The European Commission has launched its first in-depth investigation under rules on foreign subsidies that were introduced last year.

The Foreign Subsidies Regulation was brought in to address what the EU has described as “a regulatory gap”, whereby subsidies granted by EU member states are closely scrutinised under State-aid rules – but those granted by non-EU governments go unchecked.

The commission said today (16 February) that it would investigate whether the subsidiary of a Chinese State-owned train manufacturer had received a subsidy that allowed it to submit an “unduly advantageous tender” for a contract in Bulgaria.

Notification

The probe follows a notification submitted to the commission by CRRC Qingdao Sifang Locomotive Co, a subsidiary of CRRC Corporation, a Chinese state-owned train manufacturer.

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.

Under the regulation, companies are obliged to notify their public-procurement tenders in the EU when the estimated value of the contract exceeds €250 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.

‘Selective benefit’

“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,” the EU body stated.

The commission will now examine whether the financial contribution constitutes a subsidy that directly or indirectly confers a selective benefit to the company.

In line with the provisions of the new regulation, it can block or approve the award of the contract or accept commitments from the company to remedy any distortion to the market. The commission has until 2 July to take a final decision.

"European openness presupposes that everyone plays by the rules," said Thierry Breton (Commissioner for Internal Market).

"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," he added.