EU Investigates Distortive Practices By Chinese Solar Companies In Foreign Subsidy

EU Investigates Distortive Practices By Chinese Solar Companies In Foreign Subsidy

European Commission has initiated two in-depth investigations under the Foreign Subsidies Regulation (FSR) related to the potential distortive role of foreign subsidies given to bidders in a public procurement procedure. In the investigation, the commission will assess whether the economic operators concerned did benefit from an unfair advantage to win public contracts in the EU.

The investigations were launched followed by a notification submitted on the one hand by the ENEVO Group including LONGi Solar Technologie GmbH, and on the other hand Shanghai Electric UK Co. Ltd. and Shanghai Electric Hong Kong International Engineering Co. Ltd. The relevant public procedure was launched by a Romanian contracting authority (Societatea PARC FOTOVOLTAIC ROVINARI EST S.A.) for the design, construction, and operation of a photovoltaic park in Romania, with an installed power of 110 MW. This project is partially financed by the EU Modernisation Fund.

Procedural background

The Foreign Subsidies Regulation (FSR) began on 12 July 2023. It’s a new set of rules that enables the commission to address distortions caused by foreign subsidies. It thereby allows 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 providing their recipients with an unfair advantage to acquire companies or obtain public procurement contracts in the EU to the detriment of fair competition. The FSR addresses such distortions and closes a regulatory gap. It gives the EU new tools to effectively tackle foreign subsidies that cause distortions and undermine the level playing field in the internal market which is based on a competitive social market economy.

The FSR introduces Three procedures:

Two notification-based procedures to:

(i) investigate concentrations as well as (ii) bids in public procurement procedures involving financial contributions granted by non-EU governments. The notification obligations apply to economic operators since 12 October 2023.

An ex officio procedure to investigate all other market situations, where the Commission can start a review on its initiative. 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, and when the company was granted at least €4 million in foreign financial contributions from at least one-third country in the three years before notification.

Based on the procedure, following the preliminary review of all the submissions, the Commission decide whether to open an in-depth investigation for two bidders. This is possible since there are sufficient indications that both have been granted foreign subsidies that distort the internal market.

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.

In line with the provisions of the Foreign Subsidies Regulation, at the end of its in-depth investigation, the Commission may (i) accept commitments proposed by the company if they fully and effectively remedy the distortion, (ii) prohibit the award of the contract, or (iii) issue a no-objection decision.

Both consortia submitted a complete notification on 4 March 2024. The Commission now has 110 working days as of that date to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.

Companies Involved 

The first investigated consortium is composed of the ENEVO Group and LONGi Solar Technologie GmbH. ENEVO Group, the consortium leader, is a Romanian-based provider of engineering and consulting services. LONGi Solar Technologie GmbH is a newly established, fully owned, and fully controlled German subsidiary of LONGi Green Energy Technology Co., Ltd, which is a major supplier of solar photovoltaic solutions, listed on the Hong Kong Stock Exchange. Both LONGi Solar Technologie GmbH and LONGi Green Energy Technology Co., Ltd. are active in the development, manufacturing, and servicing of solar wafers, cells, and modules.

The second investigated consortium is composed of Shanghai Electric UK Co. Ltd. and Shanghai Electric Hong Kong International Engineering Co. Ltd. Both companies are 100% owned and controlled by Shanghai Electric Group Co. Ltd, a State-Owned Enterprise of the People’s Republic of China. It is ultimately owned and controlled by the Shanghai State-owned Industry Supervision and Management Committee, a state-owned entity that is subordinate to the China Central People’s Government. Shanghai Electric UK Co., Ltd. and Shanghai Electric Hong Kong International Engineering Co., Ltd. are leading global suppliers of industrial-grade solutions for energy, manufacturing, and the integration of digital intelligence. They provide services on wind, solar, and hydrogen storage, as well as an integrated process of generation, grid, load, and storage.