Is closely regulated. State aid within Europe Union, limiting the types of subsidies that Member States may provide to their own businesses.
Now the EU has extended that State a doctrine to contractors competing from abroad for EU members, state procurement awards to level the playing field and public.
The current competitions in the European Union. The new foreign subsidies regulation will require bidders to disclose subsidies that they received from foreign governments, bitters planning to compete for procurements, and in the U both civilian and defense procurements will need to understand this
new regulatory barrier.
This is another on a webinar series which is available on the Gw.
Law government, Procurement law program, Youtube Page detailed materials for today are available at public procurement, international.com.
And the video from today's session will be posted there.
And at the program Youtube page, please use the function today to pause questions to our panel rather than the chat function.
All speakers. Comments are in their personal capacity. The format for today's webinar is quite straightforward after I share the speakers, biographies, Pascal, Friton, Max, Klassa, and Ramona Otter will discuss the foreign seventies regulation in detail our
discussions. Gene, Harmon, Greer, Robert Anderson, and Christian Philippeach will then address the international trade issues raised by the foreign subsidies regular, and the practical implications for those competing in the EU public procurement market.
So very distinguished group of panelists and discussions today, the scholar is a partner at the Blomstein law firm in Berlin is a specialist lawyer for public procurement law.
A fax on vogue foragabarect and an expert in international trade law.
His public procurement. Law practice covers advice to both contracting authorities and bidders in particular, in particular, in the information technology defens and security infrastructure, energy and healthcare sectors, mocks focuses on all these aspects of German and European age trust and
competition law. You state aid and merger control law.
He's also partner at the Blondstown firms in state.
8 cases Marx is represented both companies and state authorities, before the EU courts.
And he was recently counsel to the German Federal Government before the European Board of Justice.
Ramona is an associate of the Blochstan firm.
She specializes in German and European public human law as well as East State aid and subsequent law.
Remote supports both bidders and contracting authorities, and procurement procedures, and represents their interest in front of German public procurement chambers in higher regional courts.
She advises on all aspects of the EU state and subsidy law, and assist the public sector as well as national and international companies, in stated proceedings before the European Commission and European courts Jean is a principal the jogi consulting group and previously served as the Government
procurement lead the Us. Office of the trade representative.
She is widely consulted. Authority on international trade and public procurement, and the author of one of the most important books in this area, the International and the International Procurement system which I have somewhere here wanted to show.
It's also available on Amazon. And it's really a very interesting book.
Tracing the International Trade agreements that the United States and other nations have entered into the leading book on public procurement and international trade.
Rob Anderson, previously served as the lead on Government procurement matters.
The World trade organization in Geneva. He's an honorary professor at the University of Nottingham, and he regularly speaks and writes on issues of competition, public procurement, and international trade.
He's a leading voice on improvement of trade and international public procurement, and Grier, a regular contributor to our program at Gw.
Law school. Christian is a partner in reedsmiths, antitrust and competition practice in the firm's Brussels office.
He advises on all aspects of EU and international competition and merger control law.
Use state aid and public procurement, as well as regulatory law, with more than 20 years of experience, Christian defends clients in state, 8 cases, and in regulatory matters before the European Commission with his partner, Max Leister Christian produced a very useful summary of the Foreign subsidies regulation which
is included at the Reid Smith website, and in the materials linked to the program page at public procurement, international.com.
As their summary points out, the Fsr. Encompasses foreign subsidies which may affect other areas, including mergers and acquisitions.
But our focus today will be on public procurement.
Again welcome, and here alternate over to Pascco.
Many thanks, Chris, for this introduction in the next about half hour we will give you a brief overview.
Of the main concepts of the foreign subsidies.
Regulation and also try to highlight some of the practical implications and problems that may, we may encountered in the next month.
Now, just before we go into the material issues, just allow me to make a few points to start with.
Now we're what we're dealing here with is a brand new law which already is.
And for us, since Jean January and of 2,023.
It is very broad and complex, very long, and sometimes a little poorly drafted, and it certainly adds a lot of red additional red tape.
In many instances. So companies that are doing business in the EU.
In particular, those participating in public procurement procedures.
Will need to analyze the impact of this regulation, and we'll need to start to prepare it for it.
But having said that, there's some good news as well, the concepts in the foreign subsidies regulation are not completely new at its core.
They are based on the notion of State aid law, as Chris already mentioned, which has a very long tradition, and you, law.
So these issues can be dealt with. It's not impossible.
And also, while and also while some of the main or most of the provision's will start to apply in July of 2023, the possibly most burdensome provisions, the notification obligations under the concentration tool and the public procurement, tool they will not apply until
12, of October of this year, so there is still time to look at that, and to prepare and yeah, we will try to to give some guidance on what can possibly be done.
So next slide, Chris, please. First of all, just really quick on the background, because I think that it's important to understand this where the Commission tried to go with this instrument.
Now the Commission believes that there is a low level of international harmonization on subsidies so in particular, the Wto agreement on subsidies and countervailing measures according to the Commission as a very limited effect, in addition the Commission believes that there has been an
increasing level of subsidies, and particular in a state controlled countries.
In the middle, east, and southeast Asia. Of course, above all, China, and, on the other hand, there is the State Aid law regime in the EU, which puts a burden on EU companies, and whenever any EU government wants to grant a State aid
2 and to a new company. They have to observe to that regime, and foreign companies do not have to observe to that regime.
So I guess there's the fear of the Commission that these U companies are now put at a competitive disadvantage.
Visa V. Its competitors from other countries with less restrictive state at control regimes.
Next slide, please. Chris. So so to fill this gap, the Commission created the foreign subsidy regulation rather quickly started in 2020, and it's already put in in effect this year generally what the Commission introduced, and that regulation are 3 tools there are 2 notification based tools
one concerns public procurement which we will focus on here today.
The other. One concerns concentrations which we will also touch upon, and even out of the 2 situations out of public procurements and concentrations, there still is the possibility for the Commission to look basically into all other market situations, and they created this so-called
ex officio tool for that which give them gives them a broad powers, and, as I already said, the notification based tools, they only start to apply.
So these the obligations described under these tools only start to apply in October of this year the ex officio tool already applies, as of July of this year.
So next slide, please, so we will now look a little bit more into the public procurement notification based tool.
First of all. Next slide, please. We will look at when it applies.
So first of all, yeah, basically, there was 3 basic requirements.
The first one is that the public procurement, the U.
Public Procurement directives have to apply.
So it has to be a contract via contracting authority, and no exemptions have to apply.
Now, there's one important thing to notice the notification based.
Tool does not apply to defence procurement, but this does not mean that all defense contractors can now leave this webinar because it is still possible for the Commission to take the ex officio tool and look at these sort of procurements.
So as the note. As I said, notification tool, not applicable, but ex officer tool applicable to defense procurements.
The second requirement is the value of the public contract, and that's a rather high value.
Of course, above 250 million euros. Again, if you now decide to leave this webinar, because you never participate in procurement procedures that are this high, I urge you not to do that because again, under the ex officio tool, it is possible for the commission to look at public
procurements. Below. These threats, and also there's a hidden provision, and I'm thinking about Article 29, paragraph 8, that at least, as I read it, allows the Commission to also look into all procurements under the threshold and to
require a notification, and possibly even initiate and exclusion procedure.
If it's below these thresholds, it remains to be seen if the Commission makes use of that, and it's very, very hidden in in the regulation.
But it's still a possibility now.
The third and final requirement, and we will talk about that in the next little more in the next slides in detail is the requirement that the financial quant contribution that the bidder received by a certain third country has to be above 4 million euros in the last 3 years, and what is important
to note is that this does not only apply to financial contributions that are made to the bidder, to the entity that is taking part in the procurement procedure as a bidder, but it also applies to holding companies to subsidiaries so basically the whole corporate group is covered by
that and the relevant amount has to be gathered by looking at all the different financial contributions made to these group companies.
In addition, also main subcontractors and suppliers are covered, and which is in particular the notion of main supply, supply and subcontractor is defined in a very vague way, so it is extremely difficult with these far-reaching provisions to
circumvent this notification obligations, so I guess the Commission made sure that there's really no possibility to go around it.
So next slide, please, Chris, now that we've established the thresholds, the question now is, what is financial contribution?
Again, this term is defined extremely wide, so transfer of funds of Li Li liabilities is covered.
Capital injections, grants, loans, guarantees.
What have you also the foregoing of revenue that is otherwise?
You is covered. So even tax exemptions could possibly be covered by that.
And finally even the provision of purchase of goods and services.
So even government contracts, public contracts could be covered by the term financial contribution.
So it's clear that this is a very broad term, and it's and I want to make that clear.
And it's not limited to subsidies. So it's it's just.
It's one element of the definition of subsidies which we will go into in a minute.
But it's a lot broader and of course it's not only relevant to determine the applicability, but it also is relevant in terms of what you have to actually notify.
What information do you actually have to give to the Commission?
And we will come to that in in a minute. But if that's not enough, Chris, next slide, please.
The Fsr. Does not only control a notification obligation, it also, in all other cases, as the foreign subsidy regulation says, it also contains a declaration, obligation, and the question here really is, when does it apply because the law says, in all other cases what does that
mean. It's I think, that 2 instances where it is rather clear what is meant.
The first one is that this declaration, obligation is not applicable to procurements not covered by the procurement directives, and it's also not applicable to defense procurement.
It is clearly a applicable to procurement procedures above the value of 250 million and financial costs that are below the 4 million thresholds.
So and so in that case, it's clear that there's a declaration obligation.
But the wording, all other k in all other cases, could also be read as meaning that it applies to all procurement procedures under 250 million, which would be basically all procurements above the EU thresholds, which you all know are a
lot lower than the 250 million. I don't think that.
That it's meant that way, and I think their arguments to say that you know that's not what the Commission aimed at.
But it's from the wording. It's still possible to to argue this way.
Next slide, please.
We talked about the applicability of the notification and declaration obligations, but the question, of course, is what actually do you have to notify or declare in in your offer to the to the Commission, and that is shown on this slide?
I will not go into the details. This is just to this is just to show you that there's a different amount of information and a different level of detail that needs to be provided.
If it's not, if it's a notification or a declaration obligation.
Also please note that this is still in the making, as these, you know, this exact information that you have to give to the Commission.
And as these you know these exact information that you have to give to the Commission, they are governed by the implementing regulation, which is still in the making, so this still may change, and, as I said, these obligations, these notification, declaration, obligations.
they apply from 12 October 2023.
Now on the next slides Ramona will go into the details of what the Commission actually intends to do with all that information that it has gathered.
Now under these, under this notification and declaration, tool.
Thank you, Pascal. So, after having received the notification, the Commission opens the 2 stage review procedure.
Firstly, there's a preliminary review. The Co.
In examines that whether foreign subsidy exists, and whether there's sufficient indications that it is thoughts.
The internal market. If this is the case, the Commission opens an in-depth investigation in it.
It further assesses whether the start exists that carries out the balancing tests.
And it examines any commitments by the company concerned.
I will now explain these 4 steps in further detail. Next slide, please.
As mentioned. The commission, firstly assesses, whether a firm subsidy exists.
There's definition of foreign necessity in the foreign substance.
Regulation which is copied in here. It has 4 main elements.
The first element is a financial contribution which Pascal has already explained before.
Secondly, the financial contribution must be provided by a third country.
This means that it's directly or indirectly attributable to the State.
Therefore financial contribution is not provided by a third country. If the money fully stems from privately owned sources, third, one is the most important criterion, the Financial Contribution map confer benefits.
This is the case if the financial contribution could not have changed, it could not have been obtained in a normal market condition.
This criterion, therefore, limits the front subsidies.
Definition to actual government support measures like grants or loans, with an interest rate below market.
On the other hand, it excludes any payments by the States under a contract of awarded in a competitive procurement.
Last, but not least, the financial contribution must be selective, which means that it is limited to one or more companies or industries.
Therefore general tax reduction that applies to all companies does not qualify as a foreign subsidy.
Next slide.
If, a foreign subsidy exists, the Commission examines whether it is towards the internal market, the front subsidies regulation defines the and categories of subsidies that are most likely to distort the internal market for example, subsidies granted to an ailing undertaking for the mark
take subsidies are defined where restortions unlikely, or where there is no distortion.
For example, subsidies that are below certain threshold.
However, for most of the cases an individual assessment is necessary a distortion exists where a file necessity is liable to improve the competitive position of a company in the internal market, and actually a potentially negative effect competition in the internal market S.
These terms remain very weight. There's significant uncertainty for the majority of cases, and the Commission has a very broad discretion.
Whether it comes to the conclusion that a distortion exists or not.
Next slide, please.
If the Commission comes to the conclusion that there is a distortion, it may carry out a balancing test in this penancing test, the Commission may balance the negative effects of a foreign subsidy in terms of distortion against the positive effect on the development of the subsidized economic area in the internal
markets, positive effects may relate to all you policy goals, for example, environments, protection, also, with regards to the balancing test, and in general, in its assessment, the European Commission has a very broad discussion.
We assume that when exercising its discretion, the European Commission takes the existing State, 8 case practice as a benchmark.
In this regard it is worth knowing that the U. Has currently relaxed its stated rules.
The reaction is also seen as a response to the Us. Inflation Reduction Act.
It is likely that the Commission takes this new and less strict approach, and that you state 8 law into account.
Also, when assessing foreign subsidies, meaning that there is more way also for foreign subsidies.
Next slide, please.
After the investigation procedure, the Commission makes its decision.
If the Commission concludes that there is no foreign subsidy or no distortion, it adopts so-called non objection to decision.
This allows the contracting authority to what the contracts to the bidder under investigation.
If they are on subsidies that distort the internal market.
The company under investigation has the possibility to prevent exclusion from the public procurement procedure by offering so-called commitments, for example, repayment of the site.
If the Commission considers the commitments offered by the Company's sufficient to remedy the distortion, it it adopts a decision with commitments if foreign subsidies exist which is taught the internal market, and there are no sufficient commitment the Commission provhibits, the award
of the contract to the company under investigation. The decision of the European Commission is binding for the contracting authority in the Member States.
Furthermore, for the firm subsidy, strategy regulations to be effective contracting authorities are generally not allowed to walk.
The contract to a company under investigation until the Commission made its decision.
Next slide.
This was in a nutshell. The notification based public procurement, tool as Pascal mentioned in the beginning, the foreign subsidies regulation has 2 other tools.
One is the general investigation tool also called exfisio tool, which the last Commission to investigate.
Foreign subsidies, and all other market situations. If the Commission decides to open an investigation, another general tool, the procedure.
It's pretty much similar to that under the notification based I would not go too much into detail here, as the relevance of this tool is expected to be limited.
However, I would touch upon some points that are particularly important with regard to public procurement.
Next slide, please.
In view of public procurement procedures, it is worth noting that general investigation to it does also apply to security and defense procurements which are exempted from the notification based tool, however contrary to the notification based tool such reviews and the general tool are limited
to wanted contracts, and very important they may not result in cancellation of what decisions are termination of an already awarded contract.
Instead, the Commission has the possibility to adopt a decision with redressive measures.
Redressive measures can include. For example, repayment of the subsidy.
That's also this general tool can be very, very powerful it remains to be seen.
And with situations, and to what extent the Commission actually makes use of it alongside the notification based tools.
This was a brief look into the ex officio tool, and we now hand over to my colleague Max, to explain the third tool that applies to concentration.
So if you, if we move on to the next slide, please.
Just to round this up the pillar is the notification requirement for consocrations above certain thread volts.
The hey! Again, the purpose is to filter out those transactions which are potentially infected by foreign subsidies and concentrations.
Trigger notification requirement under Bfsr if 2 cumulative thresholds are met.
This first the turnover threshold, which is met the aggregate cells of the target company exceed 500 million euros in the Uk.
And under the financial contribution, threshold, notification. It's required.
If the company companies involved were granted, combined aggregate financial contributions above 50 million euros in the 3 years preceding the transaction.
If met, the transaction has to be notified for the Commission, and must not be implemented prior to clearance.
The good news is that the deal threshold 500 million is relatively high.
The approximately twice as high as the corresponding threshold under the merchant regulation.
That means that transactions covered by this threshold are typically also notifiable under the use merger, regime, which is then subject to a separate filing.
So you have the one-stop shop with the Commission.
But 2 completely separate and independent proceedings. The Commission has estimated that approximately 40 to 50 transactions per year will be.
Of the major notifications they have received in past years, and that only a smaller chunk of these 40 to 50 merges.
Well, then also.
25.
Because they need however, as explained by her the broad notion of foreign financial contribution whether this this 50 million threshold is exceeded or not, and the devil, the devil will be in the details and just to be very clear, the notification requirement and the information needed to establish what the requirement is
triggered, is completely unrelated to whether the to the substantive test under the and Fsr.
That means that even where it's very obvious that a financial contribution the acquirer has received does not facilitate as a given transaction where there's clearly no link between a certain contribution and the acquisition at state the notification requirement may still, kick in and if that wasn't
enough. The European Commission also has the power to request notifications for sub threshold mergers, transactions where suspects that the companies involved have received a foreign financial contributions, that amount to subsidy.
If we could move to the next slide. Please. This obviously hasn't implications for dot planning.
It's an additional process that comes on top of murder filings.
And Fdi filings, but has completely different requirements.
That means that the lead time and prep. Time will not only depend on deal complexity and substantive issues, but also on the availability of information and data required to prepare the notification under the Fsr.
And to engage in pre notifications, discussions with the Commission.
We have listed a few of obvious points to be considered in the deal planning, and when negotiating the sales contracts for further consideration in the interest of time. I won't go into the details, but we could move to the next slide.
And next slide. Please.
So to rev up a quick look at the timeline Pascal mentioned to the Fsr.
Entered into force in January the substanceive provisions will enter into force in July, but the notification requirements for bits in public procurements, and the transaction tool will only appear as of 12 October this year, with the draft implementing regulation.
There is some guidance on on the notification, on the details of the notification and the requirements, and the information to be submitted to the Commission, and that's in the making.
There's no guidance so far on the substantive test.
There's very little description in in the regularulation itself.
There's no guidance in the implementing regulation, and that will only come at the beginning of 2026.
So the regulation says, we understand that there's some hope that the Commission could be quicker than that.
But any further guidance on the criteria for determining the existence of a distortion and the balancing test.
So we have to wait for for this.
The next slide. Please.
So what does all this mean for us companies?
This signals we are receiving from the Commissioner Miss Westaire. They are mixed so, on the one hand, she says, review of us, subsidies will be the absolute exception.
So some comfort here. But, on the other hand, she says, subsidies that are given in the Us.
Will be relevant to notify in the EU, and both is true.
So there is no general waiver for for us companies.
They are. If they meet the thresholds, the threshold, then they have to go through the burdensome finding process, and again, as Ramona pointed out, not only tax breaks under the inflation reduction act, but given the broad notion of foreign financial contribution basically all sorts of
dealings with the States, State and Federal level to very local level can be covered and and add to the foreign financial contribution and threatresholds set out in the Fsr.
Hence preparation is key, to cope with the additional information required for relevant dataarations and notifications.
Whether the Fsr. Will will then actually lead to us.
Companies being excluded from procurement procedures.
What transactions being prohibited, prohibited is is another question, and remains to be seen.
And that's will essentially hinge on on how the Commission uses it.
It's broad discretion in in particular, in the application of the balancing test.
The Commission seems to be well aware that too broad, or to script application of the Fsr.
Could also negatively impact competition on EU procurement markets and Emma a markets.
And as Ramona said, also the relaxation of the Us.
State, a regime under the EU. Use a green deal.
Industrial plan will have an impact on the assessment. Because what's what's quite clear is that the the Commission will not be able to prohibit something which is not prohibited in the EU.
If we then move to the next and final slide.
So? Is there any hope the Fsr. Has created a lot of criticism from stakeholders, including from, I have to say, from you companies international beyond the you active EU companies, either very companies, the the SSR is meant to save from unfair competition, from foreign finance
competitors in the draft implementing regulation.
The Commission is looking for pragmatic solutions, so it has make clear that companies can get waivers for certain types of information.
If it's clear that the information is not required, but the assessment for the substantive assessment.
And also there are certain diminished thresholds for small amounts of individual aid which are very low.
So in the 2 hundreds of 400 thousands, this is certainly welcome, but it's and may save some time, and when filling out the notification forms, but still it will be an enormous burden when you have, when you go through the process, because the main problem persists
that a lot of the information. It's not required for the notifications is not readily available.
And has to be collected upfront before you can even engage in a meeting for discussion about whether you can get away with this or that information.
So the quantity of information required for filings is clearly absolutely massive.
And often unrelated to the deal, complexity and and any substantive issues.
May the criticism make the European Commission rethink?
Now that the Fsr. Is the law, there are clearly limitations to what we commission even some in the Commission may regret what they have done.
There are clearly limitations to what the Commission can do about it.
So for the time being one can be seriously concerned that the procedural burden will mean that global companies not only us, but also EU companies, are disadvantaged in public procurements and mandate transactions, even in cases where it's very clear from the outset, that the effects of the
effects, that the effects Pfs are wants to target are very unlikely.
I'll leave it at that for now, so that we can have a meaningful discussion and hand back to Chris.
Thank you very much. That was an excellent presentation. My call colleagues at lunchtime.
Thank you. Thank you all very much. I have the happy news we, if you look at the if you look at the participants, you'll see that many of our participants are, in fact, fellow academics from around the world.
Just want to show I've found a Gene's excellent book, the International Procurement System.
It's which is an outstanding trade book.
As we refer to before I did want to just say, I want to emphasize the book, not only because of this wonderful content, but the way the gene published it.
Gene published it through Amazon is very affordable for our students, and a number of our students are participating as well.
So many, many thanks to Gene for serving as a pioneer in reforming academic publishing.
So we wanna have a discussion. Now we have. Thank you very much.
The Longshan folks for allowing sufficient time for discussion.
I'm going to turn it over first to first to Gene Reer, to talk about some of the issues in transatlantic trade that have triggered.
What is arguably a protectionist impulse on the part of the European Commissioner certainly helped frame that that this new Fsr.
Thanks. Chris, going protectionism in the United States is impacting the transatlantic trade relationship.
3 laws enacted by the Us. Congress in the last 2 and a half years, with the strong support that biden administration embody the largest set of us.
Industrial policies since the new deal. They are the infrastructure investment in Jobs Act of 19 of 2020.
One, the the Inflation reduction act of 22, and the chips, or creating helpful incentives in in to produce semiconductors in Science Act of 2022.
Through these measures the Us. Seeks to boost us, manufacturing through stringent by American requirements and subsidies, to select firms.
I'm going to discuss in just a brief detail the first 2 of these of these laws.
First looking at the infrastructure Investment in Jobs Act.
This law significantly expanded, domestic preferences for infrastructure projects, particularly at the sub federal level.
Under the act Us. Produced iron, steel, manufactured products and construction materials must be used in every infrastructure.
Project Receiving Federal funding. Most of the projects are undertaken at the at the sub feder level.
The Biden Administration has broughtly interpreted the laws, requirements to maximize its application.
While the law allows certain waivers of the buy.
American preference the Biden Administration is actively discouraging.
The use of waivers, the laws, preference does not apply to projects covered by international agreements, such as the Wto Government procurement, agreement, and a bilateral Us.
EU agreement. However, the Biden is administration has downplayed this statutory provision, and did not make any provision for its application when it issued, proposed guidance on the law's implementation in March.
The European Union single, single out. This omission in its comments to the office of management and budget on the proposed guidance.
Turning now to the Inflation Reduction Act, which is the one that's getting the most attention right now.
This act provides the single largest climate investment in us.
History, and it puts us on a path to reduce its carbon emissions by roughly 40%, by 2030.
And so that's all. That's good news, and European officials have welcomed the Iras climate goals.
But criticized, the discriminatory local content.
Provisions and its manufacturing subsidies. I fears that the incentives might induce European firms to shift their production to the Us.
A particular concern is the Irs's, I mean the Iras tax credit of up to $7,500 for buyers of new electric vehicles.
If materials such as critical minerals for those for those cars, batteries are sourced in either the Us.
Or one of its Free Trade agreement partners, or if the electric vehicles is assembled in a North American plant, the Treasury Department has, in implementing the Iras provisions, is seeking a means of addressing the concerns of the EU Japan and other trading
partners without ftas with the Us. Could take advantage of to obtain access to the tax credits and it's proposed a broader definition of free trade agreements that is traditionally used for this is actually creating some concerns.
In the Congress, and what it has done is in a proposed regulation.
That was officially published yesterday. April seventeenth.
Treasury set out criteria for this broader definition of Tas and focused on agreements that provide for critical minerals used in Evs.
Electric vehicles. It's specifically cited.
A recently concluded agreement between the Us. And Japan.
As meeting these requirements. That agreement is aimed at ensuring that the critical minerals assembled I'm sorry it's aimed at ensuring trade and critical minerals.
It includes commitments to not impose duties on exports of these minerals essential to the Ev battery supply chain as well as a commitment to confer on investment critical minerals that may affect national security it also provides detailed undertakings related to the
enforcement of labor and environmental laws. The Us. And EU are engaged in negotiations on a similar critical minerals.
Pack that would allow you at EU companies to benefit from the tax incentives.
At this point the negotiations are ongoing, so we don't quite know, and they will conclude the EU is also seeking ways or flexibility on the Iras local Assembly requirement and an instant time.
I'm gonna stop here. Thanks, Chris.
Thanks for watching. I'm gonna turn over to Rob to discuss some of the and these are, and these are some of the issues that are framed on the public procurement.
International dot-com a program page. I'm going to turn over to Rob to discuss how the Fsr.
May code with the Government, the Wto. Specifically the Government Procurement agreement and the Subsidies Agreement rob.
Thanks, thanks very much, Chris. I, for your introduction for organizing this extremely interesting session, and into our colleagues from Bloomstein for their really excellent presentation.
And indeed, as you've said just now, and you rightly point out on the on the public procurement, international web page for this webinar, there are important issues to ponder concerning.
The relationship between the foreign subsidies, regulation and very Wto agreements in particular, I will speak to the subsidies.
Agreement, also called the Agreement on Subsidies and Countervailing measures are the scm agreement and the Wto agreement on Government procurement, and you know, in broad terms.
And again I urge panelists, or I urge participants to look at the materials on Chris Webpage in broad terms.
We. I think we have to ask, and that's the way I'm putting it.
That's the way Chris puts it on his webpage, not as definitive answers, but as questions to ponder.
I think we have to ask how the Fsr.
Exists in the broader context. First, of the subsidies agreement.
And indeed, is it possible that the powers and processes which have been outlined by our colleagues from Bloomstein potentially go beyond the limits of the Wto.
S. Cm. And I'm not saying that they do.
I think this is a is an issue on which we all need to reflect, and on which you know undoubtedly background discussions are going on, even now in Brussels and Washington.
And I think in potentially Geneva. And I think that's very important.
And the other point is an interesting one. Concerning the Gpa.
The government procurement agreement. And here it really is.
Because the Gpa. People may or may not know, does not exist only to support cross-border bidding on major procurement contracts.
It also exists, to ensure nondiscrimination with respect to the operations of local affiliates, of foreign, of local affiliates, of foreign corporations.
In particular, those from Gpa. Parties, and a question it exists as to whether the burdenens that are imposed concerning notification.
For example, will have the effect of putting 4 and affiliated corporations operating in the EU procurement markets at a disadvantage.
Visa, the EU and I think we have to think about that from the and we have to inform ourselves and to give better reflection to these issues.
Now I would like to end by saying what I think is going on in broad terms.
I think that the EU believes that the current Wto framework for addressing foreign subsidies is inadequate.
I think they believe this in light of developments and current trends in one or more far far Eastern country.
And that we can all think about. And and I actually think that they're right in this broad perception.
And I think that without desk concerns that will exist as between the Us and the EU.
With respect to the application of the Ss. Fsr.
And this gene points out also with her potentially with respect to recent us.
Legislation, despite that there is potential common ground here.
I think that a number of people in both Brussels and Washington are are coming to the conclusion, and I share this, that the global instruments and frameworks for control of subsidies need to be updated and revised.
And I would go even further, and say also also the Gpa.
Needs to be looked at again now more than 10 years after the recent negotiation, what we used to call the recent renegotiation in 2012 needs to be looked at again, and with respect to issues concerning its coverage and application to environmental green procurements
and that kind of thing. So I think that we, while we in the short run, we are rightly, and the presentation is rightly looking at questions of application and concerns about paper burden which I can see are significant, and I think in the longer term we are accumulating a
body of concerns that needs to be and can be described.
Discussed in further multinateral negotiations and in bilateral negotiations between the EU and the Us.
And I think, yeah. So I'm not. So. I hear clearly the concerns that out, Blom, shine.
Colleagues have raised very effectively concerning the various requirements of the Fsr.
Those are certainly relevant, but I also have an underlying degree of sympathy with the intention here, and I think the the trade community is increasingly of the view that we need to have a new framework for looking at subsidies and countervailing
measures in international trade and I think that's right.
Thanks very much.
Thanks very much, Rob. So we have about 10 min left, and I want to turn over to Christian Christian the the materials that we accumulated on the on the program page.
Many of the materials from a law. Firms talked about preparing for the Fsr.
For both you and our colleagues at Blamstein.
What when should companies that are going to compete for European procurements?
When should companies that are going to compete for European procurements? When should they start preparing for the Fsr. And how should they start preparing?
What do you recommend?
Yes, thanks a lot. Thanks a lot, Chris, for the question, and thanks a lot to my colleagues from Blamstein, and also like to my other colleagues for for the contributions.
First? When should they prepare? The best is yesterday, so I think I think preparation is here.
Key. But before I start about the preparation and the next steps, I think I would like to give some additional comments on on the view of SSR.
From the from the perspective, from the perspective, from here out of Brussels, I think what is super important, and Rob has also said it before.
Why is Europe doing that? Why is the Commission doing that? Europe at the moment needs a lot of investments, needs a lot of of goods from from outside needs?
A lot of money, but very often we get the investments from some jurisdictions which are not always following the same rules as we are following.
It might be China. It might be also like the Middle East, where a lot of companies are controlled by several wealth funds or by authorities, or by governments, and do not always follow economic a 100% economic growth.
A 100% economic growth. So the overall idea is like to create is also like a Pascal.
So the overall idea is like to create is also like Pascal and and Max have very clearly to create here a very clear level playing field also, like for all companies participating and who want to do business in Europe, but also like for all European companies so there should not be an
advantage, for neither companies outside the U. Nor for companies acting within the U.
Everyone should follow the same rules, and you know that you do so.
The European Commission has here created, like a very clear set of rules, and they are very clearly implementing those rules, and which are complement complementing the existing rules on merger control on Fdi Front Act.
Investment which is like the hour. Our cphus regulation on regulatory rules, like end on the status.
And here we had, like a clear gap unstated, and the idea here was like to close that gap, you know that here, to create a level playing field.
And very important here. What is that role of the Us Center which extent United States might be triggered?
Yes, it might be triggered, because at the moment this is the big fear of of the European Commission.
We are a very difficult environment. We have got like a transition of our economy.
We have got the green deal at the European, which is very important for the European Commission where we've got the transition to sustainability to like green ways of doing the thing of doing things.
We've got the problem with the with the energy transition at the moment we've got the digitalization of our market.
So it's a lot of things which are changing, and at the same time due to the energy crisis.
We're in a financial crisis at the moment, and before we're just getting out of the covet crisis where a lot of companies ran difficulties and a lot of governments, even in the rest, were responding to those difficulties.
And I remember, and I think that we already mentioned before.
If a consider yet inflation, reduction, act in the Years or the Chips Act were a lot of company had access to funds also, like from the public and European Commission, wants to respond here, and one thing is super important here, that European Commission is very very determined in its action.
Even if you look at its speed, how fast! Here the Fsr.
Was like, introduced and put into forces. It's really like a outstanding for European standards.
Also something which is very important here, and that's all important when considering for a stakeholder in the Us.
Am I concerned? It's like the new political environment we have.
Got the clear shift of powers also, like towards Prless.
On many things. Member States are not that strong at the moment that a lot of regulatory intervention, a lot of of a politics and policy is now taken over by Brussels and by the European Commission, and here, also, like with the Fsr there's a very clear tool introduced where the
absolute power, in order to look at that and the competence to look at.
That is a European Commission at a competition. I think it's a competition. Yeah.
And in addition to that, what do you think Commission has also, like created, is like a powerful tool, because the Commission has also, like created.
It's like a powerful tool, because the Commission has got a lot of powers like to take decision.
As Ramona has mentioned them before, they can make a decision, a provision decision, but they also can impose quite substantive fines for companies.
They have also, like investigation tools. It's quite a powerful tool here, and and some people are saying that this the Commission has created.
Here really a tiger with cheese that really can here implement the somehow political but also like economic interest, and ensure overall that it is like a there's a level playing field for all companies.
So coming back Chris, to your question on the proprietor, we have heard before, we've got notification requirements, and in order to submit those notification, and we have got at the moment, we get also, like the guidelines and all the preparatory
documents are prepared at the moment. There are a lot of documentation and a lot of information which need to be collected, and that will take time.
And here preparation is key for every company how to prepare for that, and you know, on the one hand side we have heard the the term financial contribution, financial Contribution.
You have to go back for a couple of years and look at all different advantages that the company has received.
In what form so ever in the past it can be like a the creation of a building below the value, or like a guarantee, without any any any commission or any under under my.
Here is not only like to collect that information, to interpret the financial contribution under the euros, because we have to follow yet the euros how the financial contribution is to be.
And here's also something very important, and I want to underline completely echo water. I think Max has said here before, it's completely different.
We have got no rule of reason yet. It's not that you have to see what's the cost.
Contribution which perhaps didn't affect the market.
Looking at the financial contribution just to look at that in the first step, and then afterwards.
We are looking to reach extent, that contribution is perhaps not that market terms to look to which extent it might distort competition.
It might have an effect, and only at the end different steps to see if there's like a balance test to be made.
But first it's like to see if, or has there been a contribution and that is already sufficient to trigger the rules.
And here, important, and all that needs to be preferred prepared beforehand.
And then we have also, like addressed before this also. Something for me is super important to consider.
Are all those activities below the threshold. So no company no stakeholder, should ever think we're below the threshold.
I'm perhaps out, because maybe there's like the ex official possibility, but also, like you might have to ask for questions.
And here I would like to remind that companies when participating in a tender and when they're below their threshold as my colleagues have have pointed out before they need to give like a declaration that they below this threshold, and they are not triggered by them
to notification requirement, but it is not enough to write here.
The 2 liner. I'm not fulfilling those criteria.
You always need to have the backup for that one, because the might afterwards come.
The question, Why are you not required? Because for public information we know Abcd.
And there might come question, and there might be questions. So it is also vari, very important.
Whenever you look here at, at when you're participating in a tender, and you believe that you're not maybe caught by a notification requirement to have also, like prepared. Very, very well.
Why that not toification requirement? It's not whether that' notification is required, and we are not fulfilling that clearly.
The same applies to much control. We have got merger control proceedings where you have get also like to make beforehand, and notification.
And you might be below this threshold. I would like to draw your attention that in parallel you might have a merchant controlling a notification under competition rules not on the foreign subsidy rules, and that's also like a question in there in the so-called form 0 in Europe which is
asking, Did you receive any contribution from a government, from from a government, or from a public source?
That information might be afterwards passed on also, like for the director rate for the team, for the unit dealing with the French subsidy regulation, and if you have provided T information on the merger control requires automatically it will also like trigger here question whether or not you have a
meter filing under the subsidy current subsidy regulation, and the last point that I also would like to make it like a pre notification.
We have discussed about that before, and there's like an interesting possibility that was granted here to to companies, to stakeholders that you can go to the European Commission before you do that.
The filing and discuss with them in the framework of a pren notification whether there's available for certain information, or which kind of information need to be provided, or maybe to clarify the one or the other issue.
However, we have got the same tool in merger control, and here it is very, very important that whenever you go to the European Commission for the pre notification at open it, pre notification, discussion that everything is already prepared.
This should already be for the company, like the end of the filing, because you cannot go trust to the Commission and discuss.
Maybe I am maybe I'm not, because whenever you say something it's like in stone, and you're like a creating like problems. There.
So I think it should be here a very clear, final filing that you give to the Commission, giving more or less the Commission the opportunity like to have a look if they want to know something more, or I have some additional information, but it is not like for the companies.
Upfront. It is not like For the Forum. I think that is very important.
Like to see what kind of information that we want to provide or not to provide.
Of course you can ask on certain things like for waiver, but you should have a very, very, very clear position, and the other point is here where it's very, important to be well prepared that the pre notification procedures do not know any timeframe so is it's here.
Like the Commission is not linked to and limited to any timeframe, which is also like a very, very important, so all that, considering all that, I think it is very important that at least going back to all the periods like the it's the 3 years period, where you have to connect the information, that you
always keep track of of financial contributions that you have received in particular.
When you start doing business, that you really have a consider from the beginning on this new foreign subsidy regulation.
And what are hear the kind of information that you need to prepare, because that collection that's pre-thinking will help substantially to make afterwards the the filing requirements, the notification requirements, and all the proceedings here with you a big commission may be less
burdensome and less a complaint than then it would be when you are not really really prepared.
I think that's one general statements like with respect. With respect.
How the Commission might see it already seen from the European. From their President's perspective, and some also, like consideration with respect to their preparation of any final requirements.
I hope I managed to give a good overview on that back to you, Chris.
Excellent Christian. Thank you very much. Just want to wrap up.
I'm gonna give the the blomstein folks and Jean and Robin and opportunity for last word just a quick question for the blomstein folks that that if the State, a doctor and the normal state a doctrine does apply to the foreign subsidies regulation if you're
notification. Requirements are shaped by the State a doctrine there's a huge exemptions under the the general block exemption regulation, the Gber, which is linked on public procurement, international calm.
Well, there are huge exemptions from that state, a doctrine for certain types of expenditures by Member States.
Will those exemptions apply as well to of the alleged foreign subsidies by foreign governments?
That's a very important technical question for us. Contractors that might, for example, competing in the European Union.
That'll turn over to the long line team.
Yes, that's actually a very good question, and I think the answer is yes and no.
It will have an impact on the Yes in terms of you won't see it.
Intervention. If something is covered by something. If an EU 8 would be covered by the general block exemption regulation, and you cannot see you won't see an intervention by the Commission.
If the similar aid was given in the as a foreign subsidy outside of the EU.
So that's very clear to my mind.
But, on the other hand, it doesn't mean that you don't have to notify under the under the Fsr.
And that's that's the big problem. Because and that's the main it's also a very important difference between the Fsr.
And the State a regime as we have it, State aid, and has basically the same conditions as a foreign subsidy.
So you have the 4 requirements, including selectivity and benefit, and only if you have.
If you have all the.
Often it's very difficult to establish whether you meet the requirements or whether there are certain exceptions and something which looks like a benefit is not a benefit under the under the case law, and so on.
So there are all sorts of difficult questions, but at the end of the day you're comfortable with the decision that there is no.
8 involved. There's no notification requirement, and that's very different.
And the Bfs are, because for the fiscal you only need 2 requirements, and that's the foreign financial contribution irrespective of whether it confers a benefit or on the recipient.
And so we are. The answer is, even if you're covered by the general block exemption regulation.
And at the end of the day won't have a problem, because you will get clearance. You still have to notify and get through for the burdensome process.
Thank you very much, Jeanne. Rob.
Yeah, I had nothing to add. Thank you.
So thanks very much, Chris. I have 3 points that I want to make, you know.
First of all, it should be clear, and it should be noted here that it is not the case that no thought is being given to interacting between the Fsr.
And broader international agreements in Brussels on the contrary, it's clear that some people in Brussels are thinking about these things.
In an interesting way, and one indication of that is this provision.
I believe it's in Article 49 of the Fsr.
To the effect that Mayors shall not be maintained.
I believe it's where these are contrary to the European Union's obligations under international agreements, and I have to say, this reminds me very strongly of the language that we've also seen in many us statutes.
Now including, but certainly not limited to, the 2,000 and 9 Recovery Act, where the Us.
Implemented these strong, strong by American provisions yet but included that language and I think it was section 105 d.
That's says the foregoing Shelby administered in a way that is consistent with us, obligations under international agreements.
So people are aware of these potential, broader interactions. But having said that I think our colleague, Jean Jean, you've made an important point earlier that we probably need some guidance on, and some I think there is some guidance that is missing on giving
a fact to these provisions which are intended to ensure no conflict between these internal measures, internal in some sense, and and Wto agreements, and and and Wto agreements, and further, to that point, actually I think, as I understand it there's a
interesting proposal by the Us. Chamber of Commerce to the effect that, if I understand correctly that companies from parties to the agreement, the Wto agreement on Government procurement should potentially be given exemption from some or all of the requirements of the fsr and I'm
not here to sort of plug for that. I think it would need to be thought through carefully, but I think it's an interesting proposal, and I think and I think the global community should be thinking of ways to ensure terms to deal more effectively with problems of ways to in general terms to deal more effectively with
problems, of international subsidization which are real, at least to an extent, and but at the same time ensuring that undue burdens are not imposed on companies, and maybe especially from companies companies companies from countries that have committed themselves to the framer the kind of
framework that you see in the Gpa. So I think that's just an interesting idea to consider.
And my last point is something we've we've alluded to all along in this in this wonderful webinar.
But haven't, said explicitly, but I think one of the insights that comes out of the discussion for me is the potential relevance of the existing EU State Aids framework.
Our elements of that framework, because, I'm at on the global stage.
And I think that this is is a kind of further thought that merits conversation.
It's a deeper. It's a deep thought.
I'm certainly not saying the EU system could just easily be translated hole as bolus to the whole world.
But I do think that there may be elements to the EU framework, for for state aids, particularly the competition based elements to that framework.
That are potentially that merit reflection on on their possible broader use in international and world commerce.
Thanks ever so much for organizing this wonderful, wonderful discussion.
Chris.
Thank you very much. From. Thank you very much to all our guests today.
This is really an excellent webinar, and a very important introduction to the Fsr.
To the foreign subsidies. Regulation. Thank you all again for joining us, and have a wonderful day.
Take care bye!
Thank you.
Yeah, thank, you.