Regulation 2022/2560 ("FSR") aims to ensure a level playing field in the internal market. Understandably, a fair chance to compete on the internal market is not only in the interest of the EU, but also of market participants. Those that are disadvantaged by subsidies granted to their competitors may be expected to look for avenues to ensure that the FSR is enforced to its full potential.
There are various ways in which third parties could seek enforcement of the FSR. First and foremost, the FSR allows for complaints. We anticipate that the FSR will induce a large number of complaints (see for instance the complaint of the Spanish football league against the alleged subsidies granted to the French soccer club PSG; see here. Third parties may also be subject to the EU Commission's measures for gathering information as addressees of RFIs or by being interviewed by the Commission. They may also express their views when the Commission invites the public after it decides to open an in-depth investigation. Finally, third parties may also challenge the Commission's substantive decisions if they are directly and individually concerned.
A plausible basis for private enforcement
For the most part, the FSR does not contain provisions that would be eligible to have direct effect. Although targeted at distortive foreign subsidies, the FSR does not prohibit them. Its substantive test – not focusing on whether the subsidies are distortive, but whether the negative effects may be counterbalanced – makes the rules of the FSR largely unsuitable for direct effect.
Thus, unlike under the EU state aid rules, no general standstill obligation that could be enforced by third parties is foreseen in the FSR.
On the other hand, undertakings will face a notification obligation if the thresholds under the M&A and public procurement tools of the FSR are met. Accordingly, there is a standstill obligation for concentrations that must be notified to the Commission and for awards of contracts in above-threshold tenders. Notification and standstill obligations go hand in hand. They are also sufficiently clear to establish direct effect, meaning that third parties should be able to rely on them in private claims (if the obligations in the specific situation are relevant to them).
Additionally, if the Commission issues a decision under the FSR, the addressees are, unsurprisingly, obliged to act in compliance with it. A breach of this obligation can, in principle, also be enforced privately by a third party. This also extends to interim measures imposed by the Commission according to Art 12 FSR.
It remains to be seen whether successful follow-on damages claim following a decision of the Commission finding a distortive foreign subsidy (under the general tool) can be brought against subsidy beneficiaries. We expect that this will be an enforcement route for enterprises who were harmed, e.g., by low price practices of competing subsidy beneficiaries.
Taking the example of private enforcement of EU competition law, we assume that claims for cease-and-desist orders (particularly if breaches of standstill obligations are argued) or claims for specific performance (forcing the defendant to, e.g. notify a notifiable concentration) will be pursued in practice. Claims requiring restitution, either following a breach of a standstill obligation can also be brought. Finally, requests for preliminary injunctions can also become an option for third parties disadvantaged by distortive foreign subsidies, which are subject to a negative decision of the Commission or appear in the context of breaching a notification or standstill obligation, even connected to interim measures.
The text is based on the authors' earlier editorial opinion for EU Law Live's Competition Corner published at: https://eulawlive.com/competition-corner/private-enforcement-of-the-foreign-subsidies-regulation-by-volker-weiss-and-jan-kupcik/.
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