Will the ECJ mandate protectionism in procurement -- comments on AG Collins' Kolin Opinion (C-652/22)

In the Opinion in Kolin Inşaat Turizm Sanayi ve Ticaret (C-652/22, EU:C:2024:212, hereafter ‘Kolin’), Advocate General Collins has argued that only economic operators established in countries party to international agreements on public contracts that bind the EU may rely on the provisions of Directive 2014/25/EU. This would imply that economic operators established in other countries are not entitled to participate in a public contract award procedure governed by Directive 2014/25/EU and, consequently, are unable to rely on the provisions of that Directive before Member State courts. In my view, this interpretation is both protectionist and problematic. The ECJ should not follow it. In this blog I sketch the reasons for this view.

Limited (international law) obligation of equal treatment does not imply a general (EU) obligation to exclude or discriminate

The Kolin Opinion concerns the interpretation of Art 43 of Directive 2014/25/EU, which could be relevant to the interpretation of Art 25 of Directive 2014/24/EU (on which see A La Chimia, ‘Article 25’ in R Caranta and A Sanchez-Graells (eds), European Public Procurement. Commentary on Directive 2014/24/EU (Edward Elgar 2021) 274-286. Art 43 of Dir 2014/25/EU establishes that:

In so far as they are covered by Annexes 3, 4 and 5 and the General Notes to the European Union’s Appendix I to the GPA and by the other international agreements by which the Union is bound, contracting entities within the meaning of Article 4(1)(a) shall accord to the works, supplies, services and economic operators of the signatories to those agreements treatment no less favourable than the treatment accorded to the works, supplies, services and economic operators of the Union.

AG Collins considers that

It follows that economic operators from non-covered third-countries do not fall within the scope ratione personae of Directive 2014/25 ... Since the applicant is not entitled to participate in a procedure for the award of a public contract governed by Directive 2014/25, it cannot seek to rely on the provisions thereof before a Member State court. The referring court therefore cannot obtain a response to a reference for a preliminary ruling on the interpretation of those provisions, since any answer that the Court might give to its request would not have binding effect. That reason suffices to justify a finding that this reference for a preliminary ruling is inadmissible (para 33, emphases added).

This position implies a logical jump in the reasoning. While it is plain that only economic operators from covered third-countries have a legally enforceable right to participate in public tenders on equal terms, it is by no means clear that other economic operators must necessarily be excluded from participation. If that was the plain interpretation and implication of that provision (and Art 25 Dir 2014/24/EU), the Commission would not have needed to develop the International Procurement Instrument (IPI) to establish circumstances in which exclusion of economic operators from non-covered third countries can be mandated. Along the same lines, AG Rantos argued in the Opinion in CRRC Qingdao Sifang and Others (C-266/22, EU:C:2023:399, not available in English) that ‘Member States can grant less favourable treatment to economic operators from non-covered third parties’ (para 65, own translation from Spanish).

In fact, as the Opinion reflects, ‘[a]lmost all of the parties to the procedure before the Court take the view that Member States may regulate the participation of economic operators from third-countries in procedures for the award of public contracts’ (para 35). In particular, the Croatian government submitted ‘that EU law contains no general prohibition on the participation of economic operators from third-countries in procedures for the award of public contracts in the European Union’ and provided sound arguments in support of that, as the ‘Commission’s Guidance on the participation of third-country bidders confirms that proposition where it states that economic operators from third-countries may be excluded from these procedures, without requiring their exclusion’ (para 36). Those arguments are also aligned with AG Rantos’ CRRC Opinion (paras 72-74). Estonia also submitted there is no obligation under EU law to limit participation by economic operators from non-covered third parties (para 38). Denmark, France, and Austria also considered that there is no ban stemming from EU law, even if the Union has exclusive competence in relation to the common commercial policy (paras 39-40). This should have given the AG pause.

Instead, as suggested by the Commission, AG Collins seeks to support the Opinion’s logical jump in an additional legal argument based on the remit of the EU’s competence to regulate the participation of economic operators from third-countries in procurement procedures in the European Union. The key issue here is not whether the EU has an exclusive or a shared competence in procurement, but that AG Collins considers that

… by adopting Article 43 of Directive 2014/25, the European Union has exercised its competence in relation to economic operators established in a country party to the GPA or to another international agreement on the award of public contracts by which the European Union is bound. … economic operators established in Türkiye do not come within that category. Although the European Union has not exercised its exclusive competence to establish whether economic operators from non-covered third-countries may participate in such procedures, Member States may not rely on that fact in order to regain competence to act in that area (para 50, emphases added).

Since the European Union does not appear to have exercised its exclusive competence to determine access by economic operators from non-covered third-countries to procedures for the award of public contracts, Member States wishing to take steps to that end may inform the competent EU institutions of their proposed course of action with a view to obtaining the requisite authorisation. Nothing in the Court’s file indicates that Croatia has taken such a step. Second, unilateral action by Member States could undermine the European Union’s bargaining position in the context of its efforts to open, on a reciprocal basis, markets for public contracts in third countries. Third, it could interfere with the uniform application of EU law, since in such circumstances the application of Directive 2014/25 ratione personae could vary from one Member State to another. (para 52, emphases added).

In my view, AG Collins is conflating normative and positive analysis. It is clear that dissimilar approaches in the Member States undermine the Commission’s bargaining position—thus the need to bring in the IPI as well as other instruments such as the Foreign Subsidies Regulation (FSR)—and can lead an absence of uniformity in the application of the Directive. However, these are normative issues. From a positive standpoint, it is in my view incorrect to state that the EU has exercised its competence in relation to GPA and other covered third country operators through Article 43 of Directive 2014/25/EU or, for that matter, Article 25 of Directive 2014/24/EU. The exercise of the relevant competence concerns the entering into those international treaties, not the internal legislative measures put in place to promote their effectiveness.

To me, it is clear that the obligation to grant equal treatment to GPA and other covered economic operators stems from the GPA or the relevant international treaty, not the Directive. Art 43 Dir 2014/25/EU (and Art 25 Dir 2014/24/EU are mere reminders of the obligations under international law and cannot alter them. Their omission would not have made any difference in covered third country economic operators’ legal position. By the same token, their inclusion cannot serve to prejudice the position of non-covered third country economic operators. As above, the whole process leading to the IPI and FSR would have been entirely superfluous. In my view, the Kolin Opinion follows too closely the dangerously protectionist policy approach pushed by the Commission, and does so in a way that is not legally persuasive (or accurate, in my view).

‘Tolerance’ of third country economic operators’ participation must engage legal protection under the CFR

Moreover, the Kolin Opinion would open a very dangerous path in terms of rule of law and upholding the effectiveness of the Charter of Fundamental Rights, especially Articles 41 and 47—and allow contracting authorities two bites of the cherry in relation to tenders submitted by economic operators from non-covered third countries. Contracting authorities could ‘tolerate’ participation of non-covered third country economic operators to see if those are the ones providing the most economically advantageous offer and, if not, or if other (industrial policy) considerations kicked in, they could simply reject or set aside the tender. This would happen in a context of insufficient guarantees.

Even assuming there was an obligation to exclude under Art 43 of Directive 2014/28/EU or Art 25 of Directive 2014/24/EU, which there is not, contracting authorities would be bound by the duties under Art 41 CFR in relation to EU and covered third-country economic operators. The relevant duty would require an immediate exclusion of the not covered economic operators to protect the (in that case) participation rights of those covered. A contracting authority that had not carried out such exclusion could seek to benefit from the advantages provided by the third country economic operator in breach of its duties, which is not permissible.

Conversely, a contracting authority that had not discharged its duty to exclude would be allowed to still benefit from its inaction by discriminating against and eventually excluding at a later stage the tender of the third-country economic operator without the latter having legal recourse. This would also not be in line with the effectiveness of Arts 41 and 47 CFR and certainly not in line with the doctrine of legitimate expectations. Once an economic operator or tenderer is not excluded or rejected at the first opportunity, there is a positive and very specific representation made by the contracting authority that the economic operator and/or its tender is in the run for the contract. This must trigger legal protection—although the specific form is likely to depend on domestic administrative law.

In the case at hand, like in many other cases in daily practice, despite Kolin not being eligible for equal treatment under Art 43 of Directive 2014/24/EU—and thus not having an enforceable right to participate in the tender and to equal treatment within it deriving from international law—the contracting authority had ‘tolerated’ its participation. The Opinion is plain that, following the receipt of tenders, the contracting authority ‘concluded that 6 out of the 15 tenders submitted fulfilled the selection criteria. [Kolin], a company established in Türkiye, submitted one of the tenders selected’ (para 16). However, the Opinion does not grant Kolin any rights because of such tolerance.

Contrary to the view held by AG Collins, ‘The Austrian Government contends that, although, in principle, Directive 2014/25 does not apply to economic operators from non-covered third-countries, such operators may rely on that directive once a contracting authority has permitted their participation in a procedure for the award of a public contract award’ (para 26). I share this view. Crucially, this is not an issue the Opinion explicitly addresses. But this is the main reason why the ECJ should not follow the Opinion.

Wishful legal analysis as a trade strategy? A rebuttal to the Minister for International Trade

In the context of the Parliamentary scrutiny of the procurement chapters of the UK’s Free Trade Agreements with Australia and New Zealand, I submitted several pieces of written evidence, which I then gathered together and reformulated in A Sanchez-Graells, ‘The Growing Thicket of Multi-Layered Procurement Liberalisation between WTO GPA Parties, as Evidenced in Post-Brexit UK’ (2022) 49(3) Legal Issues of Economic Integration 247–268. I was also invited to submit oral evidence to the Public Bills Comittee for the Trade (Australia and New Zealand) Bill.

In my research, I raised some legal issues on the way the UK-AUS and UK-NZ procurement chapters would interact with the World Trade Agreement Government Procurement Agreement (GPA)—to which UK, AUS and NZ are members—and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)—to which the UK seeks accession and both AUS and NZ are members. I also raised issues with the rules on remedies in particular, both in relation to UK-AUS and the CPTPP.

I have now become aware of a letter from the Minister for International Trade, where the UK Government simply dismisses my legal analysis in an unconvicing manner. In this post, I try to rebut their position—although their lack of arguments makes this rather difficult—and stress some of the misunderstandings that the letter evidences. The letter seems to me to reflect a worrying strategy of ‘wishful legal analysis’ that does not bode well for post-Brexit UK trade realignment.

Interaction between the GPA, FTAs and the CPTPP

In my analysis and submissions, I stressed how deviations in the UK’s FTAs from the substantive obligations set in the GPA generate legal uncertainty and potential problems in ‘dual regulation’ situations, where one of the contracting parties (eg the UK) would be under the impossibility of complying at the same time with the obligations resulting from the GPA with tenderers from GPA countries and those arising from the FTAs with AUS or NZ with their tenderers—without either breaching GPA obligations or, what is more likely, ignoring the deviation in the FTAs to ensure GPA compliance. It would also generate issues where compliance with the more demanding standards in the FTAs would be automatically propagated to the benefit of economic operators from other jurisdictions. I also raised how the deviations can generate legal uncertainty and make it more difficult for UK tenderers to ascertain their legal position in AUS and NZ. And I also raised how this situation can get further complicated if the UK accesses CPTPP.

My concerns were discussed in Committee and the Minister had the following to say:

The [GPA] and the [CPTPP] are plurilateral agreements between twenty-one and eleven parties respectively, including in each case Australia and New Zealand. As recognised in Committee, the [GPA] in particular establishes a global baseline for international procurement. Nonetheless, neither prevents its members from entering into bilateral free trade agreements to sit alongside the [GPA] and [CPTPP] while at the same time going further in terms of the procurement commitments between members.

These Agreements with Australia and New Zealand do just that, going beyond both the [GPA] and the [CPTPP] baselines. … Although the texts of the Agreements with Australia and New Zealand are sometimes laid out differently to the way they are in the Agreement on Government Procurement, they in no way dilute or reduce the global baseline established by the [GPA]. (emphases added).

There are two points to note, here. The first one is that the fact that the GPA and the CPTPP allow for bilateral agreements between their parties does not clarify how the overlapping treaties would operate, which is exactly what I analysed. Of note, under the 1969 Vienna Convention on the Law of Treaties (Art 30), when States conclude successive treaties relating to the same subject matter, the most recent treary prevails, and the provisions of the earlier treaty/ies only apply to the extent that they are not incompatible with those of the later treaty.

This is crucial here, especially as the Minister indicates that the UK-AUS and UK-NZ go beyond not only the GPA, but also the CPTPP. This would mean that entering into CPTPP after UK-AUS and UK-NZ—as the UK is currently in train of doing—could negate some of the aspects that go beyond CPTPP in both those FTAs. Moreover, the simple assertion that the FTAs do not dilute the GPA baseline is unconvincing, as detailed analysis shows that there are significant problems with eg the interpretation of the national treatment under the different treaties.

Secondly, the explanation provided does not resolve the practical problems arising from ‘dual regulation’ that I have identified and leaves the question open as to how the obligations under the FTAs will be interpreted and complied with in triangular situations involving tenderers not from AUS or NZ. Either the UK will apply the more demanding obligations—which will then benefit all GPA parties, not only AUS and NZ—or will stick to the GPA baseline in breach of the FTAs. There is no recognition of this issue in the letter.

The Minister also indicated that:

There was also suggestion in Committee that it would be difficult for suppliers in the United Kingdom to navigate the Agreements with Australia and New Zealand, as well as the [CPTPP] in the future. I would like to reassure the Committee that when bidding for United Kingdom procurements, the only system that British suppliers need to concern themselves with is United Kingdom’s procurement regulations. (emphasis added).

The Minister has either not understood the situation, or is seeking to obscure the analysis here. The concerns about legal uncertainty do not relate to UK businesses tendering for contracts in the UK, but to UK businesses tendering for contracts in AUS or NZ—which are the ones that would be seeking to benefit from the trade liberalisation pursued by those FTAs. Nothing in the Minister’s letter addresses this issue.

Domestic review rights under the Australian procurement chapter

One of the specific deviations from the GPA baseline that I identified in my research concerns the exclusion of access to remedies on grounds of public interest. While the GPA only allows excluding interim measures on such grounds, the AUS-UK FTA and CPTPP seem to allow for public interest to also bar access to remedies such as compensation—and, if this does not limit access to remedies as I submit, at least it does cause legal uncertainty in that respect.

My submission is met with the following response by the Minister [the mentioned annex is reproduced at the end of this post]:

The Committee also considered the evidence raised by Professor Sánchez-Graells regarding domestic review procedures … The Government respectfully disagrees with the analysis presented at that session that a provision in the government procurement chapter of the [UK-AUS FTA] ‘allows for the exclusion of legal remedies completely on the basis of public interest’.

The public interest exclusion only applies to temporary measures put in place to ensure aggrieved suppliers may continue to participate in a procurement.

…

The Government also respectfully disagrees with the suggestion in the witness evidence that this public interest exclusion is not similarly reflected in the [GPA] or the [UK-NZ FTA]. The Government acknowledges that the specific position of the exclusion differs between these agreements and is closer to the approach adopted in the [CPTPP]. Nonetheless, the Government do not consider this alters the legal effect or gives rise to legal uncertainty. For the benefit of the Committee, the relevant provisions from each of the [FTAs], the [GPA] and the [CPTPP] are set out in an annex to this letter.

The Minister’s explanations are not supported by any arguments. There is no reasoning to explain why the order of the clauses and subclauses in the relevant provisions does not alter their legal interpretation or effects. There is also no justification whatsoever for the opinion that textual differences do not give rise to legal uncertainty. The Government seems to think that it can simply wish the legal issues away.

The table included in the annex to the letter (below) is revealing of the precise issue that raises legal uncertainty and, potentially, a restriction on access to remedies other than interim measures beyond the GPA (and thus, in breach thereof). Why would treaties that seem to replicate the same rules draft them differently? How can any legal interpreter be of the opinion that the positioning of the exception clause does not have an effect on the interpretation of its scope of application? Is the fact that these agreements post-date the GPA and still deviate from it not of legal relevance?

Of course, there are arguments that could be made to counter my analysis. They could eg focus on the use of different (undefined) terms in different sub-clauses (such as ‘measures’ and ‘corrective action’). They could also focus on any preparatory works to the treaties (especially the CPTPP and UK-AUS FTA, which I have not yet been able to locate). They could even be more creative and attempt functional or customary interpretation arguments. But the letter contains no arguments at all.

Conclusion

It is a sad state of affairs where detailed legal analysis—whether correct or not—is dismissed without offering any arguments to the contrary and simply seeking to leverage the ‘authority’ of a Minister or Department. If this is the generalised approach to assessing the legal implications of the trade agreements negotiated (at speed) by the UK post-Brexit, it does not bode well for the legal certainty required to promote international investments and commercial activities.

The reassurances in the letter are void of any weight, in my view. I can only hope that the Committee is not persuaded by the empty explanations contained in the letter either.

UK Procurement Bill, general principles and additivity -- why there is no such risk

© hehaden / Flickr.

Those following the commentary on the UK Procurement Bill will have noticed the discussions concerning the absence of a clause on the general principles of procurement [see e.g. K McGaughey, ‘Losing your principles – some early thoughts on the Procurement Bill’ (13 May 2022) http://shorturl.at/tFJP2]. In fact, there is already a proposed amendment by Baroness Hayman seeking to introduce the principles as initially envisaged in the green paper, which risks losing the additions that resulted from the public consultation. However, it is not certain that the amendment will make it to the final version of the future Act. One of the reasons behind resisting the inclusion of general principles seems to be a concern by legislative drafters that it would generate additivity — which I understand as the risk of creating self-standing obligations beyond those explicitly imposed by the specific provisions of the primary (and future secondary) legislation.

In my view, the inclusion of general principles cannot generate such a risk of additivity, as the role and function of those principles is to act as interpretive guides for the provisions in the legislation. They can hardly be seen as gap fillers or generators of self-standing obligations. Conversely, the absence of such general principles can be problematic, not only for creating a vacuum of interpretive guidance, but also for seemingly signalling a deviation from global standards.

Below are the reasons why I think the general principles of procurement, and in particular those of transparency and competition, should be included in an amended Bill before it completes its Parliamentary procedure.

General principles as global standards

Transparency and competition are crucial and intertwined general principles and/or goals in every procurement legislative framework. However, both are missing in the Procurement Bill, which thus lags international standards and best practice.

The fundamental importance of transparency and competition is recognised at the higher level of international legislation, starting with the United Nations Convention Against Corruption (UNCAC), which Article 9(1) explicitly requires signatory States (including the UK) to ‘take the necessary steps to establish appropriate systems of procurement, based on transparency, competition and objective criteria in decision-making, that are effective, inter alia, in preventing corruption’.

The same applies to the World Trade Organisation Government Procurement Agreement (WTO GPA), which explicitly links to UNCAC and translates its requirements into Art IV(4), which binds its parties (including the UK) to ensure that ‘A procuring entity shall conduct covered procurement in a transparent and impartial manner that: a) is consistent with this Agreement, using methods such as open tendering, selective tendering and limited tendering; b) avoids conflicts of interest; and c) prevents corrupt practices’.

There should thus be no question that the UK is bound under international law to ensure that its procurement is based on principles of transparency, competition and objectivity.

The UNCITRAL Model Law on public procurement also places transparency as a general goal amongst the overarching objectives of any domestic legislation enacting it. The preamble clearly sets out that the enacting State: ‘considers it desirable to regulate procurement so as to promote the objectives of: … (c) Promoting competition among suppliers and contractors for the supply of the subject matter of the procurement; … [and] (f) Achieving transparency in the procedures relating to procurement.’ Even if the Procurement Bill is not enacting the UNCITRAL Model Law, it can reasonably be expected to meet the best practices it highlights, not least because this is a benchmark that will be used to assess the quality of the UK procurement legislation post-reform.

Inclusion of the principle of transparency in the Bill

The intended inclusion of a principle/goal of transparency was clear in the Transforming Public Procurement Green Paper of December 2020 (para 27), and there was no indication of a change of position in the government’s response to the public consultation in December 2021 (para 33). Moreover, the response clarified that ‘The transparency principle previously proposed will set a minimum standard in terms of the quality and accessibility of information where there is a publication obligation elsewhere in the Bill’ (para 35).

The inclusion of an explicit principle of transparency was thus not meant to (or arguably capable of) generating additional self-standing obligations, but simply to establish an interpretive guideline in line with international obligations and best practice benchmarks. If there are concerns that the principle can in itself generate additivity over and above the specific transparency obligations in the Bill, it should be stressed that the existence of an explicit principle of transparency in the Public Contracts Regulations 2015 (reg.18(1)) has not led to an expansion of the transparency duties under the current regime. To the contrary, where such expansion has arguably taken place, it has been on the basis of common law doctrines (see e.g. R (Good Law Project & Others) v Secretary of State for Health and Social Care [2021] EWHC 346 (Admin) [at 132 ff]). 

Moreover, there are safeguards in the Bill preventing a maximalist interpretation of transparency requirements. Clause 85 (General exemptions from duties to publish or disclose information) affords the government the possibility to withhold information for specific purposes. This would thus ensure that there is no risk of additivity from the inclusion of a general principle dictating that data should be made transparent.

The inclusion of the principle of transparency has been supported by the entire spectrum of academic commentators, including those of a pro-deregulation persuasion (e.g. S Arrowsmith ‘Transforming Public Procurement Law after Brexit: Early Reflections on the Government’s Green Paper’ (Dec 2020) at 4). I have also stressed how, in the absence of a reform of e.g. the Freedom of Information Act 2000, the inclusion of a transparency principle will not generate meaningful practical changes to the existing disclosure obligations (e.g. A Sanchez-Graells, ‘The UK’s Green Paper on Post-Brexit Public Procurement Reform: Transformation or Overcomplication?’ (Jan 2021) at 6).

Inclusion of the principle of competition in the Bill

The principle of competition was not included in the Transforming Public Procurement Green Paper of December 2020. However, following submissions by the Competition and Markets Authority and commentators such as myself (see here for details), the government’s response to the public consultation of December 2021 indicated in no ambiguous terms that ‘We will introduce an additional objective of promoting the importance of open and fair competition that will draw together a number of different threads in the Green Paper that encourage competitive procurement’ (para 39).

The inclusion of an explicit principle of competition was thus also not meant to (or arguably capable of) generating additional self-standing obligations, but simply to establish an interpretive guideline in line with international obligations and best practice benchmarks. Similarly to the analysis above in relation to the principle of transparency, the existence of a principle of competition (or a narrower prohibition on the artificial narrowing of competition, as others interpret it) can hardly be seen as capable of generating self-standing obligations (for discussion, see A Sanchez-Graells, ‘Initial comments on the UK’s Procurement Bill: A lukewarm assessment’ (May 2022) 7).

Even where recent UK case law has derived obligations from general principles (R (Good Law Project and EveryDoctor) v Secretary of State for Health and Social Care [2022] EWHC 46 (TCC)), the obligations did not derive from the principle of competition, or the other principles (especially equal treatment) themselves, but from an essentialisation of the general requirements of procurement leading to the identification of ‘an irreducible minimum standard of objective fairness that applies to such procurements, even in the absence of open competition’ (at para 334, see my criticism here). As above, this does not point out to an additivity risk resulting from the general principle of competition, but rather from broader judicial considerations of the proper way in which procurement needs to be conducted.

It is worth reiterating that the importance of the inclusion of the principle of competition in the Bill was underlined by the Competition and Markets Authority, in particular in relation to its interaction with the principle of transparency: ‘Transparency can play a vital role in effective public procurement by dispelling perceptions of favouritism and maintaining trust in the procurement process – which in turn encourages competitors to contest the market. However, higher levels of transparency can also make collusion between bidders easier to sustain ... The CMA considers it essential that public procurement officials are aware of the link between collusion and transparency and report any suspicious activity by suppliers to the CMA. … The CMA proposes that … the new regulatory framework for public procurement should include a further principle of ‘effective competition’: Effective competition - procurement should promote healthy, competitive markets, which in turn drive better value for money and reduce the risk of illegal bid-rigging cartel.’ (at paras 3.2 and 3.3).

The inclusion of the principle of transparency thus needs to be twinned to the introduction of the principle of competition (for discussion of the interaction between the triad of overarching principles of competition, transparency, and integrity, see Steve Schooner, ‘Desiderata: Objectives for a System of Government Contract Law‘ (March 2002) 3 ff).

Implications and final thoughts 

Given the UK’s international commitments and the universal recognition of the importance of enshrining the general principles of transparency and competition in procurement legislation, their absence in the Procurement Bill can:

1. generate doubts as to the intended transparency and pro-competition orientation of the system—which could be used e.g. in the context of the WTO GPA by trading partners seeking to raise issues with the UK’s position in the agreement; as well as

2. push for a pro-competition and/or transparency-regarding interpretation of other general goals included in the Bill and, in particular, the ones in clause 11(1)(a) of ‘delivering value for money’, clause 11(1)(c) of ‘sharing information for the purpose of allowing suppliers and others to understand the authority’s procurement policies and decisions’, and clause 11(1)(d) of ‘acting, and being seen to act, with integrity’. Such interpretation could, coupled with common law doctrines and other precedent (as above), generate additional (self-standing) obligations in a way that the more generic principles of transparency and competition may not. And, even if they did, there would be no risk of additivity compared to the original text of the Bill.

There is thus no clear advantage to the omission of the principles, whereas their explicit inclusion would facilitate alignment of the Procurement Bill with the international standards and regulatory benchmarks it will be assessed against. The explicit inclusion of the principles of transparency and competition is thus the preferable regulatory approach.

In my view, the easiest way of ensuring the introduction of both principles would be to alter the amendment proposed by Baroness Hayman as follows (with bold indicating changes or additions):

After Clause 10

BARONESS HAYMAN OF ULLOCK

Insert the following new Clause

“Procurement principles

(1) In carrying out a procurement, a contracting authority must pursue the following principles—

(a) [omit]
(b) value for money, by having regard to the optimal whole-life blend of economy, efficiency and effectiveness that achieves the intended outcome of the business case,
(c) transparency, by acting openly to underpin accountability for public money, anti-corruption and the effectiveness of procurements,
(d) integrity, by providing good management, preventing misconduct, and control in order to prevent fraud and corruption,
(e) equal treatment of suppliers, by ensuring that decision-making is impartial and without conflict of interest,
(f) non-discrimination, by ensuring that decision-making is not discriminatory, and
(g) effective competition, by ensuring that procurement does not artificially narrow competition for a specific contract, promotes healthy, competitive markets, and reduces the risk of illegal bid-rigging cartels.”

As there is no good reason why a contracting authority should not be able to act in accordance with those principles, I would advocate for a deletion of the second paragraph of the amendment as proposed.

New paper on the growing thicket of multi-layered procurement liberalisation between WTO GPA parties

© Tom Burke/Flickr.

I have expanded on the thoughts around the multi-layered regulation of procurement-related trade liberalisation in this new working paper: The growing thicket of multi-layered procurement liberalisation between WTO GPA parties, as evidenced in post-Brexit UK. The abstract is as follows:

The World Trade Organisation Government Procurement Agreement (GPA) has created the most comprehensive plurilateral system for procurement-related trade liberalisation. However, there has been a proliferation of free trade agreements (FTAs) regulating public procurement liberalisation, including between GPA parties, which seek to bypass or go beyond the GPA on a bilateral basis, or with a more limited plurilateral remit. Such FTAs tend to follow a ‘GPA+’ approach to provide incremental trade liberalisation based on the substantive provisions of the GPA. However, there is a trend of substantive deviation between the GPA regulatory baseline and the FTA regulation of crucial issues, such as the national treatment obligation or access to remedies, including in FTAs involving the European Union or, recently, its former Member State, the UK. This creates a situation of potential conflict of treaty norms that has so far received limited attention. This article focuses on the resolution of conflicts between GPA and FTA substantive provisions under the 1969 Vienna Convention on the Law of Treaties, using the UK’s post-Brexit FTAs as a case study. It argues for a rationalisation of the system by extending the use of incorporation by reference of the GPA in FTAs involving GPA parties.

As always, feedback and any suggestions for improvement before final publication would be most welcome. The paper can be freely downloaded via SSRN: https://ssrn.com/abstract=4054711.

Deviating from the GPA in bilateral or multilateral FTAs -- how good or effective is that regulatory strategy?

© Thomas Leth-Olsen/Flickr.

One of the issues procurement lawyers may be unlikely to think much about (at least going by my own experience) is the interaction of the several (and growing number of) pieces of international regulation of procurement-related trade liberalisation. And, in particular, the interaction between the World trade Organisation Government Procurement Agreement (GPA) and the procurement chapters in the multilateral and bilateral free trade agreements (FTAs) that have been mushrooming for a while now.

This is an issue I encountered for the first time when looking at the procurement chapter of the UK-Australia FTA (UK-AUS FTA, see here and here), and on which I will be submitting evidence to the International Trade Committee of the House of Lords tomorrow. In case of interest, here are my thoughts on the matter.

**Warning**, tackling this issue requires a bit of a deep dive into the 1969 Vienna Convention on the Law of Treaties, so this post may be niche (or even more niche than usual). TLDR: despite (intentionally?) deviating from the text of the GPA, FTAs are unlikely to generate practical effects where they vary or reduce GPA-based obligations, except in limited cases where the effects are only for the economic operators of the two jurisdictions signing the FTA, which is both counterintuitive and prone to litigation, especially where GPA- situations concern access to procurement remedies.

What’s the matter?

For an increasing number of jurisdictions, procurement-related trade liberalisation has become a multi-layered regulatory puzzle. Let’s take the example of the EU. The EU is a member of the GPA, as are Singapore and Canada (all of them members of the 2012 version of the GPA since 6 April 2014). The EU has also concluded procurement chapters in FTAs, eg with Canada in 2017 (EU-Canada FTA (CETA), Chapter 19), or Singapore in 2019 (EU-Singapore FTA, Chapter 9). In these chapters, the EU has adopted a GPA+ approach based on reiterating and tweaking the rules of the GPA—as opposed to the approach followed eg with the UK in 2021, where the EU-UK Trade and Cooperation Agreement explicitly incorporates the GPA (Art 277 EU-UK TCA), and then adds some additional rules.

The dual regulation of procurement liberalisation between GPA parties in bilateral FTAs (or in plurilateral agreements) can create legal issues where the rules in the later FTAs deviate from the GPA in a manner that varies or reduces GPA obligations (ie GPA-). This is the case, for example, of seemingly reduced national treatment obligations concerning suppliers of the relevant parties offering goods or services of other GPA parties. The issue is as follows (bear with me).

The GPA imposes national treatment and non-discrimination obligations as the foundation of its regulatory architecture. The GPA national treatment clause reads ‘With respect to any measure regarding covered procurement, each Party, including its procuring entities, shall accord immediately and unconditionally to the goods and services of any other Party and to the suppliers of any other Party offering the goods or services of any Party, treatment no less favourable than the treatment the Party, including its procuring entities, accords to: a) domestic goods, services and suppliers; and b) goods, services and suppliers of any other Party’ (Art IV(1) emphasis added). This creates a two-tier requirement of ‘most favoured treatment’, both between the goods, services and suppliers of two given GPA members (procuring and supplying) and across the goods, services and suppliers of all GPA parties other than the procuring party. The underlined clause leaves the possibility open for differential treatment of suppliers of a GPA party offering goods or services of a non-GPA party but extends the national treatment obligation to suppliers offering goods of services originating anywhere in the ‘GPA club’.

This is in line with the GPA non-discrimination clause, which reads: ‘With respect to any measure regarding covered procurement, a Party, including its procuring entities, shall not: … b) discriminate against a locally established supplier on the basis that the goods or services offered by that supplier for a particular procurement are goods or services of any other Party’ (Art IV(2) emphasis added). Again, the possibility is open for differential treatment of suppliers of a GPA party offering goods or services of a non-GPA party—on the implicit assumption that domestic suppliers offering goods or services of a non-GPA party are subjected to the same differential treatment.

Now, under both CETA and the EU-Singapore FTA, the regulation of these obligations is altered (and seemingly narrowed down).

The position under CETA is that ‘With respect to any measure regarding covered procurement, each Party, including its procuring entities, shall accord immediately and unconditionally to the goods and services of the other Party and to the suppliers of the other Party offering such goods or services, treatment no less favourable than the treatment the Party, including its procuring entities, accords to its own goods, services and suppliers.‘ (Art 19.4(1) CETA, emphasis added). Prima facie, this clashes with the GPA because it reduces the circle of protected goods and services accessing procurement opportunities via suppliers to Canadian and EU goods and services, and to the exclusion of those originating in other GPA jurisdictions. This is not contradicted by the non-discrimination clause, according to which ‘With respect to any measure regarding covered procurement, a Party, including its procuring entities, shall not: … (b) discriminate against a locally established supplier on the basis that the goods or services offered by that supplier for a particular procurement are goods or services of the other Party.’ (Art 19.4(2) CETA, emphasis added). Therefore, as a result of CETA, there is an open question as to whether EU/Canadian suppliers offering non-EU/Canadian (GPA) goods or services are protected from discrimination.

The position under the EU-Singapore FTA is perhaps slightly less straightforwardly in clash with the GPA, and it is that ‘With respect to any measure regarding covered procurement, each Party, including its procuring entities, shall immediately and unconditionally accord to the goods and services of the other Party and to the suppliers of the other Party treatment no less favourable than the treatment the Party, including its procuring entities, accords to domestic goods, services, and suppliers’ (Art 9.4(1) EU-Singapore FTA, emphasis added). This omits the GPA reference to suppliers ‘offering the goods or services of any Party’ (although it does not limit it to the goods and services of the parties, as in CETA) and could seem like a logical tailoring of the obligation to a bilateral situation. However, it generates doubts as to the position of EU and Singaporean suppliers offering non-EU/Singaporean goods or services originating in GPA jurisdictions, which would have had access under the GPA but may not have access under the FTA. A restrictive interpretation limiting access to those suppliers offering EU/Singaporean goods and services could be supported by the parallel modification of the non-discrimination clause relative to the GPA standard, which reads ‘With respect to any measure regarding covered procurement, a Party, including its procuring entities, shall not: … (b) discriminate against a locally established supplier on the basis that the goods or services offered by that supplier for a particular procurement are goods or services of the other Party (Art 9.4(2) EU-Singapore FTA, emphasis added). Therefore, the same issues as in CETA arise, although there is some more wiggle room for legal interpretation in this case.

In both cases, however, it is at first difficult to establish definitely whether suppliers offering goods or services from GPA parties other than the EU and/or Singapore/Canada have indeed lost protection as a result of the newer FTA obligations. Such a modification would have been implemented without consent from the relevant GPA party and, in practice, would be challenged. More importantly, then, both FTAs create at least a risk of breach of GPA obligations for the EU (and Singapore and/or Canada) in relation to the goods or services from other GPA parties now potentially being (indirectly) discriminated against as a result of their being offered by an EU/Singaporean and/or Canadian supplier (in effect, a ‘GPA-’ situation, despite the aim of the FTA to create a GPA+ regime).

Here is where the Law of Treaties kicks in.

The regulation in the 1969 Vienna Convention

1. General regulatory background regarding conflicting treaty norms

Art 30 of the 1969 Vienna Convention on the Law of Treaties (VCLT)[1] controls the matter of conflicting treaty norms. Before engaging in an assessment of its conflict rules, it is worth stressing that a conflict between treaty norms will only arise where an interpretation of the later treaty that avoids it is either not possible, or not accepted by the parties.[2] Equally, or in a mutually reinforcing manner, understanding how the conflict norms would operate can have an effect on the interpretation of an obligation under the later treaty that the parties are likely to (voluntarily) adopt. In reality, in cases of potential conflict between treaty norms, there will be a clear interpretive ‘pull’ to try to ensure coherence, or minimise divergence, through interpretation of the later treaty which takes account of the obligations owed to others through the earlier agreement. It is a practical approach which can lessen (but cannot eliminate) the difficulties resulting from treaty clashes. In particular because Art 30 VCLT applies to successive treaties relating to the same subject matter and establishing the subject matter of a treaty can in itself be a disputed issue.[3]

Explicit regulation. In case of conflict between treaty norms other than the Charter of the United Nations (which has precedence; ex Art 30(1) VCLT), Art 30(2) VCLT foresees the possibility of explicit regulation via a conflict clause, in which case: ‘When a treaty specifies that it is subject to, or that it is not to be considered as incompatible with, an earlier or later treaty, the provisions of that other treaty prevail’.

Unregulated conflicts between the same parties. In the absence of an explicit conflict clause, the VCLT establishes residuary rules, distinguishing two situations. First, in the case of successive treaties with identical parties, Art 30(3) VCLT establishes precedence for the later treaty,[4] and ‘the earlier treaty applies only to the extent that its provisions are compatible with those of the later treaty’.

Unregulated conflicts between different parties. The second situation concerns successive treaties with different parties, for example a successive treaty between some but not all the signatories of the previous treaty. In this case, Art 30(4) VCLT establishes two rules, based on a distinction between the effects of the new treaty between its signing parties, and its effects vis-à-vis the other signatories of the previous treaty. Between the parties to both treaties, the rule in Art 30(4)(a) is the same as in Art 30(3) VCLT. That is, the newer treaty takes precedence and ‘the earlier treaty applies only to the extent that its provisions are compatible with those of the later treaty’. Conversely, and due to the relativity of treaty rights (Art 34 VCLT), under Art 30(4)(b) VCLT, ‘as between a State party to both treaties and a State party to only one of the treaties, the treaty to which both States are parties governs their mutual rights and obligations.’ Or, in other words, Art 30(4) VCLT establishes that ‘the newer treaty may be applied by its parties but only by leaving intact the rights of those that are only parties to the earlier treaty’.[5]

Modification of treaties between certain of their parties only. Art 30(5) VCLT clarifies that the two rules in Art 30(4) are subject to Art 41 VCLT concerning agreements to modify multilateral treaties between certain parties only, under the rules of those multilateral treaties. Art 41 VCLT covers two situations: (a) the possibility that such a modification is provided for by the treaty; or (b) the modification in question is not prohibited by the treaty, it does not affect the enjoyment by the other parties of their rights under the treaty or the performance of their obligations, and it does not relate to a provision, derogation from which is incompatible with the effective execution of the object and purpose of the treaty as a whole.

Art 30 VCLT does not provide explicit residual rules concerning ‘triangular situations’, where the same action by one of the parties to both conflicting treaties affects the rights resulting from both treaties at the same time (albeit for different parties), and thus unavoidably breaches one of the treaties[6] due to the 'variable geometry' of treaty-resulting obligations. In that case, the possibility of international responsibility of a State for the breach of one of the treaties arises (Art 30(5) VCLT)–especially in the cases falling under Art 30(4)(b) VCLT.[7]

Given this possibility, as mentioned above, where a State is party to two treaties imposing different obligations for triangular situations, it will have a strong incentive to try to resolve the conflict through interpretation or, to the extent allowed by the respective treaties, it will have a strong incentive to comply with the most demanding treaty in order to avoid incurring in international responsibility. Where avoiding breach of either of the treaties in those ways is not possible, States retain discretion to choose which treaty to breach[8] (under the so-called ‘principle of political decision’[9]) and may have an incentive to breach the treaty that would trigger the least (potential) international responsibility, which may well be the newer treaty with a more limited number of parties.

2. Application to the procurement context

The issue of conflicting treaty norms and their potential effect on the interpretation of the deviating clauses of the later treaty is relevant in the context of public procurement, and in particular in the context of the EU’s example above, in particular given the regulatory overlap and divergence between the GPA and the EU’s FTAs with Canada and Singapore.

Modification of the GPA between certain of its parties only. Given that the EU, Singapore and Canada are GPA parties, one possibility would be to consider their bilateral agreements as a modification of the GPA. In that regard, the GPA includes a specific clause on modifications (Art XXII(11) GPA) that would trigger Art 41 VCLT. However, Art XXII(11) GPA requires acceptance of the intended treaty modification by two thirds of the GPA parties, which makes bilateral modification of the agreement impossible (other than concerning schedules of coverage, which are structurally negotiated on a bilateral basis). Therefore, the relevant analysis is based on Art 30 VCLT.

Explicit conflict clause in the FTAs? It is worth noting that the EU-Singapore does contain a (pseudo)conflict clause regarding the GPA, according to which ‘If the Revised GPA is amended or superseded by another agreement, the Parties shall amend this Chapter by decision in the Committee on Trade in Services, Investment and Government Procurement … as appropriate’ (Art 9.20 EU-Singapore FTA). CETA contains another type of (pseudo)conflict clause in relation to the WTO Agreement and other agreements (Art 1.5 CETA), according to which ‘The Parties affirm their rights and obligations with respect to each other under the WTO Agreement and other agreements to which they are party.’ It is highly unlikely that either of these clauses qualifies as an explicit conflict clause meeting all requirements of Art 30(2) VCLT (above).

An unregulated conflict. Therefore, the potential conflict between the procurement provisions in CETA or the EU-Singapore FTA and the GPA seems to be governed by the rule in Art 30(4)(a) VCLT: ie the FTA prevails in the procurement relationship between the EU and Singapore/Canada, with the GPA provisions applying only to the extent they are compatible with the FTA. In any case and regardless of this interpretation, however, the rule of Art 30(4)(b) stands and, in their relationships with other GPA members, the EU, Canada and Singapore are bound by the GPA, regardless of any conflict with their FTA.

This makes the existence of unregulated ‘triangular situations’ particularly challenging where the FTAs deviate from the GPA in a manner that changes or limits the parties’ obligations towards each other (‘GPA-‘). Given that the extensions of coverage under CETA and under the EU-Singapore FTA are only incremental above the general coverage included in the GPA schedules for each of the parties, most of the procurement opportunities covered by the FTAs will be subject to dual regulation—or, in other words, most procurement covered by the EU’s FTAs will generate ‘triangular situations’.

GPA- situations pose significant legal uncertainty but, for the reasons below, they will likely lack any practical relevance if the EU (Canada and Singapore) want to avoid international responsibility for breach of the GPA.

What is the proper interpretation of the FTAs, then?

As above, a literal interpretation of Art 19.4 CETA would suggest that suppliers of either of the parties are protected under the national treatment regime only when they offer goods or services of the parties. This literal interpretation is clearly much more restrictive than the GPA and can affect the rights of suppliers offering non-EU/Canadian goods or services, as well as the access that should be afforded to those goods and services.

Conversely, a literal interpretation of Art 9.4 EU-Singapore FTA would suggest that suppliers of either of the parties are protected under the national treatment regime, even if they offer goods or services from third parties, whether those are GPA or not (unless domestic suppliers offering goods or services from third parties are also subjected to specific differential treatment—eg exclusion—which would set the benchmark of the national treatment obligation). Such an interpretation would significantly expand the scope of the national treatment under the EU-Singapore FTA compared to the GPA in relation to (non-GPA) third country goods and services, which does not seem to plausibly represent the parties’ intent under the FTA. However, such literal interpretation would follow Art 30(4)(a) VCLT.

In contrast, a systematic interpretation that took account of the fact that Art 9.4(2)(b) EU-Singapore FTA only refers to locally established suppliers offering goods or services of the other party (ie either EU or Singapore), would suggest an implicit requirement in Art 9.4(1) that suppliers are only protected as long as they offer EU or Singaporean goods or services. While this interpretation seems more aligned with the putative intention of the parties under the FTA, it does create problems in case of dual regulation procurement (or triangular situations), as EU and/or Singaporean suppliers offering goods or services of a different GPA origin could seek GPA national treatment of the goods or services themselves, which attempted exclusion (under a ‘GPA-’ approach) would likely breach Art 30(4)(b) VCLT.

To avoid breaching their international obligations under the GPA (Art IV(1)) in relation to the goods or services of other GPA parties offered by EU or Canadian/Singaporean suppliers, the EU, Singapore and Australia must refrain from any discrimination of covered suppliers offering goods or services originating anywhere in the ‘GPA club’. This means that, by virtue of the operation of the rule in Art 30(4)(b) VCLT in relation to the goods or services of the GPA parties protected by Art IV(1)GPA, the interpretation limiting the scope of protection under Art 9.4(1) EU-Singapore FTA cannot have any practical relevance. And, more challenging, it also means that the EU and Canada need to set aside Art 19.4(1) CETA.

Conversely, EU or Singaporean suppliers offering non-GPA goods or services may attempt to push for the maximalist literal interpretation sketched above, based on Art 30(4)(a) VCLT. However, given the explicit constraints in Art 9.4(2)(b) EU-Singapore FTA, this is unlikely to succeed under the broader rules of interpretation in the VCLT.

Conclusion

The (lengthy and technical…) analysis above shows that, given the pervasiveness of triangular situations, despite (intentionally?) deviating from the text of the GPA, FTAs are unlikely to generate practical effects where they vary or reduce GPA-based obligations. However, there is an important exception to this, which concerns cases covered by Art 30(4)(a) VCLT, where the effects are only for the economic operators of the two jurisdictions signing the FTA, which is both counterintuitive and prone to litigation, especially where GPA- situations concern access to procurement remedies (this is further assessed here).

Even if these views are correct and there is no practical effect resulting from the deviation in the text of the FTAs from the GPA standard wording, the mere existence of the legal uncertainty resulting from such deviation is undesirable. It is also difficult to ascertain whether any practical effects intended by the respective negotiating teams/governments deciding on the textual deviations are neutralised by the rules in the VCLT, in which case there may be knock-on effects concerning the balance of reciprocal concessions across the procurement chapter, or even across chapters, of the relevant FTAs. At any rate, in my view, a direct incorporation of the GPA rules and an explicit conflict clause giving the GPA precedence over the relevant FTA would be a preferable regulatory technique from this perspective, and one that has already been used by the UK, eg in the EU-UK TCA.

_________________________________________

[1] https://legal.un.org/ilc/texts/instruments/english/conventions/1_1_1969.pdf.

[2] Indeed, in some cases, they can avoid the ‘conflict’ altogether by agreeing to a GPA-compliant interpretation; see eg A Orakhelashvili, ‘Article 30’ in O Corten and P Klein (eds), The Vienna Convention on the Law of Treaties. A Commentary, vol. 1 (OUP 2011) 764, 776 at para 31; see also J Klabbers, ‘Beyond the Vienna Convention: Conflicting Treaty Provisions’ in E Cannizzaro (ed), The Law of Treaties Beyond the Vienna Convention (OUP 2011) 192, 203.

[3] However, as this is not a difficulty concerning the specific field of public procurement, this submission will not address it in any detail. For discussion, see A Orakhelashvili, ‘Article 30 of the 1969 Vienna Convention on the Law of Treaties: Application of the Successive Treaties Relating to the Same Subject-Matter’ (2016) 31(2) ICSID Review - Foreign Investment Law Journal 344-365.

[4] Subject to other general principles, such as those resulting from a conflict between lex posterior and lex specialis, see R Kolb, The Law of Treaties. An Introduction (Edward Elgar 2016) 190.

[5] Klabbers, above n 2, 194.

[6] Orakhelashvili, above n 2, 792 at para 75.

[7] International Law Commission, Draft Articles on the Law of Treaties with commentaries (1966) 271, para (11), https://legal.un.org/ilc/texts/instruments/english/commentaries/1_1_1966.pdf. See also K von der Decken, ‘Article 30’ in O Dörr and K Schmalenbach (eds), Vienna Convention on the Law of Treaties. A Commentary (Springer 2018) 539, 551.

[8] Kolb, above n 4, 186.

[9] Klabbers, above n 2, 195 and 204-205.

Procurement chapter in the UK-Australia Free Trade Agreement -- GPA+ or GPA complex?

Shutterstock/Aritra Deb.

Both the UK and Australia are members of the World Trade Organisation Government Procurement Agreement (GPA). The GPA is a multilateral agreement and its members generally make commitments applicable to all other members, but the GPA’s operation is also largely bilateral in the sense that countries can tailor their coverage schedules to include specific rules or derogations of commitments vis-a-vis specific GPA members (either on the basis of expected reciprocity, or otherwise).

Given this possibility of differentiated bilateral treatment within the multilateral framework of the GPA, it could seem surprising that the recent bilateral UK-Australia Free Trade Agreement (UK-AUS FTA) includes a chapter on public procurement (chapter 16). However, this approach to the inclusion of procurement chapters that go beyond existing GPA commitments (GPA+) in bilateral FTAs rather than through the GPA is not new. Australia has long engaged with this approach [see eg D Collins, ‘Government Procurement with Strings Attached: The Uneven Control of Offsets by the World Trade Organization and Regional Trade Agreements’ (2018) 8(2) Asian Journal of International Law 301–321]. As has the UK, in a manner that carries on from the EU’s approach that bound the UK until it gained independent GPA membership on 1 January 2021 [see eg M Garcia, ‘Procurement Liberalization Diffusion in EU Agreements: Signalling Stewardship?’ (2014) 48(3) Journal of World Trade 481-500].

Ways of going GPA+ in bilateral FTAs

There are two primary approaches to the creation of bilateral GPA+ procurement regimes in FTAs. One is to simply incorporate the GPA and the relevant schedules of coverage into the bilateral FTA by reference, and then add whichever ‘plus’ elements are agreed in specific FTA provisions and/or expanded schedules of coverage. This is the approach followed in the EU-UK Trade and Cooperation Agreement (EU-UK TCA), which Art 277 incorporates certain provisions of the GPA and covered procurement, and Arts 278-286 establish additional rules for covered procurement—with additional requirements for not covered procurement also contained in the TCA (Art 287-288), as well as a specific set of rules on modification of coverage, dispute resolution and cooperation (Arts 289-294).

The alternative approach is to replicate the text of the GPA itself in the bilateral FTA and to include additional commitments either as part of those provisions (eg by reducing optionality and making specific requirements mandatory), or by adding additional provisions, as well as including expanded schedules of coverage. This is for example the approach followed in the EU-Singapore FTA (Chapter 9), or the EU-Canada FTA (CETA, Chapter 19). And this is also the approach followed by the UK-AUS FTA, which includes a significant number of variations on the GPA text worth assessing (below).

Complications of going GPA+ in bilateral FTAs

From a legal interpretation perspective, the first approach (incorporation by reference) is likely to minimise risks of inconsistency between the GPA and the FTA because, unless the additional obligations overlap (and contradict) the basic obligations in the GPA, it is more likely that the FTA really only deals with the ‘plus’ agreed between its parties. In contrast, the second approach (replication) creates significant scope for legal uncertainty where the text of the GPA is altered in the process of its inclusion into the FTA, as it will not always be clear whether the parties sought to deviate from GPA obligations and, in my view, establishing the purpose of a specific deviation is more difficult to do in the context of a provision that is mostly like the GPA’s, rather than in a self-standing provision.

Either way, under both approaches, where the bilateral FTA deviates from the GPA in a way that is not clearly adding obligations or expanding scope of coverage, but rather varying or reducing the parties’ obligations towards each other, the extent to which the inclusion of an incompatible clause in the FTA will generate a change in the legal position of the parties under the GPA or more generally is unclear as, more importantly, is unclear whether it will generate a practical effect.

This can be a rather tricky issue of treaty interpretation governed by the 1969 Vienna Convention on the Law of the Treaties (Art 30), on which I will have to defer to specialists. However, from a practical perspective, it seems to me that the GPA+ approach is incapable of generating practical effects concerning a reduction or variation of the requirements applicable to the tendering of public contracts where the specific procurement is subject to dual coverage. Given that GPA+ extensions of coverage are usually only incremental above the general coverage included in the GPA schedules for each of the parties, most of the procurement opportunities covered by the FTA will be subject to such dual regulation.

Imagine a bilateral FTA that excludes a specific obligation (eg concerning the need to mention in the notice of intended procurement that the procurement is covered by the FTA) while that obligation is, however, included in the GPA. If a procurement is covered both by the GPA and the FTA, the procuring Member State will have to comply with the most demanding legal regime between the GPA and the FTA (at least vis-a-vis the other GPA members; in the example, it will have to indicate that the procurement is covered by the GPA) and, in that scenario, the practical effects of the deviation in the FTA from the GPA regulatory benchmark will be nullified (eg because it will be possible for tenderers from the FTA jurisdiction to identify the opportunity as also open to them).

While there can be some marginal circumstances in which there can be a practical effect (eg reducing or excluding access to remedies vis-a-vis tenderers from the FTA jurisdiction), those are unlikely to go unchallenged (eg on the basis that more unfavourable treatment under the bilateral FTA is incompatible with the GPA commitments, subject to issue of treaty interpretation, as above).

All in all, it seems difficult to understand why countries would want to vary or reduce their obligations under the GPA in bilateral FTAs—given that, at the end of the day, those are regulatory constraints they had accepted in the context of the GPA that bound them (also bilaterally) prior to entering into the FTA. It could be that reduced procedural or substantive guarantees are a trade-off they are willing to make in exchange for increased economic coverage of their bilateral procurement trade. But this seems to unnecessarily overcomplicate the legal environment, potentially with unpredictable consequences. However, this is clearly the approach followed in the procurement chapter of the UK-AUS FTA, which is worth looking at closely. Some of the analysis of the UK-AUS FTA will be applicable to other GPA+ FTAs, to the extent that they include the same, or similar deviations from the GPA.

Selected complications in the GPA+ (or GPA-) approach of the UK-AUS FTA

The procurement chapter of the UK-AUS FTA includes relevant deviations from the GPA (a full list is available below, Appendix). Some of these variations raise interpretive and practical issues, such as the effect of a change in the national treatment clause (arguably the pillar of the GPA regime), or a change in the wording of the main clause on remedies (another of the crucial provisions in the GPA). I will now address these two issues in detail, as they seem to me to be indicative of a GPA- rather than a GPA+ approach in the UK-AUS FTA—and thus liable to the sort of complication laid out above.

Remit of the national treatment obligation

The GPA imposes national treatment and non-discrimination obligations as the foundation of its regulatory architecture. The GPA national treatment clause reads ‘With respect to any measure regarding covered procurement, each Party, including its procuring entities, shall accord immediately and unconditionally to the goods and services of any other Party and to the suppliers of any other Party offering the goods or services of any Party, treatment no less favourable than the treatment the Party, including its procuring entities, accords to: a) domestic goods, services and suppliers; and b) goods, services and suppliers of any other Party’ (Art IV(1) emphasis added). This creates a two-tier requirement of ‘most favoured treatment’, both between the goods, services and suppliers of two given GPA members (procuring and supplying) and across the goods, services and suppliers of all GPA parties other than the procuring party.

The underlined clause leaves the possibility open for differential treatment of suppliers of a GPA party offering goods or services of a non-GPA party. This is in line with the GPA non-discrimination clause, which reads: ‘With respect to any measure regarding covered procurement, a Party, including its procuring entities, shall not: a) treat a locally established supplier less favourably than another locally established supplier on the basis of the degree of foreign affiliation or ownership; or b) discriminate against a locally established supplier on the basis that the goods or services offered by that supplier for a particular procurement are goods or services of any other Party’ (Art IV(2) emphasis added). Again, the possibility is open for differential treatment of suppliers of a GPA party offering goods or services of a non-GPA party—on the implicit assumption that domestic suppliers offering goods or services of a non-GPA party are subjected to the same differential treatment.

The UK-AUS FTA replicates these two clauses in Art 16.4(1) and (2). However, Art 16.4(1) simply states that ‘With respect to any measure regarding covered procurement, each Party, including its procuring entities, shall accord immediately and unconditionally to the goods and services of the other Party and to the suppliers of the other Party, treatment no less favourable …’. Similarly, Art 16.4(2) establishes that ‘With respect to any measure regarding covered procurement, neither Party, including its procuring entities, shall: … (b) discriminate against a locally established supplier on the basis that the good or service offered by that supplier for a particular procurement is a good or service of the other Party.’

The deviation in the UK-AUS FTA from the GPA clause can raise interpretive issues concerning the possibility of differential treatment of UK or AUS suppliers offering the goods or services of a third party, which can lead to two views. One view, based on a literal interpretation of the clause, is that suppliers of either of the parties are protected under the national treatment regime, even if they offer goods or services from third parties (unless domestic suppliers offering goods or services from third parties are also subjected to specific differential treatment—eg exclusion). The other view, based on a functional/systematic interpretation that took account of the fact that Art 16.4(2)(b) only refers to locally established suppliers offering goods or services of the other party, would be that it is implicit in Art 16.4(1) that suppliers are only protected as long as they offer goods or services of one of the parties (ie UK or AUS goods or services).

The interpretation is not limited to the FTA itself, but needs to take into account the interplay with the GPA, given that the UK and AUS are bound by it in relation to the other GPA parties. In that regard, if a procurement is dually covered by the FTA and the GPA, the second interpretation in my view just does not hold water because eg a UK tenderer for an AUS contract covered by both the FTA and the GPA offering the goods of another GPA member (eg the EU) would necessarily be protected by the GPA national treatment clause in order for the EU goods not to be ultimately discriminated against in breach of the AUS-EU obligations under the GPA. And a similar effect would result from the triangular interaction between the UK-AUS FTA and other FTAs binding either of the parties.

If this is correct, it also seems difficult to argue that the interpretation of Art 16.4(1) in the FTA varies, depending on whether the third country goods or services for the purposes of the FTA being offered by a UK or AUS supplier, are (or not) also third country goods for the purposes of the GPA and/or other applicable FTAs. It should also be stressed that (pragmatically) not all third countries will be seen as deserving the same treatment (eg exclusion), so that there can be undesirable implications in eg applying differential treatment to both domestic and foreign (UK and AUS) suppliers offering third country goods or services, where the origin of those services is not the same.

Therefore, it would have been much preferable to include a specific clause in Art 16.4(1) establishing that national treatment needs to be granted to suppliers of either party offering goods or services covered by this or any other international agreements requiring equal treatment of goods or services of a specific origin — or something to that effect. An alternative would have been to change the drafting and adopt a broader clause, eg based on Art 25 of Directive 2014/24/EU [for analysis, see A La Chimia, ‘Art 25’ in R Caranta and A Sanchez-Graells, European Public Procurement. Commentary on Directive 2014/24/EU (Edward Elgar, 2021) 274-286].

Overall, this will primarily be relevant in procurement covered by the UK-AUS FTA and not the GPA (either because of differential value thresholds, or differences in scope of coverage: notably, in the concessions sector). But some of these contracts can have very high values. Against that background, it seems that the uncertainty on the proper meaning of the (reduced) national treatment clause in the FTA generates an unnecessary complication.

Watering down of procedural guarantees and access to remedies?

The GPA develops a rather robust set of requirements for the design of domestic review procedures (Art XVIII GPA). The UK-AUS FTA deviates from the GPA benchmark in two important aspects.

First, the FTA limits the right to be heard in the context of a procurement challenge. While the GPA states that ‘the participants to the proceedings … shall have the right to be heard prior to a decision of the review body being made on the challenge’ (Art XVIII(6)(b)), the FTA provides instead that ‘a supplier that initiates a complaint shall be provided an opportunity to reply to the procuring entity’s response before the review authority takes a decision on the complaint’ (Art 16.19(6)(b)). Although the relevance of these differences in wording will depend on how the review bodies and courts interpret them, there seem to be two clear intended changes:

First, a reduction of the potential scope of beneficiaries of the right to be heard, which is constrained to the supplier that initiates a complaint. Whether other ‘challengers’ are allowed in a procurement review procedures will depend on the rules on active standing, but this is clearly more prescriptive than the broader term ‘participants’ used by the GPA. It is also interesting to note that the FTA uses the term ‘participants’ in the rest of Art 16.19(6), eg concerning the right to be represented and accompanied (c), or the right to access to all proceedings (d), or the right to request that the proceedings take place in public and that witnesses may be presented (e).

Second, there is a parallel reduction of the extent of the right to be heard, which is limited to replying to the procurement entity’s response to the initial complaint. The practical implications of these changes are difficult to understand in abstract terms—although they do seem to put significant pressure on the comprehensiveness of the initial complaint and perhaps seek to bar the addition of further grounds for challenge as discovery takes place—but there must be some reason behind this (eg seeking to reduce the cost of defending procurement challenges, perhaps especially in UK Courts?).

In a similarly restrictive fashion, the FTA also includes changes in the regulation of remedies. There are two issues.

The first one is an omission of the possibility to obtain a suspension of proceedings as an interim measure. While the GPA clearly indicates that the obligation to provide for rapid interim measures includes the possibility that ‘Such interim measures may result in suspension of the procurement process’ (Art XVIII(7)(a) GPA), the FTA omits that explicit reference (Art 16.19(7)(a) FTA). In general, the FTA would to me seem insufficient to exclude suspension as a potential interim measure if it is generally available under the applicable procedural rules, but this should perhaps be analysed with the second change in the regulation of remedies.

The second change is a relocation of the public interest clause allowing for the overriding adverse consequences of a procurement challenge to be taken into account, so that it not only applies to the possibility of seeking interim relief, but also to corrective action. In the GPA, the obligation to provide for rapid interim measures is caveated as follows: ‘The procedures may provide that overriding adverse consequences for the interests concerned, including the public interest, may be taken into account when deciding whether such measures should be applied. Just cause for not acting shall be provided in writing’ (Art XVIII(7)(a) GPA). This clearly is meant to allow a review body not to adopt interim measures, but without prejudice of an eventual decision on corrective action or financial compensation, which are separately regulated (Art XVIII(7)(b) GPA).

Conversely, in the FTA, the public interest clause is placed at the end of the relevant provision (Art 16.19(7)) and covers both the obligation to adopt or maintain procedures that provide for (a) prompt interim measures to preserve the supplier's opportunity to participate in the procurement; and (b) corrective action that may include compensation. This can hardly be seen as a clerical error, but the likely intended effect of excluding financial compensation on grounds of an overriding public interest is, in my view, unlikely to be upheld in case of challenge, especially bearing in mind that the FTA has already significantly limited the scope for financial compensation in establishing that ‘If the review authority has determined that there has been a breach or a failure [of the claimant’s rights under the FTA or the domestic rules implementing it] a Party may limit compensation for the loss or damages suffered to either the costs reasonably incurred in the preparation of the tender or in bringing the complaint, or both’ (Art 16.19(5)).

The possibility to completely exclude financial compensation for breach of the FTA obligations would render the system toothless. Moreover, this is clearly a deviation that would be disputed in terms of legal interpretation (eg in relation to dual coverage procurements under the GPA and the FTA). Once again, it seems that the uncertainty on the proper meaning of the watered down procedural guarantees and access to remedies in the FTA generate an unnecessary complication.

Some final thoughts on increased coverage, and its bilateral nature

A final issue worth considering is the technical complexity (and tediousness) of identifying the economic coverage gains expected of a GPA+ procurement chapter in an FTA. While this is probably abundantly clear to negotiating teams, it is quite difficult to assess on the basis of the written agreement, even carefully combing through the schedules of coverage of the GPA and the FTA. In that regard, it would be helpful if those assessments were published, or for the relevant publications to include more detail.

The Impact Assessment of the UK-AUS FTA published by the Department for International Trade (DIT) solely contains a brief paragraph (and a complicated footnote) to support rather large headline claims:

‘Australia has offered the UK more legally guaranteed procurement market access than it has offered in any other FTA, amounting to approximately £10 billion of new legally guaranteed market access for UK businesses per year.[34] In return, the UK has offered to build on the legally guaranteed market access offered to Australia in the GPA by offering additional sub-central entities and coverage of additional services’ (Impact assessment, at 21).

[34] This estimate has been derived using a combination of publicly available contract award notices (AusTender, 2018-2019). Where data is missing or unavailable, individual expenditure reports for relevant entities have been sourced. Certain assumptions have then been applied using published OECD statistics (OECD Government at a Glance, 2019). Australia provided estimates for the value of their services offer. Detailed UNSPSC-CPC matching was undertaken, with the help of Australia, to determine which exact services would come into scope of their offer. This estimate was then verifed by DIT analysts.

As things stand, the only other way of getting a sense of how much more procurement volume is susceptible of trade liberalisation and in which sectors is by looking into the documents published to ‘sell’ the conclusion of the FTA. In the specific case of the UK-AUS FTA, this other DIT document on ‘UK-Australia Free Trade Agreement: Benefits for the UK’ is illustrative. However, there are a couple of points to note about the way the ‘trade gains’ are presented.

One point is that these documents would be more useful (and credible) if they made it very clear that most of the additional opening in procurement is either reciprocal (in strict terms) or based on mutual concessions. For the agreement to be balanced, both parties need to see a similar volume of benefits and, while it is possible to compensate for net gains in one chapter (eg procurement) against another (eg financial or digital services), it would seem odd if one of the parties was clearly massively better off than the other in any given chapter, or at least in the procurement chapter, given that FTA concessions build on already existing GPA concessions and a very unbalanced FTA chapter on procurement could put pressure on the relevant party to review its GPA schedules more generally).

This is important eg in the context of the inclusion of public works concession contracts under the UK-AUS FTA because the DIT document makes significant emphasis on the opportunities for UK companies to bid for opportunities in Australia, especially in the rail sector, but this perhaps is slightly dampened by the fact that this opening up is reciprocal, as well as by the fact that some of the largest operators of rail franchises in the UK already are not ‘British’ (see eg here), which raises some questions on the extent to which there are direct advantages to UK companies commensurate to the economic claims in the impact assessment or the more accessible document on benefits for the UK.

The other point is that these documents need to be precise as to the incremental opening of procurement specifically brought by the FTA. In the second DIT document, there is eg a rather broad claim that 'UK companies will have a legally guaranteed right to bid for all contracts for financial and business services procured by Australian government bodies covered by this deal. For example, UK businesses will now have a right to bid for financial and business service contracts procured by the Australian Financial Security Authority and other federal and state-level finance departments. This will help UK businesses compete on an equal footing with Australian companies’ (emphasis added).

This is, well ... at least imprecise. The Australian Financial Security Authority (AFSA) is already covered in the GPA (AUS Annex 3), so its procurement of services is already covered (AUS Annex 5, and thanks to reciprocity of coverage of financial and related services in the UK's own Annex 5), as long as the value threshold of SDR 400,000 is crossed. What the UK-AUS FTA does is changing AFSA's classification as a Section A entity (equivalent to AUS Annex 1 in the GPA) and this reduces the value threshold for services to SDR 130,000. So, while there is clearly an incremental change, it is also clear that UK businesses already had a right to bid for AFSA contracts for financial services (just not the right to bid for those between SDR 400k and 130k). In my view, avoiding potentially misleading simplifications of the complex and incremental ways in which a GPA+ FTA extends procurement liberalisation would be desirable.

Conclusion

Until now, I had never really looked in detail at GPA+ procurement chapters in FTAs, but it does seem like there is plenty to reflect upon and perhaps even a research project hidden somewhere. If anyone has any useful suggestions, or if anyone can point me to existing research on this topic that I may have overlooked, I would be most grateful: a.sanchez-graells@bristol.ac.uk.

Appendix: The procurement chapter in the UK-AUS FTA in detail

Comparing the text of the procurement chapter in the UK-AUS FTA with the GPA, I have identified the differences below (I may have overlooked some, but hopefully not):

Art 16.1 Definitions - two seemingly technical differences:

• it includes a definition of ‘build-operate-transfer contract’ / ‘public works concession contract’ to reflect the expanded coverage (below, 16.2).

• it also includes a modification in the definition of ‘technical specifications’ as applicable to ‘services’, which adds ‘applicable administrative provisions’ as part of the definition.

Art 16.2 Scope

Scope of application reflects an extension of scope (GPA+), including:

• there is no exclusion of procurement ‘with a view to commercial sale or resale, or for use in the production or supply of goods or services for commercial sale or resale’ (cfr Art II(2)(a)(ii) GPA).

• coverage is extended to include procurement by means of ‘build-operate-transfer contracts and public works concessions contracts’, which brings concessions (especially in transport) under the scope of the FTA.

Given the bilateral nature of the FTA, the Schedules are required to regulate issues included in the core text of the GPA (a threshold adjustment formula and information on the procurement system).

Excludes the rule on delegated procurement in Art II(5) GPA.

A new section on Compliance includes:

• a general ‘good faith’ obligation (16.2(5))

• a varied non-circumvention clause (16.2(6)) that excludes the intentional element of the GPA equivalent (Art II(6)(a))

• a clause explicitly allowing both parties and their contracting authorities to develop ‘developing new procurement policies, procedures or contractual means, provided that they are not inconsistent with this Chapter’ (16.2(7)) — which I read as an (unnecessary) hint to the ongoing process of reform of the UK’s procurement rulebook following the Transforming Public Procurement green paper consultation.

The section on Valuation includes

• a specific addition in the rules on the calculation of contract value to capture any ‘other revenue stream that may be provided for under the contract’, which will be particularly relevant for concessions;

• a looser regulation of the rule on recurring contracts than in the GPA (cfr Art II(7)); and

• a streamlined and seemingly stricter approach to the coverage of contracts with unknown total value (cfr Art II(8) GPA), which will also be particularly relevant for concessions.

Art 16.3 General exceptions

• does not include the defence exception in Art III(1) GPA.

• creates a new clarification seemingly tailored to the climate crisis, whereby it is stressed that the possibility of adopting or maintaining measures ‘necessary to protect human, animal or plant life or health’ ‘includes environmental measures’.

Art 16.4 General principles

In regulating the general principle of National Treatment and Non-Discrimination, the FTA introduces two variations on the GPA:

• the wording of the national treatment requirement excludes an important element of the GPA’s clause concerning ‘suppliers of any other Party offering the goods or services of any Party’ (Art IV(1) emphasis added). See analysis above.

• there is a specific clause clarifying that ‘All orders under contracts awarded for covered procurement shall be subject’ to the national treatment and non-discrimination obligations (Art 16.4(3)), which will be particularly relevant in the context of framework agreements and similar procurement vehicles.

The FTA makes the Use of Electronic Means mandatory beyond GPA requirements.

The FTA also seems to strengthen the prohibition of Offsets by stressing that they cannot take place ‘at any stage of a procurement’ (Art 16.4(8)). However, given eg the general notes of the Australian schedule (Section G 1(c) and 1(d)), the practical effectiveness of this remains to be seen.

Art 16.6 Notices

The FTA imposes the Electronic Publication of Notices, also at sub-central level (Art 16.6(1)).

There are some changes concerning the content of the Notice of Intended Procurement:

• there is no reference to the ‘cost and terms of payment, if any’ related to access to procurement documents, which could suggest that charges are forbidden;

• there is no reference to an obligation to include ‘a description of any options’ (which would seem like an unwanted omission);

• there is no obligation to include ‘an indication that the procurement is covered by this Agreement’ (but see above re interplay with that requirement in Art VII(2)(l) GPA);

• there are no references to the publication of summary notices - which are a language-based specific requirement of the GPA that is probably irrelevant in the context of an FTA between two English-speaking countries;

• there is no option for the use of a Notice of Planned Procurement as a Notice of Intended Procurement for sub-central and other procuring entities ex Art VII(5) GPA.

Art 16.7 Conditions for participation

Art 16.7(2)(a) extends the prohibition on requirements for local experience, forbidding not only requirements that ‘the supplier has previously been awarded one or more contracts by a procuring entity of a Party’ (as in the GPA), but also requirements that ‘the supplier has prior work experience in the territory of that Party’.

Art 16.8 Qualification of suppliers

There are some precisions concerning Registration Systems and Qualification Procedures, including:

• an explicit (if unnecessary?) prohibition on using registration systems or qualification procedures to delay or bar consideration of specific suppliers (Art 16.8(3)(b) FTA, cfr Art IX(3) GPA);

• a new set of rules concerning supplier registration systems (Art 16.8(4));

• mandatory electronic publication of multi-use lists requiring continuous availability (which makes part of GPA requirements for paper-based or time-limited lists redundant; cfr Art IX(8) and (9));

• suppression of the requirement for notices of multi-use lists to include ‘an indication that the list may be used for procurement covered by this Agreement’ (cfr Art IX(8)(e); see also above Art 16.6).

There are some implicit changes regarding Information on Procuring Entity Decisions indicating the possibility to delegate the management of procurement procedures (see Art 16.8(14) and (15), referring to ‘a procuring entity or other entity of a Party’).

Art 16.9 Technical Specifications and Tender Documentation

There is a clause that goes beyond the text of the GPA on Technical Specifications, for data governance concerning ‘sensitive government information’ (Art 16.9(7), which can in part mitigate for the omission of the exception in Art III(1) GPA, as above Art 16.3 FTA);

There are some differences on Tender Documentation requirements:

• small technical change concerning the description of the conditions for participation (Art 16.9(8)(b));

• omission of the possibility of running procurements where price is the sole award criterion (Art 16.9(8)(c), although this is foreseen in Art 16.14(5)(b), so it looks like an unwanted omission).

There is a new clause on Preliminary Market Research and Engagement (Art 16.9(13).

Article 16.10 Time-Periods

The requirement for time periods and any extensions thereof to apply equally to all interested or participating suppliers is relocated (see Art 16.10(7) cfr Art XI(1) in fine GPA).

Given the obligation to publish notices of intended procurement by electronic means (Art 16.4(4)(a) and 16.6(1)), the possibility to shorten time periods for the submission of tenders on that basis makes little sense (Art 16.10(5)(a)), other than as a hangover rule meant to maintain alignment with the GPA (Art XI(5)(a)).

Art 16.12 Limited Tendering

The FTA modifies the grounds allowing for limited tendering to acquire ‘a prototype or a first good or service that is developed at its request’ (Art XIII(1)(f) GPA) to cover ‘a prototype or a first good or service that is intended for limited trial or that is developed at its request’ (Art 16.12(1)(e) emphasis added), with the remit of such limited trial remaining undefined. The same provision adds clarification that subsequent procurement of such goods or services are fully covered.

16.15 Transparency of Procurement Information

The FTA makes the Publication of Award Information mandatorily electronic (Art 16.15(2)).

The FTA omits the GPA rules on the Collection and Reporting of Statistics (Art XVI(4) and (5) GPA).

Article 16.17 Environmental, Social and Labour Considerations - entirely new.

Article 16.18 Ensuring Integrity in the Procurement Process - entirely new.

Article 16.19 Domestic Review Procedures

The FTA reorders part of the content of Art XVIII GPA, and introduces two relevant changes (analysed above):

• limitation of the right to be heard: instead of following the GPA clause stating that ‘the participants to the proceedings … shall have the right to be heard prior to a decision of the review body being made on the challenge’ (Art XVIII(6)(b)), the FTA provides instead that ‘a supplier that initiates a complaint shall be provided an opportunity to reply to the procuring entity’s response before the review authority takes a decision on the complaint’ (Art 16.19(6)(b)); and

• change in the regulation of remedies, including: (1) an omission of the possibility to obtain a suspension of proceedings as an interim measure (Art 16.19(7)(a) FTA cfr Art XVIII(7)(a) GPA); and (2) a relocation of the public interest clause allowing for the overriding adverse consequences of a procurement challenge to be taken into account, so that it not only applies to the possibility of seeking interim relief, but also to corrective action (Art 16.19(7) cfr Art XVIII(7)(a) GPA).

Article 16.20 Modifications and Rectifications to Annex - introduces changes to reflect bilateral nature of FTA.

Article 16.21 Facilitation of Participation by SMEs - entirely new (although practical effect may be doubtful, given that SME preferences are allowed).

Article 16.22 Cooperation - entirely new. interestingly, it includes cooperation on ‘exchanging government procurement statistics and data’ despite the suppression of the requirements concerning collection and reporting of statistics as per the GPA (Art XVI(4) and (5), above).

Short comments on the proposed regulation on foreign subsidies distorting the internal market, as it relates to procurement

The European Commission is currently consulting on its recent Proposal for a Regulation on foreign subsidies distorting the internal market (COM(2021) 223 final, 5 May 2021). The public consultation will be open until 15 July 2021. I have just submitted my views on chapter four of the proposal, which concerns the rules for the analysis of foreign subsidies distorting tenders for contracts with a value above €250 million. The feedback form only allows for 4,000-character submissions, so here are mine. As always, comments welcome: a.sanchez-graells@bristol.ac.uk.

The proposed Regulation on foreign subsidies distorting the internal market (RFSDIT) is both (1) undesirable and (2) problematic, in particular as it concerns the investigation of foreign subsidies linked to public procurement procedures. The following is limited to chapter 4.

1. Primarily, ch 4 RFSDIT is undesirable because it adds a layer of scrutiny and red tape that will affect high-value tenders submitted by tenderers from jurisdictions that have either signed up to the WTO Government Procurement Agreement, or that have a plurilateral or bilateral trade agreement covering procurement with the EU. Tenderers from other jurisdictions can already be excluded on the basis of the current rules (see Art 25 Dir 2014/24; Art 43 Dir 2014/25), as emphasised in the Commission's 2019 guidance on the participation of third-country bidders and goods in the EU procurement market. First, the (inadvertent) targeting of GPA- or FTA-originated tenders is in itself undesirable on trade policy terms and could erode third countries' bilateral relationships with the EU within the GPA framework, as well as under the relevant FTA (or the UK TCA) even if those already include subsidy-related provisions. Second, it is also undesirable due to the technical shortcomings of the proposal, as below, as there could be a basis for claims of unequal treatment concerning the non-scrutiny of EU-originated tenders that are tainted by illegal State aid. Finally, it is also undesirable because the ex ante nature of ch 4 screening can dissuade economic operators from participating in public tenders even if they think that subsidies they have received could overcome the tests in Arts 3-5 RFSDIT. Recipients of foreign subsidies may rather forgo their chances of being awarded a public contract than trigger an investigation they could avoid under the general motu proprio regime. Such loss of international competition is to the EU public buyers' detriment.

2. Ch 4 RFSDIT is also highly problematic because of its incompatibility with the mechanisms in the EU procurement Directives, as well as the inconsistency of approach with the rest of the chapters in the RFSDIT. First, the proposed rules are incompatible with the trigger for an investigation of the distortive effects of State aid granted to an EU-based tenderer, which derives from the prima facie abnormally low character of its tender (ALT) (see Art 69 Dir 2014/24). EU-generated non-ALT bids are not screened for receipt of (illegal) State aid, even if they can be 'winning tenders' in a given procedure. As above, this can trigger claims of discrimination against non-EU generated tenders. Second, procurement case law pre-empts tenderers from offering commitments related to the tender at hand to the Commission's satisfaction without materially altering their tenders. Such changes would be impermissible under EU procurement law. This is an inescapable limit, which is partly but insufficiently acknowledged in Art 30(1) RFSDIT. This means that any tender where the Commission found an unbalanced distortion of the internal market would lead to the inevitable exclusion of the tender. This is at odds with the appearance of 'correctability' created by Art 30 RFSDIT. This evidences the inadequacy of applying a merger or State aid control logic to the public procurement context. Third, the relative intensity of the foreign subsidy is much lower for procurement than for concentrations under the RFSDIT. Art 18(3) creates a safe harbour of up to 10% of the value of a concentration. Art 27(2) contains no parallel rule. Thus, Art 3(2) offers the only (soft) safe harbour for procurement, which means that subsidies of 2% or less of the tender value would be caught. The reason for this different treatment under RFSDIT opens it to challenge on proportionality grounds. Moreover, it is unclear how a 2% subsidy could create a situation comparable to that of an ALT, which further reinforces concerns of unequal treatment, as above.

[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.