EU lawmakers back reining in subsidised foreign companies

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FILE PHOTO: European Union flags fly outside the European Commission headquarters in Brussels

By Philip Blenkinsop

BRUSSELS (Reuters) – EU lawmakers backed on Monday new rules to curb acquisitions or bids for public contracts by subsidised foreign companies, part of a general push to ensure an economic playing field that is level and not distorted by Chinese and other firms.

The European Parliament’s trade committee voted unanimously in favour of a tighter version of a law proposed by the European Commission in May 2021 to allow it to investigate the role of foreign subsidies in the EU single market.

The new law will add to other defensive measures, such as those designed to persuade trading partners to prove reciprocal access to their markets and to deter economic coercion.

Christophe Hansen, the EU lawmaker overseeing the new law, said Europe should be “open, but not naive” and foreign companies should be subject to the same oversight on subsidies as EU counterparts.

The EU executive Commission, which oversees competition policy in the 27-nation European Union, will be able to insist on commitments, such as divestment of assets, and even to block a takeover or award of a public procurement contract.

The EU executive Commission has proposed that an acquirer would be bound to notify it if the EU target company has turnover of at least 500 million euros ($536.2 million) and foreign subsidies amount to 50 million euros or more.

The Commission would also need to hear from a bidder in a public contract receiving foreign subsidies for any contract worth at least 250 million euros. It could also start its own investigations into smaller transactions.

However, EU lawmakers want lower notification thresholds, of 400 million euros turnover for an acquisition and for public contracts of 200 million euros.

They also want an investigation into subcontractors or suppliers that receives foreign subsidies and contribute 20% of the economic value of a public contract. The Commission had proposed a 30% limit.

The European Parliament still needs to agree to the new law with EU governments, some of which want themselves to have a more active role.

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(Reporting by Philip Blenkinsop; Editing by Andrea Ricci)