[Flash] The European Commission’s first decision under foreign subsidies control (FSR).

The European Commission has taken a new step by issuing, on 24 September, its first decision under the Foreign Subsidies Regulation (FSR).

The FSR, in force since 12 July 2023, is designed in particular to screen inbound investment from China. But not only that: this first decision concerns the telecoms company Emirates Telecommunications Group Company PJSC (“e&”) and provides for concessions by e& in connection with its acquisition of sole control of PPF Telecom Group B.V. (PPF) in the EU. According to the Commission, the UAE’s unlimited State guarantees in favour of e& are among “the most likely to distort the internal market” and, as such, liable to distort the merged entity’s activities in the EU internal market.

The commitments offered, valid for 10 years and renewable, cover:

  • a commitment that e&’s articles will not derogate from ordinary UAE bankruptcy law, thereby removing the unlimited State guarantee;
  • a ban on any financing by e& and its main shareholder, the Emirates Investment Authority, of PPF’s activities in the EU internal market;
  • an obligation for e& to inform the Commission of any future acquisitions.

As a reminder, under the FSR companies must notify concentrations to the European Commission where:

  • at least one of the merging undertakings, the acquired undertaking or the joint venture is established in the EU and generates total EU turnover of at least €500 million, and
  • the parties received aggregate financial contributions from non-EU countries of more than €50 million in the three years preceding the transaction.

Internal checks ahead of any transaction are therefore essential for international groups active, or wishing to be active, in the EU, so that they can assess and, with specialist lawyers, anticipate and reduce the associated risks.

Rive Gauche Avocats, lawyers dedicated to economic law, EU and French competition law, distribution law, corporate, company and investment law and disputes, and commercial contracts and litigation.

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