June 15, 2021

Brussels wants to tackle the impact of China’s investments within the EU


I stop companies subsidized with public funds from outside the EU. One of the pillars of the European Union is the single market, which is governed by rules to guarantee equal opportunities. This means that public contributions granted in the EU must be authorized by the European Commission. But what about companies that receive investment looking primarily at Beijing?


Brussels wants to put a stop to companies with aid from China and the United States

Brussels wants to put a stop to companies with aid from China and the United States

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To address that problem, the European Commission on Wednesday proposed a new instrument to address the potential distorting effects of foreign subsidies on the single market. “The aim is to close the regulatory gap in the single market, whereby subsidies provided by non-EU governments are largely unchecked, while subsidies provided by Member States are subject to in-depth scrutiny,” Brussels states: “The new tool is designed to effectively tackle foreign subsidies that cause distortions and harm a level playing field in the single market. It is also a key element in meeting the updated EU industrial strategy adopted on Wednesday, promoting a fair and competitive single market, thus setting the right conditions for European industry to flourish. ”

Thus, the regulation provides that the European Commission has the power to investigate financial contributions granted by public authorities of a non-EU country that benefit companies that carry out economic activity within the EU “and correct their distorting effects. “.

In this context, the regulation proposes the introduction of three tools: a notification-based tool to investigate concentrations involving a financial contribution from a non-EU government, where the EU turnover of the company to be acquire (or at least one of the parties to the merger) is € 500 million or more, and the contribution is at least € 50 million; a notification-based tool to investigate bids in public contracts involving a financial contribution from a non-EU government, where the estimated value of the procurement is € 250 million or more; and a tool to investigate all other market situations and smaller concentrations and public procurement procedures, which the European Commission can initiate on its own initiative (ex officio) and request ad hoc notifications.

With regard to the two notification-based tools, the buyer or tenderer must notify in advance any financial contribution received from a non-EU government in relation to concentrations or public acquisitions that reach the thresholds. Before the conclusion of the European Commission review, the concentration in question cannot be completed and the contract cannot be awarded to the examined tenderer.

Under the proposed regulation, when a company does not comply with the obligation to notify a subsidized concentration or a financial contribution in acquisitions that exceed the thresholds, Brussels will be able to impose fines and review the transaction as if it had been notified.

The general market research tool, on the other hand, will allow the European Commission to investigate other types of market situations, such as new investments or mergers and acquisitions below thresholds, when it suspects that a foreign subsidy may be involved. In these cases, the European Commission may initiate investigations on its own initiative (ex officio) and may request ad-hoc notifications.

“The application of the regulation will fall exclusively on the Commission to guarantee its uniform application throughout the EU”, states the Community Executive: “If the Commission establishes that there is a foreign subsidy and that it is distorting, it will be able to consider the possible positive effects of the subsidy It will balance them with the negative effects caused by the distortion. When the negative effects outweigh the positive effects, the European Commission will have the power to impose corrective measures or accept commitments from the affected companies to correct the distortion. ”

With regard to corrective measures and commitments, the proposed regulation includes a number of structural or behavioral solutions, such as the divestment of certain assets or the prohibition of certain market behavior: in the case of notified transactions, the Commission also It will have the power to prohibit the subsidized acquisition or the award of the public procurement contract to the subsidized bidder.

From now on, the European Parliament and the Member States will discuss the Commission proposal in the context of the ordinary legislative procedure with a view to adopting a final text.

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