Knowledge

EU Commission White Paper on Foreign Subsidies

2020-06-22

 

Today, the Commission published a White Paper addressing the distortions caused by foreign subsidies to the EU Internal Market.[1]  As a White Paper, this is a purely consultative document. The Commission will be welcoming comments until 23 September 2020.  When this process has been concluded, the Commission will likely draft new legislation that is in line with the White Paper.  This White Paper doesn't single out China as such, but the press during the run-up to this White Paper has clearly identified China as the obvious focus. 


The White Paper address several concerns: 

  • Situations in which the receipt of foreign subsidies by a company established in the EU has the effect of distorting competition within the EU.  In other words, Chinese companies with no presence in the EU would not be affected by these provisions, even if they are actively selling in the EU. The types of market distortion of concern would be, for example, price undercutting, ability to buy up inputs and thus foreclose competitors, etc. 

  • Situations in which foreign subsidies facilitate the acquisition of EU companies. The concern here is that a foreign company is able to use subsidies from its government to enable to distort the acquisition process relating to an EU target company (by making rival bids less competitive). As the nexus between the subsidy and the acquisition, the Commission would wish to ascertain whether the acquirer received a subsidy in the last three years which satisfies thresholds to be determined.

  • Situations in which foreign subsidies have a harmful effect on EU public procurement.  The principal concern here is that the foreign subsidy enables the bidder in a public tender to offer the best price. 

  • Situations in which foreign subsidies distort the EU funding process.  The concern is that a subsidized foreign company is able to distort its own financial situation so that more easily qualifies for an EU funding program. 


The White Paper provides a lengthy discussion as to how each of the above situations may be dealt with procedurally, but without a lot of detail.  What can be expected, however, are potentially time-consuming investigations. In the case of subsidies used to facilitate the acquisition of an EU target, the White Paper appears to contemplate investigations that would run in parallel with any antitrust review(s).   


The themes and impact of the White Paper will be of critical concern to DeHeng clients, particularly SOEs doing business in the EU. SASACs, industry groups and individual companies, as well as perhaps DeHeng itself, should consider the submission of comments to the Commission as part of the consultative process.  These comments should point out the difficulties of implementation, issues of unfairness and even possible contraventions of EU law suggested by the White Paper proposals.


notes:

[1] https://ec.europa.eu/competition/international/overview/foreign_subsidies_white_paper.pdf


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Dr. Frank Fine

             

 

德恒布鲁塞尔办公室

国际反垄断业务主管

 


       

Head of International Antitrust and Data Protection, DeHeng Law Offices (Brussel) Executive Director, China Institute of International Antitrust and Investment Visiting Professor of Law, China University of Political Science and Law(Admitted to practice in England & Wales, California and District of Columbia)        


中国国际反垄断和投资研究中心担任执行主任,中国政法大学法学院国际反垄断与投资研究所访问教授。(拥有英格兰、威尔士、加利福尼亚和哥伦比亚地区执业资格。)         

E-mail:frank.fine@dehenglaw.com        


Disclaimer:                                

This article was written by the lawyer of DeHeng Law Offices. It represents only the opinions of the authors and should not in any way be considered as formal legal opinions or advice given by  DeHeng Law Offices or its lawyers. If any part of these articles is reproduced or quoted, please indicate the source.                                


声明:   

本文由德恒律师事务所律师原创,仅代表作者本人观点,不得视为德恒律师事务所或其律师出具的正式法律意见或建议。如需转载或引用本文的任何内容,请注明出处。

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  • Frank FINE

    Counsel

    Tel:+32 02 735 0880

    E-mail:frank.fine@dehenglaw.com

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