An overview on the European legislation on third-country operator access to the public procurement market and the solutions adopted by Member States.
The European Court of Justice is currently dealing with the question referred by Bucharest Court of Appeal concerning the exclusion of a company, with its registered office in the People’s Republic of China, from an open tendering procedure for the award of a public contract for the purchase of new interregional trains and the related maintenance service (European Court of Justice, CRRC Qingdao Sifang and Others Case C-266/22). The Court is required to issue its preliminary ruling on Romanian legislation that – from April 2021 – has transposed Article 25 of Directive 2014/24/EU providing that economic operators who do not fall within the scope of those provisions of EU law may continue to participate in public procurement procedures only if they have submitted bids before the date on which that legislative amendment entered into force.
The case is of particular importance given that, for the first time, the Luxembourg Court will have to assess the compatibility with European principles of a national regulation transposing European provisions on the access of foreign economic operators to the European public procurement market.
As known, the reference is to Article 25 of Directive 2014/24/EU and Article 43 of Directive 2014/25/EU for utilities sectors, which require Member States to ensure treatments equal to those accorded to European operators only in respect of economic operators coming from States signatories to Agreement on Government Procurement (GPA), concluded in the World Trade Organization framework, or bilateral free-trade agreements (FTAs). On the contrary, economic operators from third countries, which do not have any agreement providing for the opening of the EU procurement market may be excluded, as clarified by European Commission in “Guidance on the participation of third-country bidders and goods in the EU procurement market”. The access of these operators is not expressly prohibited but simply “not granted”.
This principle can be reasonably justified considering that in recent years an increase has been observed in the number of non-EU tenderers in public procurement procedures. However, foreign bidders offer rebates and prices that often stifle internal European market competition and offer reduced guarantees regarding compliance with certain requirements such as certified quality standards, environmental and sustainable development standards.
European legislation is not clear in outlining a real ground for exclusion, so it is interesting to observe how different Member States have interpreted and implemented the mentioned provisions in their domestic legislation. We have compared the situation in Belgium, Denmark, France, Germany, Italy, Netherlands, Poland and UK and we have observed that, although the same principle of equivalent treatment is implemented in domestic laws, the theme is never directly regulate as and translate in a cause of exclusion for third-country economic operators. However, this circumstance leads to divergent applications in each country.
In Germany, in the absence of any restrictive provisions, the principle of non-discrimination is generally considered to extend access - beyond domestic bidders and those from EU member states including associated countries - to potential bidders from third countries and it is interpreted broadly. In the same direction and more strongly in Poland, provided that no express provision allows a contracting entity to exclude a contractor from a third country, it is believed that it is not possible to exclude only on the basis of the principles in discussion.
On the contrary, the exclusion of third-country bidders is considered allowed (in Denmark, in Belgium, in France and in Netherland) and even mandatory (for example according to Italian case-law) in countries where the non-discrimination principle is expressly referred only to domestic or European operators or operator from countries signatories to specific agreements. Moreover, general rules are obviously implemented by tender documentation that, as happened for example in Italy of in France, could provide for specific grounds of exclusion or, as happened in Belgium - where foreign operators may under no circumstances participate in public procurement procedures - and in Netherland, could provide for express clauses of admission to the tender, on a case-by-case basis.
In the UK’s domestic legislation, suppliers from GPA Parties and/or countries with whom the UK has an international agreement with are afforded the same rights as suppliers from the UK, but only where the procurement falls within scope of the GPA and/or such international agreement. Consequently, suppliers from jurisdictions who are not afforded the same rights as suppliers from the UK may be excluded (subject to any wider obligations such as Public law duties, obligations of local government authorities or internal policy requirements) from a procurement process without redress under the UK’s domestic procurement legislation.
Similar remarks can also be made with reference to rules governing utilities sector set forth by Directive 2014/25/EU where, in addition to the general principles set out in article 43, Article 85 provides for a specific regime for tenders comprising products originating in third countries. In particular, the mentioned Article provides for the public entities operating in the water, energy, transport and postal services sectors the possibility to reject tenders for supply contracts if the percentage of products originating in a third country - with which the Union has not concluded a multilateral or bilateral agreement guaranteeing EU companies comparable and effective access to the markets of such third countries - exceeds 50% of the total value of the products constituting the tender. In this case, the approach is that it is not important which country the producer is based in, but in which country the goods offered by the producer were last processed and assembly may determine origin if it is a key production step that establishes the use of the parts and gives the goods specific qualities.
The purpose of this provision is to ensure equal treatment for companies operating in the European market. The opening up of the procurement market to international competition is subject to compliance with the principle of reciprocity, aimed at guaranteeing and recognizing also to foreign companies a treatment analogous to that one you intend to benefit from the States that companies belonged to.
For this reason, in the absence of a multilateral or bilateral agreement guaranteeing EU companies comparable and effective access to third-country markets, public entities may refuse and therefore exclude the offer of the product from that third countries, if the conditions set out in Article 85 of Directive EU/2014/25 are met.
Also, in this case it was interesting to verify how the European legislation have been interpreted and implemented by different Member States.
The legislations of the countries observed always include analogous provisions, with the exception of United Kingdom, that, following Brexit, omitted from domestic legislation Article 85. In most of the cases, Article 85 has been transposed by using the same words of the Directive. For example, Belgian, Danish, Dutch, French and Italian legislation state that “offers may be rejected”, apparently considering this scenario as an optional ground for exclusion.
It is however certain – as it is stated in the Directive - that if tenders are deemed equivalent (i.e. in the case in which the price difference does not exceed 3%) by the contracting entity with regard to the award criterion, preference must be given to the tender that cannot be rejected, unless it entails additional costs or maintenance charges.
Furthermore, some countries, such as Italy, require the contracting authority to "duly justify the reasons of its choice" if the bid is not rejected and to forward the relevant documentation to the national anti-corruption Authority, making exclusion rather than a mere “option” a “normal consequence”. In 2020, a Regional Administrative Court annulled the award of the tender called by Bergamo Airport, for the supply and installation of an arresting bed to stop aircraft that do not stop within the length of the runway, for breach of Article 137 of the Italian Public Procurement Code (which implemented the European provision in discussion). According to the Court the contracting authority should have excluded the successful bidder because the product offered was entirely supplied in China, which has no bilateral agreements with the Union, and the contracting authority did not adequately justify the choice of award. In fact, the Court explained that the ground required by Article 137 is not limited to the preference, in qualitative terms, of products from third countries as 'that provision is intended to ensure minimum conditions of protection of the level playing field between undertakings taking part in tenders on the Community procurement market, with specific reference to cases in which the supplies relate to products originating in third countries. It is therefore a specific form of protection of the general and fundamental principle of par condicio, which is put at risk of injury when goods produced in third countries with very low production costs and much more competitive market rules are offered’.
In Poland, the provision was implemented but it includes a slightly different percentage threshold: a contracting entity may reject a tender if proportion of non-EU products exceeds or is (even) equal to 50% of the total value.
In conclusion, on the topic of third-countries products there is thus a more uniform application at the level of member states. On the general eligibility of third country economic operators, however, the jury is literally still out: we have to await the decision of the Court of Justice. It will be seen whether the interpretative solution submitted by the Advocate General will be confirmed, ruling that economic operators from third-states not signatories to the agreements referred to in Article 25 of Directive 2014/24 cannot claim violation of the principles of equality, non-discrimination, legal certainty and protection of legitimate expectations enshrined in EU law in the event of exclusion from a procurement procedure that took place on the basis of national legislation that entered into force after the publication of the contract notice.