19 Jun 2020

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White Paper on foreign subsidies in the Single Market

On 17 June 2020, the Commission published a White Paper concerning foreign subsidies and their distortive effects in the Single Market. In a consultation that will be opened until 23 September 2020, the Commission seeks views and input from all stakeholders on the options set out in the White Paper.

This initiative proposes new tools to ensure that foreign subsidies do not distort competition and that a level playing field is maintained within the EU internal market.

State aid rules do not apply to subsidies granted by non-EU governments. In many instances, foreign subsidies facilitate the acquisition of EU companies, distort the investment decisions of their beneficiaries, or distort bidding in public procurement to the detriment of non-subsidised companies.

The White Paper describes a legal framework to address this regulatory gap. The framework contemplates three options (so-called “Modules”) aiming at identifying the risks and distortive effects caused by foreign subsidies in the Single market generally (Module 1); in acquisitions of EU-companies (Module 2); and during EU public procurement procedures (Module 3).

General instrument to capture distortive effects of foreign subsidies (“Module 1”)

Under this Module, where the existence of a foreign subsidy is established, a national supervisory authority or the Commission, would have the power to impose measures, such as redressive payments and structural or behavioural remedies.

Foreign subsidies facilitating the acquisition of EU companies (“Module 2”)

Module 2 aims at ensuring that foreign subsidies do not confer an unfair benefit on their recipients when acquiring EU companies, either directly by linking a subsidy to a given acquisition or indirectly by de facto increasing the financial strength of the acquirer.

Companies benefitting from financial support of a non-EU government would need to notify their acquisitions of EU companies, above a given threshold, to the competent supervisory authority. The White Paper proposes that the Commission is the competent supervisory authority.

Foreign subsidies in EU public procurement procedures (“Module 3”)

Module 3 proposes a mechanism where bidders would need to notify the contracting authority of financial contributions received from non-EU countries. This Module aims to avoid bidders benefiting from foreign subsidies, to gain an unfair advantage by submitting bids below market price or below cost. If this is the case, the bidder would be excluded from the procurement procedure.

Additionally, the White Paper proposes options to prevent advantages of economic operators regarding the application for EU financial support.