PORTUGAL: The European Commission has authorised Metropolitano de Lisboa to move ahead with awarding the contract for Lisbon’s Violet light rail line, but only after a Mota-Engil-led consortium replaced its original subcontractor, China’s CRRC, with an EU-based company following Brussels’ finding that the initial bid had been distorted by foreign subsidies.
Brussels has now given Lisbon’s light rail project promoter Metropolitano de Lisboa the green light to proceed with awarding its Violet Line contract, but only after one Portuguese-led consortium removed its Chinese state-backed subcontractor from the bid. The decision follows an in-depth investigation which found that foreign subsidies linked to CRRC had distorted the original offer from the Mota-Engil-led group, making the deal untenable in its original form.
Marking a test case for how the EU will police state-backed competition in major infrastructure tenders, it is the first time the Commission has cleared a public procurement case under the Foreign Subsidies Regulation only after requiring changes to address what it deemed an unfair advantage created by foreign subsidies. The law, in force since 2023, gives Brussels the power to investigate and remedy subsidies granted by non-EU governments that distort competition in the single market, closing a gap not covered by existing EU state aid rules.
In the ruling, published on April 21, the Commission concluded that the involvement of CRRC’s Portuguese unit, Portugal CRRC Tangshan Rolling Stock Unipessoal, had given the consortium an undue competitive advantage, but with the consortium committing to replacing the subcontractor with Polish rolling stock manufacturer Pesa, the bid was allowed to proceed.
UNIFE Director General Enno Wiebe called the ruling a “very important moment” for the credibility of the legislation, potentially setting a precedent for how the EU may enforce the regime in major infrastructure tenders amid growing competition from foreign competitors, particularly China’s manufacturing giant. “Today’s decision confirms the importance of the Foreign Subsidies Regulation in safeguarding fair competition in Europe’s strategic industries,” he said in a statement.
A tender question
First tendered in March 2024, Lisbon’s Violet Line was conceived as part of the LIOS package to develp more urban rail corridors around the capital. It has been procured under a single contract covering the design, construction and maintenance of the planned light rail route between Odivelas and Loures on the capital’s northern outskirts. The scheme covered an 11.5 km line with 17 stations, three of them underground, plus a depot and operational workshops, along with 12 light rail vehicles and three years of maintenance for both the infrastructure and fleet.
But that procedure collapsed after all bids came in, on average, around 46% above the price ceiling, forcing Metropolitano de Lisboa to revisit the budget. When the tender was relaunched in April 2025, the base price was set at around €600m, within a wider €677.5m project budget covering compulsory purchase costs, project advisory services and construction supervision.
Four bids were submitted following the relaunched tender, including offers from consortia led by Spain’s FCC Construcción and Portugal-based firms Teixeira Duarte and MasterStylo. The Mota-Engil-led consortium, however, was the only bidder partnered with a Portugal-based subsidiary of CRRC. The Chinese rolling stock giant has become increasingly capable of undercutting European rivals, including in the EU market, helped in part by financial support from the Chinese state.
‘An unfair competitive edge’
Nearly five months later, the Commission said its investigation had found the subsidies “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.” As a result of the investigation, the consortium opted during the process to replace the CRRC-backed rolling stock supplier with an EU-based provider, Poland’s state-backed rolling stock manufacturer, Pesa. “These commitments remove that distortion of competition in the internal market,” Brussels said in its statement. “As a result, the Commission has given its approval for the consortium’s participation in the tender.”
Commenting on the final ruling, Stéphane Séjourné, the Commission’s Executive Vice-President for Prosperity & Industrial Strategy, said from the very beginning of this mandate, “we committed to making full and systematic use of the FSR as a key tool to protect our Single Market against unfair practices. Today’s decision on the Lisbon light rail shows that our efforts bring results. We remain vigilant to protect public procurement procedures from distortive practices, while maintaining our openness to trade and investment.”
It remains unclear what that means for the final price of the Mota-Engil bid now that a European manufacturer will be used instead. Still, the Commission was keen to stress that the ultimate decision to award the contract lay with Lisbon: “It is for Metropolitano de Lisboa to assess whether the bid, which includes the new subcontractor, complies with all technical and quality requirements set out in the tender documents.”
The Commission said it would monitor compliance with the commitments but does not plan further action under the FSR unless new issues related to foreign subsidies arise. A non-confidential version of the decision will be published in the Official Journal of the European Union, it said, once confidentiality issues are resolved.
Industry response
The ruling lands amid a increasingly animated debate in Europe over the role of Chinese suppliers in publicly funded rail projects, as well as the long-term impact on the bloc’s industrial base. European politicians and manufacturers have repeatedly warned that foreign rail companies, CRRC in particular, are capable of undercutting EU competitors by as much as 20–40%.
Not only has that raised concerns that price-driven procurement risks could erode Europe’s position as market leader in the global rail sector, but it has also triggered warnings about safety-critical transport infrastructure being built in such close cooperation with foreign governments. The issue has sharpened in recent months, not least following the entry of CRRC-built long-distance trains into service in Austria, a move that has triggered political and industry backlash and renewed calls for tighter procurement rules, particularly around how Brussels wields the Foreign Subsidies Regulation.
Responding to the Commission’s decision on the Lisbon contract, Europe’s rail supply industry said the case marked a turning point in how the EU handles state-backed competition in strategic sectors. UNIFE’s Wiebe emphasised that the association “welcomes today’s decision under the Foreign Subsidies Regulation, and the European Commission’s firm yet balanced approach, which protects the integrity of the Single Market while maintaining openness to global competition under fair conditions.”
He added that the outcome was significant because it was the first time the Commission had imposed conditions following an in-depth procurement probe under the regulation. “It is the first time the Commission has adopted a final decision subject to conditions after an in-depth public procurement investigation under the Foreign Subsidies Regulation, and this marks a very important moment for the credibility of the instrument at large.”