Government supports intervention in foreign subsidies that distort competition in the European Union, but insists on clear rules

The European Commission is proposing new ways of tackling subsidies granted by non-EU governments that distort competition in the internal market. Finland supports the aims of the proposal calling for level playing field for businesses that receive foreign subsidies and for businesses that do not. The rules must be clear and predictable.

“It is important for businesses to have a level playing field in the EU internal market, while nevertheless taking care to ensure that the internal market remains open and attractive to foreign investment,” explains Minister of Labour Tuula Haatainen.

The European Commission adopted a proposal for a new Regulation on 5 May 2021. The Commission finds that subsidies granted by third countries can distort competition in the internal market in the same way as State aid granted by Member States. Current regulations are nevertheless inadequate to address distortion of competition caused by foreign subsidies.

The Government submitted a letter to Parliament on 17 June 2021 reporting the Commission proposal for a new Regulation and the position of Finland that the Government proposes.

Commission to apply significant powers to monitor compliance with the Regulation

The Commission proposes three new instruments that would enable it to address non-EU subsidies in the internal market:

1. Prior notification to the Commission of any acquisition if the acquiring entity is established within the territory of the European Union and the EU turnover of the business to be acquired is not less than EUR 500 million and the business enjoys a foreign financial contribution of not less than EUR 50 million over three years.
2. Prior notification of public procurement bids if the bidder carries on an economic activity within the territory of the European Union, the bids involve a financial contribution from a non-EU government, and the estimated value of the procurement is not less than EUR 250 million.
3. Ex officio investigations by the Commission of all other market situations, including business acquisitions and public procurement bids that fall below the threshold values.

The Commission could issue a commitment decision or prohibit the business acquisition or the award of a public contract if a prior notification gives the Commission grounds for holding that non-EU subsidies are distorting competition in the internal market. The Commission could also decide not to intervene in the subsidies granted. A commitment decision of the Commission would stipulate that a business is bound by its own commitment to eliminate the distortion. An ex officio inquiry could give the Commission grounds for imposing redressive measures, issuing a commitment decision, or deciding to take no further action.

A distortion in the internal market would not be the only decisive factor when the Commission assesses whether to impose redressive measures or approve commitments. The Commission would also compare the distortions with positive effects of the foreign subsidies.

The Commission would be empowered to impose fines and periodic penalty payments for failure to comply with procedural regulations.

The Commission estimates an annual workload of 30 cases under the business acquisitions instrument, 15-45 cases under the procurement instrument, and 30-45 cases of ex officio review.

Finland to negotiate for clear and predictable rules

The Commission proposal would ensure a level playing field, improving the competitiveness of businesses that do not enjoy non-EU subsidies that distort the internal market. The Government supports the idea of Commission enforcement under the draft Regulation.

The Government notes that rules must be sufficiently clear and predictable, and must not cause any unnecessary administrative burden.

Inquiries:
Virve Haapajärvi, Senior Ministerial Adviser, Ministry of Economic Affairs and Employment of Finland, tel. +358 29 504 7027
Sissi Kohtala, Senior Specialist, Ministry of Economic Affairs and Employment of Finland, tel. +358 29 504 7393