The EU foreign subsidies regulation: CRRC and ADNOC cases in focus

Since the FSR came into force in July 2023, the Commission has launched several high-profile investigations, signalling a new era of regulatory oversight in public procurement and mergers involving foreign financial contributions. Two recent cases – an in-depth probe into Chinese train-maker CRRC’s role in a Lisbon Metro tender and the review of ADNOC’s EUR 14.7 billion bid for Covestro – highlight the regulation’s impact.

Understanding the EU Foreign Subsidies Regulation

The FSR was introduced to close a regulatory gap in EU competition law. Subsidies from EU Member States are subject to strict state aid rules, but foreign subsidies previously escaped scrutiny. The FSR therefore empowers the Commission to investigate and address distortions caused by financial contributions from non-EU governments, particularly in public procurement and M&A transactions.

Companies must notify the Commission if they receive foreign financial contributions exceeding EUR 50 million over three years in M&A deals, or EUR four million per third country in public procurement bids exceeding EUR 250 million. The Commission also has ex officio powers to investigate below-threshold cases.

Remedies can include prohibiting deals, accepting commitments, or issuing no-objection decisions.

CRRC and the Lisbon Metro tender

On 5 November 2025, the Commission opened an in-depth investigation into CRRC Tangshan Rolling Stock Unipessoal, a Portuguese subsidiary of the Chinese state-owned CRRC, which is part of a consortium bidding for the Lisbon Metro’s new Violet Line.

The tender, launched in April 2025, attracted four bids, with the Mota-Engil-led consortium offering EUR 598.8 million against a base price of EUR 600 million. The project involves the design, construction, and maintenance of a new 11.5 km metro line with 17 stations, connecting Odivelas to Loures.

The Commission suspects CRRC may have benefited from foreign subsidies that enabled it to submit an “unduly advantageous” offer. The investigation follows a notification from the consortium itself, which includes CRRC as a subcontractor. The Commission will assess whether Chinese state support – potentially in the form of preferential financing or guarantees – distorted the bidding process. Depending on the outcome, the Commission may impose corrective measures, prohibit the contract award, or accept voluntary remedies.

Notably, the Lisbon Metro clarified that the investigation targets a specific proposal, not the tender process itself, and confirmed that all procedural stages may proceed except for the contract award.

ADNOC’s bid for Covestro

In parallel, following months of negotiations, the Commission is now expected to approve ADNOC’s EUR 14.7 billion acquisition of German chemical firm Covestro. The investigation, launched in July, centred on potential distortive subsidies from the UAE, including an unlimited state guarantee and a committed capital injection. These measures may have enabled ADNOC to offer terms that could not be matched by unsubsidised investors, potentially deterring rival bids and raising concerns about post-transaction competitive effects.

To seek approval, ADNOC has proposed commitments including converting the capital increase into a shareholder loan at market rates, amending its articles of association to align with standard UAE bankruptcy law, and pledging to retain Covestro’s intellectual property within Europe. These commitments mirror those accepted in the 2024 PPF Telecom case, suggesting a developing (and helpful) precedent for remedy design under the FSR.

Key takeaways

• The FSR is now a central tool in EU competition enforcement, targeting foreign subsidies that may distort the internal market.
• The FSR is often triggered in key areas such as infrastructure (e.g., transport, healthcare) or strategic sectors (e.g., semiconductors, AI).
• The CRRC case underscores the Commission’s vigilance in public procurement, especially in strategic infrastructure, and co-bidders can (and will) blow the whistle on players likely to receive state subsidies.
• The ADNOC-Covestro deal illustrates how remedies carved around state subsidies can facilitate approval of large foreign acquisitions by state owned enterprises.

Now more than ever, companies engaging in EU transactions must assess their exposure to foreign subsidies and prepare for detailed scrutiny – and, if necessary, consider what commitments could be made to seek swift approval.

Recent cases mark a turning point in EU regulatory practice, with implications for global investors and state-backed enterprises seeking access to European markets.

If you would like to discuss any of the issues covered in this blog, please contact our Competition specialists Miguel Vaz and Andrea Carrera.