Guide to the Foreign Subsidies Regulation, part 3: Notification in public procurement
In this section we discuss step by step the key requirements of the FSR for notification of foreign subsidies in public procurement procedures, from the threshold and the scope of information that must be submitted, to responsibility for the data, and practical pointers for contractors and consortia.
Why is public procurement subject to the FSR?
Public contracts are financed out of public funds, and their value often reaches into the hundreds of millions of euro. This makes it essential that foreign subsidies not give contractors an unfair advantage. The FSR introduces clear rules designed to protect competition on the market.
When is there a duty to notify the European Commission?
Notification of the Commission is mandatory when two conditions are met, for the value of the procurement and the value of financial contributions received by the contractor.
What public procurement procedures are exempt from the FSR?
The notification obligation does not apply to:
- Contracts in the defence sector
- Contracts awarded in the negotiated procedure without prior publication of a contract notice, for reasons of extreme urgency brought about by unforeseeable events.
When the contract (with an estimated value of EUR 250 million or more) is awarded through the negotiated procedure without prior publication because it can be performed only by a specific contractor (e.g. due to a lack of competition, exclusive rights, or creation of an artwork), the contractor is required to submit information about foreign financial contributions. However, in that case the Commission will not investigate the impact of foreign subsidies on the internal market.
Who makes the notification, and what do they notify?
If the contractor has not received support, or the support totals less than EUR 4 million, a declaration should be submitted (on the same form FS-PP) that the contractor (together with affiliates, main subcontractors and suppliers) have not received contributions at or above the EUR 4 million threshold from any third country.
Even if the contracting authority does not state in the contract announcement that the notification must be made, there is still an obligation to notify financial contributions. This obligation arises directly under the regulation.
The contractor is responsible for correctly identifying and carrying out the notification obligation.
Most frequent errors to watch out for:
- Omitting support received by a main subcontractor or supplier (>20% share of the contract)
- Lack of cooperation between consortium members—this carries the risk of rejection of the bid
- Assuming that a failure to mention the notification obligation in the terms of reference means that contractors have no duty to notify the Commission.
Example:
A Polish contractor is building an airport for EUR 500 million, and 30% of the work will be carried out by a subsidiary from Turkey. The consortium leader must gather and submit information not only about its own grants or loans from third countries, but also those received by the Turkish company within the last three years (e.g. credit from a state bank in Istanbul).
If the sum of financial contributions from the Turkish government is EUR 4 million or more, notification to the Commission is mandatory.
What information is required? (form FS-PP)
1. Identification of the contractor and participants in the tender
- Contractor’s full name, contact details, legal form
- In the case of a consortium, details for all members of the consortium, main subcontractors and suppliers whose economic share exceeds 20% of the value of the tender
- Description of links between participants (diagram of capital group)
2. Details of the procurement
- Title and number of the procedure, contracting authority’s name and address
- Indication of the lots of the procurement which the contractor is seeking (if the procurement is divided into lots)
- The value of the tender and its share of the procurement (particularly in procurements divided into lots).
3. Financial contributions from third countries
All “financial contributions” from third countries (outside the EU) received within three years before filing the bid
For each contribution ≥ EUR 1 million, the following should be stated:
- Form (grant, loan, guarantee, tax incentive, compensation etc)
- Amount of support
- Awarding entity (third country, government agency, sovereign fund)
- Conditions for award and use of support
- Aim of the support and economic rationale
- Whether access to support is available on market terms
- Whether access to support is limited in law or fact
- Whether the contribution concerns exclusively the operating costs connected with the specific procurement (if the contribution involves only the operating costs of the specific procurement, it may be excluded from the calculation up to the threshold of EUR 4 million—FSR Art. 29(4), Annex II sec. 2.2.2).
If the sum of all contributions of EUR 1 million or more from a given third country equals or exceeds EUR 4 million in the past three years, a collective list of contributions should be prepared for each such third country.
If the sum of contributions from a given country exceeds EUR 300,000 (the de minimis threshold) but is below EUR 1 million, the contractor may enclose a list (brief description without stating the values). This list is optional.
4. Declarations/attestations
- Attestation that all information provided is true, correct and complete
- Declaration on the lack of a notification obligation (if no contributions were received or the sum of contributions was below EUR 4 million)
5. Additional information (optional)
- Any positive effects of the subsidies for the EU market (e.g. investments in new technologies, jobs, green transition) may be described
- Other information or documents explaining the nature of the support may be enclosed
6. Protection of confidentiality
- Information may be marked for treatment as “confidential” (trade secrets, sensitive financial data)
- A justification should be provided why disclosure of such information would infringe the interests of the contractor or its group
- A list of confidential contributions may be set forth in a separate encrypted file—this is particularly important in the case of a consortium or multiple subcontractors
7. Enclosures to form FS PP
- Documents confirming receipt of financial contributions (contracts, decisions, letters, certifications)
- As needed: documents concerning the group, financial reports, analyses of the impact of the support on execution of the procurement.
Note!
- Prepare a list of all links between entities and collect information on their financing going back a minimum of three years.
- Talk to subcontractors and suppliers sufficiently far in advance—they must prepare similar data!
- Don’t understate or ignore small amounts—even modest support is included in the collective lists.
If the list of financial contributions constitutes a trade secret, and the notification is made by multiple entities (e.g. consortium members or the contractor along with its main supplier), lists from specific entities can be submitted separately as an enclosure to the notification, in the form of an encrypted file.
Verification of notifications and supplementary proceedings
The contracting authority will check the completeness and formal correctness of the notification. If anything is missing (e.g. a lack of notification from certain members of a consortium), the contracting authority will summon them to supplement the filing within 10 days.
The European Commission can also demand supplementary information, in which case the contractor has 10 days to respond. If the information is not supplemented, the bid will deemed improper and rejected.
Responsibility
The contractor who has received the subsidy is responsible for inaccurate or incomplete data. If the error concerns only one member of a consortium, only that member is exposed to sanctions (including fines or exclusion from the procurement).
Dr Anna Kulińska, Serom Kim, adwokat, State Aid & EU Internal Market practice, Wardyński & Partners
