Christopher Yukins’ short paper reviewing the procurement issues under Brexit was published yesterday in Thomson Reuters’ weekly, The Government Contractor; it’s available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2802637.
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 .
Michael Bowsher QC on the Post-Brexit Outlook in UK Procurement
Editor’s note: Michael Bowsher is the coordinating co-chair of the September 19, 2016 conference at Kings College London, which will address procurement issues after Brexit; registration is free, at http://www.eventbrite.co.uk/e/opening-transatlantic-procurement-markets-tickets-25739851589. Michael’s contribution below is part of a very interesting review of regulatory issues that may emerge from Brexit.
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Procurement
Michael Bowsher QC of Monkton Chambers considers the potential implications for the EU procurement regime, a key area for criticism from those who have campaigned to leave the EU.
“At a very simple level, it is hard to see politicians, administrators or courts wanting the disposal of the money raised from taxpayers to be done without some transparent framework in which to operate. Perhaps even more fundamentally though, these are not just the EU’s rules (which of course reflected many of the UK’s demands). Any modern trade agreement between industrialised nations includes a chapter regarding the opening up, and therefore also the regulation of, government procurement markets. The EU rules themselves are actually the expression in the EU of the requirements of the WTO’s Government Procurement Agreement (GPA). The UK or England and Wales could join the WTO without joining the GPA, but it would be very strange if it did given the list of countries that are already signed up.
“Finally, it already seemed likely that the EU would soon legislate to provide for the means of closing its own government markets to countries that did not provide reciprocal access. If that happened, we would have to put in place something comparable to the GPA rules just to continue trade for this 20% or so of the EU market, and those GPA rules require something very like the EU directives with some appropriate remedies. So, while there will be a lot of change, some elements of the current system are likely to remain.
“In the short term, there will be an immediate impact on projects, research and so forth funded by the EU, or in some way related to the EU. Those dependent on those projects and research that are funded may be immediately affected. The volume of government funded work generally may reduce and this will affect the practice of procurement law, although history shows that this can be unpredictable. Quite often when there are more people chasing less work, there is more concern as to how that smaller pie is distributed and more disputes over the result.”
UNCITRAL Call for Papers – July 4-6, 2017 Conference in Vienna
Modernizing International Trade Law to Support Innovation and Sustainable Development
A three day Congress hosted by the United Nations Commission on International Trade Law to celebrate its 50th anniversary and explore new directions in cross-border commerce
4-6 July 2017, Vienna International Centre, Vienna
Join us to celebrate the 50th anniversary of the Commission and to engage with leaders in the field of international trade law, including practitioners, judges, academics, international officials and other experts to explore the opportunities that UNCITRAL should seize in the coming years.
Participants will examine ways in which UNCITRAL can contribute to managing new development issues and fostering innovation through the modernization of international trade law. The Congress will be open to anyone with an interest in international trade and business, the work of UNCITRAL and the potential of trade law reform and innovation to translate the United Nations sustainable development goals into action to advance business and trade at country level.
Attendance at the Congress is free of charge. More information will be available on this site when it becomes available.
The Post-Brexit Pivot
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
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 .
Public Procurement Law Review Publishes Reviews of Multilateral Development Banks’ Procurement Reforms
The Pu
blic Procurement Law Review, led by Professor Sue Arrowsmith at the University of Nottingham, has published a very interesting set of essays on procurement developments at the MDBs. For U.S. lawyers, these are available on Westlaw.
| 1. All change at the World Bank? The new procurement framework
Public Procurement Law Review 2016 P.P.L.R. 2016, 4, 121-150 Peter Trepte |
| 2. An update on procurement reforms at the African Development Bank
Public Procurement Law Review 2016 P.P.L.R. 2016, 4, 151-163 Vinay Sharma |
| 3. The Inter-American Development Bank: reform to build up and increase the use of national procurement systems in Latin America and the Caribbean
Public Procurement Law Review 2016 P.P.L.R. 2016, 4, 164-171 Adriana Salazar |
| 4. The procurement policies and rules and the procurement activities of the European Bank for Reconstruction and Development (EBRD)
Public Procurement Law Review 2016 P.P.L.R. 2016, 4, 172-178 Jan Jackholt |
Welcome to Public Procurement International
For further information on this website, please feel free to contact Christopher Yukins, a professor and co-director of the Government Procurement Law Program at The George Washington University Law School, cyukins@law.gwu.edu.