Document Type

Article

Publication Date

2023

Status

Accepted

Abstract

The European Union’s Foreign Subsidies Regulation (FSR) (Regulation (EU) 2022/2560 of the European Parliament and of the Council of 14 December 2022 on foreign subsidies distorting the internal market) has now entered into force, along with an implementing regulation (Regulation (EU) 2023/1441 of 10 July 2023), which provide important clarifications for foreign firms competing for major awards in EU procurement markets. The FSR is the EU’s effort to address distortive foreign government subsidies in the EU internal market, including in public procurement. The EU restricts Member States’ power to subsidize domestic firms under the EU’s “State aid” doctrine; the FSR is an effort to level the playing field by constraining foreign subsidies to foreign vendors as well. Companies competing in EU markets must now give special notice—“notifications”—if they have received foreign government financial contributions and if the transactions at issue (procurements and other transactions, such as mergers and acquisitions) exceed certain monetary thresholds. Although the FSR exempts most EU defense procurement, the Commission retains authority to launch “ex officio” inquiries into perceived subsidies in the defense sector. The regulation is likely to trigger considerable additional administrative burdens for U.S. companies (and firms from other nations) competing for major EU public procurement awards. This article focuses on new developments relevant for firms (especially government contractors) that are potentially subject to the notification and declaration obligations of the FSR, including obligations under the FSR’s implementing regulation.

GW Paper Series

2023-65

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