The European Commission published its proposal for the Industrial Accelerator Act (IAA) on 4 March 2026. The proposal establishes a framework of measures for the acceleration of industrial capacity and decarbonisation in strategic sectors. Pedro Telles has already published a very useful reflection on the proposal on his blog (https://www.telles.eu/some-preliminary-impressions-on-the-industrial-accelerator-act-proposal/), which I recommend reading alongside this post. While the IAA covers a wide array of policy areas, from permitting to foreign direct investment conditionalities, this post will focus exclusively on the public procurement provisions contained in the articles of the proposed Regulation.

The IAA’s public procurement provisions represent a significant development in how the EU intends to leverage its public procurement market, valued at approximately 15% of the Union’s GDP, to achieve economic security and industrial policy objectives. In some respects, this approach is a welcome departure from the legal uncertainty left in the wake of the CJEU’s conclusions in the Kolin and Qingdao judgments. In other respects, the IAA introduces new problems that deserve careful scrutiny.

 

What the IAA (mostly) gets right

Less discretion (at least at first glance)

Article 11(1) of the proposed Regulation prescribes that contracting authorities and contracting entities shall exclude from access to procurement procedures tenders submitted by economic operators owned or controlled by an entity established in third countries which have not concluded an international agreement with the Union guaranteeing such access. The contracting authority does not decide whether to exclude; the Regulation decides for it.

This is a fundamentally different approach from the one established by the CJEU in Kolin and Qingdao, where contracting authorities were afforded three levels of discretion: the decision to allow or exclude third-country economic operators, the decision to implement score adjustments, and the decision to introduce rules reflecting the objective difference between third-country economic operators and EU or covered economic operators. As I have argued elsewhere, this multi-layered discretion, paired with a lack of obligation to explain any of these decisions, severely undermines the transparency and accountability of contracting authorities. The IAA eliminates this problem in part, at least for the procurement procedures falling within its scope, by prescribing a clear and uniform rule. In general I think the problem of third-country economic operator participation is betters solved by uniform rules where contracting authorities would have discretion limited only to the decision whether to allow participation or not, but this strongg position in the IAA is severely watered down with broad exceptions from this rule.

Furthermore, the IAA establishes Union origin requirements and low-carbon requirements through Articles 11 and 12, read together with the detailed provisions set out in Annexes II and III. These requirements apply to specific products in specific downstream sectors, namely buildings, infrastructure, and transport. The approach is evidence-based and sector-specific, which is consistent with the investigation-based, evidence-driven model of market regulation that the IPI, FSR, and ACI have established. This is a welcome contrast to the ad hoc, case-by-case approach that the CJEU’s conclusions imposed on contracting authorities across the EU.

The harmonisation effect of the IAA also deserves mention. As the examples of Croatia and Poland demonstrated in the aftermath of Kolin and Qingdao, Member States can and do adopt strikingly different approaches to third-country economic operator participation, further fragmenting the EU public procurement market (see my upcoming book for this specific issue). The IAA, by establishing directly applicable requirements in a Regulation, removes this fragmentation risk for the sectors it covers. Contracting authorities in Zagreb and Warsaw will apply the same Union origin and low-carbon requirements, determined by the same annexes and delegated acts, verified through the same self-declaration mechanisms.

 

Foreign investor and subsidiary definitions: a contrast with the IPI

The IAA introduces definitions of ‘foreign investor’ and ‘foreign investor’s subsidiary’ that deserve comparison with the origin provisions of the IPI. Article 3(32) of the IAA defines a ‘foreign investor’ as a natural person of a third country who does not hold the nationality of a Member State, or an undertaking of a third country, intending to make or having made a foreign direct investment. Article 3(33) defines a ‘foreign investor’s subsidiary’ as an undertaking controlled, directly or indirectly, by a foreign investor regardless of its place of establishment.

That last phrase is significant. The IPI uses a different approach to the question of foreign control, one that I have criticised as too permissive. Under Article 3 of the IPI, the origin of a legal person is determined by the country under whose laws it is constituted and in whose territory it is engaged in substantive business operations. The ‘dominant influence’ test under Article 3(1)(b)(ii) of the IPI only kicks in if the legal person is not engaged in substantive business operations in the country of its constitution. This means that a Chinese company can establish a subsidiary in a Member State, ensure that it conducts substantive business operations there, and the dominant influence of the Chinese parent company will not be called into question for the purposes of the IPI.

The IAA’s definition is far blunter, and in this context, far more effective. A subsidiary is defined by reference to control, directly or indirectly, by a foreign investor, regardless of where that subsidiary is established. If you are controlled by a third-country entity, you are treated as a foreign investor’s subsidiary for the purposes of the IAA’s Chapter IV on foreign direct investment conditionalities.

But it seems (I might be wrong) this definition applies only to the foreign direct investment provisions in Chapter IV, not to the public procurement provisions in Chapter III. For the determination of the origin of economic operators in procurement, the IPI still applies, with all the circumvention problems I have outlined above.

This is a missed opportunity. The IAA’s foreign investor’s subsidiary definition would be a far more effective tool for establishing the origin of economic operators in procurement than the IPI’s substantive business operations test. If the Commission is willing to apply this anti-circumvention logic in the context of foreign direct investment, there is no principled reason why the same logic should not extend to the procurement framework. Applying the Chapter IV definition to Chapter III would close a gap that the IPI has left open, and it would be consistent with the IAA’s own stated objective of preventing strategic dependencies in key sectors.

 

Articles 8 and 9: the reciprocity mechanism and its limits

The treatment of countries with which the Union has concluded international agreements is one of the most important aspects of the IAA’s public procurement framework.

Article 8(1) provides that content originating in third countries with which the Union has concluded an agreement establishing a free trade area or a customs union, or that are parties to the WTO GPA where relevant obligations of the Union exist under that agreement, shall be deemed to be of Union origin. This is the reciprocity mechanism: for the purposes of the Union origin requirements established by the IAA, products from these countries are treated as if they were produced in the Union. In principle, this preserves the EU’s external commitments and correctly differentiates between covered and non-covered third countries, which is the fundamental distinction that Article 25 of Directive 2014/24/EU and Article 43 of Directive 2014/25/EU were supposed to establish but failed to do so with sufficient clarity.

But Article 8(2) introduces something important. The Commission is empowered to adopt delegated acts to exclude, in whole or in part, a third country from the scope of reciprocity established by Article 8(1). The grounds for such exclusion are threefold: the third country has failed to provide national treatment to Union products or entities under the relevant agreement; such exclusion is justified to avoid dependencies or developments threatening the security of supply in the Union; or such exclusion is justified under any other exception under the applicable agreement.

This means that the Commission can, via delegated act, strip a WTO GPA party or an FTA partner of its reciprocal status for the purposes of IAA procurement requirements. The implications of this power should not be understated. A WTO GPA party whose content is currently deemed equivalent to Union origin under Article 8(1) could, following the adoption of a delegated act under Article 8(2), find its economic operators excluded from procurement procedures falling within the IAA’s scope, because their products would no longer be treated as Union origin and would therefore fail the Union origin requirements mandated by Article 11(2).

Article 9, which addresses other forms of public intervention such as support schemes, follows a similar structure but with a notable difference in scope. Article 9(1) deems content from countries with FTAs or customs unions as equivalent to Union origin, but it does not include WTO GPA parties. This means that for support schemes covered by Part II of Annex II and Part II of Annex III, economic operators from WTO GPA countries that are not also FTA partners do not benefit from equivalence. Their products are not treated as Union origin for the purposes of these support schemes, even if the same products would be treated as Union origin under Article 8(1) in the context of public procurement.

This asymmetry between Articles 8 and 9 reflects the fact that the EU’s WTO GPA commitments relate specifically to public procurement procedures, not to domestic support schemes. But it creates a two-tier system for covered countries. A country like Japan, which is party to both the WTO GPA and an FTA with the EU, benefits from equivalence under both Articles 8 and 9. A country that is party to the WTO GPA but has no FTA with the EU benefits from equivalence only under Article 8, and only for public procurement.

Article 9(2) mirrors Article 8(2) by empowering the Commission to adopt delegated acts excluding FTA or customs union countries from the equivalence established by Article 9(1), on the same three grounds. The combined effect of Articles 8(2) and 9(2) gives the Commission a powerful tool to recalibrate the EU’s procurement and industrial policy relationships with individual third countries, outside of the formal amendment or renegotiation of the underlying trade agreements. Whether this tool will be used sparingly or aggressively remains to be seen, but its mere existence changes the dynamics of the EU’s trade relationships in the procurement space.

Where the IAA falls short

 

The positive aspects of the IAA’s public procurement provisions are accompanied by a number of concerns that, if left unaddressed during the legislative procedure, could undermine the effectiveness and legal coherence of the framework.

Exceptions

The first concern relates to the exceptions established in Article 11(3). While exceptions to mandatory requirements are necessary and expected in any regulatory framework, the exceptions in Article 11(3) reintroduce precisely the type of contracting authority discretion that the mandatory nature of Article 11(1) and (2) was designed to eliminate. Article 11(3)(a) allows contracting authorities not to apply the requirements where the required products or services can only be supplied by one specific economic operator; Article 11(3)(b) allows the same where no suitable tenders were submitted, including in response to a similar former procurement procedure in the preceding two years; and Article 11(3)(c) where application would require acquisition of goods at disproportionate costs or would result in technical incompatibility.

The problem is not the existence of these exceptions, as they mirror standard exception clauses found in existing procurement legislation. The problem is the lack of meaningful oversight. Unlike the IPI, where the Commission has a role in evaluating the use of exceptions and where economic operators can use national remedies to challenge the application of exceptions under Article 10 of the IPI, the IAA provides no equivalent mechanism. The contracting authority decides, and Article 11(3)(c) even provides a presumption of disproportionality where cost differences exceed 25%. While this threshold offers some legal certainty, it also creates a built-in escape route. Contracting authorities that wish to avoid Union origin requirements need only demonstrate, or claim to demonstrate, a 25% cost difference to be presumed justified in not applying the requirements. In sectors where the cost gap between EU-produced and imported goods is significant, which is precisely the scenario the IAA is designed to address, this exception risks being invoked routinely rather than exceptionally.

Self-declarations

The second concern relates to verification. Article 11(4) requires economic operators to submit a self-declaration demonstrating compliance with the Union origin and low-carbon requirements. The reliance on self-declarations is consistent with the general framework established by Article 59 of Directive 2014/24/EU, but it is also a system whose limitations are well documented. The FSR experience has shown that self-declaration-based regimes face significant challenges with verification, as third-country entities may be reluctant or unable to provide the necessary documentation, and contracting authorities often lack the expertise and resources to verify origin claims. The IAA does not address these challenges. There is no provision for systematic verification by a central authority, no sampling mechanism, and no obligation for Member States to establish dedicated verification infrastructure. The Commission is empowered under Article 16(3) to adopt implementing acts specifying methods and procedures for verification, but the Regulation itself does not guarantee that verification will be in place when the requirements become applicable.

Commission’s powers

The third concern is the scope of the delegation of powers under Article 16. The Commission is empowered to adopt delegated acts to introduce demand-side measures for the chemical industry (Article 16(1)), to amend the Union origin and low-carbon requirements for products already listed in Annexes II and III (Article 16(2)), and to specify the calculation methodology for Union origin content (Article 16(3)). These delegations are broad. The criteria listed in Article 16(2), including market situation, technological progress, contribution to economic security, and impact on competitiveness, are open-ended and provide the Commission with substantial room for manoeuvre. While delegation is a necessary feature of a regulatory framework that must adapt to changing market conditions, the breadth of these delegations means that the content of the procurement requirements may evolve significantly without the co-legislators’ direct involvement.

Upcoming revision of the public procurement directives

The fourth concern, and perhaps the most structurally important one, is the relationship between the IAA and the forthcoming revision of the EU public procurement directives. The Explanatory Memorandum explicitly states that ‘the forthcoming revision of the public procurement legal framework will clarify how such procurement is to be carried out’, and that it will ‘provide contracting authorities with clear tools to give preference to tenders composed mainly of European products’. This means that the IAA deliberately establishes the “what” of procurement requirements without fully addressing the “how”. The success of the IAA’s public procurement provisions is therefore contingent on a separate legislative proposal that has not yet been published. This creates a period of legal uncertainty for contracting authorities, who will be required to apply Union origin and low-carbon requirements without the procedural framework that would normally accompany such requirements. The IAA assumes that the existing procurement directives, supplemented by its own provisions, are sufficient for implementation. Whether this assumption holds in practice remains to be seen.

Sectoral files

The fifth concern relates to the amendments to Regulation (EU) 2024/1735 introduced by Article 34 of the IAA. The new Article 25a inserted into the NZIA establishes Union origin requirements for public procurement of net-zero technologies, including battery energy storage systems, solar PV technologies, heat pumps, wind technologies, and nuclear fission technologies. The phased implementation, with requirements increasing over time, is sensible. But the cumulative effect of these requirements, layered on top of the existing sustainability and resilience requirements already established by Article 25 of Regulation (EU) 2024/1735, creates a dense set of rules that contracting authorities must navigate when procuring net-zero technologies. A contracting authority procuring a battery energy storage system will need to comply with the environmental sustainability requirements of Article 25 of the NZIA and the new Union origin requirements of Article 25a, each with its own exceptions, verification mechanisms, and timelines. The administrative burden this places on contracting authorities, particularly smaller ones with limited procurement capacity, should not be underestimated.

 

The bigger picture

 

The IAA’s public procurement provisions should be understood in the context of a broader trend in EU legislation: the strategic use of the public procurement market as an instrument of industrial and economic security policy. This trend is not new; the IPI, FSR, and ACI all use public procurement as a lever for policy objectives beyond the procurement itself. But the IAA takes this further by directly conditioning access to public procurement on origin requirements, effectively creating a “Made in EU” preference for certain products in certain sectors.

The legal basis for this approach is Article 114 TFEU, supplemented by Article 207 TFEU for the common commercial policy aspects. The Commission argues, and the argument has merit, that uncoordinated national measures risk fragmenting the Single Market and that harmonised EU-level action is necessary. This is correct. But as the analysis of Articles 8 and 9 above demonstrates, the IAA’s conditional equivalence/reciprocity mechanism and the asymmetry between the treatment of WTO GPA parties and FTA partners introduce a level of complexity in the EU’s international procurement commitments that should not be overlooked. The delegated act power to withdraw reciprocity from covered countries is, functionally, a standing measure that goes beyond the case-by-case exception logic that has traditionally characterised the EU’s approach to its WTO GPA obligations. Whether this power will be exercised, and how it will be received by the EU’s trading partners, may ultimately determine the international viability of the IAA’s procurement framework.

The IAA is a significant legislative proposal that attempts to provide a structured, harmonised, and evidence-based framework for leveraging the EU public procurement market to support industrial policy and economic security objectives. In its approach to mandatory requirements and centralised decision-making, it corrects some of the most problematic aspects of the current legal regime established by the CJEU. But in its reliance on self-declarations, its broad exceptions, its extensive delegation of powers, and its dependence on a forthcoming procurement reform that has not yet materialised, it leaves considerable uncertainty about the effectiveness and enforceability of its provisions. The legislative procedure ahead will determine whether these concerns are addressed.

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