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BREXIT: EU considers models for future EU-UK public procurement relationship

The World Trade Organisation (WTO) agreement on government procurement (GPA) may prove the most acceptable starting point for a future EU-UK public procurement model, according to a report for the European Parliament.11 May 2017

A paper produced for the Parliament's committee on internal market and consumer protection looked at four potential future models, on a spectrum from a model based on the European Economic Area (EEA) agreement, as used by European Free Trade association (EFTA) states, to one based on the GPA. In between, it considers an 'EEA minus' model similar to that used in the DCFTAs (deep and comprehensive free trade agreements) between the EU and some neighbouring countries, and a 'GPA plus' approach that is being proposed in trade negotiations with the US.

Under the EEA agreement model the rules would follow those used within the EU, including a requirement to use the EU’s common advertising system for notices, Tenders Electronic Daily (TED), to submit notices in one of the EU’s official languages and to use other EU tools. Other rules also apply under the EEA agreement, including those on public procurement and state aid.

However, "it can be assumed that this [model] will not be applied in its entirety," the report said, "because its application now appears to have been definitively rejected by the UK itself, in rejecting in the Brexit white paper the possibility of free movement of workers and the jurisdiction of the [Court of Justice of the European Union (CJEU)]."

The WTO's GPA has been used by the EU in trading with other countries which are not party to the GPA itself, and could therefore be used as a model for an EU-UK agreement, the report said.

The GPA provides a “relatively robust” framework for public procurement and, unlike most WTO rules, allows organisations to seek remedies from national review bodies.

It is not clear whether the UK would need to rejoin the GPA after Brexit by following the same process as any other member, or if it could continue with its current rights and obligations. In practice, this is likely to depend on other GPA members and the consensus between them, the report said.

An EEA-minus approach would maintain EU access to UK markets on the same basis as currently, and the UK’s access to the common EU advertising system could feasibly be maintained, the report said. Future changes to legislation and case law may be difficult to apply, however.

A GPA-plus model based on the GPA but with additional rules would provide access to markets to the same extent as under the GPA but addressing any issues specific to the EU-UK relationship, the report said.

The withdrawal agreement will need to consider the consequences of changing from one regime to another, whether permanently or on an interim basis, and address the fact that the ultimate shape of the relationship may be undetermined at the time of Brexit, it said.

"If the relationship in indeed undetermined when Brexit occurs, it seems likely that the UK’s current procurement regulations transposing the EU regulations will remain in place pending any final determination of that relationship in public procurement. However, given the absence of significant WTO rules at a multilateral level, an interim EU-UK access arrangement might still be needed in a withdrawal agreement to secure rights for EU undertakings to access UK procurement markets, and to enforce the UK procurement regulations pending any final agreement or, at least, pending the UK’s accession / succession to the GPA," it said.

An interim agreement will be less necessary if it is arranged for the GPA to apply to the UK at the time of Brexit, the report said.

The withdrawal agreement will also have to consider whether the UK should retain access to TED and other EU tools, it said.

Public procurement expert Caroline Ramsay of Pinsent Masons, the law firm behind Out-Law.com said: "Regardless of the model finally adopted, the rules on public procurement will not be cast aside. It is also important to remember that until the withdrawal agreement takes its full effect, and for some time after that, the current set of UK procurement rules remains applicable as it is and failure to comply with these rules exposes parties to a tender process to serious consequences."

"In relation to the relationship between the UK and the EU, the GPA-plus seems a strong interim or long term model. It presents however important differences with the current framework. The GPA covers the key requirements on transparency, advertising and competition similar to the EU principles," Ramsay said.

"The rules on transparency, however, are not as strong as in the EU rules. The GPA, to some extent, is also narrower in scope than the EU procurement framework in relation to the utility sector, the defence sector, some services and concessions and certain private contracts subsidised by government. The GPA includes neither below-threshold procurement nor rules on contract modifications that do not result in a new award procedure. The rules on remedies for businesses are also reduced compared to the EU rules with the absence of a 'standstill' period following the notification of an award decision and limitations on damages for examples," she said.

"Of course, these gaps are likely to be the object of negotiations and might be addressed in the EU/UK Brexit agreement. We could also envisage, in the longer term, a scenario where the GPA itself is amended to some extent. However, a GPA-plus model is unlikely to ever lead to near-common policy between the EU and the UK towards third countries," Ramsay said.

The term 'public procurement' covers the purchase of goods, works and services by the public sector, and entities subject to public sector influence.

Public expenditure on goods, works and services in 2015 amounted to 13.1% of EU GDP and 13.6% of UK GDP, and the value of tenders published in the EU’s electronic database for public procurement represented 3.1% of GDP for the EU and 4.9% of GDP for the UK, the report said.

The EU has tried to include provisions on opening up procurement markets in all its trade agreements and is likely to want to ensure the future opening of these markets between the EU and UK after the UK’s withdrawal from the EU, the report said.

EU trade agreements for opening up procurement generally feature four key elements: a set of provisions defining which procurement is covered; rules that prohibit discrimination in awarding covered contracts, including discrimination against trading partners national undertakings; transparency rules on the drafting of specifications and award of contracts; and provisions for enforcement, including rights for affected undertakings to enforce the rules before national review bodies, the report said.