Regulating distortive foreign subsidies in the internal market: Council adopts position

To ensure a level playing field for all companies operating in the internal market, member states today agreed a negotiating mandate for the regulation on foreign subsidies distorting the internal market.

Mandate has been approved by the Council’s Permanent Representative’s Committee (Coreper), so the Council can start negotiations with the European Parliament as soon as the European Parliament has agreed its position.

The regulation aims to address 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 investigate any economic activity benefiting from a third-country subsidy on the internal market and to set up a specific framework for subsidies granted by third countries in the context of large concentrations and large public procurement procedures.

Balancing test and governance

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.

The Council text clarifies the criteria and procedures for applying this test, including through the publication of guidance.

The regulation will be implemented exclusively by the Commission. The Council text specifies that during this centralised implementation by the Commission, member states will be kept regularly informed and will be involved, through the advisory procedure, in decisions adopted under the regulation. It also introduces an alert mechanism allowing member states to flag up suspected distortive subsidies.

Public procurement

To make the provisions on public procurement more effective and more transparent, the Council text clarifies the procedures applicable to the various existing procedures and stipulates that the Commission should publish guidance on the implementation of the regulation in the context of public procurement procedures.

The Council text shortens the deadlines for investigations to ensure that implementation of the regulation does not slow down public procurement procedures.

3 tools

The regulation proposes three tools which the Commission can use to investigate financial contributions from non-EU governments: two notification-based tools – to investigate large concentrations and bids in large public procurement procedures – and a general market investigation tool.

The Council text raises the notification thresholds to:

• €600 million for mergers
• €300 million for bids in public procurement procedures

The Council mandate shortens to five years the period during which the Commission can retrospectively investigate subsidies granted before the regulation enters into force which create distortions on the internal market after it has entered into force.

The Council text limits the Commission’s scope to change the procedural thresholds and deadlines: the Commission would only be able to increase notification thresholds and shorten deadlines.