On 23 September 2020, the European Commission (“Commission“) ended a public consultation into proposals to create new review mechanisms aimed at countering distortive effects of foreign subsidies in the EU single market. The premise of the proposals is that some companies operating within the EU may be at an unfair competitive advantage, if they are receiving foreign subsidies not available to their EU counterparts due to state aid rules.

The new mechanisms would apply to companies benefitting from non-EU subsidies, and would be triggered if non-EU subsidies might have a distortive effect on competition in the EU. Three mechanisms have been proposed, relating to:

  • Foreign subsidies in the Single market generally;
  • Acquisitions of EU companies;
  • EU public procurement procedures.

It is important for companies to be aware of these potential reforms, given that in future, the Commission and national authorities may separately scrutinise deals not just with respect to merger control and foreign investment rules, but also in relation to foreign subsidies. Although we do not anticipate draft legislation in 2020, the Commission has recently described these measures as a “maximum priority” for it in 2021, and we expect that the outcome of the consultation will be progressed as quickly as possible. For further detail, please see our previous client alert on the topic accessible here.

Author

Sunny Mann is a Partner and leads the EMEA and UK International Trade team, ranked Tier 1 by Legal 500. His practice includes a focus on national security, foreign investment, export controls and trade sanctions matters. He has worked on a number of foreign investment review cases, including obtaining clearance for a high profile acquisition triggering potential defence and national security concerns, one of the very few cases to go through a full UK statutory review. In the Legal 500, Sunny is ranked as a "Leading Practitioner".

Author

Alexander is an Associate in Baker McKenzie’s London office in the EU, Competition & Trade Practice. He has experience advising private equity and industry clients on foreign investment rules in a range of sectors (including consumer goods, media and technology).

Write A Comment