<h3>As of October 12, 2023, the notification obligations for transactions and public tenders under the EU Foreign Subsidies Regulation are fully applicable.</h3>
<p>On January 12, 2023, the Foreign Subsidies Regulation of the European Parliament and the European Council (the <strong>FSR</strong>) had entered into force (cf. <a href="https://www.homburger.ch/en/insights/the-eus-new-foreign-subsidies-regulation">Homburger Bulletin of January 12, 2023</a>). On July 10, 2023, the European Commission (the <strong>Commission</strong>) had adopted the corresponding Implementing Regulation, right before the FSR started to apply with regard to ex officio reviews by the Commission as of July 12, 2023. As of today, October 12, 2023, the notification obligations for mergers and public procurement proceedings involving financial contributions from foreign (non-EU member) states (including Switzerland) under the FSR apply, and the regulation is hence fully applicable.</p>
<p>As compared to an earlier draft, the final Implementing Regulation in several regards limits the administrative burden for such notifications. As set out below, it nevertheless remains considerable.</p>
<h3>1.        Notification requirements – Concentrations</h3>
<p>Under the FSR, companies must notify the Commission of a concentration if (i) at least one of the undertakings concerned (one of the merging parties, the target or the joint venture) is established in the EU and generates annual turnover in the EU of more than EUR 500 million and (ii) the combined aggregate financial contributions of any of the undertakings concerned received from non-EU countries exceed EUR 50 million in the three years prior to notification. Undertakings may request pre-notification consultations with the Commission as to whether the thresholds for notification are met. The Commission may, however, request that concentrations that do not meet the thresholds must nevertheless be notified.</p>
<p>The notifying parties must provide the following information if the above thresholds are met:</p>
<ul>
<li>In the case of financial contributions from foreign (non-EU) countries most likely to distort the internal market, as defined in the FSR (Article 5, in particular subsidies to ailing companies, support directly facilitating a merger or unlimited guarantees; also referred to as «Article 5 support»): details of all financial contributions of an individual amount of at least EUR 1 million granted to the undertakings involved in the transaction over the last three years.</li>
<li>In the case of all other non-EU financial contributions: an overview of the financial contributions granted to the notifying party/parties in the last three years of an individual amount of at least EUR 1 million and only in relation to those countries that have granted contributions of at least EUR 45 million to the undertakings concerned by the concentration in the three years preceding the concentration, subject to a number of exceptions.</li>
</ul>
<h3>2.        Notification requirements – Public Procurement</h3>
<p>In the case of financial contributions from non-EU countries in the context of public procurement procedures, undertakings must notify the Commission if (i) the contract value exceeds EUR 250 million and (ii) the tenderer received subsidies of more than EUR 4 million from non-EU countries in the three years prior to the tender.</p>
<p>Undertakings must provide the following information:</p>
<ul>
<li>In the case of foreign (non-EU financial) contributions in the form of Article 5 support: details of all individual relevant contributions of at least EUR 1 million received by the notifying undertaking(s) in the three years preceding the notification.</li>
<li>In the case of all other non-EU financial contributions: an overview of the financial contributions granted to the notifying undertaking(s) in the three years preceding the notification, of an individual amount of at least EUR 1 million and only in relation to those countries that have granted at least EUR 4 million to each of the notifying undertaking(s) in the three years preceding the notification.</li>
</ul>
<h3>3.        Analysis and Takeaways</h3>
<p>As set out above, an important simplification compared to the previous draft of the Implementing Regulation is that the de minimis threshold for reportable financial contributions per country has been significantly increased from EUR 4 million to EUR 45 million. This means that if the total amount of such contributions is below EUR 45 million in the previous three years, they do not have to be reported.</p>
<p>Nevertheless, undertakings involved in mergers and public procurement proceedings that are likely to exceed the relevant turnover and value thresholds are recommended to extensively gather information on potential non-EU financial contributions, especially in the area of taxes. In addition, it is advisable to include relevant clauses into merger agreements, comparable to existing merger control clauses.</p>
<p>The FSR will directly affect Swiss companies with business activities in the EU, in particular if they engage in M&amp;A activities or submit public tenders in the EU, as the FSR defines foreign subsidies broadly to include any direct or indirect financial contribution from a non-EU country (including e.g. Switzerland) which confers a benefit on or more undertakings.</p>


RZ_Preview_PB_Paragraph_Crushed_01

Foreign Subsidies Regulation now fully applicable

RZ_Preview_Paragraph_Aufblasen_01

Partial Revision of the Cartel Act: Swiss Federal Council Presents Draft Law

<h3>1. Introduction: The EU&#8217;s New Foreign Subsidies Regulation</h3>
<p>On January 12, 2023 the new Foreign Subsidies Regulation of the European Parliament and the European Council (the <strong>FSR</strong>) entered into force, and it will take effect on July 12, 2023. The FSR seeks to identify and redress potential distortions in the EU&#8217;s internal market caused by subsidies from foreign (non-EU) countries, including Switzerland, to companies active in the EU. According to the EC, the FSR closes a regulatory gap: Whereas EU Member State subsidies are subject to close scrutiny, prior to the FSR subsidies granted by non-EU governments to companies operating in the EU were not reviewed for potential distortive effects in the EU. The FSR complements existing EU state-aid regulations, which regulate EU  Member State subsidies, and extends the EU state-aid regime to non-EU countries.</p>
<p>The FSR will directly affect Swiss companies with business activities in the EU, in particular if they engage in M&amp;A activities or submit public tenders in the EU. We recommend that potentially affected companies use the next six months before the FSR takes effect to prepare.</p>
<h3>2. The FSR Grants the EC Three New Powers</h3>
<p>The FSR grants the EC three new tools to investigate and redress potential distortions of competition in the internal market by foreign (non-EU) subsidies.</p>
<h4>2.1. Notification Obligation for Large Concentrations</h4>
<p>Beginning on October 12, 2023, nine months after the FSR enters into force, companies must notify the EC of a concentration if (i) at least one of the undertakings concerned (one of the merging parties, the target or the joint venture) is established in the EU and generates annual turnover in the EU of  more than EUR 500 million and (ii) the combined aggregate contributions any of the undertakings concerned received from non-EU countries exceeds EUR 50 million in the three years prior to notification. Undertakings may request pre-notification consultations with the EC as to whether the thresholds for notification are met. The EC may, however, request that concentrations that do not meet the thresholds must still be notified.</p>
<h4>2.2. Notification Obligation for Bids in Public Procurement</h4>
<p>Regarding public procurement bids in the EU, companies must notify the EC if (i) the contract value exceeds EUR 250 million and (ii) the tenderer received subsidies of more than EUR 4 million from non-EU countries in the three years prior to the tender. The EC may request that bids that do not meet the thresholds must be notified if it considers that the the bid would merit <em>ex ante</em> review given its impact in the EU. This notification obligation takes effect on October 12, 2023.</p>
<h4><strong><em>2.3. Ex Officio</em> </strong>Investigation Powers of the EC</h4>
<p>The EC will also have the power to investigate all other potential market distortions from non-EU governmental subsidies, including any subsidies received in the preceeding ten years (but not more than five years before the FSR enters into force). Foreign subsidies not exceeding EUR 4 million over three consecutive years are deemed not to distort the internal market.</p>
<h3>3. How to Assess Whether a Foreign Subsidy is Distortive?</h3>
<p>If the EC determines that a foreign subsidy distorts competition, it will weigh the negative effects of the foreign subsidy on competition in the internal market against the positive effects on the development of the relevant subsidised economic activity on the internal market as well as other positive effects in relation to the relevant policy objectives, in particular those of the EU. If the EC finds that the negative effects outweigh the positive ones, it may impose remedies. These including undoing the acquisition of an EU target, ordering repayment of foreign subsidies, refraining from investments in the EU, expulsion from public tender proceedings in the EU, and licensing obligations under FRAND-conditions (Fair, reasonable and non-discriminatory). The EC will make decisions based on the facts available, whether or not the relevant undertaking(s) or foreign countries cooperate.</p>
<h3>4. What Are Foreign Subsidies under the FSR?</h3>
<p>The FSR defines foreign subsidies broadly to include any direct or indirect financial contribution from a non-EU country (including e.g. Switzerland) which confers a benefit on or more undertakings. Accordingly, foreign subsidies include:</p>
<ul>
<li>The transfer of funds or liabilities (e.g., capital injections, granted loans, and guarantees);</li>
<li>Forgiving debts or payments due (e.g., tax exemptions, granting special or exclusive rights without adequate remuneration); and</li>
<li>The provision of goods or services at non-arms&#8217; length conditions.</li>
</ul>
<p>According to the FSR, financial contributions will not be considered to confer a benefit if a «<em>benchmark assessment shows that the undertaking would have obtained that benefit under normal market conditions.</em>»</p>
<p>As regards transfer pricing, the FSR states that «<em>transfer pricing in the context of goods and services exchanged within an undertaking can confer a benefit if that transfer pricing is not in line with normal market conditions. The benefit conferred by a financial contribution may be passed to an undertaking engaging in an economic activity in the Union.</em>» Companies should therefore review their internal pricing policies to identify potential passing on of foreign subsidies.</p>
<h3>5. How Does the FSR Impact Swiss Companies?</h3>
<p>The FSR directly affects Swiss companies with turnover in the EU in particular if they plan M&amp;A activities or are engaged in public tenders in the EU. Swiss companies should expect potential notification obligations if the thresholds are met and can also be the target of <em>ex officio</em> investigations by the EC, should they be active in the EU. Any subsidies that Swiss companies receive from Swiss federal, cantonal or local governmental bodies qualify, in principle, as foreign subsidies under the FSR. These can include special, individually negotiated tax arrangements and individually granted support, even pandemic-related support if granted specifically to a particular company. In addition, Swiss companies also need to consider subsidies granted by any other non-EU countries worldwide.</p>
<h3>6. Conclusion and Next Steps</h3>
<p>Under the FSR, it is likely that many companies will be required to give notice to the EC of M&amp;A transactions and bids for public tenders. Companies should systematically collect information regarding any financial contributions they receive or received from non-EU countries for the past five years and establish whether these contributions were received under market conditions. This information will be necessary (i) to assess whether a M&amp;A deal or a public tender bid is notifiable under the FSR, and (ii) to provide information and prepare a defense should a company become the target of an <em>ex officio</em> investigation.</p>
<p>The EC has announced that it will shortly publish guidelines regarding the application of the FSR. Please mark your calendar for our roundtable on the FSR and its impact on Swiss companies taking place on <u>Tuesday, March 21, 2023 at 1730 CET</u>.</p>


The EU's New Foreign Subsidies Regulation

Corporate / M&A

Financing and Investment Products

Regulatory

Competition

Woehrle-web-640x140

Homburger News

Share-Image Teamplate Deals-and-Cases

<p>On November 30, 2023, Wöhrle Group, headquartered in Wildberg, Germany, has announced that it had acquired Oskar Rüegg Holding AG, headquartered in Jona, Switzerland, and its subsidiaries (Switzerland / Bulgaria / Mexico).</p>
<p>Both companies specialize in the manufacture of sophisticated stamped parts and assemblies and are established players in the industry. Both companies together have revenue of around EUR 100 m in the automotive and other industries.</p>
<p>Homburger advised the Wöhrle Group on this transaction. The Homburger team was led by Daniel Häusermann and included Claudine Schär and Erik Habich (all Corporate / M&amp;A), Reto Heuberger, Peter Müller and Philippe Weber (all Tax), Stefan Kramer and Fabrice Eckert (both Banking / Finance) as well as Jonas Krull (Regulatory / Competition).</p>


Homburger advised Wöhrle Group on its acquisition of Oskar Rüegg Group

Visa-web-640x140

<p>On June 29, 2023, the Competition Commission announced that it opens an investigation into Visa&#8217;s domestic interchange fees for debit cards. ComCo had previously agreed with Visa on an interchange fee for the introductory phase of debit cards. Now that this phase is over, Visa has lowered its interchange fees effective July 1, 2023. ComCo intends to find long-term solutions for the interchange fees.</p>
<p>Homburger represents Visa in this investigation. The team is led by partner Richard Stäuber and comprises partner Franz Hoffet and associate Jonas Krull (all Competition &amp; Regulatory).</p>


Homburger represents Visa in the investigation of the Competition Commission into debit interchange fees

Real Estate

IP / IT

Employment and Executive Compensation

Homburger for Implenia

20230403_Implenia

<p>On March 30, 2023, Implenia AG (SIX: IMPN), Switzerland&#8217;s leading real estate and construction service provider, announced that it had agreed to purchase Wincasa AG for CHF 171.6 m from Swiss Prime Site AG (SIX: SPSN). Wincasa is the leading Swiss real estate service provider with more than 250,000 managed properties, CHF 81 bn in assets under management and 1,350 employees (FTE). The closing of the transaction is planned for the second quarter of 2023, subject to regulatory approvals.</p>
<p>Homburger acts as counsel to Implenia. The Homburger team is led by Marcel Dietrich (Competition, Real Estate) and Daniel Häusermann (Corporate / M&amp;A, Real Estate) and comprises Peter Müller (Tax), Oriana Schöni (Corporate / M&amp;A), Gabriel Kasper, Kristina Martinovic and Hélène Bruderer (IP / IT), Allegra Arnold and Jonas Krull (Competition), Stefan Kramer, Manuel Baschung and Daniel Junginger (Financing and Investment Products / Regulatory), Gregor Bühler and Sebastian Wyler (Employment and Executive Compensation), as well as Anna Delia Lohmann and Giulia Meier.</p>


Jonas J.
Krull

Homburger advised Wöhrle Group on its acquisition of Oskar Rüegg Group

Homburger represents Visa in the investigation of the Competition Commission into debit interchange fees

Homburger advised Implenia on the acquisition of Wincasa

Foreign Subsidies Regulation now fully applicable

Partial Revision of the Cartel Act: Swiss Federal Council Presents Draft Law

The EU's New Foreign Subsidies Regulation

Switzerland: Law & Practice, Trends and Developments - Cartels 2023

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Jonas J. Krull

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Jonas J.Krull

Homburger advised Wöhrle Group on its acquisition of Oskar Rüegg Group

Homburger represents Visa in the investigation of the Competition Commission into debit interchange fees

Homburger advised Implenia on the acquisition of Wincasa

Foreign Subsidies Regulation now fully applicable

Partial Revision of the Cartel Act: Swiss Federal Council Presents Draft Law

The EU's New Foreign Subsidies Regulation

Switzerland: Law & Practice, Trends and Developments - Cartels 2023

Join the Team

Jonas J. Krull

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Teams

Jonas J.
Krull