Chinese Companies on High Alert Following New European Union Ruling

European Court Restricts Chinese and Turkish Companies in Public Procurement

On Tuesday, October 22, the Court of the European Union issued a long-awaited ruling that significantly curtails the ability of companies from countries without a trade agreement with the Union to participate in public procurement processes.

The case in question involved a Turkish firm, but the ruling’s implications will be most acutely felt by Chinese companies, which have posed a competitive threat to European businesses due to unfair competition practices linked to low pricing.

Impact of the Ruling

This legal decision takes place in a context of a subtle trade war between Brussels and Beijing, highlighted by the ongoing discussions around tariffs on electric vehicles.
The EU Court ruling could exacerbate tensions further.

Details of the Court Decision

The European Court’s decision is based on the case C-652/22, known as Kolin.
The Turkish company had initially raised a complaint with the Croatian Administrative High Court, which escalated the matter to the EU Court for clarification on how procuring entities might allow bidders to rectify or clarify bids post-deadline in accordance with EU public procurement directives.

The Ankara-based Kolin Inşaat lost its case when the Court confirmed that Turkey’s lack of a formal agreement with the EU disqualifies it from public procurement processes within the Union.
The Court stated, “Economic operators from third countries, such as Turkey, that have not concluded such international agreements with the Union cannot participate in public procurement procedures…”

This means that while these companies might still engage in the bidding process, they lack substantial legal protection and can only cite breaches of general principles without being shielded by EU or national laws.

Consequences for Chinese Companies

Chinese firms should be particularly concerned following this ruling.
For several years, EU tenders were accessible to companies from nations without a free trade agreement.
However, with the rising number of contracts awarded to Chinese companies, the EU’s stance has shifted.

Chinese firms have often underbid in public contracts, leading to suspicions of significant state subsidies aiding their competitiveness.

Additionally, while Chinese bidders enjoyed easy access to the EU market, China itself imposed strict limitations on EU bidders through protective measures.

The recent EU ruling now also restricts legal protections for Chinese firms participating in member state procurement, presenting potential disadvantages for their business activities within the Union.