International Legal Vision | Chinese Enterprises Encountered EU "Subsidy Review" Storm: Who Moved the Cheese of Globalization?
Published:
2024-04-25
The EU's in-depth investigation of Chinese enterprises in accordance with the "Foreign Subsidies Regulations" has many legal issues, which not only damages the legitimate rights and interests of Chinese enterprises, but may also adversely affect the global trade order and stability.
On April 22, 2024, the Official Journal of the European Union published a briefing on the second and third in-depth investigations of the Foreign Subsidies Regulation (Foreign Subsidies Regulation,FSR), both of which involved Chinese companies. The briefing notes that, on the basis of a preliminary review, the Commission concluded that there were sufficient indications that a consortium had received foreign subsidies that "distorted the internal market" in its bid for a Romanian photovoltaic park and decided to conduct an in-depth investigation into the case.
Coincidentally, on April 23, law enforcement agencies authorized by the European Commission raided the offices of a Chinese company in Poland and the Netherlands without prior notice, controlling its information equipment and employees' mobile phones, checking office documents and requesting relevant data. According to reports, the reason for the European investigation is that Chinese companies violated the EU's overseas subsidy regulations and distorted market competition.
The EU's in-depth investigation of Chinese enterprises in accordance with the "Foreign Subsidies Regulations" has many legal issues, which not only damages the legitimate rights and interests of Chinese enterprises, but may also adversely affect the global trade order and stability.
1,The Legal Problems of FSR Depth Investigation in EU
1. The definition and scope of application of the EU Foreign Subsidies Regulations are controversial.
The implementation of the EU Foreign Subsidies Regulation (FSR) and its in-depth investigation has obvious ambiguity and too wide room for interpretation, especially in the definition of "Foreign Subsidy (foreign subsidies)", which covers various forms of financial The transfer and use of resources may include grants, loans, tax breaks, tax incentives and other forms. FSR focuses not only on direct financial allocations or loans, but also on indirect financial arrangements that may benefit the operator. The broad definition makes it possible to explain what is "foreign financial aid" in practice, which may lead to a certain degree of subjectivity and uncertainty, which gives the EU a great deal of discretion in the process of investigation. it can expand the scope of investigation at will, and even bring normal business activities into the scope of subsidies, which not only violates the principles of clarity and predictability that the law should have, it also poses a potential threat to the legitimate rights and interests of Chinese enterprises.
2. The EU has insufficient transparency and improper procedures in the FSR investigation process.
In accordance with the principles of international law, any investigation involving international trade should follow the principles of impartiality, fairness and transparency. However, in the FSR in-depth investigation, the EU failed to fully protect the legitimate rights and interests of the investigated enterprises, including the right to know and the right to defend. For example, in the second and third in-depth investigation on the public bidding of the Romanian photovoltaic park project, the EU did not inform other bidding consortia and the reasons for not investigating them in accordance with the Foreign Subsidies Regulations. The EU also failed to disclose relevant information and investigation results in time, as a result, the investigated enterprises and relevant stakeholders can not fully understand the progress and results of the investigation, which may lead to discriminatory treatment of Chinese enterprises, and seriously damage the credibility and authority of the European Union as an international trade organization.
In addition, in the second and third in-depth investigations of the FSR, EU agencies required Chinese companies to "voluntarily" disclose "unrestricted" information, which undoubtedly increased the burden of proof for companies. The EU requires Chinese companies under investigation to provide a large amount of sensitive information, including but not limited to financial status and business strategies. This information not only involves the business's trade secrets, but may also be used for unfair commercial competition. During the surprise investigation on April 23, the European Union did not notify Chinese companies in advance, nor did it give Chinese companies sufficient opportunities to defend and appeal. This "one-word" approach obviously violated the basic requirements of legal procedures.
3. The scope of the EU's in-depth investigation of the FSR of Chinese enterprises is unnecessary.
The FSR regulations require the investigating body to examine not only the "foreign financial assistance" received by the company under investigation, but also the foreign financial assistance received by its parent company and other affiliated companies under the control of the same parent company located in a third country. This approach undoubtedly expands the scope of the review, increases the compliance costs of the enterprise, and also brings unnecessary workload to the investigation agency. More importantly, this expanded scope of review is likely to lead to the abuse and misunderstanding of the concept of "subsidy", which will damage the legitimate rights and interests of enterprises.
4. The EU's in-depth FSR survey of Chinese companies reflects its protectionist tendencies.
Under the background of global economic integration, the trade between countries is becoming more and more frequent, and the degree of interdependence is increasing. However, the EU has adopted restrictions and suppression measures against Chinese companies through FSR investigations and other methods, which obviously violates the principles of fairness, justice and openness in international trade. This practice of the EU not only damages the legitimate rights and interests of Chinese enterprises, but also undermines the stability and prosperity of global trade.
2. for the EU FSR depth investigation, Chinese enterprises should take a positive response strategy
In the face of the EU FSR in-depth investigation, Chinese companies need to be highly vigilant and forward-looking. In-depth understanding of the essence of FSR regulations, a comprehensive review of their own business behavior in the EU market, and the construction of a sound compliance system are the key to ensure the steady development of enterprises. At the same time, actively communicating with relevant EU institutions, seeking professional support, and continuing to pay attention to changes in regulations are also an indispensable part of responding to investigations. Specific recommendations are as follows:
Facing the in-depth investigation of EU FSR, Chinese enterprises need to comprehensively strengthen their own compliance construction from multiple dimensions, actively deal with possible risks and challenges, so as to ensure compliance operation in the EU market and lay a solid foundation for the steady development of enterprises.
Summary
We call on the EU to fully consider the clarity of the law, the fairness of the procedure, the rationality of the consequences and the principles of international law when taking similar actions, so as to avoid abusing power and harming the interests of other countries. At the same time, we also hope that Chinese companies can strengthen their awareness of self-protection, actively respond to EU investigations, and safeguard their legitimate rights and interests.
In the future international trade, all countries should uphold the concept of openness, cooperation and win-win, and jointly maintain a fair, transparent and predictable international trade environment. For regulations such as the Foreign Subsidies Regulations, countries should strengthen communication and coordination to avoid unnecessary trade disputes and frictions. Only in this way can we realize the healthy development of international trade and promote the prosperity and progress of the global economy.
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