As a consequence of its June 23 vote to leave the European Union, the United Kingdom (UK) will need to negotiate new trading relationships with the EU, the World Trade Organization (WTO), the United States and other countries. One of the WTO agreements that will be affected by Brexit is the WTO Government Procurement Agreement (GPA). This post presents a first look at the implications of Brexit on the UK’s membership in the GPA.
The UK was one of the original parties to the first international procurement agreement – the General Agreement on Tariffs and Trade’s Code on Government Procurement (GATT Code), which entered into force in 1981. However, when the 1994 GPA replaced the GATT Code, the UK was no longer a separate party, but a member of the EU.
Under the GPA, the EU and its 28 member states speak with a single voice – that of the European Commission, the EU’s executive arm. The EU specifies the procurement covered by each member state in its GPA annexes, applying the same terms and conditions to all member states, and basing its coverage on its procurement directives.
The UK will continue to be covered under the EU’s GPA coverage schedules until the EU removes its procurement. But, the EU cannot make that change unilaterally. The GPA requires parties to notify their counterparts of any proposed modifications to their commitments. The EU has used such notifications to add new member states on three occasions, most recently for Croatia. Accordingly, it would be expected to follow this approach and notify its proposed removal of the UK from its coverage schedules.
A proposed modification to coverage schedules becomes effective 45 days after its circulation, if no party objects. However, if a party objects, the modification cannot be made until the objection is removed, or an arbitration panel determines the removal is appropriate.
A EU notification to remove the UK’s procurement after Brexit should not be controversial as the EU would no longer have any control or influence over the UK’s procurement. Nonetheless, a Brexit notification could prompt reflection by the GPA parties of the resulting significant reduction in the value of the procurement covered by the EU under the Agreement. As noted in a recent post, the UK accounted for one-quarter of EU-covered procurement in 2012, the latest year for which the EU provided procurement data to the WTO.
When the UK is no longer part of the EU’s GPA coverage, it would then be a position to seek membership in the GPA on its own. It would likely do so through accession to the Agreement, unless the GPA parties were to find another creative way to keep the UK under the GPA umbrella.
The UK’s negotiations to rejoin the GPA would involve the procurement that it would cover and the conformity of its laws with the GPA. As for its covered procurement, the UK would not be able to simply rollover its current coverage as part of the EU because elements of that coverage are tied into EU procurement directives. For example, its sub-central coverage includes contracting authorities, which are bodies governed by public law as defined by the EU procurement directive. Similarly, the UK covers contracting entities whose procurement is covered by the EU utilities directive.
Before it could negotiate its own coverage under the GPA, the UK will need to negotiate its relationship with the EU. For example, will it enter an arrangement such as the European Economic Area (EEA), whose members (Norway, Iceland and Liechtenstein) pattern their GPA commitments after those of the EU?
Other GPA-related issues that will need to be addressed include potential ramifications of a gap in UK coverage between exiting the EU and entering the GPA on its own. Would such a gap affect the U.S. waiver of the Buy American Act and other domestic purchasing requirements for the UK as a EU member state? Such issues will be explored in subsequent posts.
Jean Heilman Grier
September 13, 2016