This article was published prior to the publication of the post-Brexit agreement between the UK and EU which covers the relationship between the UK and EU following the end of the implementation period (commonly referred to as the “transition period”) created by the European Union (Withdrawal Agreement) Act 2020, and should be read in that context.
When the UK left the European Union on 31 January 2020, it was Brexit that many thought would dominate the headlines of 2020, not the impact of a global pandemic. Whilst the pandemic has diverted attention away from the trade talks and ‘deal/no deal’ debates that had encompassed the political landscape of the previous year, it is hard to ignore the fact that the end of the Transition Period on 31 December 2020 is looming, and uncertainty about Life After Brexit is growing.
This article considers the impact of Brexit on public procurement and State aid, including what we know so far, and how contracting authorities and businesses can effectively plan for the future.
Public procurement in the UK is regulated by the Public Contracts Regulations 2015 (the “PCR 2015”), which derive from the EU Public Contracts Directive 2014. The PCR 2015 are domestic law, and will continue to apply to public procurements in the UK after 31 December 2020. That being said, the Government has already announced some amendments to the current regime, with further amendments likely as the new trade landscape becomes apparent.
From 1 January 2021, contracting authorities:
Contracting authorities should be aware that any procurements that have not been finalised (i.e. a contract award notice has not been published) by 31 December 2020 will be subject to the existing procurement regulations. The existing PCR 2015 remedies available will also apply to these procurements.
The UK’s accession (in it’s own right) to the Agreement on Government Procurement (“GPA”) from 1 January 2021 was confirmed on 7 October 2020. The GPA is a multinational agreement under the World Trade Organisation (“WTO”), and the UK’s accession to it ensures that UK contracting authorities and businesses can continue to tender for contracts across the EU, as well as in the United States, Australia, Hong Kong and other GPA party countries, following the expiry of the Transition Period.
The GPA works to ensure fair, open and transparent procurement conditions – similar to those in the EU, albeit more flexible. The GPA applies to the procurement of goods, services and construction works, but not all procurement activities of each GPA party are caught by the GPA. Where a procurement is covered, the procuring party is prevented from favouring its own domestic entities for contracting, and must follow various procedural procurement requirements, such as publishing notices (where required) and using specific tendering processes.
Contracting authorities and businesses should familiarise themselves with the GPA rules, as whilst the PCR 2015 will continue to govern domestic procurements, the procurement of global contracts caught by the GPA will be subject to the GPA rules. Details of which type of contracting authority, what type of purchase and what value of purchase will be covered will be set out in the coverage schedule of the GPA for the UK once known.
The State aid rules were introduced to invoke a ‘level playing’ field amongst EU member states when granting aid from state resources. The State aid rules have applied throughout the Transition Period, however the UK Government has now confirmed that from 1 January 2021, these will be replaced by the rules under the WTO’s Agreement on Subsidies and Countervailing Measures (the “WTO Rules”), which the UK is a party to. Whilst some subsidies are prohibited under the WTO rules, the rules are generally much less onerous than the EU State aid rules, with the key differences being:
The WTO Rules reflect a substantial shift away from the strict EU State aid rules currently being followed. Even if the UK Government opts to implement a domestic subsidy regime in the future, it is anticipated that this will largely follow the WTO Rules, so contracting authorities can expect much more freedom with regards to distributing aid to domestic businesses going forwards.
That being said, UK contracting authorities should be aware that aid granted before the 31 December 2020 can still be investigated by the European Commission for up to four years from the end of the Transition Period. Contracting authorities should ensure that any aid granted prior to that date is compliant with current State aid rules. Northern Ireland will also continue to be subject to the State aid regime in relation to goods, although this is subject to political debate currently.
Whilst it is still unclear if/when a domestic subsidy regime will be implemented, the Government has confirmed that it wants to work with businesses and public authorities on this, giving both contracting authorities and businesses more input on the future of subsidy regulation in the UK.
Contracting authorities should:
For more information on the article above please contact Lucy Woods.
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