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EU moves to regulate 'distortive' foreign subsidies

09 May 2022, 23:06 CET
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EU moves to regulate 'distortive' foreign subsidies

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(BRUSSELS) - EU institutions adopted their position Thursday on a regulation on foreign subsidies distorting the internal market, with the aim of ensuring a level playing field for all companies operating in the market.

The new tool gives the EU Commission the power to investigate and counteract market-distorting foreign subsidies granted to companies set to acquire EU businesses or take part in EU public procurement.

The goal is to ensure fair competition among firms active on the EU market by establishing equality of opportunity; while EU countries have to abide by state aid rules, so far there has been no comparable regime in place for support granted by non-EU countries.

A comprehensive framework allows the Commission to investigate any economic activity benefiting from a third-country subsidy on the internal market and to set up a specific framework for subsidies granted by third countries in the context of large concentrations and large public procurement procedures.

As is the case under the EU state aid control framework, if the Commission finds that a foreign subsidy exists and that it distorts competition, it will perform a balancing test. This tool will assess the balance between the positive and negative effects of a foreign subsidy.

The regulation will be implemented exclusively by the Commission. The Council text specifies that during this centralised implementation by the Commission, member states will be kept regularly informed and will be involved, through the advisory procedure, in decisions adopted under the regulation. It also introduces an alert mechanism allowing member states to flag up suspected distortive subsidies.

To make the provisions on public procurement more effective and more transparent, the Council text clarifies the procedures applicable to the various existing procedures and stipulates that the Commission should publish guidance on the implementation of the regulation in the context of public procurement procedures.

The Council text shortens the deadlines for investigations to ensure that implementation of the regulation does not slow down public procurement procedures.

The regulation proposes three tools which the Commission can use to investigate financial contributions from non-EU governments: two notification-based tools – to investigate large concentrations and bids in large public procurement procedures – and a general market investigation tool.

The Council text raises the notification thresholds to: €600 million for mergers; €300 million for bids in public procurement procedures.

The Council mandate shortens to five years the period during which the Commission can retrospectively investigate subsidies granted before the regulation enters into force which create distortions on the internal market after it has entered into force.

The Council text limits the Commission's scope to change the procedural thresholds and deadlines: the Commission would only be able to increase notification thresholds and shorten deadlines.

Today's mandate was approved by the Council's Permanent Representative's Committee (Coreper), so the Council can now start negotiations with the European Parliament.

Council negotiating mandate

European Commission proposal for a regulation on foreign subsidies distorting the internal market

The European Parliament adopted text will be available here (04.05.2022)

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