Photo of Carole Maczkovics

Carole Maczkovics

Carole Maczkovics has developed a cutting-edge expertise in State aid law, with a strong background in the economic regulation of network industries (energy and transport) and in public contracting (EU subsidies, public procurement, concessions).

Carole has a proven track record of advising public and private entities, which she successfully represents in administrative and judicial proceedings on complex State aid and regulatory matters before the European Commission as well as before the Belgian and European courts. She also assists clients with the application of the new EU Foreign Subsidy Regulation and UK subsidy control regime.

Carole has published many articles on State aid law and on regulated network industries, and contributes to conferences and seminars on a regular basis. She is a visiting lecturer at King’s College London and at the Brussels School of Competition on the application of regulation and competition law (including State aid) in the railway sector. Carole gives trainings on State aid law at EFE, in Paris. She has been recently appointed as Academic Director of the European State aid Law Institute (EStALI).

The EU Foreign Subsidies Regulation (“FSR”), which creates a new screening mechanism for non-EU subsidies granted to companies doing business and engaging in certain activities in the EU, took effect on 12 July 2023, with notification obligations starting on 12 October 2023. This post looks back at the FSR’s first six months and attempts to provide an outlook of what companies active in the EU can expect in 2024.  

Key Takeaways

Based on the reported enforcement activity of the European Commission (“Commission”) to date,[1] we see three main takeaways that businesses could expect from FSR enforcement in 2024:  

  • In the first eight weeks of the FSR’s implementation, the Commission received 38 (pre-) notifications of transactions. This number already surpasses the 30 notifications that the Commission had anticipated to receive per year. At the same time the number of Commission staff has remained very small, well below the 145 employees it initially estimated it would require to enforce the FSR. The Commission has, however, remained confident that it would be able to deal with this higher-than-expected workload; and we do not believe that companies should expect less diligent screening of their notifications. That said, the Commission could make use of the flexibility provided by certain mechanisms in the FSR Implementing Regulation (e.g., waivers) to reduce the level of detail it requires in individual notifications. We anticipate that the extent to which it uses such flexibility will very much depend on the notifying parties’ ability to convince the Commission of the transparency and robustness of a lighter notification.
  • Businesses should be aware that the Commission will not publish details of any preliminary review decision that clears a foreign subsidy. Guidance on the interpretation of key concepts contained in the FSR (e.g., the criteria used to assess the distortive potential of a foreign subsidy) is not expected before 2026. Although the Commission publishes and updates questions and answers, there will be few insights on these key issues for some time. Engagement with the Commission’s teams might offer means to bridge this information gap in the context of a particular transaction or tender.
  • Finally, the Commission has opened a number of anti-subsidy investigations into certain Chinese exports into the EU, showing that it will continue to enforce its trade instruments, (in this case the EU Anti-Subsidy Regulation), and also providing insights about its interplay with the FSR.

Continue Reading The EU Foreign Subsidies Regulation – Enforcement expectations for 2024

The EU Foreign Subsidies Regulation (FSR) adopted in December 2022 creates a new instrument to prevent foreign subsidies from distorting the European Union (EU) internal market. It aims to fill a perceived regulatory gap left by EU State aid rules applying to subsidies granted by EU countries but not by foreign states. It started to

The Foreign Subsidies Regulation (“FSR”) enters into force today, 12 July 2023. It creates a new instrument designed to prevent foreign subsidies from distorting the EU internal market (see our blog). The objective is to level the playing field within EU markets between companies subject to scrutiny under the EU State aid rules and companies receiving subsidies from non-EU Member States. Two days ago, on 10 July 2023, the European Commission (the “Commission”) adopted the Implementing Regulation (“IR”), which sets out the procedure and enacts the notifications forms. Continue Reading The EU Foreign Subsidies Regulation starts to apply – what you need to know about the notification obligations

Belgium introduced an FDI screening mechanism anticipated to enter into force on July 1, 2023, adding yet another jurisdiction in the EU which has adopted national measures to implement the EU’s FDI Regulation (EU) 2019/452. The new Belgian regime may place additional compliance obligations on companies, and, for some investments, it will entail modifications to initially planned transactions. For companies considering transactions – directly or indirectly – in Belgium, the new regime creates an additional layer of deal conditionality, besides merger control and the EU Foreign Subsidies Regulation (also due to be implemented this year – see our previous blogpost here).

Key Takeaways:

  • The FDI screening mechanism will cover key sectors for the Belgian economy; for example, critical infrastructures, essential technologies or raw materials, defense, and energy;
  • Notification is mandatory and the investors cannot close the transaction before the foreign investment has been cleared, or they risk incurring hefty fines;
  • The preliminary assessment phase can take up to 30 calendar days and where a more in-depth review is required, this can take up to an additional month, but extensions and suspensions are possible.
  • The Interfederal Screening Commission (“Screening Commission”) will review the notifications. The competent minister will clear the investment, impose remedies, or prohibit the investment where no remedies can overcome the concerns over Belgian national security, public order or strategic interests.

Continue Reading Belgium takes action to screen foreign direct investment (FDI) on its territory

The European Competition Commissioner, Margrethe Vestager, announced on 20 March 2023 that new State aid investigations into “aggressive tax planning” practices of multinationals can be expected. This follows an in-depth inquiry into tax ruling practices in European Union (“EU”) Member States for the period 2014-2018.

While the European Courts have annulled several European Commission (“Commission”) decisions that ordered companies to repay to the State advantages gained from tax rulings, they have decided that State aid law also applies to tax measures, even if direct taxation is a prerogative of Member States. However, as this article sets out, the European Courts have limited the Commission’s review.

In particular, by its judgment of 8 November 2022 in the Fiat Chrysler case (C-885/19 P), the Court of Justice of the European Union annulled a Commission decision ordering Fiat Chrysler to refund EUR 30 million of tax advantages to Luxembourg. It clarifies when a tax ruling can be considered State aid.

These are the key takeaways of this judgment:

  • Although not harmonized at the EU level, direct taxation must comply with State aid rules. Therefore, the Commission may review tax rulings under State aid law and verify, for instance, that the tax system is applied consistently with the objectives pursued.
  • As long as direct taxation is not harmonized at the EU level, it is up to Member States to determine the tax regime applicable to companies. Therefore, the Commission should consider that the normal tax system, against which discriminations favoring certain companies may be State aid, is determined by national law.
  • When examining whether a tax measure favors certain companies over others, the Commission cannot substitute the normal national applicable law with its own standard of normality.

This judgement will likely impact pending investigations into the tax rulings issued to other companies and in ongoing proceedings. It will also set the approach the Commission may take in potential new investigations.

In short, this judgment says that if a tax ruling is issued in compliance with the national legal framework and not manifestly inconsistent with the objectives pursued by the national tax regime, it is unlikely to be State aid.Continue Reading Will the EU Commission start new State aid investigations into multinationals’ tax rulings after of the Court of Justice’s judgment in the Fiat Chrysler case?

As part of “A Green Deal Industrial Plan for the Net Zero Age” to respond to the US Inflation Reduction Act (IRA) (see our alert), the European Commission (the “Commission”) adopted on 9 March 2023 its Temporary Crisis and Transition Framework for State Aid measures to support the economy following the aggression against Ukraine by Russia (the “TCTF”). The text amends the Temporary Crisis Framework last amended on 28 October 2022 (see our blog). 

These are the three most important things you need to know about the TCTF:

  • To avoid that an investment would be located outside the European Economic Area (EEA), EU countries may support investments in the manufacturing of relevant equipment for the transition towards a net-zero economy, such as batteries, solar panels, wind turbines, heat pumps, carbon capture usage and storage (CCUS), as well as their key components and critical raw materials necessary for their production. They may even grant aid matching foreign subsidies to support those investments, provided that they are located in the poorer areas of the EU.
  • EU countries’ possibilities to grant aid for accelerating the rollout of renewable energy are extended to any renewable technologies, including hydropower, and no longer require a bidding process to select the aided projects that are considered as less mature.
  • The TCTF is not a subsidy program, and it is up to EU Member States to provide public funding.

Continue Reading The Commission adopts its Temporary Crisis and Transition Framework relaxing State aid rules as a response to the US Inflation Reduction Act

European Union (“EU”) Foreign Subsidies Regulation (“FSR”), a new state aid instrument adopted at the end of 2022, will have a significant impact on transactions in the EU. The FSR impacts any company that is present in or wants the enter the EU, and has received financial support in any form from non-EU governments. 

The

Regulation (EU) 2022/2560 of the European Parliament and of the Council of 14 December 2022 on foreign subsidies distorting the internal market (FSR) entered into force on 12 January 2023 and will start to apply as of 12 July 2023.

The FSR creates a brand new instrument to fill a regulatory gap, by preventing foreign subsidies from distorting the European Union (EU) internal market. Whereas companies receiving public support in the EU are subject to strict State aid rules, companies obtaining public support outside the EU are generally not. This was perceived as putting companies in the EU at a disadvantage compared to companies that obtained subsidies outside the EU, but that also engaged in economic activity in the Union.

The FSR’s scope extends far beyond the obvious State support, to cover common types of benefits that are granted all over the world, including in countries driven by a market economy. Its obligations will inevitably place an additional administrative burden on companies engaging in an economic activity in the EU. Acceptance of a foreign subsidy distorting the EU internal market may have far-reaching consequences for the company. The FSR places additional compliance obligations on companies, and for many will entail a thorough assessment to identify and justify foreign subsidies received. For companies considering transactions in the EU, the FSR effectively creates a third layer of deal conditionality, besides merger control and Foreign Direct Investment laws. This is adding a further unique set of thresholds, timings and factual considerations, to be included in companies’ strategies to invest in the EU. This will require expertise in EU antitrust and State aid law, and a good understanding of the details of the FSR.

Key things you need to know:

  • As under EU State aid law, a foreign subsidy includes any form of public support granted by a third country, e.g., direct grants, capital injections, interest-free or low-interest loans, etc., but also support such as tax exemptions or reductions, and exclusive rights without proper remuneration.
  • From 12 October 2023, when acquiring control of a company in the EU or participating in a public tender in the EU, companies will have to notify the European Commission (Commission) of foreign subsidies received, if the relevant thresholds are met, or if the Commission so requests. Notifications have suspensive effect. Failure to notify may lead to severe sanctions.
  • The Commission may launch ex officio investigations into other market situations that are not already caught by other legislation.
  • If the Commission deems that a foreign subsidy distorts the internal market, the beneficiary may need to apply remedies, such as reducing its market presence. If these remedies are not effective, the Commission may prohibit a concentration or the award of a public procurement contract that is not yet closed.

Continue Reading The EU Foreign Subsidies Regulation enters into force

On 4 January 2023, the UK’s new subsidy control regime came into force, implementing a new subsidy regulation framework designed for the post-Brexit era.  Underpinned by the Subsidy Control Act 2022 (the “Act”), related statutory instruments and government guidance, the new regime aims to grant public authorities the power to design and award subsidies in an agile way while complying with the UK’s international commitments on subsidy control.   Key things you need to know:

  • The UK’s new subsidy control regime seeks to provide a framework that allows public authorities to award subsidies efficiently, while ensuring that such subsidies do not distort the domestic market or fall foul of the UK’s international commitments on subsidy control.
  • Public authorities are responsible for self-assessing a proposed subsidy or scheme’s compliance with the regime’s requirements.
  • Proposed Subsidies and Schemes of Interest (“SSoIs”) and Particular Interest (“SSoPIs”), i.e. subsidies above certain thresholds or of certain importance, are subject to referral – voluntary (for SSoIs) and mandatory (for SSoPIs) – to the Competition and Market Authority’s Subsidy Advice Unit (“SAU”), which will provide non-binding advice regarding the proposed subsidy. The Government can exercise a “call-in” referral power, i.e. refer a subsidy or scheme to the SAU for review.
  • Subsidies that qualify for assessment under a “Streamlined Route” (“SR”), i.e. subsidies that are less likely to cause distortions on the market and meet the relevant criteria set out by legislation, will not be subject to referral or the Government’s call-in powers.
  • An awarded subsidy can be challenged in court, though during a relatively short (in many cases 30-day) window. A range of remedies are available to challenging parties, including prohibition, injunctions and recovery orders.

Continue Reading The UK’s new subsidy control regime comes into force

On 19 October 2022, the European Commission (the “Commission”) adopted its new State aid Framework for research, development and innovation (the “2022 RDI aid Framework”). This instrument governs Member States’ investment in RDI activities. It is an important response to the 2020 Commission Communication on a new European Research Area for Research and Innovation (the “ERA Communication”), aiming at strengthening investments and reaching a 3% GDP investment target in the field of RDI. The 2022 RDI aid Framework is a revision of the previous version of 2014.

The three most important things you need to know about the 2022 RDI aid Framework are:

  • The Commission’s approval is subject to a set of criteria to determine whether the aid is justified and can be authorised, and compliance with recent EU objectives such as the EU Green Deal and the EU Industrial and Digital Strategies will have a positive influence on the Commission’s assessment;
  • RDI activities now explicitly include digitalisation and digital technologies; and
  • Member States can grant aid for testing and experimentation infrastructures which predominantly provide services to undertakings for R&D activities closer to the market.

Continue Reading The Commission has revised its framework for State aid for research and development and innovation