Foreign subsidies regulation

In July 2023, the new regulation on foreign subsidies (FSR) that may distort the internal EU market entered into force. The FSR regulation complements already existing state aid controls to effectively promote fair competition by disallowing subsidization of EU and non-EU firms by non-EU countries. The new regulation affects mergers and acquisitions and public procurement procedures alike. The Commission, on its own initiative, may also start market investigations if it suspects that markets are distorted by foreign subsidies. The European Commission has sole authority to apply the foreign subsidies regulation.

According to the regulation, a foreign subsidy is a financial contribution provided directly or indirectly by a third country and limited to one or more undertakings or industries. The number of firms affected by the regulation is expected to be relatively high due to this very wide interpretation of selectivity (as opposed to EU state aid rules). The new FDI-regulation can affect practically all firms with a non-EU state owner (even partial ownership) or funder (direct or indirect) and which are active in the EU market via acquisitions or public procurement.

Allegro Consulting can help identify the legal and economic risks imposed by the EU's foreign subsidies regulation. It is particularly important to carry out an economic analysis, if it can be shown that the foreign subsidy is unlikely to cause distortions, and, in fact, it has positive effects in the market. An assessment as such may be crucial to, for example, an efficient and timely entry of foreign firms into the European markets and to avoid the repayment of foreign subsidies or other redressive measures of the European Commission.

By advocating for a fairer competition landscape, Allegro Consulting can help, for example:

  • non-EU-firms establish their position in the EU market via acquisitions and/or public procurement; and
  • European firms draft a complaint to the European Commission, if there is a suspicion of illegal foreign subsidies distorting the competition in the market
  • EU-firms protect their interests, if a competitor or a group of competitors enjoys an unfair competitive advantage due to non-EU foreign subsidies.