Technology Sector under Closer Scrutiny – German Government Significantly Extends the Scope of Foreign Direct Investment Review in Germany

On 27 April 2021 the German government adopted the 17th amendment (“Amendment”) to the Foreign Trade and Payments Ordinance (“AWV”) aligning the German Foreign Direct Investments (“FDI”) regime with the EU Screening Regulation. The Amendment significantly extends the number of sectors and target activities that require mandatory notification in Germany and brings significant procedural changes and clarifications. The revised Ordinance entered into force on 1 May 2021 and will apply to all transactions signed thereafter.

The Amendment follows a series of prior legislative changes. In light of the COVID-19 pandemic, the German government previously adopted the 15th AWV-Amendment in June 2020, which introduced far reaching filing obligations in the healthcare sector. Subsequently, the first amendment of the Foreign Trade and Payments Act introduced standstill obligations backed by fines and criminal charges in July 2020. Together with the 16th AWV-Amendment in October 2020 the German FDI regime was also aligned with the requirements of the EU Screening Regulation.

Our blog provides an overview of the German FDI regime and highlights the key changes introduced by the Amendment. Continue Reading

More scrutiny to come in the EU for companies that receive non-EU subsidies

Companies that benefit from non-EU state support or subsidies will soon face heightened scrutiny in the European Union (EU) as the European Commission unveiled on May 5 its proposed Regulation on foreign subsidies distorting the internal market.  As its name suggests, the proposed Regulation will create a new tool to address what the European Commission sees as a “regulatory gap” in avoiding potential distortions caused by companies receiving non-EU subsidies and ensuring a “level playing field” in the EU.  Perhaps emblematic of its perceived importance at a time where calls from Member States to tackle potential distortive foreign investment have multiplied, it took the European Commission less than a year from the publication of the White Paper on levelling the playing field with respect to foreign subsidies to analyze the results of its public consultation and to put this proposal to the EU legislator.

The proposed Foreign Subsidies Regulation is wide-ranging and will apply in addition to the existing merger control and Foreign Direct Investment screening mechanisms.  Given the strong support it has received from most Member States and European industry bodies, it is widely anticipated that this new tool will be written into law without material change.

Here is what foreign companies that receive any form of non-EU public support and are active or considering deals involving the EU need to know, and prepare for. Continue Reading

UK National Security & Investment Law is Approved by Parliament

On Wednesday 28 April, the UK Parliament adopted the National Security & Investment Law (“NS&I Law”).  The law received Royal Assent the following day and will come into legal effect in late 2021.

The NS&I Law will introduce mandatory notification and pre-clearance requirements for transactions in 17 ‘core’ sectors.  This long-awaited piece of legislation, has passed through Parliament substantially un-amended, except that the investment threshold for mandatory notification has been raised from the acquisition of a 15 per cent. to 25 per cent. interest in shares or voting rights in an acquisition target. The UK Government retains extensive discretion to “call-in” investments for review, both within and outside the 17 ‘core’ sectors, including (i) acquisitions of control of assets and (ii) equity investments below the 25% threshold where “material influence” is acquired, if it reasonably suspects that a transaction gives rise to national security risks. Continue Reading

The CJEU accepts the principle of staggered hybrid cartel settlements in Pometon

On 18 March 2021, the Court of Justice of the European Union (“CJEU”) largely dismissed the appeal by Pometon against the General Court’s (“GC”) judgment, which previously partially dismissed Pometon’s appeal against the European Commission (“Commission”) steel abrasives cartel decision. Continue Reading

The CJEU’s Lundbeck judgment

On 25 March 2021, the Court of Justice of the European Union (“CJEU”) dismissed the appeals by Lundbeck, Merck KGaA (and Generics UK), Arrow, Alpharma (and Xellia) and Ranbaxy, against the General Court’s (“GC”) judgment upholding the European Commission’s (“Commission”) 2013 pay-for-delay infringement decision.

Background

The case concerns the antidepressant containing the active pharmaceutical ingredient (“API”) citalopram.  Lundbeck’s patents for the API and two processes to produce it were protected in a number of European countries until 2003 (“Lundbeck’s original patents”).  Over time, Lundbeck developed other processes for the production of citalopram, in respect of which it obtained various patents (“Lundbeck’s new process patents”).

In 2002, Lundbeck entered into settlement agreements concerning potential launches of generic versions of citalopram with Generics UK (at the time an indirect wholly-owned subsidiary of Merck KGaA), Alpharma, Arrow and Ranbaxy.  Under the agreements, Lundbeck made payments to these producers of generic citalopram (“Other Providers”) in various forms (e.g., direct payments, purchase of generic citalopram stock for destruction, and guaranteed profits in a distribution agreement).  In exchange, the Other Providers agreed to cease or refrain from selling generic citalopram in the EEA as a whole or in specific Member States.

In 2013, the Commission adopted an infringement Decision against Lundbeck and each of the Other Providers, concluding that the agreements were “by object” restrictions of competition. Continue Reading

Commission provides guidance regarding its Article 22 policy change

On 26 March 2021, the European Commission (“Commission”) published a Staff Working Paper summarising the findings of its evaluation of procedural and jurisdictional aspects of EU merger control (the “Evaluation”), along with a communication providing guidance regarding its change in approach to the use of Article 22 of the EU Merger Regulation (“EUMR”) to refer cases over which neither the Commission nor the member states have jurisdiction (“Guidance”). Additionally, the Commission launched an impact assessment on policy options for further targeting and simplification of merger procedures, inviting stakeholders to submit their views by 18 June 2021. Continue Reading

Covington Helps Riga Airport Secure EC Recapitalization Approval

Covington represented Riga International Airport and the Latvian State in obtaining State aid approval for the recapitalization of Riga International Airport. On March 8, 2021, the European Commission (EC) approved the state recapitalization of up to €39.7 million, comprising a capital injection and a waived dividend payment for the 2019 financial year. Continue Reading

Proposals published for radical overhaul of UK competition regime following Brexit

On 16 February, John Penrose MP published his long-awaited report into the UK’s competition regime.  Penrose was tasked by the UK Government with reviewing how the UK’s competition regime can:

  1. Play a central role in meeting the challenges of the post COVID-19 economy and in driving recovery.  The Government’s Policy Paper stated that “the pandemic is the biggest threat the UK has faced in decades and overcoming it will require all the dynamism and creativity that exists across all sectors and in all regions and nations of the UK“;
  2. Contribute to the Government’s aim of levelling up across all nations and regions of the UK;
  3. Increase consumer trust, including by meeting the Conservative Party’s 2019 Manifesto commitment to tackle bad business practices, and ensure the competition regime is strong, swift, flexible and proportionate;
  4. Support UK disruptors taking risks on new ideas and challenging incumbents; and
  5. Make best use of data, technology and digital skills which are vital to the modern economy.

Continue Reading

EU General Court dismisses first two challenges to State aid awarded to national airlines in response to the COVID-19 pandemic

On 17 February 2021, the General Court of the European Union (“General Court”) in Cases T-259/20 and T-238/20 dismissed Ryanair’s challenges to pandemic aid packages introduced in France and Sweden in order to support the domestic airline sector. The judgments are the first ones where the General Court has decided on the legality of the State aid schemes adopted in response to the COVID-19 pandemic. Continue Reading

The Commission Publishes the Latest Extension of the Temporary Framework for State aid measures to support the economy during the Covid-19 outbreak

The Commission’s Temporary Framework for State aid measures supporting the economy during the Covid-19 pandemic (the “Temporary Framework”) is proving to be a success.  More than 200 Member State schemes and individual measures have been cleared under the Temporary Framework since its adoption in March 2020.  It seeks to provide the European economy with a platform to recover from the crisis while limiting distortions of competition in the Internal Market.

On 28 January 2021, the European Commission (“Commission”) adopted a fifth amendment (the “Amendment”) to the Temporary Framework (see our post on the Temporary Framework here, of the first amendment here and of the second amendment here). The third amendment expanded mostly the Framework to further support micro, small and start-up companies and incentivise private investments. The fourth amendment mostly prolonged the validity of the Framework and introduced new possibilities for the State to exit from recapitalised companies while maintaining its previous stake in those companies. The New Amendment extends further the Temporary Framework until 31 December 2021. Continue Reading

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