The European Commission has adopted today the rules for implementing the Foreign Subsidies Regulation (‘FSR’). The Implementing Regulation details procedural aspects of the implementation of the FSR. It also contains notification forms for concentrations involving foreign financial contributions and for foreign financial contributions in public procurement procedures.
The Implementing Regulation
The Implementing Regulation adopted today takes into account the feedback received during the one-month public consultation period that took place between 6 February 2023 and 6 March 2023. In particular, as mandated by the FSR, it addresses respondents’ requests to limit the administrative burden related to notifications.
The Foreign Subsidies Regulation sets out an obligation for companies to notify:
- concentrations where the acquired company, one of the merging parties, or the joint venture is established in the Union and generates an EU turnover of at least €500 million and where the parties to the transaction were granted combined aggregate foreign financial contributions of at least €50 million over the past 3 years;
- foreign financial contributions in public procurements procedures, where the estimated contract value is at least €250 million and the bid involves combined aggregate foreign financial contribution of at least €4 million per third country over the past 3 years.
The Implementing Regulation, and in particular the notification forms, detail the reporting obligations of notifying parties, specifying the information that needs to be included in the notification forms for concentrations and public procurement procedures. In particular:
- For concentrations, companies have to report:
- for foreign financial contributions which are considered by the FSR as the most likely to distort the internal market (such as those granted to ailing undertakings, those directly facilitating a concentration or unlimited guarantees, also known as “Article 5 financial contributions”), detailed information on all financial contributions of an individual amount of at least €1 million, granted to the parties to the transaction over the past 3 year;
- for all other foreign financial contributions, an overview of financial contributions granted to the notifying party/ies over the past 3 years, of an individual amount of a least €1 million and in relation only to those countries that have granted to the parties to the transaction at least €45 million over the 3 years before the concentration, subject to a number of exceptions.
- For foreign financial contributions in public procurement procedures, companies have to report:
- for foreign financial contributions, detailed information on all financial contributions falling under Article 5 of at least €1 million individually granted to the notifying party/ies in the three years prior to the notification;
- for all other foreign financial contributions, an overview of financial contributions granted to the notifying party/-ies of an individual amount of a least €1 million and in relation only to those countries that have granted to each of the notifying party/ies at least €4 million per country over the 3 years prior to the notification.
Moreover, the Implementing Regulation provides detailed rules on:
- the procedure for notifications to the Commission of concentrations and of participation in public procurement involving foreign financial contributions. This includes the notification forms for each procedure, the person entitled to submit a notification and the effective date of notification;
- the Commission’s investigation process, including procedures to be followed by companies for submitting commitments to address possible concerns of the Commission;
- the procedural rights of the parties regarding the protection of confidential information, access to files and submission of observations;
- the calculation and suspension of time limits for the provision of information and submission of commitments;
- the transmission and signature of documents by notifying parties to the Commission through digital means, where relevant.
Next Steps
The FSR will start to apply from 12 July 2023. As of 12 October 2023, companies will have to notify concentrations and participation in public procurement procedures involving foreign financial contributions and meeting the relevant notification thresholds.
Background
The FSR allows the Commission to investigate financial contributions granted by non-EU countries to companies operating in the EU and redress, if needed, their distortive effects. It empowers the Commission to adopt procedural rules in relation to the enforcement of the FSR.
The FSR was proposed by the Commission in May 2021 and agreed by the European Parliament and the Council in record-time, in June 2022. It entered into force on 12 January 2023 and will start applying on 12 July 2023.
For more information
Further details and guidance on the application of the FSR can be found in the technical Q&A document published here, while more general information on the FSR can be found here.
Q&A: Foreign subsidies Implementing Regulation and notification forms
Brussels, 10 July 2023
1. What is included in the Implementing Regulation of the Foreign Subsidies Regulation (‘FSR’)?
The Implementing Regulation provides detailed rules on:
- The procedures for notifications to the European Commission of concentrations involving foreign financial contributions and of foreign financial contributions in public procurement procedures. As an example, it defines who is entitled to submit notifications for concentrations and foreign financial contributions in public procurement processes. The Regulation also includes the notification forms for each procedure.
- Investigations by the Commission, including time limits for parties to submit comments following the opening of an in-depth investigation, as well as details on certain investigation tools of the Commission (such as interviews, oral statements, the treatment of information from contracting authorities and others).
- The procedures for submission of commitments to address possible concerns of the Commission. For example, when a company under investigation offers commitments, it should identify any information which it considers to be confidential and justify such confidentiality claims, providing a non-confidential version of the commitments.
- The submission of observations by the company under investigation.
- The procedures to be followed by the Commission for the use of information acquired pursuant to the FSR, and how confidential information is to be identified and protected.
- The access to the Commission’s file by companies under investigation.
- The calculation of time limits for the provision of information and submission of commitments, as well as on the circumstances under which time limits may be suspended.
- The transmission and signature of documents through digital means, except where the Commission exceptionally allows for the use of other means.
2. What is included in the notification form of a concentration (‘Form FS-CO’) of the FSR?
The Form FS-CO specifies the information that must be provided by the notifying party/ies when submitting a notification to the Commission on a proposed concentration involving foreign financial contributions.
The Form FS-CO requires basic information and supporting documentation about the parties, the transaction, the foreign financial contributions received by the parties, as well as information necessary for assessing whether the foreign financial contributions may distort the internal market. All the required information must be true, correct, and complete. The notifying party/ies may also provide information on the possible positive effects of the foreign subsidies.
Where specific pieces of information required by the Form FS-CO are not reasonably available to the notifying party/ies, they may request that the Commission discharges them from the obligation to provide such information. Also, upon reasoned request of the parties, if there is information that is not necessary for the Commission’s assessment of the case, the Commission may waive the obligation to provide certain information in the notification form.
The notifying party/ies is/are encouraged to engage in pre-notification discussions with the Commission in sufficient time prior to the notification, preferably on the basis of a draft Form FS-CO.
3. What is included in the notification form of a public procurement (‘Form FS-PP’) of the FSR?
The Form FS-PP specifies the information that must be provided by the notifying party/ies when submitting either a notification or a declaration to the Commission involving foreign financial contributions.
In the case of a notification of foreign financial contributions, the Form FS-PP requires: (i) a summary description of the public procurement procedure, (ii) information about the notifying party/ies and the foreign financial contribution(s), (iii) information on possible positive effects of the foreign subsidies, (iv) a list of the supporting documents, and (v) a signed attestation that the provided information is true, correct, and complete. The notifying party/ies is/are invited to also provide an explanation of how the tender is not unduly advantageous for the company receiving the foreign financial contribution, as well as information on possible positive effects of the foreign subsidies.
If no notifiable foreign financial contributions have been granted to the notifying party/ies in the last three years, a limited amount of information will be required. The notifying party/ies will have to submit a declaration to that effect.
Where specific pieces of information required by the Form FS-PP are not reasonably available to the notifying party/ies, they may request that the Commission discharges them from the obligation to provide the relevant information. Also, upon reasoned request of the parties, if there is information that is not necessary for the Commission’s assessment of the case, the Commission may waive the obligation to provide certain information in the notification.
The notifying party/ies is/are encouraged to engage in pre-notification discussions with the Commission in sufficient time prior to the notification, preferably on the basis of a draft Form FS PP.
4. Will the Commission provide any further guidance on the FSR?
Further details and guidance on the application of the FSR, can be found in the technical Q&A document published here, that will be updated on the basis of questions received from stakeholders.
In addition, in order to provide companies with more certainty early on, the Commission has committed to start clarifying the concepts of distortion and balancing test at the latest one year after the start of application of the FSR.
The Commission will also publish guidelines on certain key concepts included in the FSR within three years after its the entry into force. These guidelines will include the main criteria for determining a distortion in the Single Market, the balancing test performed by the Commission to determine whether a distortive subsidy leads to certain positive effects that outweigh its negative effects. It will also include the criteria that the Commission will take into account when evaluating whether to request the notification of concentrations or of foreign financial contributions in public procurement procedures falling below the notification thresholds.
Source – EU Commission