A new European trade tool: The first investigation under the International Procurement Instrument
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The European Commission has launched its first investigation into a non-EU country's procurement practices leveraging its new tool, the International Procurement Instrument. This investigation looks at the public procurement market in China for medical devices.
A new tool in the trade toolbox
Adopted in 2022, the International Procurement Instrument ("IPI") is a new tool that aims to address the restrictive public procurement measures or practices that EU companies face when attempting to enter markets in non-EU countries.1 For public procurement procedures launched after 29 August 2022, this new instrument allows the Commission to investigate where a non-EU country's measures or practices impact an EU company trying to market goods or services in the non-EU country.
IPI in a nutshell
The IPI allows for the Commission to impose measures to restrict access to companies from the non-EU country in EU public tenders in a proportionate manner and in ways that avoid negative impacts for the EU. The IPI principally targets tenderers originating in the non-EU country in question. It does not directly target goods with non-EU origin (though successful tenderers would be limited in the amount of goods from the non-EU country that they could supply if an IPI measure were imposed).
The IPI investigation takes a maximum of nine months, with a possible extension of an additional five months. The Commission will investigate the presence of market distorting practices alleged in the notice of investigation, and will consult with the non-EU country where these practices are alleged to have taken place. The investigation may be suspended if the non-EU country undertakes corrective action to eliminate or remedy the measure or practice or if it commits to end the measure or practice within six months.
The investigation can be terminated if the alleged behaviour is not maintained or does not lead to a serious and recurrent impairment of market access. Of course, if such measures or practices are established, the Commission may adopt an IPI measure if it is in the EU's interest.
The IPI measures can last five years with the possibility of a five-year extension. They can take the form of either a score adjustment or the exclusion from tenders. IPI measures would also be limited to EU public procurement for contracts with a value over €15 million for works and concessions, or over €5 million for goods and services.2 In areas where a an IPI measure is in place, successful tenderers are also limited in their use of subcontractors from the non-EU country, subject to an IPI measure.
Investigation into Chinese medical device procurement market
On 24 April 2024, the Commission launched its first IPI investigation into the practices and measures of the Chinese public procurement market for medical devices.3 Similar to the previously announced anti-subsidy investigation into electric vehicles,4 the Commission has initiated this investigation without a complaint from industry, but rather of its own initiative.
The notice of investigation includes allegations of measures and practices implemented by China in the public procurement market for medical devices:
- Chinese policies and strategies favouring domestic medical devices and services, including, inter alia, the ‘Buy China' policy which favours locally manufactured goods, the ‘Made in China 2025' strategy that requires hospitals to steadily increase domestically produced mid- and high-end medical devices from 50% in 2020 to 70% in 2025, the requirement that local authorities increase the domestic procurement rate of medical devices, and the requirement that public hospitals give priority to domestic medical devices and that they are encouraged to purchase domestic high-value medical devices through centralised procurement;
- The use of ‘Administrative Measures for the Procurement of Imported Goods', which imposes rules for procurement of imported products that may include additional application-evaluation-approval steps, national interest clauses, and other government offsets; and
- Imposing conditions in its centralised procurement, resulting in abnormally low bids that cannot be sustained by profit-oriented companies.
Procedure
Now that the Commission has issued its notice of investigation, Member States and interested parties (which may include companies, associations of companies or cross-industry organisations) have until 24 May 2024 to participate in the investigation and provide relevant information.5
The Commission will now also invite the Chinese authorities to provide their views and relevant information. It will enter into consultations with the Chinese authorities with the aim of finding a resolution to the measures or practices at the heart of the investigation.
The IPI investigations can take up to nine months to complete, with a possible extension for an additional five months.6 The outcome of the investigation will then be published in the Official Journal—whether it is a termination, suspension following consultations, or the implementation of an IPI measure.7
Ruth Benbow (Knowledge Manager, London) contributed to the development of this publication.
1 Regulation (EU) 2022/1031 of the European Parliament and of the Council of 23 June 2022 on the access of third-country economic operators, goods and services to the Union's public procurement and concession markets and procedures supporting negotiations on access of Union economic operators, goods and services to the public procurement and concession markets of third countries (the "IPI Regulation"), available here.
2 Article 6(4) of the the IPI Regulation.
3 See Notice of initiation of an investigation pursuant to the International Procurement Instrument concerning measures and practices of the People's Republic of China in the public procurement market for medical devices, 24 April 2024. Available here.
4 See European Commission initiates anti-subsidy investigation on imports of electric vehicles from China, 4 October 2024. Available here.
5 Details and guidance for providing information to the Commission as an interested party is available through the Access2Markets platform, available here.
6 Article 5(3) of the the IPI Regulation.
7 Article 5(5) - (8) and Article 6(10) - (11) of the the IPI Regulation.
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