Understanding the EU’s International Procurement Instrument

In June 2025, the European Commission adopted its first-ever measures under the International Procurement Instrument Regulation (IPI), restricting access to the EU public procurement market for medical devices for economic operators and medical devices from the People’s Republic of China. This is the first application of the IPI, a new trade instrument aimed at tackling lack of reciprocity in access to public procurement in third countries.

The Commission’s decision was immediately followed by the publication of a report detailing the application of the IPI and the progress made in third country market access. This report sheds light on the Commission’s intended use of the IPI, and provides new information on China’s restrictive practices that limit the access of EU businesses to the Chinese public procurement market.

In this client alert, we take a closer look at the IPI and the measures that the Commission decided to adopt with regard to China. We also consider how the Commission is likely to use the IPI in the future to tackle similar trade problems.

What is the International Procurement Instrument?

The IPI was adopted in 2022 with the aim of ensuring reciprocity for the EU and third countries in accessing their public procurement markets. Where there is an apparent lack of reciprocal access, the Commission can initiate an IPI investigation, either after a substantiated complaint by a Member State or an interested party, or ex officio.

The investigation is conducted over the course of nine months and entails consultations with the relevant third country and an inquiry into those aspects of its legislative, regulatory and administrative framework that are allegedly disadvantaging EU businesses, as compared to domestic businesses. Throughout the investigation, stakeholders are invited to provide information in relation to the complaint.

At the end of the investigation, the Commission publishes a report of its findings, setting out the next steps it intends to take. If the report confirms the existence of unfair trade practices, together with an unwillingness to remedy them on the part of the third country, the Commission will go on to determine what IPI measures may be appropriate. Then, as in other trade defense proceedings, the IPI measures are implemented by the Commission through a separate act, following the approval of the Member States in the Trade Barriers Committee.

Why did the EU need an International Procurement Instrument?

The IPI was adopted in response to a need to adapt the EU’s toolbox to new difficulties in international trade, and respond to the request by EU companies for a level playing field with third countries. It can be seen as part of a wave of new trade instruments that also includes the Foreign Subsidies Regulation (FSR) and the Anti-Coercion Instrument (ACI). All of these initiatives allow the Commission to bring their own, ex officio, investigations into unfair trade practices that disadvantage European industries but fall outside the pre-existing anti-subsidy and anti-dumping legal framework.

The Commission is increasingly relying on such unilateral tools to address the regulatory gaps in areas not fully covered by WTO rules. The IPI complements the WTO’s Government Procurement Agreement (GPA) because it applies to countries that are not signatories either to the GPA or to any other bilateral or multilateral procurement agreements with the EU. Indeed, even GPA signatories can be subject to IPI measures for procurement areas not covered by their existing obligations. By using the IPI, the Commission seeks to ensure a more comprehensive trade defense system in the procurement sector, addressing shortcomings in the GPA and extending protections to areas falling outside the WTO’s scope.

China, which is not a signatory to the GPA, and which is,  reportedly an increasingly difficult market to access for EU companies, has become a primary focus for the workings of the IPI. This was made clear by the Commission’s recent adoption of IPI measures in relation to the Chinese public procurement market for medical devices. It also aligns with the EU’s broader ‘de-risking’ strategy regarding China, reflected in the Commission’s intensified fair trade enforcement efforts and push for further reciprocity. In 2024 alone, the Commission launched , 20 of which targeted Chinese imports.

Which IPI measures can be implemented under the International Procurement Instrument?

To incentivize third countries to ensure reciprocity in access to public procurement, the IPI prescribes two levels of possible measures that the Commission may adopt:

• • • A score adjustment on tenders submitted by businesses from a particular third country. This penalty involves lowering a tender's score by a certain percentage during the evaluation of the criteria defined in the public procurement documents, leading to a competitive disadvantage for the bidder as compared to bidders from other countries.
    • An exclusion of all tenders submitted by businesses from the third country in question. This measure goes beyond merely applying a scoring penalty and results in the affected bidders being disqualified from the bidding process.

In addition to these measures, the third country targeted by the IPI is indirectly affected by requirements placed on successful bidders, regardless of their origin, as they must limit their subcontracting to, and sourcing from, the third country in question to no more than 50% of the contract value.

However, only EU public procurements with an estimated value equal or above 15 000 000 EUR net of VAT for works and concessions, and equal or above 5 000 000 EUR net of VAT for goods and services, fall within the scope of the IPI measures. Furthermore, the measures expire after a period of five years, although they may be extended, adjusted or replaced after a review by the Commission.

The choice of measure is dependent on the availability of alternative sources for the EU’s contracting entity and on the assessment of its proportionality with regard to the identified trade distortion by the third country.

How did the Commission apply the International Procurement Instrument in its first IPI investigation?

According to the Commission, the investigation into the Chinese public procurement market for medical devices revealed exclusionary practices that favored domestic products, and discriminatory measures that restricted access for EU economic operators. Based on its findings, the Commission considered a score adjustment to be insufficient as an IPI measure in light of the scale and impact of China’s actions.

Although the Commission invited the Chinese Government to discuss these findings and agree appropriate steps to eliminate the trade distortions, no understanding was reached. Therefore, the Commission decided to apply the most far-reaching measures available under Article 6 of the IPI Regulation, concluding that the exclusion of Chinese tenders in the medical devices sector was the most effective way to remedy the impaired access caused by China’s procurement policies.

As a result of the chosen IPI measure, all Chinese economic operators are excluded from submitting a tender:

• • • in all EU procurement procedures concerning all categories of medical devices
    • with a value equal or above EUR 5 000 000 net of VAT
    • organized by all EU contracting authorities and contracting entities.

It is worth noting that the Commission's investigation revealed a “significant”, but not total, exclusion of foreign suppliers from China's medical device procurement market, with an estimated 87% of tenders facing discriminatory barriers. Yet, the EU still opted for the toughest possible response. This decision reflects the Commission’s growing frustration with persistent trade imbalances and its willingness to escalate its enforcement positioning in pursuit of fairer trade conditions. Indeed, the IPI measure suggests a strategic choice was made to put increased pressure on China to take meaningful steps toward opening its procurement markets.

What response can be expected from third countries following IPI measures?

In response to the Commission’s decision, China called on the EU to revoke the newly imposed restrictions, and, only a few days later, announced its own retaliation measures, excluding all participation by EU businesses in China’s public procurements regarding medical devices.

This trade battle is further evidence of rising tensions in EU-China trade relations, particularly within the framework of the EU’s ‘de-risking’ strategy. Considering the Commission’s increasingly assertive trade defense agenda, this first IPI investigation is unlikely to be the last.

Likewise, the EU can expect tit-for-tat retaliation from China for investigations launched ex officio, in the same way that China imposed anti-dumping measures on EU brandy as a response to the anti-subsidy investigation into Chinese battery electric vehicle imports. In 2024 the EU filed a request for consultations before the WTO Dispute Settlement Body measures described as retaliatory in nature

Furthermore, certain third countries are increasingly challenging the EU’s neo-unilateralist trade approach, which, they argue, restricts their access to the EU market. For instance, the Russian Federation has raised objections to the EU’s Carbon Border Adjustment Mechanism, calling it a set of disguised trade-restrictive and discriminatory measures justified under environmental pretexts. Russia has also criticized the EU’s Emissions Trading System, particularly the provision allowing certain sectors to receive free allocations of emission allowances, as it claims that this constitutes a prohibited subsidy linked to export performance.

Given the growing number of disagreements between third countries and the EU over its progressively assertive trade policies, an escalation in trade tensions and therefore an increased risk of retaliatory measures impacting market access is highly likely.

How do IPI investigations into the Chinese public procurement market benefit the EU’s general trade defense?

In trade defense investigations against China, the Commission and other EU complainants frequently rely on a Commission on significant distortions in the economy of the China for the purposes of trade defense investigations. This document (the “China Report”), which includes detailed information pertaining to public procurement in China, was first published in 2017 and then updated in 2024. Interestingly, the IPI investigation into Chinese public procurement market for medical devices and the following IPI report confirm information in the earlier China Report on distortion in Chinese public procurement, while also including additional elements specific to medical devices.

Both the China Report and the IPI report both reached some of the same conclusions, namely that:

• • • China’s legal framework calls on public entities to opt for domestic products, whenever these are available. This so-called ‘Buy Chinese clause’ has its basis in the national Government Procurement Law and in the Measures for the Administration of the Government Procurement of Imported Products.
    • There is a significantly increased procedural burden on imported goods, which must undergo an examination and receive approval from the Ministry of Finance before entering the country.
    • Volume-based procurements are incentivized by the Chinese government. Non-subsidized EU companies therefore experience a significant disadvantage compared to subsidized Chinese suppliers who are able to offer lower prices.

In addition, specific trade distortions relating to the medical devices sector were identified in the IPI report, such as:

• • • The presence of sector-specific measures and quotas that require hospitals to procure domestically produced products, where available. This aligns with China's national strategic plan ‘Made in China 2025’, which sets a target for Chinese companies to achieve an 85% share of the domestic medical devices market and reflects the country's explicit commitment to prioritizing local manufacturers.

While the investigation into the Chinese public procurement market on medical devices is the first to be carried out under the IPI, it has already provided the Commission with valuable insights into China’s broader procurement landscape and policies. It is likely that a growing number of IPI investigations will not only strengthen the basis for implementing further IPI countermeasures but will also expand the body of information available on China’s public procurement framework. This additional information can then support the Commission in other investigations into China, including those that may result in anti-dumping or anti-subsidy measures, as the Commission focuses on shielding EU domestic industry from Chinese overcapacity.

We would like to thank Lydia Bondarenko for her assistance in preparing this client alert.