A PYMNTS Company

A Lot To Digest, And More To Come!

 |  February 14, 2023

By:  Merit Olthoff & Thomas Lübbig (D’Kart)

On 6 February 2023 the European Commission released a draft notification form as part of the draft Implementation Regulation to the FSR (EU Regulation 2022/2560 of 14 December 2022 on foreign subsidies distorting the internal market). This reminded Merit Olthoff and Thomas Lübbig of lines from a famous German poem:

“Spirits that I’ve cited – my commands ignore.” – These lines from a famous poem will certainly be well known to German-speaking readers of this blog. And the fortunate translation provided by Edwin Zeydel is just as poignant as Goethe’s original. Why are we reminded of this when looking at the draft notification form released by the European Commission on 6 February 2023 as part of the draft Implementation Regulation to the FSR?

With the FSR, the European Commission seeks to control “foreign subsidies”, which it broadly defines as a “direct or indirect financial contribution by a non-EU country, which is limited to one or more companies or industries and which confers a benefit on a company active in the Single Market” (quoted from the EU’s dedicated FSR webpage). “Foreign subsidy” is an umbrella term which covers various financial instruments such as “interest-free loans, unlimited guarantees, capital injections, preferential tax treatment, tax credits, grants, etc.”. Under the FSR, the Commission is empowered to review ex ante certain inbound investments in the event of (i) concentrations involving subsidies and (ii) bids in public tenders for major projects in an EU Member State where a bidder may be “supported by the government of a non-EU country through direct subsidies”. These cases are to be brought to the attention of the Commission through a mandatory and suspensory ex ante notification. At the same time the Regulation provides for the own-initiative investigation of matters where the “EU subsidiary of a non-EU country parent company has access to cheap, State-supported financing in the non-EU country of the parent company” (as all the preceding citations also quoted from the EU’s dedicated FSR website).

To carry out these kinds of investigations, the Commission will need three key resources: (i) data and information, (ii) dedicated staff, and (iii) sufficient time…