UNFAIR FOREIGN SUBSIDIES: EUROPE CLARIFIES ITS RULES
Mathieu Gitton
Former Director of representative office in Brussel with expertise in corporate strategy and lobbying
In the vast arena of international trade, the European Union stands as a vigilant guardian of fair competition. The Foreign Subsidies Regulation (FSR), which came into force on July 13, 2023, strengthens this ambition by combating any form of foreign support likely to create imbalances within the internal market.
THE CHALLENGES OF THE FSR
A cornerstone of this framework is the clear definition of "distortion." This clarification is all the more urgent as foreign subsidies, seemingly innocuous, may take the form of investments, merger participations, or targeted financing that undermines fair competition. For this reason, the European Commission is preparing detailed guidelines, expected by January 2026, to provide businesses with a precise understanding of the various obligations imposed by this new regulatory framework.
TOWARD CLEAR CRITERIA FOR DISTORTION
The forthcoming guidelines will specify how to assess the existence of a market distortion, particularly by identifying relevant criteria and indicators. The goal is to determine the extent to which a foreign subsidy grants an unfair competitive advantage and how that advantage impacts the equilibrium of the EU single market. Companies seeking clarity on market access rules will find a reference framework to evaluate whether their situation falls under the FSR’s scope.
THE BALANCING TEST: WEIGHING BENEFITS AND RISKS
At the heart of this regulation is the balancing test, which will allow the European Commission to assess whether the potential benefits of a foreign subsidy outweigh its negative impact on competition. This evaluation will be crucial to determining the scope of European intervention and justifying any corrective measures.
PRIOR NOTIFICATION POWER: A PREVENTIVE MEASURE
The FSR grants the Commission the authority to require prior notification when a merger or foreign contribution in public procurement is likely to create a distortion, even if it falls below the formal thresholds set by the regulation. The guidelines will detail the circumstances under which the Commission can exercise this prerogative, ensuring an early detection of potentially harmful projects.
DISTORTION IN PUBLIC PROCUREMENT: ENSURING FAIRNESS
The Commission also intends to clarify the concept of “unduly advantageous offers” in public procurement processes. The aim is to define the direct link between a foreign subsidy and the competitiveness of a bid to guarantee fair treatment among bidders and ensure the optimal use of public funds.
A WIDE-RANGING AND INCLUSIVE CONSULTATION PROCESS
Until April 2, 2025, the European Commission invites Member States, private sector actors, academia, and all stakeholders to submit their contributions as part of an open consultation. This initiative aims to gather diverse feedback on the implementation of the FSR. A second consultation phase will be launched in Q3 2025, offering an opportunity to comment on the draft guidelines and ensure full transparency in the regulatory process.
WHAT IMPACT CAN BUSINESSES AND INVESTORS EXPECT?
By clarifying the rules of the game, Europe aims to achieve two fundamental goals: ensuring greater transparencyand providing increased predictability for economic operators. Businesses already operating within the EU will benefit from greater legal certainty, while foreign investors will be encouraged to align with European market standards to avoid potential corrective investigations. The single market will gain in stability while remaining open to international investment.
CONCLUSION: A FAIRER AND MORE RESPONSIBLE EUROPE
The path toward a fairer and more resilient Europe continues with the implementation of this regulation and the development of its guidelines. In an ever-evolving global landscape, the European Union reaffirms its commitment to protecting fair competition within its internal market and preventing unfair foreign financing from distorting economic competition. These guidelines, expected in January 2026, will shape the future of responsible and transparent trade, positioning Europe as a leader in economic fairness and integrity.
To participate in this consultation or learn more, visit the official website: European Commission Consultation.
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