Limiting US access to European public contracts: what legal tools can the European Union use?
The European Union is seeking to defend its interests in the face of increasingly asymmetrical market opening and the current strengthening of the United States’ protectionist arsenal. To promote greater reciprocity, the EU has created a number of legal instruments to regulate, or even restrict, third-country access to its public procurement and concession contracts. What are these tools, and how can they be used to counter US practices?
Access partially regulated by the Agreement on Government Procurement
American economic operators’ access to European public contracts is governed by the World Trade Organization’s Agreement on Government Procurement (GPA), concluded as part of the Marrakech Accords of April 15, 1994. The revised version of the AGP came into force for the United States, the European Union and its member states on April 6, 2014.
In the sectors covered by this agreement, the United States enjoys treatment no less favorable than European economic operators to the public procurement markets of the Member States (commitment included in Article 25 of Directive 2014/24/EU and Art. 43 of Directive 2014/25/EU).
The principle of no less favorable treatment does not apply a priori to bids from U.S. operators relating to procedures for the award of concession contracts (works/service/public service concessions) – as the U.S. is not included in the EU’s coverage agreement, and no general principle is laid down in Directive 2014/23 EU.
Nor does this principle apply to public defense and security contracts – which are expressly excluded from the scope of the GPA (GPA, art 3).
For these contracts, it should therefore be possible to limit access to US operators in line with the principles established by the Kolin ruling (CJEU, October 22, 2024, aff. C-652/22) concerning public contracts concluded with a non-signatory third country. Member States do not have the power to introduce a general restriction mechanism. On the other hand, public purchasers/awarding authorities can decide on a case-by-case basis to exclude such operators from procurement procedures.
In French law, these European rules have been transposed and supplemented as follows:
– for “traditional” public procurement contracts, article L. 2153-1 of the French Public Procurement Code (“CCP”) requires the purchaser to guarantee, within the limits of international agreements, equivalent treatment for economic operators as well as for works, supplies and services originating or produced in the EU or countries that are signatories to the GPA or equivalent agreements. On the other hand, the CCP does not lay down a similar principle for concessions.
– for public procurement and concession contracts in the defense or security sector, articles L. 2353-1 and L. 3124-6 of the CCP establish the principle of contracting with economic operators from European Union or European Economic Area member states, with the option for purchasers/awarding authorities to authorize, on a case-by-case basis, the participation of operators from third countries.
To sum up, under French law, American economic operators can be excluded from public contracts and concessions in the defense and security sector, provided this is expressly stipulated in the tender documents.
IMPI: targeted measures for public contracts not covered by an international agreement
Regulation (EU) 2022/1031, known as IMPI (International Procurement Instrument), is part of the EU’s strategy to guarantee EU companies fair access and conditions of competition to public contracts in third countries. It should be noted that this regulation applies only to public contracts and concessions in non-defense and non-security sectors.
It enables the European Commission, either on its own initiative or on the basis of a substantiated complaint, to investigate restrictive practices implemented by third countries regarding access to their public contracts.
Where discrimination is found to exist in relation to contracts not covered by an international agreement, the Commission may adopt an IMPI measure to be applied by public purchasers/awarding authorities, which may take one of two forms:
– adjusting the rating of bids from operators originating from the third country concerned (reducing their rating by up to half, or fictitiously doubling the price offered) ;
– outright exclusion of their bids.
Public purchasers/concessioning authorities will also have to include the following obligations in their consultation documents:
– not to subcontract more than 50% of the total value of the contract to economic operators originating from a third country subject to an IMPI measure;
– in the case of contracts for the supply of goods, to ensure that, for the duration of the contract, goods or services supplied as part of the performance of the contract and originating in a third country subject to an IMPI measure do not represent more than 50% of the total value of the contract, whether these goods or services are supplied directly by the tenderer or by a subcontractor.
The IMPI applies to works contracts and concession contracts with a value of €15 million or more excluding VAT, and to public service and supply contracts with a value of €5 million or more excluding VAT.
This tool could therefore be used by the European Commission to restrict the access of US operators to the procedures for awarding concession contracts, which are not covered by the GPA.
The anti-coercion instrument: from deterrent to bazooka
Regulation (EU) 2023/2675 on protection against economic coercion aims to enable the European Union to respond to hostile measures from third countries seeking to exert pressure on its sovereign decisions.
This tool applies to contracts concluded with operators from third countries, even if these countries are signatories to the GPA, and could therefore be used against economic operators from the United States.
It is based on a four-stage procedure:
– the Commission must qualify the measure as coercive. Economic coercion exists when a third country applies or threatens to apply a measure affecting trade or investment in order to prevent or obtain the cessation, modification or adoption of a particular act by the Union or a Member State, and in so doing interferes with their legitimate sovereign choices.
In the present case, this would require demonstrating that the customs measures restricting access to the US market envisaged by the US administration constitute a lever for exerting pressure on the Union or a Member State, which does not seem to be ruled out by certain representatives of the European Commission;
– where, following its examination, the Commission concludes that the third-country measure constitutes economic coercion, it must submit to the Council a proposal for an implementing act determining that the third-country measure fulfils the conditions relating to the existence of economic coercion. The Council determines the existence of economic coercion by means of an implementing act on the basis of a proposal from the Commission;
– a dialogue must then be opened with the third country with a view to putting an end to the coercion and, where appropriate, obtaining compensation for the damage caused;
– in the absence of a resolution, countermeasures are adopted by means of implementing acts of the Commission if they are necessary to protect the interests and rights of the European Union and its member states, and are in the Union’s interest;
– these measures are subject to regular review in the light of changing circumstances.
In addition to the introduction of new customs duties, other possible measures to counter coercion include
– the exclusion from public procurement of suppliers, goods or services from operators in the third country concerned ;
– an unfavorable adjustment to their evaluation as part of the bid evaluation process for the award of public contracts (reduced rating, re-evaluated price).
Presented as a veritable legal “bazooka”, this tool is primarily intended to act as a deterrent. As the parliamentary report underlines: “by its very existence, [it] should encourage third countries tempted to exert pressure on the Union or one of its Member States to renounce it” (AN, M. Deprez-Audebert, Rapp. d’info. n° 5123, Feb. 22, 2022, p. 41). Its practical effectiveness remains to be demonstrated.
Faced with the asymmetrical opening up of public contracts, the European Union has a legal toolbox enabling it to react to the discriminatory practices of the United States. The challenge now lies in the effective and strategic implementation of these instruments, which requires the adoption of positive acts by the European Commission, without each Member State being able to take unilateral decisions.
It should be noted that none of the measures in question can be used to call into question ongoing contracts with economic operators from the United States. The main aim is therefore to limit their access to new opportunities for public contracts on European soil.