European Commission opposes distortive effects of foreign subsidies

May 26, 2021 Benn-Ibler Rechtsanwälte

The European Commission proposes a new regulation on distortions in the Single Market caused by foreign subsidies. This regulation aims to close the existing regulatory gaps in the Single Market.

The granting of subsidies by non-EU governments currently goes largely unchecked, while subsidies granted by Member States are subject to close scrutiny. Foreign subsidies take various forms, such as interest-free loans or other forms of non-cost recovery financing. With the help of this new regulation, foreign subsidies that lead to distortions and harm competition could be effectively combated in all market situations. Especially in view of the updated EU industrial strategy, this proposal is an important implementation tool.

The new regulation enables the Commission to investigate financial contributions received by companies doing business in the EU from authorities of a non-EU state, and, if necessary, to avert the distortive effects of such contributions. Three instruments are to be introduced for this purpose:

1.      A notification-based merger review tool for cases where a non-EU government provides a financial contribution and the acquired company's turnover generated in the EU is EUR 500 million or more and the foreign financial contribution is at least EUR 50 million.

2.      A notification-based tool for the review of bids in public procurement procedures for cases where a non-EU government provides a financial contribution and the estimated value of the contract is EUR 250 million or more.

3.      An instrument for the examination of all other market situations and for mergers and lower value award procedures, where the Commission may initiate an examination on its own initiative and require ad hoc notifications.

This proposal will now be discussed by the European Parliament and the Member States under the ordinary legislative procedure so that a valid version can be adopted.

European Commission, press release (05.05.21), Brussels