The Foreign Subsidies Regulation (FSR) is a tool nominally designed to assess and counter foreign subsidies that are likely to produce distortions in the EU’s internal market.
For the FSR’s purpose, a foreign subsidy exists where a financial contribution is provided, directly or indirectly, by a third country, which confers a benefit on a business active within the EU, and which is limited, in law or in fact, to one or more businesses or industries.
The European Commission (EC) is responsible for ascertaining whether a foreign subsidy exists and for determining whether such foreign subsidies lead to negative effects that outweigh their positive impact.
Financial contributions are defined very widely within the FSR, and this expansive definition is one of the most criticized parts of this new regulatory tool.
This definition captures all forms of contributions, regardless of their nature and rationale, and includes, inter alia:
Any transfer of funds or liabilities, such as grants, capital injections, loans, loan guarantees, below-cost financing, fiscal incentives, debt forgiveness, setting off of operating losses, compensation for financial burdens imposed by public authorities, and debt-to-equity swaps.
Any foregoing of revenues that are otherwise due, such as tax exemptions and the granting of special or exclusive rights without adequate remuneration.
The provision or purchase of goods or services, even if at fair-market terms and prices.
Such financial contributions are considered foreign if they are provided by:
A third country’s central government and its public authorities at all other levels.
A foreign public entity or a private entity whose actions can be attributed to the third country.