EU sanctions for public contracts
On 8 April 2022, for the first time since the start of the Ukraine war, the EU issued prohibitions on awarding and performing public contracts and concessions. The bans entered into force as part of the fifth package of sanctions against Russia and are applicable directly. The relevant provision for EU sanctions regarding public contracts is Article 5k of Regulation EU 833/2014 (hereinafter the "Sanctions Regulation"). According to this, a prohibition on awarding and performing public contracts and concessions fundamentally exists to the detriment of persons, institutions and organisations with a so-called connection with Russia (cf. our newsletters "Sanctions: BAAINBw requires new self-declaration on EU Sanctions Regulation" of 2 June 2022 and "Russia sanctions - what's left for public contracts?" of 8 June 2022).
As an exception, Article 5k (2) of the Sanctions Regulation provides for a reservation of authorisation: according to this, the competent national authority can authorise the award and performance of contracts under certain circumstances.
On 24 June 2022, a General Permit issued by the German Federal Office of Economics and Export Control (Bundesamt für Wirtschaft und Ausfuhrkontrolle, BAFA) with the official title "General Permit No. 31 (Award of Public Contracts and Concessions)" ("Allgemeine Genehmigung Nr. 31", hereinafter "AGG No. 31") was published in the Federal Gazette.
What is the purpose of the new AGG No. 31?
Content of the permit
In accordance with AGG No. 31, the BAFA permits the awarding of public contracts and concessions to natural and legal persons, institutions and organisations with a connection to Russia, as well as the continued performance of contracts with such contractors, if and to the extent that the contracts are intended for:
- activities related to goods and services associated with civil nuclear capabilities,
- intergovernmental cooperation on space programmes,
- the provision of absolutely necessary goods or services, if they can be provided exclusively or only in sufficient quantity by those persons with a connection to Russia referred to in paragraph 1,
- the activities of the diplomatic and consular missions of the EU and its member states in Russia,
- the purchase, import or transportation of natural gas and petroleum, including refined petroleum products, and titanium, aluminium, copper, nickel, palladium and iron ore from or through Russia to the EU; or
- the purchase, import or transportation of coal and other solid fossil fuels listed in Annex XXII of the EU Sanctions Regulation until 10 August 2022 (for the exemption criteria see also Article 5k (2) (a) - (f) of the Sanctions Regulation, which is identical in content).
The exact wording of AGG No. 31 can be found here.
AGG No. 31 can only be used by contracting entities within the meaning of Sec. 98 of the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen, GWB) and is initially limited in term until 31 December 2022. With regard to the prohibition of contract awards in procurement procedures that have not yet been concluded, the date of initiating the procurement procedure is decisive for the temporal applicability of the exemption criteria. This is based either on the publication of the contract notice or - in procedures without a contract notice - on the invitation to tender. The decisive date for the contract performance prohibition in case of existing contracts is the date of notification of utilisation of AGG No. 31 to the contractor.
Reverse exceptions
AGG No. 31 provides for six reverse exceptions which, if their criteria are fulfilled, uphold the general prohibition of awarding or performing a contract under Article 5k (1) of the Sanctions Regulation (see Section II.3.3 of AGG No. 31). This is the case, inter alia, if the services to be provided as a result of the award of the contracts and concessions and the continuation of the contracts violate the other prohibitions or approval requirements of the Sanctions Regulation.
Ancillary provisions - registration and notification
In addition, AGG No. 31 contains ancillary provisions to be fulfilled by the contracting authority. These include, in particular, a registration obligation as well as a notification and documentation obligation: If contracting authorities intend to make use of AGG No. 31 or have already made use of it, they must register once with the BAFA as a user before the first use or within thirty days thereafter (registration requirement). A new registration for each further use of AGG No. 31 is not required. Furthermore, if contracting authorities make use of AGG No. 31, they must notify applicants and bidders of this use and document it for the purposes of the award procedure (notification and documentation obligation).
What changes?
Companies with a connection to Russia that participate in procurement procedures are under no obligation to register with the BAFA for the use of AGG No. 31 or to send the contracting authority a corresponding notification. Registration, notification and documentation obligations only exist for the contracting authority.
AGG No. 31 now makes it easier for contracting authorities to award contracts to companies with a connection to Russia or to continue such contracts despite the existing sanctions. However, the contracting authority is not obliged to use AGG No. 31. It may refrain from invoking AGG No. 31 if it does not intend to award a contract to a company with a connection to Russia or to continue a contract with such a company. Thus, bidders or contractors have no claim to usage of AGG No. 31.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
