EU subsidies rule would hurt global firms, business groups warn

A draft European Union rule on foreign subsidies would have a “chilling effect” on foreign businesses operating in the bloc at a time when Europe needs investment to stay competitive, according to a group of global business associations.

The regulation imposes requirements that are unfamiliar to businesses and would require elaborate internal compliance mechanisms that do not currently exist, the groups, which include the American Chamber of Commerce to the EU and the Japan Business Council in Europe, said in a joint statement. 

“We fear that companies will not be in a position to comply with the Regulation as the reporting obligations currently stand,” the groups wrote.

The EU hammered out an agreement last year on sweeping new rules aimed at preventing foreign firms — such as those from China — from abusing state subsidies to scoop up EU businesses or undercut rivals for big procurement contracts in the bloc. Under the draft rules, takeovers by foreign companies would need to be vetted by EU watchdogs if the buyers got more than €50 million ($54.6 million) in foreign state support and the EU revenue of the tie-up would be at least €500 million.

The business groups are speaking up at a time when the EU is looking for ways to counterbalance a US law that provides subsidies to boost investment in green technologies that Europe worries will win away investment from domestic companies. European Commission President Ursula von der Leyen last month warned President Joe Biden that the law’s bias against European companies was unacceptable, and anything short of a pragmatic fix would become a major irritant in the transatlantic relationship.

EU antitrust chief Margrethe Vestager said Tuesday that the foreign subsidies regulation would correct an imbalance with subisdies going to companies from third countries.

“The EU is leveling the playing field and, in 2023, the commission will start implementing and enforcing the regulation,” she said. “This will preserve an open single market — one in which all businesses compete on fair and equal terms, wherever they come from.”

The business associations want the EU’s executive arm to refine the draft to reduce the administrative burden in compliance through limiting reporting obligations on companies and removing the need to report immaterial contributions. 

They also are seeking to exempt the disclosure of classified information when third-country governments consider certain contracts secret and to establish a direct information-sharing channel for subcontractors and suppliers to provide information directly and avoid sharing proprietary data.