First exclusion decision under the International Procurement Instrument

Introduction

The European Commission has published the results of the first investigation carried out under the International Procurement Instrument ('IPI'), as reflected in its report of 14 January 2025. As a result, the European Commission has decided to exclude Chinese companies from European public biddings for medical devices with a value exceeding 5 million euros, as well as to limit the inputs of Chinese origin to 50% in such tenders.

History, nature and objectives of the IPI

Public procurement is big business around the globe, accounting for around 40% of the planet's total trade flows. The European Union ('EU') allows companies from all over the world to participate in tenders and be awarded public contracts in Member States on a competitive basis, whereas this possibility is restricted to European companies in third countries.

This lack of reciprocity and the unfair competitive conditions for European companies led to the creation of the IPI, which was finally adopted by Regulation (EU) 2022/1031  ('IPI Regulation') on 23 June 2022 and entered into force on 29 August 2022. The main objective of this mechanism is the reciprocal opening of public procurement markets and the elimination of discriminatory practices in third countries, ensuring that European companies can compete on a level playing field in foreign tenders. To this end, the IPI Regulation raises the possibility of restricting access to European public contracts to companies from third countries that do not apply a reciprocity criterion.

The IPI Regulation allows the European Commission to conduct investigations and consultations on potential distortions generated by the participation of foreign companies in European public procurement procedures.

Such investigations may be initiated on the Commission’s initiative or on the basis of complaints lodged by companies or associations. This possibility provides economic operators with an additional tool to report the involvement of companies from third countries which hinder the access of European companies to their public procurement markets. Corrective measures that may be taken by the Commission include adjusting the scores or excluding bids from third-country companies.

The Commission's first investigation under the IPI

In April 2024, the Commission launched on its own initiative the first investigation under the IPI, relating to several practices implemented by the Chinese government that severely and recurrently restricted the access of European companies to the Chinese medical device procurement market. Specifically, the investigation dealt with three types of measures:

1. the promotion of the acquisition of national products;
2. the restriction of the acquisition of imported goods, including sanitary products; and
3. the imposition of conditions for the centralized procurement of medical devices by China that give rise to abnormally low offers which are impossible to sustain by companies operating under market conditions.

Following the announcement of the investigation in the Official Journal of the EU, the Commission invited the Chinese authorities to file written submissions and open consultations with the Commission. While the Chinese authorities did not provide a formal response to the questions raised, they agreed to open a consultation procedure with the Commission, which took place in July 2024 in Beijing.

The results from the investigation: exclusion of Chinese companies from EU medical device biddings

The investigation concluded on 14 January 2025 with a report by the European Commission confirming the existence of discriminatory practices against European companies in the Chinese market for public tenders for medical devices.

China's discriminatory practices are based on the application of a national preference policy, based on both rules and strategic documents, which significantly restrict the access of foreign products to its public biddings. Additionally, China's Public Procurement Law establishes a general preference for domestic goods and services, which results in administrative measures that hinder access to foreign products. The Commission also denounced the lack of transparency in the bidding processes, as well as the artificially low prices of the procurement calls aiming at precluding the offers of foreign companies operating under market conditions.

During the proceedings, the Government of China did not provide proof against the main facts, merely asserting, without providing evidence, that some of the practices were not widely applied. As a solution, China proposed to negotiate a bilateral agreement on government procurement, but the Commission rejected this alternative.

As a result of the investigation, on 19 June 2025, the European Commission adopted restrictive measures in the field of public procurement within the EU through Implementing Regulation 2025/1197. These measures consist in the exclusion of Chinese companies from public tenders of more than 5 million euros in the sector of medical devices, as well as the imposition of a maximum limit of 50% of inputs from China in such contracts. A more detailed analysis of these measures can be found in this blog.

Conclusions

The European Commission's response is part of a broader EU strategy to strengthen a level playing field in its internal market and protect European companies from unfair practices by third countries.

The IPI is just an additional mechanism and a further step in a growing trend towards the use of trade defense instruments, such as the Foreign Subsidies Regulation or anti-dumping and safeguard investigations in strategic sectors, such as those of electric vehicles or steel.

This reflects the growing importance of protectionism at global level and the EU's effort to ensure that market access is truly reciprocal. In this context, the IPI appears as a new opportunity to resolve competitive imbalances, with the possibility of lifting restrictions if discriminatory practices cease. In addition, it opens an interesting possibility for European operators who bid abroad and face unfair competition to report such conducts to the European Commission.