EU Issues Guidance to Clarify Enforcement of Foreign Subsidies Rules

Per a statement from the Commission, the Guidelines clarify how it determines the existence of a distortion of competition linked to a foreign subsidy. The assessment follows a two-step approach. First, the Commission examines whether the subsidy strengthens a company’s competitive position within the EU. In cases where subsidies are not directly aimed at EU-based activities, the analysis will look more closely at whether those funds could be used to cross-subsidise operations in the internal market. Second, the Commission evaluates the broader impact on competition, including whether the subsidy could alter market behaviour or dynamics in a way that harms other market participants. The Guidelines also outline a non-exhaustive set of subsidy types that may raise concerns.

The document also addresses how distortions will be assessed in the context of public procurement. According to the Guidelines, if there are indications that a foreign subsidy has influenced the terms of a tender, the Commission will first examine whether the subsidy was used when designing the bid. If that is the case, it will then compare the bid with competing offers and with the contracting authority’s own estimates to determine whether it is unduly advantageous. Per a statement, if an advantage is identified, the Commission will assess whether it stems to a significant extent from the foreign subsidy or from other legitimate factors.

Another key element is the explanation of the so-called balancing test. According to a statement, this process involves weighing the negative effects of a distortive foreign subsidy against any positive effects that are directly linked to that subsidy. Only benefits that are specific to the subsidy under review will be taken into account. If the Commission finds that the positive effects outweigh the negative impact on competition, it will not raise objections. If the opposite is true, the Commission may accept commitments from the company concerned or impose corrective measures.

The Guidelines also clarify how the Commission will use its “call-in” powers for mergers and public procurement procedures that would not otherwise require notification. Per a statement, the Commission may request prior notification where it suspects that foreign subsidies have been granted to the relevant companies within the previous three years and where there is a risk of distortion. The decision will depend on factors such as the competitive significance of the transaction or tender, whether it involves a strategic sector, and the likelihood of competitive harm. The Guidelines introduce new safe harbours, exempting low-value procurement procedures, subsidies below €4 million, and subsidies granted to address certain exceptional circumstances from being called in. In all cases, the Commission must act before a transaction is fully implemented or a contract is awarded.

Before finalising the Guidelines, the Commission carried out extensive consultations. According to the background information, it launched a call for evidence in March 2025 and held targeted discussions with Member States and stakeholders from business, the legal and economic professions, academia, and consumer groups. A public consultation on the draft Guidelines took place between July and September 2025.

The Foreign Subsidies Regulation itself entered into force on 13 July 2023. It gives the Commission powers to tackle distortions in the internal market caused by subsidies granted by non-EU governments, while maintaining the EU’s openness to trade and investment. These subsidies can affect the market through a wide range of activities, including mergers, public procurement, and other forms of investment.

Under Article 46 of the Regulation, the Commission was required to publish the Guidelines by 13 January 2026. In addition, the FSR obliges the Commission to submit a report to the European Parliament and the Council by 14 July 2026 reviewing how the Regulation has been implemented and enforced, a process that may lead to further legislative proposals.

Source: EC Europa