EU
reaches political accord over new regulation aimed to control foreign subsidies
The
Council and the European Parliament have reached a provisional political
agreement on a regulation on foreign subsidies distorting the internal market
(the Regulation).
The
Regulation was initially proposed by the European Commission in May 2021 and
seeks to remedy market distortions by subsidies granted by non-EU states to companies
operating in the EU internal market.
The
European Commission will have the power to investigate financial contributions
granted by public bodies of a third country to undertakings involved in
economic activity in the EU.
There
will be a requirement for prior authorisation in respect of concentrations
(where the acquired company, one of the merging parties or the joint venture
generates an EU turnover of at least EUR500 million and the transaction
involves a foreign financial contribution of at least EUR50 million) and public
procurement tenders (where the estimated contract value is at least EUR250
million). There will also be a general
market investigation tool for other market situations and below threshold mergers
and public procurement procedures.
The
agreement is subject to approval by the Council and the European Parliament.
The
Regulation will enter into force on the 20th day following its publication in
the Official Journal and will become directly applicable across the EU six
months after its entry into force. The notification obligations will apply 9
months following entry into force.
Although
the final text of the regulation is not yet settled the basic structure has
been provisionally agreed. Overall, and
when viewed against the intensification of EU regulation in the area of FDI
this contributes to a multi-layered approval procedure for mergers and other
economic activity involving public support from a third country, including the
UK.
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