EU lawmakers agreed on new powers on Thursday to vet foreign investments and block state-backed companies from making unfair inroads into the EU market.

Once in force, the new rules will give EU competition authorities fresh abilities to probe foreign companies seeking to snap up EU-based firms or public contracts.

The rules don't specifically mention China, but they land as ties between the EU and its biggest trading partner are at a low point and they are largely understood to be targeting Beijing.

The final legal text was negotiated between members of the European Parliament, the European Commission and negotiators from France, which holds the EU's rotating six-month presidency until July 1.

"We are closing the French presidency with an agreement on our proposal for foreign subsidies," the EU's competition czar Margrethe Vestager said in a tweet.

"This is fairness. We control state aid within the EU and now we want to make sure that European economies are not undermined by foreign subsidies," she added.

The text now needs final ratification by the EU's 27 member states as well as a plenary session of the European Parliament, where opposition will be unlikely.

Vestager said that given the time needed to staff the commission to face its new responsibility, the instrument should come into force only in mid-2023.

Under the new rules, the bloc's powerful antitrust authority would investigate state-backed foreign companies seeking to acquire EU businesses with an annual turnover of more than 500 million euros ($524 million).

State aid investigations would also be launched into subsidised companies bidding for large public contracts in Europe, such as in rail or telecommunications, worth more than 250 million euros.

If necessary, Brussels will be able to implement corrective measures to remedy possible distortions of competition, and in some cases even prohibit a merger or the award of a public contract to the company concerned.

"The agreement reached on this new instrument will make it possible to combat unfair competition from countries that grant massive subsidies to their industry," said French Finance Minister Bruno Le Maire in a statement.

"This is a major step towards protecting our economic interests," he added.

In an effort to placate accusations of protectionism, the law also commits the EU to continue pushing for stronger international rules against distortive subsidies, notably via a reform of the World Trade Organization.

The American Chamber of Commerce to the EU, backed by similar associations from South Korea, India, Australia and Japan, has expressed doubts about the law, saying that it would create red tape and inflict legal uncertainty.

The new rule "poses a significant administrative burden on EU and non-EU businesses alike by introducing wide-ranging notification requirements and lengthy investigation periods," a statement earlier this month warned.

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