Czech Business Today

On 17 June 2020, the Commission adopted a white paper on foreign subsidies. The white paper identifies a legislative gap in EU state aid rules as regards competition, trade and public procurement, which effectively prevents the EU from taking action when foreign subsidies cause distortions in the internal market, favouring specific concentrations or bidders in public procurement. It also points to the problems linked to the access to EU funding for operators receiving foreign subsidies, which could distort the competition for these funds.

To date, no Member State has implemented rules tackling the potential distortion caused by foreign subsidies. As announced in the Commission’s work programme for 2020-2021, this proposed regulation sets out detailed rules for a new instrument to address the regulatory gap in EU legislation and ensure a level playing field in the internal market by avoiding unfair competition.

The proposal is also mentioned in the Communication on the Trade Policy Review, on ensuring a level playing field. The aim of the proposed legislation is to investigate public procurement and market behaviour by foreign-subsidised companies that may distort the EU internal market. It provides for mandatory notification of concentrations where the turnover of the company concerned exceeds EUR 500 million and the parties have benefited from more than EUR 50 million in foreign financial contributions in the previous three years, as well as mandatory notification where foreign-subsidised companies take part in public procurement where the contract value is over EUR 250 million.

The proposal also aims to enable the Commission to investigate market behaviour, including mergers and acquisitions below these thresholds, by any entity benefiting from foreign subsidies exceeding EUR 5 million for three consecutive years. The proposal shows that the problem is not foreign investment, but the subsidies that facilitate the acquisition of EU companies, affect investment decisions, distort trade in goods and services, affect the behaviour of the beneficiaries and harm competition. Unlike subsidies, for which the Commission has exclusive power to intervene, in the case of foreign investment this is the remit of the Member States which in any case are always empowered to screen foreign investments on the grounds of security or public order.

The EESC considers that it is crucial that the EU and its markets remain open and competitive, deeming this to be key to the proper and balanced functioning of its society and economy, to ensuring a stable footing for businesses. In light of this, the Committee considers that the objective of safeguarding the single market from subsidies which bring about unfair competition must go hand in hand with the goal of having an effective instrument applied consistently to the entire EU, with the smallest possible burden on businesses.

Marie Zvolská, EESC Member, Group I – Employers