The last few weeks have seen a number of legislative changes affecting public procurement procedures. Importantly, many of these changes have not been to the main Public Procurement Act but to other pieces of legislation applicable to public procurement.

Below we review the most significant of these changes that have come into force in recent weeks.

The FSR

On 12 October 2023, the procurement mechanism set out in Regulation (EU) 2022/2560 of the European Parliament and of the Council of 14 December 2022 on foreign subsidies distorting the internal market, commonly referred to as the FSR (short for Foreign Subsidies Regulation) began to apply.

• The FSR focuses primarily on foreign subsidies, i.e., financial contributions provided directly or indirectly by a third (non-EU) country that confer a benefit and which are limited to one or more undertakings or industries. This is a very broad concept and covers a wide range of transactions, from simple transfers of funds, to loan guarantees, tax incentives and the supply of goods and services on preferential terms, whether from public entities or private entities linked to a third country.
• Sanctions are to be imposed where subsidies are found to distort the EU’s internal market.
• In practice, the most important are the notification obligations which are mandatory for all competitive procurement procedures for contracts with a value equal to or greater than EUR 250 million. The European Commission may also extend the notification obligations to other procedures if it decides that an ex ante review of a tender is necessary because it suspects that the economic operator concerned may have benefited from foreign subsidies in the three years prior to the submission of the tender.
• An economic operator submitting a tender which has received one or more foreign financial contributions worth a total of at least EUR 4 million from a non-EU country over the previous three consecutive years must notify these contributions. Economic operators who have received foreign financial contributions totaling less than EUR 4 million are required to submit a declaration instead of a notification, but must still provide a list of the financial contributions received from third countries and a confirmation that they are not notifiable.
• The above obligations also apply to financial contributions made to the economic operator’s subsidiary companies without commercial autonomy, its holding companies, and main subcontractors and suppliers involved in the same tender.
• The above notifications and declarations must be sent by the contracting authority directly to the European Commission for review. The Commission has very broad review powers and may, in particular, require any undertaking or association of undertakings to supply information, impose heavy fines and periodic penalty payments in the event of failure to comply with such requests and may conduct any necessary interviews.
• If a foreign subsidy is found to be unacceptable, the Commission may even prohibit the award of a public contract to the economic operator concerned or impose other types of redressive measures to counteract the distortion of the internal market caused by the foreign subsidy, such as requiring access to infrastructure under fair, reasonable and non-discriminatory conditions, reductions of production capacity or certain investments to be refrained from.
• Severe financial sanctions may also be imposed for failure to comply with the formal requirements of the FSR. The Commission may impose on economic operators fines of up to 10 percent of their annual turnover and periodic penalty payments of up to 5 percent of their aggregate turnover in the preceding financial year for each day of non-compliance.
• Pending the outcome of the review procedure, the contract may not be awarded to the tenderer under review by the Commission.
• Disputes relating to matters governed by the FSR are not subject to the jurisdiction of the National Appeals Chamber (Krajowa Izba Odwoławcza), but are referred to the Court of Justice of the European Union.