FSR: first public procurement decision subject to conditions

On April 21, 2026, the European Commission ("the Commission") authorized Metropolitano de Lisboa to go ahead with awarding the public contract to design, construct and maintain the Lisbon Violet metro line, subject to the fulfillment of certain conditions. This decision marks a milestone, as it is the first time that the Commission has adopted a final decision subject to conditions following an in-depth investigation into public procurement under the Foreign Subsidies Regulation (FSR). It is also the first time that the Commission has examined foreign subsidies received by a subcontractor in a public procurement procedure.

Violet Line project and Commission investigation

The Violet Line is a light rail system that will connect the towns of Odivelas and Loures in northern Lisbon. The project has a base budget of approximately €600 million and is expected to be completed in 2029. It falls under Metropolitano de Lisboa’s ambitious investment plan exceeding €1.3 billion for the 2026-2028 period. The relevant public tender was launched in April 2025.

The winning bid was submitted by a consortium led by Mota-Engil, which included Portugal CRRC Tangshan Rolling Stock Unipessoal ("Portugal CRRC")—a subsidiary of Chinese SOE, i.e. state group CRRC—as a subcontractor. It is worth noting that, under the FSR, companies participating in public tenders in the European Union (EU) must notify the contracting body of all the foreign subsidies received when: (i) the estimated contract value is at least €250 million; and (ii) the participants—including their main subcontractors and suppliers—have received aggregate foreign financial contributions of at least €4 million per third country over the three years prior to the notification.

After learning about the procedure in September 2025, the Commission urged the awarding entity to request the bidders to submit their notifications or declarations under article 29 FSR. While the operators of the consortium led by Mota-Engil submitted FSR public procurement notifications, Portugal CRRC, as the main subcontractor, submitted a declaration, understanding that it did not reach the thresholds.

After a preliminary assessment, the Commission started an in-depth investigation on November 5, based on indications that Portugal CRRC could have received foreign subsidies that distorted the procurement procedure, enabling the consortium to submit an unduly advantageous bid.

The in-depth investigation confirmed that those subsidies—in the form of direct subsidies, tax reductions of between 15% and 25% for some CRRC subsidiaries, awards of public contracts in non-transparent tender processes, an implicit state guarantee and preferential loans and bonds—had indeed given the consortium an unfair competitive edge, to the detriment of other bidders participating in the tender and the integrity of the EU’s internal market.

Commitments of a structural nature: replacement of subcontractor

To amend the distortion detected, the Commission has accepted the commitments assumed by the consortium to replace Portugal CRRC with PESA (Pojazdy Szynowe PESA Bydgoszcz), a Polish rolling stock manufacturer that has not received distortive foreign subsidies.

These "structural" commitment—unlike the behavioral commitments accepted in the e&/PPF Telecom and ADNOC/Covestro cases (albeit adopted under the merger control tool of the FSR) —, should remove competitive distortions in the internal market.

The ultimate decision to award the contract lies with Metropolitano de Lisboa, which must assess whether the bid with the new subcontractor meets all technical and quality requirements set out in the tender documents.

On the date of publication of this article the Commission’s decision has not been published. This analysis is based on the information revealed in the press release and by several public sources (once the confidentiality issues are resolved, a non-confidential version of the decision will be published in the Official Journal of the European Union).

Reactions and public debate

The decision has led to various reactions. For example, Stéphane Séjourné, Executive Vice-President of the Commission for Prosperity and Industrial Strategy, highlighted that this decision shows the EU’s commitment to the application of the FSR to protect the single market from unfair practices, without closing the door to trade and investment.

For its part, the European Union Chamber of Commerce in China (EUCCC) has expressed strong opposition, stating that the FSR grants the Commission "excessively broad discretionary power". The EUCCC has highlighted that the Chinese company was only participating as a subcontractor and with less than 10% of the project’s total value. The Chinese Ministry for Trade described the practice as discriminatory, and certain sectors have warned that these measures could damage economic relations between China and the EU.

In any case, this decision sets a precedent in the application of the FSR in the field of public procurement in the EU, showing the Commission’s determination to take firm action against foreign subsidies that could distort public bidding procedures.

Key conclusions

This case confirms that companies participating in public tenders in the EU must carry out a rigorous analysis under the public procurement tool of  the FSR, not only covering their own foreign financial contributions, but also those of their subcontractors and consortium partners, paying particular attention to entities related to SOEs, i.e. state-owned companies or beneficiaries of public financing programs.

The decision highlights the need to incorporate, already from the bid’s preparatory phase, contractual risk management mechanisms for FSR and potential commitments with subcontractors or consortium partners, including termination or replacement clauses (step-in clauses) that make it possible to maintain the bid’s viability and the project’s deadlines.

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