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26 June 2020 / article

The Proposed EU Rules on Foreign Subsidies

On 17 June 2020, the European Commission (the ‘Commission’) published a so-called White Paper dealing with the alleged distortive effects caused by foreign (non-EU) subsidies in the EU Single Market. Following our general coverage of the document, in this blog we shall take a deep dive into the rules on public procurement proposed by the Commission.

As explained in an earlier post, the White Paper proposes three ‘Modules’ of instruments that may be introduced in order to address potential distortive effects of subsidies from non-EU countries.

  • Module 1 proposes the establishment of a general market scrutiny instrument, to capture all possible market situations in which foreign subsidies may cause distortions in the EU Single Market.
  • Under Module 2, companies benefitting from financial support of a non-EU government would need to notify their acquisitions of EU companies, above a given threshold, to the Commission.
  • Module 3 of the White Paper proposes a mechanism where bidders in public tenders would have to notify the contracting authority of financial contributions received from non-EU countries.

This post is devoted to a closer look at Module 3.

Under the rules proposed in Module 3, tenderers should notify to the contracting authority when submitting their bid whether they, including any of their consortium members, subcontractors or suppliers have received a financial contribution within the last three years preceding the participation in the procedure and whether such a financial contribution is expected to be received during the execution of the contract.

The Commission suggests that both itself and (undefined) national authorities would oversee that this obligation is adhered to.

The Commission stresses that it is up to companies themselves to assess whether they fall under the obligation to notify any state aid from non-EU governments they may have received. However, third parties and competitors with (some) evidence that a notification should have been made are entitled to inform the contracting authority that a rival bidder received state aid from a non-EU government.

The Commission envisages that upon receipt of the notification, the contracting authority shall forward the notification to the competent national authority. In the Netherlands, which does not have a procurement authority, we expect that this would be the Authority for Consumers & Markets. That authority will subsequently carry out a two-step investigation. If an initial investigation shows that a foreign subsidy may have been granted, the authority shall start an in-depth investigation. At the end of that investigation, the supervisory authority shall provide the Commission with a draft decision regardless whether it concludes that there was a foreign subsidy or not.

Pending the investigation, the tender procedure may continue although the contracting authority is not allowed to award the contract to the (potential) tenderer under investigation. Should another bidder win the tender, then the contract may be awarded.

In case the contracting authority finds that there has indeed been a subsidy that distorted competition, it will exclude the tenderer concerned from the ongoing procurement procedure. The Commission also suggests that this measure may be accompanied by a further exclusion of new tenders for a maximum of three years. The Commission states that the company in question may appeal such a decision excluding it from one or more tenders.

In the interest of its many clients that may be affected by the regulatory package proposed by the Commission, Loyens & Loeff intends to continue to closely monitor and cover the developments in the months to come.



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