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Belt and Road Insights - December 2017

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Summary: Welcome to the December edition of BLP’s refreshed ‘Belt and Road Insights’. With several high-profile projects already in full flow, our focus now shifts to examine in detail the key legal considerations associated with these major projects, and their potential implications on how they can shape trade and investment opportunities along the Belt and Road Route.

Antitrust and Competition issues along the Belt and Road

In any major tender procurement exercise, both fair procurement and competition law considerations are relevant. A recent decision by the Nepalese Government provides a timely example. Having reached an agreement with China’s Gezhouba Group in June to construct the $2.5bn, 1,200MW Budhi-Gandhaki hydroelectric plant, the Nepalese government subsequently scrapped the plans in November, amid criticisms over the tender process.

This example highlights the importance of complying with rules around open tendering. However, it is not just rules surrounding fair tendering that are relevant. With the continued expansion of competition law across Asia, particularly across the ASEAN Member States, competition law rules have an important part to play in the procurement and tendering process. Key jurisdictions such as China, Singapore, Malaysia and Hong Kong have active competition law regimes, and market participants need to be aware of their obligations under them.

Two key competition issues that could arise during a procurement process are:

  • Bid Rigging: Most competition law regimes across Asia (and worldwide) classify bid rigging as illegal cartel conduct. Bid rigging refers to arrangements between competing bidders on bid terms in order to ensure a particular bidder wins. As well as tenderers needing to ensure they avoid any accusation of illegal bid rigging, procurers should be alert to potential bid rigging in the tenders they receive.
  • Bidding Consortia and Joint Ventures: The establishment of joint ventures and consortia to submit bids can raise competition law issues. Depending on the terms of the joint venture and the level of integration between the joint venture parties, the joint venturers may need to consider anything from an analysis under competition law provisions that prohibit anticompetitive conduct to full merger clearance before executing the joint venture.

In addition, other competition law issues such as abuse of dominance (when either a procurer or a tenderer is in a dominant market position) and anticompetitive agreements may be relevant.

BLP’s Antitrust & Competition group advises clients on antitrust compliance globally, and would be happy to answer any questions you may have.
 

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