Our first #CambreTalksCompetition event, organised with media partner PaRR, focussed on the European Commission’s White Paper on Foreign Subsidies, with special guest Eddy de Smijter, Head of the International Relations Unit at DG Competition, who drafted the initiative. François Renard, Head of the Greater China Antitrust Practice at Allen & Overy, provided a reality check on Europe’s plans for screening foreign subsidies, with commentary from Claire Harris, Senior Advisor at Cambre, and moderation by Jeremy Fleming-Jones, Editor and Bureau Chief at PaRR.

How is the EU planning to level the playing field?

On 17 June, the Commission adopted a White Paper on levelling the playing field as regards foreign subsidie. A public consultation, which will be open until 23 September, will feed into the preparation of the proposals to come. The White Paper suggests three key proposals to address distortive effects posed by foreign subsidies in the single market in the form of modules: Module 1 proposes an ex post tool, Module 2 an ex ante tool and Module 3 a foreign procurement tool.

What are the ex ante and ex post tools proposed?

In Module 1, the Paper proposes a general scrutiny tool – an ex post control – according to which a supervisory authority will have the ability to consider whether foreign subsidies have a distortive effect on the EU single market. This tool would for instance allow Europe to capture aid by a third country that would otherwise be illegal under EU state aid rules had it been provided by a Member State to a company in the EU. Distortive effects could be addressed via regressive payments or behavioural remedies after consideration of the subsidies’ benefits. Inspired by the division of labour in antitrust, the Commission currently favours a shared competence with national authorities (but not necessarily national competition authorities).

Module 2 provides for an ex-ante notification tool under which foreign subsidies that are being used to facilitate acquisitions of EU companies can be scrutinised. In this case, companies which are intending to use some form of foreign investment in an acquisition would be required to notify the supervisory authority to analyse whether the investment was distortive leading to potential remedies. The Commission currently favours itself as the potential supervisory authority arguing that should the information be centralised at one level, deals would be assessed more quickly. Coordination could be required with merger control or FDIs.


It is all about levelling the playing field […] This is not about scaring away foreign investmentsaid Eddy de Smijter. The aim is to ensure that business in Europe is conducted under the same rules for everyone. The EU has identified a potential distortion of competition in the EU single market due to foreign subsidies that cannot be dealt with under current regulation or legislation such as trade defense or EU competition rules (state aid, merger control or antitrust rules), or last year’s FDI regulation. The Commission aims to look into all types of goods, services, and industries. To encompass all distortive foreign subsidies that are hindering a level playing field in acquisition, public procurement or subsidising activities of undertakings already present in the EU, EU companies and foreign companies alike will be targeted. Focusing on resolving the regulatory gap, the proposal does not cover subsidies I related to the import of goods that are already dealt with under trade defence instruments.

What about in practice?

According to François Renard, the White Paper as it stands could result in a chilling effect on foreign investment. First, it is not clear what the Commission is wishing to protect as there is no clear definition of what is meant by “distortion” or “level playing field”. Second, the simple risk of investigation under the ex-post control is already a sanction and will deter a number of deals by creating a constant surveillance mechanism. For 10 years there will remain the possibility of opening an investigation into a company which has received a foreign subsidy that has or potentially has a distortive effect in Europe. Third, the ex-ante review has a very broad scope as it concerns any potential acquisition of material influence over a target that generates or may potentially generate in the future significant turnover in Europe. Practically this would mean that most deals would need to be notified to the authorities to avoid putting them in jeopardy. Sellers looking for money would typically avoid such deals because of this risk. Finally, proceedings could be lengthy, as with the anti-subsidy proceedings, and place the onus on businesses to collect information that might not be available with certain third-party states.

It remains to be seen what other feedback the Commission will receive on its proposal. What is certain is that levelling the playing field in the Single Market is at the heart of the initiative; a bold and courageous move in these troubled geopolitical uncertain times.

Tune in for a follow-up Cambre/PaRR discussion on the topic after the summer break.