With the aim of creating a more level playing field for EU companies, the European Parliament’s International Trade Committee (“INTA”) published on 17 December 2021, a Draft Report on the EU Proposal for a Regulation on distortive foreign subsidies. MEP Christophe Hansen (EPP, Luxembourg), who is the rapporteur for this initiative, expressed support for the overall aim and design of the proposal. He noted that the Regulation addressed a “longstanding regulatory gap that puts European companies at a competitive disadvantage” compared to companies benefitting from foreign subsidies that are not subject to the same “rigorous scrutiny” applied to subsidies given by EU Member States. In Europe, such Member State subsidies are subject to EU State aid rules. This Draft Report marks an important step in the progress of the Regulation through the Parliament.
As previously reported, the European Commission published a ‘White Paper on levelling the playing field as regards foreign subsidies’ in June 2020 which considered how the EU could address market distortion caused by subsidies granted by non-EU authorities to undertakings established in the Union. The adoption of the White Paper started a 14-week public consultation, which ended on 23 September 2020. Most of the replies to the consultation showed a strong support across the EU in favour of introducing measures to regulate foreign subsidies in the Union. A summary of the consultation results was published by the Commission and is available here.
In light of this public feedback and in an effort to “level the playing field”, the Commission presented a proposal for a Regulation on foreign subsidies distorting the internal market on 5 May 2021. The draft Regulation proposed the introduction of a three-tiered investigation tool:
The Commission’s powers under the proposed Regulation are extensive and, if adopted in its current form, could significantly impact how non-EU companies operate or invest in the EU. As the sole enforcer of the Regulation, the Commission would have the power to impose a wide range of both structural and behavioural remedies on undertakings to correct any actual or potential distortion caused by the subsidy. These include, for example, the divestment of certain assets, providing access to infrastructure, and reducing capacity or market presence. In addition, the Commission would have the power to impose fines for procedural breaches (up to 1% of the company’s aggregate global turnover) and fines for breaches of Commission decisions or obligations under the Regulation (up to 10% of global turnover).
As already noted, INTA’s Draft Report expressed support for the Regulation proposal. However, the rapporteur proposed a number of amendments, including:
The European Parliament’s Committee on International Trade will discuss the Draft Report and the Opinion Reports of the other relevant committees, most importantly the Economic and Monetary Affairs Committee (“ECON”) which has “exclusive competence on concentrations” and the Internal Market and Consumer Protection (“IMCO”) Committee which has shared competence on other specific Articles of the Regulation. and.
After political discussion and debate about the proposed amendments, the lead committee (INTA) will vote on the Draft Report. Once approved, the Draft Report will be sent forward for a plenary vote and, if adopted, it will become the Parliament’s mandate for negotiations with Council on its respective text (Council Position). Inter-institutional (‘trilogue’) negotiations to reach a final agreement are expected to take place in later in 2022.