EU Launches First Anti-Subsidy Probe on UAE Buyer

EU Launches First Anti-Subsidy Probe into UAE Buyer of EU Telecoms Assets

Brussels is taking decisive action by initiating its inaugural anti-subsidy probe into foreign buyers of EU assets, utilizing new powers to scrutinize a multibillion-euro telecoms deal involving a buyer from the United Arab Emirates.

With the European Commission intensifying its oversight of overseas investment flows, it is set to commence a formal in-depth investigation this week into e&’s proposed acquisition of Czech PPF group’s telecoms assets across Bulgaria, Hungary, Serbia, and Slovakia.

Although the precise timing remains uncertain, insiders with direct knowledge of the case suggest that the announcement of the investigation could occur as early as Monday. Telecoms group e&, previously known as Etisalat and predominantly owned by the UAE government, secured a €2.2 billion deal to acquire the assets last August, receiving approval from national competition regulators. However, the commission harbors concerns that the Abu Dhabi-based company may have received state funds, constituting unfair subsidies, to facilitate the transaction. Furthermore, it questions whether such state funding could potentially provide e& with an advantage over its EU competitors, thereby undermining fair competition.

According to sources familiar with the investigation, the commission’s decision to launch an in-depth probe of this nature hinges on the identification of indications suggesting subsidies that could distort the market. Etisalat is anticipated to counter these allegations by asserting that it has not received any state support from the UAE and that no state subsidies were employed to undermine its rivals.

The involvement of foreign buyers of EU assets in such regulatory scrutiny is unprecedented, marking a departure from the bloc’s traditional focus on member state actions under its state aid regime. The EU’s foreign subsidies regulation, passed last year, aims to prevent companies outside the bloc from gaining unfair advantages from cash-rich governments, such as China, when acquiring European assets.

Alec Burnside, a partner at the Brussels-based law firm Dechert, underscores the significance of this action, noting, “This is the first use in an acquisition of the important new powers under the foreign subsidies regulation. Until now state aid rules have applied only to EU governments.”

To date, cases brought under the foreign subsidy regime have predominantly targeted Chinese companies, particularly in situations concerning bidding for public contracts or direct subsidies. The Etisalat probe signifies the EU’s inaugural application of its powers to scrutinize asset acquisitions, expanding the scope of its regulatory oversight.

Recent developments have seen two Chinese bidders withdraw from a tender to supply a solar park in Romania following an in-depth investigation opened by Brussels into the bidding consortiums.