Regulating public procurement law at supranational level: The example of eu agreements on public procurement
| Date | 01 March 2010 |
| Pages | 301-334 |
| Published date | 01 March 2010 |
| DOI | https://doi.org/10.1108/JOPP-10-03-2010-B001 |
| Author | ohannes Siegfried Schnitzer |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public Finance/economics,Texation/public revenue |
JOURNAL OF PUBLIC PROCUREMENT, VOLUME 10, ISSUE 3, 301-334 FALL 2010
REGULATING PUBLIC PROCUREMENT LAW
AT SUPRANATIONAL LEVEL: THE EXAMPLE OF EU AGREEMENTS ON
PUBLIC PROCUREMENT
Johannes Siegfried Schnitzer*
ABSTRACT. This paper provides an analysis of the fragmented sphere of
international agreements on public procurement law in the European Union.
After a comprehensive review of the most important European Communities
agreements on public procurement, this paper describes how these
agreements can be subdivided within certain categories and certain types
and how this categorisation and typification is vital with regard to the legal
effect of a particular agreement. In this regard, it is argued that EC
agreements on public procurement (including the World Trade Organization
Agreement on Government Procurement) are, in principle, capable of direct
applicability. Thus, disappointed bidders are – from an EU perspective –, in
general, able to invoke the provisions of such EC agreements before national
courts and authorities, based upon the non-discrimination principles
incorporated in such agreements.
INTRODUCTION
International agreements on public procurement have one major
objective: They are aimed at liberalising – and thus opening up –
national procurement markets in order to allow public entities to
meet their demands by purchasing from the supplier that offers best
value-for-money (VFM), regardless of which country such supplier is
registered in (Arrowsmith, 2005).
Apart from joining the plurilateral World Trade Organization (WTO)
Agreement on Government Procurement (GPA), the European
Communities (EC) – due to the Treaty of Lisbon (ToL) now the
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* Johannes S. Schnitzer, LL.M., Dr., is a lawyer at Wolf Theiss attorneys-at-
law in Vienna, Austria. He is an expert in procurement law.
Copyright © 2010 by PrAcademics Press
302 SCHNITZER
European Union (EU) – concluded a bundle of regional and bilateral
agreements on public procurement with its major trading partners
over the course of the past decades (Schnitzer, 2005). Many such
Agreements contain provisions aimed at opening governmental
procurement markets, particularly on the matter of how and to what
extent the EU should grant or obtain access to third country markets.
Indeed, it would not be overstating matters to describe these
remarkable developments as a global revolution in modern
procurement law (Wallace, 1995).
Notwithstanding the EU´s legal strides towards greater
liberalisation with its major trading partners since the 1980s, the
impression might nevertheless arise that such liberalisation has
recently lost its (factual) momentum. In particular in the light of the
lasting global economic crisis, certain EU members have started to
show tendencies towards applying a protectionist approach when
purchasing goods, services or works and to pursue a policy of "buy
national" only.
This paper suggests that maximizing value for money for the
public sector is best reached by promoting effective cross-border
competition among suppliers. With regard to public procurement, this
is best reached on the basis of legally binding international
agreements on public procurement, which have as their purpose the
dismantlement of trade barriers between national procurement
markets.
METHOD
The first section of the paper is an explanation of the rationale as
to why national procurement markets should be liberalised. The
second section deals with the relationship between international
agreements concluded by the EC (now EU) and the WTO regime. The
third section analyses the treaty-making power of the EC. After a
chapter giving an overview of international agreements on public
procurement law follows a section on the most important third-
country agreements concluded by the EC. The next chapter divides
such EC agreements on public procurement law within certain
categories. The penultimate section discusses the effects of the EC
agreements on public procurement law both in EU law and the
domestic law of the EU Member States. The last section supplies the
conclusion.
REGULATING PUBLIC PROCUREMENT LAW AT SUPRANATIONAL LEVEL 303
NATIONAL PROCUREMENT MARKET LIBERALIZATION
The primary rationale for regulating public procurement at a
national level is to use public funds efficiently (Reich, 1999). Thus,
the central economic and political objective of procuring entities is to
find the best possible terms of procurement, the best VFM (Bovis,
1998). In contrast to this, the primary rationale for regulating public
procurement markets at bilateral, regional, or multilateral level is to
open them up and to reduce or remove trade barriers, thus
maximizing cross-border competition (Trionfetti, 2003). International
agreements regulating public procurement, for instance, require that
states advertise contracts which are sufficiently large as to be of
interest to companies from other states and award such contracts
according to commercial criteria (Trepte, 2004). It should be
emphasised that discriminatory behaviour by public purchasers in
favour of domestic industry clearly constitutes an obstacle to free
trade and further economic integration (Trepte, 2007). This fact has
generated much attention from numerous international
organisations, such as the EU. As seen in this paper, the majority of
these international agreements regulating public procurement
contain provisions requiring non-discrimination, stopping the use of
procurement as a means to support and promote domestic industry
and promoting the operation of government markets in accordance
with the principle of comparative advantage (Arrowsmith, 2008). In
this spirit, global free trade will function to maximize the global
economic welfare of the free trade group as well as national
economic welfare. By specializing in the production and export of
goods and services for which it holds a comparative advantage, a
state's resources will be used most efficiently and thus, wealth will be
enhanced (Arrowsmith, 2005).
Theory of Comparative Advantage
The theory of comparative advantage goes back to the economist
Ricardo, who based his theory on the different production functions of
two states (Sykes, 1998). The core idea is that free trade maximises
both the aggregate wealth of the two states as well as the wealth of
each of the two individually. This exchange (of goods or services) thus
allows each country to specialise in those areas in which it has an
absolute or relative competitive advantage over the other country.
This means that it saves production factors otherwise used in
economically inefficient production processes, and instead moves
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