NEWS – EU & INTERNATIONAL PUBLIC PROCUREMENT

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26.04.2024

Foreign Subsidies Regulation (‘FSR’) – EU Competition Day: competition and competitiveness in uncertain geopolitical times – Speech by EVP

“The Digital Markets Act and the Foreign Subsidies Regulation were designed to protect fair competition within the Single Market. They address two novel risks.

(…)

Another new tool is the Foreign Subsidies Regulation – which I know is a hot topic!

With the Foreign Subsidies Regulation, we address another dimension. We address an external challenge to our competitiveness and resilience. Activities or acquisitions in Europe infused by distortive subsidies impair our markets’ competitiveness. They destroy the level playing field. And they weaken our economic security.

We are committed to an open Single Market. But business in the European Union must be based on fair competition, reciprocity and a level playing field. I think that the events of the last weeks have shown that we will defend those principles vigorously.

We have launched a series of investigations, in quick succession. We already closed our investigation into the Chinese train manufacturer CRRC after it withdrew from a Bulgarian public procurement procedure in Bulgaria. But we continue to investigate bids by Chinese companies in public procurement for solar parcs in Romania. Now, we are also investigating subsidies in wind energy projects in the EU. And a couple of days ago we carried out the first surprise inspections under the Foreign Subsidies Regulation in the security equipment sector in several Member States.

I think we have made it clear that we will protect the Single Market. We will tackle distortive subsidies from wherever in the world they arise. But we will only act on the basis of clear evidence and in full respect of our international engagements and commitments.

We are very focused on enforcement measures. But I would also recognize the positive attitude that we see from companies and stakeholders. These new tools do foster compliance. And compliance directly achieves the goals that we have set for ourselves.

  • The DMA entered into force after months of engagement with gatekeepers. Many important announcements have been made that already bring concrete and tangible benefits. Today, your phone allows you to do things that you could not do yesterday. It is easier to get rid of apps you don’t want, to choose your preferred default setting. You also have better control over your data. All of that is new.
  • For the Foreign Subsidies Regulation, I will admit that it brought us a bit more notifications than we initially expected. But our practice shows that this is not a tool to discourage investment in the EU. Investors initially feared that we would create too much red tape. But companies that have gone through the notification system have found a very swift and clear outcome”.

https://ec.europa.eu/commission/presscorner/detail/en/speech_24_2324

 

24.04.2024

International Procurement Instrument (IPI): first investigation into Chinese medical devices

“Today, the European Commission has initiated for the first time an investigation under the International Procurement Instrument (IPI), in response to measures and practices in the Chinese procurement market for medical devices which discriminate unfairly against European companies and products. Evidence gathered by the Commission indicates that China’s procurement market for medical devices has gradually become more closed for European and foreign firms, as well as for products made in the EU. This is due to measures introduced by China that differentiate between local and foreign companies, and between locally produced and imported medical devices. Having previously raised its concerns directly and repeatedly with Chinese authorities, and in the absence of satisfactory replies or actions, the Commission has decided to address this issue through the IPI Regulation.

The EU is a strong advocate of a level playing field in international procurement markets. In this context, the first aim of an IPI investigation is to foster dialogue between competent authorities on removing discrimination in public procurement, for the benefit of all. Only if dialogue fails to deliver an equitable agreement will the Commission consider imposing IPI measures.

Executive Vice-President and Commissioner for Trade Valdis Dombrovskis said: “The International Procurement Instrument is a powerful new mechanism to support our European companies in markets that are less open than ours. It also aims to promote open public procurement markets globally. Openness is vital for businesses to thrive, for consumers, and to spur innovation worldwide. We are launching this investigation with China so that we can achieve a level playing field in our procurement markets for producers of medical devices, on both sides. Regrettably, our repeated discussions with China on this trade irritant have been fruitless. We trust that this IPI investigation will galvanise our dialogue and help us find mutually agreeable solutions.”

“The European Commission has decided on its own initiative to initiate, pursuant to Article 5(1) of Regulation (EU) 2022/1031, an investigation into alleged measures and practices of the People’s Republic of China (‘PRC) resulting in a serious and recurrent impairment of access of Union economic operators, goods and services to the PRC’s public procurement market for medical devices.

At the same time, the PRC is invited to enter into consultations with the European Commission in order to eliminate or remedy the alleged measures and practices.

Member States and interested parties are invited to participate in the investigation and provide relevant information, within 30 calendar days from the date of initiation of the investigation”.

https://policy.trade.ec.europa.eu/help-exporters-and-importers/accessing-markets/public-procurement/international-procurement-instrument/china-medical-devices_en

https://ec.europa.eu/commission/presscorner/detail/en/ip_24_2044

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=OJ:C_202402973

 

Infringement procedures – The Commission urges BULGARIA, SPAIN and ROMANIA to comply with the public procurement legislation

The European Commission decided to open an infringement procedure by sending a letter of formal notice to Romania (INFR(2023)2114) and to issue reasoned opinions concerning Bulgaria (INFR(2018)2268) and Spain (INFR(2021)2171) for failing to comply with the public procurement legislation. The rules covering public contracts and concession contracts (Directive 2014/23/EUDirective 2014/24/EU and Directive 2014/25/EU) had to be transposed by Member States into domestic law by 18 April 2016. By requiring Member States to follow impartial and transparent procedures, these directives aim to open public markets to genuine competition between companies across the EU and to ensure the best value for money for public purchases. The Commission is addressing the countries over various issues relating, among others, to restrictions of operators’ rights in the case of Romania and exclusion of private hospitals from EU public procurement rules even when they are partly financed through public funds in the case of Bulgaria.  The Spanish legislation does not respect in particular the scope of application of the Directives regarding the type of contracting authorities, contracts and contract modifications that must be covered.

Bulgaria, Spain and Romania now have two months to respond and address the shortcomings raised by the Commission.  In the absence of a satisfactory response the Commission may decide to issue a reasoned opinion to Romania and to refer Bulgaria and Spain to the Court of Justice of the European Union.

Infringement procedures – The Commission asks SPAIN and HUNGARY to comply with rules on motorway concession contracts

The European Commission decided to open an infringement procedure by sending a letter of formal notice to Hungary (INFR(2024)4006) and an additional letter of formal notice to Spain (INFR(2021)4052) for failing to comply with rules on motorway concession contracts. Both letters aim to ensure the respect of EU rules on concessions, which provide for the equal treatment of economic operators interested in participating in procurement procedures and the respect of the obligation of transparency. The Commission is addressing various issues related to those contracts. It considers that Hungary’s 35-year concession lacked transparency in estimated value, failed to transfer sufficient operating risk, and was extended for an unduly long period without justification, violating EU law. Spain extended the duration of two motorway concessions without properly applying tender procedures, breaching EU rules.

Spain and Hungary now have two months to respond to the arguments put forward by the Commission. Otherwise, the Commission may decide to send them a reasoned opinion.

https://ec.europa.eu/commission/presscorner/detail/en/inf_24_1941

 

05.04.2024

Green Public Procurement (‘GPP’) – Joint Statement EU-US Trade and Technology Council of 4-5 April 2024 in Leuven, Belgium

“The European Union and the United States underscore that, by achieving a common understanding on green public procurement practices, we can accelerate the uptake of more sustainable and greener solutions to achieve our common environmental and climate goals.

To this end, we have issued a Joint EU-US Catalogue of Best Practices on Green Public Procurement. It will contribute to advancing sustainability objectives by identifying and promoting policy tools for accelerating the deployment of publicly financed sustainability projects in the European Union and the United States.

The Joint Catalogue presents a collection of policies, practices, and actions used across all stages of the procurement process, from the strategic planning to pre-procurement, procurement, and post-contract award stage, and addresses all types of environmental and climate challenges, such as reduction of greenhouse gas emissions, energy efficiency or promoting circular economy approaches. It can serve as an inspiration for policymakers and suppliers, as well as provide ideas for the uptake of green solutions in public procurement globally.

The European Union and the United States will continue to work together on how to use the Joint Catalogue and maximise its impact”.

Green Public Procurement (‘GPP’) – EU and US continue strong trade and technology cooperation at a time of global challenges

“Today, the EU and the United States held the sixth meeting of the EU-US Trade and Technology Council (TTC) in Leuven, Belgium. The meeting allowed ministers to build on ongoing work and present new deliverables of the TTC after two and a half years of cooperation.

(…)

Promoting easier, more sustainable and more secure trade on the transatlantic marketplace

Promoting sustainable trade as part of the green transition is a priority for both parties and the TTC remains a key forum for the EU and the US to cooperate on this. Both sides reaffirmed the importance of the Transatlantic Initiative on Sustainable Trade (TIST), which since its inception in 2022 frames the TTC’s work in this regard. At today’s meeting, ministers took stock of the work taking place under TIST including on conformity assessment, to facilitate trade in goods and technologies that are vital for the green transition. They agreed to publish a Joint Catalogue of Best Practices on Green Public Procurement to help accelerate the deployment of publicly financed sustainability projects, and to advance their cooperation on solar supply chains”.

https://ec.europa.eu/commission/presscorner/detail/en/ip_24_1827

 

03.04.2024

Foreign Subsidies Regulation (‘FSR’) – Commission opens two in-depth investigations in the solar photovoltaic sector

“Today, the Commission launched two in-depth investigations under the Foreign Subsidies Regulation. The investigations relate to the potentially market distortive role of foreign subsidies given to bidders in a public procurement procedure. The Commission will assess whether the economic operators concerned did benefit from an unfair advantage to win public contracts in the EU.

The investigations launched today follow notifications submitted by on the one hand the ENEVO Group including LONGi Solar Technologie GmbH, and on the other hand Shanghai Electric UK Co. Ltd. and Shanghai Electric Hong Kong International Engineering Co. Ltd. The relevant public procedure was launched by a Romanian contracting authority (Societatea PARC FOTOVOLTAIC ROVINARI EST S.A.) for the design, construction and operation of a photovoltaic park in Romania, with an installed power of 454.97 MW*. This project is partially financed by the EU Modernisation Fund.

According to the Foreign Subsidies Regulation, companies are obliged to notify their public procurement tenders in the EU when the estimated value of the contract exceeds €250 million, and when the company was granted at least €4 million in foreign financial contributions from at least one third country in the three years prior to notification.

Following its preliminary review of all the submissions, the Commission considered it justified to open an in-depth investigation for two bidders, since there are sufficient indications that both have been granted foreign subsidies that distort the internal market.

During the in-depth investigation, the Commission will further assess the alleged foreign subsidies and obtain all the information required to establish whether they may have allowed the companies to submit an unduly advantageous offer in reply to a tender. Such an offer could cause other companies participating in the public procurement procedure to potentially lose sales opportunities.

In line with the provisions of the Foreign Subsidies Regulation, at the end of its in-depth investigation the Commission may (i) accept commitments proposed by the company if they fully and effectively remedy the distortion, (ii) prohibit the award of the contract, or (iii) issue a no-objection decision.

Both consortia submitted a complete notification on 4 March 2024. The Commission now has 110 working days as of that date to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.

Companies

The first investigated consortium is composed of the ENEVO Group and LONGi Solar Technologie GmbH. ENEVO Group, the consortium leader, is a Romanian-based provider of engineering and consulting services. LONGi Solar Technologie GmbH is a newly established, fully owned and fully controlled German subsidiary of LONGi Green Energy Technology Co., Ltd, which is a major supplier of solar photovoltaic solutions, listed on the Hong Kong Stock Exchange. Both LONGi Solar Technologie GmbH and LONGi Green Energy Technology Co., Ltd. are active in the development, manufacturing and servicing of solar wafers, cells and modules.

The second investigated consortium is composed of Shanghai Electric UK Co. Ltd. and Shanghai Electric Hong Kong International Engineering Co. Ltd. Both companies are 100% owned and controlled by Shanghai Electric Group Co. Ltd, a State Owned Enterprise of the People’s Republic of China. It is ultimately owned and controlled by the Shanghai State-owned Industry Supervision and Management Committee, a state-owned entity that is subordinate to the China Central People’s Government. Shanghai Electric UK Co., Ltd. and Shanghai Electric Hong Kong International Engineering Co., Ltd. are leading global suppliers of industrial-grade solutions of energy, manufacturing and the integration of digital intelligence. They provide services on wind, solar and hydrogen storage, as well as an integrated process of generation, grid, load, and storage.

Procedural background

The Foreign Subsidies Regulation (‘FSR’) started to apply on 12 July 2023. This new set of rules enables the Commission to address distortions caused by foreign subsidies, and thereby allows the EU to ensure a level playing field for all companies operating in the internal market while remaining open to trade and investment.

In recent years, foreign subsidies appear to have distorted the EU’s internal market, including by providing their recipients with an unfair advantage to acquire companies or obtain public procurement contracts in the EU to the detriment of fair competition. The FSR addresses such distortions and closes a regulatory gap. It gives the EU new tools to effectively tackle foreign subsidies that cause distortions and undermine the level playing field in the internal market which is based on a competitive social market economy.

The FSR introduces three procedures:

  • Two notification-based procedures to (i) investigate concentrations as well as (ii) bids in public procurement procedures involving financial contributions granted by non-EU governments. The notification obligations apply to economic operators since 12 October 2023.
  • An ex officio procedure to investigate all other market situations, where the Commission can start a review on its own initiative.

The Commission will publish a non-confidential version of today’s decision, as well as the future final decision, after adoption, in the Official Journal of the European Union”.

26.03.2024

Foreign Subsidies Regulation (‘FSR’) – Withdrawal by CRRC Qingdao Sifang Locomotive Co., Ltd. from public procurement following the Commission’s opening of an investigation – Statement by Commissioner Breton

“The Commission takes note of the withdrawal by CRRC Qingdao Sifang Locomotive Co., Ltd. from a public procurement tender organised by the Bulgarian Ministry of Transport and Communications. The withdrawal follows the Commission’s announcement of an in-depth investigation under the Foreign Subsidies Regulation. As a result of the withdrawal, the Commission will close its in-depth investigation.

The public procurement tender concerns the purchase of 20 electric “push-pull” trains, as well as their maintenance over 15 years. The estimated value of the contract is around BGN 1.2 billion (€ 610 million).

CRRC Corporation Limited (known as CRRC) is a Chinese state-owned rolling stock manufacturer. It is the world’s largest rolling stock manufacturer in terms of revenue. Rolling stock manufacturers produce the locomotives and carriages used by railway operators, as well as subways, trams and other railway vehicles”.

“In just a few weeks, our first investigation under the Foreign Subsidies Regulation has already yielded results. Our Single Market is open for firms that are truly competitive and play fair. We will continue to take all necessary measures to preserve Europe’s economic security and competitiveness – with assertiveness and speed”.

https://ec.europa.eu/commission/presscorner/detail/en/statement_24_1729

 

23.02.2024

State aid rules on Public Service compensation: Commission opens in-depth State aid investigation into French compensation to maritime transport companies

“The European Commission has opened an in-depth investigation to assess whether the public service compensation granted to Corsica Linea and La Méridionale for the provision of maritime transport services to Corsica between 2023 and 2030 is in line with EU State aid rules.

The Commission’s investigation

In December 2022, France awarded to Corsica Linea and La Méridionale (individually, or jointly as Groupement Corsica Linea-La Méridionale) five contracts for the provision of maritime transport services for passengers and freight between Marseille and five Corsican ports (Ajaccio, Bastia, Propriano, L’Île Rousse and Porto-Vecchio) for the period 2023-2030.

France notified the Commission compensation to Corsica Linea and La Méridionale of €853,6 million for the provision of these services.

At this stage, based on its preliminary assessment, the Commission considers that additional information is necessary to determine whether the public compensation paid to Corsica Linea and La Méridionale is in line with EU State aid rules, and in particular with the 2012 Service of General Economic Interest (‘SGEI’) Framework.

For this reason, the Commission has decided to open an in-depth investigation to assess whether:

  • The inclusion of transport of towed freight and truck drivers in the contracts is justified by a public service need, given the presence on the market of a commercial offer developed from the neighboring port.
  • The volume of freight traffic to be transported pursuant to the contracts does not exceed the public service need identified by the French authorities.

In addition, additional clarifications are needed to conclude that the contracts comply with EU rules on public procurement.

The Commission will now investigate further. The opening of the in-depth investigation gives France and other interested parties the opportunity to submit their comments. It does not prejudge the outcome of the investigation.

Background

Under the EU State aid rules on public service compensation,  companies can be compensated for the extra cost of providing a public service, subject to certain criteria. This enables Member States to grant State aid for the provision of public services whilst, at the same time, making sure that companies entrusted with such services are not overcompensated. This minimises distortions of competition and ensures an efficient use of public resources.

The non-confidential version of the decision will be made available under the case number SA.101557 in the State aid register on the Commission’s competition website once any confidentiality issues have been resolved. New publications of State aid decisions on the internet and in the Official Journal are listed in the Competition Weekly e-News”.

16.02.2024

Foreign Subsidies Regulation (‘FSR’) – Commission opens first in-depth investigation

“Today, the Commission is launching its first in-depth investigation into the potentially market distortive role of foreign subsidies, exercising its powers under the Foreign Subsidies Regulation. This investigation relates to a public procurement procedure. It shows the Commission’s determination to preserve the internal market’s integrity by ensuring that recipients of foreign subsidies cannot benefit from an unfair advantage to win public contracts in the EU, to the detriment of fair competition.

The investigation launched today follows a notification submitted to the Commission by CRRC Qingdao Sifang Locomotive Co., Ltd., a subsidiary of CRRC Corporation, a Chinese state-owned train manufacturer. It concerns a public procurement procedure launched by Bulgaria’s Ministry of Transport and Communications, relating to the provision of several electric “push-pull” trains as well as related maintenance and staff training services.

According to the Foreign Subsidies Regulation, companies are obliged to notify their public procurement tenders in the EU when the estimated value of the contract exceeds €250 million, and when the company was granted at least €4 million in foreign financial contributions from at least one third country in the three years prior to notification.

Following its preliminary review of the notification received from CRRC Qingdao Sifang Locomotive, the Commission considered it justified to open an in-depth investigation, since there are sufficient indications that this company has been granted a foreign subsidy that distorts the internal market. For this, the Commission had to assess whether the foreign financial contribution constitutes a subsidy that directly or indirectly confers a selective benefit to the company; and whether this allows the company to submit an unduly advantageous tender.

During the in-depth investigation, the Commission will further assess the alleged foreign subsidies and obtain all the information required to establish whether they may have allowed CRRC Qingdao Sifang Locomotive to submit an unduly advantageous offer in reply to a tender. Such an offer could cause other companies participating in the public procurement procedure to potentially lose sales opportunities.

In line with the provisions of the Foreign Subsidies Regulation, at the end of its in-depth investigation the Commission may (i) accept commitments proposed by the company if they fully and effectively remedy the distortion, (ii) prohibit the award of the contract, or (iii) issue a no-objection decision.

CRRC Qingdao Sifang Locomotive submitted a complete notification on 22 January 2024. As of that date, the Commission has 110 working days, until 2 July 2024, to take a final decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.

Companies and products

CRRC Corporation Limited (known as CRRC) is a Chinese state-owned rolling stock manufacturer. It is the world’s largest rolling stock manufacturer in terms of revenue. Rolling stock manufacturers produce the locomotives and carriages used by railway operators, as well as subways, trams and other railway vehicles.

The Bulgarian Ministry of Transport and Communication public procurement tender is for 20 electric “push-pull” trains, as well as their maintenance over 15 years. The estimated value of the contract is around BGN 1.2 billion (€610 million).

Procedural background

The Foreign Subsidies Regulation (‘FSR’) started to apply on 12 July 2023. This new set of rules enables the Commission to address distortions caused by foreign subsidies, and thereby allows the EU to ensure a level playing field for all companies operating in the internal market while remaining open to trade and investment.

In recent years, foreign subsidies appear to have distorted the EU’s internal market, including by providing their recipients with an unfair advantage to acquire companies or obtain public procurement contracts in the EU to the detriment of fair competition. The FSR addresses such distortions and closes a regulatory gap. It gives the EU new tools to effectively tackle foreign subsidies that cause distortions and undermine the level playing field in the internal market which is based on a competitive social market economy.

The FSR introduces three procedures:

  • Two notification-based procedures to (i) investigate concentrations as well as (ii) bids in public procurement procedures involving financial contributions granted by non-EU governments. The notification obligations apply to economic operators since 12 October 2023.
  • An ex officio procedure to investigate all other market situations, where the Commission can start a review on its own initiative.

The Commission will publish a non-confidential version of today’s decision, as well as the future final decision, after adoption, in the Official Journal of the European Union”.

 

07.02.2024

Defence Procurement – The Commission calls on Czechia to comply with the Defence Procurement Directive

“Today, the Commission decided to open an infringement procedure by sending a letter of formal notice to Czechia  (INFR(2023)4017) for a breach of its obligations under Directive 2009/81/EC (the ‘Defence Procurement Directive’) and under the Treaty of the Functioning of the European Union (TFEU) in relation to the procurement of military helicopters.

The Defence Procurement Directive aims at enhancing transparency and openness within the European Defence Equipment Market (EDEM) and at providing a level playing field for European companies while ensuring that the security interests of the Member States are protected. The Commission considers that the procurement procedure and conditions applied by Czechia to award the contract did not comply with the Defence Procurement Directive and with Treaty-based principles. The breach relates to the circumvention of the Defence Procurement Directive on the organisation of competitive tendering, by misusing the exemption on government-to-government contracts provided in that Directive. The direct award of the contract also breaches the Treaty principles of non-discrimination, equal treatment, and transparency by depriving EU companies from the possibility to submit offers and effectively compete for the contract. The breach also relates to the Czech authorities’ request for industrial participation of Czech companies in the contract. Restrictive measures imposing obligations on foreign suppliers to cooperate only with domestic companies breach basic principles of the Treaty. It discriminates against economic operators, goods and services from other Member States and impedes the free movement of goods and services and/or the right of establishment in the internal market. The Commission is therefore sending a letter of formal notice to Czechia, which now has two months to respond and address the shortcomings raised by the Commission. In the absence of a satisfactory response, the Commission may decide to issue a reasoned opinion”.

https://ec.europa.eu/commission/presscorner/detail/en/inf_24_301

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