Competition policy and subsidies in EVFTA

Competition policy and subsidies in EVFTA

EVFTA has taken effect from 01 August 2020 and marked an obvious advance on cooperative relationship between Vietnam and European. In which, relevant parties significantly concerned about this treaty’s competition policy. However, EVFTA sets out Chapter 10 to regulate the competition policy to ensure fair competition and the subsidies for both parties. Through this article, BLawyers Vietnam will provide you an overview of those two policies in EVFTA.

1. Competition policy

EVFTA gives the autonomy for each Party in developing and enforcing competition law. The treaty just brings out principles to implement competition policy. All enterprises, private or public shall be subject to the competition regulations in EVFTA. Accordingly, the treaty regulates a legislative framework that 03 acts following shall be considered as anti-competitive conducts:

  • Agreements between enterprises, decisions by associations of enterprises and concerted practices which have as their object of effect the prevention, restriction or distortion of competition;
  • Abuses by one or more enterprise off a dominant position; and/or
  • Concentrations between enterprises which would significantly impede effective competition.

However, EVFTA also has regulations on exemption from the competition law of a party. Competition law does not apply to tasks of public interest, proportionate to the desired public policy objective and transparent.

2. Subsidies

EVFTA uses the definition and scope of specific subsidies set out in the Agreement on Subsidies and Countervailing Measures. Accordingly, a subsidy is specific to an enterprise or industry or group of enterprises or industries within the jurisdiction of granting authority. Subsidies in EVFTA applies to all enterprises.

a. Cases exempted from scope of subsidies of EVFTA

There are 06 cases of subsidies to:

  • Individual or consumers or general measures are not consider as specific;
  • Non-economic activities;
  • Fisheries and subsidies related to trade in goods covers by Annex 1 to the Agreement on Agriculture;
  • (Of which) the amount per beneficiary over a period of three years is above 300,000 special drawing rights (SDR);
  • Sectors or sub-sectors are not listed in Chapter 8 of EVFTA (Liberalization of Investment, Trade in Services and Electronic Commerce); and
  • Be formally agreed or granted before or within 05 years after the entry into force of EVFTA.

The Parties of EVFTA admit that subsidies have the potential to distort the proper functioning of market. They also undermine the benefits of trade liberalization. As so, a subsidy is only granted when it is necessary to achieve a public policy objective. EVFTA sets an illustrative list of public objectives for which a Party may conduct:

  • ­ Practice involves a direct transfer of funds, potential direct transfer of funds or liabilities;
  • ­ Revenue that is otherwise due is foregone or not collected;
  • ­ Provides goods or services other than general infrastructure, or purchase goods;
  • ­ Makes payments to funding mechanism, or entrusts or directs a private body to carry out one or more type of functions regulated; and
  • ­ Any form of income or price support in the sense of exemption of non-discrimination principle in Article XVI of GATT 1994.

Nevertheless, the Parties should not grant subsides to enterprises providing goods or service if they negatively affect or are likely to negatively affect competition and trade.

b. Conditional subsidies 

There are 02 specific subsidies as follows:

  • A legal arrangement whereby a government or any public body is responsible for covering debts or liabilities of certain enterprises with the limited conditions regarding the amount of those debts and liabilities or the duration of that responsibility; and
  • Support to insolvent or ailing enterprises in various forms with a duration off more than 01 year with the condition that a credible restructuring plan has been prepared.

To ensure the transparency principle, each Party shall notify to other every 04 years of legal basis, form, amount or budget, and the recipient off a specific subsidy (if possible). If a Party considers that a specific subsides granted by the other subject to negatively affect trade or investment, it may express its concern in written form to the other and request consultations on the matter. The requested Party shall provide information or conduct to eliminate or minimize these negatively affect caused by subsidies.

Of note, no party shall have recourse to dispute settlement under EVFTA for any matter raising under anti-competitive conduct and consultations.

If you have any questions, please revert to us at consult@blawyersvn.com.

You can read more about preferential tariff through origin of products under EVFTA at our site.

blawyersvn-cta-image

Request a consultation

To schedule a meeting with BLawyers Vietnam’s attorneys, please call us or complete the intake form below. We will respond within 24 hours.

  • This field is for validation purposes and should be left unchanged.