Response to call for feedback on Implementing Regulation for the Foreign Subsidies Regulation

Position Paper

6 Mar 2023

Competition

HomePolicy and newsLibraryResponse to call for feedback on Implementing Regulation for the Foreign Subsidies Regulation

The Draft Implementing Regulation is a positive step towards clarifying the content, scope, and procedural aspects of Regulation (EU) 2022/2560 on foreign subsidies distorting the internal market – the Foreign Subsidies Regulation (FSR). As American businesses invested in Europe, we share our view on the Draft Implementing Regulation and its two Annexes (Draft FSR IR) to ensure that the final text provides for a balanced and proportionate application of the FSR. The main issues include:

Scope of reporting obligations: While the Draft FSR IR narrows to some extent the reporting obligations stemming from the FSR, the administrative burdens imposed on businesses are still significant. Exempting the disclosure of financial contributions which are clearly non-selective or market-based would reduce the compliance costs for businesses and ensure that the Commission can focus its resources on contributions most likely to distort the internal market, as outlined in article 5 of the FSR.

Avoiding risks and unintended consequences: The Commission should balance the effective implementation of the FSR against the need to limit risks for businesses, particularly in cases where compliance with the FSR is beyond their direct control . Therefore, the Commission should: (i) exempt the disclosure of classified information in line with existing international agreements; (ii) clarify the attributability of financial contributions to third countries; (iii) amend existing provisions requiring businesses to report information beyond their own participation in an M&A or public procurement procedure, and which is therefore not directly available to them; and (iv) establish an alternative mechanism whereby suppliers and subcontractors directly report commercially sensitive information to the Commission.

Concentrations: The Commission should limit the reporting obligation to those categories of foreign contributions that are most likely to distort the internal market, as listed in article 5.1 of the FSR. This would harmonise obligations in both Annexes and allow the Commission to focus on the most relevant financial contributions. In addition, in an acquisition, the reporting obligations relating to the financial contributions received by a target should be limited to those granted to the target because of the acquisition in question.

Public procurement: The Draft FSR IR fails to clearly define key concepts/mechanisms in the FSR’s procurement provisions, creating legal uncertainty for businesses. The Commission should clarify that: (i) reporting requirements in public procurement procedures only apply to contracts valued at or above €250M or €125M per lot; and (ii) a single notification form will be required where financial contributions exceed the de minimis thresholds in some countries but not in others. We also welcome clarity regarding: (i) the concept of ‘unduly advantageous offer’, which lacks case-law precedents; (ii) the operationalisation of the pre-notification period in procurement procedures; and (iii) the concepts of ‘economic share’ and ‘[subsidiaries] without commercial autonomy’.

Ex officio review: The Commission should provide further details on the likely parameters of its ex officio interventions. Given the broad scope of the Commission’s ex officio powers, companies are unable to plan for compliance with future requests, requiring them to pre-emptively track a disproportionate volume of information regarding financial contributions on the theoretical possibility that this information will be required.

Waivers: Businesses need additional guidance on the conditions under which the Commission will be likely to grant waivers. Without this clarity, the waiver system could paradoxically increase legal uncertainty and exacerbate administrative burdens.

Procedural transparency: Further clarifications regarding submission timelines and file access procedures are necessary to safeguard businesses’ rights of defence.

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