Foreign subsidies regulation

Very soon, the European institutions will adopt a new regulation on foreign subsidies that may distort the internal EU market. This is intended to complement already existing state aid controls and to effectively promote fair competition by disallowing subsidization of EU and non-EU firms by non-EU countries. The new regulation will affect mergers and acquisitions and public procurement procedures alike. The European Commission will have sole authority to apply the foreign subsidies regulation.

According to the proposed 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:

  • non-EU-firms establish their position in the EU market via acquisitions and/or public procurement, providing that their presence leads to a fairer, more equal outcome in the market (for example, the market entry distorts the hegemony of businesses with market power); and
  • EU-firms protect their interests, if a competitor or a group of competitors enjoys an unfair competitive advantage due to non-EU foreign subsidies.