A European court has issued a significant ruling that limits the rights of suppliers from the United States and other countries to participate in the European Union’s vast public procurement market unless the procurement is covered by the WTO Government Procurement Agreement (GPA) or another EU agreement. In a decision termed “monumental” by an international law firm, the Court of Justice of the European Union (CJEU) ruled that contractors from a third country that does not have an international agreement with the EU covering public procurement are not guaranteed the right under EU law to participate in the Union’s procurement on equal terms with EU bidders and those from countries with such agreements. This post examines the court’s decision and its implications for US and other foreign suppliers.
The October 22 ruling of the EU’s top court in Kolin Inşaat Turizm Sanayi ve Ticaret (C-652/22) arose from a procurement in Croatia. In 2022, a Croatian contracting entity, HŽ Infrastruktura, awarded a contract for the construction of railway infrastructure linking two towns in Croatia to the Strabag group (comprised of Strabag AG, an Austrian company; Strabag d.o.o. a Croatian company; and Strabag Rail a.s., a Czech company).
A Turkish firm, Kolin Inșaat Turizm Sanayi ve Ticaret, another tenderer in the procurement, challenged the contract award, contending that after the deadline for submission of tenders, the contracting entity had unlawfully invited the Strabag group to provide additional information, including an expanded list of the works it had carried out, as well as clarifications, and had taken that information into consideration in awarding the contract. It also claimed that the award infringed on the principle of equal treatment in the EU Directive 2014/25 on procurement by entities operating in the water, energy, transport, and postal services sectors (Utilities Directive) and asked Croatia’s High Administrative Court to annul the contract award.
The Croatian court requested a preliminary ruling by the CJEU due to its uncertainty as to whether the contract award complied with the Utilities Directive. It asked the EU court to clarify the circumstances in which, after the deadline for submission of tenders, contracting authorities may request tenderers to make corrections or clarifications and then take the supplemental information into consideration in awarding a contract.
Rather than addressing the issues raised by the Croatian court, the CJEU examined whether the Turkish firm had a right to participate in the procurement since Türkiye is not a party to the GPA or any EU procurement agreement.
The Court concluded that EU law does not preclude contractors from third countries without an EU procurement agreement (in the absence of exclusion measures adopted by the EU) from participating in a procurement governed by the Utilities Directive. However, it concluded that they do not have the same rights as contractors from members states or third countries with procurement agreements. They cannot rely on the directive for equal treatment of their tenders. Therefore, the CJEU ruled that the Turkish firm did not have any rights under the Utilities Directive to challenge the contract decision.
The Kolin ruling has substantial implications for US suppliers participating in EU procurement. US goods, services, and suppliers are guaranteed equal treatment with EU and foreign suppliers in procurement that the EU has opened to the US under the GPA. However, the EU has incorporated various reciprocal conditions in its GPA commitments, denying the US rights to participate in procurement where the US does not offer reciprocal access, such as in the transportation sector and services purchased by subcentral entities. To date, US firms have generally had de facto access to that procurement. Now, however, the Kolin decision provides a legal basis for EU procuring entities to deny equal treatment to US firms in procurement to which they do not have rights under the GPA. (For a comprehensive examination of the reciprocal conditions under the GPA, see GPA Reciprocal Conditions: Leverage for Bilateral Agreements.)
Recently, the EU has adopted measures that allow it to take action against third countries that benefit from participation in its largely open procurement market but refuse to provide EU suppliers with reciprocal access to their own procurement or engage in unfair bidding in the EU. In 2019, the European Commission issued third-country guidance, clarifying the authority of the member states to reject bids from third countries that do not have the right to participate in a particular procurement under the GPA or another agreement. Notably, it did not require such bids to be rejected.
Subsequently, the EU implemented two measures that allow it to restrict third-country access to EU procurement. The first was the 2022 International Procurement Instrument (IPI) that provides the EU Commission with leverage to negotiate the opening of public procurement markets in third countries that do not provide reciprocal access to EU suppliers, and if the refuse, their participation in EU procurement could be restricted. The Commission initiated its first IPI investigation against China’s procurement of medical devices earlier this year.
The second, the Foreign Subsidies Regulation (FSR), implemented in 2023, empowers the Commission to address distortions in EU procurement caused by foreign subsidies benefiting companies bidding on public procurement contracts in the EU. After the Commission initiated FSR investigations in several procurements, alleging bids benefitted from foreign subsidies, the Chinese tenderers withdrew from the procurement.
The CJEU’s ruling in the Kolin case could have broader implications for participation in EU procurement by firms from the US and other countries than the recently adopted EU measures.
A European court has issued a significant ruling that limits the rights of suppliers from the United States and other countries to participate in the European Union’s vast public procurement market unless the procurement is covered by the WTO Government Procurement Agreement (GPA) or another EU agreement. In a decision termed “monumental” by an international law firm, the Court of Justice of the European Union (CJEU) ruled that contractors from a third country that does not have an international agreement with the EU covering public procurement are not guaranteed the right under EU law to participate in the Union’s procurement on equal terms with EU bidders and those from countries with such agreements. This post examines the court’s decision and its implications for US and other foreign suppliers.
The October 22 ruling of the EU’s top court in Kolin Inşaat Turizm Sanayi ve Ticaret (C-652/22) arose from a procurement in Croatia. In 2022, a Croatian contracting entity, HŽ Infrastruktura, awarded a contract for the construction of railway infrastructure linking two towns in Croatia to the Strabag group (comprised of Strabag AG, an Austrian company; Strabag d.o.o. a Croatian company; and Strabag Rail a.s., a Czech company).
A Turkish firm, Kolin Inșaat Turizm Sanayi ve Ticaret, another tenderer in the procurement, challenged the contract award, contending that after the deadline for submission of tenders, the contracting entity had unlawfully invited the Strabag group to provide additional information, including an expanded list of the works it had carried out, as well as clarifications, and had taken that information into consideration in awarding the contract. It also claimed that the award infringed on the principle of equal treatment in the EU Directive 2014/25 on procurement by entities operating in the water, energy, transport, and postal services sectors (Utilities Directive) and asked Croatia’s High Administrative Court to annul the contract award.
The Croatian court requested a preliminary ruling by the CJEU due to its uncertainty as to whether the contract award complied with the Utilities Directive. It asked the EU court to clarify the circumstances in which, after the deadline for submission of tenders, contracting authorities may request tenderers to make corrections or clarifications and then take the supplemental information into consideration in awarding a contract.
Rather than addressing the issues raised by the Croatian court, the CJEU examined whether the Turkish firm had a right to participate in the procurement since Türkiye is not a party to the GPA or any EU procurement agreement.
The Court concluded that EU law does not preclude contractors from third countries without an EU procurement agreement (in the absence of exclusion measures adopted by the EU) from participating in a procurement governed by the Utilities Directive. However, it concluded that they do not have the same rights as contractors from members states or third countries with procurement agreements. They cannot rely on the directive for equal treatment of their tenders. Therefore, the CJEU ruled that the Turkish firm did not have any rights under the Utilities Directive to challenge the contract decision.
The Kolin ruling has substantial implications for US suppliers participating in EU procurement. US goods, services, and suppliers are guaranteed equal treatment with EU and foreign suppliers in procurement that the EU has opened to the US under the GPA. However, the EU has incorporated various reciprocal conditions in its GPA commitments, denying the US rights to participate in procurement where the US does not offer reciprocal access, such as in the transportation sector and services purchased by subcentral entities. To date, US firms have generally had de facto access to that procurement. Now, however, the Kolin decision provides a legal basis for EU procuring entities to deny equal treatment to US firms in procurement to which they do not have rights under the GPA. (For a comprehensive examination of the reciprocal conditions under the GPA, see GPA Reciprocal Conditions: Leverage for Bilateral Agreements.)
Recently, the EU has adopted measures that allow it to take action against third countries that benefit from participation in its largely open procurement market but refuse to provide EU suppliers with reciprocal access to their own procurement or engage in unfair bidding in the EU. In 2019, the European Commission issued third-country guidance, clarifying the authority of the member states to reject bids from third countries that do not have the right to participate in a particular procurement under the GPA or another agreement. Notably, it did not require such bids to be rejected.
Subsequently, the EU implemented two measures that allow it to restrict third-country access to EU procurement. The first was the 2022 International Procurement Instrument (IPI) that provides the EU Commission with leverage to negotiate the opening of public procurement markets in third countries that do not provide reciprocal access to EU suppliers, and if the refuse, their participation in EU procurement could be restricted. The Commission initiated its first IPI investigation against China’s procurement of medical devices earlier this year.
The second, the Foreign Subsidies Regulation (FSR), implemented in 2023, empowers the Commission to address distortions in EU procurement caused by foreign subsidies benefiting companies bidding on public procurement contracts in the EU. After the Commission initiated FSR investigations in several procurements, alleging bids benefitted from foreign subsidies, the Chinese tenderers withdrew from the procurement.
The CJEU's ruling in the Kolin case could have broader implications for participation in EU procurement by firms from the US and other countries than the recently adopted EU measures.
