AEGIS Europe Position on the Review of the Foreign Subsidies Regulation
/AEGIS Europe welcomes the opportunity to submit its input to the European Commission as part of the Review of the Foreign Subsidies Regulation (FSR). In recent years, there has been an increasing influx of bidders from economic operators from third countries. If we consider that EU funds (e.g. European Structural and Investment Funds, Connecting Europe Facility) can be involved and de facto awarded to economic operators, distorting competition based on price, this is even more relevant as it can contribute to a decreased competitiveness of EU companies.
This situation, which has been documented notably by the OECD in its publications on measuring distortions in international markets (e.g. rolling stock value chain, aluminium, semi-conductors), can lead to a loss of market share and deindustrialisation of the EU, as well as having negative effects on competition in the Single Market. Coupled with increasing contractual requirements and award criteria focused mostly if not exclusively on price, European companies could be discouraged to submit bids due to low chances of winning, which would be detrimental to the quality of the solutions supplied to public authorities and create supply risks.
Against this background, the FSR is an autonomous EU trade instrument of outstanding importance for ensuring a level playing field in European procurement markets. Below, we present a series of recommendations to further strengthen the tool.
Identification of subsidies most likely to distort the internal market:
AEGIS Europe believes that a number of foreign subsidies should be considered to have a distortive effect on a per se basis, notably all subsidies to beneficiaries active in sectors: o Characterised by structural excess capacity. o Featuring high-tech and/or dual-use products to a significant extent; or, o Designated as strategic by the government providing the subsidies (e.g. in policies such as Made in China 2025).
Also to be considered distortive per se should be foreign subsidies to operators which have privileged and/or protected access to a significant non-EU market, especially if the non-EU market is the operator’s domestic market.
Additionally, we believe that it would be beneficial to integrate elements arising from previous investigations of the European Commission, such as explicitly considering the amount of the subsidies compared to the estimated valued of the public procurement as a relevant fact for assessing a potential distortion.
Balancing test:
AEGIS Europe insists that a balancing assessment must start from the presumption that there is a fundamental and strong EU interest in favour of removing the effects of distortive foreign subsidies, especially those endangering sustainable and diversified supply chains and the preservation of a strong industrial base in Europe.
In addition, because a balancing assessment must involve an adequately transparent and coherent analysis of both short-term and medium-term impacts of the distortions in question, the Commission should carry out full and timely consultation of relevant EU industries and give meaningful consideration of their input.
Beef up ex officio review:
Ex officio investigations should be launched towards economic operators that have already been subject to one or several in-depth investigations in other public procurement procedures that remained incomplete due their withdrawal of the bids in question. When an economic operator has been targeted by a public procurement investigation and that investigation is either not concluded or has resulted in determination that the company received distortive foreign financial contributions, there must be an automatic investigation if this company participates in other tenders – be it above OR below the threshold. Any award to an economic operator for which the Commission has already identified a strong presumption of distortive foreign subsidies poses a major risk to the credibility of the instrument. Therefore, this issue should be addressed in the 2026 review to remedy this flaw.
Finally, the Commission should also investigate, through ex officio review, how foreign subsidies may create distortions through the opening of factories by State-owned third-country companies in the EU or change of ownership of European companies to the benefit of State-owned third country economic operators.
Lower the public procurement threshold:
The threshold of EUR 250 million for public procurement is high and fails to capture many important projects, for example in the construction or rail supply industries. A revised threshold of EUR 150 million would be more appropriate to partly solve the current challenges faced by the instrument in conjunction with more ex officio investigations. Hence the power of the Commission to request the notification of foreign financial contributions in a public procurement procedure below the notification thresholds is key given the easy circumvention of the instrument by foreign economic operators. In any case the ex officio mechanism should be efficiently and more systematically utilised, especially if the threshold remains unchanged.
Strengthening enforcement towards Contracting Entities and Member States:
The FSR rightly aims at minimising disruptions and delays in public procurement procedures, which is in the interest of Contracting Entities and industry alike. In particular, the Commission cannot start an investigation related to a tender once the tender has been awarded to a bidder (Article 29 (8)).
However, the Commission should have the authority to overrule an award decision if two factors are met: (i) the contracting entity did not ensure the notification process whereas the project value was above the public procurement threshold; (ii) the economic operator to which the contract has been awarded has been subject of a previous in-depth investigation, whether complete or incomplete.
This will strengthen the knowledge of the instrument and the willingness of certain Contracting Entities to comply with the obligations. Furthermore, coordination with Member States should be strengthened in case patterns are noticed, and Member States should also support the European Commission in helping Contracting Entities with awareness-raising on their obligations as well as capacity-building measures.
Simplify the instrument and reduce the administrative burden:
The European Commission should consider it a priority to reduce the administrative burden and reporting obligations, as this would have a positive impact on all concerned parties (Contracting Entities, Industry and European Commission itself), while ensuring that a balance is found and that the objectives of the Regulation are fully met. For economic operators that have to submit information multiple times over the same year because they regularly participate in public tenders above the notification threshold, one notification per year should be sufficient, provided of course that they – or their parent company or their subsidiaries – do not receive any new foreign financial contribution in the meantime.
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AEGIS Europe is an industry alliance that brings together more than 30 European manufacturing associations representative of the whole value chain, from commodities down to consumer end products. Our Members account for more than €500 billion in annual turnover, as well as for millions of jobs across the EU.