Regulation 43 – Labels

Commentary

Regulation 43 defines a number of rules regarding the use of labels in public procurement. Labels – at least with this level of detail – are a new addition to the European legal framework. In Directive 2004/18/EC they were only mentioned in Recital 29 and Article 23, in both instances connected with environmental considerations. The lack of detailed rules on labels was behind at least one important CJEU decision, the Dutch Coffee case (C-358/10 Commission v Netherlands).

Directive 2014/24/EU has gone beyond the limited rules of Article 23(6) of Directive 2004/18/EC and put a clear emphasis on the possibility to use eco labels and labels certifying certain social aspects of products and services (such as fair trade, or sustainability) as part of the process of detailing technical specifications and, generally, with the goal of creating some clear space for the introduction of environmental and social considerations in the drafting of technical specifications. This was a highly contentious issue and Directive 2014/24/EU now aims at consolidating the guidance provided by the CJEU. As clearly stressed in Recital (75), Contracting authorities that wish to purchase works, supplies or services with specific environmental, social or other characteristics should be able to refer to particular labels, such as the European Eco-label, (multi-)national eco-labels or any other label provided that the requirements for the label are linked to the subject-matter of the contract, such as the description of the product and its presentation, including packaging requirements. It is furthermore essential that those requirements are drawn up and adopted on the basis of objectively verifiable criteria, using a procedure in which stakeholders, such as government bodies, consumers, manufacturers, distributors and environmental organisations, can participate, and that the label is accessible and available to all interested parties. … References to labels should not have the effect of restricting innovation.

In Regulation 43 we can find a number of do’s and don’ts regarding the use of labels, most of them concerned with making sure that the use of labels are not a roundabout way to discriminate against bidders, particularly foreign bidders. The rules are particularly detailed and imply an attentive look by contracting authorities to ensure compliance. There are no clear prohibitions of national labels, but the way Regulation 43 is designed makes them almost impossible to use for their intended purpose and potentially leave contracting authorities with a lot of work to do in compliance assessment. Some of the caveats also imply a very good degree of knowledge of the labels being asked and the actual technical requirements imposed by the standard.

As a general rule, labels can be used for environmental and social requirements in technical specifications as long as they are connected with the subject matter of the contract. However, they will have to comply with the five cumulative requirements set in paragraph 1:

i) be linked with subject matter;

ii) be based on objective and non-discriminatory criteria;

iii) have been established in an open and transparent procedure involving all stakeholders;

iv) be accessible to all interested parties; and

v) economic operator not having undue influence over standard setter.

These requirements effectively force the contracting authority to undertake a reasonable due diligence on the assessment of the label. We suspect that the third to fifth requirements will be hard to judge by a contracting authority. After all the job to be done by using a label is to outsource having to comb through information to make an assessment on specific characteristics and those two requirements imply making an assessment on the label requirements themselves and even the creation process.

Regulation 43 also includes a number of caveats which may hollow out the benefits of using labels in the first place. For example, if a label is legally available, economic operators can provide evidence that they comply with an “equivalent” label, letting the contracting authority to check if they are indeed “equivalent” or not. Furthermore, under certain circumstances  economic operators can also provide evidence that they comply with the substantive requirements set by a label even though they do not have the certification in itself, forcing the contracting authority to check the necessary documentation to see if it complies with the required label or not.

The rules on labels clearly follow the general criteria that regulate the establishment of technical specifications and particularly the prohibition of references to a specific make or source, or a particular process which characterises the products or services provided by a specific economic operator, or to trade marks, patents, types or a specific origin or production with the effect of favouring or eliminating certain undertakings or certain products of Article 42(4) of Directive 2014/24/EU. Moreover, as will happen with any other sorts of technical specifications, contracting authorities are bound to adopt a possibilistic approach to the assessment of compliance with label requirements. This is particularly clear from the provision that, in cases where the tenderer has not been able to obtain the specific label indicated by the contracting authority or an equivalent label within the relevant time limits for reasons that are not attributable to that economic operator, requires contracting authorities to accept other appropriate means of proof, which may include a technical dossier from the manufacturer, provided that the economic operator concerned proves that the works, supplies or services to be provided by it fulfill the requirements of the specific label or the specific requirements indicated by the contracting authority (Article 43(1) in fine Directive 2014/24/EU). In our view, this provision encapsulates the ultimate requirement of the principle of technical neutrality.

Overall, it may well be that using labels will not be a time-saving exercise that perhaps contracting authorities are expecting.

 

Proposed citation: Albert Sanchez-Graells & Pedro Telles, (2016) Commentary to the Public Contracts Regulation 2015, available at: www.pcr2015.uk.

Last modified: September 5, 2016 by Pedro Telles

43.—(1) Where contracting authorities intend to purchase works, supplies or services with specific environmental, social or other characteristics they may, in the technical specifications, the award criteria or the contract performance conditions, require a specific label as means of proof that the works, services or supplies correspond to the required characteristics, provided that all of the following conditions are fulfilled:—

(a) the label requirements only concern criteria which are linked to the subject-matter of the contract and are appropriate to define characteristics of the works, supplies or services that are the subject-matter of the contract;

(b) the label requirements are based on objectively verifiable and non-discriminatory criteria;

(c) the labels are established in an open and transparent procedure in which all relevant stakeholders, including government bodies, consumers, social partners, manufacturers, distributors and non-governmental organisations, may participate;

(d) the labels are accessible to all interested parties;

(e) the label requirements are set by a third party over which the economic operator applying for the label cannot exercise a decisive influence.

(2) Where contracting authorities do not require the works, supplies or services to meet all of the label requirements, they shall indicate which label requirements are required.

(3) Contracting authorities requiring a specific label shall accept all labels that confirm that the works, supplies or services meet equivalent label requirements.

(4) Where an economic operator had demonstrably no possibility of obtaining the specific label indicated by the contracting authority, or an equivalent label, within the relevant time limits for reasons that are not attributable to that economic operator, the contracting authority shall accept other appropriate means of proof, which may include a technical dossier from the manufacturer, provided that the economic operator concerned proves that the works, supplies or services to be provided by it fulfil the requirements of the specific label or the specific requirements indicated by the contracting authority.

(5) Where a label fulfils the conditions mentioned in paragraph (1)(b), (c), (d) and (e) but also sets out requirements not linked to the subject-matter of the contract, contracting authorities shall not require the label as such but may define the technical specification by reference to those of the detailed specifications of that label, or, where necessary, parts of it, that are linked to the subject-matter of the contract and are appropriate to define characteristics of that subject-matter.