The EU Foreign Subsidies Regulation: Implications for Public Procurement and Some Collateral Damage

The European Union has erected a significant new barrier to foreign competitors that seek to compete in EU Member State public procurements. In the European Union there are uniform rules (known as “State aid” rules) on subsidies for all Member States, which are intended to ensure that competition in the internal market is not distorted by government subsidies. To counter (perceived) disadvantages of EU firms when competing with competitors from non-EU countries not subject to the EU “State aid” regime, the EU has adopted the Foreign Subsidies Regulation (FSR), which entered into force in January 2023 and will go into full effect in October 2023. The FSR poses significant challenges for firms from outside the EU (such as the U.S. or China) that hope to compete in procurement procedures, or engage in mergers and acquisitions (M&A) involving the EU. This article focuses on the FSR’s requirements for vendors from abroad that will compete in EU Member States for covered procurements, including defense procurements. As the discussion reflects, vendors that intend to compete in EU Member State procurements should prepare for the FSR’s requirements regarding government support, or risk being excluded or sanctioned by the European Commission

EU Foreign Subsidies Regulation Update: Risks And Responsibilities For Foreign Firms In EU Public Procurement Markets

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

Self-cleaning as a defence to exclusions for misconduct: an emerging concept in EC public procurement law?

The EU procurement directives provide for both discretionary and mandatory exclusions from EU public contracts of suppliers convicted of criminal offences or involved in gross misconduct. This article seeks to demonstrate that, although it is not stated expressly in the directives, it is a legal requirement to recognise as a defence to exclusion that the supplier concerned has undertaken self-cleaning measures to prevent a repetition of the conduct concerned