2024-02-17 18:37:06
This is Brussels’ first in-depth investigation under the new regulation, will last 110 days and delay the procedure for the delivery of long-distance trains
The European Commission is launching today its first in-depth investigation under the July 12, 2023 regulation into possible foreign subsidies that harmed the common market. It has been commissioned by the Ministry of Transport to supply 20 long-distance trains with a speed of up to 200 km/h, with a capacity of a minimum of 300 seats, to maintain them for 15 years. The estimated value of the contract is about BGN 1.2 billion (610 million euros), which is provided under the recovery and sustainability plan.
The candidates are the Spanish train manufacturer Talgo and the Chinese CRRC Qingdao Sifang Locomotive Co. The procedure is at the stage of negotiations with the candidates, the Ministry of Transport recalled. The investigation is into the involvement of China’s CRRC Qingdao Sifang Locomotive Co and suspicions that it is subsidized and this could give it an advantage.
The Commission said it was exercising its powers under the Foreign Subsidy Regulation and this first investigation showed the EC’s determination to preserve the integrity of the internal market. Brussels wants to ensure that recipients of foreign subsidies cannot take advantage of an unfair advantage to win public contracts in the EU to the detriment of fair competition.
It is also reported that the investigation began following a notification submitted to the commission by CRRC Qingdao Sifang Locomotive Co., Ltd., a subsidiary of CRRC Corporation, a Chinese state-owned train manufacturer.
However, the Ministry of Transport said that the European Commission was asked before the procedure started how to act if there were applicants from third countries. In the procedure itself, again, through the Ministry of Finance, an inquiry was made as to whether it should continue with the participation of Chinese companies. From there, the answer was to continue.
After submitting the offers, Georgi Gvozdeikov’s department sent the declarations that the candidates are required to fill out to the European Commission. And on the basis of them, she undertakes her thorough investigation.
From Brussels, after the preliminary examination of the notification received by CRRC Qingdao Sifang Locomotive, the Commission considered it justified to open an in-depth investigation because there were sufficient indications that this company had been granted a foreign subsidy that distorted the functioning of the internal market.
The Commission had to assess whether the foreign financial assistance constituted a subsidy that directly or indirectly conferred a selective advantage on the company; and whether this allows the company to present an unduly advantageous offer.
During the in-depth investigation, the EC will further assess the alleged foreign subsidies and obtain all necessary information to determine whether they may have enabled CRRC Qingdao Sifang Locomotive to submit an unduly advantageous bid in response to a tender. Such an offer could cause other companies participating in the procurement procedure to potentially lose sales opportunities.
At the end of its thorough investigation, the EC may accept commitments proposed by the company if they fully and effectively remedy the infringement, prohibit the award of the contract or issue a decision of no objection.
CRRC Qingdao Sifang Locomotive submitted a full notification on January 22, 2024. From that date, the commission has 110 working days, until July 2, 2024, to make a final decision. The initiation of an in-depth investigation does not predetermine the outcome of the investigation.
Also included in the press release is the business card of the Chinese company CRRC Corporation Limited (known as CRRC). It is the world’s largest rolling stock manufacturer by revenue. It manufactures locomotives and wagons, trams and other railway vehicles.
General context of the procedure
The Foreign Subsidy Regulation (FSR) came into force on 12 July 2023. This new set of rules enables the Commission to deal with violations caused by foreign subsidies and thus enables the EU to ensure a level playing field for all companies operating in the internal market while remaining open to trade and investment.
In recent years, foreign subsidies appear to have distorted the EU’s internal market, including by giving their recipients an unfair advantage in acquiring companies or receiving public procurement contracts in the EU to the detriment of fair competition. The RCS overcomes these violations and fills the regulatory gap. It provides the EU with new tools to effectively deal with foreign subsidies that cause distortions and undermine the level playing field in the internal market, which is based on a competitive social market economy.
Three procedures are introduced with the RCS:
Two notification-based procedures for i) investigation of concentrations as well as ii) tenders in public procurement procedures involving financial participation provided by non-EU governments. Notification obligations apply to economic operators from 12 October 2023.
An official investigation procedure for all other market situations where the Commission may initiate a review on its own initiative.