Summary: On 17 June 2020, the European Commission ('EC') issued a White Paper proposing three new regulatory tools to tackle distortive effects that may be caused by foreign subsidies in the EU Single Market (the 'White Paper').1

The White Paper is the latest in a series of EU responses to rapidly growing concerns – in the EU and elsewhere – about increased geo-strategic and geo-economic competition between the world's major economic powers – through government ownership, subsidization, or other forms of government control or involvement, or simply through active and often discriminatory industrial policy measures in sectors and industries that are considered to be of strategic interest. The White Paper also comes, at least in part, as a response to an increased sense – in the EU and elsewhere – that the World Trade Organization (WTO) and other multilateral institutions may no longer be able to provide sufficient insulation against or a sufficiently strong legal and policy tool to address such concerns.

For the next three months, until 23 September 2020, a public consultation on the proposals in the White Paper will take place2 and companies and trade associations should actively consider getting involved – directly or indirectly – to shape the future form of these likely new EU tools. We anticipate the European Parliament, by and large, to support the new initiatives3, although many MEPs may have their own views as to the specific form certain measures should take and the concerns that must be addressed.4 The same will be true of EU Member States. Either way, it seems likely that the White Paper will lead to the adoption of far-reaching new legislation in the EU and potentially far-reaching new powers for the European Commission (EC) and/or certain EU Member State authorities, that can be invoked to block investment and shape competition in the EU Single Market.

Below, we provide some general background on the context in which these measures have been adopted first (Section I), followed by a discussion of the key new tools (or "Modules") that the White Paper proposes (Section II), and a brief conclusion (Section III).

I. General Background

  1. Foreign Subsidies and Geostrategic Competition

Concerns about geo-strategic and geo-economic competition have increased rapidly over the past several years. China and Russia are among the key countries that EU and EU Member State policymakers and observers are typically focused on (e.g., in terms of Chinese government investments in key strategic infrastructure or technologies). Other examples include recent developments in the context of the Coronavirus pandemic (e.g., reported attempts by the Trump Administration to acquire German vaccine developer Cure-Vac, and export and other trade restrictions in the pharmaceutical and life sciences sector). There is also uncertainty as to whether a post-Brexit UK will agree to what the EU sees as a level playing field in return for access to the EU's Single Market. We have previously reported on developments in relation to EU and EU Member State measures on Foreign Direct Investment ("FDI") here, as well as some of the various trade-related restrictions imposed by the U.S. and the EU in the context of COVID-19 here. .

In the White Paper, the EC notes that the European Union ('EU') is very much open to trade and foreign investment. However, the EC views subsidies granted by non-EU governments as a potential challenge to ensuring a level competitive playing field in the EU's Single Market. More specifically, the EC notes that foreign subsidies can distort competition in the EU internal market by allowing less efficient market operators to grow at the expense of more efficient ones, or by encouraging subsidy races. As regards acquisitions, there are also concerns about the overvaluation of EU assets and consequent inability of EU-based companies to compete in making strategic acquisitions because of a subsidised acquirer's willingness to pay a higher than market price. Finally, the EC is concerned that price dumping by subsidised companies will squeeze EU companies out of public procurement and other tenders, as they will not be able to compete on price.

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1 European Commission, White Paper on levelling the playing field as regards foreign subsidies of 17 June 2020, COM(2020) 253 final.

2 The questionnaire is available at

3 See Report on competition policy – Annual Report 2019 (2019/2131(INI)) Committee on Economic and Monetary Affairs, available at

4 The European Parliament played an active role, for example, in amending and further expanding the scope of the recent EU Foreign Direct Investment Review regulation that will come into full force in October of this year.

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