FSR and Nuctech: China’s blocking response to EU enforcement

The EU’s FSR probe into Nuctech’s activities in the threat detection systems sector is increasingly becoming a test case for how far regulators can reach across borders — and how foreign governments may respond.

In April 2024, the European Commission (“the Commission”) carried out inspections at Nuctech’s EU premises in Poland and the Netherlands under Article 14 FSR. Inspectors did not stop at local servers: they asked Nuctech’s EU entities to give access to work email accounts used in the EU but hosted on group servers in China — the kind of globally hosted IT environment many multinational groups use as standard.

Nuctech challenged the inspection decision and sought interim measures to suspend both the decision and the follow up requests for access to those mailboxes. The President of the General Court rejected that application on 12 August 2024 (Case T 284/24 R). On appeal, the Vice-President of the Court of Justice likewise refused interim relief on 21 March 2025 (Case C‑720/24 P(R)), mainly because the companies had not shown that compliance would cause serious and irreparable harm. The Court of Justice treated the risk of Chinese administrative fines as essentially financial damage, and found that the submissions on possible business suspensions, licence revocations, or criminal sanctions under Chinese law were either not supported by concrete evidence or too uncertain to meet the urgency threshold.

In December 2025, after a preliminary review, the Commission escalated the matter to a full in-depth investigation, see here. According to public reporting, the probe focuses on alleged Chinese state support for Nuctech in the form of grants, preferential tax measures and preferential financing (loans), and on how those measures may have affected competition in tenders for major threat detection systems and services in the EU. Under the FSR, this can ultimately end in a no objection decision, redressive measures, or commitments. As of the latest reports, the investigation remains open and no final decision has been announced.

The underlying main action (Case T 284/24) also continues. Nuctech’s EU entities ask the General Court to annul the inspection decision and a series of follow up requests. They argue, in essence, that the Commission overstepped Article 14 FSR by requiring EU subsidiaries to retrieve and hand over data held on servers of a non EU group company, that complying with those demands would put the group at odds with Chinese law, and that the 2024 inspections lacked a sufficient factual and legal basis and did not properly respect fundamental rights. A hearing in that action took place in the middle of April 2026.

Even so, China has already responded. According to an announcement issued on 15 May 2026 by China’s Ministry of Justice, together with the Ministry of Commerce and other authorities under China’s Regulations on Countering Unlawful Extraterritorial Jurisdiction, the notice classifies the EU’s cross border investigative steps in the Nuctech FSR case as unlawful and states that no organisation or individual may implement or assist in implementing those measures. In that same announcement, China describes the EU’s information demands as broad and unnecessary, argues that the FSR is being enforced in a targeted and discriminatory way against Chinese companies, and points to Chinese data security rules that restrict the transfer of data stored in China to foreign authorities without prior approval.

That stance contrasts with the structure of the FSR and the EU courts’ interim rulings so far. Article 14 FSR gives the Commission powers to examine business records ‘irrespective of the medium on which they are stored’ and to access any information that is accessible to the entity subject to inspection; undertakings must submit to inspections ordered by Commission decision. The EU courts have, at the interim stage, declined to suspend the inspection decision and have not accepted, on the evidence presented, that complying with the Commission’s requests would necessarily force the companies into criminal conduct under Chinese law. For now, Nuctech therefore sits at the intersection of an active EU administrative investigation, evolving case-law on the reach of EU investigatory powers, and an explicit third country blocking response.

From a single case to a broader conflict of laws landscape in EU law enforcement

The FSR is aimed at a clear economic concern: foreign subsidies that risk distorting competition in the EU internal market. To address that concern, the Commission needs information about how a group is financed, how it competes, and how public support flows through its structure. That in practice pushes enforcement tools — requests for information, data access demands, dawn raids and cooperation obligations — into parts of a business that may be organised, hosted or supervised outside the EU, as the Nuctech inspections have already illustrated.

Tensions arise when those same elements are regulated elsewhere by ‘do-not-comply’ rules. These include blocking statutes at EU and Member State level, data-sovereignty and anti-extraterritoriality regimes in third countries, and foreign rules governing sanctions, export controls, and, by analogy, boycott-related conduct. Their common feature is not that they are triggered by the FSR as such, but that they tell companies when they must not assist a foreign measure or must first notify or seek approval at home. An FSR information request may look like standard regulatory process from an EU perspective; another jurisdiction can frame the same request as an instance of improper extraterritorial jurisdiction and instruct local firms or affiliates not to support it.

For multinational groups, the practical risk is that one authority may require disclosure or cooperation, while another prohibits it or subjects it to conditions. When that happens in the context of foreign-subsidy reviews, sanctions enforcement, export controls, or trade-related countermeasures, the issues quickly move beyond a single file and into global supply chains, financial arrangements, technology flows, and group-wide governance. In that setting, companies increasingly need to think about EU regulatory enforcement, non-EU sovereignty and data restrictions, and dispute-management strategy as parts of the same problem rather than separate workstreams.

The geopolitical tensions are now focused on the enforcement of the EU’s foreign subsidies regime. However, the findings of the EU courts, and any ensuing international backlash, may have effects in other fields of law where the European Commission and national competent authorities exercise similar remote investigation and inspection powers, including in competition and trade law, online safety law, consumer protection law, and even artificial intelligence law.

Looking ahead

Nuctech has become an early test of the FSR’s ex officio powers and the EU’s appetite for cross border inspections in a contested legal environment. The Commission’s in depth probe is still underway, the General Court has yet to rule on the main action, and the Court of Justice has already upheld the refusal of interim relief on the basis that urgency was not shown.

The European Commission’s investigatory measures in the Nuctech inspection reflected a practice that could be deemed as common in other fields of law (e.g., competition law). It is therefore likely that the EU courts’ final position on the ability of EU authorities to investigate foreign-stored information accessible through EU establishments will have a spillover effect into the investigatory tools existing in other regulations.

We will be following both tracks closely and, like many internationally active businesses, will be looking for the first clear signals from the EU courts — over the coming months — on how they intend to steer Nuctech and, with it, internationally operating industries more broadly.

For more information please contact:
Alejandro Guerrero – Partner
Pablo Moro Valbuena – Associate
Laura Cortés López – Associate
Frenkchris T Sinay – Associate
Frank Zhuang – Partner, YaoWang Law Offices
Angela Yan – Partner, YaoWang Law Offices