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Procurement: Using TTIP to Fill the Gaps Left by Brexit

In the wake of Brexit, much of the public discussion about the Transatlantic Trade and Investment Partnership (TTIP) — the comprehensive trade agreement being negotiated between the European Union and the United States — has focused on the delay that Brexit may cause the TTIP negotiations, and has reflected hope on the part of the British left that Britain can now stay out of TTIP.

In the long term, however, it is perhaps unlikely that a newly independent Britain would remain outside TTIP, which if concluded is likely to prove a critical tool to open markets, and reduce regulatory barriers, between European nations and the United States. Although the White House has warned that an independent UK would be joining TTIP from a “different starting point,” TTIP, if successful, could simply be too attractive for Britain to ignore — especially if the alternative, a bilateral deal with the United States, would offer reduced access for a weaker Britain.

This possibility that Britain would, after Brexit, seek to join TTIP opens a strategic question: could TTIP be used to close some of the gaps opened by Brexit?

In procurement, the most serious gap left by Brexit is uncertainty — will the UK agree to continue to follow the EU procurement directives, and can the UK continue to calm the protectionist voices emerging in the European Union? TTIP may address both problems.

To understand why, we can look to the structure of other free trade agreements, such as the WTO Government Procurement Agreement (GPA), to make an educated guess as to how TTIP would be structured. Under the GPA, each party lists the nations and agencies to be covered. Thus, under the revised GPA, the European Union has in Annex 1 agreed (with UK acquiescence) that certain United Kingdom agencies will be covered.

We can assume that the procurement provisions under TTIP would adopt the same structure, listing covered nations and agencies. That has been the case under the Transpacific Partnership (TPP), which lists in Annex 15-A the agencies regarding which the TPP parties have agreed to open their procurements.

We can also assume that the European Union would not object to agreeing under TTIP that its member states will comply with the European procurement directives; agreeing to bind its member states to its own rules should not be difficult for the EU. Finally, it seems safe to assume that the EU and the United States would be willing to stipulate that any nation that entered the TTIP structure would be allowed to enter only on terms at least as favorable as those that previously bound that state, under that agreement. Neither the European Union nor the United States would have an obvious reason to object to such a condition; neither, of course, favors Brexit.

Under such a provision, if post-Brexit Britain sought to enter TTIP separately as a nation outside the European Union, Britain would be bound to the coverage terms that previously applied, i.e., arguably the same UK government agencies would be covered, and they would be bound to follow the European procurement directives (or a set of procurement rules as least as rigorous as the EU rules).

None of this would be simple, of course. But by demanding that any new entrant — including the United Kingdom — join TTIP on terms as least as favorable as before, TTIP might help bring stability and predictability to procurement in the U.S. and European markets.

That leaves, then, the question of emerging protectionism regarding procurement in the European Union, driven by European concerns that some trading partners, including the United States, have unfair access. While the United Kingdom has often opposed new protectionism in Brussels, the UK’s influence will likely plummet under Brexit. Under a redrawn arrangement in TTIP, however, Britain would be able to engage anew, not as a voice within the EU, but rather as another negotiating partner in TTIP. The dynamics would be different, but the United States would regain an ally in opposing new European protectionism in procurement.

– Chris Yukins

Editor’s note: On September 19, 2016, these Brexit developments will be discussed at our annual conference on transatlantic procurement at King’s College London; GWU Law School is a co-sponsor. Attendance is free, and further information is available athttp://www.eventbrite.co.uk/e/opening-transatlantic-procurement-markets-tickets-25739851589 .

The Post-Brexit Pivot

Brexit While an earlier post discussed how Britain’s procurement rules may evolve after Brexit, this post assesses how international procurement reform — specifically, the UK-based colleagues engaged in those reforms — may shift focus after the historic referendum.

First we must put Brexit into context, with regard to procurement law. In 2014, the European Union revamped its procurement directives. By U.S. standards, the EU directives are relatively short and straightforward. For example, Directive 2014/24/EU, which covers most larger public purchases of goods and services, is less than 180 pages long, while by contrast the Federal Acquisition Regulation runs to thousands of pages. Though the EU directives tend to place first emphasis on economic integration, not best value, the EU rules generally align closely with global best practices, and the EU rules conform with international trade agreements such as the WTO’s Government Procurement Agreement.

Although EU member states had two years to transpose the 2014 directives into their own laws, in less than a year the UK government enacted its new Public Contracts Regulations 2015. The new UK law, it was noted by some, was an almost direct transcription of the governing EU directives, although the UK, as a member state, had more discretion to innovate. Some suggested quietly that the UK government rushed the Public Contracts Regulations to avoid the coming storm over Brexit; subsequent events seemed to confirm that.

During the Brexit debate this year, those urging that Britain leave the European Union condemned the EU procurement directives as an example of intrusive regulation from Brussels. The “Leave” campaign argued that “EU public procurement law imposes extremely onerous requirements on public authorities.” Justice Secretary Michael Gove, a Conservative leader in the Leave campaign, joined the chorus; he argued: “If we Vote Leave we can scrap the EU’s foolish rules on how Whitehall runs procurement processes which add billions to the cost of Government every year.”

The Brexit vote thus left UK procurement law in a jumble. Britain’s procurement law is today based on an EU governance model that many British voters have rejected, and on EU rules that Britain’s chief legal officer has called “foolish” — though the EU rules reflect, in the main, international best practices. If Britain abandons sound procurement rules, it risks losing legitimacy in its procurement system; if Britain instead rewrites its procurement law, it may come full circle to a body of rules, shaped by international obligations and best practices, which looks much like what it already has.

While it is difficult to predict how future UK governments will untangle all this, it may be easier to discern what role the UK procurement community could play, post-Brexit. Many of the world’s best procurement lawyers and academics work in Britain, and they may well pivot: from voices inside the European Union, bound sometimes by norms of European economic integration, to strong voices in a more global procurement community, focused first on procurement as an instrument of best value for governments and their citizens. If this shift does occur — if the British leaders in procurement do pivot to step beyond European goals, to more global concerns — Brexit ironically may have built a bridge, not a chasm.

– Chris Yukins

Editor’s note: On September 19, 2016, these Brexit developments will be discussed at our annual conference on transatlantic procurement at King’s College London; GWU Law School is a co-sponsor. Attendance is free, and further information is available at http://www.eventbrite.co.uk/e/opening-transatlantic-procurement-markets-tickets-25739851589 .

Procurement After Brexit: An American Perspective

Brexit Britain’s historic vote to leave the European Union will have a profound impact on public procurement law, both in the European Union and around the world. The impact may not be catastrophic — like Norway, the United Kingdom may choose to remain in the European Economic Area which would keep the UK in the single market and bind it to existing European procurement directives — but the indirect impact, in a diminished role for the British in European procurement policy, could prove quite serious.

As the Freshfields procurement law group (historically one of the leading groups in Europe) has noted, if the UK stayed within the European Economic Area, Britain would remain part of the single European market and European procurement rules would continue to apply to UK public procurement. From the Freshfields page:

What if the UK leaves the EU, joins the European Free Trade Association and remained a member of the European Economic Area (EEA)? (the Norwegian option)

There would be no impact on current applicable public procurement law. Under the EEA Agreement, non-EU states that join the EEA still participate in the EU’s internal market by adopting all the relevant EU legislation, apart from that on fisheries and agriculture. This means that the EU’s public procurement law will continue to apply.

Should Britain not join the EEA, as senior London barrister Michael Bowsher QC has noted, in order to protect its own exports Britain might find itself forced to provide reciprocal access to its procurement markets, under the World Trade Organization’s Government Procurement Agreement (GPA) or otherwise. Under these scenarios, Britain still would follow international best practices for open markets, but UK procurement law likely would follow a separate path — a less European path — of development.

The indirect impact of Brexit on global procurement policy also should not be underestimated. Britain will have no direct say in writing the European Union’s procurement rules, which have played an increasingly important role in shaping global best practices over the past few decades. Moreover, as Michael Bowsher points out, in important part because of British resistance the European Union has stopped short of adopting proposed barriers to other nations (such as China and the United States) that the EU accuses of protectionism; with Brexit, the British voice will be muted, and those EU procurement barriers may well rise. That, in turn, will make it more important for the United States to conclude the Transatlantic Trade and Investment Partnership (TTIP) with the EU, to reinforce U.S. access to European procurement markets.

Finally, Britain is home to many of the world’s brightest lawyers and academics in procurement law. Their role in helping the European Union shape flexible, common-sense procurement rules focused on achieving best value will almost certainly be diminished, and that, one might argue, will be a loss for everyone.

Editor’s note: On September 19, 2016, these Brexit developments will be discussed at our annual conference on transatlantic procurement at King’s College London; GWU Law School is a co-sponsor. Attendance is free, and further information is available at http://www.eventbrite.co.uk/e/opening-transatlantic-procurement-markets-tickets-25739851589 .