EU excludes Russian contractors from participating in public procurement
As a consequence of Russia's continued attacks in Ukraine, the EU has adopted a fifth sanctions package that restricts the ability of Russian companies to participate in public contracts and concessions. In this news article, you can read more about the things that contracting entities and suppliers should take into account in upcoming tenders and in public contracts already awarded.
On 8 April 2022, the EU announced its fifth sanctions package against Russia. The new sanctions prohibit contracting entities in the EU from awarding public contracts or concession contracts to the following types of tenderers:
- Russian nationals, Russian entities, or other legal persons established in Russia
- non-Russian entities in which a Russian national or a Russian entity has an ownership interest (directly or indirectly) of more than 50%
- non-Russian entities acting on behalf of a Russian national or a Russian entity.
Furthermore, the sanctions prohibit the above persons and entities from executing public contracts already entered into. If, however, the contract was made before 9 April 2022, the prohibition will not apply until 10 October 2022.
Russian subcontractors and auxiliary entities are also subject to the sanctions if they account for more than 10% of the contract value.
The sanctions affect all public contracts that exceed the thresholds set out in the Danish Public Procurement Act, the Utilities Directive, the Defence and Security Directive, or the Concessions Directive, whether the contracts are specifically exempted from the procurement obligation or not. Contracts whose value does not exceed the thresholds - such as contracts falling within the Danish Public Tenders Act - will not be affected, however.
Exceptions
The Sanctions Regulation exempts certain contracts which may still be awarded and executed if specifically authorised by a Member State, including contracts for the purchase of oil, natural gas, certain minerals, and “strictly necessary goods and services” which can only be provided (in sufficient quantities) by Russian suppliers. That is, with an authorisation from the Member State.
Our comments
Like the previous sanctions, the Regulation has direct effect on individuals and companies in all EU Member States. Danish contracting entities must therefore check if a contractor is sanctioned before awarding a contract. To ensure that Russian-owned entities are not awarded a public contract, the contracting entity must establish the ownership structure of the successful tenderer.
Contracting entities should also consider whether the sanctions affect contractors or subcontractors for ongoing contracts, which may have to be suspended or terminated. For contracts entered into before 9 April 2022, the prohibition will not apply until 10 October 2022, however.
It will also be relevant for tenderers and contractors to check whether their subcontractors are established in Russia or have Russian owners - and if so, whether these can or should be replaced.
Read the Regulation (in Danish).
Read also the news article: EU's 5th sanctions package against Russia - and new humanitarian exemptions (in Danish).
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