SelfCleaning A tool to fight corruption in public

Self-Cleaning: A tool to fight corruption in public procurement Dr. Gerung von Hoff Dubrovnik, 5 June 2009 DAC 5054752

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

Requirements

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

Rationale

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

Legal Reasons for Self-Cleaning Principle of proportionality n 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) n Exclusion has to be restricted to tenderers who, at the time of the award, must be considered to be unreliable Principle of equal treatment n No objective justification for treating equally Ø companies who have taken comprehensive self-cleaning measures and Ø candidates who have made no effort to eliminate the causes of their wrongdoing 6

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

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

Contact: Dr Gerung von Hoff, LL. M. Freshfields Bruckhaus Deringer Potsdamer Platz 1 10785 Berlin/GERMANY Phone: 030 20 28 36 00 Fax: 030 20 28 37 66 E-Mail: gerung. vonhoff@freshfields. com