[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.

UK Supreme Court Miller Judgment seeks to reassert Parliamentary sovereignty, but it does so in breach of EU law and in disservice to the UK Parliament

The UK Supreme Court (UKSC) has today handed down its Judgment in the well-known litigation concerning the UK's constitutional requirements for triggering Art 50 TEU and starting the process of leaving the EU -- see R (on the application of Miller and another) v Secretary of State for Exiting the European Union [2017] UKSC 5 (the Miller Judgment).

The UKSC has ruled that the UK Government cannot trigger Article 50 TEU without previous UK Parliament legislative intervention. In doing so, the UKSC has sought to reassert the basic constitutional principle of Parliamentary sovereignty. However, it has done so in a way that both infringes its duties under EU law and does a disservice to the UK Parliament.

Breach of UKSC's duties under EU law

One of the difficult legal issues on which the Brexit litigation hinged concerned the interpretation of Art 50 TEU and, in particular, the revocability of a notice given under Art 50(2) TEU. The interpretation of this point of law falls within the exclusive competence of the European Court of Justice (ECJ) under Art 263 TFEU. Interestingly, the UKSC stressed this monopoly of interpretation as a key element of EU law at para [64] of the Miller Judgment: 'so long as the United Kingdom is party to the EU Treaties, UK courts are obliged (i) to interpret EU Treaties, Regulations and Directives in accordance with decisions of the Court of Justice, (ii) to refer unclear points of EU law to the Court of Justice, and (iii) to interpret all domestic legislation, if at all possible, so as to comply with EU law' (emphasis added).

However, the UKSC has violated the ECJ's monopoly of interpretation of the EU Treaties by accepting the parties' commonly agreed position on the irrevocability of an Art 50(2) TEU notice at [26] of the Miller Judgment:

In these proceedings, it is common ground that notice under article 50(2) (which we shall call “Notice”) ... once given, it cannot be withdrawn. Especially as it is the Secretary of State’s case that, even if this common ground is mistaken, it would make no difference to the outcome of these proceedings, we are content to proceed on the basis that that is correct, without expressing any view of our own on either point. It follows from this that once the United Kingdom gives Notice, it will inevitably cease at a later date to be a member of the European Union and a party to the EU Treaties (emphases added)

In doing so, the UKSC has infringed its obligation under Art 267(3) TFEU to engage in a preliminary reference to the ECJ concerning the interpretation of Art 50 TEU (for legal background see here and here). This cannot be saved by an argument that, under domestic procedural rules (or conventions), the UKSC had the possibility of taking this approach--and effectively dodging one of the most complex and unpredictable legal issues on which the litigation rested.

There are several reasons for this, but the primary one is that, as matter of EU law, a preliminary reference by the highest court of an EU Member State is unavoidable where the interpretation of EU law is necessary to enable it to give judgement--or, in other words, where the judgment relies on a given interpretation of EU law.

In my view, it is beyond doubt that the UKSC Miller Judgment is based on the interpretation that an Art 50(2) TEU notice is irrevocable, and that this represents the legally binding view of the majority judgment, regardless of the attempt to save the UKSC's view on this point in para [26] -- or, in other words, it is not (logically, legally) true that the UKSC's Miller Judgment operates 'without expressing any view of our own on either point' (ie regarding the revocability or not of the Art 50(2) TEU notice).

There are explicit indications of this interpretation in paras [59], [81], [92] and [104], where the Judgment indicates that

... analyse the effect of the 1972 Act and the arguments as to whether, in the absence of prior authority from Parliament in the form of a statute, the giving of Notice by ministers would be ineffective under the United Kingdom’s constitutional requirements, as it would otherwise impermissibly result in a change in domestic law [59]

 ... A complete withdrawal represents a change which is different not just in degree but in kind from the abrogation of particular rights, duties or rules derived from EU law. It will constitute as significant a constitutional change as that which occurred when EU law was first incorporated in domestic law by the 1972 Act. And, if Notice is given, this change will occur irrespective of whether Parliament repeals the 1972 Act [81]

... There is a substantial difference between (i) ministers having a freely exercisable power to do something whose exercise may have to be subsequently explained to Parliament and (ii) ministers having no power to do that thing unless it is first accorded to them by Parliament. The major practical difference between the two categories, in a case such as this where the exercise of the power is irrevocable, is that the exercise of power in the first category pre-empts any Parliamentary action. When the power relates to an action of such importance to the UK constitution as withdrawing from the Treaties, it would clearly be appropriate for the power to be in the second category [92]

 Although its invocation [of Art 50 TEU] will have the inevitable consequence which Lord Pannick described ... [104, all emphases added]. 

In view of the relevance of the points of irrevocability of the Art 50(2) TEU notice, it is clear to me that the UKSC had an obligation to seek the interpretation of this provision by the ECJ and that, in not doing so, it has breached EU law. Moreover, beyond what some may consider a highly technical or academic point, by not seeking this clarification the UKSC has also done a disservice to the UK Parliament.

Disservice to the UK Parliament

The UK Parliament will imminently enter into debates and legislative action concerning the trigger of the process to withdraw from the EU by serving notice under Art 50(2) TEU. Unless political events unfold in a surprising way, and based on a previous Parliamentary resolution, the UK Parliament should be considered to be politically committed to support the UK Government's stated commitment to trigger Art 50 TEU by the end of March 2017.

However, these debates and eventual Parliamentary decisions will develop under the shadow of uncertainty that remains around the revocability or not of the Article 50(2) TEU. In that regard, the debates and positions expressed by MPs will not be as meaningful as they could if it was clear that the triggering Art 50 TEU would actually put (or not) the UK in the unavoidable course of leaving the EU -- with or without an exit deal, and regardless of the assessment of the fallback position. This can result in the need to make wild assumptions and to necessarily decide on the basis of worse case scenario analysis that may not reflect an alternative (possible) reality of reduced definiteness of the triggering of Art 50 TEU.

The UKSC could have avoided this situation by referring the question for interpretation to the ECJ. On the contrary, by premising its Judgment on the irrevocability of the notice, the UKSC has raised the stakes and the risks of Parliamentary debate even higher and created a situation where decisions are bound to be made in a rushed fashion and in a scenario of all or nothing (perceived) implications of the giving of notice under Art 50(2) TEU. It is hard to see how this can contribute to the practical enablement of Parliamentary sovereignty.

PM May's Speech has brought limited clarity of Brexit impact on procurement, but can consequences be significant?

In her Brexit speech of earlier today, Theresa May PM has clarified a few things, including that the model for a future relationship between the UK and the EU that she is "proposing cannot mean membership of the single market". She has also indicated that her Government would not consider an open-ended transitional arrangement because that could plunge Britain intopermanent political purgatory”. This seems to indicate a very clear direction towards a so-called hard Brexit that generates risks of an actual cliff edge (or a very short 'smoothing period') for UK and EU economic operators, including the public sector, businesses and consumers.

However, she has also expressed that her plan includes the priority for the UK to "seek the greatest possible access to [the EU's single market] through a new, comprehensive, bold and ambitious Free Trade Agreement". And that she hopes that this can be done in parallel to the Article 50 TEU negotiations, so that it is in place within 2 years. Prof Peers has aptly synthesised what came to mind.

It is difficult to anticipate the implications of all these contradictory goals in the area of public procurement regulation, but three main alternative scenarios seem now on the table:

  1. successful completion of a UK-EU FTA that can be in force at the time the UK leaves the single market, and which allows for continuity of EU and UK commitments under the WTO rules (notably, the Government Procurement Agreement, GPA) [FTA scenario];
  2. no UK-EU FTA (either at all, or because it is incomplete/in negotiation at the time the UK exits the single market), but agreement (not only between UK and EU, but also by their international trading partners) of  'workable' arrangements based on WTO rules (including GPA) [WTO/GPA safety net scenario]; and
  3. no UK-EU FTA and no workable agreement under WTO rules (including GPA) [unregulated international trade scenario].

The implications of each of these scenarios in the area of public procurement would, in my view, be as follows: 

  1. A tailor-made FTA would probably include features similar to the recent EU-Ukraine Deep and Comprehensive Free Trade Area (DCFTA), and this would require full compliance with the EU public procurement acquis. In short, this would imply the continuation of the status quo and no need for reform of the Public Contracts Regulations 2015 (although that would be possible because the current transposition followed an extremely restrictive copy-out approach that severely constraints its potential to unleash better procurement practices and results). 

    Access to GPA procurement markets would depend on the UK’s status under WTO GPA and the continued acceptance of the EU's coverage commitments by the other WTO GPA signatories, but this option could easily secure continued access to GPA markets because the UK and the EU could make a solid case that the trade reality in their procurement markets has not changed in a material way.

    This would be possible if the UK Government accepted the need for continuity in the public procurement area, which is something PM May hinted would be happening on a sectoral basis by stressing that the UK-EU FTA "... may take in elements of current Single Market arrangements in certain areas ... as it makes no sense to start again from scratch when Britain and the remaining Member States have adhered to the same rules for so many years." 
     
  2. Failure to complete an FTA could still allow for WTO GPA-based trade in public procurement markets, not only between the UK and the EU, but in the wider context of GPA markets (although in my view this would be less likely because a breakdown in the trade relations between the UK and the EU would most likely trigger calls for renegotiation, at least of coverage, from other GPA signatories).

    In that case, if the UK sought to rely on the WTO GPA only, it would need to clarify whether it can retain its status as a party in its own right or -- having lost derived membership linked to EU membership -- seek fresh accession to the GPA. Either way, the scope of coverage of the reciprocal commitments between the UK and the rest of GPA parties (including the EU) would need to be clarified and probably renegotiated, with the UK facing pressure to accept deeper commitments than currently negotiated by the EU en bloc (and the EU's commitments may at the same time be also under pressure to be renegotiated due the lower volume of the EU27 procurement markets as compared to the EU28). The main risk for the UK implicit in this option would concern the discontinuity of access to the procurement markets of GPA parties (including the EU), as well as having to make additional coverage concessions in order to retain (similar to) current access to those markets.  

    Additionally, the UK would still need to convince the rest of GPA signatories (including the EU) that its procurement system complies with the general (minimum) requirements of the agreement. The easiest way of doing so would be to retain current rules that implement the EU public procurement acquis, which ensure compliance with the EU’s (and UK's future) international obligations under the WTO GPA. In that regard, the possibility of introducing significant reforms to the Public Contracts Regulations 2015 would also be limited, or at least conditioned by the risk of triggering what could potentially be protracted negotiations on substance of procurement regulation, in addition to the above mentioned negotiations on (adjustment of) coverage.
     
  3. The implications of the final scenario of unregulated international trade are clear, at least from a legal perspective. "Hard Brexit", ie no trade agreement of any kind combined with loss of WTO GPA membership (or a workable arrangement ensuring continued reciprocal favourable treatment while access is (re)gained), would imply loss of access to EU and worldwide procurement markets (either totally or partially). Clearly, it would also provide the UK with an opportunity to close up its procurement markets to non-domestic bidders, but this would severely damage the UK public sector in many different ways, including potential higher prices, which does not seem like a desirable policy road to take. Either way, this would likely have a major impact both on the UK public sector and in its business community, particularly that reliant on cross-border direct and indirect procurement-related trade. At the same time, it would open the possibility of a complete overhaul of public procurement rules in the UK, including the repeal of the Public Contracts Regulations 2015, with or without a replacement. However, it would also imply complete isolation of UK (public procurement) markets and is clearly an undesirable state of things.

All in all, then, it seems that if the UK Government actually seeks to ensure that free trade remains a feature of the UK's economy, particularly through continuity of WTO (GPA) based trade and the conclusion of a "new, comprehensive, bold and ambitious Free Trade Agreement" with the EU, there is limited scope for reform of the Public Contracts Regulations 2015 other than to overcome the self-imposed limitations derived from the copy-out of a set of rules that is meant to be developed and fleshed out by the Member States. If that is seen as a worthwhile exercise, it can start tomorrow and irrespective of Brexit, because the regulatory space exists under currently applicable EU public procurement acquis. I am not optimistic that this will happen, though (and have not been since before the referendum).

Additional Thoughts on Brexit and Public Procurement

I had the pleasure of participating in last night's seminar on Brexit and Public Procurement, which was part of the Brexit Seminar Series 2016/17 organised by the Centre of European Law of King's College London. There was interesting discussion of the WTO GPA, UNCAC and UNCITRAL model law requirements and the possibilities they bring after Brexit, including a rather subtle argument why the UK may retain its condition of party to the WTO GPA on the basis of its final provisions in its Article XXII--which I either did not fully understand, or really do not see working out.

However, there was also a good measure of wishful thinking based on the opportunities that dropping the 'straitjacket of the EU single market approach' to procurement regulation could provide, as well as the possibilities that Brexit would bring in order to mend a system that is broken (with reference to both EU public procurement and State aid law), and which covers up an anti-British bias that can only get worse in the future if the Commission manages to adopt its 'Fortress Europe' strategy. I guess that, after this, my remarks (see presentation below) came in as a minoritarian and pro-EU reaction to these arguments. The rest of this post provides a synthesis of the arguments I made.

In order to counteract some of the arguments being made and, hopefully, to put the issue into broader perspective, I focused my remarks around whether the reform of [British] procurement regulation is feasible or a utopia (which links to my broader ideas on the difficulties of reimagining public procurement regulation). I broke this down in four parts: (1) the unavoidable costs of adopting a distinct 'Very British Model' (borrowing this label from Sarah Hannaford QC); (2) what is likely to happen with the Public Contracts Regulations 2015 immediately after Brexit; (3) what level of coordination between UK (Eng) and EU law should be achieved in the future; and (4) what can and should realistically be done to further reform (UK) public procurement law in the future.

1. On the unavoidable costs of a Very British Model, I guess that the simple insight I was trying to stress was that having diverging regulatory regimes increases the cost of doing business for companies aiming to serve markets where different procurement regimes apply. From the perspective of British companies (particularly SMEs, which PM May seems to be intent on actively supporting), this de facto makes it more difficult for them to export to the EU if they get used to a different domestic regulatory regime.

This can in turn result in a change of supply chains where EU 'importers' acquire the goods (works less well for services) from UK manufacturers and then sells them to the public sector in the rest of the EU, which will require the creation of commercial mark-ups / margins that may well wipe out any financial advantage derived from the taking of the Sterling, as well as any increases in productivity in the future.

Moreover, a Very British Model that significantly deviated from the current EU system would create a significant barrier for cross-border collaboration with other public buyers in the EU (which was mentioned could be particularly relevant in terms of defence procurement, given recent policies to boost EU's military capabilities through a joint defence fund), but also with potential third countries (eg Canada). It would also make negotiations to gain (or retain) membership of the WTO GPA and to subject internationally funded (large infrastructure) projects to the revised Very British System because international partners may need to be convinced that, though different, that new system complied with their requirements. If nothing else, this will be a drain of international and trade negotiators' time and energy.

2. On the likely  immediate future of the Public Contracts Regulations 2015, it is hard to make a forecast. Short of their total repeal and the creation of a massive regulatory vacuum in the control of public expenditure in the UK (which I do not think likely, and certainly hope not to be pursued), the PCR2015 are likely to stay in the books for a while (with or without Great Repeal Bill).

It is possible that the UK Government is tempted to chop bits of them off the statute book. Either suppressing the remedies they create for non-domestic bidders, as suggested by Prof Arrowsmith, and which I consider a daft strategy--for the lack of a better term--because it will not only alienate foreign bidders and international trading partners, but also be easy to circumvent through formal submission of tenders by UK-based entities. Or else shooting holes in the PCR2015 to get rid of parts that may be considered particular examples of bar procurement regulation (say, the use of self-declarations in the form of the ESPD). That would diminish the consistency of the regulatory system and could create undesirable effects.

Overall, as I said before, in the short run, the would be better off by completely keeping the status quo ante Brexit (including remedies for international tenderers and investors) if it wants to preserve its (diplomatic) options of a swift conclusion of procurement-related trade agreements, as well as preventing disruption in investment and infrastructure projects.

3. On the desirable level of coordination between future UK rules and EU public procurement law, including the CJEU case law, I submitted that, regardless of the formal legal obligations to comply with CJEU case law under EEA or other types of agreements, from a normative point of view and at least for as long as the law on the books reads the same way (ie up and until there is a repeal and substitution of the PCR2015), UK law should continue to be substantively coordinated with EU public procurement law.

For two reasons. First, because deviations will create the same additional costs of doing business indicated above (1). And, second, because on the whole (and I am not one to cosy up to the CJEU), I consider that its public procurement case law has been progressive and positive, and helped shape a regulatory system that is massively misunderstood and misconstrued, particularly but not only in the UK (more below).

4. On the productive ways in which [British] public procurement can be reformed in the longer run, I took the seemingly radical view that legal reform should not be the main focus and that there are more pressing issues that can only be sorted out with significant investment (which, of course, triggered the reaction from the floor that 'it ain't gonna happen' in this context and with the massive black hole that Brexit will create in the UK's public finances between now and, at least, 2021). I also stressed that the UK had shown no regulatory creativity whatsoever in the transposition of the 2014 Public procurement package, which indicates that there is a lack of direction and strategy on which to build a significant reform of the current system.

I stressed that most of the complaints against the EU public procurement rules coming from the business community, and particularly SMEs, would equally exist with any regulatory regime that imposed any level of red tape on businesses because that is, quite simply, in the nature of things. Same goes for the criticisms from the public sector. Of course, the existing rules are perfectible (topically, on the need to reform the Remedies Directive), but no system will ever be perfect and there is a level of discomfort with public procurement rules that needs to be accepted as trade off for the anti-corruption and pro-competitive / value for money results they achieve.

Additionally, significant problems of legal certainty and difficulties in the coordination of different sets of procurement rules are exclusively a domestically created issue. For example, the difficult coordination of general procurement rules under the PCR2015 and those applicable to healthcare procurement in the context of NHS England are a UK problem that can, and must, be resolved domestically (see eg here, with a focus on conflicts of interest). 

Moreover, I also stressed that the EU public procurement rules are greatly misunderstood and construed as imposing a tight straitjacket on both procurers and businesses. That is simply not the case, particularly after the revision of the 2014 Public procurement package, which has created enormous spaces for administrative discretion and negotiations--that have in turn triggered the need, more than ever, for a competition-oriented interpretation and implementation of the rules.

My view, and I am happy to expand it, is that properly understood and applied, the current EU rules allow for all the goals I have so far heard businesses and public sector officials indicate they want from a revised [British] public procurement system--except those linked to a protectionist industrial policy, which are economically unwise and undesirable in any case.

The real problem is that an improvement of procurement practice requires three main (and very expensive) changes: (a) a serious investment in technology and the effective roll out of eProcurement; (b) significant investment in human capital and the upgrade of the public sector skill set (particularly in non-legal aspects linked to market intelligence and procurement best practice, along the same lines stressed by the European Court of Auditors in the context of EU institutional procurement); and (c) significant investment in strengthening the public oversight powers of entities such as the National Audit Office and the Office for Budget Responsibility (on the worrying contrary trend, see here) so as to reduce the dependence on (and incentives for) private litigation as the only (meaningful?) check on the way procurement is carried out.

Overcoming this problem requires investment and long-term planning. Two things that seem to go against the very grain of the Brexit process. So, overall, I would not hold my breath. I would more generally not expect any significant change in the way procurement is carried out in the UK in the short to medium term, which in itself can create problems in the longer run.

ECJ new recommendations on the initiation of preliminary ruling proceedings sends clear signal to UK Supreme Court that the Miller case must be referred

The Court of Justice of the European Union (CJEU) has published today a new set of Recommendations to national courts and tribunals, in relation to the initiation of preliminary ruling proceedings [2016] OJ C 439/1. This is a very timely document, which clarifies the circumstances under which a reference for a preliminary ruling can or must take place, as well as the basic parameters that those requests must meet in order to effectively enable the CJEU to issue preliminary rulings, including in cases requiring particularly expeditious handling.

In the context of the Brexit related litigation before the UK Supreme Court in the appeal of the High Court's Miller decision, these Recommendations are particularly timely and relevant. There has been a very intense discussion by distinguished legal scholars about the existence or not of an obligation to refer the case to the ECJ for interpretation of Article 50 TEU--and, in particular, in relation with the (ir)revocability of an Art 50(1) notice in view of Art 50(2) TEU. The positions are too wide to discuss here (see this very useful compilation of materials), and I hold the relatively minoritarian view that the UK Supreme Court is under an absolute and inexcusable obligation to request a preliminary ruling on the interpretation of Article 50 TEU.

I find additional support for my view and the underlying interpretation of the CILFIT test in para [6] of the CJEU's Recommendations, which very clearly indicates that:

Where a question is raised in the context of a case that is pending before a court or tribunal against whose decisions there is no judicial remedy under national law, that court or tribunal is nonetheless required to bring a request for a preliminary ruling before the Court (see third paragraph of Article 267 TFEU), unless there is already well-established case-law on the point or unless the correct interpretation of the rule of law in question admits of no reasonable doubt (emphasis added).

Para [3] is also relevant in its stress that:

The jurisdiction of the Court to give a preliminary ruling on the interpretation or validity of EU law is exercised exclusively on the initiative of the national courts and tribunals, whether or not the parties to the main proceedings have expressed the wish that a question be referred to the Court (emphasis added).

In my opinion, the CJEU has sent the clearest possible message to the UK Supreme Court: they expect a request for an interpretation of Article 50 TEU. And the UK Supreme Court will be well advised to do so as soon as possible, once all intervening parties have presented their arguments. Tertium non datur.

What does Brexit mean for public procurement? Short remarks on Arrowsmith's White Paper

Prof Arrowsmith has published a White paper on the implications of Brexit for the law on public and utilities procurement, where she briefly considers the alternative models for the future regulation of public procurement in the UK after an exit from the EU. A fuller academic version of the paper is bound to appear in a Brexit special issue of the Public Procurement Law Review. In her White Paper, Arrowsmith provides the skeletal implications that different UK-EU relationships would have in terms of public procurement regulation, most of which point towards a clear need for (broad) continuity of the existing EU-based model.

Along the same lines already drawn by previous commentators (see here), her White Paper stresses the limited scope (and incentive) for a change of regulatory model if the UK is to have full access to the EU single market (under either the 'Norwegian'/EEA model, or the slightly more flexible 'Swiss' approach). She indicates that there is a (theoretical) possibility for the UK to reach a bespoke agreement with the EU that softens the requirements under the current EU Directives, but she also stresses that the stronger indication is that the EU would rather push for a consolidation of existing rules, both because that is the obvious 'off-the-shelf' solution, and due to the different negotiation dynamics between previously unrelated parties (the EU and Switzerland, for these purposes) and between the UK and the EU, which render arguments based on the need to 'learn' about the EU procedures or to reform internal rules to ensure approximation and consistency moot.

She then also assesses two scenarios that, in my view, are only interesting from a theoretical perspective. First, the strict application of the WTO GPA, which leads her to suggest that this option would allow the UK to develop a more flexible procurement regime but, realistically, only in the long run because access to the WTO GPA (of which the UK is not a Member in its own right, but only as part of the EU) would be significantly facilitated by keeping the existing EU-based regulations in place. She also mentions that this option would require the UK to agree on coverage with the EU and all other GPA members, and that 'there ... seems to be no reason why the other GPA parties would want to reopen the existing detailed coverage arrangements with the UK, or vice versa'. She is right to stress that business as usual would be the best way of ensuring quick accession to the GPA by the UK, but the question then arises of what is the advantage of such loose relationship with the EU compared to full access to the single market?--and the simple answer is that, in procurement terms, there is none in the short run and that any long run advantage seriously depends on the way the GPA itself evolves, which is not something we can include in our analysis with any meaningful level of predictability.

Second, and maybe in the only controversial or provocative point of her White Paper, Arrowsmith entertains the idea "that Brexit [c]ould see the UK throw off the shackles of EU procurement law, leaving it free to design its own system", in what she labels "the freedom option", which would derive in case the UK was not able to commit to any trade agreements covering public procurement. Arrowsmith rightly considers this situation unlikely and, as far as I can assess her qualitative comments on its implications, probably undesirable. I think that Arrowsmith's assessment of this situation is however partial because it fails to stress the losses in terms of trade that would derive from such "freedom solution", that I would rather label "the self-destructive, isolationist option".

Beyond the possibility of creating a superior public procurement system, which is by no means guaranteed (as Arrowsmith stresses herself), this solution of "absolute regulatory freedom" would not be viable unless the UK had no intention of keeping a meaningful level of international trade in public procurement markets. This scenario would come together with the possibility for any third country to discriminate against UK producers and exporters in their own procurement, as well as reduced incentives for international suppliers to participate in tenders where their ability to enforce individual rights was more reduced than in other jurisdictions. In general, it does not seem far fetched to consider that there would be less overall competition for contracts tendered by the UK government and, in the end, this would harm the UK taxpayer via higher prices and/or reduced quality of supplies, services and works needed to run public services.

I guess that my broader point is that, in this area of economic regulation, as in any other, arguments based on the possibility to develop a (theoretically) better system from a legal / technical perspective need to be considered together with their economic implications. And, from this perspective, any option that implied limited access to the EU single market and, even more, to the international markets, would impose a very heavy burden on UK's public expenditure. That is why it is important not to isolate technical legal analysis from its broader context in this important debate.

Moreover, and this is not a perspective generally included in Brexit assessments, multilateral investment banks also have a stake in the domestic regulation of public procurement. In case the UK wanted to have any chance of securing international funds for large infrastructure projects (which it may well want to preserve, in order to retain some possibilities of, for instance, EBRD investment in the country), it would still need to have a domestic regulation that complied with standards very close to those of the current EU-based regulatory mechanisms. Otherwise, it could not be out of the question that internationally-funded projects would need to be tendered under special rules in the future, thus not leaving the "freedom option" completely unconstrained.

Similarly, these issues of reduced international competition (with its negative economic effects) and difficulties in continuing to attract procurement-related international investment would arise in case Arrowsmith's proposal for a transition period between Brexit (ie, 2 years after the trigger of Art 50 TEU, which now seems likely to happen in early 2017) and the moment trade agreements were reached, in which she considers that a "sensible and likely interim solution would be to retain the award procedures of the regulations in place, but without provision for enforcement by non-domestic suppliers, pending eventual confirmation, modification/replacement, or total repeal of the regulations, depending on the outcome of trade negotiations and other decisions on how procurement will be regulated after Brexit". In my view, this is a bad idea and the UK would be better off by completely keeping the status quo ante Brexit (including remedies for international tenderers and investors) if it wants to preserve its (diplomatic) options of a swift conclusion of procurement-related trade agreements, as well as preventing disruption in investment and infrastructure projects.

Once again, from a broader perspective and like in most other areas of Brexit-related renegotiation, strategies that not only do not consolidate or grandfather rights, but also seek to (temporarily) restrict rights and guarantees, seem not to be conducive to productive future relationships and there is no reason to believe that such moves would not severely damage the UK's chances of reaching satisfactory agreements for the future. Thus, in my view, Arrowsmith's proposal for a transition period of reduced enforcement rights for non-UK bidders should not be followed.

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.
 

Brexit may have negative effects for the control of public expenditure, particularly regarding subsidies to large companies

In the current state of turmoil, it is difficult to speculate on the exact relationship between the EU and the UK that can result from the Brexit vote and the future negotiations to be held under Article 50 TEU, in case it gets triggered. However, in order to contribute to the debate of what that relationship should look like in the interest of taxpayers in the UK, it is important to consider the implications that a post-Brexit deal could have in terms of the potential disappearance of the EU rules applicable to the control of how public funds are spent. A reduction in the control mechanisms applicable to certain types of public expenditure could indeed diminish the effectiveness of policies funded by UK taxpayers and create shortcomings in public governance more generally.

This is particularly clear in the case of the EU State aid rules in Articles 107 to 109 TFEU and accompanying secondary legislation, which ultimately aim to avoid subsidy races, as well as the protectionist financing of national champions by Member States. Ultimately, these rules establish a set of controls over the selective channelling of public funds to companies, be it in the form of direct subsidies, or in more indirect ways such as tax exemptions, special contributions to pension plans, or the transmission of public assets (such as public land) in below-market conditions.

The European Commission has created a framework that allows Member States to use State aid for horizontal purposes (such as the support of environmental, innovation or employment-related activities), but also aims to prevent the use of public funds in order to benefit specific companies, in particular through a subsidisation of their operating costs. The European Commission enforces these rules and can bring Member States that breach them before the Court of Justice of the European Union. Additionally, competitors of the companies that receive State aid can challenge those decisions in their domestic courts.

Even if these rules are admittedly imperfect and their enforcement could be improved,* there is no question that the European Commission has been active and rather effective in combating the use of public funds to benefit specific large companies. Remarkably, Member States need to notify State aid measures to the European Commission and must not provide any aid until the Commission has authorised it. Overall, this means that in cases involving large companies, no State aid contrary to the EU rules is generally put in effect, as demonstrated by the discussions surrounding the Hinkley Point project. Where Member States infringe this standstill obligation, the Commission can force a recovery of the aid. The recent tax avoidance cases involving Starbucks or Fiat are a clear testimony of this important role in controlling the way public funds are spent in support of large companies.

The European Commission is thus heavily involved in the State aid measures aimed at specific large companies and acts as a filter to ensure that the expenditure of public funds pursues a legitimate objective in compliance with EU law. This was particularly the case of the State aid channelled to banks in the aftermath of the 2008 financial crisis.

Overall, then, at least for cases of State aid involving large sums of money and large companies, the Commission acts as an important filter to prevent damaging economic interventions in the economy, which constitutes an important check on how public money is spent. Whether such a tight system could be relaxed in order to enable a more proactive EU-wide industrial policy is a subject of significant debate, but the constraints that EU State aid rules currently impose on the provision of direct and indirect financial support to large companies are certainly not perceived as minor.

The question is thus whether a post-Brexit deal could free the UK Government from such State aid control, at least in the medium to long-run, so that it could engage in largely unchecked public subsidy policies, such as creating particularly beneficial tax conditions in order to try to retain or attract large multinational companies considering relocating elsewhere in the EU, or channelling public funds to chosen companies, either in support of industrial policy goals or otherwise.

These would be policy interventions clearly tackled by the European Commission under existing rules, and they would also be caught by the EFTA Surveillance Authority in case the post-Brexit deal resulted in the UK joining the European Economic Area (the so-called ‘Norwegian option’), which would require compliance with the same rules. However, whether interventions aimed at subsidising large companies would be caught in case of a ‘WTO-based’ trade scenario is less clear because the WTO rules on subsidies are not as tight as the EU’s, and their enforcement ultimately relies on other WTO Members bringing a complaint against the UK to the dispute settlement board, which is a very political decision ultimately reliant on trade calculations. To be sure, the EU itself could bring cases against the UK, but this would be a highly contentious issue in the framework of a relationship already very strained by the UK’s exit from the EU and detachment from the EEA.

Should the UK not be a part of the internal market via membership of the EU or the EEA, and in the absence of effective WTO-based external checks on the use of public funds to provide financial support to large companies, the control of this form of public expenditure would fall solely to Parliament and the domestic UK institutions, such as the National Audit Office.

This can be seen as an advantage by those convinced by arguments of self-control and UK-centric governance, but economic regulatory capture theory, and public policy theory more generally, have repeatedly demonstrated that such a self-policing architecture is unlikely to prevent ‘politicised’ uses of public funds. It seems clear to me that, in that case, the possibilities for any given Government to engage in expenditures of this type would be greater than they currently are, which would not necessarily result in the pursuance of the best interests of taxpayers in the UK.

Therefore, if there is value in having an external control of subsidies to large companies in order to avoid anti-economical protectionist policies or redistributive policies that take money away from other pressing social priorities—and I would certainly argue that there is—it seems clear to me that any post-Brexit deal that does not include the application of EU/EEA State aid rules would imply a net loss in terms of public governance and, in particular, in terms of an effective control of public expenditure, particularly regarding subsidies to large companies. Ultimately, then, from this perspective, it seems to me to be in the interest of taxpayers in the UK to strongly support a post-Brexit arrangement that retains State aid control, either by the European Commission or the EFTA Surveillance Authority.

__________________

* A Sanchez-Graells, “Digging itself out of the hole? A critical assessment of the Commission’s attempt to revitalise State aid enforcement after the crisis” (2016) 4(1) Journal of Antitrust Enforcement 157-187.

Some thoughts on Brexit and its implications

©  Barry Blitt / New Yorker

© Barry Blitt / New Yorker

Brexit occurred and it is difficult to overcome the shock and focus your thoughts on what’s next. 

From a legal perspective, in my mind, the only clear thing is that nothing has yet happened and nothing will happen until Article 50 TEU is formally engaged. With Cameron leaving, the Tory leadership in the air and the Labour leadership under mounting pressure, the problem is though that the EU is going to push hard to receive the Article 50(2) TEU notification as soon as possible. Political pressure has started to mount, although Chancellor Merkel seems intended to at least soften the tone of the opening salvos by representatives of the European Institutions.

Nevertheless, the pain of waiting for an internal UK decision to pull the Article 50 TEU trigger may be too big a bullet to bite, particularly if the bleeding in the financial markets continues and there are further signs of internal destabilising pressures by Eurosceptic groups (from France, the Netherlands, Denmark… or elsewhere). In the end, for the EU, every concession to the UK in this time of turmoil is a very dangerous path—as the echoes of Le Pen’s statement that ‘The UK has started a movement that will not stop’ clearly evidence.

Reasonably, the only way to show ability to manage the situation in an orderly and effective way is to get started as quickly as possible with the negotiations leading to an Article 50(3) TEU withdrawal agreement, either upon request of the (new) UK Government or unilaterally by an EU that may well get to the limit of its patience sooner rather than later and seek ways to construct the necessary notice as served in order to force the UK to sit at the negotiating table. All legal possibilities must certainly be under consideration in different corners of the EU.

In my opinion, and strictly from the perspective of EU law, there are good arguments to consider that a prompt Article 50(1) TEU notification is part of the duty of loyalty and sincere cooperation under Article 4(3) TEU. However, it also seems clear that getting the clock ticking towards the 2-year guillotine when one of the parties is not ready or willing to negotiate may be more than counterproductive. And, more generally, it also seems clear that there is no obvious enforcement mechanism for such duty to notify (if it indeed exists) and that any attempt by the European Commission to bring the UK to the Court of Justice of the European Union would not only be self-defeating but also probably ineffective in the long run. So, all in all, it seems that EU law is very limited in its ability to overcome classic problems of enforceability of international public law when the issues that need addressing are classical problems of strategic behaviour by a sovereign state.

To complicate matters further, the situation is somewhat surreal and difficult to tackle from a legal perspective because the significant complexities of internal UK constitutional law cast a very long shadow on the ‘realness’ of Brexit and the (theoretical) possibilities to disregard the result of the referendum either at the Westminster Parliament or in the corridors of Whitehall. Moreover, as lawyers, we are in danger of falling into a fallacy of presumed effectiveness of the law as we conceive it, particularly if we forget that enforcing EU law against the UK will be particularly difficult and time-sensitive in any given scenario.

Thus, the sad reality is that, more than ever, law is now a slave of politics and the existing legal framework will undoubtedly be bent beyond recognition in order to accommodate whatever is politically feasible at any given point of the impossible to anticipate chain of developments. This creates growing frustration because the impossibility to enforce the legal framework may well lead to its disregard, which threatens to have long-lasting damaging effects on the trust in the rule of law in the UK and the EU.

Hard times for legal pragmatism, which probably advises us to stay away from the craziness of the initial developments after the Brexit referendum and save our thoughts for later, when specific proposals reach the public sphere. However, it is very hard to refrain from commenting, not least because so much is at stake. 

Would a Brexit significantly change the way the English public sector buys supplies and services?

With two months to go for the all important UK referendum on EU membership, I thought it was about time to open the Brexit can of worms. This is a blog post I wrote for wider dissemination through the University of Bristol engagement channels. Comments welcome!

There has been some serious thought put into the potential implications of Brexit for the ways in which the UK public sector buys supplies and services—or, in technical terms, on the Brexit implications from a public procurement perspective. Academics, such as Dr Pedro Telles, and practitioners such as Michael Bowsher QC, Peter Smith, Roger Newman or Kerry Teahan have started to reflect on the likely consequences from a legal and business case perspective.

The overwhelming consensus is that a Brexit is highly unlikely to result in any significant substantive changes of the rules applicable to the public sector’s buying activity and that existing ‘EU-based regulation’ (notably, the Public Contracts Regulations 2015, as already amended by the Public Procurement (Amendments, Repeals and Revocations) Regulations 2016) is very likely to be replaced by an almost identical ‘English-reimagined regulation’. Economic studies, such as that carried out by Global Counsel, have also considered the likely impact of Brexit on public procurement as moderate—although in the economic area there is less consensus, as pointed out by Procurious.

Overall, it may seem that public procurement is an area where a Brexit would be unlikely to create much more than legal uncertainty and some economic costs (which are for the UK population to evaluate) and that, after a suitable (possibly long) period of time, new rules would be in place and the sector would carry on as usual. Optimists may identify an opportunity to improve existing rules once the EU requirements are set aside and a distinct English-reimagined regulation can be adopted and implemented (if that is at all possible, which most commentators reject). I would like to entertain that possibility for a second and consider to what extent the creation of a significantly better English-reimagined public procurement regulation is likely to materialise.

At the risk of being considered a pessimist or excessively critical, I do not think this possible at all, much less in a tight time-scale of around two years. I think that the process of transposition of the most recent EU rules (notably Directive 2014/24/EU) into the Public Contracts Regulations 2015 is a cautionary tale. That process of transposition required a reform of UK public procurement rules and had a two-year timeline, so the regulatory reform scenario could not be more similar and timely.

When the modernisation of the pre-existing EU procurement rules was first proposed, the Cabinet Office set out a clear negotiation strategy with ambitious goals, which mainly revolved around the creation of space for employee led organisations/mutuals to enable employees to gain experience of running public services prior to full and open competition, the shortening of procedures and reduction of red tape, the flexibilisation of the rules in order to allow for better commercial practices, and measures to enhance SME access to public procurement. All of this was achieved and the Cabinet Office was clear in stressing that the ‘revised [EU] package represents an excellent overall outcome for the UK, with progress achieved on all of our priority objectives’.

After having successfully secured most of the UK desired reforms during the 2011-2014 negotiation process, and in order to benefit from them as soon as possible, the Public Contracts Regulations 2015 were very quickly adopted in under a year. However, in part as a result of such rush to secure the benefits mentioned above, and possibly also as a side effect of the self-imposed restriction derived from ‘the government’s policies on “copy-out” of European Directives (where available) and avoidance of “gold-plating”, [which] further limit[ed] the extent to which Cabinet Office can deviate from the wording of the EU directive when casting the national UK implementing regulations’, the new UK procurement legislation is rather defective (as discussed in this podcast).

The 2015 reform was a significant opportunity to improve the regulation of public procurement in the UK and to rethink a system based on the flexible alternatives now included in the 2014 EU public procurement package, but it was misused and is now lost. By not adding domestic detailed rules to the EU framework, or developing significant guidance (there is some in selected areas, such as public-public contracts or contract modification), and by rushing an insufficiently developed transposition, the Cabinet Office created a situation where procurement practice is very likely to carry on as usual unless old rules are now barred (most are still compatible with the revised framework, though) or the specific contracting authority identifies any clear advantage in adopting new practices. Piece meal legal reform, piece meal guidance and piece meal procedural innovation is unlikely to result in any deep transformation of the way the UK public sector buys supplies and services.

In my view, this is a cautionary tale because fundamentally rethinking the public procurement function and its processes, and then designing a coherent system of rules that effectively support them, is a very hard thing to do (and one to which I intend to dedicate significant effort in the coming years). Moreover, the policy priorities expressed by the UK during the process of modernising the EU framework are now embedded in the revised EU and UK procurement rules. This seems to leave nothing left for the UK to want to push for in any subsequent legal reform, so there is no actual public interest or clear public policy driver for any additional reform of current rules—bar the need for technical adjustments. Thus, overall, a Brexit is very unlikely to result in any significant change in the way the English public sector buys supplies and services. Not because of EU impositions—then as a trade requirement rather than a regulatory obligation—but due to the lack of internal drive and practical need for an English-reimagined public procurement regulation.

 

My preliminary thoughts on why UK's Referendum Bill franchise infringes Art 18 TFEU

This is just a short development of my thoughts regarding why UK's Referendum Bill franchise infringes Art 18 TFEU. For an analysis of the voting franchise and the difficult issues it raise, see Prof Jo Shaw's excellent piece here. I will develop lengthier arguments in view of the debate I hope this will spur. For now, this is a broad brushstroke presentation of the argument:


Art 18 TFEU prohibits any discrimination on grounds of nationality, and that prohibition of discrimination applies within the scope of application of the Treaties and without prejudice to any special provisions contained therein. As recently stressed by the CJEU in Dano (C-333/13, EU:C:2014:2358) “Every Union citizen may therefore rely on the prohibition of discrimination on grounds of nationality laid down in Article 18 TFEU in all situations falling within the scope ratione materiae of EU law. These situations include those relating to the exercise of the right to move and reside within the territory of the Member States conferred by point (a) of the first subparagraph of Article 20(2) TFEU and Article 21 TFEU”… “the principle of non-discrimination, laid down generally in Article 18 TFEU, is given more specific expression in … Directive 2004/38 in relation to Union citizens who … exercise their right to move and reside within the territory of the Member States” (59 & 61).


I will limit my points to non-UK EU citizens that have resided in the UK for more than five years, which have acquired permanent residency under Art 16 Dir 2004/38 (thought the same arguments apply functionally to the rest of non-UK EU citizens residing in the UK, at least those who are not an unreasonable burden on the social assistance system). 


Those non-UK residents will (likely) see their permanent residency right affected (if not taken away) should the UK pull out (barring a general grandfathering of those rights). While some non-UK EU citizens are given right to vote in the referendum (Irish, Maltese, Cypriots) regardless of any other condition linked to their right to residence under Art 16 Dir 2004/38 or otherwise; others (rest of nationalities) do not get the right to vote on an issue that affects the continuity of the rights acquired under Dir 2004/38—and, ultimately, Arts 20-21 TFEU, which clearly engages Art 18 TFEU. This is discrimination based on nationality and, consequently, prohibited by Art 18 TFEU. Moreover, given the relevance of permanent residence rights for the development of basic human rights as recognised in the EU Charter (such as private and family life, Art 7; or property, Art 17, just to mention the most likely to be affected), this sort of discrimination is unacceptable.


Of course, the only valid argument against this is that Art 50(1) TEU determines that “Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements”. However, even then, it seems contrary to UK constitutional principles to force non-UK citizens to apply for citizenship (if they can) in order to have their basic fundamental rights upheld. Hence, this is not only politically and socially unacceptable, but legally flawed and open to challenge before the Court of Justice of the European Union.