EuroWire, BRUSSELS: The European Commission has set out broad criteria that will allow it to exclude foreign companies from participating in public procurement markets across the European Union when those firms benefit from subsidies granted by non EU governments that distort competition, according to a policy document published by the Commission.
The criteria clarify how the Commission will apply the EU Foreign Subsidies Regulation in public procurement procedures. The regulation, which entered into force in 2023, establishes a framework to address financial contributions from non EU countries that provide an unfair advantage to companies operating in the EU internal market. The new guidance explains how such subsidies will be assessed when companies bid for public contracts awarded by EU institutions, member states, or other public authorities.
Under the framework, the Commission will examine whether a foreign financial contribution improves a bidder’s competitive position in a procurement procedure in a way that undermines fair competition. This includes subsidies that reduce production costs, improve access to financing, or allow bids to be submitted at prices or conditions that competitors without such support cannot reasonably match. The assessment will focus on the existence of a distortion rather than on the intent of the foreign authority granting the support.
The rules require companies participating in large public tenders to notify the Commission of foreign financial contributions they have received. Notification obligations apply to procurement procedures with an estimated value of at least €250 million when the bidder, including its subsidiaries and main subcontractors, has received aggregate foreign financial contributions of at least €4 million per non EU country over the previous three years. The Commission may also request information in smaller procedures if there are indications of distortive subsidies.
When a notified subsidy is found to distort competition, the Commission is empowered to impose corrective measures. These can include commitments by the company to repay the subsidy, reduce capacity, or adapt its bidding behavior. In cases where remedies are not sufficient to address the distortion, the Commission may prohibit the award of the contract to the subsidized bidder or exclude the company from the procurement procedure.
European Commission defines scope of foreign subsidy enforcement
The guidance also outlines how the Commission will balance any negative effects of a foreign subsidy against possible positive effects, such as contributions to environmental protection or public policy objectives. This balancing test is applied on a case by case basis and does not prevent the Commission from taking enforcement action where distortions are established. The document emphasizes that the primary objective of the regulation is to safeguard equal conditions in the internal market.
The criteria complement other EU instruments governing access to public procurement, including rules on international reciprocity. In recent years, the EU has expanded its legal toolbox to respond to unequal access to procurement markets and to address practices that disadvantage European companies abroad. The Foreign Subsidies Regulation operates alongside existing trade defense measures and public procurement directives, without replacing them.
Commission officials said the clarified criteria are intended to provide greater legal certainty for contracting authorities and companies participating in EU tenders. Public buyers are expected to continue applying national and EU procurement rules, while the Commission retains exclusive competence to assess and act on foreign subsidies under the regulation. National authorities are required to cooperate with Commission investigations and to take account of its decisions in procurement procedures.
Foreign financial contributions face detailed scrutiny
The publication of the criteria marks a further step in the implementation of the Foreign Subsidies Regulation, which applies across all member states. Companies active in EU public procurement are required to maintain detailed records of foreign financial contributions and to ensure timely and accurate notification where thresholds are met. Failure to comply with notification obligations can result in fines and exclusion from procurement procedures.
The Commission stated that enforcement of the regulation will be based on verifiable information provided by companies, public authorities, and other market participants. Investigations may be launched following notifications or on the Commission’s own initiative when there are indications of distortive foreign subsidies. Decisions adopted under the regulation are subject to judicial review under EU law. The clarified criteria apply to procurement procedures launched after the entry into force of the Foreign Subsidies Regulation and form part of the Commission’s broader mandate to uphold competition rules within the EU internal market.