Is the Commission Adding Fuel to the Fire? How The Commitments in the Lisbon Metro FSR Decision (Case FSP.103117) Fit into Recent China-EU Tensions

The European Commission (“Commission”) has published the full text of its Lisbon Metro decision. The Lisbon Metro decision is the first in-depth and commitment decision under the Foreign Subsidies Regulation’s (“FSR”) public procurement regime. The decision required the replacement of a Chinese state-owned subcontractor, marking a significant development following several FSR investigations into Chinese bidders in public procurement since the FSR entered into force. Additionally, the publication comes at a time of intensified tensions between China and the EU over the Commission’s use of its investigative powers under the FSR, a development covered on multiple occasions on the Kluwer Competition Law Blog:

When EU Foreign Subsidies Regulation Meets China’s Blocking Statute | Kluwer Competition Law Blog; Facts Available, Reasons Required: The FSR Meets China's Blocking Order | Kluwer Competition Law Blog. While the impact of the Lisbon Metro decision on the stand-off between the EU and China over the FSR still remains to be seen, the commitment decision has the potential to add fuel to the already smoldering fire.

Background

During its review under the FSR, the Commission concluded that the Mota-Engil-led consortium’s tender for the Lisbon Metro Violet Line was unduly advantageous because its main subcontractor, an EU subsidiary of the Chinese SOE CRRC Group Corporation Ltd. (“CRRC”), had benefited from foreign subsidies that enabled it to submit an unduly advantageous offer to the consortium.

Mota-Engil addressed the Commission’s concerns by committing to replace the CRRC subsidiary with the Polish rolling-stock manufacturer PESA for the entire contract performance period.

In recent months, tensions have heightened between the EU and China: First, in May of this year, the Chinese Ministry of Justice (“MOJ”) characterized the EU’s FSR investigation into Nuctech as an unlawful exercise of extraterritorial jurisdiction and stated that no organization or individual may comply with or assist in implementing such measures. This position was reiterated in August, when the MOJ issued a further announcement characterizing the Commission’s in-depth investigation into JD.com’s envisioned acquisition of CECONOMY under the FSR’s M&A tool in the same terms.

Additionally, the Lisbon Metro decision is not the first run in between CRRC and the Commission in the context of the FSR: The Commission’s first in-depth investigation under the public procurement tool concerned a tender submitted by CRRC Qingdao Sifang Locomotive Co. Ltd., a subsidiary of CRRC. Ultimately, CRRC Qingdao Sifang Locomotive Co. Ltd. withdrew from the tender procedure thereby ending the investigation without a substantive decision.

Commitments in Focus

Although the replacement of the CRRC subsidiary with Polish rolling-stock manufacturer PESA as a condition for clearance of the Mota-Engil-led bid has long been public knowledge, the recently published full text decision is the first Commission publication to expressly acknowledge and address the fact that PESA, like CRRC, is itself an SOE:

94.6% of PESA’s shares are held by the Polish Development Fund, a state-owned financial group. The Commission even further explains in the Lisbon Metro decision that the Polish Development Fund serves as Poland’s primary economic development agency. Further, at para. 594 of the Lisbon Metro Decision the Commission notes that during the reference period, PESA received various grants under the Recovery and Resilience Facility (the overall value of which is not disclosed), as well as various sizeable financing and capital injections from the Polish Development Fund, some of which may have been subject to EU State aid control. Ultimately, the Commission, however, explained that it would not look further into these measures under the decision as these measures could not qualify as foreign subsidies under Article 3 FSR.

The Commission’s legal reasoning under the FSR is stringent and there is no fault to be found with the application of the law; financial contributions granted by the Polish Development Fund do not qualify as foreign as they are not attributable to a non-EU entity and therefore do not fall within the scope of the FSR.

Nevertheless, at first glance, there are clear similarities between CRRC and PESA. Both are SOEs that benefit from State financing. From an EU perspective an important distinction justifying their different treatment is that for the Polish Development Fund’s financing activities EU State aid rules are in place to ensure that they do not distort competition and trade within the EU.

However, against the backdrop of Chinese criticism that the FSR unfairly targets Chinese companies, the commitment decision in the Lisbon Metro case has the potential to reinforce such concerns and further fuel existing tensions. For example, already in April 2026, following the Commission’s initial decision in the Lisbon Metro case but before publication of the full decision text, the Chinese Chamber of Commerce to the European Union (“CCCEU”) criticized the Commission’s enforcement of the FSR on the basis that it could, in practice, restrict the participation of Chinese enterprises in EU public procurement, mergers and acquisitions, and other ordinary business activities. It also called on the EU to ensure, inter alia, that the FSR is applied in a non-discriminatory manner.