La grieta legal

The EU is a Party to the WTO’s plurilateral Government Procurement Agreement (GPA). There are therefore potential legal ramifications should the EU take unilateral actions against contract bidders from other WTO GPA parties. First, the ‘Buy national’ regulation is contrary to the spirit as well as the explicit objectives of the GPA. The preamble of the Agreement recognises both the need for an effective multilateral framework of rights and obligations with respect to laws, regulations, procedures and practices regarding government procurement and also that laws, regulations, procedures and practices regarding government procurement should not be prepared, adopted or applied to foreign or domestic products and services and to foreign or domestic suppliers so as to afford protection to domestic products or services or domestic suppliers and should

not discriminate among foreign products or services or among foreign suppliers. At least as regards the bids covered by the GPA, this commitment appears to be directly opposed to the objective of the EU proposal.

Secondly, Article III.1 of the GPA states that each Party shall provide immediately and unconditionally to the products, services and suppliers of other Parties offering products or services of the Parties, treatment no less favourable than that accorded to products, services and suppliers of any other Party. The voluntary nature of the proposed regulation would appear to work against the no- less-favourable treatment that must be immediately and unconditionally to all other parties to the Agreement, Again, at least as regards those non-reciprocating parts of procurement bids covered by the GPA in the Annexes of Appendix 1.

Thirdly, in an effort to remove the unilateral imposition of remedies potentially leading to trade wars, the GPA specifically provides for two types of disputes to be settled within its framework. Disputes between the parties over the application of the Agreement are to be settled under the WTO’s Dispute Settlement Mechanism, including good offices, consultations and arbitration. It also provides for the resolution of disputes regarding the process of awarding a particular contracts using domestic bid challenge systems. This is required by Article XX of the GPA, which includes a requirement for both consultations and challenge procedures between the contracting agencies and the disappointed bidder. Consequently, unilateral remedies imposed by the European Commission on other Parties of the GPA may be challenged both domestically by disappointed bidders and in the WTO GPA by aggrieved signatory governments. Such unilaterally-imposed remedies may nullify the rights benefits accorded under that Agreement as regards access to the markets and entities set out in the schedules.

In this respect, the US implementation of its ‘Buy America’ policy under of the American Recovery and Reinvestment Act (ARRA) is instructive. Section 1605 of the ARRA states that none of the funds made available by the Act may be used for a project for the construction, alteration, maintenance or repair of a public building or public work unless all of the iron, steel and manufactured goods used in the project are produced in the United States. However, this provision does not apply in any case in which the head of the federal department or agency involved finds that, inter alia, it is inconsistent with United States obligations under international agreements. Such agreements include, for example, the EC and the US exchange of letters on government procurement (on 30 May 1995), by which the US granted no less favourable treatment than for out-of-state suppliers and for out-of-city suppliers for a number of states and cities. The US’ amended Trade Agreements Act of 1979 also authorises waivers to federal-level discriminatory procurement provisions for parties to international agreements that provide reciprocal access for US goods, services, and suppliers in their procurement. These waivers have been issued when the GPA has been expanded to cover additional WTO Members and when the United States has entered an international agreement that covers government procurement.

The European Commission’s ‘Buy European’ proposal, on the other hand, contains the possibility of identifying non-reciprocal procurement markets among other GPA Parties, and then imposing its own penalties on them if they do

not open this sector up to the EU. As a signatory Party to the GPA, the EU has set out the agreed coverage of the Agreement, as have all GPA Parties in the Annexes to Appendix 1 of the Agreement. These Annexes are the result of negotiations agreed to by all the Parties of the GPA. Coverage has also been subsequently expanded from within the framework of the Agreement. The EU proposal, however, seeks to re-negotiate or alter the GPA Parties’ existing coverage outside of the forum of the WTO GPA, with the aim of getting the Parties to expand their schedules to ‘match’ EU coverage where their Schedules were negotiated otherwise or else it will ‘contract’ its own coverage even if it below what was agreed to in the Annexes to Appendix 1 of the GPA. Such a move to contract the coverage of the GPA by the EU seems prima facie to be open to challenge under the WTO GPA because it necessarily affects the existing rights and benefits accruing to the other parties.

This proposal sends warning signals to acceding- and observer-status GPA parties, most notably China, that if the EU does not like the results of its accession agreement in terms of market coverage, it could seek to remedy this situation outside of the Agreement. Such a challenge will take place on an ad hoc basis, on home ground and at the time when a large enough and important enough contract is being tendered. Implementation of this proposal, therefore, falls short of sustaining predictable, transparent, and non-discriminatory trading relationships.