Members' Research Service By / July 5, 2021

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

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.

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Written by Marcin Szczepański (3rd edition, updated on 21.06.2022) .

Public financing of enterprises, which has been on the rise globally, can have a distortive effect on competitive markets. In response to this trend, in May 2021 the European Commission published a proposal for a regulation to tackle foreign subsidies with a distortive effect on the EU single market. It would enable the Commission to investigate subsidies granted by non-EU public authorities to companies operating on the single market, and to apply countervailing measures, should these subsidies be found to be distortive.

The Commission would have three tools at its disposal: two are notification-based, allowing it to investigate foreign subsidies in companies’ mergers and acquisitions, and to investigate the bids in large public procurement procedures involving third-country government support. The acquirer or bidder would have to give ex-ante notification of external financial contribution. The third would enable the Commission to investigate other market situations.

The Parliament adopted its position in plenary in May 2022, and trilogue negotiations have since commenced.

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:

Christophe Hansen (EPP, Luxembourg)

2020/0114(COD)
Shadow rapporteurs: Inmaculada Rodríguez-Piñero Fernández (S&D, Spain) Catharina Rinzema (Renew, the Netherlands) Reinhard Bütikofer (Greens/EFA, Germany) Geert Bourgeois (ECR, Belgium) Emmanuel Maurel (The Left, France) Marco Campomenosi (ID, Italy) Ordinary legislative procedure (COD) (Parliament and Council on equal footing – formerly ‘co-decision’)
Next steps expected: Continuing trilogue negotiations

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