European Business Law, the fourth volume in our series, shows how the European authorities simultaneously abolish all restrictions on access to and exercise of economic activities and support the growth of domestic markets, through the harmonization the internal legislation or the enactment of genuinely unified regulations.

European Business Law

Subsidies may give rise to the imposition of countervailing duties only if they are specific . Specificity implies that the subsidy is granted only to certain undertakings  or according to criteria or conditions governing the eligibility which are not objective. The criteria or conditions are objective where they are neutral, do not favor certain undertakings over others and “are economic in nature and horizontal in application, such as number of employees or size of enterprise”. They must be clearly set out by law, regulation, or other official documents, so as to be capable of verification .

The anti-subsidy regulation draws up an exhaustive list of factors, which may be taken into consideration if the subsidy, notwithstanding any appearance of non-specificity, i.e. not meeting the criteria previously laid down, by contrast appears in fact specific :

- the use of a subsidy program by a limited number of certain types of undertakings , or the dominant use by certain undertakings; 

- the granting of disproportionately large amounts of subsidies to certain undertakings ,

- the manner in which discretion has been exercised in the decision to grant a subsidy .

It is not necessary that these factors be met cumulatively. Only one of them may be used to identify a specific subsidy, even if the Commission most often relies on several factors . If none of those factors is identified, the subsidy is obviously not specific .

Specificity is also recognized in respect of regional subsidies, limited to certain undertakings within a defined geographic area falling within the jurisdiction of the authority which grants the subsidy .

Lastly, export subsidies  and domestic subsidies  are specific, irrespective of these factors.

There is export subsidy where its granting is legally contingent upon export performance or is in fact tied to actual or anticipated exportation or export earnings. Annex I of Regulation No 2016/1037 draws up a non-exhaustive list thereof. Allowing inputs necessary for the production of a determined export product to be imported free of duty or duties forgone on imports which confer a benefit upon an exporter who can import goods duty free using credits earned on previous exports, are subsidies legally contingent upon export performance . The same goes for an income tax exemption scheme on export sales or the scheme of a third State which, depending on the level of export commitment which a company is prepared to undertake, issues a license authorizing it to import at preferential rates . Schemes which cover inputs needed to produce products to be sold to export-oriented national units, are de facto contingent on export performance. In this last case, the granting of the subsidy is tied to projected exports since the public authorities anticipate export earnings received subsequently by export-oriented units or special economic zones .

Internal subsidies are those whose granting is contingent upon the use of national over imported products. The subsidy may be substitution  or discriminatory subsidy and the discrimination is still characterized regardless of whether the benefit is exclusive  or only more significant .

Regulation No 2016/1037, Article 4(2)(a).

Regulation No 2016/1037, Article 4(4)(a).

Regulation No 2016/1037, Article 4(4)(b).

Commisssion Regulation No 1556/98 of 17 July 1998, imports of stainless steel bars (India), LawLex200900002859JBJ: see also Commission Decision No 90/266 of 13 June 1990, imports of ball bearings (Thailand), LawLex201100000572JBJ, finding that the programme of rebates on electricity rates for exporters eligibility for which is dependent upon eligibility for rebates on indirect taxes on exports and the amount of which is calculated on the basis of amount of electricity used per unit of product exported is a countervailable subsidy.

Commission Regulation No 1411/2002 of 29 July 2002, imports of polyester textured filament yarn (India), LawLex200900002780JBJ.

See, for example, Council Regulation (EU) No 193/2007 of 22 February 2007, imports of polyethylene terephthalate (India), LawLex200900002489JBJ, which considers that the scheme which allows a main contractor to import inputs free of duty which are required in manufacturing goods to be sold as 'deemed exports' to export-oriented units, is de facto contingent upon export performance insofar as the tax exemption in favor of the supplier is passed on through prices applied by the exporter.

See, for example, Commission Regulation No 618/1999 of 23 March 1999, imports of stainless steel wire importations (India, Korea), LawLex200900002886JBJ, as regards a preferential loan whose grant is contingent upon the use of domestic over imported goods.

See, for example, Commission Regulation No 1092/2000 of 24 May 2000, imports of styrene-butadiene-styrene thermoplastic rubber (Taiwan), LawLex200900002871JBJ, as regards a tax credit reserved for domestically produced equipment.

See, for example, Commission Decision No 284/2000 of 4 February 2000, imports of certain flat rolled products of iron or non-alloy steel (India, Taiwan, South Africa), LawLex200900002910JBJ, as regards a tax credit which is doubled for the purchase of domestic equipment; see, also, Council Regulation (EU) No 978/2000 of 8 May 2000, imports of synthetic fibres of polyester (Australia, Indonesia, Taiwan), LawLex200900002534JBJ, as regards a subsidy scheme which accepts that local content rules may be deviated as long as national good content is sufficient to ensure that the country concerned will derive a significant net benefit from its export.

Regulation No 2016/1037, Article 4(2)(b); See, for example, Council Regulation (EU) No 1994/2000 of 18 September 2000, imports of styrene-butadiene-styrene thermoplastic rubber (Taiwan), LawLex200900002577JBJ, which considers that the criteria of eligibility of the undertakings which are the recipients of loans at preferential interest rates are not objective where they are not neutral, economic in nature and horizontal in application, because certain business sectors continue to obtain benefits; Commission Regulation No 1092/2000 of 24 May 2000, imports of styrene-butadiene-styrene thermoplastic rubber (Taiwan), LawLex200900002871JBJ, which considers that a loan scheme at preferential interest rate is specific where the eligibility is expressly limited to certain undertakings and not based on neutral criteria.

Regulation No 2016/1037, Article 4(2)(c).

See, for example, Council Regulation (EU) No 978/2000 of 8 May 2000, imports of synthetic fibres of polyester (Australia, Indonesia, Taiwan), LawLex200900002534JBJ, which considers that a subsidy granted in the form of unpaid import duties is specific, where its access is limited to certain types of undertakings, or to geographical area, or completely excludes certain sectors.

See Commission Regulation No 708/2003 of 23 April 2003, imports of certain electronic microcircuits known as DRAMs (Korea), LawLex200900002754JBJ, which considers that, despite any appearance of non-specificity, the debenture program from which an undertaking has benefited is specific where only six companies benefit from it whereas it relates to a very high amount, and insofar as that undertaking has received a disproportionately large amount of the total expenditures of the program, i.e. 41%.

See Council Regulation (EU) No 977/2002 of 4 June 2002, imports of certain ring-binder mechanisms (Indonesia, India), LawLex200900002506JBJ, which considers that a subsidy granted in the form of unpaid import duties is specific where the eligibility is reserved for undertakings in certain sectors and is dependent on the discretion of the authorities concerned; No 1480/2003 of 11 August 2003, imports of certain electronic microcircuits known as DRAMs (Korea), LawLex200900002542JBJ, which considers that a program of purchase of maturing bonds is, de facto, specific, given that the public authorities' discretion was used to preselect the recipients, and other companies were not retained although they were in a similar situation as regards credit ratings (BBB) and the number of bonds maturing at the same time.

See Council Regulation (EU) No 1480/2003 of 11 August 2003, imports of certain electronic microcircuits known as DRAMs (Korea), LawLex200900002542JBJ, which considers that a program of purchase of maturing bonds is, de facto, specific where three out of the four conditions laid down in Article 3(2)(c) of the anti-subsidy regulation are fulfilled, i.e. the use of the program by a limited number of undertakings, predominant use by certain undertakings and the granting of disproportionately large amounts of subsidy to certain undertakings; Council Regulation (EC) No 1741/2000 of 3 August 2000, imports of polyethylene terephthalate (India, Malaysia, Taiwan, Thailand), LawLex200900002851JBJ, which considers that an income tax exemption program which is subject to the production of certain products selected from criteria that are vague and subjective, which is fixed at differentiated rates depending on the type of product or the location of the producer and which aims to promote the use of domestic over imported goods, is specific.

See Commission Regulation No 123/2000 of 20 January 2000, imports of polyester staple fibres (Australia, Taiwan, Korea, Thailand), LawLex200900002897JBJ, considering that tax credits for research and development or personnel training, which are awarded to all companies which invest in these actions, are granted automatically on the basis of detailed criteria, without leaving discretion to the public authorities to determine whether an investment is eligible; No 1741/2000 of 3 August 2000, imports of polyethylene terephthalate (India, Malaysia, Taiwan, Thailand), LawLex200900002851JBJ, as regards a subsidy granted in the form of double deduction for insurance premiums for importers which is not specific where all the undertakings may benefit from it according to objective eligibility criteria.

Regulation No 206/1037, Article 4(3); see, inter alia, in a case where the amount of the benefit differs depending on the region concerned: Commission Regulation No 573/2002 of 3 April 2002, imports of sulphanilic acid (India), LawLex200900002800JBJ; See, also, Council Regulation (EU) No 193/2007 of 22 February 2007, imports of polyethylene terephthalate (India), LawLex200900002489JBJ, which considers that the sub-scheme only intended to companies which have invested in certain geographic regions falling within the court of an Indian State and which provides for a different benefit depending on the area concerned, is specific.

493. Specificity