EU: Post-Infringement Redemption - How to avoid exclusion from EU tenders and funding after a competition law infringement

As recently highlighted in our December newsletter, companies found to have infringed competition law increasingly face exclusion from public procurement procedures. This can significantly impact their business, in particular for those who are heavily reliant on public procurement.

Companies can, however, stave off exclusion by providing the tendering authority with evidence that they implemented remedial or self-cleaning measures.

This article examines how economic operators can effectively "redeem themselves" by adopting remedial measures and consequently avoid exclusion from EU funding or EU public tenders through the framework established in Article 138 of the EU Financial Regulation.[1]

Exclusion and the self-cleaning framework in the EU Financial Regulation

Under the EU public procurement framework, companies that have been found guilty by a competition authority or court of having entered into agreements with the aim of distorting competition must be excluded from EU funding and tenders organised by EU institutions - such as the Commission, Parliament, the Council and Court of Justice, executive agencies, Union bodies and decentralised agencies, as well as Member States and other entities implementing EU budget (EU tenders).[2] Such a decision can significantly impact companies that regularly participate in EU tenders or rely on EU funding, as companies can be excluded on this ground not only for the tender or funding opportunity in question but for all tenders and funding opportunities falling within the scope of the EU Financial Regulation for a maximum period of three years.[3]

To avoid exclusion from EU funding and tenders, a company can, however, demonstrate that it has adopted remedial measures to an extent sufficient to demonstrate its reliability.[4] In addition to compensating prejudiced parties, if any,[5] and paying any fines imposed by the competition authority,[6] the EU Financial Regulation's non-exhaustive list suggests that the company at risk of exclusion should provide evidence that it has taken “measures to identify the origin of the situations giving rise to exclusion and concrete technical, organisational and personnel measures within the relevant business or activity area (…), appropriate to correct the conduct and prevent its further occurrence”.[7] We explore this remedial measure in further detail below.

Identifying the origin – the root cause analysis 

Before implementing remedial measures, the EU Financial Regulation requires economic operators to ascertain the “origin” of the competition law infringement. This makes sense - it would be difficult to remedy something without first understanding what the anti-competitive behaviour actually entailed.

In practice, this analysis is often completed before the competition law authority formally establishes the infringement. Companies often launch an internal investigation in parallel to an authority’s investigation, either to benefit from the authority’s leniency program or to gather exculpatory evidence as part of their defence strategy. A well-designed internal investigation will focus on identifying the full scope of the potential infringement, including the types of conduct involved, the affected business areas, and the implicated individuals or teams. As part of this exercise, the investigating lawyers will also typically seek to understand the underlying structural, cultural, or procedural factors that allowed the anti-competitive conduct to occur. This includes examining whether deficiencies in the organisation's compliance culture and systems (i.e. such as insufficient communication from the top, inadequate alerting mechanisms or a lack of meaningful consequences for non-compliance) contributed to the infringement.

There is often a tension between the need to document this process in order to demonstrate to tendering authorities that a thorough internal investigation was carried out, and the need to ensure that no documents are created which may be subject to discovery or disclosure obligations. For example, detailed written reports summarising interview findings or internal assessments of liability exposure may have to be produced in subsequent regulatory proceedings or, in some jurisdictions, even in civil litigation. Involving external lawyers can help manage this tension, as their involvement may benefit from legal professional privilege, in many cases shielding their working products, including interview notes, legal memoranda and strategic advice, from disclosure.

Technical, organisational and personnel measures appropriate to correct the conduct and prevent its further occurrence 

Once a company has identified the root cause of the infringement, it must adopt measures appropriate to correct the conduct and prevent its further occurrence. The EU Financial Regulation specifically mentions three categories of measures, namely measures of a technical, organisational or personnel nature.

• Technical measures: These involve systems, controls, and platforms designed to support and monitor compliance on an ongoing basis. Examples of such measures include enhancing escalation procedures for decisions that carry a higher competition law risk, and ensuring there is an effective whistleblowing hotline.
• Organisational measures: These establish governance structures, reporting lines, and institutional arrangements to ensure compliance functions operate independently and with appropriate authority. Examples include creating a dedicated compliance function with direct board reporting, further strengthening competition law policies and procedures, conducting regular risk assessments and audits, and implementing mechanisms to assess speak-up culture through employee surveys and feedback tools.
• Personnel measures: These focus on equipping employees with the knowledge and skills to identify competition law risks and with incentives to act compliantly. They also include measures to ensure accountability for past misconduct.

In summary, Article 138(10) of the EU Financial Regulation requires companies found to have infringed competition law to take decisive action to restore their reliability in the eyes of tendering authorities. 

Strengthening the proof of the remedial measure’s sufficiency

Article 138(9) of the EU Financial Regulation makes it clear that remedial measures can only be taken into account only insofar as they are sufficient to demonstrate the applicant or tenderer’s reliability. The burden of proof lies squarely with the applicant company, which must affirmatively establish that the remedial measures adopted are adequate for that purpose. In practice, this will require a company to submit detailed documentary evidence showing the existence and the implementation of the measures. To accept sufficiency, tendering authorities typically want to see that the remedial measures go beyond superficial policy updates and demonstrate genuine cultural transformation within the organisation.

While the final decision on sufficiency rests with the tendering authority, the EU Financial Regulation explicitly confirms that a company can bolster its case in two ways:

• The company can submit an assessment by an external independent auditor confirming that the technical, organisational, and personnel measures adopted by the economic operator are appropriate to correct the identified conduct and prevent its recurrence.
• The company can submit a decision by a national or Union authority deeming the remedial measures sufficient to address the exclusion situation.

Whilst not legally required, assessments from established, reputable auditors can provide persuasive evidence of corrective action and strengthen the case that the remedial measures are sufficient to restore the company's reliability.

Key takeaways 

We identify the following key takeaways and recommandations: 

• Document everything meticulously, but keep discovery/disclosure risks in mind - Maintaining a comprehensive record of the internal investigation will be important when demonstrating its sufficiency later on. However, due to discovery and disclosure risks, it is advisable to ensure the description of the investigation as well as its results are protected by legal professional privilege. Similarly, keep documentation on implementation timelines, risk assessments, training completion rates, whistleblowing reports, board minutes, and internal audit reports as these demonstrate compliance maturity and provide concrete evidence that measures are appropriate to correct conduct and prevent recurrence.
• Consider commissioning an external independent audit – Whilst not legally required, an external auditor assessment can lend additional credibility to the remedial measures adopted. Such an audit complements the work of legal advisors who can conduct a privileged internal investigation and develop a long-term compliance strategy. While the legal work remains protected under legal privilege, the external audit provides an independent and external validation of the implemented measures that can more easily be shared with tendering authorities.
• Demonstrate sustained cultural transformation, not just policy updates – As the saying goes, “compliance is a verb." It requires continuous action and ongoing commitment. Superficial updates to policy documentation are unlikely to convince officials in the long run.

If you need more information or further guidance in this area, please contact Baptist Vleeshouwers and Claire De Neve.

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