Issue link: https://maltatoday.uberflip.com/i/1369939
16 maltatoday | SUNDAY • 9 MAY 2021 This article is part of a content series called Ewropej. This is a multi-newsroom initiative part-funded by the European Parliament to bring the work of the EP closer to the citizens of Malta and keep them informed about matters that affect their daily lives. This article reflects only the author's view. The European Parliament is not responsible for any use that may be made of the information it contains. Chinese, Azerbaijani Enemalta investments would fall foul of new EU rules DAVID LINDSAY THE controversial Chinese and Azer- baijani investments into Enemalta would have almost certainly been deemed high- ly questionable, if not illegal, if new rules unveiled by the EU this week had been in force at the time when former energy minister Konrad Mizzi's grand designs for Enemalta were being unfurled. The new rules unveiled by the Europe- an Commission this week - and which will now move on to the European Par- liament where a rigorous debate is to be expected - will block foreign compa- nies from making acquisitions and from receiving public contracts in Europe if they are deemed to have benefitted from government subsidies or state aid. Since the advent of the Joseph Mus- cat administration in 2013, Malta had seen controversial third country invest- ments by state-owned corporations, in particular in the energy sector. These include the one-third sale of Enemal- ta and the sale of the majority stake of the BWSC power station to the Chinese state-owned Shanghai Electric. Another saw the involvement of the Azerbaijani state-owned SOCAR in the new Delimara power station's Electro- gas consortium, as well as the govern- ment's contractual commitment to pur- chase natural gas from that company for 18 years. The two investments by foreign state- owned companies have been among the more contentious deals struck by the government and both have been mired in well-known corruption revelations. Their breadth, however, truly came to light with the revelations that kickback vehicles 17 Black and Macbridge were owned respectively by Electrogas di- rector and shareholder Yorgen Fenech and Chinese Enemalta negotiator Chen Cheng. The former has been charged with complicity in the murder of journalist Daphne Caruana Galizia, purportedly over further Electrogas leaks she was on the cusp of exposing, while the latter has also been tied to Enemalta's Mon- tenegro wind farm investment scandal. These two foreign investments, how- ever, would almost certainly have fallen foul of the new EU rules as both compa- nies – SOCAR and Shanghai Electric - are actually state-owned, and not mere- ly the recipient of state subsidies. This state of affairs, according to the new rules, distorts the playing field between state and private industry actors. The Commission's proposals to elim- inate such investments will now move on to the European Parliament, where they could very well be expected to en- joy significant backing, and onto Coun- cil level, where they could be met with a great deal more resistance from individ- ual member states that stand to benefit from such investments. The EU's main diplomatic aim at the moment appears to be the adoption of a hardball approach with China, which has been seen to be investing heavily in European infrastructure, particularly in the harder-hit countries in the bloc. They are also expected to provide a fresh impetus to allow the EU's an- ti-trust bodies to go after large Chinese state-supported companies, much in the same way that the EU intends crack- ing down on multinational digital giants such as Apple and Amazon through Digital Taxation legislation currently being formulated. Chinese companies, however, are not the only targets but they appear to be the exercise's primary quarry. The new regulations will address rising concerns in Europe that third-country state-bol- stered businesses are competing unfair- ly by offering unbeatably low bids for public tenders and offering premiums for acquisitions. As such they aim to close a Single Mar- ket regulatory gap through which sub- sidies granted by non-EU governments currently go largely unchecked, while subsidies granted by Member States are subject to close scrutiny. They come as member states are voic- ing increasing alarm that European companies are being bought by third country firms enjoying unlimited credit lines from their governments, or of be- ing forced out of business because rivals can afford to sell at below cost levels. Recent high-profile acquisitions in particular by Chinese companies in particular have seen the European buy- outs of Volvo Cars, tire maker Pirelli, the Greek port of Piraeus, Swiss agro- chemicals manufacturer Syngenta and the Finnish Amer Sports. On the other end of the spectrum, the French government recently halted the purchase of grocery chain Carrefour SA by Canada's Alimentation Couche- Tard Inc, citing food sovereignty and the need to secure supply chains during the Covid-19 pandemic. Italy also recently teamed up with France to protect truck maker Iveco SpA from being taken over by China FAW Group Co. Prime Minister Mario Draghi, meanwhile, sent a further mes- sage by recently blocking a bid by Chi- na's Shenzhen Invenland Holdings Co. for the small semiconductor firm LPE SpA. The proposals' tools in a nutshell Under the proposed Regulation, the Commission will have the power to in- vestigate financial contributions grant- ed by public authorities of a non-EU country which benefit companies en- gaging in an economic activity in the EU and redress their distortive effects, as relevant. Three tools are being proposed, two notification-based and a general market investigation tool: • A notification-based tool to inves- tigate concentrations involving a finan- cial contribution by a non-EU govern- ment, where the EU turnover of the company to be acquired (or of at least one of the merging parties) is €500 mil- lion or more and the foreign financial contribution is at least €50 million. En- emalta far exceeds this threshold, as do the Shanghai Electric and SOCAR in- vestments. • A notification-based tool to inves- tigate bids in public procurements in- volving a financial contribution by a non-EU government, where the esti- mated value of the procurement is €250 million or more, which again appears to fit the bill in the case of the Enemalta deals; and additionally • A tool to investigate all other market situations and smaller concentrations and public procurement procedures, which the Commission can start on its own ex-officio initiative and may re- quest ad-hoc notifications. Azerbaijani state-owned SOCAR in the new Delimara power station's Electrogas consortium, with the government committing Malta to purchase natural gas from that company for 18 years