Foreign Subsidies Regulation: European Commission Summary Notice on the In-Depth Investigation in the ADNOC / Covestro case published

On 28 July 2025, the European Commission formally opened an in-depth investigation under the Foreign Subsidies Regulation (Regulation (EU) 2022/2560) into the planned acquisition of German chemical producer Covestro AG by Abu Dhabi National Oil Company (ADNOC), a state-controlled oil and gas producer from the United Arab Emirates (FS.100156, see our PR here).

Following a notification of the transaction on 15 May 2025, the Commission’s preliminary assessment found sufficient indications that the parties may have benefited from foreign subsidies liable to distort competition in the EU internal market. These include:

  • Unlimited guarantee – deriving from ADNOC’s exemption from UAE bankruptcy laws in the three years prior to the bid, potentially enabling the company to obtain more favourable financing conditions.
  • Capital increase – a commitment by ADNOC to inject capital into Covestro as part of the acquisition process, also within the three-year period, with indications it was not on market terms and was limited to Covestro.
  • Other foreign financial contributions to ADNOC that may qualify as foreign subsidies, which will be examined further.

The Commission’s preliminary view is that the unlimited guarantee falls under Article 5(1)(b) FSR and the capital increase under Article 5(1)(d) FSR, making them most likely to distort the internal market. These measures may have strengthened ADNOC’s position in the bidding process—potentially deterring rival bidders or enabling a higher-than-market valuation—and could give the combined entity post-transaction advantages such as preferential financing and investment strategies not aligned with market conditions. The investigation will assess both the impact on the acquisition process and any competitive effects within the EU market after completion.

Stakeholders and Member States are invited to submit comments within 10 working days following the date of publication. Clayton & Segura can support and advise you to prepare and submit your feedback.

For more information, see the Commission’s summary notice.