Foreign subsidy controls: The new European Commission proposal

Responding to the requests from the European Parliament and the European Council, the Commission has proposed an ambitious regulation to control foreign subsidies distorting the internal market. The challenge is to find a balance between the positive effects of foreign investments in Europe, particularly in terms of jobs, and the unfair practices facilitated by foreign subsidies. Building in particular on experience with State aid and merger policies, the proposed regulation establishes a system of mandatory prior notification of concentration and participation in a public procurement procedure which could be facilitated by foreign subsidies. The Commission will balance the negative effects of the foreign subsidy in terms of distortions on the internal market with the positive effects on the development of relevant economic activities, taking potential redressive measures or commitments into account. To conduct these investigations, the Commission will have strong investigative powers including the possibility of requesting information and conducting on-site inspections in undertakings. The scope of the proposal covers all economic activities with very limited exemptions. Sensitive sectors like defence, shipbuilding, maritime transport or air transport are at least partly covered.

1. The debate around “unfair competition” caused by subsidies granted by third countries to their undertakings is not new. The European Commission (hereafter “the Commission”) is regularly criticised for imposing a strict State aid policy whilst competitors of European undertakings located in third countries enjoy generous subsidies. The reality, however, is not quite that cut and dry. In practice, the aim of State aid policy, defined in close cooperation with Member States, is to shape State aid around objectives of common interest, whilst limiting the distortions on the internal market. In this context, the Commission’s 2019 State Aid Scoreboard [1] showed that, in 2018, Member States spent more than EUR 170 billion State aid on Community undertakings. [2] 2. However, a similar State

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Alain Alexis, Foreign subsidy controls: The new European Commission proposal, November 2021, Concurrences N° 4-2021, Art. N° 102822, pp. 210-218

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