How do we deal with cross-border interest in public procurement? (I)
Interview with Dr. Andrea Sundstrand from Stockholm University. In addition to her academic career, Andrea is an expert lawyer in public procurement and has published extensively over the years. One of her most recent projects is the Procurement Law Journal, the first academic journal on the area published in the Nordic countries. Some of the articles are published in English and are available in open access. Her experience with the journal was one of the topics of our discussion in addition to the issue of cross-border interest in public procurement.
The topic of today is very close to my heart. We will be talking about cross-border interests in public procurement. I think that you have a lot of important and interesting points to raise and I believe that our next half an hour is going to very useful for people trying to understand exactly where the boundaries lie in terms of public procurement today?
Yes, I think so too.
So let’s start with the cross-border interest tests, why do you think it’s important and why should we bring attention to this almost arcane area of EU public procurement law?
Well it’s interesting because the primary law which was actually there from the beginning only regulates dealings between member states, since the EU doesn’t really think that things that only concern one member state is any concern of the EU. So for having EU laws you have to have some kind of cross-border effect and that really doesn’t matter if it’s public procurement or competition law or other kind of regulations, it has to be some kind of interaction between member states for the EU to be interested in regulating those areas. So when they looked at public procurement they said “well maybe we need some more detailed regulations than the ones in the primary law so we’ll adopt directives of public procurement”. And then of course in the directives we have these thresholds and for the longest time everybody thought that “well as long as a procurement is above the thresholds it’s covered by EU law, but when it’s below the thresholds well it’s up to the member states to decide”. And I think what nobody realised until the European Court of Justice said so is that actually some of the procurements below the thresholds could be covered by primary law since they could have an interest, suppliers from other member states. So I think this was a surprise to a lot of, both contracting authorities and suppliers that even smaller contracts actually could be covered by EU law.
By "thresholds" you mean "financial thresholds", am I correct?
Yes. The financial thresholds set, are set out in the directives so it’s like 200,000 Euros for suppliers and services for example.
But that’s a very interesting trade-off, above a certain value those financial thresholds, contracts are deemed to have cross-border interests and as such are regulated by the directives, but if those contracts have a value that is lower than the threshold then you need to apply the cross-border interest test?
Yes. And I think as I said for the longest time people didn’t realise that, they thought so to speak that the thresholds was the cross-border test, that as long as it was below the thresholds they wouldn’t actually have to bother with EU law at all, you could just use national regulations. But now since we have a couple of cases, several now from the EU Court saying that isn’t really the case because even a smaller contract could be of interest to suppliers in other member states. For example if the contracting authority is situated very close to a border or if it’s a contract where it’s normally you would get offers from other countries even though it is a small value, maybe for specific goods that are easily shipped between the member states and so on. So we have a couple of cases saying what we should look at to consider if the contract has the cross-border interests or not.
And what’s your view on that?
Well it doesn’t make it easier of course for contracting authorities to decide what rules to apply. If I take the example from Sweden we have an easier situation than you have in England because in Sweden we have regulated also contracts below the threshold rather rigorously and for example the general principles of EU primary law also apply down to the very first Swedish Crown where you buy something. So for us it’s not that big a difference really but in other countries like in Denmark where they don’t actually have any regulations on public procurement below the thresholds this would be kind of a problem because then you wouldn’t really know what rules apply to these cross-border interest procurements that are below the thresholds.
Speaking of member states as far as I know, well England, Wales and Northern Ireland they’re starting to regulate contracts below the thresholds without explicit referral to the EU primary law. I have also heard recently that Greece in one of its many reforms that it has done recently has also effectively decided to apply the regime of the directives almost from the start in terms of value instead of above the financial thresholds. What do you think is the best option for the member state?
I don’t know. I know that in Sweden we have decided to regulate more or less down to 50,000 Euros and the reason is that we think that it’s important also for below threshold procurement which is in Sweden about 80% of all procurement to be put out to competition because if contracting authorities in the north of Sweden only buy from suppliers in the north of Sweden and vice versa in the south of Sweden, our best and most cost efficient companies wouldn’t be able to grow and win contracts if we limited the market. So even below thresholds as I said it’s about 80% of all procurement, in Sweden we consider that, that’s such a big market and so much money that it’s important to put it out to competition but as long as there’s no cross-border interest this would of course be up to the individual member state to decide. I was actually working with the OECD a couple of years ago and we made a survey to look at all member states and how they have regulated their procurement below the threshold for B services and most of them have actually had put in place some kind of regulations and rules for procurement also below the thresholds and that survey is actually published on their website.
But those countries that actually regulate contracts below the thresholds do not necessarily apply EU primary law, that is to say for example they may advertise a contract in the national website but they are under no obligation of treating potential suppliers equally irrespective of where they’re based as they are above the thresholds, unless of course they actually turn out to the contract?
Well that’s the problem because if there is a contract below the threshold with no cross-border interest the member states are free to choose. They don’t really have to regulate it at all. They can buy from their friends or from their relatives or whatever the member states decide. But if you have a contract below the thresholds with the cross-border interest, primary law actually regulates those contracts and as the European Court of Justice has said for example that means that a contract has to be put out to competition, you have to have a certain contracting document, you have to treat everybody equal and so on because the general principles are applicable to those contracts.
Is it not true that one of the biggest difficulties of using the cross-border interest below the threshold is actually to define in advance and with to degree of certainty and security that a contract will generate cross-border interest?
Absolutely. And that is the whole problem and that was something that the member states thought they had solved I think by putting these thresholds into place, that okay below member states decide, above follow EU law. But now we suddenly have another threshold that we don’t really know when it is, so each contracting authority has to make a decision in advance would this contract be of interest to suppliers from other member states and that is of course a very difficult decision to make. But I guess you have to look at how did the contract attract foreign suppliers the last time we put it out to competition and such things to decide on an individual basis, but of course this is difficult.
Yeah but by default the contracting authorities will do what costs them less or fewer transaction costs so they’re going to say “well if I can get away without advertising this and without trying to ensure that we’re going to have international competition, I’m just going to think that we’re not going to have international competition and for example go directly for a direct award of a contract”. If that happened it’s pretty much impossible in most circumstances for anyone to know that a) a contract was available, was potentially available, and b) that perhaps it could have had cross-border interest?
Yes. And the interesting thing is that if you have a contact with, below the thresholds but with a cross-border interest the member states have to put efficient remedies into place for aggrieved suppliers since this is considered, to be able to participate in such contracts or such competitions are considered to be a right according to the EU law for each member or each individual in the EU. So I can take an example from Sweden, we have not put into place any remedies for service concessions and this is the same thing as contracts below the thresholds because they are both regulated only by primary law so far, and where actually had letters now from the commission saying “why didn’t you do this because this is a right for each individual to participate and be treated fairly in a service concession with a cross-border interest?” And Sweden has answered something like “well we know we haven’t done that, we should have done it but by April of 2016 we’re going to have this new law so with concessions in place”. But the commissions answer to that has been for like six months ago that “well that isn’t enough because you haven’t done it now” and I don’t think Sweden has answered that yet but there’s obviously big risk that we will actually end up in the European Court of Justice for the first time actually, we have managed to stay away from there so far. And that is the same thing with procurements below the thresholds with a cross-border interest, that actually the member states have to, they have to put into place efficient remedies for aggrieved suppliers. So even if it would be difficult to prove in a Court, you still have to have the possibility to go to Court even for those contracts and I think most member states do not have any remedies in place for those contracts.
That’s very interesting because in fact I remember seeing an opinion somewhere that the remedy system for example in England, Wales and Northern Ireland effectively only was applicable for contracts above the thresholds?
Yes. So that would actually be against EU law since you have to have for all…
I agree with you. So it appears that we have a very strange system in place, above certain financial thresholds contracts are subject to the full might of EU regulation, below financial thresholds they may or may not be subject to EU law but only to primary law, a little bit like Schrödinger's cat it appears that the contracts may be or not subject to such regulation. What could be done to improve the situation and make it easier both for contracting authorities and suppliers to understand the system?
Well that’s a good question. I wish I could answer. I really don’t know. I think your answer would be to lower the thresholds and maybe that is mine also because if there is contracts with cross-border interest then of course they should be covered by the directives because that’s the whole idea with the directives to cover those contracts that are of cross-border interest between the member states, to cover those. And if there are contracts falling outside well that is not good because that would be very confusing for contracting authorities to know what rules to apply. But I really don’t know otherwise because I think there will always be contracts not covered, very low value and so on, or at the north of Sweden where the cost to deliver something from abroad would be too high and so on. So you have to have some separation between these two contracts where the member states must be able to choose themselves if they want to regulate or not but exactly how to do that, that’s difficult and I really don’t have any good ideas for now.
Okay. Moving on. You’ve done a lot of research in cross-border interest over the last few years, where are your interests now lying in these days?
Well I am working at the Stockholm University a lot trying to teach public procurement students and actually getting the topic of public procurement up on the agenda for several universities in Sweden. We have been so far behind both Denmark and England who have several universities that specialise in these questions, in Sweden we’re just at the beginning so that’s what I’m doing. And also looking at different things constantly on public procurement and doing articles, writing out articles and different books on public procurement in general. So this is a full-time task since there is so much happening in this area right now.
Okay. So let me rephrase the question, where do you think our focus should be in terms of public procurement in the near future?
Do you mean ours as researchers?
Yes, or where should the rules change or where should be improved in general?
That’s a big question! I think there are a lot of rules that could be improved and I think it’s always difficult when you have twenty-eight member states deciding new rules. So I think in the coming two or three years our focus both as practitioners and as researchers will be just to try to understand the new rules coming and to try to figure out what they actually mean in practice. Because there’s one thing to be in Brussels with twenty-eight member states to decide rules, totally different thing is for the contracting authorities in the north of Sweden actually trying to apply these rules. So I think that will be the focus for the coming years.
So you think that the focus is going to be into training and in improving the skills of public procurers and also people that work with the rules in practice?
Very much practice because now the big legislation package are soon coming into place, the lawyer’s task now will be to try to explain these rules to the practitioners I think.
Okay, very well. I’ve got one final topic that I would like us to cover which is your new Procurement Law Journal?
You started it in 2014, it’s in the second year, how is it going?
It’s going very well and I’m so pleased because nobody believed in it, not even the publishers believed in it. But two weeks ago they actually took me out to buy me champagne lunch just to celebrate because now it’s actually we have so many subscribers I don’t have to pay for it myself anymore which is nice. And we have both the Swedish government, Swedish parliament and the Swedish High Administrative Court are subscribers and it has had already by the third issue ever a great impact on public procurement legislation in Sweden and I’m very happy about this. And we have a lot of researchers who wants to write articles so it’s very interesting to see or I’m very happy to see that my feeling that this would be, this would cover something that was missing earlier, I’m very happy to see that that was actually true.
Could you tell us a little bit more about the experience of setting up a journal and running it?
Well actually it’s much more easy than you think. The difficult thing is to get people to write articles and we’ve succeeded pretty well so far. It’s not very difficult, it’s just that it takes a lot of time of course. Each issue we have four articles and I’m also very proud that one of the articles always is written by a student, so a student who has written a very good Master thesis rewrites the thesis into an article and I think that’s good because then you make sure that also young lawyers are interested in public procurement law. Some articles are written in English, I hope to get one from you soon.
I know, I know!
And those articles we publish open access on our webpage which is with the address urt.cc, so you can actually already today go in and read the articles in English. The Swedish articles you would have to subscribe to be able to find on the internet.
Is there any plans to making those Swedish articles available further down the line maybe in English in open access as well or do you think they’re always going to remain behind your subscription service?
I think that’s a matter of cost actually. I wouldn’t mind translating them into English because they are on general EU law also so that will be interesting also for lawyers in other countries but it’s so far a question of funding. So we will have to make sure first that the printing cost because all the people working with this journal we all do it pro-bono so we don’t get paid so our costs are the printing costs and the cost of sending the journal to the subscribers and of course the cost for paying for the website, and those costs we have now covered. If we are going to get more money or have some kind of profit I would firstly thinking about giving maybe scholarships to talented students but maybe now you say it that could be a good idea also if we do have some profit in the future that we could actually translate some of the Swedish articles into English.
That is certainly an area where I could see some value because there’s a lot that each jurisdiction produces in its native language, I mean I’ve seen it all over the place in Portugal, Spain, France, Italy, and certainly Sweden is not going to be different. But there’s not a lot that is being published and disseminated about a specific jurisdiction in English?
Yeah, I know and I agree with you, it’s a shame. I really would like to read articles from Spain, how did they do it there, different issues they are fighting with, maybe we have the same problems in Sweden and we can help each other solve these problems and of course for me it’s a problem then if the articles are in Spanish or Italian which I don’t know. Maybe we could set up a translation service together?
There are a few online already that are quite cheap.
Okay. You have to tip me off?
I will after the show. Very well, last question. What sets your journal apart from the existing ones? I mean there’s already quite a few journals in public procurement?
The first idea was that this journal would focus on the situation for the Nordic and Baltic countries and we’re also in the Board, in the Legal Board we have researchers both from Estonia and Finland and Denmark and hopefully eventually from Norway and Iceland also. So our goal was to focus on the specific problems of the northern countries. Of course it turns out now I read a couple of these articles that these are often problems we have with the legislation in all member states, so that was our main thing. So what makes this journal so special? I think that we are very focused on practical issues so we like to look at how the law actually works in practice, maybe that is something that I hope that we can help so that the researchers can help practitioners how to interpret the rules and thereby how to use the legislation for doing great public procurements.
Could you give us an example of the cross-pollination in the different Nordic states is happening via the journal? I think it’s a great idea that you’re bringing together researchers and practitioners from other jurisdictions and countries but how is that working?
Well it’s working fine. The first thing of course is that we have articles not just from Swedish researchers but also from researchers from Denmark and Estonia, we’re going to have an article from someone from Finland in the next issue and so on, so I’m really happy about that. But also we are, in 2014 we had a first conference with the journal where we invited researchers from all of these countries and hopefully we can have this conference, like a Nordic public procurement conference once every year or once every two years so we can come together and help each other with public procurement issues. So if we have someone doing research in Estonia maybe we can use that research also in Sweden and contribute to Swedish legislation also.
Thank you very much Andrea. It was a pleasure to have you.
Thank you. Pleasure to talk to you.
You can find me at my blog telles.eu or on Twitter where I use two handles, @Detig for general discussion and also @publicprocure for procurement related topics. As ever I’m very grateful to the British Academy and to the British Academy Rising Star Engagement Awards to make possible these podcasts.