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Welcome to the Jungle! journal article

Identification of Foreign Subsidies Under the New EU Foreign Subsidies Regulation

Philipp Reinhold, Thomas Weck

European State Aid Law Quarterly, Volume 23 (2024), Issue 1, Page 22 - 34

The new industrial competition in the digital and ecological age has led to a global subsidy race. Against this backdrop, the EU's new instrument for foreign subsidies seems to have come at just the right time. However, the initial euphoria, particularly among companies in the EU that are under strong competitive pressure from China, has faded. There are more and more complaints about the extreme lack of clarity, particularly with regard to the comprehensive notification obligations, which is leading to considerable legal uncertainty. Until more detailed guidelines and/or exemptions are published, a step-by-step approach regarding the individual requirements and a corresponding risk assessment are essential. This also includes a better understanding of the concept of a foreign subsidy envisaged by the EU. Keywords: FSR; Foreign Subsidies Regulation; Merger; Public Procurement; Notification

Fostering Tech Sovereignty with a Level Playing Field on State Aid and Foreign Subsidies journal article

Andreas Haak, Barbara Thiemann

European State Aid Law Quarterly, Volume 21 (2022), Issue 1, Page 20 - 30

In her 2021 State of the European Union Address, European Commission President Ursula von der Leyen stressed ‘the importance of investing in our European tech sovereignty’ and continued by appealing that ‘[w]e have to double down to shape our digital transformation according to our own rules’. Availability of semiconductors (also referred to as microchips or simply as chips) is essential for industry and national security alike. Without microchips there is no tech sovereignty. Given the currently fragile state of global supply chains, expanding fabrication capacity within the EU is high on the political agenda. At the same time, ensuring fair competition is of paramount importance. While tech sovereignty must be matched by sufficient State funding, it still needs to be awarded in compliance with EU State aid rules. These rules must not work as an impediment to tech sovereignty. Furthermore, the rules of the game must be the same for everyone. This regulatory objective is most evident in the draft Distortive Foreign Subsidies Regulation. Keywords: twin transition; ICPEI; supply chain; sovereignty; EU Chips Act; foreign subsidies

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

Justyna Smela Wolski

European State Aid Law Quarterly, Volume 21 (2022), Issue 2, Page 153 - 172

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

The EU Foreign Subsidies Regulation: journal article

Substantive Assessment Issues and Open Questions

Morris Schonberg

European State Aid Law Quarterly, Volume 21 (2022), Issue 2, Page 143 - 152

The EU Institutions have now reached political agreement in relation to the Foreign Subsidies Regulation, a potentially far-reaching instrument that effectively creates a new subsidy control regime for non-EU subsidies affecting the EU's internal market. This article addresses the key substantive assessments that the European Commission will need to consider when investigating foreign subsidies under the Regulation, namely: (i) the existence of a ‘foreign subsidy’; (ii) whether the subsidy causes a ‘distortion’ in the internal market; (iii) whether the negative effects in the internal market may be balanced by any positive effects of the subsidy; and (iv) the determination of redressive measures or commitments required to address the distortions. It identifies a number of significant open issues and questions that could have a substantial effect on how the Regulation operates and ultimately, its impact in practice on competitive conditions within the internal market. Keywords: foreign subsidies; WTO; distortion; balancing; redressive measures