It’s been an exciting summer for public procurement scholars and practitioners alike so far, and the excitement will culminate in early September! The date of (official) publication of the draft Public Procurement Regulation has shifted a couple times, but this hasn’t stopped the leak of an early version of that draft – driving early commentary and analysis. I’ll refrain from commenting on the specificities of the leaked version: summer break is beginning and the date the official draft is published is really close (9 September) – which is bound to differ from the leaked one to some extent.

Having said that, I’m happy with the choice of legislative instrument (we’ve had 50 years of Directives with limited success – time for a different approach). And following our meetings with DG GROW colleagues drafting the Regulation and Commission EVP Séjourné last week (part of EVP Séjourné’s outreach to EU public procurement scholars to gather input on the public procurement Directives revision) I have a better understanding of the goals the new Regulation needs to achieve, and the tools used to do so.

One of the most important goals is: achieving strategic goals via public procurement.

When we buy as individuals, we send a message: we vote with our wallets. Contracting authorities, spending public money at scale, send an even stronger message about the values behind the purchasing decision, but also about the values of the society behind the public purchasers. Strategic procurement is therefore essential. Nor does “strategic” necessarily conflict with “competitive”. Competition — yes, but fair competition; it is not fair if everyone does not start from the same position. Heavily subsidised external competition harms the internal market and makes EU economic operators that follow the rules uncompetitive. The EU should not reward anti- competitive behaviour or a lack of reciprocity. A European preference mechanism that corrects for this is not anti-competitive; it restores the conditions under whichcompetition is meaningful.

But, I think it would be a mistake and a big missed opportunity to concentrate exclusively on the ”external dimension” of anti-competitive market behaviour. There is also an internal one – when a Member State is trying to find ways to discriminate against economic operators from other Member States – the so-called intra-EU ”local content” provisions.

It has been clearly established by the Treaties and subsequent CJEU case-law that intra-EU ”local content” is incompatible with the common market:

• Intra-EU local content requirements impede the development and functioning of the internal market, contrary to Article 3(3) TEU and the Member States’ obligations under Article 4(3) TEU, and conflict with Article 26 TFEU and the free movement provisions, notably Articles 34 and 36 TFEU.
• Intra-EU local content has been systematically rejected by the CJEU in Commission v Denmark (C-243/89), Contse (C-234/03), Rush Portuguesa (C-113/89) and Rüffert (C-346/06). 

The logical question is – if intra-EU local content is clearly impossible under EU law (this is a resolved matter) then why should it be adressed in the upcoming legislation?

Well because unfortunately attempts to give preference to national suppliers have existed for decades, and recently certain Member States are trying to legislate intra-EU public procurement discrimination, based on a misguided view of national interests, and fuelled by examples from abroad – countries that do not share the obligations arising from membership in the EU (some of them seem to want those obligations back though).

My proposal is to include a Recital addressing this in the new Regulation. This recital would create no new obligation — none is needed, since the prohibition is well established by the Treaties and the case-law — but it would remove any perceived ambiguity on which national local content initiatives currently trade, and it would draw the clear dividing line the revision needs: European preference is a matter for the Union, directed outward; it is never a licence for preference between Member States.

I’ll try to be as concrete as possible and suggest a wording of this Recital;

Requirements, technical specifications, award criteria or contract performance conditions which favour goods, services, workers or economic operators of one Member State over those of other Member States (‘local content requirements’) restrict the fundamental freedoms of the internal market, are contrary to the Treaties as consistently interpreted by the Court of Justice, and cannot be applied in procurement procedures covered by this Regulation. Preferences based on origin may be established only by Union law, within the Union’s exclusive competence under the common commercial policy, and only in respect of works, supplies, services and economic operators of third countries not covered by the Union’s international obligations.

But what effect would this have if the Treaties and CJEU case-law are being twisted and ignored? Unfortunately sometimes CJEU case-law tends to be obscure to (at least a portion of) the practitioners on the national level, especially the older judgements. A front-and-centre Recital might be useful in reiterating this clear ban on intra-EU discrimination. Also, this seems better than doing nothing and waiting for another CJEU judgement on the matter.

 

 

 

 

 

 

 

 

 

 

 

 

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