International Investment Law and Public Procurement: An Overview

Public procurement law inter alia provides a means to foster competition in the purchasing of goods and services by governments. For tenderers incurring significant expenditures during the procurement procedure, legal remedies are of vital importance. Since these are not equally guaranteed by all states, the issue occurs as to whether international investment law can serve as a gap-filling regime to protect foreign tenderers against harmful state conduct during procurement proceedings. The chapter therefore examines the applicability of international investment agreements (IIAs) to the procurement procedure and, hence, the qualification of a tender and the pre-award expenditure as protected investments. However, the question is neither regulated adequately in most IIAs, nor has a definite approach developed in arbitral practice so far. While successful bidders can claim compensation for damages arising from the pre-award phase, the protection of unsuccessful bidders must be answered in a differentiated manner. The chapter argues that a distinction has to be made between an open and a pre-elective award procedure. In the latter case, the host state invites the foreign tenderer to participate in the procurement proceeding and thus provides the consent to admit the investment in its territory. Moreover, foreign tenders increase competition within the award procedure, fostering competition in the host state’s procurement market. Assuming that the IIA is applicable, the chapter argues that the ordinary business risks of participating in a tender procedure can be sufficiently taken into account when assessing liability.