Prepared by Guido Ajello, Arianna Mariani and Rocco Tana
On June 30, 2022, in the Official Journal of the European Union (“OJEU”) has been published the Regulation (EU) 2022/1031 of the European Parliament and of the Council on “the access of third-country economic operators, goods and services to the Union’s public procurement and concession markets and procedures supporting negotiations on access of Union economic operators, goods and services to the public procurement and concession markets of third countries (International Procurement Instrument – IPI)” (“Regulation”).
In particular, the Regulation established the so-called “International Procurement Instrument”, which is an instrument aimed at restricting access to European public procurement or concession markets by economic operators, goods or services originating in third countries that are not parties to the World Trade Organization’s Multilateral Agreement on Government Procurement or to bilateral or multilateral trade agreements with the European Union (“Instrument” or “IPI measure”).
Within the framework of the policy historically adopted by the European Union – consisting in supporting an ambitious opening of the international public procurement and concession markets of the Union and its trading partners, in a spirit of reciprocity and mutual benefit (see Whereas No. 5 of Regulation) – the Instrument is aimed at encouraging the opening of protected markets by promoting the mitigation of existing discrimination against EU companies in third countries. This is also considering that, according to the EU Council Press release, “fewer than half of the world’s public procurement markets are currently open to European companies”.
To this end, the Regulation introduces specific provisions aimed at limiting, or excluding, access to European public contracts for economic operators originating in third countries where restrictive practices are applied or where there are trade barriers against European companies.
Regarding the objective scope of application, the Instrument can be applied to procedures conducted under the European Directives on public procurement and concessions (Directive 2014/23/EU, 2014/24/EU and 2014/25/EU) with an estimated value of € 15 million or more for works and concessions and € 5 million for goods and services. So, for the above-mentioned types of procedures starting after the entry into force of the Regulation (i.e., August 29, 2022), the contracting authorities shall include in the public procurement documents some additional obligations on successful tenderers, specifically:
- the prohibition of subcontracting more than 50% of the total value of the contract to economic operators originating in a third country which is subject to an IPI measure;
- for contracts whose subject matter covers the supply of goods, to ensure for the duration of the contract that goods or services supplied or provided in the execution of the contract and originating in the third country which is subject to the IPI measure represent no more than 50 % of the total value of the contract, irrespective of whether such goods or services are supplied or provided directly by the successful tenderer or by a subcontractor;
- to provide to the contracting authority upon request adequate evidence corresponding to the previous letter a) or b), at the latest upon completion of the execution of the contract;
- the payment of a proportionate charge, in the event of non-observance of the obligations referred in letter a) or b), of between 10% and 30% of the total value of the contract (see Article 8, Regulation).
In addition, in order to assess whether specific measures or practices in a third country that could result in an impairment of access of European economic operators, goods or services to the public procurement or concession markets of that third country, the Regulation assigns to the Commission an investigative power to examine to what degree laws, rules or other measures on the public procurement or concession markets of the third country concerned ensure transparency in line with international standards, and do not result in serious and recurrent restrictions against European economic operators, good, or services.
In this regard, Article 5 of the Regulation provide for a detailed process of the investigation activity conducted by the Commission, regulating, inter alia: (i) the terms and necessary conditions to start the procedure; (ii) the possibility – under certain conditions – to suspend the investigation; as well as (iii) the possible termination of the investigation by the publication in the OJEU of a notice of termination in the event that the Commission finds that the alleged third-country measure or practice is not maintained or that it does not result in a serious and recurrent impairment of access of European economic operators, goods or services to the public procurement or concession markets of the third country.
Otherwise, if according to the investigation is ascertained the existence of a measure or practice of a third country that is anti-competitive, the European Commission may adopt – according to proportionality criteria- an IPI measure to limit the access of economic operators, goods or services from a third country to public procurement procedures by requiring contracting authorities, alternatively, to impose a score adjustment or to exclude tenders submittedby economic operators originating in that third country (see Article 6, Regulation). It should be noted that the IPI measure expires five years after its entry into force and may be extended for a duration of five years.
In conclusion, the Regulation is a useful instrument to promote free and fair competition, in an attempt to end protectionist measures in international public procurement markets, as long advocated by European Union. Considering that many third countries are reluctant to open their public procurement or concession markets to international competition, as an effect of the Regulation, EU economic operators will be able to aspire to new business opportunities previously hampered by unjustified local restrictive practices.
Let’s Talk
For a deeper discussion, please contact:
Guido Ajello
PwC TLS Avvocati e Commercialisti
Director