The IPI: Europe Finally Gains a Reciprocity Tool for Public Procurement

July 27, 2026

Key Takeaways

The International Procurement Instrument (“IPI”) – Regulation (EU) 2022/1031 – gives the European Commission a tool to replicate restrictions that certain third countries impose on European operators in public procurement. The first implementing measure, adopted in June 2025, excludes bidders of Chinese origin from EU public procurement contracts sourcing medical devices valued at €5 million or more. In July 2026, the Lyon Administrative Court issued the first judicial decision interpreting the IPI, ruling that contracting authorities must conduct genuine diligence into the commercial substance of bidders even registered in the EU for the purpose of compliance with the Medical devices regulation but with minimal operations, to determine whether their origin allows them to bid.

The first implementing regulation of the IPI imposes total exclusion of Chinese-origin suppliers of medical devices, the most stringent IPI measure available.
Circumvention safeguards apply: contracts may not include more than 50% of Chinese-origin medical devices or more than 50% of Chinese-origin subcontractors and public purchasers must verify that an EU based bidder has commercial substance in the country of incorporation.
The Lyon Administrative Court, upon the request of the EU headquarter of a US-based group, has confirmed that contracting authorities must actively investigate the commercial substance of EU-registered bidders — the mere existence of an entity registered in the EU is not sufficient.
Chinese manufacturers must appoint EU-registered authorized representatives, so they will never appear as direct bidders. Courts must look through the corporate structure to assess genuine commercial activity.
However, the IPI's long-term deterrence effect will be undermined if bidders can absorb or price in the risk of penalties. The level of penalty (from 10 to 30%) will therefore be key for the future implementation of the IPI.

The IPI Regulation: A European Response to the Closure of Global Public Procurement Markets

The International Public Procurement Instrument is a European framework regulation (EU) 2022/1031 adopted on June 23, 2022. Its objective is to restore a level playing field in public procurement tenders for European companies that encounter significant barriers to bid to tenders in third countries. The IPI establishes the principle of reciprocity: if a third country significantly restricts European operators’ access to its public procurement markets, the European Commission may adopt an IPI measure that mirrors that restriction by limiting access to EU tenders for bidders and supplies stemming from that country.

The regulation only targets tenders valued above €5 million (excluding tax) for goods and services, and above €15 million (excluding tax) for construction and concessions.

Three types of measures are available, depending on the severity of the measures imposed on EU-based bidders:

A ranking penalty (rating is artificially lowered by up to 50%, without affecting the contract price if the bid is awarded).
The outright exclusion of the bidder from the procedure.
A maximum threshold for the supplies and subcontractors from the concerned country, subject to a penalty up to 10% to 30% of the total contract value.

First Implementing Regulation: Exclusion of Medical Devices of Chinese Origin

The first implementing regulation adopted under the IPI (EU) 2025/1197 of June 19, 2025 entered into force on June 30, 2025 and concerns medical devices of Chinese origin.

In response to the structural closure of the Chinese market, the Commission has opted for the most stringent measure: the total exclusion of Chinese suppliers from all European public procurement contracts for medical devices valued at €5 million or more.

In order to prevent circumvention of the prohibition, the contract shall not include more than 50% of medical devices of Chinese origin or 50% of sub-contractors of Chinese origin.

The measure applies to all contracting authorities in the Union. The sole exception concerns devices with no therapeutic alternatives and/or with compelling reasons of public interest, of which the Commision would be notified.

The Lyon Administrative Court’s Preliminary Injunction

The first decision on the interpretation and implementation of the IPI regulation has been issued just one year after its adoption and concerns the open tender initiated by the largest public purchaser group, for the acquisition of surgical robots, for a total amount of €1.5 billion.

Even if it remains at the level of a preliminary injunction, the order from the Lyon Administrative Court of July 22, 2026¹ is an important decision regarding the diligence expected for determining the origin of the bidder.

A key parameter is that any legal manufacturer registered outside of the EU must appoint an authorized representative and an importer registered in the EU to place its medical devices on the EU market.

However, the IPI sets a presumption that the origin is the country where the company is registered, provided it conducts substantial commercial operations in such country. To the contrary, if the company appears to have been created for tax or IPI evasion, the origin is the one of the persons or entities controlling the bidding entity.

The Court ruled that the purchaser had to conduct further diligence to assess the effectiveness of the commercial operations when the bidder was the authorized representative registered within the EU having only one employee and negligible revenue.

This ruling brings several positive developments and leaves certain steps to confirm:

The first very encouraging signal is that the IPI regulation will create effective changes in public tenders.
Second, it is key that case law has endorsed the fact that – for regulatory compliance reasons – bidders in the medical devices sector will never be registered in mainland China. They therefore warrant deeper scrutiny whenever indicators challenge the substance of their commercial operations.
Third, the effectiveness of the IPI regulation will depend on the deterrence factor that the penalty will play; it would miss the point if the bidders manage to cover the risk through the bid price.

Outlook

As the IPI framework matures and additional implementing measures are adopted, companies active in EU public procurement, whether as bidders, manufacturers, or supply chain participants, should be asking several strategic questions. Does the corporate structure of EU-registered authorized representatives withstand the substance test endorsed by the Lyon Administrative Court? Are existing supply chains exposed to the 50% thresholds for goods and subcontractors of Chinese origin? How should IPI-related penalties be set without undermining the effectiveness of the IPI? For contracting authorities, what level of diligence is expected when assessing the origin of bidders whose ultimate parent is established in a targeted third country? These questions will only grow in significance as the Commission pursues further investigations into additional sectors and trading partners.