Martial Arts, EU's Push for 'Foreign Subsidy Regulation' Faces Backlash... Joint Statement with US and Japanese Business Groups

"Concerns Over Excessive Regulation Stifling Corporate Investment"…Statement Submitted to EU Commission

[Asia Economy Reporter Lee Hyeyoung] As the European Union (EU) is pushing to introduce legislation regulating the entry of foreign companies that have received subsidies overseas into Europe, the Korea International Trade Association (KITA) announced on the 16th that it has jointly submitted a statement expressing industry concerns to the EU Commission together with local foreign business organizations.

The statement included participation from the European Korean Business Association (secretariat: KITA Brussels office) as well as major business and industry groups from key European investor countries such as the United States, Japan, Australia, and India.

Through the joint statement, they pointed out ▲the ambiguity of key concepts within the bill ▲overlapping and excessive demands for investigation materials from multiple government agencies ▲broad discretionary investigation authority ▲excessive investigation periods ▲and insufficient appeal procedures regarding rulings.

The organizations emphasized that if the bill is enacted, it would increase corporate management risks and administrative burdens, delay mergers and acquisitions (M&A), and cause disadvantages for companies participating in public procurement, thus necessitating improvements.

The EU Commission announced a draft of the extraterritorial subsidy regulation bill in May last year and conducted stakeholder consultations. The legislative amendment process is currently underway with the European Parliament and the Council, and KITA’s Brussels office also submitted a statement reflecting Korean companies’ concerns to the Commission in July last year.

According to the bill, foreign companies seeking to acquire or merge with companies of a certain scale in the European market or participate in public procurement must report subsidy details received from foreign governments over the past three years and obtain prior approval from EU authorities. Submitting false information or failing to report can result in hefty fines amounting to 1-10% of sales revenue.

In particular, the discretionary investigation clause includes provisions allowing EU authorities to investigate any situation suspected of causing competitive distortion due to subsidies, even if foreign companies are not involved in M&A or government procurement, raising concerns about abuse of authority.

Jitna Cho, head of KITA’s Brussels office, said, "Due to repeated objections from foreign companies, EU policymakers have taken a step back and are lowering the regulatory level. Notably, a key figure leading this bill in the European Parliament recently mentioned that the bill could be repealed if a global multilateral system is launched." She added, "We will continue to work closely with local organizations to ensure that the voices of our companies are actively reflected in EU policies."

This content was produced with the assistance of AI translation services.