Fair trade and reciprocity – Tenders comprising third countries products

First the COVID-19 pandemic and then, in March, the incidence of a container ship getting stuck in the Suez Canal brought our dependency on global supply chains to our attention in a drastic way. Both events have, on the one hand, made it clear that a reliable European production guarantees security of supply and, on the other hand, the interruptions to the supply chain have also sharpened the perception of countries with which the EU has concluded a free trade agreement and those with which there is no such free trade agreement – referred to as third countries. China or India are examples of third countries.

While the EU has broadly opened up its public procurement markets for businesses from third countries, many of these countries do not grant any similar access to EU businesses.

It is not always realised that, in the context of tendering for the delivery of products and in compliance with EU Directive 2014/25/EU [1], public clients in the EU from the water, energy and communications supply sector have the either reject non-EU bids where the proportion of goods originating in non-EU countries exceeds 50 percent or give preference to the EU bid if prices are equivalent (meaning within a three percent margin).

This procedure is established by the implementation of said EU Directive 2014/25/EC in the national law of all the Member states. So, for example, the EU Directive has been implemented

• in Germany: § 55 of the sectoral regulations (SektVO) [2],
• in Austria: § 303 BVergG (Federal law on the awarding of contracts) [3],
• in France: L.2153-1 et seq. of the French Code on public procurement,
• in Belgium: art.154 – Loi du 17 JUIN 2016 relative aux marchés publics,
• in Luxemburg: art. 147 – Loi du 8 avril 2018 sur les marchés publics,
• in the Netherlands: art. 3.76 – Aanbestedingswet 2012 – Geldend van 18-04-2019 t/m heden,
• in Italy: Art 137, CODICE DEI CONTRATTI PUBBLICI Decreto legislativo 18 aprile 2016, n. 50, and
• in Spain: art. 70 “Preference for community offers in supply contracts”, Royal Decree-Law 3/2020, on February 4, 2020 (https://www.boe.es/buscar/pdf/2020/BOE-A-2020-1651-consolidado.pdf). On June 28, 2021, this Royal Decree-Law was incorporated into the “Public Sector Contracts Code”, along with the rest of the EU directives and legislation related to public procurement (https://boe.es/legislacion/codigos/codigo.php?modo=1&id=031_Codigo_de_Contados_del_Sector_Publico).

As an example of the legal provisions listed above, the text from Section 55 SektVo ist quoted as follows:

1. The client who issues a supply contract may reject tenders in which the proportion of goods originating from countries which are not parties to the Agreement on the European Economic Area is more than 50 percent of the total value and with whom there are also no other agreements on reciprocal market access. The Federal Ministry for Economic Affairs and Energy publishes the countries with which such agreements exist and the areas to which they apply in the Federal Gazette.
2. If two or more tenders are of equal value according to the awarding criteria, then the offer which cannot be rejected in accordance with paragraph 1 is to be given preference. The prices are to be considered as equal if they do not differ from one another by more than 3 percent. Sentence 1 is not to be applied if the preferential treatment would lead to the acquisition of equipment which has technical features other than those of the equipment already used by the client, thereby resulting in incompatibility or technical difficulties during operation and maintenance or in disproportionate costs.

Not to be left unmentioned is the fact that, public clients also have the possibility of stipulating other awarding criteria when placing contracts, such as quality, environmental or social aspects to assess the cost effectiveness of an offer. With the targeted use of awarding criteria of this kind it is at least possible to rate European bidders higher than bidders from third countries.

It is worth noting that, with consistent application of the existing possibilities for rejecting tenders with products from third countries and/or the use of appropriate awarding criteria, European network operators in the water, energy and communications supply sector can make a significant contribution to

• protecting the businesses manufacturing in Europe according to European criteria,
• maintaining skilled jobs with high health, safety and social standards and
• safeguarding know-how in strategic key industries in Europe, in particular with respect to water supply.

In 1997, former German Federal President Roman Herzog made a keynote speech in Berlin with the famous quote “Germany needs to wake up with a jolt”.  – These days it makes sense to replace the word “Germany” in this quote with “Europe”. We must jolt ourselves into action and urgently start focusing on the European markets and strengthening them. Especially with reference to crucial water and energy supplies with their underground infrastructure, the sensitive lifelines of our towns and cities, we are ideally positioned. What are we waiting for? It is up to us to promote, stabilise and secure the European market – ecologically, economically and for generations to come.