CCIA Warns EU Foreign Subsidies Plan Could Deter Investment Needed for Economic Recovery

BY Heather Greenfield
December 17, 2021

Brussels, BELGIUM — The Computer & Communications Industry Association (CCIA Europe) backs the European Commission’s crackdown on distortive foreign subsidies but fears that the proposal, as it stands, could inadvertently discourage third-country organisations from providing the investment required to help fund Europe’s post-pandemic recovery.

In its position paper on the EU Regulation on foreign subsidies, CCIA Europe states that the broad scope of the proposal creates significant legal uncertainty and unworkable obligations for companies and enforcers.

By introducing definitions of subsidies that go far beyond existing state aid regimes and uniquely placing the burden of proof on businesses, the proposal penalises companies receiving non-EU subsidies compared to recipients of EU subsidies.

The proposal grants the Commission the power to investigate businesses and their financial records without giving a clear indicator as to what could trigger such investigations. This power goes as far as to conduct on-site visits and question staff.

Distortion, the premise for the proposal, is not clearly defined. If found, it may result in significant fines, penalties, and redressive measures such as required divestment of assets and existing markets. This layers considerable risk on top of legal uncertainty.

The Commission will also be able to go back over a 10-year period, posing challenges for companies that operate in countries without obligations to keep records for that amount of time. CCIA Europe believes a one-year period would suffice.

The following can be attributed to CCIA Vice President & Head of Office, Christian Borggreen:

“We fear that the proposal to address valid concerns about the distortions caused by foreign subsidies will have the inadvertent consequence of thwarting the international investment Europe so desperately needs to kickstart its economic recovery.

“’We know that this isn’t the European Commission’s intention and we’d be delighted to help make this proposal workable for both European and international businesses.’’

The following can be attributed to Partner at RBB Economics and author of a recent study on the proposal, Benoît Durand:

“The European Commission’s Proposal to level the playing field creates significant new risks for all firms doing business in the Single Market. The Commission’s broad approach can be expected to seriously discourage foreign investment in the EU – even if that investment involves no subsidy and results in no distortion – to the detriment of Europe’s economic recovery.”

 

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