Category: European Union

Photo: Cedric Puisney

The Court of Justice for the European Union issued what observers have called a “monumental” decision in Kolin Inşaat Turizm Sanayi ve Ticaret (Case C-652/22 (Oct. 22, 2024)). Taking up an international trade question that had not been raised by the referring court, the Court of Justice ruled that vendors from third nations – from nations, such as Türkiye, that have not entered into free trade agreements with the EU addressing procurement — cannot demand equal treatment in public procurements under member states’ laws that are founded on the EU Procurement Directives.

Understanding the Kolin Decision

As Jean Heilman Grier pointed out in her thoughtful commentary in November 2024, the Kolin decision may pose a more serious threat to free markets than the EU’s recent measures to boost EU vendors’ access to foreign procurement markets, the International Procurement Instrument and the Foreign Subsidies Regulation. See Jean Heilman Grier, Court Restricts Access of Third Countries to EU Procurement (Nov. 2024); Pascal Friton, The EU’s Consistent Pursuit of a Resilient Economy – Still a Necessity or a Wrong Priority?, 2021 Gov’t Contracts Year in Review Briefs 7; Pascal Friton, Max Klasse & Christopher R. Yukins, The EU Foreign Subsidies Regulation: Implications for Public Procurement and Some Collateral Damage, 65 Gov. Contractor ¶ 63 (Mar. 22, 2023); see also European Commission, Guidance on the participation of third-country bidders and goods in the EU procurement market (2019).

Although U.S. vendors are guaranteed access to EU markets under the World Trade Organization’s Agreement on Government Procurement (GPA), Ms. Grier noted that “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 [e.g., state] entities.” While U.S. firms “generally had de facto access to that procurement,” now, she warned, the Kolin decision may provide a legal basis for procuring entities (agencies) in EU member states “to deny equal treatment to US firms in procurement to which they do not have rights under the GPA.”

Editor’s note: In December 2024, Jean Grier published a highly detailed analysis of Kolin, written against the backdrop of EU trade restraints on procurement. See Jean Heilman Grier, Feature Comment, European Court Restricts Foreign Firms’ Access to EU Procurement, 66 The Government Contractor ¶ 330 (Thomson Reuters, Dec. 11, 2024).

Nor is it clear how, exactly, access to EU public procurement markets might be impaired. University of Bristol (UK) Professor Albert Sanchez-Graells, in his in-depth analysis of Kolin, noted that the Court of Justice opinion leaves unanswered what rights, exactly, vendors from third nations such as Türkiye or China will have in member states’ procurements. While (as he pointed out) the decision nominally leaves it to contracting agencies to decide how to handle bids from third-country vendors, the court’s decision suggests that third-country vendors should suffer less favorable treatment – but does not define what that means. See Albert Sanchez-Graells, The Court of Justice decidedly jumps on the procurement protectionism bandwagon, creating legal uncertainty along the way (C‑652/22) (Nov. 6, 2024).

In a response to Albert Sanchez-Graells, Professor Roberto Caranta (University of Turin) argued that the Court of Justice appropriately addressed the international trade questions that have proven so controversial. Professor Caranta further argued that the Court of Justice in Kolin properly concluded that vendors from third countries that have not joined free trade agreements with the EU cannot claim rights to equal treatment under the EU directives; this, he urged, is an essential incentive to encourage third countries to join those free trade agreements (such as the WTO Government Procurement Agreement). Professor Caranta agreed with Albert Sanchez-Graells that the Kolin decision left too heavy a burden on EU procuring entities — to decide whether vendors from third countries can participate in a competition, and if so under what legal conditions.

Editor’s note: Marko Turudić of the University of Zagreb gave a very interesting presentation on Kolin at the ICAPP 2024 conference in Dublin on November 12, 2024.

The Draghi Report: Urging European Preferences

EU Member States’ response to Kolin may be colored by a recent European Commission report led by former Italian Prime Minister Mario Draghi, The Future of EU Competitiveness (Oct. 2024). The Draghi report argued that EU member states should harness public procurement to drive European competitiveness. To do so, among other things the report urged member states to “favour competitive European defence companies” over U.S. suppliers, which dominate the European defense market. (This pronouncement, noted a CSIS report, “will make U.S. defense companies nervous.”) The Kolin decision will make it easier for EU procuring agencies to impose preferences for European companies against U.S. and third-country firms, especially where there are gaps in existing free trade agreements.

The Letta Report: Procurement and the Single Market

The EU response may also be colored by the “Letta report,” which called not for protectionism but rather for EU-centered policies in procurement, to drive forward the European single market. In June 2023 the European Council called “for an independent High-Level Report on the future of the Single Market,” which was commissioned from the former Italian head of government, Enrico Letta. The Letta report, Much More Than a Market — Speed, Security, Solidarity: Empowering the Single Market to deliver a sustainable future and prosperity for all EU Citizens (April 2024), addressed EU public procurement policy in detail, beginning at page 42.

The Letta report called for a “Circular Single Market” to support environmental and economic sustainability “by fostering innovative business models and consumer behaviors.” The report called for procurement strategies that would align public spending with broader goals, especially in innovation and sustainability. Finally, the Letta report called for the strengthening of administrative capacities in procurement, to advance effectiveness and accountability in the implementation of the EU’s strategies.

Kolin from a U.S. Perspective

Observers from the United States can understand the Kolin decision through both U.S. law and shifting U.S. trade policies.

From a legal perspective, the Kolin decision puts the European Union closer to the United States’ more absolute bar under the Trade Agreements Act of 1979, 19 U.S.C. § 2501 et seq. Under the Trade Agreements Act, vendors from foreign countries are generally barred from larger federal procurements if their nations have not entered into trade agreements with the United States. 19 U.S.C. § 2512; FAR 52.225-5; Christopher R. Yukins & Steven L. Schooner, Incrementalism: Eroding the Impediments to a Global Public Procurement Market, 38 Geo. J. Int’l L. 529, 559 (2007) (citing the “walled garden” set up by the Trade Agreements Act); Christopher R. Yukins & Allen Green, International Trade Agreements and U.S. Procurement Law, in The Contractor’s Guide to International Procurement (ABA 2018) (Erin Loraine Felix & Marques Peterson, eds.). Because the United States has joined the GPA and an array of bilateral reciprocal defense procurement agreements with EU member states (and NATO allies), under current agreements U.S. vendors should continue to have broad access to EU public procurement markets.

Policy changes on the horizon, however, may imperil U.S. access. The Kolin decision was issued just a few weeks before President Trump won a second term in the U.S. elections. The coming Trump administration may raise new protectionist barriers, and (as Ms. Grier noted) the Kolin decision suggests that where there are gaps in U.S. international trade agreements with the European Union – where, for example, U.S. vendors’ access to a European defense market is not clearly defined by a reciprocal defense procurement agreement – the EU member states, responding to fresh U.S. protectionism, may try to raise new barriers to U.S. vendors in the EU’s public procurement markets.

Conclusion — A New Path Forward

As the United States enters a new administration, the Kolin decision marks a point of reflection. Unlike the Trade Agreements Act in the United States, the European Court of Justice decision leaves open the door for third-country vendors’ participation in EU public procurement markets, though under uncertain terms. The decision also reinforces the importance of existing free trade agreements between the United States and the EU and its member states. As with other measures recently undertaken by the European Union, the decision suggests barriers to EU procurement markets are rising, and the United States will need to pay careful attention to ensure that U.S. firms continue to have access to those markets.