01 December 2020

From a competition law perspective, exclusivity clauses in vertical supply chains often require careful deliberation. But does the same hold true within the realms of public procurement?

Across the European Union, public authorities are spending nearly € 2 trillion a year on purchasing various goods, works and services. To prevent the misuse of public means within the Union – but also to promote competition and strengthen the free movement of goods and services – the EU maintains a set of procedural rules for public procurements in the member states, notably through the Public Procurement Directive (2014/24/EU). In Sweden, those rules have been implemented primarily through the Public Procurement Act (2016:1145).

EU law contains general rules on certain types of procurement contracts, e.g. framework agreements with one or several suppliers (see article 33 of the Directive). These rules do not aim to govern the contractual relationship between the contracting entity and the supplier, but rather the contracting entity’s discretionary powers and its responsibilities towards the public. In essence, the procurement rules are largely concerned with pre-contractual issues.

Despite the abovesaid, there has been an ongoing discussion in Sweden as to what extent procurement legislation may have bearing – be it directly or indirectly – on the contractual obligations of the respective parties and the interpretation of the procured agreement.

One particular issue that has arisen in Swedish case law during the past few years is whether the procurement of a frame agreement with one single supplier, as set forth in Article 33 of the Public Procurement Directive, binds the contracting authority to purchase the goods and services concerned from that supplier only. In other words: may a duly contracted single supplier also claim contractual exclusivity?

As a long-standing and general principle of Swedish contract law, contract parties must agree separately on exclusivity, be it tacit or in express language. Unless such an agreement exists, each party is considered free to pursue its own interests and conduct business with others as it sees fit.

In 2016, the Court of Appeal of Lower Norrland found that a procured frame agreement regarding window cleaning services should be assumed to bind the contracting authority to order such services from the supplier only, whenever a need for such services arose.[1] Whereas the agreement in question did not contain a specific exclusivity clause in favour of the supplier, the court held that the agreement had been procured with a single supplier, and that it contained “all terms and conditions required for latter call-offs”, making it “binding upon both parties”. According to the court, this type of contract should be construed as to state not only that the contracting authority is entitled to order window cleaning services from the supplier, but also that the supplier has a right to provide the contracting agency with said window cleaning services.

According to the ruling of the court of appeal, the procurement contract entailed implicit exclusivity for the benefit of the supplier – simply by virtue of its form.

Earlier this year, the Svea Court of Appeal was presented with a similar dispute.[2] The NVC – an institute under Nordic Council of Ministers’ social and health sector – had procured marketing services from a local PR-firm. The services had been procured in accordance with the rules of procurement applicable at the time, implementing the predecessor to the 2014 Public Procurement Directive, directive 2004/18. The NVC later decided to contract another firm to handle certain marketing services – which in turn triggered the original supplier to lodge a breach of contract complaint against NVC.

Acknowledging the position of the court in the 2016 case, the Svea Court of Appeal held that the contract in question was a procurement contract, binding upon both parties. However, the Svea Court of Appeal pointed out that the Directive is neutral with regards to the contracting agency’s obligations toward the supplier (referencing recital 61 of the 2014 Public Procurement Directive). According to the court, the procurement rules, as laid out in the Public Procurement Act and the Directive, do not aim to govern the contractual obligations of the parties to a procurement but rather to “establish rules for how contracting agencies must act in order to open up their purchases to competition”. Thus, the extent of the parties’ respective obligations under the procurement contract was regarded as a matter of national contract law – not procurement law. In contrast to the findings of the court in 2016, the Svea Court of Appeal considered that the type of contract had no decisive meaning when determining contractual exclusivity.

Applying the aforesaid general principle of Swedish contract law, the court ultimately ruled that the procurement contract in question contained no exclusivity clause, explicit or implied.

It is too soon to tell whether the ruling by the Svea Court of Appeal will put an end to the discussion of implicit exclusivity in procurement contracts. Obviously, exclusivity clauses as such are delicate matters. They may amount to vertical restrictions with the potential to restrict competition within the meaning of article 101.1 of the TFEU. An introduction under national law of implicit exclusivity clauses to certain types of agreements, especially by reference to EU procurement legislation in place to facilitate competition, therefore gives rise to a bit of systematic dissonance. In worst case scenarios, the parties may be exposed to unsolicited risks of violating competition rules.

The Svea Court of Appeal’s judgement has been appealed to the Supreme Court, where it is currently pending a grant for a leave to appeal.

Ulf Isaksson and Fredrik Thorslund


[1] Hovrätten för Nedre Norrland, judgement of the 9 November 2016 (T 678-14)

[2] Svea hovrätt, judgement of the 22 June 2020 (T- 8524-19)