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Legal Basis of the Proposal for a Regulation on Foreign Subsidies Distorting the Internal Market

Justyna Smela Wolski

DOI https://doi.org/10.21552/estal/2022/2/6

Keywords: foreign subsidies, common commercial policy, trade, competition, internal market, legal basis

This article explores the possible legal bases of the Proposal for a Regulation on Foreign Subsidies, which, at first glance, displays elements of competition, internal market, and common commercial policy. It is argued, in particular, that the Proposal does not fulfil the requirements regarding the use of Article 114 TFEU established in the Court’s case law despite its self-proclaimed goal of removing ‘distortions within the internal market’. Firstly, it is disputed that foreign subsidies can fall within the scope of a Member State’s competence. Secondly, even if the former reasoning were proved to be wrong, it is difficult to hold that the goal of the Regulation is to harmonize in order to prevent future obstacles to trade between Member States. In any case, should a general basis be needed due to the effects of the Regulation on the internal market, Article 352 TFEU would be a more plausible option, insofar as it applies to non-harmonisable areas and to the creation of new legal forms, such as foreign subsidies, which are at the crossroads of the notion of State aid of Article 107 TFEU and the notion of subsidy of the Anti-Subsidy Regulation. Nevertheless, it is concluded that the entirety of the Proposal could be based on Article 207 TFEU if a teleological and wide interpretation of the common commercial policy, such as that of Opinion 1/78, is followed. Notably, it is argued that the restoration of effective competition within the internal market is not a goal in itself, but rather a consequence of remediating undesirable trade-related behaviours of third countries. Finally, the role that the Regulation, if adopted, will play in Moldova and Ukraine is studied.
Keywords: foreign subsidies; common commercial policy; trade; competition; internal market; legal basis

Justyna Smela Wolski, Legal Consultant at Freshfields Bruckhaus Deringer. For correspondence: <mailto:justyna.smela@coleurope.eu>. This article is based on the Master thesis which was given the 2022 Lexxion award for the best thesis on EU State aid, EU public procurement or EU structural funds policy at the College of Europe, Bruges, Belgium.


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