Mandatory exclusions: a new tool to protect human rights in EU public procurement?

November 28, 2016 •

David_HansomBy David Hansom
Partner, VWV LLP London

The EU procurement regime draws on and develops many of the principles set out in the World Trade Organisation’s Global Procurement Agreement.

Both draw on principles of fairness, non-discrimination on the grounds of nationality, and equal treatment,  as is well known by procurement lawyers around the world.

But recognition of the need for the protection of human rights through public contracts is only now starting to gain traction as a key area of procurement policy and practical application by EU member states.

The UN Guiding Principles on Business and Human Rights (UNGPs), which are supported by the EU, and promoted by a growing number of individual member states through National Action Plans (NAPs) provide a strong normative basis for developments in this area, but the discretion afforded to EU member states to implement the EU procurement directives, and lack of awareness of the impacts of procurement on human rights, mean that many simply have not yet linked procurement with human rights through their national legislation.

Thus in some ways, countries such as the Netherlands, Sweden, the US and the UK are amongst countries leading advances in this area.

The EU procurement directive 2014/24/EC contains (at Article 57) a range of permitted grounds of exclusion for suppliers from a particular procurement activity. These include various mandatory and discretionary exclusions, such as bribery offences, non-payment of taxes as well as previous poor performance of a contract under the Public Contracts Regulations 2015 (which implement the EU procurement rules in England, Wales and Northern Ireland).  In the UK, holding a person in servitude or slavery (as well as knowing, or where an operator ought to have known that a person was held in slavery or servitude) is a ground of mandatory exclusion, and the same is true of the broadly defined offence of “human trafficking”.

This means that suppliers and, by extension, their identified sub-contractors, now need to declare that they do not have such a conviction. This is good news in raising the profile of human rights in the context of modern slavery into public purchasing of goods and services, as part of the UNGPs’ “state-business nexus”.  It is already spreading the message on the importance of human rights protections in supply chains.

However, the requirement for a “conviction” under the EU rules raises the bar high.

Many situations leading to human rights abuses in supply chains do not lead to criminal prosecutions, and many that should do so are never reported; alternatively, they may well occur in far-off jurisdictions. Enforcement of sanctions, including corporate criminal responsibility, can be difficult to achieve.

In addition, the ground of exclusion will apply only to the part of the organisation making a bid for a specific public contract. So exclusions based on criminal convictions will not always filter out bids from other parts of a corporate group, or joint ventures involving an offending company. This is particularly the case with multinational operators with regional or group holdings. Tracing the guilty party can be problematic, at best.

Finally, the UK’s Public Contracts Regulations 2015 limit the grounds of exclusion to 5 years from the date of the relevant conviction. It is also possible for suppliers that have been found guilty of relevant offences to provide evidence of “self-cleaning” to justify why they should not be excluded from the procurement in any event.

Across the EU, public bodies are slowly but steadily becoming more concerned about human rights issues in their contracting and supply chains. But the approach to human rights and procurement amongst member states, and at the European Commission level, remains piecemeal – a tendency which may intensify  as the UK  prepares to withdraw from EU collective decision making.