What would Brexit mean for procurement law?

Angelica Hymers, Browne Jacobson

The EU procurement regime is complained of by many as unduly restrictive and difficult to manage, and for those people perhaps one of the welcome thoughts associated with Brexit (a British exit from the EU) is the possibility of no longer having to run another EU compliant tendering process. For those people this article is likely to come as rather a disappointment, as it appears to us that the EU procurement regime is here to stay, in one form or another.

What will happen to EU law and its effect in the UK will depend on the relationship between the UK and the EU after Brexit. A number of possible outcomes have been suggested, each with their own implications for procurement law. Whichever approach is taken, it is likely that the UK will wish to retain some relationship with the EU, bearing in mind that the EU accounts for around 50% of British exports and accordingly, access to the EU market is vital for UK businesses:

The UK Joins the European Free Trade Association (EFTA) and European Economic Area (EEA)

This approach would see the EU lose influence over many areas of UK life, including agriculture and fisheries, energy and transport, foreign and security policy, but from a procurement perspective the outlook is likely to be very much business as usual. EFTA and EEA membership give member countries access to the EU internal market, and require that EU Member states are given reciprocal access to the markets of EFTA and EEA members. Accordingly, Non EU states which are party to these agreements are still party to all relevant EU procurement legislation in the same way as the UK is now.

The UK negotiates free trade agreements with the EU

If this approach was taken, the UK would need to either negotiate one, all-encompassing free trade agreement, or a number of agreements on a specific sectoral basis. Many countries have free trade agreements with the EU, such as the TTIP currently being negotiated between America and the EU, and the CETA between Canada and the EU. The common feature of these agreements is that they all contain a procurement chapter which (more or less) replicates the EU regime.

Complete break with the EU

If the UK took the approach that a complete break with the EU was necessary, then it could rely on the various agreements within the World Trade Organisation framework to gain access to the EU market, such as the Government Procurement Agreement (GPA). The UK is currently party to the GPA through its membership of the EU, but if it were to leave the EU it would need to join in its own right. This would require signing up to procurement rules which are not unlike the EU rules currently in place. Accordingly, the position for public bodies under this approach is unlikely to be significantly different to the position they are currently in.

Conclusion

In each case, if the UK wishes to trade with the EU it is likely to need to comply with procurement rules which are similar to or the same as those it is already subject to. The reason for this is that the EU procurement regime is intended to protect trade within the internal market by ensuring that companies across the EU are able to trade on an equal and non-discriminatory basis. Accordingly, the EU is reluctant to allow third party states (those who are not EU members) to have access to its internal market without giving its Member states the reciprocal benefit of access to the markets of those states on the same terms. In 2012 the EU put forward a procurement initiative intended to restrict access to the EU internal market to states not willing to give reciprocal access by allowing EU states to reject bids from such states, thus increasing the EUs leverage in its negotiations with such states on reciprocal access. The procurement initiative was blocked by a number of states including the UK, but the EU has recently put forward a new, similar initiative which could affect the UK if it ceased to be an EU Member state.

It is worth noting that even in the scenario where the UK severs all ties with the EU and does not enter into any trade deal or arrangement, the UK is likely to continue to require some form of procurement regulation. Competitive tendering requirements were in place before the present EU procurement regime came into force and the existence of regulation in this area has given rise to the principle that contractors are entitled to equal, non-discriminatory treatment when tendering for contracts. Indeed, it is the increasing volume of procurement challenges which supports and encourages the development in legislation in this area and is the reason why the EU rules are increasingly detailed, which is a clear sign that procurement legislation is required. If the EU regime were removed, contractors would still expect the fundamental rights that the EU regime protects and in all likelihood, public law would need to develop quickly to protect those rights. Accordingly, this approach would result in a high degree of uncertainty until the law had developed sufficiently, which in turn would be likely to cause significant headaches for public bodies trying to get to grips with a quickly changing legal environment.

Accordingly, it appears that there are unlikely to be significant changes to the procurement regime, and, if such changes were to take place, the likelihood is that there would still be procurement law to comply with, whether in the form of the EU regulations or otherwise.