In public procurement procedures, foreign financial contributions must be reported
As of 12 October 2023, once they exceed certain financial thresholds, undertakings participating in public procurement procedures are required to notify the contracting authority of all foreign financial contributions.
This obligation is imposed by the Foreign Subsidies Regulation ((EU) 2022/2560), which was published on 23 December 2022. (We wrote about this issue in the article “EU tenders: Foreign subsidies must not distort competition.”)
In general, the regulation became effective as of 12 January 2023, but some of the implementing provisions apply from 12 July 2023, and some, including Arts. 21 and 29, only from 12 October 2023. Art. 29 covers prior notification and declaration of foreign financial contributions in the context of public procurement.
As of 12 October 2023, undertakings participating in a public procurement procedure must notify the contracting authority or contracting entity of all foreign financial contributions when:
- The estimated value of the public procurement or framework agreement net of VAT, or a specific procurement under the dynamic purchasing system, is EUR 250 million or more; and
- The economic operator, including its subsidiary companies without commercial autonomy, its holding companies, and, where applicable, its main subcontractors and suppliers involved in the same tender in the public procurement procedure, was granted aggregate financial contributions in the three years prior to notification (or, if applicable, the updated notification) of EUR 4 million or more per third country.
For a procurement divided into lots, the notification obligation applies to cases where the value of the lots for which the bidder applies is EUR 125 million or more (Art. 28(2)).
Contracting authorities should indicate in the contract notice (or in the case of a procedure without prior publication, in the contract documents) that undertakings are subject to the obligation to report foreign financial contributions. However, the absence of such information does not eliminate the obligation to apply the regulation if a specific order falls within its scope.
In all other cases, undertakings will be required to submit a statement listing foreign financial contributions received and confirming that foreign financial contributions received are not reportable under Art. 28(1)(b) of Regulation 2022/2560.
Also, Commission Implementing Regulation (EU) 2023/1441 was published on 12 July 2023.
According to Form FS-PP (Annex II to the Implementing Regulation), information on foreign financial contributions must be provided only if such contributions equal or exceed the threshold of EUR 1 million (sections 3.1, 3.2, 3.3 and the instructions to Table 1 of Form FS-PP). According to the Commission’s guidelines on reporting of foreign subsidies, the EUR 1 million threshold refers to individual financial contributions granted by one third country to each notifying party. Thus, to determine whether the threshold has been met, foreign financial contributions granted to different reporting parties are not added up. Also, foreign financial contributions granted by different third countries to the same party should not be aggregated.
As a rule, in an open procedure, a declaration of foreign financial contributions or statement is submitted only once, at the time of submitting a bid. In multi-stage proceedings, the declaration or statement is to be submitted twice: first with the request to participate, and then, as an updated declaration or updated statement, with the bid or final offer.
By way of decision, the Commission may impose on an undertaking a fine not exceeding 10% of its total turnover in the preceding fiscal year if the undertaking intentionally or negligently:
- Failed to notify foreign financial contributions in accordance with Art. 29 of the regulation during the public procurement process, or
- Circumvented or attempted to circumvent the notification requirements, as referred to in Art. 39(1) of the regulation.
Karolina Parcheniak, attorney-at-law, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners
