On June 2, the Council endorsed negotiations with the European Parliament on the creation of the International Procurement Instrument (IPI). Once implemented, the instrument could have a significant impact on China’s access to European public procurement bids.
What you need to know
- IPI is an offensive tool aimed to help the EU open public procurement markets of third countries such as China, the US or Japan, where European companies’ participation in public procurement bids is limited. First proposed by the Commission in 2012, IPI only became topic of wider discussion in 2019 in the context of China, but discussions in the Council were put on hold to prevent potential impact on the negotiation of the Comprehensive Agreement on Investment (CAI). The European Parliament is now expected to comment on the Council’s proposal, and inter-institutional discussions are expected to start over the summer.
- IPI would allow the European Commission to initiate a public investigation into potential discrimination of European companies in third country procurement markets. Depending on the outcome of the investigation the Commission could, on a case-by-case basis, impose IPI measures such as price penalties to bids or exclusion from bids by companies from a third country.
As the EU progresses in the development of its defensive toolbox, China is also strengthening its legal defenses against external instruments. For example, Beijing is in the process of developing its first anti-foreign sanctions law, presently being discussed by the Standing Committee of the National People’s Congress. Although it is primarily being considered in the context of the United States’ activity, the instrument is indicative of wider a trend of China wanting to shield itself from external legal measures. When developed, the EU’s new instruments such as the anti-subsidy law, IPI or the due diligence mechanism could fall into the category of measures that Beijing will seek to contain through its legal instruments.