Earlier in 2023, the EU Foreign Subsidies Regulation (Regulation 2022/2560) came into effect. The Regulation provides the power to the Commission to investigate financial contributions granted by non-EU Member States to companies active in the EU.
Under the Regulation, if the Commission finds that such financial contributions constitute distortive subsidies, it can impose measures to redress their distortive effects. The rationale for the introduction of the Regulation is that subsidies (state aid) granted by non-EU Member State up until now, were unchecked at EU level, while similar subsidies granted by EU Member States were long subject to close scrutiny by the Commission under EU state aid law.
Given that state aid law is part of the EEA Agreement, it might be perceived that the Regulation would require incorporation into the EEA Agreement through the relevant EFTA process, and thus, apply to EFTA-EEA states: in all meaning that state aid granted by Iceland and Norway (subject to the EFTA Surveillance Authority) would not be considered a ‘foreign subsidy’.
However, that is not so: the Regulation is not a ‘Text of EEA Relevance’, despite one of the Regulation’s legal bases being Article 114 TFEU (the internal market harmonisation legal basis). The Regulation is based on Article 114 TFEU and Article 207 TFEU (the Common Commercial Policy) (CCP), and the CCP is not a part of the EEA Agreement.
What effect does this have for inter-Nordic and EFTA-EEA to EU trade within the EU? The Commission is therefore clear that ‘[a]ll foreign financial contribution granted by [states] that are not EU Member States (thus including those granted by [EFTA-EEA states] count’ for determining whether state aid granted by Iceland and Norway are distorting the internal market.
One consequence of all this is that it means that state aid granted by Iceland and Norway now comes more firmly under the remit of the Commission, and not the EFTA Surveillance Authority.
A summary of the Foreign Subsidies Regulation can be found here, and the Commission’s Q&A here (in particular, Q12).