Brussels prepares new rules to crack down on foreign public subsidies

Brussels is trying to finalize a new legislative power that can crack down on market-distorting subsidies from foreign governments as the EU aims to protect itself from unfair competition with capitals, including Beijing. ..

The proposed rule, a summary of which was seen by the Financial Times, represents a significant strengthening of Block’s approach to state-sponsored competition from abroad.

The bill, which will be announced next week, will be interpreted as a challenge, especially for China, in a tense moment for EU-Beijing relations. This was after the EU and China reached a preliminary agreement on a groundbreaking investment agreement at the end of last year, but ratification of the agreement will take some time.

The EU already has several tools for dealing with foreign subsidies, such as trade defense measures to deal with potential security threats and screening for foreign investment.

However, the state’s aid regulations only directly cover cash distributed by European states. Authorities are concerned that this leaves a gap when it comes to subsidies from non-EU member states that facilitate acquisitions in Europe or support the activities of companies within the block.

Under the proposed regulations following Brussels White paper The European Commission, announced last year, is empowered to intervene in acquisitions of EU companies and bids for public procurement if supported by state subsidies from outside the block.

With the new system, the largest and potentially most distorting acquisition or procurement bids must be notified to the Commission in advance. According to two people familiar with the discussion, these include acquisitions of companies worth at least € 500 million or procurement contracts worth at least € 250 million.

The Commission has the authority to request information and conduct field surveys and choose to initiate investigations in other cases, but foreign subsidies of less than € 5 million distort the EU single market. It is considered unlikely. Fines may be imposed if a company fails to comply with information requests or abandonment orders for acquisition plans.

Due to the lack of transparency of foreign subsidies, the Commission uses a set of “indicators” to include the size of the subsidy for a particular market size or value, the potential of a single market. Evaluate the degree of distortion. Acquisition. Certain types of grants, such as unlimited guarantees, are considered particularly distorted.

Remedies include behavioral or structural remedies such as banning transactions and selling assets, as well as repayment of subsidies received, along with interest.

The proposed regulation falls under the authority of Marguerite Vestager, Vice President of the Commission to Oversee Competition.

“In recent years, foreign subsidies have had a distorting impact on the EU’s domestic market, and the competition seems to be uneven,” the Financial Times said.

In some cases, they have sacrificed competition by facilitating acquisitions of EU companies and distorting trading of services. Government distributions include interest-free loans, unlimited state guarantees, or tax subsidies.

The draft legislation will soon be open for scrutiny by Member States and the European Parliament. However, it could take years before the regulation is enacted, and officials warn that the proposal may still change.

EU officials said the proposal would also affect European companies if they were found to be receiving subsidies from outside the EU. “The source of the money is important, even if it’s a European company,” said an official with direct knowledge of the proposal.

The Commission said there were “no specific comments” on the proposal.

Brussels prepares new rules to crack down on foreign public subsidies

Source link Brussels prepares new rules to crack down on foreign public subsidies

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