The Wind (Turbines) of Change: Ex Officio Investigation and Dawn Raids Are a New Double First Under the FSR

The Foreign Subsidy Regulation, which went into force on July 12, 2023, is designed to counteract distortions in the European Union’s internal market attributable to financial subsidies given to companies doing business in the EU by non-EU governments. On April 9, the European Commission initiated its first ex officio investigation under the FSR in the wind turbines sector and on April 23 conducted its first dawn raids relating to security equipment.

For many years, the European Commission (EC) championed the benefits to industry and consumers that could come from convergence in the global application of similar antitrust laws governing free markets. It course-corrected with the Foreign Subsidy Regulation (FSR) (see our detailed publications from January and October 2023).

The first ex officio FSR investigation in the wind turbines sector will seek to determine if Chinese manufacturers selling in Bulgaria, France, Greece, Romania, and Spain benefit from foreign subsidies that distort the internal market. The initiation of the investigation by the EC demonstrates that industrial policy is back—with a vengeance.

This investigation comes soon after the in-depth investigations following notifications in public procurement cases relating to train locomotives and solar panels, on February 16 and April 3, 2024, respectively (see here and here). The EC has no fixed deadline by which to decide whether it will open an in-depth investigation into the wind turbines sector. More information will no doubt be issued by the EC as the case progresses.

The EU lags behind key trading partners in the production of computer chips, electric vehicles, solar panels, and wind turbines, among others. This is bad news for the drive to meet EU green energy targets and not lose out in the ongoing technological transformation. The enactment of the FSR itself was a clear sign that the EU recognized that new legal measures were required to fight what it perceived as state-sponsored competition.

Having failed to establish a meaningful share of EU-produced solar panels in the internal market (under 3%), the EC is keen not to see history repeat itself in the wind turbines sector. The new investigation has been welcomed by European producers. WindEurope (a Brussels-based EU association representing companies active across the wind energy value chain)  has noted that prices of wind turbines offered in Europe by Chinese manufacturers are as much as 50% lower than similar EU products. WindEurope also points to a deferred payment mechanism offered by Chinese manufacturers that grants wind farm operators a three-year grace period before any money is disbursed.

The EC has also just conducted its first FSR dawn raids, on April 23, targeting the offices of Nuctech, a Chinese state-owned baggage security scanner manufacturer. The raids on Nuctech’s premises in Poland and the Netherlands were based on indications that Nuctech may have received foreign subsidies that could distort the internal market. The EC officials were accompanied by representatives of the member state competition authorities. The investigators are believed to have seized company and employee IT equipment and cell phones as part of this latest probe, as FSR enforcement escalates.

While the FSR cases to date all concern Chinese producers, we note that the rules are country-agnostic, and apply to all companies operating in the EU, provided the relevant FSR criteria are satisfied.