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Defence and security public procurement contracts : counterpoint and harmony (article 215-1 PPC)

The exclusion of third countries operators from the european union et the european economic area

a. Exegesis

Until then, the “third-countries economic operators to the European Union or European Economic Area” (the “Third-countries operators”) were allowed to apply, without special limitation, to procurement procedures launched by signatory Authorities for the awarding of contracts.

Today, although the D&S PPC does not contain any explicit prohibition, its provision are entirely different, for, in a diffuse manner, they prohibit Third-countries operators to apply to these contracts, unless otherwise determined by the signatory Authority. This turnaround, which purpose is to preserve the technological and industrial interests’ of the French and European defense and security base, is not the result of an European Directive implementation but comes from more remarkable sources: international treaties.

The first convention, the Treaty on the Functioning of the European Union, stipulates in Article 346 (former Article 296 of the Treaty establishing the European Community), that “any Member State may take such measures as it considers necessary for the protection of the essential interests of its security which are connected with the production of or trade in arms, munitions and war material; such measures shall not adversely affect the conditions of competition in the internal market regarding products which are not intended for specifically military purposes”.

Secondly, the Agreement on Government Procurement (“AGP”), signed in the framework of the World Trade Organization, provides a similar exception, although couched in broader terms, in its Article XXIII, 1st paragraph, which states that the parties to the AGP may “prevent any Party from taking any action or not disclosing any information which it considers necessary for the protection of its essential security interests relating to the procurement of arms, ammunition or war materials, or to procurement indispensable for national security or for national defense purposes.”

Considering these conventionally allowed exemptions to the rules on public procurement, the eighteenth recital of Directive 2009/81/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defense and security, and amending Directives 2004/17/EC and 2004/18/EC provides that States “should take that decision on grounds of value for money, recognizing the need for a globally competitive European Defense Technological and Industrial Base, the importance of open and fair markets and the obtaining of mutual benefits. Member States should press for increasingly open markets. Their partners should also demonstrate openness, on the basis of internationally-agreed rules, in particular as concerns open and fair competition.”

To protect its essential interests, France has inserted in the D&S PPC a presumption of exclusion of Third-countries operators from public procurement procedures launched by signatory Authorities. The regulatory power has probably preferred this operating method to an explicit provision forbidding Third-countries operators to apply to procurement contracts.

Among the main provisions that embody this exclusion in the D&S PPC, one can underline Article 215-I, which provides that the signatory Authority willing to open the procurement process to Third-countries operators must make its decision known in the notice of the competitive public tender.

Other interesting provisions for Third-countries operators are the following:

- Article 215-II D&S PPC provides that accessibility criteria must be established particularly with regard to information security requirements and procurement, preservation of interests related to defense and state security, interest for the development of the industrial and technological base of the European defense, objectives of sustainable development, achievement of mutual benefit and reciprocity requirements.

- Article 218 D&S PPC provides that when allowed to participate in a procurement procedure, the Third-countries operators must be able to provide, in support of their applications, all documents, information or evidence to assess whether they meet the accessibility criteria for the procedure specified in the notice of the competitive public tender.

- Article 232-I D&S PPC provides that the signatory authority may require that the Third-countries operators complete their applications where some documents, information or evidence referred to in Article 218 are lacking and this within a maximum period of ten days. If they fail to produce these documents, information or missing documents within the prescribed period, the Third-countries operators will not be allowed to participate in further proceedings for the awarding of the contract.

- Article 232-II D&S PPC provides that the signatory authority decides on the Third-countries operators’ rights to participate in the procurement process, in accordance with the accessibility criteria specified in the notice of the competitive public tender. The Authority then considers the Third-countries operators’ applications that have not been excluded under Article 233 D & S PPC (on the choice of candidates).

- Article 252 provides that the signatory authority must establish a report containing, among others, as appropriate, the reasons that motivated its decisions related to the Third-countries operators’ participation in the procurement process.

b. Issues

This recent turnaround will produce significant effects on Third-countries operators already established in the French defense and security market or willing to integrate it. This shift of the French position will require that they respond to the new D&S PPC issues without delay and bare in mind that the number of markets opened to them will be known only a posteriori, after governmental decision.

This reaction also requires a precise definition of the notion of third-countries economic operators to the European Union or European Economic Area, as well as a study of the legal feasibility of, alternatively, the signing of a general subcontracting agreement with a European operator, the setting up of institutionalized co-contracting or the establishment of a European branch.

to be continued

Rédigé par Laurent-Xavier Simonel and Benjamin Touzanne le Jeudi 19 Janvier 2012


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