Global Perspectives on Public Procurement. Edition №3
Legal Regulation of Public Procurement in the EU
1. Describe the European Union’s legal system in general.
The legal system of the EU encompasses the obligations and responsibilities of the member states regarding the acquisition and retention of membership in the EU. These are compiled in a comprehensive collection of laws and regulations known as the Acquis communautaire, which includes:
- EU treaties;
- legislation adopted for the application of these treaties and case law developed by the Court of Justice of the European Union (CJEU);
- declarations and resolutions adopted by the EU;
- measures in the spheres of joint foreign policy and security policy, justice and internal affairs;
- international agreements concluded by the EU, as well as agreements concluded between the member states themselves regarding the activities of the EU.
The EU Acquis consists of 35 Chapters that set out the requirements for membership (including Chapter 5 “Public Procurement”).
The legal system of the EU consists mainly of primary and secondary legislation.
First, these are the Constituent Treaties of the EU, which regulate the very principles of the functioning of this union – the Treaty on the Functioning of the European Union – TFEU, as well as the protocols to it – this is primary EU law.
Also, primary documents include the Charter of Fundamental Rights of the European Union and the general principles established by the CJEU.
Secondary EU law consists of legislative and non-legislative acts adopted by various EU institutions. They enable the EU to exercise its powers.
Which legal acts refer to the secondary law of the EU?
Article 288 of the TFEU defines that the European institutions can adopt five types of legal acts. To exercise the Union’s competences, the institutions shall adopt regulations, directives, decisions, recommendations and opinions.
Regulations, directives and decisions are binding legal acts. If they are adopted in a legislative manner in accordance with Article 289, they are considered legislative acts. The decision may specifically concern one or more addressees (Member States, individuals or legal entities). There are also solutions without a specific addressee, for example in the field of common foreign policy and security policy.
Recommendations and opinions are not binding legal acts.
- Regulations are directly applicable and are mandatory for implementation by legislative acts. It should apply throughout the EU;
- Directives are legislative acts that set goals that all EU countries must achieve. However, individual countries must develop their own laws to achieve these goals;
- Decisions are binding on those to whom they are addressed (eg an EU country or an individual company) and are directly applicable;
- Recommendations are not mandatory. The recommendation allows institutions to express their views and propose a course of action without imposing any legal obligations on those to whom it is addressed;
- Opinions are tools that allow institutions to make non-binding statements, in other words, without imposing any legal obligations on those to whom they are addressed.
2. What is the status of international agreements with other countries within the legal framework?
International agreements with non-EU countries or international organisations are separated from primary and secondary law and form a unique category. At the same time, in terms of hierarchy and importance, they rank below primary legal acts.
3. What legislative acts regulate the field of public procurement in the EU?
Public procurement in the EU is governed by the Public Procurement Directives.
In order to comply with the principles of the single market and to create a level playing field for business in EU member states, EU legislation establishes minimum but mandatory rules for public procurement. These rules regulate the procurement of goods, works and services by the relevant state (including municipal) authorities, vast majority of public enterprises and certain operators of communal services.
These requirements must be transposed into national legislation and applied to tenders whose value exceeds the European thresholds for public procurement. For tenders whose value is below those value thresholds, countries may apply national rules. At the same time, even in sub-threshold procurement, countries must adhere to the general principles of EU law.
4. Which EU Directives regulate public procurement in EU member states?
By April 18, 2016, EU countries had to transpose the following (updated) directives into national legislation:
Directive 2014/23/EU on the award of concession contracts – establishes a set of European Union rules for public authorities and entities in the utility sector through concessions;
Directive 2014/24/EU on Public Procurement – establishes procurement procedures for public authorities. It states that when national authorities use public procurement to invite tenders for works, supplies or services, they must treat all participants equally, be transparent and not discriminate against them;
Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors – establishes the rules for contracting government contracts by entities working in the energy, transport and postal sectors. The rules of the directive are based on the rules of the general Directive on public procurement 2014/24/EU, but take into account the specifics of these sectors;
Directive 2009/81/EU on defence procurement – applies a more flexible and confidential regime for the procurement of military goods and related works and services.
Two Directives on “remedies” apply to complaints and reviews:
Directive 92/13/EEC on coordinating the laws, regulations and administrative provisions relating to the application of Community rules on the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors.
These two Directives were amended by Directive 2007/66/EC.
5. Where can a tender participant turn if he believes that his rights have been violated?
The directives respect the procedural autonomy and legal traditions of the EU countries. This means that each Member State has the right to decide for itself which system of legal remedies in public procurement it will implement. Each Member State implements the Remedies Directives differently, with some Member States having almost completely rewritten their national rules on remedies, while others have integrated remedies into their existing legislation.
As a result, approximately half of the Member States have ordinary courts responsible for remedies, while half have specially created bodies for this purpose.
A business entity should exhaust all available national legal processes before seeking EU-level protection before the Court of Justice. The Court of Justice of the EU applies strict rules as to when such claims can be brought and admitted (more details can be found here).
6. Are there any other special EU legislation regulating the field of public procurement?
In June 2022, the European Parliament issued Regulation (EU) 2022/1031), which activated the International Procurement Instrument (IPI), which limits access to EU public procurement for suppliers from countries that do not provide reciprocal access to their own public procurement markets, regardless of their participation in the agreements granting them access.
The IPI gives the European Commission powers to investigate and apply fines to identify unfair treatment of EU companies and to apply restrictive measures.
The European Single Procurement Document (ESPD) is a self-declaration form used in public procurement procedures.
The ESPD was created under the EU Procurement Directive 2014, and on 5 January 2016 the European Commission issued the European Commission Implementing Regulation, which “establishes a standard format for the Single European Procurement Document”.
Before the introduction of ESPD, companies had to provide various documents confirming that they can participate in the procurement procedure (for example, about the payment of taxes, about the absence of a criminal record). Thanks to ESPD, companies can fulfil these obligations using a single form of self-declaration – ESPD. Then only the tender winner has to provide the actual documents.
7. Is the sanctions policy against russia in the field of EU public procurement regulated and if so, how?
Following the start of russia’s full-scale war against Ukraine, Council Regulation (EU) 2022/576[13] (amending for Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine) provided for regulation of public procurement, according to which, from October 11, 2022, companies must ensure that there is no so-called connection with russia in their current contracts. This also applies to the supply chain. Otherwise, there is a risk of termination of the contract.
To comply with the requirements of this Regulation, contracting authorities began to require bidders to declare in a self-declaration that they have no connection with russia.
However, exceptions to this rule are allowed if there is no viable alternative. Such exceptions recognize the sphere of civilian nuclear forces and facilities, as well as essential goods or services that can only be provided by excluded persons. Unless an exception applies, even existing government contracts with Russian companies must be terminated immediately.
8. How is the public procurement process regulated at the national level in EU member states?
As mentioned earlier, Member States must comply with EU core principles in national public procurement legislation, even if procurement is below EU thresholds. In addition, each EU Member State was required to harmonise local public procurement legislation with EU directives before joining the Union. Although all national public procurement laws are based on the same Directives, they still differ in content and bidders should not rely solely on the EU Directives for their knowledge but should also check local relevant regulations to make sure there are no discrepancies.
Each Member State will conduct a public tender procedure in accordance with national public procurement legislation. After signing the contract with the winning participant, it will be performed in accordance with national law. Therefore, bidders need to know not only the legislation on public procurement, but also the relevant legislation that regulates the relationship between the buyer and supplier.