Solar photovoltaics tender in Romania: On 3 April 2024, the EC launched two in-depth investigations against two consortia for allegedly submitting unfair bids in a public tender for the design, construction and operation of a photovoltaic park in Romania, with an installed power of 454.97 MW, partly financed under the EU Modernisation Fund. The first consortium is composed of a Romanian-based provider of engineering and consulting services (the consortium leader) and a newly established, wholly owned German subsidiary of a Hong Kong-listed supplier of solar photovoltaic solutions active in the development, manufacturing and servicing of solar wafers, cells and modules. The second bidding consortium comprises two wholly-owned subsidiaries of a Chinese state-owned enterprise that are leading global suppliers of industrial-grade solutions of energy, manufacturing and the integration of digital intelligence. They provide services on wind, solar and hydrogen storage, as well as an integrated process of generation, grid, load and storage. Both consortia submitted a complete notification to the FSR on 4 March 2024, and the EC has 110 working days from that date to conclude its investigation.

Electric trains tender in Bulgaria: On 16 February 2024, the EC launched its first in-depth investigation against the subsidiary of a leading Chinese state-owned train manufacturer into the potentially market distortive role of Chinese subsidies in the context of a tender launched by Bulgaria's Ministry of Transport and Communications relating to the purchase of 20 electric push–pull trains, as well as their maintenance over 15 years (with an estimated contract value of approximately €610 million). Shortly thereafter, the Chinese bidder withdrew from the public tender, and the EC closed the investigation, highlighting the success of the EC’s enforcement: “In just a few weeks, our first investigation under the Foreign Subsidies Regulation has already yielded results. Our Single Market is open for firms that are truly competitive and play fair. We will continue to take all necessary measures to preserve Europe’s economic security and competitiveness – with assertiveness and speed”. This case shows that, even absent a formal decision, FSR enforcement in itself can have a massive impact on businesses’ investment plans in the EU.

Investigatory powers include dawn raids: On 23 April 2024, the EC announced that it is conducting unannounced inspections (dawn raids) at the premises of a company active in the production and sale of security equipment in the EU (the EC was accompanied by their counterparts from the national competition authorities of the EU member states where the dawn raids were carried out). Dawn raids are one of EC’s far-reaching powers to assess possible distortions on the EU’s internal market resulting from foreign subsidies. The EC’s long experience in conducting dawn raids in antitrust investigations makes them a particularly effective tool for investigating alleged non-compliance with the new FSR rules.

More M&A deals being reviewed than expected: M&A deals can also be subject to a mandatory notification obligation under the FSR since 12 October 2023, and the EC is reviewing far more M&A under the FSR than originally expected. This is reflected in the EC’s recent FSR brief published in February 2024 with statistics on the notifications it has received during the first 100 days since the start of the notification obligations:

• The EC was engaged in pre-notification discussions in 53 M&A cases. The vast majority of cases (43 out of 53) were subject to parallel review under the EU merger rules, and some cases also triggered a parallel review under national merger control rules (5 out of 53). In addition, around half of the cases involved FDI screening in one or more EU member states.
• More than half of the cases involved non-EU to EU M&A deals, but the FSR also covered purely EU to EU M&A deals and even non-EU to non-EU transactions.
• Almost one-third of all M&A cases in pre-notification involved an investment fund as a notifying party.

By way of contrast, during the legislative process back in 2021, the EC had predicted only 33 M&A notifications per year. In the first 100 days alone, the number of communicated M&A deals therefore already exceeded the EC’s prior estimate. To accommodate businesses with the new reporting obligations for M&A deals, the EC policy brief provides clarifications on some recurring issues that have arisen in the context of the M&A notifications received, including how to categorise foreign financial contributions correctly, the level of detail required to report those identified as most likely to distort the internal market and how to interpret some the exceptions included in the notification form for M&A deals. The EC also regularly updates the Q&A on practical aspects of the new regime on its website.

Implications and outlook

The EC’s enforcement track record over the last six months clearly highlights that the new FSR rules have already started showing their teeth in practice and FSR compliance must be taken seriously by all international businesses investing and operating in the EU. Extensive record-keeping is a must to ensure that all foreign (non-EU) financial contributions are monitored and tracked accurately and to avoid delays and other negative implications for their M&A investments, participation in public tenders and operations in strategic sectors within the EU. For more guidance on the new FSR rules and how they can affect business activities in the EU, see our prior alerts from November 2022, May 2023 and October 2023.

1. EU starts investigation into Chinese wind turbines under new Foreign Subsidies Regulation
2. Press Release by WindEurope, “EU starts investigation into Chinese wind turbines under new Foreign Subsidies Regulation” (9 April 2024); see also Politico, EU launches probe into Chinese wind turbines (9 April 2024).

Client Alert 2024-087