Global Perspectives on Public Procurement. Edition №2
International trade agreements of Ukraine regulating public procurement
In the second edition of the rubric ‘Global Perspectives on Public Procurement’, we offer an overview of the main international trade agreements that regulate Ukraine’s international relations in the field of public procurement.
Ukraine has always been active in the international arena of public procurement. This not only enables the country to further integrate into global trade relations, but also enhances the efficiency of the management of the budgetary funds by adopting and implementing the best international practices, modern standards, and principles of competition, transparency, and non-discrimination in public procurement. International trade agreements regulating public procurement play a crucial role in this process. These agreements provide Ukrainian companies with access to public procurement markets in other countries while opening the Ukrainian market to foreign bidders.
1. Agreement on free trade between Ukraine and EFTA
The first international agreement that regulated the issue of public procurement for Ukraine was the Free Trade Agreement between Ukraine and the European Free Trade Association (EFTA), which includes Switzerland, Liechtenstein, Norway and Iceland. This agreement was ratified by Law N 4091-VI dated December 7, 2011.
The agreement covers trade in industrial goods, agricultural products, fish and seafood, as well as trade in services. Dispute settlement is an important component of the agreement.
In addition, Chapter 6 of the Agreement establishes the rules for the mutual opening of public procurement markets between Ukraine and EFTA members, as well as other requirements and obligations regarding the functioning of the public procurement market between the Parties to the Agreement.
The document contains annexes establishing threshold values, lists of organizations that can make purchases at the central and regional levels, as well as selection criteria for such organizations, lists of exceptional goods, lists of organizations operating in the utility and similar sectors (for each of countries).
At the same time, it should be noted that since the adoption of the Agreement, the provisions on public procurement have not been revised and updated.
2. Association Agreement between Ukraine and the EU
Next in the chronology of adoption was the Association Agreement between Ukraine, on the one hand, and the European Union, the European Atomic Energy Community and their member states, on the other hand, ratified by the Law of Ukraine dated September 16, 2014 No. 1678-VII.
The purpose of adopting this Agreement was, first of all, the development of a deep and comprehensive free trade area (DCFTA) between Ukraine and the EU. In addition to stimulating trade, the Agreement contributes to the deepening of Ukraine’s political dialogue with the EU, expansion of economic ties, adaptation of Ukrainian legislation, standards and regulations to EU norms.
Article 153 of the Association Agreement obliges Ukraine to gradually bring its legislation in the field of public procurement into compliance with the EU acquis and to ensure fair and transparent public procurement of goods and services, to modernize its tender procedures in accordance with EU norms. The main objective is to create competition in the procurement process in the public sector in order to get the best deal for taxpayers’ money.
3. Agreement on free trade between Ukraine and Canada
On March 14, 2017, Ukraine ratified the Canada-Ukraine Free Trade Agreement (CUFTA), which entered into force on August 1, 2017. The updated Agreement was signed on September 22, 2023 and entered into force on July 1, 2024. This Agreement opened duty-free access to 98% of the Canadian market for Ukrainian exporters.
Chapter 11 “Public Procurement” of the updated Agreement regulates the relations between the countries regarding the issue of public procurement, namely: threshold values and formulas for their adjustment, access schedules (a list of purchasing organizations subject to the Agreement) to the public procurement market of both countries, a list of goods and services, as well as exclusions.
A significant innovation is the expansion of access to the public procurement market, which allows businesses from each country to fully participate in the public procurement processes of another country.
In addition, a separate article defines the importance of supporting and promoting the participation of small and medium-sized enterprises in public procurement, as well as supporting the comprehensive development of sustainable procurement and responsible business conduct.
4. Agreement on political cooperation, free trade and strategic partnership between Ukraine and the United Kingdom of Great Britain and Northern Ireland (hereinafter – the Agreement), which entered into force on January 1, 2021.
On December 16, 2020, Law of Ukraine No. 1100-IX “On the Ratification of the Agreement on Political Cooperation, Free Trade and Strategic Partnership between Ukraine and the United Kingdom of Great Britain and Northern Ireland” was adopted.
The main prerequisite for the adoption of this Agreement was, first of all, the withdrawal of Great Britain from the EU (March 29, 2019 at 11:00 p.m.) and the need to develop further bilateral cooperation between Ukraine and the Kingdom.
It should be noted that relations in the field of public procurement between Ukraine and the Kingdom are also regulated by the WTO Agreement on Public Procurement, but the bilateral Agreement has a more detailed regulation.
The agreement between Ukraine and Great Britain provides for mutual access to public procurement markets on the basis of the principle of national regime at the national, regional and local levels for state contracts and concession agreements in traditional sectors of the economy, as well as in the communal economy.
This Agreement also applies to public contracts for the performance of works, the supply of goods and the provision of services, as well as to contracts in the utility and infrastructure sectors and to concession contracts for the performance of works and the provision of services, and provides for mutual symmetrical liberalization of access to public contracts of Ukraine and the United Kingdom of Great Britain and Northern Ireland on the basis of transparency, non-discrimination, proportionality and equal treatment. Annex XVI-C to Chapter 8 (under Article 141(3)) sets thresholds for the application of the relevant legislation, which will be reviewed every two years.
On February 8, 2024, representatives of the governments of Ukraine and the Kingdom signed Agreement No. 3, which amends the text of the Agreement in terms of obligations regarding the liberalization of trade between the countries.
The agreement will be valid until March 31, 2029 (5 years), with the exception of two product items — eggs and poultry meat products, the liberalization of trade with which will be extended for 2 years – until April 1, 2026.
On August 22, 2024, the Verkhovna Rada of Ukraine ratified these changes to the Agreement by adopting the Law “On the Ratification of Agreement No. 3 in the form of an exchange of letters between Ukraine and the United Kingdom of Great Britain and Northern Ireland on Amendments to the Agreement on Political Cooperation, Free Trade and Strategic Partnership between Ukraine and the United Kingdom of Great Britain and Northern Ireland” (r. No. 0268).
Currently, there is a further discussion between the governments of the countries regarding the improvement of the provisions of the Agreement in terms of regulation of public procurement, one of the reasons for which can also be noted a comprehensive change in the legislation on public procurement in the Kingdom (which will enter into force on October 28, 2024), including electronic procurement platforms.
5. WTO Agreement on Government Procurement
And of course, we have the multilateral WTO Agreement on Government Procurement, which is the largest in terms of the number of Parties. Ukraine joined the WTO Agreement on Government Procurement in 2016.
You can learn more about the WTO GPA from our previous article.