The European Commission (Commission) enforcement activities under the new EU Foreign Subsidies Regulation (FSR) have been making headlines since February 2024, when the first in-depth investigation was launched. A month after our previous update on the application of the FSR, this new EU enforcement tool remains a top priority.

First ever in-depth investigation into an M&A transaction under the FSR

On 10 June, the European Commission (EC) announced that it had launched for the first time an in-depth investigation into an M&A transaction. The investigation concerns the acquisition by the Emirates Telecommunications Group Company PJSC (e&) of sole control of PPF Telecom Group B.V. (excluding its Czech business). The acquirer is a State-controlled telecommunications operator based in the United Arab Emirates (UAE).  

The preliminary investigation indicates that there are sufficient indications that e& has received foreign subsidies that have distorted the EU internal market. The alleged subsidies were in the form of an unlimited guarantee from the UAE and a loan from UAE-controlled banks directly facilitating the transaction. The Commission noted that such subsidies are among the most likely to distort the internal market, as set out in Article 5 of the FSR. 

Once again, the EC is utilizing the FSR to safeguard the EU’s strategic industries, such as energy, security equipment, and telecommunications, from unfair and predatory competition. However, this marks the first instance of the EC targeting a UAE company.

Nuctech challenges the EC dawn raids

Following the dawn raids conducted by the EC at the Dutch and Polish offices of Nuctech on 23 April, the Chinese manufacturer of security equipment decided to challenge the inspection decision before the General Court. Nuctech’s appeal is understood to focus on whether it is required to hand over documents held in China, possibly linked to state-held information which it may not be authorized to disclose.

A ruling on this point by the General Court will be crucial for the application of the FSR, not just in seizing information during raids, but also more broadly in general investigations. It is understood that other companies under scrutiny have informed EC officials that their information sharing capabilities were constrained by Chinese legal regulations. Allegedly, this played a role in their decision to withdraw from EU tenders after being investigated.

Envision and Mingyang understood to be under FSR ex officio investigation

In our FSR update from May 2024, we informed you about the opening of an ex officio inquiry into Chinese suppliers of wind turbines. At that time, the names of the companies under investigation had not been disclosed. However, it is now known that the EC’s investigation is targeting Envision and Mingyang, two of the main Chinese players involved in building wind parks across the EU.

If you need more information or further guidance in this area, please contact José Rivas, Paula González and Antonio Rodrigues.

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