EU agrees to curb takeovers by state-backed foreign firms

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

By Foo Yun Chee

BRUSSELS -EU states and lawmakers on Thursday agreed to rules to put a brake on state-backed foreign firms acquiring EU companies with annual turnover of 500 million euros ($520 million), underlining a more protectionist approach against a possible Chinese buying spree.

The European Commission presented proposals for the new takeover rules last year, aiming to stave off what it deems as unfair competition from countries such as China.

The takeover rules will apply to companies getting more than 50 million euros in subsidies.

The EU countries and lawmakers also agreed to prevent foreign subsidised companies from taking part in public tenders above 250 million euros, confirming a Reuters story on Thursday.

Fines up to 10% of a company’s aggregated turnover may be imposed if firms do not notify the EU of their subsidies. The commission will be empowered to investigate subsidies granted up to five years before the rules come into force in mid-2023..

Acquisitions or contract bids made by subsidised foreign firms above those thresholds would trigger an investigation and measures to counter distortive effects. The political agreement came after nearly six hours of negotiations.

“We want to make sure that European companies are not undermined by foreign subsidies,” Commission Vice President Margrethe Vestager said.

The new rules will close the regulatory gap between EU companies subject to strict rules and foreign rivals with looser reins, said lawmaker Christophe Hansen who steered the topic through Parliament.

“Re-establishing fair competition on the EU Single Market is not only important for the companies, but also to shore up support for global trade and open economies,” he said in a statement.

The rules empower the EU executive to start a dialogue with non-EU countries that repeatedly grant distortive subsidies.

Lobbying group BusinessEurope cautioned against unnecessary red tape.

“We now need to make sure that the regulation is implemented in a way that effectively addresses the most distortive foreign subsidies while minimising the administrative burden on companies and public administrations,” BusinessEurope Director General Markus J. Beyrer said in a statement.

($1 = 0.9614 euros)

(Reporting by Foo Yun Chee; Editing by Edmund Blair, Richard Chang and David Gregorio)