Protecting the Internal Market From Subsidisation With the EU State Aid Regime and the Foreign Subsidies Regulation: Two Sides of the Same Coin?

Abstract

The European Union’s (EU) internal market is a popular venue for international investments and activities by third-country entities. Once on the EU internal market, foreign companies can operate freely and enjoy the benefits of the internal market: free circulation of goods, services, establishment, and capital, complemented by competition and State aid rules to allow a level playing field with EU companies. However, in recent years, the issue of subsidisation of companies active on the EU internal market by third States and the corresponding distortions have gained novel prominence and lead to an increased discussion in practice and academia. Reports by the European Court of Auditors,1 the German Monopoly Commission (Monopolkommission),2 and several Member States3 have given examples that third-country subsidies, notably those subsidies granted by the Chinese State to State-owned enterprises (SOEs) with subsidiaries active on the EU internal market, would constitute State aid if granted by an EU Member State. Yet, State aid rules do not apply to such financial contributions granted by third States. Therefore, foreign subsidies could create an uneven playing field on the internal market: the companies receiving financial support from EU States are subject to EU State aid discipline, while companies receiving third-country subsidies are not subject to comparable State aid systems. Thus, the latter are having a noticeable advantage over EU companies for their economic activities on the EU internal market.