Much to Be Worked Out: The European Commission’s Proposal for a Regulation on Foreign Subsidies Distorting the EU Internal Market

The European Commission’s May 2021 Proposal for a Regulation on Foreign Subsidies Distorting the EU Internal Market is an eye-catching measure due to its expressly extra-territorial nature. It applies to any business – including EU businesses – engaged in an economic activity in the EU and lays down rules and procedures for investigating subsidies from a non-EU Member State that distort the EU internal market and for redressing such distortions. Included are compulsory notification regimes for acquisitions and when engaging in certain public procurement procedures in the EU. The Proposal would extend in part the EU State Aid regime (which controls the grant of subsidies by EU states) to subsidies granted by non-EU countries (foreign subsidies). If adopted, companies should expect active enforcement as the Commission will allocate some 145 FTEs to enforcing the rules. Companies should consider the implications and start collecting relevant information in order to comply now.

By Matthew Hall¹

Among the various new obstacles to foreign direct investment worldwide, probably the most eye-catching is the European Commission’s May 2021 Proposal for a Regulation on Foreign Subsidies Distorting the EU Internal Market.² The Proposal stands out in particular due to its solely extra-territorial nature, which was made explicit in the Commission’s accompanying press release:³

[The Proposal] aims at closing the regulatory gap in the Single Market, whereby subsidies g