European Commission opens in-depth FSR ex officio investigation into Nuctech threat-detection-systems activities

Mechanism

The European Commission opened the investigation under FSR Article 4(1), which enables DG Competition to probe whether a foreign-subsidised undertaking's market conduct distorts the EU internal market. Unlike the FSR's notification tracks (concentrations and public-procurement tenders — the only routes under which Phase I/II procedures had previously been triggered), this is an ex officio investigation: DG COMP identified the concern independently rather than acting on a notification.

The procedural history is important:

1. April 2024 dawn raids — DG COMP carried out unannounced inspections at Nuctech Warsaw and Nuctech Netherlands under FSR Article 14 inspection powers. Nuctech challenged both the inspection decisions and requested interim measures before the EU Courts (CJEU reference 62024CO0720). 2. Phase I preliminary review concluded that Nuctech had received Chinese government grants, preferential tax treatment, and below-market financing of a scale and selectivity that warranted in-depth scrutiny. 3. Phase II opening (December 2025) — the Commission formally opened the in-depth investigation, making this the first FSR ex officio Phase II (the third FSR Phase II overall, after the ADNOC/Covestro concentrations track filed 2025-11-10 and the CRRC Lisbon light-rail tender Phase II opened November 2025).

Nuctech's market position is the core concern: the company supplies scanners to ~80% of EU airports and ~70% of EU sea/land border crossings. DG COMP's preliminary view is that this dominant position was built or sustained with Chinese state subsidies — grants from national and regional government bodies, preferential financing through policy banks (likely CDB and/or Export-Import Bank of China), and concessional tax rates available to companies associated with Tsinghua University / Tsinghua Tongfang.

Downstream implications

• Precedent for FSR ex officio scope: Establishes that DG COMP will use ex officio powers

against established foreign incumbents in strategic-infrastructure markets — not just against one-off M&A or tender bids. Creates the template for parallel reviews of CRRC (rail), Goldwind/Mingyang/Envision (wind), LONGi/JinkoSolar (solar), and BYD (EVs).

• PRC retaliation arc: Directly triggered the PRC blocking-statute counter-escalation.

MOFCOM Announcement 21/2026 (filed 2026-05-02) — the first operational use of China's blocking statute against five US refineries — architecturally derives from the "necessary-measures" commitment in the January 2025 MOFCOM TIB Final Determination on EU FSR (queued). China's MOJ issued an extraterritoriality determination on 15 May 2026 declaring the Nuctech investigation an instance of "improper extraterritorial jurisdiction."

• Security-infrastructure review: Nuctech's scanner dominance across EU airports and

border crossings raises a parallel national-security concern (distinct from the subsidy question) that the investigation may surface even if DG COMP confines its formal findings to FSR distortion.

• Remedies range: If the in-depth investigation confirms the subsidy distortion, the

Commission may impose redressive measures (structural remedies, divestiture, price conditions) or accept Nuctech commitments — a more intrusive outcome profile than the ADNOC/Covestro IP-licensing remedy.

Open questions

• Will the Commission accept behavioural commitments from Nuctech (as in ADNOC/Covestro) or

impose structural remedies, potentially including forced divestiture of EU subsidiaries?

• Does the investigation create a pathway for member-state (Poland, Netherlands) parallel

national-security reviews of Nuctech's scanner concessions?

• How does the MOJ extraterritoriality determination interact with Nuctech's pending CJEU

interim-measures application (62024CO0720) — does PRC pressure translate into any softening of the Commission's procedural stance?

• Will DG COMP open a parallel ex officio investigation into CRRC's market position in EU

urban/suburban rail (the obvious next candidate given the Lisbon tender Phase II already opened November 2025)?