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CCCEU responds to EC white paper

CCCEU| Updated: Sep 25, 2020

BRUSSELS -- The China Chamber of Commerce to the EU (CCCEU) has submitted its feedback to the European Commission's public consultation on the white paper on levelling the playing field as regards foreign subsidies, raising concerns over possible legal barriers to Chinese companies operating in the bloc.

Calling on the Commission to carefully examine the legality, rationality, and necessity of adopting new legislative tools on foreign subsidies, the chamber urged that the white paper not be turned into legislation.

CCCEU Chairwoman Zhou Lihong said: "The legal framework proposed in the white paper to scrutinize foreign subsidies will directly take a toll on non-EU undertakings, including our members, and the EU legislative and business environment they operate in. On behalf of CCCEU members, we expressed our views and concerns in the feedback document. We hope the European Commission will duly and carefully consider our concerns and, in the end, reduce business and investment barriers as well as adopt a fair, transparent, and non-discriminatory approach towards foreign companies including Chinese ones." 

Released by the European Commission, the white paper, which was undergoing a public consultation process until September 23, put forward options aimed at "addressing the distortive effects caused by foreign subsidies", in three areas: in the single market generally, in acquisitions of EU companies, and during EU public procurement procedures. 

In its response to the public consultation, the CCCEU stressed that it would be unnecessary for the EU to formulate a new set of legal instruments. 

The new legal tools proposed in the white paper lack a clear legal basis under EU treaties, will overlap with a number of existing EU and member states' instruments, and produce "double standards" in their enforcement, the CCCEU noted. 

The proposed legal tools could also potentially be incompatible with the EU's WTO obligations including principles such as national treatment, most favored nation status, and non-discrimination. 

Meanwhile, the new rules contain "unclear or unreasonable concepts and standards, unequal procedural rights, or contradict the fundamental principles of law". 

For instance, the white paper reverses and imposes the burden of proof on investigated companies, which should not be obligated to provide information beyond their ability. It could violate the right of defense of investigated companies as they will only be notified after the preliminary findings are made. 

The CCCEU believes the white paper falls short of clarifying key concepts such as definition and forms of "foreign subsidies," "leveraging effect," and "material influence," which will create great legal uncertainties and grant the EU more discretionary power.

Going into detail, the CCCEU also believes the minimum threshold for a foreign subsidy investigation proposed by the white paper -- a cumulative amount of 200,000 euros over a consecutive period of three years -- is too low to achieve "substantive justice". Therefore, the CCCEU recommends different review thresholds depending on the size of transactions or companies, and a sector-specific approach. 

The EU should also take into consideration businesses' solidarity efforts in crises, the CCCEU said, and proposed "grandfather clauses" to be inserted in possible future legislation, as some Chinese companies' investments in Europe followed invitations by member states in the aftermath of the European debt crisis. The favourable terms they enjoyed at the time should be legitimately protected and exempted from future scrutiny, the chamber said. 

The CCCEU holds the view that it will become necessary for the competent supervisory authority to run an "EU interest" test before determining the need to redress foreign subsidies. "Having invested millions of euros in supporting European societies and projects of public interest, many Chinese companies have been playing an active role in local community development, donating to educational, environmental, and social assistance causes based on local needs," the CCCEU said. 

The European Commission issued the "White Paper on Levelling the Playing Field as regards Foreign Subsidies" on June 17 and has since launched a public consultation open till September 23. 

The CCCEU set up a task force comprising lawyers, business representatives and EU affairs experts to prepare its response to the public consultation. In July, the CCCEU organized a video seminar to discuss the white paper's potential impact on the activities of Chinese business in the EU. In parallel, intensive surveys and discussions have been underway.

On September 10, the CCCEU and Roland Berger jointly published the 2020 Recommendation Report, urging Brussels to address Chinese businesses' pressing concerns amid declining sentiment on the ease of doing business in the bloc. In the Report, the CCCEU suggested the EU conduct feasibility studies before adopting new laws and regulations on trade and investment activities.

Founded by Bank of China (Luxembourg) S.A., China Three Gorges (Europe) S.A. and COSCO Shipping Europe GmbH in August 2018, the Brussels-based CCCEU now represents up to 70 members and chambers in member states, covering about 1,000 Chinese enterprises in the EU.