Vice-President for Jobs, Growth, Investment and Competitiveness Jyrki Katainen

Today we have adopted an important initiative on public procurement.

Public procurement may sound bureaucratic, but it is an issue of utmost importance.

Because every year, your public administrations spend €2 trillion yearly in buying public services and goods. €2 trillion! That is the equivalent of 14% of GDP of the EU28!

We are talking about an issue which either has or hasn’t a big impact on growth perspectives.

These €2 trillion is your taxpayer money. And it’s the public services you enjoy on a daily basis: the bus you take to work, your child’s school, your electricity supply, your local swimming pool, the cleaning or catering at university…

It is very important to make public procurement function properly, efficiently and innovatively.

For instance innovation could be included much better in public procurement than we do at the moment. And the circular economy should be taken into account when doing a public tender.

One example of an innovative way to promote circular economy can be found in The Netherlands. The military had a tender on clothing. One of the preconditions was that clothes should be made of recycled material.

I would like to highlight two important dimensions of today’s initiative:

1) Investment

When we talk about €2 trillion per year spent on public procurement, everybody can understand that this has a big impact of on the quality of public investment. Everything depends on how the money is used and how public procurement is run. Public investment can make a change; can make a difference, if the tender and public procurement is run well and innovatively.

2) International dimension

When we negotiate a trade agreement, we always want to talk about access to public procurement – and reciprocity is a key element for our trade and investment negotiations. In some areas, for instance in the trade agreement with Canada (CETA), we got a very good and far reaching result on this.

Commissioner for Internal Market, Industry, Entrepreneurship and SMEs Elżbieta Bieńkowska

We already have solid legislation in the EU on public procurement.

These rules were further simplified in 2014. But what we have found and we have been working on this with Jyrki [Katainen] the last several months also using our previous experience, especially my previous experience: We found out that public authorities are not making enough use of the new opportunities that were established in 2014.

So to use public procurement in a more strategic way, especially in these times of technological change to use them to reach environmental, societal, technological objectives when buying goods and services.

Sometimes we notice the rules might be new, not known, challenging or difficult. So there is a quite big fear against potential irregularities and we come back to the known old comfort zones and established practices.

Public procurement constitutes of 14% of GDP. We cannot afford not to have a coordinated renewed focus and political ownership in this area.

This is why we have been working on this package. This package is of course not a legislative package, but I am quite sure as it was warmly welcomed and appreciated by all of the Member States, that this package will help the public authorities to use public procurement – this huge amount of money – strategically as a tool to obtain better value for taxpayers money and to contribute to a more innovative, resource-efficient, inclusive and competitive economy.

The initiative has four main strands:

1. We have defined priority areas for Member States to improve: We encourage Member States to develop a strategic approach to procurement policies, focusing on six priorities:

o    Make greater use of innovative, green and social criteria in awarding public contracts;

o    Make sure that public buyers have all the necessary professional skills;

o    Improve access for SMEs to procurement markets in the EU, to stimulate cross-border procurement, and for EU companies in third countries;

o    Increase the transparency, integrity and quality of procurement data;

o    Fully use digital technologies;

o    Increase cooperation among public buyers across the EU.

2. Voluntary ex-ante assessment of large infrastructure projects:

o    Large infrastructure projects are important are complex, they are often affected by delays and budget overruns. We are setting up a voluntary mechanism to help national authorities with a proper application of public procurement laws

o    We will advise on smaller questions on an early stage of the process and create a so-called help-desk. This will save time, avoid potentially costly mistakes, and ultimately help stimulate investments in infrastructure projects

o    The mechanism is voluntary, the Commission’s advice is non-binding, and information will be subject to strict confidentiality requirements

3. Recommendation on professionalisation of public buyers, the skills

4. Consultation on stimulating innovation through public procurement: Today we are also launching a consultation to collect feedback on how to stimulate innovation through the procurement of goods and services.

It is important to underline that each element of the package is accompanied by immediate support from the Commission.

How will the package benefit citizens?

Public procurements are all around: public transport, roads, conference centres, city squares, schools, hospitals …

Our goal is it that before launching a call for infrastructure works – before taking out of the drawer old dusted former called tenders, before relying on the “lowest price”-selection-criteria (which is in the majority of the Member States the number one criteria) – before all of this: the authorities should ask themselves a number of questions, for example:

• Can I reserve a part of the execution of the contract to disadvantaged workers?
• Can I build a special access facility for disabled people?
• Can I condition the performance of the contract on the use of environmentally friendly materials?

We try to answer these questions together with Member States and stakeholders. Hopefully there will be a real culture shift. No more exclusive lowest-price-criterion, but a much bigger emphasis on the overall society benefit objective.

The European Commission is today issuing a favourable opinion on the European Central Bank’s (ECB) recommendation of 23 June 2017, in which the ECB asked for a greater role in regulating clearing systems for financial instruments, for example with regard to central counterparties (CCPs), by proposing to amend Article 22 of its Statute.

With today’s opinion, the Commission strongly welcomes the initiative to provide the ECB with a clear regulatory competence in the area of central clearing. With the proposed amendment to its Statute, the ECB seeks to bring clearing systems for financial instruments within its regulatory competences. This important change will enable the ECB to fully perform the tasks conferred on it by the recent Commission proposal to amend the European Market Infrastructure Regulation (EMIR). In his Letter of Intent of September 2017, Commission President Juncker urged the European Parliament and Council to swiftly adopt the proposal to amend EMIR and the ECB recommendation to amend Article 22.

In its opinion, the Commission also recommends some limited adjustments to the ECB proposal to underline the need for consistency with the regulatory powers between the ECB, the European Parliament, the Council and the Commission with regard to clearing systems.

The European Parliament and the Council will now consider for adoption the proposed changes to the ECB statute under the ordinary legislative procedure, thanks to a simplified procedure under Article 129(3) of the Treaty on the Functioning of the European Union. As President Juncker underlined in his State of the Union speech of 13 September, making use of the possibilities offered by such clauses – namely allowing for technical changes to the Treaty under the ordinary legislative procedure – is an important tool to allow for faster and more efficient EU decision-making.

Background

ECB recommendation

In its recommendation of 23 June, the ECB proposed amending Article 22 of the Statute of the European System of Central Banks and of the European Central Bank as follows:

“The ECB and national central banks may provide facilities, and the ECB may make regulations, to ensure efficient and sound clearing and payment systems, and clearing systems for financial instruments, within the Union and with third countries.”

The recommendation suggests in particular that the ECB be given regulatory powers to adopt binding assessments and require remedial action, in close cooperation with other EU authorities. Moreover, where necessary for protecting the stability of the euro, the ECB should have the regulatory powers to adopt additional requirements for CCPs involved in the clearing of significant amounts of euro-denominated transactions. The ECB also emphasises that this new task should only be used for monetary policy purposes.

The Treaty on the Functioning of the European Union (Article 129 (3)) requires the Commission to provide an opinion on this recommendation. The European Parliament and Council then decide on the amendment.

Ongoing review of financial regulation

The ECB recommendation and today’s Commission opinion are to be seen in particular in the context of the Commission’s legislative proposal of 13 June 2017 to review the European Market Infrastructure Regulation (EMIR) (Regulation No 468/2012).

The proposed targeted reforms are designed to further improve the financial stability of the European Union. Central counterparties are already well-regulated and equipped to deal with financial distress, thanks to a range of measures adopted in the wake of the financial crisis. However, further amendments are still needed to ensure a more consistent and robust supervision of CCPs in EU and non-EU countries, as well as to deal with newly-emerging challenges. CCPs have become a systemically-important part of the financial sector and their importance is growing. In addition, the upcoming withdrawal of the United Kingdom from the EU will have a significant impact on the regulation and oversight of clearing in Europe.

The recommended change to the Statute would enable the ECB to perform fully the responsibilities that the Commission’s legislative proposal foresees for central banks of issue in the process of authorisation, recognition and oversight of CCPs based both within and outside the EU.

For more information

Commission Opinion on the Recommendation of the European Central Bank amending Article 22 of the Statute of the European System of Central Banks and the European Central Bank

Memo: Commission Opinion on the Recommendation of the European Central Bank amending Article 22 of the Statute of the European System of Central Banks and the European Central Bank

Proposal for a regulation amending European Market Infrastructure Regulation (EMIR)

Communication on further changes to European Market Infrastructure Regulation (EMIR)

Proposal on more robust supervision of central counterparties (CCPs)

1. Why is the Commission adopting this Opinion?

The European Central Bank (ECB) adopted a recommendation with a view to amending Article 22 of the Statute of the European System of Central Banks and the European Central Bank on 23 June 2017. The ECB has used Article 129(3) of the Treaty on the Functioning of the European Union, according to which the European Parliament and the Council can change a limited number of the Articles of the Statute following a recommendation from the ECB or a proposal by the Commission. In the case of a recommendation from the ECB, Article 129(3) foresees that the Commission gives an opinion on that recommendation.

2. What changes to the Statute is the European Central Bank seeking to achieve in its recommendation?

Article 22 of the Statute currently only establishes regulatory powers for the ECB in relation to payment systems with a clearing stage, but not for all clearing systems, including those for clearing financial instruments. The current powers serve to allow the ECB to perform its task of ensuring the smooth operation of payment systems, but do not go beyond that area. With the recommended amendment, the ECB seeks to expand its regulatory powers to also include “clearing systems for financial instruments”, such as central counterparties (CCPs), in view of the bearing these infrastructures could have on the ECB’s basic tasks and primary monetary policy objectives.

3. Does the Commission agree with this recommendation from the European Central Bank?

Yes, the Commission strongly welcomes this recommendation and fully supports the ECB in its wish to amend Article 22 of the Statute. However, these new regulatory powers, which will be enshrined in primary law, need to be appropriately framed to ensure that there can be no regulatory conflicts, particularly between:

– regulations adopted by the ECB under (the amended) Article 22;

– legal acts adopted by the co-legislators (the European Parliament and the Council), as for example the European Market Infrastructure Regulation (see below);

– or legal acts adopted by the Commission in the form of delegated or implementing acts.

In light of this, the Commission’s Opinion suggests some additional framing to the ECB’s recommended amendment to Article 22.  

4. How are clearing and central counterparties currently regulated at the EU level?

The European Market Infrastructure Regulation (EMIR), adopted in 2012, is one of the most important EU post-financial crisis pieces of legislation. It covers clearing of financial instruments (for example derivatives) and the prudential and supervisory requirements on central counterparties (often referred to as CCPs).

A significant part of clearing is done across borders, both within the EU and internationally with CCPs established in third countries. The scale and importance of CCPs in Europe and globally has nearly doubled since the post-crisis G20 commitment to clear standardised over-the-counter (OTC) derivatives through CCPs.

A central counterparty is a financial institution that helps facilitate the clearing and settlement process in financial markets. The central counterparty interposes itself between parties to contracts traded in one or more financial markets, becoming the buyer to every seller and the seller to every buyer. A CCP’s main purpose is to manage the risk that could arise if one of the counterparties is not able to make the required payments when they are due – i.e. defaults on the deal. CCPs are commercial firms. There are currently 17 European CCPs authorised and 28 third-country CCPs recognised under EMIR, most of which clear various exchange traded or over-the-counter derivatives.

This is an important risk mitigation tool since it means that financial transactions can be completed even if individual buyers or sellers were to default on their individual obligations.

The role of central counterparties has expanded in the global financial system during recent years, reflecting not only the introduction of regulatory obligations in the interest of systemic stability, but also the voluntary use amid increased global initiatives and greater awareness of the benefits of central clearing. However, this has inevitably concentrated risk at the level of the central counterparties. Major problems in one central counterparty could pose significant risks to the smooth operation of payment systems and the implementation of the single monetary policy, which would ultimately affect the achievement of the primary objective of the ECB of maintaining price stability.

5. What does this change to Article 22 (once adopted) mean in the context of the latest changes proposed by the Commission, in June 2017, to the European Market Infrastructure Regulation (EMIR)?

The Commission’s proposal of 13 June 2017, amending the European Market Infrastructure Regulation, strengthens the common European supervisory system over central counterparties, led by the European Securities and Markets Authority. It also reinforces the responsibilities of the central banks of issue (the ECB in case of euro-denominated financial instruments) in the context of the authorisation and oversight over central counterparties on matters of relevance for monetary policy. The proposal deals with central counterparties in the EU as well as counterparties in third countries. Once adopted, the new regulatory powers recommended by the ECB will ensure, inter alia, that the ECB is able to fulfil its responsibilities as the central bank of issue of the euro under the proposed changes to the European Market Infrastructure Regulation.

The recommended changes to Article 22 are thus consistent with, and complementary to, the EMIR-framework, including the latest changes proposed in June 2017.

6. How does this amendment to the Statute make use of simplified procedures, as mentioned by President Juncker in his State of the Union speech of 13 September?

The Statute is contained in Protocol 4, annexed to the Union Treaties, and is thus a part of these Treaties. According to Article 129(3) of the Treaty on the Functioning of the European Union, a limited number of Articles of the Statute can be changed by a simplified procedure instead of using the regular procedure to amend the Treaty. Under this simplified procedure, the European Parliament and the Council will adopt the change to the Statute, using the ordinary legislative procedure.

The new regulatory powers that will be granted to the ECB via the amendment of Article 22 of the Statute will be enshrined in primary law. It is thus very important that they are appropriately framed.

7. What is the link to the judgment of the General Court delivered in 2015 in the case United Kingdom vs. the European Central Bank?  

In this case, the General Court held that the current wording of Article 22 of the Statute had to be interpreted narrowly and that the regulatory powers of the ECB were limited to clearing in relation to payment systems and did not cover all clearing systems. Consequently, the Court stated that the ECB did not have the competence, under Article 22 of its Statute, to regulate clearing systems for financial instruments more generally, so for example with regard to clearing systems for derivatives. With its recommendation, the European Central Bank seeks to extend the regulatory remit of Article 22 and increase legal clarity and certainty.

8. What are the next steps?

The Commission’s opinion, once adopted, will be transmitted to the European Parliament and the Council, which will deal with the recommended amendment to Article 22 of the Statute in the ordinary legislative procedure. This means that the co-legislators (the European Parliament and the Council) will deal with this matter in parallel to the pending changes to the European Market Infrastructure Regulation from June this year.

For More Information

Commission Opinion on the Recommendation of the European Central Bank amending Article 22 of the Statute of the European System of Central Banks and the European Central Bank

Commission proposals on more robust supervision of central counterparties (CCPs)

MEMO on the proposal to amend EMIR

Commission proposal on more robust supervision of central counterparties (CCPs)

To strengthen the Single Market and as part of the continuous effort to stimulate investment in the EU, today the Commission has put forward an initiative to carry out procurement more efficiently and in a sustainable manner, while making full use of digital technologies to simplify and accelerate procedures.

Vice-President for Jobs, Growth, Investment and Competitiveness Jyrki Katainen said: “We have put investment centre stage since taking office in November 2014, notably by attracting private capital with the Investment Plan for Europe. Now we want to unlock the full potential of public procurement in ensuring that the €2 trillion spent yearly in public services and products boost our economy, spur innovation and help meet sustainability goals.

Elżbieta Bieńkowska, Commissioner for Internal Market, Industry, Entrepreneurship and SMEs, added: “We encourage public authorities to use public procurement strategically as a tool to obtain better value for taxpayers money and to contribute to a more innovative, sustainable, inclusive and competitive economy. The Commission will continue to assist Member States in doing so, and invites public authorities at all levels of government and other stakeholders to work in a broad partnership.”

Today’s initiative has four main strands:

• Definition of priority areas for improvement –Member States are encouraged to develop a strategic approach to procurement policies, focusing on six priorities: greater uptake of innovative, green and social criteria in awarding public contracts; professionalisation of public buyers; improving access by SMEs to procurement markets in the EU and by EU companies in third countries; increasing transparency, integrity and quality of procurement data; digitisation of procurement processes; and more cooperation among public buyers across the EU.
• Voluntary ex-ante assessment of large infrastructure projects – Complex projects can go wrong right from the beginning if the project managers do not fully grasp the complex rules that apply to large-scale procurement. The Commission will set up a helpdesk that can answer specific questions at an early stage related to projects with an estimated value over €250 million. For projects of high importance for the Member State concerned or with a total estimated value above €500 million, relevant authorities can ask the Commission to check the complete procurement plan for compatibility with the EU procurement legislation, significantly reducing uncertainties and the risk of delays and legal challenges. The mechanism is voluntary, the Commission’s advice is non-binding, and information will be handled subject to strict confidentiality requirements.
• Recommendation on professionalisation of public buyers – The Commission recommends steps to be taken by Member States to ensure that public buyers have the business skills, technical knowledge and procedural understanding needed to comply with the rules and make sure that taxpayers get the best goods and services for their money. The Commission will facilitate the exchange of good practices and innovative approaches.
• Consultation on stimulating innovation through public procurement – Today the Commission is launching a targeted consultation to collect feedback from stakeholders on how to stimulate innovation through the procurement of goods and services. Procurement of innovation may concern the outcomes of innovation as well as innovative ways of purchasing. The consultation is open until 31 December and will feed into future guidance for public authorities, addressing issues such as how to set a strategy, organise support for innovation procurement or use innovation-friendly procurement tools.
  

The Commission will continue to support Member States in making full use of the possibilities offered by the new public procurement rules and looks forward to building a partnership with authorities and stakeholders to improve procurement on the ground.

Background:

The EU is making an unprecedented effort to stimulate the economy and unlock investment, in particular via the Investment Plan for Europe, and a positive fiscal stance in the European Semester. These policies need to be underpinned by structural reforms to foster innovation and growth. It is therefore crucial to focus on improving the functioning of the Single Market and the removal of barriers to investment, at the national and European level.

A substantial part of public investment in our economy is spent through public procurement: €2 trillion yearly representing 14% of EU GDP. Ensuring that this taxpayer money is spent efficiently and effectively is of common European interest.

EU public procurement legislation requires all public contracts above a certain threshold to be put out for tender respecting the principles of transparency, equal treatment and non-discrimination. These rules were further simplified in 2014. Rather than only award a contract on the basis of the best price, authorities are encouraged to integrate qualitative criteria, demand innovative, energy saving solutions or insisting on sustainable and socially inclusive approaches.

The Commission continues to closely monitor the transposition of EU public procurement legislation into national law, and to help public authorities understand and take full advantage of the possibilities of public procurement.

In parallel, as announced in the Industrial Policy Strategy, the Commission continues to strive to conclude ambitious procurement chapters in free trade agreements, helping EU companies to sell abroad. There is an urgent need to unlock the current stalemate in the Council with regard to the Commission’s proposal for an International Procurement Instrument swiftly.

More information: