The European Union (EU) has initiated a review of its procurement directives (regulations) that may include the application of preferences in EU procurement. President Ursula von der Leyen proposed adoption of preferences in her political guidance for a new commission in July 2024. In the guidelines, she announced a revision of the directives that would allow preferences to be given to European products in public procurement for certain strategic sectors. This post considers the factors underlying the potential revisions and implications for foreign firm participation in the EU procurement market.
As the first step in implementing the Commission president’s plans, on December 13, 2024 (two weeks into its new term), the European Commission launched a review of its public procurement directives (adopted a decade ago) to determine whether they should be revised. These directives regulate EU public procurement with generally applicable rules in Directive 2014/24/EU (Public Procurement Directive), special rules that apply to entities operating in the water, energy, transport, and postal services sectors in Directive 2014/25/EU (Utilities Directive); and rules for concessions in Directive 2014/23/EU (Concessions Directive). The directives set out minimum public procurement rules that govern the way public authorities and certain public utility operators in the EU purchase goods, services, and works above a certain value.
In initiating its directives review, the Commission cited reports that acknowledge public procurement is "a key tool for promoting EU objectives.” One was the so-called “Draghi Report” that urges EU member states to harness public procurement in order to drive European competitiveness. That report, The future of European competitiveness, by the former Italian prime minister Mario Draghi, recommends that the member states favor competitive European defense companies over US suppliers, which dominate the European defense market.
Another report that provided an impetus for the review is a 2023 special report by the European Court of Auditors, Public procurement in the EU – Less competition for contracts awarded for works, goods and services in the 10 years up to 2021. It points to the need for action to address the "decrease of competition in public procurement and make full use of the potential of the EU’s public procurement market.”
The review will also consider relevant cases before the Court of Justice of the EU. That consideration could be expected to include the Court of Justice’s ruling in the Kolin case. In that October 2024 case, the Court ruled that suppliers from a third country that does not have an international agreement with the EU covering public procurement are not guaranteed, and have no right to demand, treatment on equal terms with EU bidders and those from countries with such agreements in EU procurement. That decision involved the Court’s analysis of the application of the Utilities Directive. It remains to be seen whether a revision of the directives incorporates that decision or perhaps modifies its effects.
The Commission is asking for public comments on its directives by March 7, 2025. It aims to complete its evaluation of the comments and for the Commission to take action in the third quarter of 2025. The Commission is likely to propose revisions of the directives that may well include procurement preferences. However, as discussed in an earlier post, it is unlikely that any preferences would be contrary to the EU's obligations under international agreements.
Jean Heilman Grier
January 10, 2025
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