[Input sought] Access to procurement remedies and reciprocity in EU/EEA Member States

I have been thinking for a while about a comparative procurement law question on which I would appreciate your help and input (please comment below or send me an email to a.sanchez-graells@bristol.ac.uk if you have information about your jurisdiction that you can share, for which I would be most grateful). The question concerns the extent to which contracting authorities in the EU/EEA Member States apply an access filter for bids coming from non-EU/non-GPA covered states -- that is, whether contracting authorities check that the tenderer/tender are covered by trade-liberalising instruments or not at the initial stages of a procurement process -- and the extent to which that filter or its absence may then carry on to the access of non-EU/non-GPA tenderers to domestic remedies in those jurisdictions -- that is, whether remedies are limited to EU/GPA tenderers or are more broadly available.

My interest in this topic comes from the fact that, one of the issues that keep arising in the context of the Brexit debate (particularly in view of Prof Arrowsmith's proposals, which I criticised here, and Pedro Telles also criticised here) concerns the future access for UK tenderers/candidates to domestic remedies in the EU27/EEA jurisdictions in case of no deal with the EU and the UK resorting to GPA rules. This links to the broader question of which tenderers/candidates have access to procurement processes and to domestic remedies in the EU27/EEA jurisdictions, as mentioned above.

In my view, Member States can either control coverage by EU/GPA rules at the start of the process or not, and this may result from either an obligation to check or discretion to check. Later, in relation to the point on remedies, there are probably only four relevant (legal) options:

(a) all tenderers/candidates have access to all domestic remedies regardless of their nationality (ie totally open remedies system).

(b) all tenderers/candidates have access to some domestic remedies regardless of their nationality, but only EU/EEA tenderers/candidates have access to 'premium' remedies mandated by EU law (ie those with standstill, etc) (ie open EU+ remedies system).

(c) only tenderers/candidates covered by GPA/WTO, EU/EEA or bilateral FTAs have access to all domestic remedies (ie trade-led remedies system).

(d) only tenderers/candidates covered by GPA/WTO, EU/EEA or bilateral FTAs have access to some domestic remedies, but only EU tenderers/candidates have access to 'premium' remedies mandated by EU law (ie those with standstill, etc) (ie trade-led EU+ remedies system).

I am interested in writing a short paper on this issue and would really appreciate your input on: (i) whether there is some other legally-compliant model I may have overlooked and, (ii) more importantly, what is the model in your jurisdiction (specially if you are based in an EU27/EEA country). So far, the information I have been able to gather is as follows [apologies to those of you who have helped me with this if I have misinterpreted it -- corrections welcome; when reading this, please bear in mind that the content evolves as I discuss these issues with national experts and explore the ideas further, particularly in terms of the contours between models (a) and (c)]:

  1. Austria (thanks to Michael Fruhmann): Federal Procurement Law states, that procurement procedures shall be carried out in compliance with the fundamental principles of EU Law, the principles of free and fair competition and the equal treatment of all applicants and tenderers. However, different treatment of applicants and tenderers on grounds of their nationality or of the origin of goods which is permissible under international law remains unaffected by this obligation. The (legal) consequence is, that if no union or international obligations (re latter: this depends on the existence and scope of FTAs, RTAs also) exist to open PP procedures to foreign bidders, contracting authorities are free to admit participation or to deny the participation of such bidders. However, if such bidders are allowed to participate they have the same standing as national/EU bidders (also as regards remedies). In practice this comes down to the question, whether the contracting authority wants such bidders to participate. This is a case by case decision depending i.a. on the subject matter of the contract, the interest to intensify/safeguard competition in a given procedure. This decision (no admittance) can of course be reviewed (and has been reviewed) but the courts confirmed that without any EU/international obligation it's fully within the competence of the contracting authority to decide either way. Generally, this points towards the model being generally (c), but with the possibility of going beyond that and getting closer to (a) depending on the contracting authority's discretion.
  2. Belgium (thanks to Baudoin Heuninckx): a contracting authority may reject the request to participate or tender by undertakings from countries outside of EU/WTO or without an FTA, so there is a potential "filter" at the very beginning of the procedure. In terms of remedies, every candidate or tenderer has access to all remedies regardless of nationality. Potentially, this leads to the remedies model being (c).
  3. Czech Republic (thanks to Jaroslav Mencik): contracting authorities may not restrict participation in public tenders of suppliers from the EU, the EEA, Switzerland, or other states with which the Czech Republic or the EU has concluded international agreements which guarantee that suppliers from such a state will have access to the public contract being awarded. It follows that contracting authorities are required neither to check the nationality of tenderers nor exclude non-EU/non-GPA tenderers (but may choose to do so). Remedies follow model (a), all tenderers participate on equal terms.
  4. Denmark (thanks to Carina Risvig Hamer): it is not foreseen in legislation, but contracting authorities can decide not to allow participation from non-EU/non-GPA tenderers. All candidates and tenderers have full access to remedies. Potentially, this leads to the remedies model being (c). 
  5. Estonia (thanks to Mari Ann Simovart): remedies are available to any "interested party" without any restriction based on the country of origin. In short, model (a) applies. However, a contracting authority can restrict access to a particular procurement procedure for tenderers of EU/EEA/WTO only - in which case, tenderers outside EU/EEA/WTO can be regarded as having no "interest" towards the particular procurement and thus no standing to claim review.
  6. Finland (thanks to Kirsi-Maria Halonen): contracting authorities would not always check whether a tenderer is covered by the agreements, but could do so at the beginning of the tendering procedure. If accepted to participate/tender, the candidate/tenderer would likely have access to all domestic remedies. This leads to the remedies being closer to model (c), but it is possible that de facto, contracting authorities may be granting equal treatment beyond GPA/EU/FTA coverage in sui generis basis (model (a)). It is in the contracting authorities' discretion whether to even look into the matter/exclude. If tenderers are not excluded, they'll have equal rights for remedies. However, it is worth bearing in mind that this is untested in the courts.
  7. Germany (thanks to Gabriella Gyori): not taking into account decentralized matters (due to the differences among the "Bundesländern"), according to the federal public procurement legislation related to above threshold procedures, tenderers from outside of Germany are allowed to participate, treated equally and have equal rights. Remedies follow model (a). 
  8. Greece (thanks to Marios Skiadas): in order to be eligible to participate in a public tender, economic operators must be based in an EU, EEA, GPA or other countries which have signed bilateral or multilateral agreements with the EU in matters related to public procurement procedures. Contracting authorities have a first chance of checking this requirement when they assess the ESPD or equivalent documentation. Additionally, during the final stage of the awarding phase, the winning bidder is required to submit all legal documents regarding company establishment, operation and representation. Therefore, the contracting authority will in practice have a “second chance” to check conformance. Access to remedies applies to all parties with an interest in being awarded a public contract. By combining this to the eligibility criteria stated above,Greece follows model (c).
  9. Hungary (thanks to Gabriella Gyori): economic operators shall be excluded from participating in the procedure as a tenderer, candidate, subcontractor or an organization participating in the certification of suitability, if have their fiscal domicile in a country outside the EU, the EEA or the OECD or in a non WTO/GPA country or outside the overseas countries specified in the TFEU or in a country which has not signed any agreement with Hungary on avoiding double taxation or which has not signed a bilateral agreement with the EU concerning public procurement. Claims can be submitted by a contracting authority, a tenderer(s) or any other interested person whose right or legitimate interest is being harmed or risks being harmed by an activity or default which is in conflict with the procurement legislation. This brings the remedies system close to model (c).
  10. Ireland (thanks to James Farrell): based on long-standing practices, there are not requirements of EU/EEA/GPA membership as a qualifying requirement for tenderers, or references to different treatment of tenderers emanating from non-EU/EEA/GPA countries in any policy or guidance documents issued by the relevant Irish authorities. The general approach, driven by Ireland's open trading policy, is to take value wherever it can be found. There have been no court challenges in Ireland where an unsuccessful tenderer sought to argue that a winning tender should be disqualified because of the country of origin/registration/domicile of the tendering entity. Regarding remedies, apart from reliefs arising under the Remedies Directive there are also domestic reliefs such as Judicial Review, Injunctions etc that would be available to tendering entities regardless of nationality. Therefore, Ireland follows model (a).
  11. Italy (thanks to Roberto Caranta): only tenderers/candidates from MS/parties to GPA/WTO, EU/EEA or bilateral FTAs are eligible to bid. Eligible suppliers then have access to all domestic remedies; so the systems follows model (c).
  12. Lithuania (thanks to Deividas Soloveičik): there is no obligation for contracting authorities to check non-EU/ non-GPA suppliers. Remedies follow model (a), all suppliers participate on equal terms.
  13. Netherlands (thanks to Tim Beukema): Dutch law states that a contracting authority shall not grant any advantage in regard to the tender and the contract that is not granted to parties from countries within the EU. In regard to rejection of participants, contracting authorities may reject the request to participate by undertakings from countries outside of the GPA, EU or FTA. Entities operating in the water, energy, transport and postal services sectors (special sectors) have the possibility to reject a participation or tender if the goods that a party provides consists of more than 50% from countries on which the EU has no obligation to, i.e. countries outside the GPA, EU or FTA. A special sector company has the obligation to decline an offer of such party in the case of an equal bid from a undertaking within the GPA, EU or FTA that has less than 50% of the goods from within these countries. Claims can be submitted by parties who are interested in the tender in the case that his rights are being harmed or could be harmed because of the fact that the tender procedure breaches the procurement rules, which is a remedies system in accordance with model (c).
  14. Norway (thanks to Eirik Rise): follows model (c); only tenderers/candidates covered by GPA/WTO, EU/EEA or bilateral FTAs have access to domestic remedies, and only to the extent that it is covered in the relevant FTA.
  15. Poland (thanks to Paweł Nowicki and Piotr Bogdanowicz):  There is a newly introduced obligation to comply with WTO GPA and other international agreements to which the EU is a party, and there is no explicit obligation to exclude non-EU/non-GPA tenderers. Remedies follow model (a).
  16. Portugal (thanks to Pedro Telles): [not clear yet whether there is an initial filter]. Remedies follow model (a).
  17. Romania (thanks to Dacian Dragos): [not clear yet whether there is an initial filter]. Remedies follow model (a).
  18. Slovenia (thanks to Njives Prelog): suppliers from all over are allowed to participate, treated equally and have equal rights. Remedies follow model (a). 
  19. Spain: at the initial stage, contracting authorities have an obligation to check coverage by EU/GPA rules or to require confirmation of reciprocal access for Spanish tenderers in the country of origin of non-EU/non-GPA tenderers (which are also required to have a branch office in Spain). Remedies follow closely model (a) because remedies are open to all those admitted to tender procedures [ie go beyond (c), but are still somehow trade-led due to reciprocity requirement].
  20. Sweden (thanks to Andrea Sundstrand): there is no check at the start of the procedure and suppliers from all over are welcome to participate on equal terms. Remedies follow model (a) and all suppliers have access to exactly the same remedies regardless of whether they are from countries that Sweden has trade agreements with.
  21. United Kingdom (thanks to Aris Christidis and Pedro Telles for discussions): The UK system replicates the EU Directive in terms of extending equal treatment (which can be seen to include access) to economic operators covered by EU law, the WTO GPA, or other international agreements by which the EU is bound (see reg. 25 PCR2015). The remedies system is limited to those economic operators to which contracting authorities are legally taken to owe a duty to comply with public procurement rules. Effectively, this is limited to economic operators from the EEA, GPA signatories (provided the procurement is covered) and countries with bilateral agreements in force (see regs. 89 and 90 PCR2015).

This initial scoping exercise seems to indicate clustering around models (a) and (c). It would be amazing if we could collectively cover most of the EU27/EEA and complete the exercise, not only in order to gain a better understanding of this issue, but also because this will be relevant for Brexit negotiations around procurement in the immediate future. Your contribution will, of course, be duly acknowledged and gratefully received.

Some remarks on the House of Commons' Brexit Research Briefing--Procurement Section

The Library of the House of Commons (HoCL) has issued a Research Briefing on the impact of Brexit across policy areas. It is obviously an effort in the right direction of providing research-based input to the ongoing Brexit debate. As such, it should be welcome.

However, a 184-page document cannot deal with the complexities and detail needed to properly assess policy impacts in a substantial way. Having insufficiently detailed information runs the risk of oversimplifying reality and presenting the likely impact of Brexit in a distorted fashion.

In my view, this is clearly the case concerning the HoCL research briefing's focus on public procurement, on which it simply sets out the following:

3.5 Public procurement
Much UK public procurement is regulated by EU rules, which are set out in the core EU Treaties, in EU directives and in UK regulations that implement the directives. These rules are controversial because they are often seen as overly bureaucratic and because they limit the ability of public bodies to ‘buy British’. They do, however, offer UK firms the opportunities to supply the public sectors of other countries, as well as making it easier for the UK public sector to reach a wider range of potential suppliers, potentially increasing value for money in its purchases.
In practice, the extent of direct cross-border public procurement is limited. An estimated 1.3% of the value of larger UK public sector contracts was awarded directly abroad in 2009-2011. Some 0.8% of the value of larger public contracts secured by UK companies was directly from abroad.
Alternatives and withdrawal
At present, the EU rules that apply to public procurement in the UK also apply to other EEA countries, under the EEA agreement. Switzerland is subject to a separate arrangement.
If the UK were to leave the EU and the EEA, it would ultimately need to decide whether it wanted agreements with other countries to mutually open up their public procurement markets. This could be done through individual trade agreements, or the UK could participate as an individual country in the WTO’s General Procurement Agreement (GPA) for certain goods and services. However, this would mean that the UK would have to allow suppliers in other countries to bid for some UK public procurement opportunities, and the WTO route would mean that the UK had to follow certain procedures in its procurement processes – potentially doing away with some of the reduction of burden that could follow from no longer having to apply the EU rules. (p. 39, references omitted)

My trouble with the procurement section of the HoCL research briefing concerns two main points:

1. That it misrepresents the economic importance of cross-border public procurement between the UK and the rest of the EU by suggesting that it only affects between 0.8% and 1.3% of large value procurement contracts.

The HoCL research briefing uses statistics that focus exclusively on direct cross-border award of contracts to SMEs (which is indeed very low), but does not mention indirect cross border effects derived from the establishment of EU suppliers in the UK, and UK suppliers in other EU Member States, who then sell from their respective "domestic" subsidiaries (for instance, Siemens UK would qualify as a domestic supplier for the purposes of direct cross border tenders, while most people would agree that the Siemens group is German for industrial policy purposes).

The data also omits sales through wholesalers/intermediaries, which are also very important, particularly in goods (UK manufacturers, particularly larger ones, may be selling a good part of their exports to foreign public sector buyers through intermediaries established in those countries, which could decide to stop sourcing the goods from UK manufacturers if this created issues in terms of rules of origin/tariffs, etc after Brexit).

The Commission issued data in 2011 that estimated indirect cross-border procurement much closer to 25% in value at EU level (see p. 36 here). There is no segregated data for the UK of which I am aware, but in my view there is the potential for a much deeper economic impact than the HoCL policy brief suggests by only presenting figures in the 0.8-1.3% range. This is misleading, in my opinion.

2. That it misrepresents accession to the WTO government procurement agreement (GPA) as a future alternative, instead of acknowledging that it is the present reality in the UK.

Indeed, the HoCL research briefing presents the WTO GPA as an alternative to the status quo without mentioning that the EU rules already ensure reciprocal treatment under the GPA--or, in other words, that the UK already gives access to its procurement markets to undertakings from GPA signatories and already has access to their markets by virtue of EU membership.

The key point is that a withdrawal from the EU would immediately imply a loss of access to GPA signatories' markets for UK businesses and, thus, a negotiation of single GPA membership by the UK would not provide any advantage to UK businesses but, at best (that is, assuming the UK did not need to make concessions beyond the current EU concessions), it would be a quest to keep the status quo. Dr Clair Gammage discusses this important issue here (although regarding general WTO membership).

Even if there are new talks about its failure, it would also be important to stress that the TTIP contains a very important chapter on extended access to US-EU procurement markets, which would likely not be replicable outside of the EU.

*   *   *

Overall, in my view, this shows that more detailed research and analysis is required than that with which the HoCL has been able to engage to date, and should serve as an indication of the difficulties in meaningfully compiling concise documents that can usefully support policy decisions. Assessing the implications of Brexit in discrete policy areas is, by itself, a daunting task. And assessing the impact of Brexit across the economy and the legal system may just be an impossible goal. MPs would be well advised to keep that in mind and to seek more detailed input on specific areas of concern.
 

Interesting paper on International Trade and Regulatory Cooperation in Public Procurement (Hoekman, 2015)

I have just read the recent paper by Prof B Hoekman, 'International Cooperation on Public Procurement Regulation' (November 1, 2015). Robert Schuman Centre for Advanced Studies Research Paper No. RSCAS 2015/88. I found his insights into how to move the development of trade policies through public procurement very suggestive. As his abstract explains,

 

Most governments have yet to agree to binding disciplines on government procurement regulation, whether in the WTO or a preferential trade agreement. Empirical research suggests that reciprocally-negotiated market access commitments have not been effective in inducing governments to buy more from foreign suppliers. Foreign sourcing by governments has been rising for most countries, however, independent of whether States have made international commitments to this effect – although there is some evidence that this trend was reversed post-2008 in several countries that had the freedom to do so. The stylized facts suggest a reconsideration of the design of international cooperation on procurement regulation, with less emphasis on specific market access reciprocity and greater focus on good procurement practice and principles, efforts to boost transparency, and pursuit of pro-competitive policies more generally (emphasis added).

Hoekman's discussion of the reasons why the current focus on bilateral market access reciprocity 'is unlikely to have much of an effect' is particularly interesting:

One reason why market access reciprocity arguably has limited returns is that many contracts that are issued by procuring entities concern products that are difficult to supply on a cross-border basis. Construction and services of many kinds will generally have to be supplied locally and there may be good reasons for procuring locally even if a good is tradable. If the products procured are intangible (services) or there are problems in monitoring and enforcing contract compliance, discrimination can increase the likelihood of performance by suppliers. The best (economic) case for discrimination revolves around situations where there is asymmetric information, e.g., difficulties in monitoring the performance of a contractor if buyer and provider are located far from each other, or there is a need to offer a firm quasi-rents in order to increase the probability of contract compliance through the threat of losing repeat business (Evenett and Hoekman, 2013). Moreover, geographic proximity may be a precondition for effectively contesting procurement markets—making some products, in particular services, in essence non-tradable. Problems of asymmetric information and contract compliance may imply that entities can economize on monitoring costs by choosing suppliers that are located within their jurisdictions. In turn, this will make it more difficult for foreign firms to successfully bid for contracts, even if the goods or services involved are tradable and in the absence of formal discrimination. Such rationales have been explored extensively by Laffont and Tirole (1993); many of the underlying technical arguments are summarized and synthesized in Breton and Salmon (1995). The policy issue that arises in such situations is whether there are barriers against establishment (FDI) by foreign suppliers, as this is a precondition for them to bid for/supply contracts (Evenett and Hoekman, 2005) (pp. 16-17, emphasis added, for complete references, see bibliography in his paper).

This passage is particularly relevant in the context of EU public procurement, not least because it spells out in very clear economic terms the reasons why an 'obsession' with cross-border trade as a metric of good procurement is highly unlikely to actually result in better (economic) procurement results [for discussion of the current policy, see here, A Sanchez-Graells, 'Are the Procurement Rules a Barrier for Cross-Border Trade within the European Market? — A View on Proposals to Lower that Barrier and Spur Growth', in C Tvarnø, GS Ølykke & C Risvig Hansen, EU Public Procurement: Modernisation, Growth and Innovation (Copenhagen, DJØF, 2012) 107-133.; and ibid, 'Collaborative Cross-Border Procurement in the EU: Future or Utopia?' (2016) Upphandlingsrättslig Tidskrift (Procurement Law Journal),  forthcoming].

I also found very interesting that Hoekman presents in very straightforward terms the economic view that, put simply, procurement is not a 'magic wand' with which to implement all sort of secondary policies. In his clear exposition:

The pursuit of non-economic objectives by governments can have very different implications for economic efficiency. In principle, policy should target directly the source of problem at hand: lack of economic opportunities for minority groups; regional economic wealth differentials; market failures, and so forth. For example, take the case where a government awards a tender to an SME instead of a large company that submitted a lower cost bid because of an SME preference policy. It may be more effective and efficient if instead the government were to address the factors that impede the ability of SMEs to compete with larger firms. This can of course be due to different factors, ranging from financial market imperfections to excessively burdensome administrative requirements that are too costly for SMEs to meet. Dealing with these constraints directly as opposed to using a SME preference policy will be more efficient (Evenett and Hoekman, 2013) (p. 17, emphasis added, full references in his paper).

In the end, Hoekman recommends that the best way of ensuring good procurement outcomes is to 'promote a pro-competitive environment' (p. 21). I could not agree more and, once again, turning to the situation in the EU, this is what I have suggested is the best way forward in order to achieve the Europe2020 goals [see A 'Truly competitive public procurement as a Europe 2020 lever: what role for the principle of competition in moderating horizontal policies?' (2016) 22(2) European Public Law Journal, forthcoming]. I hope policy makers will start taking economic insight into account, particularly when it is presented in such clear and persuasive terms as Prof Hoekman does.