International Procurement Instrument as a (mythical?) sword to fight for reciprocity of treatment of EU economic operators on foreign markets

The discussion on the International Procurement Instrument (IPI), a legal mechanism aimed at providing the EU with arguments in negotiations with third countries on opening up their public procurement and concession markets more widely to EU entrepreneurs, has been ongoing for more than a decade. The EU finally succeeded (in June 2022) in adopting Regulation 2022/1031 on IPI. In February 2023, even guidelines for the application of the provisions of the said Regulation were adopted. However, it is still an open question whether the cited actions of a legislative nature will find their practical dimension.  

The European Commission already started the discussion on IPI in 2012. For many years the topic came and went, only to finally take real shape in 2022. At that time, Regulation 2022/1031 on the access of third-country economic operators, goods and services to the Union’s public procurement and concession markets and procedures supporting negotiations on access of Union economic operators, goods and services to the public procurement and concession markets of third countries was adopted.

The above-mentioned Regulation aims to achieve reciprocity by opening third-country markets and improving market access opportunities for EU economic operators.

In a nutshell: if EU economic operators encounter practices in a third country (i.e. a country that is not party to the WTO Agreement on Government Procurement or trade agreements with EU on public procurement) that restrict their access to the market for public procurement and concessions in that country, the above circumstance could constitute a "flywheel" for the EU's action to, in effect, put an end to such practices. 

This is because in such a case, the European Commission (acting either on its own initiative or upon a substantiated complaint of a EU interested party or a Member State) will be able to initiate an investigation to lead to the adoption of the instrument referred to in the Regulation - IPI.

The adopted instrument will mean, most euphemistically, the possibility of disadvantaging economic operators or products originating in the third countries covered by the IPI measure at the stage of economic operators selection or in the execution of the contract. This will be able to manifest itself in ordering contracting authorities to (i) make a scoring adjustment or (ii) exclude a tender submitted by economic operators originating from a third country covered by the instrument.

The IPI may also provide certain restrictions applicable to the successful tenderer that is not originating from the third country, such as a prohibition on subcontracting more than 50% of the value of the contract to economic operators originating from the third country covered by the IPI measure, or ensuring that goods supplied under the contract that originate from the third country do not constitute more than 50% of the total value of the contract.

Of course, a number of additional, individual circumstances will have to be taken into account during the course of the proceedings aimed at adopting the IPI (e.g. corrective action taken by a third country, lack of EU goods or services to meet the contracting authorities' requirements). As a result, these circumstances may affect the effectiveness (or lack thereof) of adopting an IPI in a given case (e.g. through the possibility of suspending the Commission's investigation, introducing exceptions to the application of the IPI).

In theory, the "reality" of the applicability of the IPI in practice can be confirmed by the fact that in late February 2023 the Commission issued guidelines on facilitating the application of the Regulation's provisions by contracting authorities and economic operators. These guidelines contain information, in particular, on the terms used in the Regulation, such as the origin of natural and legal persons, goods, services and also on how to apply the provisions of the Regulation. However, they were issued based on the relevant reference found in the Regulation.

Moreover, for the time being, no proceedings have been initiated on the establishment of an IPI (which is not necessarily indicative of the "lack of reality" of the possibility of applying an IPI and more of the need to take into account many aspects involved in its application, including those of a political nature). This is evidenced by the fact that no announcement has been published in the Official Journal of the European Union on the initiation of an investigation into allegations of a third country measure or practice.

Thus, in the context of the above, it is difficult to unequivocally assess the described legal mechanism.

On the one hand, IPI can certainly serve as a certain mean of putting pressure on third countries in negotiations of a political nature.

On the other hand, the procedure described in the Regulation seems to contain a great deal of scope for limiting the effective impact of the IPI or even suspending ongoing proceedings aimed at its adoption. In the final analysis, this could mean that the adopted measure proves to be too little repressive, or that it is not adopted at all (despite the original reasons for doing so).

Therefore, time will tell whether the IPI will remain only a mythical sword (which no one will see in practice) or will play an important role in the process of public procurement and concessions in the EU. By August 30, 2025 at the latest, the Commission will submit a report on the application of the Regulation and then we will know the answers to these questions.

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We discuss judgments from the European Court of Justice and their influence on the interpretation of public procurement law in Poland. We follow and comment on legislation in the European Union. We address current issues in Polish case law.

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