October 28
2021
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Chinese State Owned Enterprises and EU Merger Control

Alexandr Svetlicinii

review by

Jochem de Kok

Guided by the ‘go global’ policy and the Belt and Road Initiative, Chinese State Owned Enterprises (SOEs) have rapidly expanded their global presence. The application of the EU Merger Regulation (EUMR) to acquisitions of European companies by Chinese SOEs has proven to be a particularly challenging and controversial task. Concerns over Chinese investments in the EU have furthermore resulted in new regulatory frameworks being adopted and proposed throughout the EU in order to target concerns regarding national security and subsidised acquisitions. Alexandr Svetlicinii’s recent book Chinese State Owned Enterprises and EU Merger Control provides a welcome contribution to the legal research in this important and rapidly developing area of law.

The book consists of four chapters. After a succinct and accessible introduction to the general principles governing the treatment of SOEs under the EUMR in the first chapter, the second chapter provides a detailed and interesting analysis of the regulation and governance of China’s state owned enterprises. Noteworthy is that the ease at which Svetlicinii succinctly sets out the regulation of SOEs under the EUMR in the first chapter, seamlessly continues in the second chapter on the regulation of SOEs under Chinese law. Svetlicinii runs the reader through the key developments in the regulation of Chinese SOEs, and provides a detailed overview of the two institutional channels through which the Chinese State can exercise control over its SOEs: ownership-based and political control. The chapter concludes with the regulation of mergers of SOEs under the Chinese anti-monopoly law. Whilst English literature on the regulation of Chinese SOEs is certainly available, a clear and to-the-point assessment from the perspective of European competition law was not until now. The second chapter thus brings a highly valuable contribution to the existing literature, as the regulation and governance of Chinese SOEs provides foundational building blocks for carrying out an assessment of the treatment of Chinese SOEs under the EUMR.

In the third chapter, Svetlicinii provides a well-researched and in-depth analysis of the decision-making practice relating to the treatment of Chinese SOEs under the EUMR. The chapter includes a detailed assessment of the so-called ‘wait and see’ approach and the EDF/CGN/NNB decision, in which the Commission concluded that all Central SASAC-controlled SOEs in the energy sector form part of the same economic unit. Svetlicinii considers the positions of various commentators, but remains largely silent on his own views on whether the Commission’s approach can or should be applied to other sectors and/or which SOEs should form part of a relevant ‘single economic unit’ in light of the analysis provided under Chapter 2. The author does suggest that DG Competition could learn from the detailed factual assessments that DG Trade carries out in the context of anti-dumping investigations, and that the Commission’s decision-making practice under the EUMR has consistently focused on ownership-related aspects of governance, effectively leaving out the mechanism of political control. The author, however, could have taken his analysis to a higher level by applying the assessment and knowledge of Chinese law more clearly to the question of how Chinese SOEs ought to be treated within the legal framework of the EUMR. This missed opportunity, however, does not take away from the fact that Svetlicinii’s research is the most detailed, yet succinct and accessible analysis of the regulation of Chinese SOEs to date.

In the fourth chapter, the author continues with a discussion on regulatory reforms proposed or brought about due to broader concerns over acquisitions by Chinese SOEs. The author runs through the various proposals to reform merger control, the EU FDI Screening Regulation, national FDI screening mechanisms, and the White Paper on Foreign Subsidies. The author concludes that the various legal instruments may result in parallel and overlapping procedures. Whilst the chapter provides an informative introduction to recent developments, it does not dive into the more fundamental questions posed by the rapid adoption and expansion of various screening mechanisms on the European continent, including those relating to their necessity, proportionality, effects and risks.

Svetlicinii concludes by summarising the previous chapters. In addition, he observes that the lack of detailed guidance from the Commission has resulted in different developments and interpretive tools by the national competition authorities. The author encourages the Commission to develop detailed guidance on the merger assessment of SOE-related concentrations. Whilst this recommendation is certainly valid, it is a missed opportunity that Svetlicinii does not offer more concrete and detailed proposals on the necessary (or desirable) content of such guidance.

In conclusion, Svetlicinii has produced a well-researched, detailed yet succinct work on the treatment of Chinese SOEs under EU law, uniquely from the perspective of both EU and Chinese law. The added value of his work in particular lies in the combined approach of the subject from the perspective of both spheres of law and the impressive degree of systematic analysis. In light of the author’s knowledge of both worlds, it is a shame that the book does not offer a more critical reflection on how Chinese SOEs ought to be treated. Overall, the work is more akin to a well-researched and well-structured handbook, rather than a critical reflection on the current or future regulation of Chinese SOEs under EU law. In light of the controversial nature of the topic, an objective and neutral account perhaps fulfils a just-as-important role in guiding the future development of the European regulatory framework. This succinct, well-researched and objective account of the regulation of Chinese SOEs therefore provides a welcome and important addition to the available research.

 

Jochem de Kok is an Associate at the Competition & Regulation department of an international law firm in Amsterdam, and a PhD candidate at the University of Amsterdam. 

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