New hurdles for third-country bidders in EU procurement

The European Court of Justice (ECJ) has recently issued two decisions which will make it harder for bidders from non-EU countries to participate in EU tenders. The ECJ held that bidders from non-EU countries do not have equal access and the right to equal treatment in EU tenders unless their coun-try of origin has concluded a bilateral agreement, such as the WTO GPA. This also applies to legal remedies in case the bid is not successful. This is a significant shift for most EU Member States, where third-country bidders so far were typically admitted to tenders without question. Last month, the European Commission published Q&A on the legal implications of these judgments and adopted the first restrictive measure under the International Procurement Instrument. This alert summarizes key issues third-country bidders need to keep in mind when participating in EU tenders in the future.

What bidders need to know

• Access to tenders for third-country bidders is now at the individual discretion of each contracting authority. Each may decide independently whether to admit third-country bidders at all and if so, whether to apply any score adjustments to a bid submitted. And this decision can be made or changed at any stage of the tender process and revisited for each subsequent tender.
• Third-country bidders may also lack access to legal remedies to challenge these decisions in national courts.
• These restrictions do not apply to bidders from countries that are parties to the GPA or other bilateral agreements (like the EU-UK Trade and Cooperation Agreement) ensuring equal access, provided the specific tender is covered by the relevant agreement.

What bidders need to do

• Review tender documentation to determine whether third-country bidder participation is addressed. If not, consider raising the issue in the Q&A process.
• Verify whether the procurement is covered by an international agreement. The Commission’s IT Tool, while not legally binding, can be helpful.
• Consider establishing an EU-based entity or partnering with EU firms, particularly if EU tenders are part of your business model.
• Familiarize yourself with the relevant contractual and administrative legal frameworks that may provide access to legal remedies.

Background

Historically, most EU Member States allowed open market access, admitting bidders regardless of their origin. EU procurement rules also only contained limited exceptions, primarily for sensitive sectors such as defense. Market access became more restrictive with the introduction of the International Procurement Instrument (IPI (EU)2022/1031) in 2022 and the Foreign Subsidies Regulation in 2023. 

The ECJ has now gone a step further in its recent judgments in Kolin (C-652/22) and Qingdao (C-266/22), which addressed third-country access. While both decisions rely on the legal framework before the IPI directive entered into force, their implications remain the same:

• In Kolin, a Turkish bidder sought legal remedies before a Croatian court regarding additional documentation in a tender process. The ECJ declined to answer the material questions and instead focused on whether the Turkish bidder had a right to invoke the procurement directives' provisions and seek remedies – which it denied. The ECJ based its judgment on the principle that access to the European procurement market falls within the scope of the EU’s common commercial policy, which is exclusively governed by EU law. As current EU law does not provide for the participation of third-country bidders (international agreements such as the GPA notwithstanding), bidders from outside the EU are not entitled to participate in EU procurement procedures or benefit from the protections afforded by EU procurement law.
• In Qingdao, the ECJ had to rule on the permissibility of a Romanian law expressly restricting access to tenders for third-country bidders. The ECJ reiterated that it is for the individual contracting authority to decide whether or not third-country bidders are allowed to participate in a tender. And – even in the absence of EU legislation - any national laws regarding this are infringing on the explicit EU competence and therefore void.

What does this mean for bidders going forward?

The ECJ's rulings create a significant amount of uncertainty for bidders, especially since EU Member States are still in the process of adapting national procurement laws to the new requirements. Third-country bidders (which includes consortia and sub-contractors) currently run the risk of being barred from participating in EU tenders from the start, being excluded during the process, or being subject to disadvantages in scoring. Since preparing a bid often is a costly and time consuming activity, clarifying associated risks as soon as possible in a tender is paramount to ensure resources are not wasted. 

The ECJ's rulings also leaves the question unanswered to what extent national contracting authorities may – or even have to – still treat third-country bidders equally, e.g. due to general non-discrimination requirements under national law. In its Q&A (see above), the European Commission has clarified that each contracting authority needs to make an individual decision in each tender on how to treat third-country bidders. The European Commission further clarified that EU Member States also cannot legislate or adopt legally binding acts of general application concerning access to the EU public procurement market by third-country bidders. This has to be left to the individual decision of each contracting authority. The European Commission even went so far as to state that EU Member States may not even adopt guidelines for its contracting authorities as to how to treat third-country bidders.

There is some hope that contracting authorities as well as national review bodies and courts will identify national principles of law, such as the often constitutional principle of non-discrimination, the rule of law or the principle of proportionality – rooted in almost every administrative and constitutional legal framework of EU Member States – as a basis to provide third-country bidders with clear guidance as to their ability to participate in a tender and with legal remedies in case the bid is not successful. Until EU Member States have adapted to the new situation, however, bidders are advised to factor the uncertainty over their right to participate in EU tenders into any commercial decision.

We are grateful for the support of legal trainee Neele Schauer in preparing this summary.