On the 17 June the EU Commission published a White Paper on foreign subsidies, aimed at dealing with the distortive effects caused by lack of level competition. This was a priority of Margrethe Vestager when she re-took office in the Commission of Van der Leyen. The Commission consultation is open until 23 September 2020.

The consultation reflects the view that EU companies, subject to EU State Aid restrictions, were placed at a disadvantage when competing against non-EU companies, who may have received support from non-EU governments, and that this had led to instances in which foreign subsidies seem to have facilitated the acquisition of EU companies or distorted the investment decisions, market operations or pricing policies of their beneficiaries, or distorted bidding in public procurement.

The White Paper proposes three scenario based options (“Modules”):

(i) Competing within the Single market generally - where the main proposal is a supervisory authority, which would be a national authority or the Commission, and which may act upon any indication or information that a company in the EU benefits from a foreign subsidy, through redressive payments and structural or behavioral remedies.

(ii) Acquisitions of EU companies – where the main proposal is for the Commission to be given the power to review potential acquisitions of EU companies by parties which have notified the relevant authority they have received a foreign subsidy. The Commission could either accept commitments by the bidding party that effectively remedy the distortion or, as a last resort, it could prohibit the acquisition.

(iii) EU public procurement bids – it is proposed that bidders would have to notify the contracting authority of financial contributions received from non-EU countries. The competent contracting and supervisory authorities would then assess whether there is a foreign subsidy and whether it made the procurement procedure unfair. In this case, the bidder would be excluded from the procurement procedure.

Finally, the White Paper sets out ways to address the issue of foreign subsidies in the case of applications for EU financial support.

Levelling the competition within the EU Single Market with regards to companies who are receiving support, in a variety of forms, from non-European governments is likely to benefit UK companies. This consultation has though alternative potential repercussions should the UK look to radically diverge its rules on State Aid in the post-Brexit environment. For further information contact Marcus.corry@lawsociety.org.uk.