When EU Foreign Subsidies Regulation Meets China’s Blocking Statute

Background: extraterritorial reach of FSR

The European Union’s (EU) Foreign Subsidies Regulation 2022/2560 (FSR), in force since 2023, enables the European Commission to investigate financial contributions granted by non-EU governments where they may distort the internal market of the EU. Its application is triggered by an undertaking’s economic activity in the internal market (FSR, Articles 1(2) and 2). This effects-based jurisdiction authorizes the Commission to assess conduct, financial relationships, and government support that took place entirely outside the EU, often between a foreign state and its own domestic entities.

Under Article 13 FSR, the Commission can require undertakings to produce information about financial contributions received from third-country authorities, including internal communications and documents that may be located abroad or relate to a foreign government’s own affairs. This creates potential for conflict with foreign state secrecy or national security laws, blocking statutes, data localization and export control laws. Article 15 FSR authorizes inspections outside the EU, provided the third country’s government raises no objection. Under Article 16 FSR, the Commission may draw adverse inferences and decide on the basis of facts available where an undertaking fails to supply requested information, including by refusing an inspection within or outside the Union. Companies may thus be legally barred by their home jurisdiction from disclosing information, yet penalized by the EU for non-cooperation.

In April 2024, the Commission carried out unannounced inspections at Nuctech’s premises in Poland and the Netherlands, seeking internal emails and data stored on servers in China. Nuctech resisted, arguing that disclosure could breach Chinese data-security and state-secrets rules. The General Court rejected Nuctech’s request for interim relief, relying on the familiar EU law proposition that the application of EU law to conduct outside the Union is legitimate where such conduct has foreseeable, immediate and substantial effects in the EU. In December 2025, the Commission opened an in-depth investigation into whether Nuctech had benefited from foreign subsidies capable of distorting the EU market.

China’s response to FSR investigation in Nuctech

On 9 January 2025, China’s Ministry of Commerce (MOFCOM) determined that the Commission’s practices in investigating Chinese enterprises under the FSR and its implementing rules fall under Article 3 of the Rules on Investigations into Foreign Trade Barriers and constitute trade and investment barriers. MOFCOM’s spokesperson stated that FSR investigations restricted and obstructed access of Chinese enterprises’ products, services and investments, compromising their competitiveness in the EU market.

In April 2026, China’s State Council adopted the Regulation on Countering Unjustified Foreign Extraterritorial Jurisdiction (Decree 835/2026). Under these rules, such jurisdiction covers foreign actions that violate international law and the basic norms governing international relations and harm China’s sovereignty, security and development interests, or the legitimate rights and interests of Chinese citizens and organizations. No organization or individual may enforce or assist in enforcing such measures.

On 15 May 2026, China’s Ministry of Justice (MoJ) issued an announcement declaring that certain investigative measures taken by the Commission in its FSR investigation into Nuctech constituted unlawful extraterritorial jurisdiction. The blocking order prohibited organizations and individuals in China from complying with, or assisting in, those measures. MOFCOM’s spokesperson suggested that the Commission “has compelled Chinese banking institutions to cooperate, making unreasonable demands for vast amounts of information located within China that are irrelevant to the investigations”.

From the EU perspective, Nuctech operates in the EU market and is subject to EU market-regulatory rules. From China’s perspective, the Commission reached into Chinese territory for information held by Chinese entities and potentially protected by Chinese law. The EU thus frames the measure as internal-market regulation; China, as unjustified long-arm jurisdiction.

The episode has a partial analogue in the EU’s earlier Gazprom investigation. In 2012, Russia required strategic companies and their subsidiaries to obtain prior approval before disclosing certain information to foreign authorities. That constrained voluntary cooperation, but did not prevent the Commission from pursuing its antitrust investigation, relying on evidence available within the EU, or drawing appropriate conclusions from non-cooperation. The Nuctech episode is potentially more significant: China’s response operates through an institutionalized blocking framework and expressly frames the EU investigation itself as unjustified extraterritorial jurisdiction. Blocking measures have traditionally countered the extraterritorial application of foreign sanctions and other foreign regulatory measures; China extends this logic to a new field, targeting an investigative demand rather than a sanctions designation.

China’s response to FSR investigation in JD.com

On 28 May 2026, the Commission announced an in-depth investigation into the proposed acquisition of CECONOMY AG by JD.com, Inc., notified on 17 April 2026. JD.com, headquartered in the Cayman Islands, belongs to a group operating retail and online marketplace businesses in China; CECONOMY is a German retailer of consumer electronics and home appliances whose brands include MediaMarkt, MediaWorld and Saturn. The transaction was cleared by the Bundeskartellamt. Its President, Andreas Mundt, explained that “JD.com has so far been active in Germany only to a very limited extent. The merger thus involves parties with only insignificant competitive overlap and does not give rise to any competition concerns.”

During its preliminary inquiry, the Commission determined that the acquiring entity may have received foreign subsidies distorting the EU internal market, including preferential financing, tax incentives and grants provided by entities possibly attributable to the Chinese government.

In the meantime, on 20 July 2026, the General Court delivered an order on the Commission’s investigatory powers under the FSR in Goldwind v Commission (T-335/26R). Goldwind Science & Technology Co. Ltd, a Chinese wind turbine manufacturer, sought interim relief suspending a Commission request to provide information under Article 13(2) FSR. The Commission had sent multiple information requests to the Goldwind Group since April 2024 in an investigation into potential foreign subsidies in the wind power sector. On 3 February 2026, it opened an in-depth investigation, expressly noting it might require broader disclosure covering additional entities. Goldwind brought an annulment action and sought suspension of the request pending that action, arguing that it exceeded the scope of the in-depth investigation decision.

Interim relief under Articles 278 and 279 TFEU requires (1) a prima facie case; (2) urgency, meaning serious and irreparable harm that cannot await the main judgment; and (3) a balance of interests favoring relief, where applicable. Goldwind alleged serious and irreparable harm from (1) prolongation of the investigation, causing commercial and reputational damage, and (2) irreversible harm to its rights of defence from disclosing the information. The President of the General Court held that if the contested decision were annulled, the Commission would be barred from relying on any information obtained under it. Urgency not being established, the application for interim measures was dismissed.

On 19 August 2026, China’s Ministry of Justice determined that the EU’s cross-border investigation practices towards Chinese entities in its FSR investigation of JD.com constitute undue extraterritorial jurisdiction measures. Pursuant to Decree 835/2026, it issued a blocking order stipulating that no organization or individual may implement or assist in implementing the specified investigation. At the press conference, the MoJ spokesperson stated that the Commission “arbitrarily demanded extensive and unnecessary information about China from Chinese entities”, qualifying these requests as a serious violation of international rule of law.

Outlook: compliance risks and contested evidence

China’s blocking orders create a conflict of laws but do not effectively disable the FSR. The Regulation has no exception for foreign blocking rules, and Article 16 allows the Commission decide on the facts available where cooperation is withheld. The blocking orders therefore shift compliance risk rather than halt procedure: undertakings face fines and periodic penalties under Article 17 FSR and adverse inferences, or liability under Decree 835/2026 in China.

In notified concentrations, the undertaking expects clearance, so non-cooperation risks an adverse decision, including prohibition, on the facts available. JD.com’s decision to offer commitments after China’s blocking order, illustrates that incentive. Ex officio investigations, as in Nuctech, are more exposed: without clearance at stake, the Commission’s assessment may depend more heavily on evidence held by undertakings concerned.

As a result, FSR Article 15 inspections in China, which require the host government’s non-objection, are now realistically unavailable. One should expect greater reliance on evidence within the EU (subsidiaries’ records, complainants, market investigations, public sources), wider use of Article 16 inferences, and narrower, better-justified information requests, which also reduce litigation risk.

The decisive legal question remains untested on the merits: whether a foreign blocking order can justify non-cooperation or mitigate a fine. The interim-relief orders in Nuctech and Goldwind left the Commission’s requests operative without answering that question, and two refusals suggest suspension of information requests will be hard to obtain.

One should also expect escalation beyond the courtroom. China treats the FSR as a trade barrier and has warned of retaliation, so further blocking orders should accompany new FSR cases. The JD.com decision may become the first real test of whether the FSR can deliver outcomes on a contested evidentiary record.