The proposal for an EU Regulation on foreign subsidies distorting the internal market : how will it impact corporate mergers and acquisitions?

The European Commission’s proposal for an EU Regulation on foreign subsidies distorting the internal market was provoked by the failure to reach international agreement on the regulation of foreign subsidies and the increased amount of Chinese investment in the EU. The proposal allows the Commission to review foreign subsidies and requires notification of such subsidies in the context of concentrations and public procurement procedures. While explicitly aimed at levelling the playing field, the notification regime for concentrations may disadvantage investors which received foreign subsidies compared to those which benefited from State aid from EU Member States. By taking into account “financial contributions” from third countries rather than foreign subsidies, the second notification threshold may cast its net wider than required. Several open questions remain on the application of the Proposed Regulation, if adopted: in terms of its interaction with the EU merger control regime, the ability of the Commission to enforce it, the meaning of several terms, and the procedures for the review