/2560 of the European Parliament and of the Council on foreign subsidies distorting the internal market which is valid from 13 July 2023 as available at https://eur-lex.europa.eu/legal-content/CS/TXT/?uri=CELEX:32023R1441.
6) Practical information on the submission of merger notifications, including a working editable version of the notification form, is available in English at https://competition-policy.ec.europa.eu/foreign-subsidies-regulation/practical-information_en
7) Practical information on the submission of notifications for public procurement procedures, including a working editable version of the notification form, is available in English at https://single-market-economy.ec.europa.eu/practical-information_en
[1] State aid is defined in Article 107(1) TFEU. Further information on the definitional characteristics of State aid is available at https://www.uohs.cz/cs/verejna-podpora.html
[2] Commission Regulation (EU) No 1407/2013 of 18 December 2013 on the application of Articles 107 and 108 of the Treaty on the Functioning of the European Union to de minimis aid. For further information on de minimis aid, see: https://www.uohs.cz/cs/verejna-podpora/podpora-de-minimis-a-registr-de-minimis.html
