EU Launches Anti-subsidy Investigation Against Longi, Shanghai Electric

(AsianFin)—The European Commission has launched two investigations to determine whether two consortia violated the Foreign Subsidies Regulation (FSR) in a 110 MW PV tender in Romania.

“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 €250 million ($271 million), and when the company was granted at least €4 million in foreign financial contributions from at least one third country in the three years prior to notification,” the European Commission (EC) said in a statement.

“Following its preliminary review of all the submissions, the commission considered it justified to open an in-depth investigation for two bidders, since there are sufficient indications that both have been granted foreign subsidies that distort the internal market,” said the EC.

The tender was organized by the special purpose vehicle Societatea Parc Fotovoltaic Rovinari Est S.A., with partial financing provided by the EU modernization fund.

The first group under scrutiny comprises Romanian engineering company Enevo Group and Longi Solar Technologie GmbH, the German subsidiary of Chinese solar module manufacturer Longi. The second consortium involves Shanghai Electric UK and Shanghai Electric Hong Kong International Engineering, both subsidiaries of the Chinese industrial conglomerate Shanghai Electric.

“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 the companies 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,” said the commission.

A final decision on the case should be announced within 110 working days.

“Solar panels have become strategically important for Europe: for our clean energy production, jobs in Europe, and security of supply,” said Thierry Breton, the EU commissioner for the internal market. “The two new in-depth investigations on foreign subsidies in the solar panel sector aim to preserve Europe’s economic security and competitiveness by ensuring that companies in our Single Market are truly competitive and play fair.”

Following the announcement by the EC, the European Chamber of Commerce in China issued a statement criticizing the FSR for its broad and ambiguous definition of "foreign subsidies," which not only increases the burden on companies but also risks discrimination against Chinese companies.

The chamber accused the EU of abusing the FSR as a "new tool of economic coercion" and interfering with fair and legal business operations of Chinese companies locally. It urged the EU to enhance transparency, fully safeguard the defense rights of Chinese companies, and reduce barriers to EU investment, public procurement, and business operations.

These are the second and third investigations under the EU foreign subsidies regulation, which has allowed the EC since July 2023 to evaluate whether subsidies allow companies to submit overly advantageous offers.

In February, the European Commission initiated an investigation into China Railway Corporation subsidiary CRRC Qingdao Sifang's participation in a procurement project for 20 electric trains by Bulgaria's Ministry of Transport and Communications, citing "sufficient evidence" of distorted foreign government subsidies. Despite the subsequent statement by the EU Chamber of Commerce in China (CCCEU) that CRRC had complied with the regulations by submitting a complete declaration, CRRC Qingdao Sifang ultimately withdrew from the bidding process.

The FSR, as the EU's latest legal tool, differs from traditional anti-subsidy measures in its inclusion of "foreign government subsidies" within the scope of EU market competition review, according to Pu Lingchen, the partner in charge of international trade and compliance at Chance Bridge Law Firm.

It has posed new challenges to Chinese companies venturing into Europe, Pu said, adding that the scope and depth of future investigations will continue to expand and deepen.