June 17 (SeeNews) – The European Commission (EC) on Wednesday opened a public consultation to help prepare legislation intended to tighten its regulatory mechanisms that prevent foreign state-backed rivals from taking over European businesses.
The EC will accept stakeholders' submissions on its White Paper on Foreign Subsidies until September 23, it said in a statement.
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Under one set of proposals, the EC will identify gaps in regulations which may allow foreign states to finance acquisitions of ownership or stakes in European companies by non-EU rivals.
Businesses backed by non-EU states will need to notify the EU competition regulator when they acquire an interest in any local company above a given threshold. The EC could then either demand concessions or block a potential transaction outright.
The measures seek to prevent third-party states from conferring "an unfair benefit" on commercial entities in potential deals by providing funding for acquisitions or linking the deals to future subsidies.
Apart from the effect of foreign financing on potential acquisitions of European companies, the proposed measures will also tackle regulatory gaps in public procurement procedures, access to EU funding as well as imbalances in the European single market as a whole caused by foreign subsidies.
"Europe's economy is open and closely interlinked to the rest of the world. If this is to remain a strength, we must stay vigilant. That is why we need the right tools to ensure that foreign subsidies do not distort our market, just as we do with national subsidies," the EC's executive vice president and competition commissioner, Margrethe Vestager, said.
The EU needs to watch out for investments coming from other parts of the world, which could be on the lookout for deals in the case of a staggered recovery of the global economy, Vestager told media in May.
The white paper is set to prepare the ground for a new legal mechanism in 2021, according to the EC's work programme set out in January.
The move comes as the governments of France, Germany, Sweden and the UK are at different stages of preparing measures to shield strategic businesses and sectors from unwanted takeovers by companies from third-party states like the US and China.