Spurred by the report on The Future of European Competitiveness led by former Italian Prime Minister Mario Draghi, institutions across Europe are examining how to promote innovation through public procurement. On November 13-14, 2024, GW Law’s Christopher Yukins met with his colleagues in Europe about these ongoing initiatives.
Photo: C. Yukins, N. Meerschoek, W. Jannsen, E. Manunza, Elior Korem
At the University of Utrecht’s School of Law, Professor Yukins met with Professor Elisabetta Manunza and her team to discuss academic cooperation between the EU and U.S. procurement research communities. Among other things, they discussed ongoing research with NATO’s Defense Innovation Accelerator for the North Atlantic (DIANA). University of Utrecht Associate Professor Willem Janssen and Professor Marta Andhov have dealt often with issues of innovation through procurement in their award-winning podcast, BESTEK. Utrecht PhD student Nathan Meershoek has written on the challenges of innovation in defense procurement; NATO’s unit to foster innovative technology, DIANA, is one answer to those challenges.
DIANA was established by NATO to find and accelerate dual-use innovation capacity across the Alliance. DIANA provides companies with the resources, networks and guidance to develop deep technologies to solve critical defense and security challenges.
Professor Yukins also met with Stephan Corvers and his team in s-Hertogenbosch. The CORVERS consultants are legal experts in strategic public procurement, innovation and contracting. CORVERS has been asked to help assess best practices in procurement for innovation, from around the world, on behalf of the European Assistance For Innovation Procurement – EAFIP, an initiative financed by the European Commission (DG CONNECT) to provide local assistance to public procurers to promote innovation and best practices.
A few days after those meetings, the European Commission announced a series of initiatives to advance innovation in procurement. Those initiatives included a public consultation on possible updates to the EU procurement directives — including, importantly, a review of how the directives might be updated to foster innovation.
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.
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.”
Albert Sanchez-Graells
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).
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
Mario Draghi and Ursula von der Leyen, President of the European Commission
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.
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.
David Drabkin, Daniel Schoeni and Christopher Yukins spoke at the “Upphandlings-Konferensen” (“Public Procurement Conference”) held in Stockholm on April 25-26, 2024. The conference was very kindly hosted by Professor Andrea Sundstrand of Stockholm University.
David Drabkin
Dave Drabkin and Chris Yukins’ presentation, drawing on their report on debarment for the Acquisition Innovation Research Center, addressed convergence of the contractor exclusion/debarment systems in the United States and the European Union. A recent decision by the Court of Justice for the European Union, Infraestruturas de Portugal SA, explained that the EU Public Procurement Directive should be read to mean that procuring agencies in the EU have clear first authority to handle vendor exclusions and to assess vendors’ misconduct and remedial measures — from the U.S. perspective, a critical step in building effective risk-based debarment regimes in Europe to allow agencies to manage supply chain risk. (For background on the Infraestruturas decision, see Adrian Brown‘s recent piece in the Public Procurement Law Review and Albert Sanchez-Graell’s insightful analysis.)
Daniel Schoeni
Daniel Schoeni’s presentation — which was very well-received by the assembly of Swedish procurement attorneys — reviewed the parallels between the EU and the U.S. systems. Drawing on his PhD thesis at the University of Nottingham, Dan Schoeni explained that while the legal frameworks in the U.S. and the EU are remarkably similar, their foundations and implementations vary widely because of their different histories, politics and perspectives.
Professor Andrea Sundstrand – Stockholm University
Please feel free to join this interesting presentation on EU defense procurement and the decisions of the European Court of Justice. Professor Sundstrand of Stockholm University will discuss her article on the intersection of Member State autonomy over defense matters and the European Union’s authority to direct procurement rules.
Wednesday, 14 February 2024 – 3 pm – GW Law School, 2000 H Street NW, Washington DC – Stockton 306
This was a contribution to a special edition of the University of Nottingham’s Public Procurement Law Review on defense procurement in light of the war in Ukraine. What follows is the abstract, including the British spelling:
Rather than summarising the US national procurement regime for defence—the approach taken by many valuable contributions to this special edition, regarding other nations—this article defers to the existing literature and instead places the US practice of defence procurement law in a broader context, especially in light of Russia’s war against Ukraine. The US experience is that civilian and military purchasing are largely interchangeable, and that hard lessons learned from both quarters, such as in the procurement of supplies in a battle zone and the elimination of trade barriers, could be used to advance the cause of Ukraine and its democratic allies in the current war. The moral imperatives presented by the war in Ukraine are obvious, and this brief piece concludes that legal practitioners in our discipline, even if they are not specifically defence experts, can share a common skillset crucial to preserving democracy and rebuilding Ukraine, despite this terrible war.
This article was first published by Thomson Reuters, trading as Sweet & Maxwell, 5 Canada Square, Canary Wharf, London, E14 5AQ, in the Public Procurement Law Review, 32 Pub. Proc. L. Rev. 445 (2023), and is reproduced by agreement with the publishers. For further details, please see the publishers’ website. The manuscript version of the article is available here on the Social Science Research Network (SSRN).
Gian Luigi Albano of Italy’s centralized purchasing agency, CONSIP, joined Keith McCook (a senior procurement attorney in South Carolina government) and GW Law’s Christopher Yukins on November 10, 2023 to discuss the law-and-economics of framework agreements (which in the U.S. system are known as “indefinite-delivery/indefinite-quantity” contracts).
They spoke at the 10th anniversary meeting of the National Association of State Procurement Officials (NASPO) Law Institutein New Orleans. The Law Institute is a regular gathering of chief procurement officers (CPOs) and state public procurement attorneys from around the United States.
On June 7, 2023, GW Law School’s Prof. Christopher Yukins will address a Brussels conference, organized through Utrecht University, “Challenges for Public Procurement in Europe and Beyond: Concept Programme.” He will address the EU Foreign Subsidies Regulation (FSR), which will impose heavy disclosure requirements on vendors from abroad — including vendors from the United States — competing for EU Member State public procurements. The U.S. Chamber of Commerce has recommended that members of the WTO Government Procurement Agreement (GPA) be exempted from the FSR; Professor Yukins discusses that proposed exemption in his brief presentation (click here for slides).
For background materials and a prior webinar on the FSR, click here
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