Court of Justice of the European Union (CJEU) restricts access to public contracts for contractors from third countries.

On October 22nd, the Court of Justice of the European Union (“CJEU”) issued a precedent-setting ruling in the Kolin Inşaat Turizm Sanayi ve Ticaret case (C-652/22 – the “Kolin case”). This is of crucial importance to contractors engaging or aiming to engage in the public procurement market of the European Union (“EU”), who originate from countries outside of the EU that are not party to international agreements with the EU which would formally admit such contractors to public tenders in the EU.

The Kolin case concerned a request for a preliminary ruling directed to the CJEU by a Croatian court during proceedings to assess the legality of a decision to award a contract for the construction of railway infrastructure to a competitor of Kolin Inşaat Turizm Sanayi ve Ticaret based in Turkey (“Kolin”) after said competitor was permitted to amend and clarify its bid in wide scope after the deadline for submission of bids. The Croatian court expressed uncertainty as to whether this decision was compliant with the provisions of EU Directive 2014/25 on procurement by entities operating in the water, energy, transport and postal services sectors (the ”Directive”).

The CJEU refused to answer the questions posed by the Croatian court, justifying this refusal by differentiating between the legal situation of contractors from countries outside of the EU that have concluded an international agreement with the European Union guaranteeing on the basis of reciprocity and equality access to public procurement for contractors (including signatories to the World Trade Organization Agreement on Government Procurement - GPA) and the legal situation of contractors from countries outside of the EU that have not concluded such an agreement - such as Kolin.

The CJEU stated that:

• the latter group cannot effectively invoke the provisions of the Directive and thus demand equal treatment of their bids with those submitted by other bidders;
• the matter of access of third-country contractors to public procurement procedures in Member States is an exclusive EU competence, and therefore Member States are not authorized to adopt legal acts of a general nature in this scope, even if the EU has not yet adopted any acts applicable in this regard;
• in the absence of such an act, it is up to a particular contracting entity to assess whether it should allow such a contractor to participate in a contract award procedure – and the contracting entity may set forth in the contract documents conditions of treatment that are intended to reflect an objective difference in the situation of such contractors;
• national authorities may not interpret the same national provisions transposing the Directive in a manner simultaneously making them applicable to contractors of the latter group;
• while it is conceivable that the treatment of such contractors should comply with certain requirements, such as transparency or proportionality, a remedy by one seeking to raise a violation of such requirements by a contracting entity can only be examined in light of national law, not EU law.

The consequences of this judgement for the public procurement market in the EU are monumental. The Kolin ruling makes it clear that in the absence of an international agreement on public procurement between the EU and a third country, the participation of contractors from said country in EU public tenders on equal terms with EU bidders and those from countries bound by such agreements, is not guaranteed by EU directives.

The Kolin case ruling is just one of several measures adopted in recent years within the EU which may substantially affect the situation of contractors from third countries in the area of public procurement.

April 18th, 2016 – entry into force of the last generation of EU public procurement directives (2014/24, 2014/25) promoting the protection of security, labour and environmental standards in public contracts and introducing measures such as the possibility of preferring EU products in sectoral procurement and a new regulation on preventing selection of bids with abnormally low prices.

July 24th, 2019 – issuance of the EU Commission’s extensive guidance on non-EU participation in the EU procurement market, focused on the tools in the then-current public procurement legal framework which may be used to protect against distortions of the EU internal market caused by contractors originating from outside of the EU.

August 29th, 2022 – introduction of the EU’s International Procurement Instrument (the “IPI”) laying down procedures for the EU Commission to investigate alleged measures or practices negatively affecting the access of EU businesses, goods and services to non-EU procurement markets, and consult with the non-EU countries concerned as well as impose measures to restrict access to EU public procurement procedures for businesses, goods and services from the non-EU countries concerned.

July 12th, 2023 – entry into force of the first provisions included in the Regulation on foreign subsidies distorting the internal market (the “FSR”) introducing a wide range of legal tools enabling the EU Commission to address distortions of the EU internal market caused by subsidies provided by countries outside of the EU.

October 22nd, 2024 – CJEU ruling in the Kolin case.

While the above measures do not exclude outright the possibility of a third-country contractor competing for the award of public contracts in the EU, they introduce additional legal issues which cannot be overlooked if the goal of such a contractor is to successfully bid for a contract.