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.
