Distortive foreign subsidies regulation: A level playing-field for the single market [EU Legislation in Progress]

Written by Marcin Szczepański (1st edition) .

With public financing of enterprises on the rise globally, and substantially increased as a result of the pandemic, subsidisation has become an issue of growing concern in competitive markets. In May 2021 the European Commission published a proposal for a regulation on distortive foreign subsidies. It follows a 2020 white paper that identified gaps in the trade laws and put forward ways to close them. The draft regulation aims to tackle those foreign subsidies that have a distortive effect on the single market. It proposes to do so by giving the Commission powers to investigate subsidies granted by non-EU public authorities to companies operating on the internal market. If these are found to be distortive, the Commission will be able to apply redressive measures. The regulation proposes three new tools: two are notification-based, enabling the Commission to: investigate foreign subsidies in companies’ mergers and acquisitions; and investigate the bids in large public procurement procedures, involving third-country government support. The acquirer or bidder will be required to give ex-ante notification of external financial contribution. The third tool is an ex‑officio tool enabling the Commission to take the initiative to investigate other market situations. As co-legislators, Parliament and Council will now begin analysing the proposal.

Versions

Regulation of the European Parliament and of the Council on foreign subsidies distorting the internal market
Committee responsible:	International Trade (INTA)	COM(2021) 0223 of 5.5.2021
Rapporteur:	To be appointed	2020/0114(COD)
Shadow rapporteurs:	To be appointed	Ordinary legislative procedure (COD) (Parliament and Council on equal footing – formerly ‘co-decision’)
Next steps expected:	Initial discussions in committee