Avoiding gold plating in the transposition of #EUlaw: A distinctive UK approach?

The Department for Business, Innovation and Skills has recently published its March 2013 'Gold-plating review' as a Report on the Operation of the Transposition Principles in the Government’s Guiding Principles for EU Legislation. The Report covers 88 proposals to implement EU measures over the eighteen-month period, from 1 July 2011 to 31 December 2012.

In my view, the Report clearly shows resistance to the prompt incorporation of EU Law into the UK legal system, as clearly indicated by the fact that "in 95% of cases over the eighteen-month period Departments have implemented on or after the transposition deadline, with only four examples where Departments sought agreement to implement measures early" (emphasis added).

Most remarkably, the UK Government is not shy to acknowledge the infringement of EU Law that belated transposition implies. And this should be worrying, not least because it can trigger the initiation of infringement procedures by the European Commission.

In my view, it is legitimate for Member States to take advantage of the transposition periods as they consider in their best interest. But it cannot be in the (national) public interest to breach EU Law by belatedly transposing Directives into the UK legal system. Even taking into consideration the interest of the UK in eventually renegotiating its terms of membership of the EU, only an exquisite compliance strategy will build a solid negotiating platform.

Therefore, contrary to the generally positive conclusion of the Report, I think that the UK Government should implement an effective strategy to make sure that no Directive gets transposed after its transposition deadline. That is a clear requirement for the proper transposition of EU Law. And it should not be overseen.


Becoming true #EUcitizens: The only way out of the #crisis (and beyond)?


Citizens of the European Member States seem to be resorting back to Euroscepticism and show clear signs of cold feet regarding the single market / single currency project (reality?).

According to the December 2012 Eurobarometer, 40% of the population of the EU Member States is against the European economic and monetary union with a single currency (with an additional 7% showing scepticism or, simply, lack of knowledge about the project).


Source: Standard Eurobarometer 78, December 2012, p. 16.

Moreover, 29% of the citizens of the EU Member States have a negative image of the EU—and the breadth of disenchantment with the EU project may be increased to 68% if one adds those that have a neutral image (surely, neutral means that the project does not match their expectations and can easily change into negative, particularly if the economic crisis continues to worsen).


Source: Standard Eurobarometer 78, December 2012, p. 15.

These are very worrying data and some are using them to support anti-EU movements. I think that is both opportunistic and dangerous. Talks about taking steps back and pulling out of the Eurozone and/or the EU usually do not follow a thorough consideration of their ultimate implications (some of which are unknown because the construction process has always been considered irreversible).

In my view, the only way out of this accelerating vicious circle is to stop being citizens of a Member State of the European Union and start being EU citizens. Only when most (all) of us realize the massive space of personal freedom and liberties created by the EU project will we be in a position to understand the fundamental importance of remaining involved and to continue working (and sacrificing) to further the EU and finally consolidate it.

The European Commission is working clearly in that direction and has declared 2013 the European Year of (EU) Citizens. A series of informative materials have been published to try and raise awareness of our rights as EU citizens, in the hope that a better informed citizenship will appreciate the benefits of the EU project and will be in a better position to accept the sacrifices it demands at certain times.

However, as stressed by some analysts like Kellner, if one wants to prompt (short term) action, taking a positive approach may not be as effective as exploiting the ‘fear factor’. Indeed, citizens are more likely to react and vote or demonstrate out of fear (or rage) than fuelled by optimism, compromise and good intentions. Extremist parties know this far too well and tend to take advantage of it (as will be discussed in full in a relevant and much needed event).

So maybe the EU project is doomed after all, because it goes against its very essence to use threats and dark horizons as a tool to promote integration. The situation is starting to look like a street fight were the polite citizen just does not know what to do to escape from the raider with a flicknife. And the answer seems to be the same as always, he can only be rescued by a group of neighbours walking by the dark alley and scaring off the assaultant.

That is why I think it ultimately rests on each of us becoming a true EU citizen and to actually get involved in the EU project. I think that this applies specially to younger generations (those of us below 40 now), since we are taking the existence of the EU for granted—much as we take for granted peace and development in this continent, or our constitutional and fundamental rights (given that most of us are ‘post-constitutional children’ and consider that our liberties and personal freedoms are grandfathered and nobody can take them away from us). It would be a disaster if we were proven wrong and, at some point, we had to start telling bonfire stories about the long-gone EU.

This contribution is also published at the interesting blog http://www.greekpublicpolicyforum.org. 

How #publicprocurement rules seem to be diminishing #competition in #China: A wake up call

The latest edition of the China Competition Bulletin reports on the state of affairs in Chinese public procurement markets, where inadequate rules and procedures seemingly fail to ensure value for money as a result of a lack of transparency and accountability.

According to the report, 
The principles of openness and transparency, fair competition, impartiality, and good faith are required to be observed in government procurement. China’s government procurement system provides general rules on competition, transparency, and fairness. However, the implementation of the rules is less than ideal. Insufficient disclosure of information, conflicts of interest, discriminatory treatment of enterprises, excessive prices, and poor quality purchasing have been frequently reported and raised the public’s concern in recent years. The newly released Blue Book of Rule of Law: Annual Report on China’s Rule of Law No. 11 (2013) provides an empirical report on the current state of government procurement.
Remarkably, other than the difficulties in having access to comparable data (and, generally, to data), the report evidences that
Data and price comparison results revealed that certain government procured goods can be much more expensive than average market prices. An extreme example mentioned in the report was a desktop computer that was procured at a cost of CNY 98,730 when the average market price for a computer with the same specifications was CNY 2,649. [...] In the end, the prices of 19,020 items were compared. These goods covered 29 product categories such as uninterruptible power systems, laptops, dehumidifiers, printers, and fax machines. The results show that the prices of 15,190 items were higher than the average market prices and that taxpayers had paid an extra CNY 20,743,897.50. On the positive side, the price comparison results show that 68,025 items purchased through the centralised procurement of the Central Government had saved taxpayers CNY 5,543,185. The 68,025 items, covering desktops, workstations, and printers, were chosen from 85,963 records collected for the research.
In view of such findings, 
the report notes that transparency is the foundation of fair competition, impartiality, and good faith. Transparency can effectively facilitate fair competition, deter corruption, and prevent China, the world’s largest procurement market, from turning into the world’s largest market for public corruption.
It seems that the Chinese public procurement system would benefit from a revision along the lines suggested by the report itself, which includes recommendations for the revision and improvement of the legal system for government procurement; which should be coupled with those in the OECD July 2012 Recommendation and, more generally, it offers a clear example of the interaction between public procurement and competition, as well as the need to consider  effects of public procurement regulations on competitive markets, as Prof. Yukins and Lt. Col. Cora have just emphasised in their featured comment in Government Contractor, March 6, 2013, Vol. 55, No. 9, ¶ 64.

When analysing the situation in the USA, Yukins and Cora conclude that
a substantial body of literature confirms that procurement rules can have a significant negative impact on competitive commercial markets. Procurement rules can, for example, raise new barriers to entry in the commercial marketplace, facilitate collusion in the commercial space, or artificially buoy commercial prices. Federal procurement regulators have not, as a regular matter, assessed those possible impacts in past rulemaking, but sound practice and legal authority, including an executive order, seem to call for such assessments. Assessing procurement rules’ likely impact on competitive markets would be in accord with best practices in rulemaking, and would help ensure that the federal procurement system integrates efficiently, and not disruptively, into the broader economy.
Their views and recommendations, which I fully share [Sanchez Graells, Public Procurement and the EU Competition Rules (Oxford, Hart Publishing, 2011)], are relevant for procurement reform in all major jurisdictions, such as the USA, the EU and  China. Hopefully, too, such revisions can lead to an exchange of best practices and, to the extent desirable, certain global convergence.

Not worth the paper it is written on? ~ AG on the expectations created by legal advice in #competition (C-681/11) #EULaw

In her Opinion in case C-681/11 Schenker and Others, Advocate General Kokott has addressed a very relevant question regarding the possibility to avoid competition sanctions on the basis of the (legitimate) expectations created by professional legal advice. In her Opinion, she expressly addresses the question 'Is an error with regard to the lawfulness of conduct unobjectionable in the case where the undertaking acts in accordance with advice given by a legal adviser experienced in matters of competition law and the erroneous nature of the advice was neither obvious nor capable of being identified through the scrutiny which the undertaking could be expected to exercise?'. In my view, as clearly emphasised by the AG, this is of major relevance in the 'self-assessment' paradigm created by Regulation 1/2003.

According to the AG, the framework for the analysis must be the following:
Apparently, the members of the [cartel] wrongly considered that they had stayed ‘on the safe side’, as far as European Union law was concerned, by restricting the geographical scope of their cartel to Austria alone. In the light of the case-law of the European Union courts and the administrative practice of the European Commission, there is no doubt that that legal opinion was objectively incorrect. However, it is unclear whether the infringement of the prohibition of cartels under EU law can also be attributed subjectively to the undertakings concerned. In other words, it must be examined whether the undertakings participating in the [cartel] culpably infringed the prohibition of cartels under EU law (Opinion in C-681/11, at para 36, emphasis in the original, footnotes omitted).
In that regard, and after clearly indicating that the principle of nulla poena sine culpa applies in the field of EU Competition law as an implicit requirement of Articles 6(2) of the European Convention on Human Rights and 48(1) of the European Charter of Fundamental Rights [for general discussion on human rights in this area, see A Sanchez Graells, 'The EU’s Accession to the ECHR and Due Process Rights in EU Competition Law Matters: Nothing New Under the Sun?', in Kosta, Skoutaris & Tzevelekos (eds), The Accession of the EU to the ECHR (Hart Publishing, 2014), available at http://ssrn.com/abstract=2156904], AG Kokott goes on to explain that:
44. According to the principle of nulla poena sine culpa, an undertaking may be held responsible for a cartel offence which it has committed on a purely objective basis only where that offence can also be attributed to it subjectively. If, on the other hand, the undertaking commits an error of law precluding liability, an infringement cannot be found against it nor can it form the basis for the imposition of penalties such as fines.
45. It should be stressed that not every error of law is capable of precluding completely the liability of the undertaking participating in the cartel and thus the existence of a punishable infringement. Only where the error committed by the undertaking regarding the lawfulness of its market behaviour was unavoidable – sometimes also called an excusable error or an unobjectionable error – has the undertaking acted without fault and it cannot be held liable for the cartel offence in question.
46. Such an unavoidable error of law would appear to occur only very rarely. It can be taken to exist only where the undertaking concerned took all possible and reasonable steps to avoid its alleged infringement of EU antitrust law.
47. If the undertaking concerned could have avoided its error regarding the lawfulness of its market behaviour – as is often the case – by taking adequate precautions, it cannot escape any penalty for the cartel offence committed by it. Rather it will be liable at least for a negligent infringement, which, depending on the seriousness of the questions of competition law involved, may (but not must) lead to a reduced fine.
48. It is necessary to assess whether the error of law committed by an undertaking participating in a cartel was avoidable or unavoidable (objectionable or non-objectionable) on the basis of uniform criteria laid down in EU law, so that uniform conditions in respect of EU substantive competition law apply to all undertakings operating in the internal market (‘level playing field’) (Opinion in C-681/11, at paras 44 to 48, bold emphasis in the original,  underlined added, footnotes omitted).
After briefly referring to the old Miller case law on the suitability of the (legitimate) expectations created by legal advise as a competition defence, the AG enters an interesting revision of this issue in the new paradigm created by Regulation 1/2003 and she considers that
57. [...] obtaining expert legal advice has a completely different importance in the system under Regulation No 1/2003 than was the case in the system under Regulation No 17. Consulting a legal adviser is now often the only way for undertakings to obtain detailed information about the legal situation under antitrust law.
58. It is not acceptable, on the one hand, to encourage undertakings to obtain expert legal advice but, on the other, to attach absolutely no importance to that advice in assessing their fault in respect of an infringement of EU antitrust law. If an undertaking relies, in good faith, on – ultimately incorrect – advice provided by its legal adviser, this must have a bearing in cartel proceedings for the imposition of fines.
59. In particular, the purely civil liability of a lawyer for incorrect legal advice given by him does not, contrary to the view taken by the European Commission, constitute adequate compensation in itself. Civil recourse by a client against his lawyer is generally subject to considerable uncertainty and, moreover, cannot dispel the condemnation (‘stigma’) associated with the imposition of cartel – i.e. quasi-criminal – penalties against the undertaking.
60. Of course, obtaining legal advice cannot exempt an undertaking from all individual responsibility for its market behaviour and for any infringements of European competition law. The opinion of a lawyer can never give carte blanche. Otherwise, this would open the way to the production of opinions tailored to the interests of the undertaking and the power to give official negative clearance abolished by Regulation No 1/2003 would be transferred de facto to private legal advisers, who do not have any legitimacy in that regard.
61. In accordance with the fundamental objective of the effective enforcement of European competition rules, any expectations on the part of an undertaking created by legal advice may be recognised as the basis for an error of law precluding liability only where, in obtaining that legal advice, certain minimum requirements were complied with, which I will describe briefly below.
Minimum requirements in obtaining legal advice
62. The basic condition for taking into consideration the legal advice obtained by an undertaking is that the undertaking relied in good faith on that advice. Protection of legitimate expectations and good faith are closely related. If the facts justify the assumption that the undertaking relied on a legal opinion against its better judgment or that the report was tailored to the interests of the undertaking, the legal advice given is irrelevant from the very outset in assessing fault for an infringement of the rules of European competition law.
63. Furthermore, the following minimum requirements apply to obtaining legal advice, in respect of which the undertaking concerned itself bears the risk and responsibility for compliance.
64. First of all, the advice must always be obtained from an independent external lawyer. [...]
65. Second, the advice must be given by a specialist lawyer, which means that the lawyer must be specialised in competition law, including European antitrust law, and must also regularly work for clients in this field of law.
66. Third, the legal advice must have been provided on the basis of a full and accurate description of the facts by the undertaking concerned. If an undertaking has given only incomplete or even false information to the lawyer consulted by it regarding circumstances which originate from the area of responsibility of the undertaking, the opinion of that lawyer cannot have an exculpating effect in cartel proceedings in relation to any error of law.
67. Fourth, the opinion of the consulted lawyer must deal comprehensively with the European Commission’s administrative and decision-making practice and with the case-law of the European Union courts and give detailed comments on all legally relevant aspects of the case at issue. An element which is not expressly the subject-matter of the legal advice but may possibly be inferred implicitly from it cannot form the basis for recognition of an error of law precluding liability.
68. Fifth, the legal advice given may not be manifestly incorrect. No undertaking may rely blindly on legal advice. Rather, any undertaking which consults a lawyer must at least review the plausibility of the information provided by him.
69. Of course, the diligence expected of an undertaking in this regard depends on its size and its experience in competition matters. The larger the undertaking and the more experience it has with competition law, the more it is required to review the substance of the legal advice obtained, especially if it has its own legal department with relevant expertise.
70. In any event, every undertaking must be aware that certain anti-competitive practices are, by their nature, prohibited, and in particular that no one is permitted to participate in ‘hardcore restrictions’, for example in price agreements or in agreements or measures to share or partition markets. Furthermore, large, experienced undertakings can be expected to have taken note of the relevant statements made by the European Commission in its notices and guidelines in the field of competition law.
71. Sixth, the undertaking concerned acts at its own risk if the legal opinion obtained by it shows that the legal situation is unclear. In that case, the undertaking is at least negligent in accepting that by its market behaviour it infringes the rules of European competition law.
72. Admittedly, in the light of the minimum requirements I have just proposed, the value of legal opinions given by lawyers is slightly diminished for the undertakings concerned. However, this is inherent in the system created by Regulation No 1/2003 and is also no different in conventional criminal law; in the final analysis, any undertaking is itself responsible for its market behaviour and bears the risk for infringements of the law it commits. Absolute legal certainty cannot be secured by obtaining legal advice from a lawyer. However, if all the abovementioned minimum requirements are satisfied, an error of law precluding liability can be taken to exist where the undertaking concerned has relied in good faith on an opinion from its legal adviser.
73. It should be added that a lawyer who, by delivering opinions tailored to the interests of an undertaking, becomes an accomplice in the undertaking’s anti‑competitive practices will have to contend with not only consequences under the rules of civil law and of professional conduct, but may possibly also himself be subject to penalties imposed in cartel proceedings (Opinion in C-681/11, at paras 57 to 73, underlined added, footnotes omitted).
In my view, the very high minimum requirements suggested by AG Kokott may seem desirable from a theoretical perspective but, in practice, may generate the result that (very expensive, specialised) legal advice in EU Competition law matters is not worth the paper it is written on--and, consequently, undertakings may not even bother seeking (and paying for) it. 

Moreover, the level of pressure under which competition specialists would operate may make it impossible for them to effectively cover (ie insure) their potential liability at reasonable costs--thereby having a negative effect on the availability and affordability of good quality legal advice in this field. 

On the other hand, building a strong in-house competition team may even be self-defeating, as it comes to raise the threshold of diligence applicable to the undertaking. Therefore, companies may even consider whether they are better off simply omitting competition legal advice.

Given the complexity of the assessments required in certain cases, as well as the standard practice of introducing caveats and limitations in legal opinions (not only in this field of legal practice), coupled with the (not-so) residual duty of the requesting undertakings to double-check the accuracy of the legal advise obtained; successfully relying in a defence based on the legitimate expectations created by the advice of the legal expert seems very hard to achieve.

In that regard, I think that the CJEU should depart from the Opinion of AG Kokott in one of two possible ways: a) either the CJEU avoids endorsing her analysis and confirms the full applicability of Miller in the post- Regulation 1/2003 paradigm (which would generate simplicity and avoid litigation), or b) it adopts a more flexible approach and sets a less demanding standard for this defence (and,consequently, creates some room for an effective  'serious legal advice' defence). 

In my view, route b) would be preferable because resort to 'sound legal advice' can be coupled with the requirements connected with the implementation of effective competition compliance programs for the purposes of giving undertakings a chance of ever succeeding in proving lack of intention or unobjectionable conduct. In that regard, there seems to be some need for further consistent developments of the rules applicable in the 'self-assessment' paradigm created by Regulation 1/2003.

US GAO report on the use of small business and other preferences in the acquisition of goods

The US GAO has published an interesting report on the Army's and Defense Logistics Agency's Approach for Awarding Contracts for the Army Combat Shirt. 

The report details how the relevant agencies have moved from preferential emergency contracting towards more competitive preferential contracting for the supply of the increasing number of necessary army combat shirts. 

I think that the report is particularly interesting for non-US procurement lawyers, as it describes very clearly the decision-making procedures that need to be complied with in order to resort to preferential award of government contracts, with or without competition.

With a little help from my friends: AG Jääskinen supports flexible interpretation of rules on reliance on third party capabilities in #publicprocurement

In his Opinion of 28 February 2013 in case C‑94/12 Raggruppamento Temporaneo Imprese (‘RTI’), Advocate General Jääskinen has clearly indicated that the rules of arts 47(2) and 48(3) of Directive 2004/18 preclude national legislation which prohibits, except in special circumstances, reliance on the capacities of more than one auxiliary undertaking in order to fulfill the selection criteria concerning the economic and financial standing and/or technical and/or professional ability of an economic operator tendering for a contract as main contractor.

The approach followed by the AG must be welcome and, in my opinion, his teleological interpretation in view of the 'ultimate' objectives of the Directives deserves particular praise:
31. This argument is further supported by analysis of the objectives of Articles 47(2) and 48(3) of Directive 2004/18. According to the Court, one of the primary objectives of the public procurement rules of the European Union is to attain the widest possible opening‑up to competition, and that it is the concern of European Union law to ensure the widest possible participation by tenderers in a call for tenders.
32. The objective of widest possible opening‑up to competition is regarded not only from the interest in the free movement of goods and services, but also in regard to the interest of contracting authorities, who will thus have greater choice as to the most advantageous tender. Exclusion of tenderers based on the number of other entities participating in the execution of the contract such as allowing only one auxiliary undertaking per qualitative criteria category does not allow for a case by case evaluation, thus actually reducing the choices of the contracting authority and affecting effective competition.
33. Another objective of the public procurement rules is to open up the public procurement market for all economic operators, regardless of their size. The inclusion of small and medium‑sized enterprises (SMEs) is especially to be encouraged as SMEs are considered to form the backbone of European Union economy. The chances of SMEs to participate in tendering procedures and to be awarded public works contracts are hindered, among other factors, by the size of the contracts. Because of this, the possibility for bidders to participate in groups relying on the capacities of auxiliary undertakings is particularly important in facilitating the access to markets of SMEs. (AG in C-94/12 at paras 31 to 33, emphasis added).
These considerations rely on a conception of public procurement as a 'competition-enhancing' tool, which I personally very much favor [A Sanchez Graells, Public Procurement and the EU Competition Rules, Oxford: Hart Publishing, 2011]. However, relevant commentators such as Professor Arrowsmith continue to oppose this approach [S Arrowsmith, "The Purpose of the EU Procurement Directives: Ends, Means and the Implications for National Regulatory Space for Commercial and Horizontal Procurement Policies", in C. Barnard, M. Gehring and I. Solanke (eds.), Cambridge Yearbook of European Legal Studies (Hart Publishing, Oxford, 2011-2012), Vol. 14, pp.1-48]. Therefore, the doctrinal debate that the RTI Opinion in brings to the spotlight deserves some attention.

I think that it will be interesting to see if the CJEU expressly adopts the reasoning of AG Jääskinen in the final Judgment in the RTI case. If so, I think that the path towards the express and full recognition of the principle of competition in public procurement will continue to be paved and that there will be opportunities for further developments in the right direction.

http://youtu.be/gQLtCoh5EaI

#Decency in #publicprocurement could take us out of the #crisis: or how #corruption is making us bleed out

Stories about corruption in public procurement are so common that they have become part of the daily news (and, sadly, a part that tends to receive less and less attention due to routine and tiredness from repetition). However, when one looks at the aggregate data, an immediate need for reaction becomes evident.

As the EU Commissioner for Home Affairs has just emphasised "The Commission's best estimate is that 120 billion euros are lost each year to corruption in the 27 Member States of the EU. That is the equivalent of the whole EU-budget. In public procurement, studies suggest that up to 20- 25% of the public contracts’ value may be lost to corruption." 

Given that  public procurement represents around 20% of the GDP in the European Union, a loss of 20% of its value due to corrupt practices of all sorts means that corruption in public procurement costs around 4% of the EU GDP. 

If we add the fact that, sometimes, corruption is coupled with collusion (or bid rigging), which can generate an increase in prices of approximately 20% (with instances of around 40%), the numbers may be easily brought up to losses due to illegal and indecent behavior representing 40% to 50% of its value--i.e. around 8-10% of GDP.

The power of these facts seems unbeatable and we should all have it now clear in our minds that only decency can save us from the economic crisis.

However we want to run the numbers or reduce them to be conservative in our claims, even a reduction of 50% of the perceived level of corruption would not only avoid most of the cuts being imposed on the budgets for the provision of public services, but it would also allow for a relaxation of tax pressure on individuals and companies, and to provide effective economic incentives to entrepreneurship and innovation. 

Even in clearer terms: addressing the issue of corruption and collusion in procurement would single-handedly bring the EU from recession/depression into economic growth. In this regard, the initiative of the European Commission to move from rhetoric to results in the fight against corruption (in public procurement) in the EU must be echoed, voiced and supported.

This is something we intend to do at workshops B5 and B6 of the Global Revolution VI Conference next June in Nottingham. Suggestions and active participation is encouraged and definitely more than welcome!