PPPs #2: EU Works Concessions under Trade Agreements

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The European Union (EU) covers public works concessions – a form of public-private partnerships (PPPs) – under the revised WTO Government Procurement Agreement (GPA), as well as under bilateral agreements. Under the GPA, the EU limits its coverage of works concessions to a national treatment regime, but does not indicate the extent of obligations under such a regime. However, bilateral agreements with two GPA partners, the Republic of Korea and Canada, that cover works concessions elaborate on the obligations that apply to such projects.

EU-Korea FTA: In the EU-South Korea Free Trade Agreement (FTA), which entered into force in 2011, the EU and Korea exchanged PPP coverage: public works concessions for the EU and build-operate-transfer (BOT) contracts for Korea. The FTA excludes the PPP projects from the obligations of its Government Procurement Chapter and instead sets out the requirements for the projects in a separate BOT Contracts and Public Works Concessions Annex, which applies to projects above a threshold of 15 million Special Drawing Rights (SDRs). Both parties bring their GPA coverage of central government and sub-central government entities under the Annex. Neither extends its coverage to the utilities nor other entities covered under the GPA.

Key definitions in the FTA Annex explain the projects that are covered. Korea applies the same definition of a BOT contract that it uses under the GPA and its FTA with the United States. For the EU, three definitions clarify what is meant by public works concessions:

  • A public works concession is “a contract of the same type as a public works contract except for the fact that the consideration for the works to be carried out consists either solely in the right to exploit the work or in this right together with payment”.
  • Public works contracts are: “public contracts having as their object either the execution, or both the design and execution, of works related to one of the activities within the meaning of Division 51 of the CPC or a work, or the realisation, by whatever means, of a work corresponding to the requirements specified by the contracting authority”.
  • A work is “the outcome of building or civil engineering works taken as a whole which is sufficient of itself to fulfil an economic or technical function”.

The obligations for BOTs and public works concession contracts are limited to national treatment and non-discrimination obligations and certain procedural requirements. Those requirements include: publication of a notice of intended procurement with basic information; publishing the award of a contract within a reasonable time in official media; and ensuring an effective system of review of decisions by competent authorities covered by the Annex, but does not require the creation of a special system of administrative or judicial review. In addition, the Annex allows the parties to take measures to encourage small and medium-sized enterprises to participate in BOT and public works concessions.

EU-Canada CETA: Under the EU-Canada Comprehensive Economic and Trade Agreement (CETA), which has not yet entered into force, the EU and Canada cover PPP projects. The EU provides Canada with the same works concessions coverage that it provides under the GPA to certain parties, but withholds from Canada. Canada covers construction services contracts, which are described as involving:

  • “as complete or partial consideration, any grant to the supplier of the construction service, for a specified period of time, of temporary ownership or a right to control and operate the civil or building work resulting from such contract, and demand payment for the use of such work for the duration of the contract”.

This is generally comparable to the definition that Korea and the U.S. use for BOT contracts.

For PPP projects, both Canada and the EU will open the contracts awarded by the federal government entities and sub-central government entities that they cover under CETA. In addition, Canada will cover the crown corporations and other government enterprises that it lists under Other Entities in CETA. But, its commitment does not extend to contracts undertaken by airports, railways, ports, water authorities, electric utilities or gas authorities. These exclusions are comparable to the EU’s exclusion of its utilities from its public works concessions commitments.

The parties limit the obligations in the CETA government procurement chapter that apply to PPP projects. The applicable obligations include non-discrimination, publication of notices of intended procurement (which does not include the time frame for delivery of goods or services or duration of the contract), publication of the contract award and domestic review procedures, which are the same as those in the GPA.

The EU’s agreements with Korea and Canada illustrate the limited procedural commitments that the EU undertakes with regard to public works concessions. It could be assumed that these are the obligations that it applies to the works concessions subject to its national treatment regime under the GPA.

Jean Heilman Grier

June 29, 2015

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