Self-Cleaning: A tool to fight corruption in public procurement Dr. Gerung von Hoff Dubrovnik, 5 June 2009 DAC

1 Concept of Self-Cleaning Exclusion of unreliable tenderer oGeneral rule: public procurement law provides for excluding tenderers who are unreliable (e.g. corruption leads to unreliability) Exception: self-cleaning oTenderer takes effective measures to ensure that wrongful acts will not recur in the future and thereby regains reliability

Requirements

3 Clarification of the relevant facts and circumstances Cooperation with prosecutors and regulatory authorities Repairing the damage Personnel measures Structural and organisational measures (compliance system) Complementary measure: integrity pact

Rationale

5 Legal Classification Economic operators are generally guaranteed market access and the right to participate in public tender procedures However, to ensure that public authorities do not contract with unreliable tenderers, exclusion of corrupt tenderers is justified Exception to an exclusion/debarment is made in case of self-cleaning based on  the principle of proportionality and  the principle of equal treatment  economic and political reasons

6 Legal Reasons for Self-Cleaning Principle of proportionality Any restrictive measure has to be appropriate and necessary. Excluding self-cleaned companies is neither necessary (company is no longer corrupt) nor appropriate (no punitive rationale) Exclusion has to be restricted to tenderers who, at the time of the award, must be considered to be unreliable Principle of equal treatment No objective justification for treating equally  companies who have taken comprehensive self-cleaning measures and  candidates who have made no effort to eliminate the causes of their wrongdoing

7 Economic and Political Reasons for Self-Cleaning Protection of public funds Admission of self-cleaned tenderers to the award procedure enhances competition  contributes to reducing the offering price Fair competition and fight against corruption Self-cleaning measures effectively prevent corruption related activities from recurring Self-cleaning measures ensure that competition is on a level playing field

8 Self-Cleaning in important jurisdictions European institutions’ procurement rules: Article 133 a para 1 of Regulation 2342/2002/EC Austria: Case law of the Supreme Court and Section 73 (1) Federal Procurement Act Italy: Article 38 lit. d) of the Code on Public Works, Supplies and Service Contracts Germany: Well established case-law Non-European jurisdictions: Israel, Mexico, USA

Dr Gerung von Hoff, LL.M. Freshfields Bruckhaus Deringer Potsdamer Platz Berlin/GERMANY Phone: Fax: Contact: