Commission sets broad criteria to exclude foreign firms from public contracts

The European Commission gives itself wide discretion to prevent companies that receive foreign subsidies from participating in Europe’s big public procurement market in guidelines published on Friday.

The guidelines aim to give companies greater predictability by clarifying how the Commission assesses distortive foreign subsidies under the 2023 Foreign Subsidies Regulation (FSR), which targets support granted by non-EU governments, notably China and the United States.

If a company active in the EU has benefited from a foreign subsidy and compete for public tenders, the Commission assesses whether that support strengthens the firm’s competitive position.

Under the new guidelines, even where subsidies are not directed at EU activities, the Commission says it will conduct a closer assessment to gauge the risk they could be used to cross-subsidise operations in the bloc.

In recent years, several high-profile cases have exposed the limits of existing EU tools, prompting investigations into Chinese firms accused of benefiting from unfair state subsidies and  bidding for EU public contracts – from medical devices to train rolling stock. Public procurement accounts for roughly 15% of the EU’s gross national product.

“With the release of the Foreign Subsidies Regulation Guidelines, we are giving organisations a clear and practical way to turn good intentions into action,” said Commission Executive Vice-President Teresa Ribera, adding that the rules aim to set “shared expectations for responsible decision-making, so investments can move forward in a way people can trust.”

However, the guidelines also offer olive branches to China. They exempt low-value tenders and subsidies below €4 million, as well as cases deemed “extraordinary”, from prior notification and ex-ante Commission review.

They also spell out how companies can avoid scrutiny by showing that the subsidies deliver positive effects aligned with EU policy objectives.

(cs)