BusinessEurope reaction to the European Commission legislative proposal on distortive foreign subsidies

Key messages

• BusinessEurope welcomes the proposal for a regulation to address distortions caused by foreign subsidies in the Single Market published in May 2021. The Regulation has been given a more proportionate scope, with focus on the potentially more distorting subsidies. Yet, the notification thresholds for concentrations and public procurement procedures may need to be lowered to capture relevant distortive subsidies. At the same time, the administrative burden on companies and public authorities needs to be kept as low as possible. Moreover, the Commission needs to allocate an adequate amount of resources to the operation of this instrument in order that lower thresholds for procurement and concentrations do not negatively impact its ability to use the ex officio tool.
• The Regulation should include specific provisions to deal with foreign state-owned enterprises (SOEs). For example, the Commission could reverse the burden of proof for foreign SOEs, particularly where it has well-founded evidence of the existence of significant distortions in a third country or a sector in a third country. The WTO compliance of this measure needs to be ensured.
• The Commission will need to provide detailed guidance on different aspects of the final regulation to companies to give them more legal certainty. This should include guidance e.g. on the application of the ex-officio tool, the definition of foreign subsidies, the calculation of fines and penalty payments, interim measures the Commission can take, commitments companies can offer or inquiries that will be prioritised in case of an excessive number of notifications.
• The definitions and procedures under the instrument should be aligned as much as possible with relevant EU legislation, e.g. on state aid, trade defence, foreign investment screening, public procurement and antitrust. Duplication of reporting requirements and overlaps in terms of scope should be avoided.
• BusinessEurope does not favour a retroactive application of the instrument to public procurement procedures and concentrations that were completed or initiated before the regulation enters into force.