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News 29 avril 2024

Smart Alert | Implementation of the EU Foreign Subsidies Regulation: The European Commission launches several in-depth investigations in transport and energy sectors.

April 29, 2024

Smart Alert |Implementation of the EU Foreign Subsidies Regulation: The European Commission launches several in-depth investigations in transport and energy sectors.

Since the entry into force of Regulation (EU) 2022/2560 on foreign subsidies distorting the internal market in October 2023 (“FSR”), the European Commission launched investigations on the impact of foreign subsidies granted to companies bidding for some European public tenders in the transport and energy sectors.

Shortly after the coming into force of FSR, the Commission initiated a preliminary investigation on imports of electric vehicles from China. This investigation, which is still ongoing, aims to determine whether foreign subsidies granted to electric vehicle manufacturers by the People’s Republic of China are adversely impacting the European Union’s industry, and specifically European e-car manufacturers.

Even if this investigation is carried out under a different regulation, European Regulation (EU) 2016/1037 on protection against subsidised imports from countries not members of the European Union, it is in line with FSR, which pursue the same objective of avoiding distortions of competition resulting from public subsidies in the European market.

In February 2024, the European Commission started its first in-depth investigation under FSR in response to suspicious bids submitted in a public tender for the supply and maintenance of trains of the Bulgarian Ministry of Transport and Communications.

This inquiry was started following the notification filed under FSR by the bidder, Quingdao Sifang Locomotive Co, Ltd, a subsidiary of the world’s main manufacturer of railway equipment. The investigation revealed that the amount of the subsidy granted was €1.7 billion, i.e five times higher than the €336 million bid apparently submitted by the Chinese company. The company chose to withdraw its bid before the European Commission had a chance to rule on the impact of this subsidy on competition on the European market.

Since then, the European Commission opened several other in-depth investigations in the energy sector. The background is presumably the European dependence on third countries for critical technologies and production of raw materials.

On 3 April 2024, the European Commission announced two in-depth investigations on foreign subsidies granted to companies bidding in a public tender for the design, construction and operation of a photovoltaic park in Romania. In this sector, less than 3% of solar panels installed in the EU are manufactured in Europe.

These investigations follow FSR filings submitted by the following consortia:

  • ENEVO, a Romanian engineering and consultancy services provider, and LONGi Solar Technologie GmbH, a German subsidiary of the Hong Kong eponymous group, which is a major supplier of photovoltaic solutions.
  • Shanghai Electric UK Co. Ltd. and Shanghai Electric Hong Kong International Engineering Co. Both companies are ultimately controlled by a state-owned entity controlled by the Chinese Central Government.

The European Commission suspects that the two bidding consortia benefit from an unfair competitive advantage in the tender because of subsidies granted in China. The background is that the relevant public tender is partly financed by the European Modernisation Fund.

Following an in-depth examination balancing the positive and negative effects of the subsidies on competition on the European market, the Commission may either (i) raise no objections and authorise the award of the public contract, (ii) issue a decision authorising the award of the contract subject to commitments, or (iii) decide to prohibit to the award of the contract, where it considers that the proposed commitments are inappropriate or not sufficient to fully and effectively remedy the distortion on competition or if the economic operator does not offer commitments.

On 9 April, the European Commission announced a new investigation on Chinese wind turbine suppliers. The Commission has not yet specified the context of this investigation but intends to examine the conditions under which wind farms are developed in Spain, Greece, France, Romania and Bulgaria.

Relevant press releases:

Commission opens two in-depth investigations under the Foreign Subsidies Regulation in the solar photovoltaic sector
Speech by Executive Vice President Vestager on technology and politics at the Institute for Advanced Study