Restricting the Origin of Products in Public Procurement

The issue

The main difficulty is that the Estonian Public Procurement Act expressly provides that a contracting authority may restrict the participation of tenderers originating from third countries (§ 7(3) of the Public Procurement Act). However, there is no provision allowing a public-sector contracting authority to restrict the origin of the products offered—as opposed to the origin of the tenderers as legal persons—because such products are legally offered by EU tenderers, such as distributors or local subsidiaries.

Contracting entities operating in the utilities sectors are subject to a specific provision in § 161 of the Public Procurement Act, which permits a tender to be rejected where more than 50% of the products offered originate in third countries.

The Public Procurement Act, which governs the acquisition of goods and services necessary for the provision of public services, does not mention security considerations as something that should take precedence over the promotion of competition. However, according to the National Security Concept of Estonia, the significant deterioration of the international security environment requires Estonia as a whole to make considerably greater and faster efforts to strengthen its security.

To create a safer and more crisis-resilient environment, security considerations must be taken into account when developing policies, legislation, work processes, supply chains, infrastructure, international cooperation and other areas. Estonia assesses risks associated with public procurement in order to exclude products, services and tenderers that could endanger services essential to the functioning of the state (pp. 4–5 and 11).

Security begins with each and every one of us. In addition to military and defence resources, it is particularly important for the provision of vital services, including energy supply, the operation of airports and ports, cash circulation, electronic identification and digital signature services. The National Security Concept sets out commendable principles, stating that security begins with every individual and that particular attention must also be paid to protecting vital services.

Unfortunately, the more closely one examines the detailed legislation, the clearer it becomes that protecting such services has been made extremely difficult. The Public Procurement Act, which regulates the acquisition of goods and services necessary for providing those services, does not mention security considerations as something that should take precedence over the promotion of competition.

In a 2024 opinion article published by ERR, I argued that perhaps the time had come to reconsider our priorities and recognise the protection of security as an important principle equal to the protection of competition and equal treatment. I am convinced that all these important principles can coexist without undermining one another.

Developments in the Court of Justice of the European Union

In the meantime, the Court of Justice of the European Union delivered two significant judgments concerning the rights of tenderers from third countries—China and Türkiye—to rely on EU public procurement directives when seeking to protect their rights in procurement disputes: Kolin (C-652/22) and Qingdao (C-266/22).

First, the Court held that Member States do not have the competence to regulate trade relations between the EU and third countries through national legislation—in other words, to determine whether tenderers from such countries enjoy statutory protection. The power to conclude trade agreements lies exclusively with the European Union.

Second, the Court held that each contracting authority may decide this issue within an individual procurement procedure. Third, the Court stated that tenderers from third countries do not derive any rights from the EU public procurement directives.

The Court did not answer whether a contracting authority may consequently also restrict goods and services originating in third countries. The European Commission likewise essentially left this question unanswered in its relevant Q&A document (see section 1.4).

Restrictions on the subject matter of a public contract under the Public Procurement Act

It can nevertheless be argued that contracting authorities have the right to impose such restrictions. If companies from third countries are not entitled to demand equal treatment with EU companies, the same reasoning could also be applied at the level of manufacturers and products.

Section 88(7) of the Public Procurement Act provides that technical specifications must afford all economic operators equal access to the procurement procedure and must not create unjustified obstacles to opening up public procurement to competition.

This means that although a contracting authority must ensure equal conditions, it is not prohibited from imposing restrictions altogether. Such restrictions must simply be objectively justified. If a contracting authority justifies a restriction on the origin of a product by reference to national security or economic security risks, the restriction may be regarded as lawful.

I have also expressed this view to the contracting authorities I advise, although always with the disclaimer that there has been no judgment confirming the lawfulness of this approach.

I now feel confident enough to publish these thoughts because Professor Dr iur Mari Ann Simovart, who teaches public procurement law at the University of Tartu, reached the same conclusion in her article “Contracting Authorities’ (In-)Ability to Neutralise the Threat of Hostile Technology in EU Public Procurement” (EDSeQ 1|2026).

Drawing by analogy on the judgments in Kolin and Qingdao, Simovart concludes that contracting authorities are entitled to restrict products on the basis of their origin and that nothing in the Directive provides grounds for the opposite conclusion (pp. 79–80).

In conclusion, contracting authorities may prohibit, through the technical specifications, products or their critical components originating in third countries where there is an objective justification for doing so (§ 88(7) of the Public Procurement Act).

It could also be argued that there is no obligation to provide such justification at all, because § 3(2) of the Public Procurement Act does not require contracting authorities to treat manufacturers from such countries equally with other manufacturers. Nevertheless, the safer approach is to have an objective justification and to demonstrate that any restriction of competition is based on an objective need.