Procurement after Brexit: the UK and the GPA

08 Jun 2018 | by Jack Williams

The UK has expressed its interest in joining the WTO’s Agreement on Government Procurement (as revised) (‘GPA’) (available here) in its own right for after Brexit. The letter from the UK’s Permanent Representative to the WTO is available here.

The GPA is a plurilateral agreement i.e. optional and subject to accession by WTO Member States. There are currently 19 parties to the GPA comprising of 47 WTO members. The UK is currently a member pursuant to its EU membership.

In the usual WTO format, the GPA is composed of two parts: the text of the Agreement itself and the parties’ own market access schedules of commitments (‘schedules’). As common in the WTO, most rules do not automatically apply to all procurement activities of each party; instead, the parties’ schedules determine whether a procurement activity is covered by the GPA or not. The schedules are divided into seven annexes:

Annex 1: central government entities
Annex 2: sub-central government entities
Annex 3: other entities
Annex 4: goods
Annex 5: services
Annex 6: construction services
Annex 7: general notes.

The EU’s schedule is available here.

Benefits of the GPA

A possible vacuum

There are no general multilateral obligations concerning government procurement (the WTO’s label for what is more commonly known as public procurement) under WTO rules. (There are certain specific provisions concerning State-Trading Enterprises, for instance.) Government procurement is therefore largely excluded from the basic obligations under both GATT and GATS. Absent the UK being a party to the GPA, the default position under WTO rules apply with the result that there are no mutual rights of access to public procurement. As such, without membership of the GPA, a ‘hard Brexit’ scenario (i.e. the WTO membership fall-back option, absent any deal with the EU) becomes ever harder in procurement terms, with particular consequences for UK entities looking to bid for government contracts abroad and in so doing needing to be able to rely upon GPA rights.

Scope

The scope of procurement activities covered under the GPA schedules for the EU (and the UK at present) is, however, narrower than the scope of covered procurement under the EU procurement laws. For example, market coverage access is particularly more limited in terms of below-threshold or private contracts subsidised by government; defence; and utilities. However, activities could be added to the UK’s GPA schedule if the UK wished to expand the coverage of the public procurement market access in the UK. Further, there is no most favoured nation rule regarding the coverage of the GPA, so the UK and EU (or, indeed, the UK and other GPA parties) could extend coverage between themselves without extending such coverage to other WTO members or GPA parties.

However, the initial indications surrounding the UK’s application to re-join the GPA are that the UK and EU have agreed that the UK will remain subject to the same rights and obligations currently applicable pursuant to the commitments in the current EU schedule. This is understandable: proposing to adopt the commitments would have delayed and possibly complicated matters if done as part of the UK’s application for accession rather than simply adopting the status quo of the currently-applicable schedule. First, protracted negotiations with the EU would likely have pursued (both concerning any division and ‘horse-trading’ if the UK proposed to widen access for other markets or restrict EU access). Second, such a course would increase the risk of potential negotiations with other GPA parties seeking to alter the terms of their access, though this is an inherent risk of re-application in any event. British officials have been keen to highlight that rolling over membership of the Agreement should be relatively easy, since there is an incentive for other members to retain their access to the UK procurement market too. But any negotiation in the WTO provides the opportunity to make new demands.

Obligations and requirements

The nature of the obligations and requirements under the Agreement are also less ‘deep’ in the GPA than under EU law. For example, whilst — unlike most WTO rules — the GPA provides for remedies for affected undertakings before national review bodies (including the suspension of contracts), this is significantly less stringent than those for enforcing EU Regulations and Directives. For instance, there is no standstill period or automatic suspension of award decisions under the GPA and more limited remedies post-contract (see, further, GPA Article XVIII).

Whilst that all may be true, the benefits of access to the GPA parties’ markets (including open, fair and transparent conditions of competition in government procurement in some of the UK’s most important trading partner economies) is likely to be a great attraction, especially when compared with a “no-deal” counterfactual scenario. Even if a deal were struck between the EU and UK, there is still great benefit in maintaining GPA membership in order to maintain rights to participate in procurement markets covered by other parties, including the USA and other growing markets.

To apply or not to apply?

With the Government’s aim being to maintain its current WTO commitments and rights, including the GPA for the reasons outlined, the question becomes how the UK could achieve that. The UK is currently a party to the GPA only through its EU membership. In the absence of any clear precedent, there has been some uncertainty as to whether there was a legal obligation for the UK to formally apply to re-join the GPA for post-Brexit by following the same process as any new Party to the Agreement, or whether the UK could have succeeded to all rights and obligations to the GPA in its own right without an application.

The UK has seemingly opted for the prudent and cautious approach of making that application. The accession process starts with the submission of an application for accession and has two main aspects: negotiations between the acceding member and parties of the GPA on the former’s coverage offer, and verification that the acceding member’s procurement legislation is consistent with the GPA’s requirements – for example, regarding transparency, procedural fairness for suppliers and domestic review.

One would imagine that this ought to be a relatively swifter and easier process than the accession of an entirely new party. First, UK procurement legislation is already compliant with GPA requirements by virtue of the UK implementing into domestic law the EU procurement directives. Whilst gravely over simplified, the current terms of the EU (Withdrawal) Bill would copy across those requirements into domestic law post Brexit so that domestic law would continue to be compliant. Second, since GPA accession is based on the UK’s existing GPA obligations that may not even involve the difficulties in adjusting schedules or fresh negotiations that may arise under some other WTO Agreements. Presumably most parties are content, at least for the short term, with the current arrangements. Third, the mutual interests involved of reciprocal market access continuing, at a minimum, on the current basis means that parties are unlikely to object. Nonetheless this is no doubt an opportunity to seek to take advantage of the UK’s position and in particular to require that any necessary updating be done to the UK’s schedules.

The WTO’s Committee on Government Procurement is now expected to assess the UK’s accession request when it meets later this summer. That Committee will review the draft market access offer and checklist of issues circulated with the UK’s letter.

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