The International Procurement Act

On 29 August 2022, Regulation (EU) 2022/1031 of the European Parliament and of the Council, or the International Procurement Act (IPI)[1], entered into force. Its purpose is to promote access and equal conditions for European Union companies outside the EU. This is supposed to be done with response measures: if the EU or national authorities receive a notification about a third country having a ban on EU companies participating in  procurements, the contracting authorities in the EU can exclude applicants from this country from participating in certain procurements. Excepted from the IPI are countries with which the EU has an agreement on mutual obligations in the field of public procurement, such as members of the World Trade Organization Agreement on Government Procurement or a member of a trade agreement that includes provisions on public procurement.

In Latvia, contracting authorities will be obliged to determine such exclusion rules in procurement procedures conducted in accordance with the Public Procurement Law, the Law on the Procurement of Public Service Providers, and the Law on Public-Private Partnership. The IPI applies to tenders with an estimated contract price equal to or greater than EUR 15,000,000 excluding VAT for works and concessions, and equal to or greater than EUR 5,000,000 excluding VAT for goods and services. For now, these laws are not expected to be amended and contractors will have to apply the IPI regulation directly.


How can Latvian companies achieve fair competition based on the IPI?

If it is difficult for EU companies to participate in the public procurement and concession procedures of the relevant third country, companies or their associations will be able to submit a complaint on the EU Commission’s website. An EU member state will also be able to address the EU Commission on this matter. If, after diplomatic communication, the third country in question does not change its measures and practices, the IPI authorises the EU Commission to introduce countermeasures (IPI measures).

The European Commission will launch an IPI investigation and as a result may order purchasers throughout the EU in general or in a specific type or sector of procurement to:

  • reduce the score of the applicant’s offer, who is from the relevant third country
  • exclude offers from applicants, who are from the relevant third country

Information on the implemented IPI measures will be published in the Official Journal of the European Union. IPI measures will apply only to those procurement and concession procedures initiated after the relevant IPI measure comes into force.


What are the obligations of contracting authorities as a result of the IPI measure?

Firstly, contracting authorities should follow IPI measures and apply them in their tenders.

Secondly, during any procurement or concession procedure to which an IPI measure applies, contracting authorities must refer to the Regulation and all applicable IPI measures in the Regulation, and the draft procurement contract must provide for the following mandatory provisions for the IPI measure to be effective:

  • not to subcontract for more than 50% of the total value of the contract with economic participants from a third country to which an IPI measure applies
  • for contracts under which goods will be supplied, to ensure that goods or services originating in a third country covered by the IPI measure are no more than 50% of the total value of the contract
  • no later than on the completion of the contract, to submit to the contracting authority or the contracting party, upon their request, evidence of compliance with the above-mentioned obligations
  • If the above-mentioned requirements are not met, to pay a reasonable fee corresponding to 10–30% of the total value of the contract

Upon a justified request from an EU member state, the EU Commission can identify specific customers located in administrative units with a population of less than 50,000 inhabitants and exempt them from the application of the Regulation.

[1] Regulation (EU) 2022/1031 of the European Parliament and of the Council of 23 June 2022 on the access of third-country economic operators, goods and services to the Union’s public procurement and concession markets and procedures supporting negotiations on access of Union economic operators, goods and services to the public procurement and concession markets of third countries (International Procurement Instrument – IPI).