Foreign subsidies distorting the internal market: provisional political agreement between the Council and the European Parliament

Foreign subsidies distorting the internal market: provisional political agreement between the Council and the European Parliament. The Council and the European Parliament reached (30 June 2022) a provisional political agreement on the regulation on foreign subsidies distorting the internal market.

The regulation aims to remedy the distortions created by subsidies granted by non-EU countries to companies operating in the EU’s single market. It establishes a comprehensive framework for the Commission to examine any economic activity benefiting from a subsidy granted by a non-EU country on the internal market. In doing so, the regulation aims to restore fair competition between all undertakings — both European and non-European — operating in the internal market.

Investigation of financial contributions

The Commission will be empowered to investigate the financial contributions granted by the public authorities of a non-EU country to undertakings engaging in an economic activity in the EU by means of three tools:

two prior authorisation tools — to ensure a level playing field for the largest mergers and bids in large-scale public procurement ;

a general market investigation tool to investigate all other market situations and lower-value mergers and public procurement procedures.

The co-legislators have decided to maintain the notification thresholds proposed by the Commission for mergers and public procurement procedures:

EUR 500 million for mergers;

EUR 250 million for public procurement procedures.

The Commission will be empowered to investigate subsidies granted up to five years before the entry into force of the regulation and distorting the internal market after its entry into force.

In order to ensure uniform application of the regulation throughout the EU, the Commission will be exclusively competent to enforce the regulation. During this centralised implementation, member states will be kept regularly informed and will be involved, through the advisory procedure, in decisions adopted under the regulation.

If an undertaking fails to comply with the obligation to notify a subsidised concentration or a financial contribution in the context of public procurement procedures meeting the thresholds set, the Commission will be able to impose fines and examine the transaction as if it had been notified.

Assessment of the effect of foreign subsidies

As is the case under the EU state aid control framework, if the Commission finds that a foreign subsidy exists and that it distorts competition, it will perform a balancing test. This is a tool to assess the balance between the positive and negative effects of a foreign subsidy.

If the negative effects outweigh the positive effects, the Commission will be empowered to impose redressive measures or to accept commitments from the undertakings concerned that remedy the distortion.

Next steps

The provisional agreement reached today is subject to approval by the Council and the European Parliament. On the Council’s side, the provisional political agreement is subject to approval by the Permanent Representatives Committee (Coreper), before going through the formal steps of the adoption procedure.

The regulation will enter into force on the 20th day following that of its publication in the Official Journal of the European Union.