On April 3, 2024, the European Commission (“Commission”) launched two in-depth investigations into tenders by Chinese solar photovoltaic suppliers under the EU Foreign Subsidies Regulation (“FSR”).[1] The investigations relate to a public procurement procedure launched on September 27, 2023 by a Romanian contracting authority (Societatea Parc Fotovoltaic Rovinari Est S.A.) for the design, construction, and operation of a photovoltaic park with an installed capacity of 454.97 MW.[2]
Overview of the FSR: filing conditions and criteria for assessment
The FSR, designed to tackle distortive subsidies given by non-EU countries to companies active in the EU single market, entered into effect on July 12, 2023.[3] It empowers the Commission to investigate potentially distortive non-EU subsidies in the context of ex ante notifications for certain large mergers and public tenders, and in ex officio investigations.
In public procurement procedures, the FSR requires tenderers to notify their bid if:
- the overall contract value of the tender is at least €250 million (and if divided into lots, the aggregate value of the lots applied for is at least €125 million); and
- the tenderers and any main subcontractors and suppliers involved in the same tender received at least €4 million in financial contributions from a single non-EU country in the last three years prior to notification.
The Commission holds extensive powers to address distortions caused by foreign subsidies. It may impose corrective measures or commitments, prohibit the relevant merger or public contract awards, and even accept the reimbursement of the foreign subsidy (with interest), provided that the repayment is transparent, verifiable, and effective.
Prior enforcement of the FSR
These investigations in the photovoltaic sector follow the Commission’s first in-depth investigation under the FSR, opened on February 16, 2024. This concerned a tender by Chinese state-owned train manufacturer CRRC Qingdao Sifang Locomotive Co., Ltd. (“CRRC”) for a €610 million contract to supply electric trains in Bulgaria, submitted on January 22, 2024.[4] On March 26, 2024, CRRC withdrew its bid from the tender procedure and the Commission closed the investigation. Commissioner for the EU’s internal market, Thierry Breton, celebrated the victory, stating that “[i]n just a few weeks, our first investigation under the [FSR] has already yielded results. Our Single Market is open for firms that are truly competitive and play fair” and vowed that the Commission “will continue to take all necessary measures to preserve Europe’s economic security and competitiveness – with assertiveness and speed.”[5] The Commission has since announced new FSR investigations targeting Chinese suppliers of wind turbines for wind parks in Spain, Greece, France, Romania, and Bulgaria.[6] The Commission also announced on April 23, 2024 its first-ever FSR dawn raid at the premises of Nuctech, a Chinese producer of security equipment, in the Netherlands and Poland, to gather possible evidence of distortive foreign subsidies.[7]
Investigations of Chinese solar photovoltaic producers
The Commission’s solar photovoltaic investigations concern two different bids by consortiums involving Chinese companies:[8]
- A consortium comprising ENEVO Group, a Romanian engineering and consulting services provider, and LONGi Solar Technologie GmbH, a German subsidiary of the Chinese photovoltaic manufacturer LONGi Green Energy Technology Co., Ltd.
- A consortium consisting of two companies owned and controlled by Shanghai Electric Group Co. Ltd, a Chinese state-owned enterprise that provides an integrated process and services concerning the generation, grid, load, and storage of wind, solar and hydrogen energy.
The Commission opened its in-depth investigations after finding that:
- Both consortia received: (i) government grants, (ii) tax refunds, fiscal incentives and levies, (iii) financing, and, in the case of Shanghai Electric Group Co. Ltd, and (iv) sales of goods and the provision of services of c. €546 million, in the three years prior to notification; and
- The amount of these benefits was significantly higher than the value of the contracts for which the consortia are bidding.[9]
The Commission will now conduct a detailed review to determine by August 14, 2024 if these financial contributions amounted to non-EU subsidies that allowed the two consortia to submit unduly advantageous offers for the photovoltaic park contract.
Implications
These investigations underscore the Commission’s serious commitment to utilising its new FSR powers. They also highlight the significant repercussions that FSR notifications can entail, as evidenced by CRRC’s withdrawal of its bid after the Commission opened an in-depth FSR investigation.
As the Commission ramps up FSR enforcement, it is prioritizing strategic sectors crucial for the EU economy. Executive Vice-President and Commissioner for Competition, Margrethe Vestager has explained that dependency on third countries for critical technologies “is not only dangerous for [the EU’s] competitiveness” but also jeopardizes the EU’s economic security.[10] Similarly, Commissioner for the EU’s internal market, Thierry Breton, explained that its solar panel investigations “aim to preserve Europe’s economic security and competitiveness by ensuring that companies in our Single Market are truly competitive and play fair.”[11] [12]
While only time will shine light on the Commission’s future enforcement under the FSR, it is likely that a continued focus on strategic sectors essential for the EU economy will persist.
[1] Regulation (EU) 2022/2560 of the European Parliament and of the Council of 14 December 2022 on foreign subsidies distorting the internal market, OJ 2022 L 330/1.
[2] See Commission Press Release IP/24/1803, “Commission opens two in-depth investigations under the Foreign Subsidies Regulation in the solar photovoltaic sector,” April 3, 2024.
[3] See our July 2023 Alert Memorandum, “EU Foreign Subsidies Regulation Takes Effect and Filing Forms Adopted”.
[4] The tender, initiated by Bulgaria’s Ministry of Transport and Communications, related to the procurement of 20 electric “push-pull” trains and, as well as their maintenance over a 15-year period, with an estimated contract value of €610 million. See Commission Press Release IP/24/887, “Commission opens first in-depth investigation under the Foreign Subsidies Regulation,” February 16, 2024. See also Summary notice C/2024/1913 concerning the initiation of an in-depth investigation in case FSP.100147.
[5] See Statement STATEMENT/24/1729 by Commissioner Breton on withdrawal by CRRC Qingdao Sifang Locomotive Co., Ltd. from public procurement following the Commission’s opening of an investigation under the Foreign Subsidies Regulation, March 26, 2024.
[6] See Commission Speech SPEECH/24/1927, Speech by Executive Vice President Vestager on technology and politics at the Institute for Advanced Study, April 9, 2024.
[7] See Commission Press Release MEX/24/2247, “Commission carries out unannounced foreign subsidies inspections in the security equipment sector,” April 23, 2024 and Reuters, China’s Nuctech raided in EU over foreign subsidies concerns, April 24, 2024.
[8] See Commission EU tenders portal under the reference “Romania-Târgu Jiu: Construction work for power plant”, 2023/S 189-592487.
[9] See Summary notice C/2024/2830 concerning the initiation of an in-depth investigation in Case FSP.100151, and Summary notice C/2024/2832 concerning the initiation of an in-depth investigation in Case FSP.100154.
[10] See Commission SPEECH/24/1927, Speech by Executive Vice President Vestager on technology and politics at the Institute for Advanced Study, April 9, 2024.
[11] See Commission Press Release IP/24/1803, “Commission opens two in-depth investigations under the Foreign Subsidies Regulation in the solar photovoltaic sector,” April 3, 2024.
[12] The importance of the solar sector was further underscored by the signing of the European Solar Charter on April 15, 2024, in the margins of the informal Energy Council meeting attended by the Commission, the 27 EU Member States, and industry representatives. At the signing ceremony, Commissioner for Energy, Kadri Simson, stressed the sector’s significance, stating that “[w]e all want a thriving EU solar manufacturing industry.” (See Commission News Announcement, “Commission supports European photovoltaic manufacturing sector with new European Solar Charter,” April 15, 2024; and Commission SPEECH/24/2052, Speech by Commissioner Simson at the signing ceremony of the European Solar Charter on the margins of the Informal Energy Council, April 15, 2024).