The European Commission has published today a Staff Working Document (‘SWD') clarifying how it will determine when a foreign subsidy distorts the internal market and how it will apply the balancing test under the Foreign Subsidies Regulation (‘FSR').
The SWD consists in questions and answers providing initial clarifications on the assessment of the existence of a distortion caused by a foreign subsidy on the internal market and on the application of the balancing test. In particular, the SWD provides initial clarifications on the interpretation and the assessment of concept of distortion both for concentrations and public procurements procedures. It also clarifies the Commission's approach to subsidies most likely to distort the single market, notably unlimited guarantees. The SWD further clarifies the Commission approach to the balancing test and its impact on the outcome of an investigation.
The initial clarifications set out in the SWD will be further developed through case practice and the Union courts' case law. The Commission will also publish guidelines on the application of certain provisions of the FSR at the latest by 12 January 2026.
The FSR started applying on 12 July 2023. It enables the Commission to address distortions caused by foreign subsidies and allows the EU to ensure a level playing field for all companies operating in the Single Market, while remaining open to trade and investment.