On 10 July 2023, the European Commission (the “Commission”) adopted the Implementing Regulation (“IR”) for the European Union (“EU”) Foreign Subsidies Regulation (“FSR”). The FSR, which starts to apply today, 12 July 2023, creates a new instrument designed to prevent foreign subsidies from distorting the EU internal market (see our blog). The objective is to level the playing field within EU markets between companies subject to scrutiny under the EU State aid rules and companies receiving subsidies from non-EU Member States.
To attain this objective, the FSR empowers the Commission to assess foreign subsidies either on its own motion or after the notification of concentrations or public procurement tenders in the EU where certain thresholds are exceeded. Foreign subsidies are financial contributions (i.e. any value transfer) granted by non-EU countries, or entities whose action can be attributed to a non-EU country (i.e. foreign financial contributions or “FFC”) that confer a benefit that is not available on the market, specifically to one or to several companies or industries. Where foreign subsidies are problematic, this assessment may lead to remedies and even to the prohibition of the concentration or of the award of a public contract. Although the FSR starts to apply on 12 July 2023, allowing the Commission to investigate foreign subsidies on its own motion, the notification obligations only kick in on 12 October 2023. That means that notification may be requested for transactions signed after 12 July but not closed by 12 October and for public procurement procedures initiated after 12 July.
The purpose of the IR is to set out the rules applicable to proceedings conducted by the Commission under the FSR, including the submission of notifications.
Key things you need to know about the IR and the notification obligations:
- The IR enacts the forms that notifying parties will have to complete and submit to the Commission in the context of concentrations and public procurement tenders.
- The Commission must review foreign subsidies within statutory time limits that start to run as soon as the notification is complete and that may be suspended to obtain further information.
- Detailed information must be submitted for FFCs that are considered to fall into the most distortive categories of foreign subsidies, whereas aggregate information must be provided for most other FFCs.
- Information must be provided for FFCs provided to all group entities of the party or parties involved.
- Companies that are likely to be involved in large concentrations or public procurements would be well advised to prepare sufficiently well in advance to avoid delays in their clearance timeline.