The European Commission has launched the first -depth investigation into the potentially market distortive role of foreign subsidies, exercising its powers under the Foreign Subsidies Regulation.
This investigation relates to a public procurement procedure. It shows the Commission’s determination to preserve the internal market’s integrity by ensuring that recipients of foreign subsidies cannot benefit from an unfair advantage to win public contracts in the EU, to the detriment of fair competition.
The investigation follows a notification submitted to the Commission by CRRC Qingdao Sifang Locomotive Co., Ltd., a subsidiary of CRRC Corporation. It concerns a public procurement procedure launched by Bulgaria’s Ministry of Transport and Communications, relating to the provision of several electric “push-pull” trains as well as related maintenance and staff training services. The public procurement tender is for 20 electric “push-pull” trains, as well as their maintenance over 15 years. The estimated value of the contract is around BGN 1.2 billion (EUR 610 million).
According to the Foreign Subsidies Regulation, companies are obliged to notify their public procurement tenders in the EU when the estimated value of the contract exceeds EUR 250 million, and when the company was granted at least EUR 4 million in foreign financial contributions from at least one third country in the three years prior to notification.
“Today [16 February 2024] we launch the first investigation under the Foreign Subsidies Regulation to establish whether foreign subsidies allowed Chinese state-owned rolling stock manufacturer CRRC to submit an unduly advantageous offer in reply to a tender for electric trains in Bulgaria. European openness presupposes that everyone plays by the rules. Ensuring that our EU Single Market is not distorted by foreign subsidies to the detriment of competitive firms that play fair is vital for our competitiveness and economic security,” Thierry Breton, Commissioner for Internal Market said.
Following its preliminary review of the notification received from CRRC Qingdao Sifang Locomotive, the Commission considered it justified to open an in-depth investigation, since there are sufficient indications that this company has been granted a foreign subsidy that distorts the internal market. For this, the Commission had to assess whether the foreign financial contribution constitutes a subsidy that directly or indirectly confers a selective benefit to the company; and whether this allows the company to submit an unduly advantageous tender.
During the in-depth investigation, the Commission will further assess the alleged foreign subsidies and obtain all the information required to establish whether they may have allowed CRRC Qingdao Sifang Locomotive to submit an unduly advantageous offer in reply to a tender. Such an offer could cause other companies participating in the public procurement procedure to potentially lose sales opportunities.
In line with the provisions of the Foreign Subsidies Regulation, at the end of its in-depth investigation the Commission may accept commitments proposed by the company if they fully and effectively remedy the distortion, prohibit the award of the contract, or issue a no-objection decision.
CRRC Qingdao Sifang Locomotive submitted a complete notification on 22 January 2024. As of that date, the Commission has 110 working days, until 2 July 2024, to take a final decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.
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