The honeymoon phase of the Foreign Subsidies Regulation is over!

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Paperwork, paperwork, paperwork. The industry voices have been clear about the Foreign Subsidies Regulation (FSR) since its entry into force mid-2023. But what is the authority’s view? We provide you with an update on recent developments, including the European Commission’s first-ever in-depth investigation under the FSR, its first FSR policy brief, and the Dutch Ministry of Economic Affair’s guidance for undertakings facing the FSR.

Since 2023, the Foreign Subsidies Regulation (FSR) has been applicable across the European Union. The FSR’s goal is to create a level playing field between European and foreign-backed companies active on the internal market (see our July 2023 newsletter). With the FSR, subsidies by non-EU states can be reviewed by the European Commission in the context of large transactions, large public tenders and on the Commission’s own initiative. Taking stock of what happened during the honeymoon phase of the FSR, we identify four important developments:

1. On 16 February 2024, the Commission announced that it has launched its first-ever in-depth investigation under the FSR. The investigation targets CRRC, a Chinese state-owned train manufacturer, who participated in a EUR 610 million Bulgarian government tender. CRRC notified its participation in the tender under the FSR. Following a preliminary review of the notification, the Commission has decided to open an in-depth investigation. In the summary of the decision to initiate an in-depth investigation, the Commission notes that CRRC originally did not report any foreign financial contributions in its notification. After sending a request for information to CRRC, the Commission decided that there are “sufficient indications” that the company has been granted a foreign subsidy that distorts the internal market of the EU. The Commission has until 2 July 2024 (110 working days) to come up with a final decision – although this deadline could be extended in “‘duly justified exceptional cases”.

2. The European Commission has published its first so-called FSR Brief. This policy brief includes statistics on the first 100 days since the start of the notification obligation for concentrations on 12 October 2023 and provides an overview of observations and guidance. Common issues in pre-notification are what type of foreign financial contributions should be reported, the scope of the exceptions to the reporting obligation, and how the FSR deals with investments by funds. The Commission stresses that parties should ensure the completeness of notifications in order to ensure a timely assessment. It is expected that the European Commission will publish additional policy briefs in the future.

3. The Commission has published an article on the first 100 days of the FSR in large public procurement procedures. The Commission has received more than 100 submissions concerning large tenders in the European Union (this includes declarations that there is nothing to notify). However, the Commission stresses that there is still a need to spread awareness of the FSR and its obligations for parties that want to participate in a tender or organise a tender. In order to achieve this, the Commission will begin an awareness campaign. Economic operators are also invited to inform the European Commission about any suspicions of unnotified foreign subsidies received by competitors. 

4. The Dutch Ministry of Economic Affairs and Climate has published guidance on the FSR (in Dutch). The guidance gives a practical overview of the requirements of the FSR for economic operators and contracting authorities that want to set up a tender or are in charge of a tender. With its clear flow-charts this document is a helpful tool to spread awareness of the FSR to the non-legal parts of an organisation, such as personnel involved in procurement. Additionally, the guidance also provides information on the European Commission’s International Public Procurement Instrument.

This article was published in the Competition Newsletter of March 2024. Other articles in this newsletter: