THE EU COMMISSION’S INVESTIGATIVE POWERS UNDER THE FSR: THE CONSECRATION OF THE EU’S EXTRATERRITORIAL JURISDICTION ?
EU–China tensions escalate over the EU Foreign Subsidies Regulation
Recent developments surrounding the European Commission’s enforcement of the Foreign Subsidies Regulation (“FSR”) have reignited debates regarding the extraterritorial reach of EU regulatory powers and the escalating legal tensions between the European Union (“EU) and China.
The controversy notably arises in the context of the Commission’s ongoing investigation into Chinese company Nuctech under the FSR framework. On 15 May 2026, Chinese authorities publicly criticised the investigation, arguing that the Commission is using the FSR as a unilateral instrument to target Chinese undertakings and requesting information extending beyond the EU’s territorial jurisdiction. In particular, China objected to the Commission’s requests for information addressed to Chinese financial institutions and concerning data located in China, characterising such measures as unlawful exercises of extraterritorial jurisdiction.
From the Commission’s perspective, however, the FSR constitutes a legitimate internal market instrument aimed at addressing distortions of competition caused by foreign subsidies granted to companies active within the EU. The Commission maintains that its investigative powers — including requests for information addressed to non-EU entities — are necessary to ensure the effectiveness of the Regulation and remain consistent with EU law and international obligations. In particular, the Commission considered that the requests for information addressed to Chinese undertakings in the context of the Nuctech investigation constitute “standard measures”.
These developments arguably confirm concerns already raised when the Commission published its first White Paper on foreign subsidies in 2020. At the time, it was foreseeable that such an instrument would significantly affect the normal investment and business operations of Chinese undertakings and financial institutions active within the EU, particularly given the broad investigative powers conferred upon the Commission and the extensive disclosure obligations that may be imposed on foreign operators.
The FSR as a vehicle for the EU’s extraterritorial jurisdiction?
The legal debate raised by the Nuctech investigation goes beyond the sole application of the FSR and touches upon a broader question: to what extent may the EU exercise regulatory and investigative powers over conduct, entities or information located outside its territory?
From an international public law perspective, jurisdiction is traditionally grounded on the territoriality. However, contemporary economic regulation increasingly relies on forms of “qualified extraterritoriality”, particularly where foreign conduct produces effects within a domestic market. In that respect, the EU has traditionally applied an “effects-based” approach in several areas of law, notably competition law, data protection and financial regulation.
The FSR endorses that approach. Although formally designed to regulate distortions affecting the EU internal market, its practical application necessarily extends beyond EU borders. Indeed, the very object of the Regulation concerns financial contributions granted by third countries, often involving non-EU parent companies, foreign state-owned entities and financial institutions located outside the Union.
Under the FSR, the Commission may request extensive information concerning foreign subsidies, financing arrangements and corporate structures from undertakings established outside the EU. While the Regulation itself does not provide for direct enforcement powers abroad comparable to those of national authorities exercising territorial jurisdiction, it nevertheless creates significant pressure on foreign operators to cooperate. Failure to comply may expose companies to substantial fines, adverse inferences or restrictions regarding access to the EU market.
The legal justification advanced by the Commission remains on the existence of a sufficient territorial nexus with the EU internal market. In essence, the Commission’s position is that companies benefiting from access to the EU market may legitimately be required to disclose information necessary to assess whether foreign subsidies distort competition within the EU.
Whether such an approach constitutes a legitimate application of the “effects doctrine” or an excessive extension of EU jurisdiction remains open to debate. Critics argue that the breadth of the Commission’s investigative powers — particularly where requests concern information located entirely outside the EU or involve non-EU financial institutions — risks blurring the traditional limits of territorial jurisdiction and creating potential conflicts with foreign blocking statutes, data protection regimes or national sovereignty interests.
Towards an increasingly assertive EU economic governance model
This dispute highlights the broader legal and geopolitical implications of the FSR, whose enforcement increasingly intersects with questions of sovereignty, international comity and regulatory overlap. It also reflects the EU’s broader shift towards a more assertive economic governance model, notably in areas relating to economic security, strategic autonomy and competitive neutrality.
As the Commission continues to expand its enforcement practice under the FSR, multinational companies — particularly those benefiting from direct or indirect financial support from a foreign state — should closely monitor the evolving regulatory landscape and carefully assess the implications of the Regulation for cross-border transactions, public procurement procedures and internal compliance mechanisms.
See Regulation (EU) 2022/2560 of the European Parliament and of the Council of 14 December 2022 on foreign subsidies distorting the internal market (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02022R2560-20221223).
For more information, please contact Bruno Lebrun – Partner – b.lebrun@janson.be.