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31 Aug 2023

Levelling the playing field or just greater complexity – the implications of the EU Foreign Subsidies Regulation

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We are pleased to share with you our briefing on the EU's Foreign Subsidies Regulation ("FSR"). The FSR will add both more regulatory complexity for transactions and public tenders in the EU, as well as sharpen the investigatory powers of the European Commission ("Commission") still further.

The FSR aims to address what is perceived as a regulatory gap between the EU's State aid rules that govern subsidies provided to companies by EU Member States and the impact of subsidies provided to companies operating in the EU from foreign (i.e., non-EU) governments. At present, European Member States are subject to stringent rules around what subsidies can and cannot be given to industries and specific entities, the aim of which is to ensure a so-called "level playing field" for all economic actors. The same, however, does not apply to companies active in the EU which receive subsidies from foreign governments (for instance, because they are headquartered abroad). The FSR is, therefore, intended to redress this imbalance and ensure that all economic actors in the EU are subject to the same (or, at least, similar) rules and limitations.

In short, the FSR introduces three key tools – in effect:

  1. A new mandatory merger filing requirement where the relevant acquirer has received more than €50 million in foreign subsidies in the preceding three years;
  2. An obligation to receive clearance for public tender bids worth €250 million or more where the relevant bidder has received €4 million or more in foreign subsidies from a particular foreign government; and
  3. An ex officio power for the Commission to investigate any foreign subsidies it considers might have a distortive impact on the EU's internal market.

The Commission will have the power to fine entities which infringe the new FSR requirements up to 10% of their global annual turnover. But more importantly, from a compliance perspective, companies will need to go back up to three years or more to check what subsidies they have received from governments in case any of the relevant thresholds trigger a mandatory filing. As such, it is not a piece of legislation to be taken lightly!

Stephenson Harwood therefore invites you to read our full briefing note on the FSR. Our competition team would also be delighted to discuss any questions or queries you may have and, more broadly, provide advice to help you address or prepare for the impact of the FSR on your business.

Click here to read more.

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