On 5 May 2021, the European Commission (Commission) published a proposed Regulation, along with an impact assessment report, aiming to address potential distortions caused by foreign subsidies in the Single Market (the Proposed Regulation). The Proposed Regulation as drafted introduces an additional regulatory requirement for companies doing business in Europe. Inevitably, it will increase the regulatory risk and burden for companies that are active in the EU and have received foreign (i.e. non-EU) subsides.

Under the Proposed Regulation, companies may have to notify any transaction financed by foreign subsidies to the Commission and any company wanting to participate in any public procurement in the EU with a value greater than EUR 250 million will have to notify the Commission prior to submitting their tender offer and to provide a substantial amount of information. This means for M&A transactions involving EU targets and non-EU companies that have benefited from foreign subsides, pre-closing (i.e. suspensory) hurdles may now include: (i) the new mandatory filing obligation, (ii) the “existing” merger control filing obligation at the EU or the Member State national level, and (iii) foreign investment filing obligations at the EU Member State level. In addition, under the Proposed Regulation the Commission will have the ability to initiate ex officio reviews of foreign subsidies in the preceding 10 years, meaning companies may have to comply with requests for information and be subject to inspections. The Commission may conduct these inspections both in the EU and outside of the EU (subject to certain conditions).
 
At this stage, the Proposed Regulation is still a proposal and is subject to review and subsequent amendments from the European Parliament and Council of the European Union. The ordinary legislative process to adopt the Regulation is unlikely to be concluded before the end of 2022. In the meantime, it is important for companies to engage with the Commission and make their views known. The Commission is seeking feedback until 30 June 2021, which you can submit here.

For more information on the Proposed Regulation and its potential impact, please see our client alert here or reach out to your Baker McKenzie lawyers for more information and for assistance to submit feedback.

Author

Paul Johnson is a partner in Baker McKenzie Brussels' European & Competition Law Practice. He is an English qualified solicitor and has been practicing in Brussels and the UK for almost 15 years. Paul regularly represents clients on competition matters before the European Commission and has provided competition law advice with respect to over 100 jurisdictions around the world. Paul has extensive experience in all areas of EU competition law, including multi-jurisdictional and EU merger control (notifications and third party complaints), foreign investment review, joint ventures, cartels, abuse of dominance, distribution and other commercial relationships.

Author

Nina Niejahr is a counsel in the Firm’s European & Competition Law Practice in Brussels and co-chair of the European State Aid Group. She is an active participant in the State Aid Working Group of the European Competition Lawyers Forum. Ms. Niejahr has published extensively and speaks regularly at seminars and conferences on a variety of EU competition and state aid law topics. She is the author of the chapter on EU legal protection in state aid cases, published in the 2011 Münchener Kommentar zum Wettbewerbsrecht (Kartellrecht) and in the 2016 Säcker/Montag European State Aid Law: A Commentary.

Author

Gavin Bushell is a partner in the European & Competition Law Practice Group in Brussels, where he advises clients on EU competition and merger control law. He has 20 years of experience practicing law and is a frequent speaker at legal conferences, particularly on merger control matters. In 2020, Gavin was listed as one of a limited number of practitioners in the Who’s Who Legal: Thought Leaders – Competition 2020.

Author

Samantha Zakka is an associate in Baker McKenzie Brussels' European & Competition Law Practice.