Chinese State Owned Enterprises and EU Merger Control by Alexandr Svetlicinii

Author:Alexandr Svetlicinii
Language: eng
Format: epub
Publisher: Taylor and Francis
Published: 2021-04-15T00:00:00+00:00

3.3 Setting the precedent: the EDF/CGN/NNB decision

The CGN decision is the first decision involving a Chinese SOE in which the Commission has taken a firm stance on jurisdiction and abandoned, although to a limited extent, its ‘wait and see’ approach.53

53 Kyriakos Fountoukakos and Camille Puech-Baron, ‘China/EU: The Gradual Evolution of the EU Commission’s Merger Control Decisional Practice Towards SOEs Amidst an Increasingly Protectionist World’ (2017) Concurrences N° 4–2017, Art. N° 84891 <www.concurrences.com/en/review/issues/no-4-2017/international/kyriakos-fountoukakos> accessed 31 July 2020, 5.

In 2016, the Commission examined a concentration whereby the French SOE Electricité de France S.A. (EDF) and the Chinese SOE China General Nuclear Power Corporation (CGN) sought to acquire joint control over NNB companies, which operated three nuclear power plants in the United Kingdom: Hinkley Point, Sizewell, and Bradwell.54 At the time of notification, CGN was controlled by the Central SASAC (90% of shares), while the minority shareholding (10%) was held by the Guangdong SASAC.

54 EDF/CGN/NNB Group of Companies (Case No. COMP/M.7850) [2016] OJ C151/1, decision of 10 March 2016.

According to CGN, it enjoyed operational independence from the Central SASAC due to the following circumstances: (1) the SOE law in China proclaimed separation of ownership from control; (2) the Central SASAC can appoint or remove CGN’s management but cannot interfere with the day-to-day operations of the SOE; (3) CGN does not have any interlocking directorships with the SASAC.55 The Commission, in its assessment, has referred to other provisions of China’s SOE law and SASAC’s regulations, which authorized the SASAC to supervise the investment decision making of the SOEs.56 The SASAC’s powers to appoint/remove senior management and to approve the investment plans of the SOE allowed the Commission to conclude that ‘Central SASAC participates in major decision making, in the selection and supervision of senior management of SOEs and can interfere with strategic investment decisions’.57 According to the Commission, the ability of the Central SASAC to coordinate the activities of the SOEs under its control was evidenced by the fact that in 2014 several centrally owned SOEs formed the China Nuclear Industry Alliance (CNIA).58 With reference to the report of the World Nuclear Association, the Commission noted that the establishment of the CNIA was ‘directed by the [Chinese] government to achieve some synergy’ and is ‘designed to eliminate detrimental or unseemly competition in export markets’.59

55 Ibid., paras 34–36.

56 Ibid., para 39.

57 Ibid., para 42.

58 Ibid., para 44.

59 Ibid.

The ultimate conclusion reached by the Commission in the present case was as follows:

[i]n view of the fact that Central SASAC can interfere with strategic investment decisions and can impose or facilitate coordination between SOEs at least with regard to SOEs active in the energy industry, the Commission concludes in the case at hand that CGN and other Chinese SOEs in that industry should not be deemed to have an independent power of decision from Central SASAC.60

Such an assessment prompted the comment that ‘the Commission satisfied itself with the analysis of formal legal documents and with the fact of possibility or capacity that they give to Central SASAC to control and coordinate’.

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