On 30 June 2022, the Council of the EU (the “Council”) and the European Parliament (the “Parliament”) reached a much awaited agreement on the proposal of the European Commission (the “Commission”) for the Regulation on foreign subsidies distorting the internal market (the “FSR”) (see our alert on the proposal). This political agreement swiftly concludes the trilogue discussions initiated in the beginning of May this year, after the Council (see our blog post) and the Parliament (see our blog post) each adopted their own positions. The agreement has been approved by the Permanent Representatives Committee (“COREPER”) of the Council on 13 July and the Committee on International Trade of the European Parliament on 14 July.
The FSR grants substantial new powers to the Commission and “will help close the regulatory gap whereby subsidies granted by non-EU governments currently go largely unchecked”, according to remarks from Executive Vice-President of the Commission, Margrethe Vestager. It will be deeply transformative for M&A and public procurement in the EU.
The agreement on the FSR did not lead to any major changes in the proposal made by the Commission. The most notable points of discussion between the Parliament and Council and the outcome of this agreement are:
- The thresholds above which companies are obliged to inform the Commission about their foreign subsidies remain unchanged compared to the Commission’s proposal;
- The time period in which the Commission has to investigate foreign subsidies in large public procurement has been reduced. In the same way, the retroactive application of the FSR has been limited to foreign subsidies granted in the five years prior to the application of the regulation;
- The Commission will issue guidelines on the existence of a distortion, the balancing test and its power to request notification of non-notifiable transactions, at the latest three years after the entry into force of the FSR; and
- A commitment to a multilateral approach to foreign subsidies above the FSR and the possibility for the Commission to engage in a dialogue with third countries has been included.