ECONOMIC ORIGIN OF MEDICAL DEVICES: KEY CRITERION IN EUROPEAN PUBLIC PROCUREMENT AND FDI SCREENING

The entry into force of Implementing Regulation (EU) 2025/1197 marks a significant shift in the public procurement of medical devices. For the first time, under the International Procurement Instrument (IPI), the European Commission has adopted a measure restricting the access of economic operators and medical devices originating from the People's Republic of China to the European Union's public procurement market for medical devices. This measure does not turn geographical origin into a general exclusion criterion, nor does it establish a general ban on products manufactured outside the European Union.

However, for procedures falling within its scope, it introduces a new legal assessment: contracting authorities must verify not only technical compliance, CE marking, price, or delivery times, but also the origin of the economic operator, the origin of the supplied medical devices, and the structure of the supply chain.

At the same time, companies active in the medical sector may also be subject to the foreign direct investment screening regime when the transactions contemplated involve taking over control, acquisition of equity stakes, or assets relevant to national security or public order.

Therefore, public procurement and foreign direct investment control account for two distinct legal filters, which may become complementary in the case of operators controlled from outside the European Union.

Procedures covered by Regulation 2025/1197

The European measure is aimed at public procurement procedures concerning medical devices covered by CPV codes 33100000-1 to 33199000-1 (as defined in Regulation (EC) No 2195/2002) with an estimated value of at least EUR 5 million, excluding VAT. In these procedures, the contracting authority must exclude economic operators originating from China, as provided for in the regulation.

The restriction cannot be translated into a general rule such as "all products manufactured in China are excluded."

The regulation operates with two distinct concepts:

• the origin of the economic operator;
• the origin of the medical devices supplied during the performance of the contract.

Thus, a company registered in a Member State may have ties of control (influence resulting from majority shareholding, the right to appoint or dismiss the majority of directors, veto rights over strategic decisions, contracts, or other mechanisms involved in establishing the commercial strategy, investments, or company management) with an entity from a third country, and an European tenderer may supply devices or components manufactured in China.

In accordance with the IPI rules, the legal origin of the tenderer and the commercial origin of the product are subject to distinct analyses.

The 50% threshold goes beyond the "Made in" label

For contracts awarded to operators who are not excluded, the IPI Regulation imposes obligations regarding the contract performance.

In accordance with the provisions of the Regulation (EU) 2022/1031, medical devices originating from the country targeted by the measure cannot account for more than 50% of the total value of the contract. The amount calculation cannot be limited to the country where the final assembly took place or the address printed on the packaging.

In determining the origin, are applied the relevant European rules on non-preferential origin and are examined the documents that reflect the manufacturing process and the supply chain.

In practice, verification can prove challenging for complex devices that include: electronic components produced in multiple states; integrated software and maintenance services; sub-assemblies purchased from different suppliers; products manufactured by a company within the same group but in a different jurisdiction; and distribution via an intermediary established in the European Union.

Documents that may be requested from tenderers

To effectively apply the IPI measure, the contracting authority should include in the documents of the procedure documentary requirements tailored to the scope of the contract.

Depending on the complexity of the products and the structure of the supply chain and abiding by the with the principle of proportionality, the following may be requested:

1. a declaration regarding the economic operator's origin;
2.  information on the tenderer's shareholding structure and direct or indirect control, to the extent necessary to verify origin;
3. a declaration regarding the origin of the tendered medical devices;
4. a list of manufacturers, distributors, and, where applicable, subcontractors involved in supplying the products;
5. customs documents, non-preferential certificates of origin, or other technical and commercial documents enabling the verification of origin;
6. a commitment by the contractor to inform the contracting authority of any change regarding the manufacturer, the place of manufacture, or the supply chain;
7. clauses regarding the consequences of inaccurate or incomplete declarations.

These requirements must not be formulated in a way that creates unjustified obstacles to competition.

They must be linked to the scope of the contract and proportionate to the legal risk the contracting authority needs to manage.

Application in Romania: The European Regulation takes precedence over general rules

Law No. 98/2016 on public procurement enshrines the principles of non-discrimination, equal treatment, mutual recognition, transparency, and proportionality. As a general rule, a contracting authority cannot impose restrictions based on the geographic origin of economic operators or products, unless there is an explicit legal basis therefor, since the geographic criterion is not listed among the grounds for exclusion.

However, Regulation 2025/1197 constitutes such a specific legal basis.

In procedures falling within its scope, the contracting authority not only has the right but the obligation to apply the European measure.

Conversely, for procedures falling below the EUR 5 million threshold or not involving medical devices covered by the Regulation, the authority cannot, on its own initiative, extend the exclusion to all economic operators or products from a specific third country.

Such an extension might violate the principle of proportionality, the principle of equal treatment, or the rules regarding the drafting of technical specifications. Technical specifications must not be confused with trade policy measures.

Article 155(6) of Law No. 98/2016 stipulates that technical specifications must allow equal access to the procedure and must not create unjustified obstacles to competition. Article 156(2) prohibits, as a general rule, specifying a particular manufacturer, origin, trademark, or specific production method when doing so would favor or exclude certain economic operators or products.

Consequently, contracting authorities should not transpose Regulation 2025/1197 by wording a technical specification such as "product manufactured in the European Union." Such a requirement would be overly broad and could entail exclusion of products from third countries having access to the European market under international agreements and would go beyond the specific measure applicable to China.

The right approach may consist of:

1. identifying the procedures that actually fall within the scope of Regulation 2025/1197;
2. including the IPI conditions applicable to tenderers and the contractor in the documentation;
3. requesting the documents necessary to verify origin;
4. introducing contractual obligations to monitor the 50% threshold;
5. establishing consequences for inaccurate declarations and for breaches of obligations during contract performance.

The Regulation also allows for an exception to the application of the IPI measure in a public procurement procedure if the only available tenders meeting the requirements of the tendering procedure originate from economic operators in the third country subject to the IPI measure, and if the decision not to apply the IPI measure is justified by overriding reasons of public interest, such as public health or environmental protection.

The verification of operator's origin must go beyond its registered office

One of the most sensitive issues concerns companies established in the European Union that are part of groups controlled from outside the EU. In the context of the International Procurement Instrument (IPI), the formal registration of a subsidiary in a Member State does not suffice to establish that the operator is of European origin.

The following factors must be analyzed, as appropriate: shareholding structure; direct and indirect control; the center of economic activity; the existence of substantial commercial activity in the state of establishment; and the links between the bidder, the manufacturer, and the entity executing the contract.

The subcontracting chain becomes part of the legal verification process

Law No. 98/2016 allows the contracting authority to request information regarding subcontractors involved in the execution of the contract and any changes occurring during its term. The contractor is required to disclose the names, contact details, and legal representatives of the subcontractors, and the introduction of new subcontractors is subject to the contracting authority's control. Furthermore, Article 220 allows for the extension of information obligations to subcontractors at subsequent levels of the subcontracting chain.

These provisions provide the procedural basis for monitoring a contract subject to IPI requirements, but the documentation must be adapted accordingly. In the absence of such clauses, verifying the 50% threshold may prove difficult after the contract has been signed.

Framework agreements raise additional issues

In the healthcare sector, it is common practice to conduct procurement via multi-year framework agreements divided into lots and followed by subsequent contracts.

In practice, the CNSC has already ruled that the €5 million threshold is to be assessed at the level of the procedure rather than at the level of the lot. Artificially fragmenting a procurement process to circumvent the applicable regulations is not permitted. The contracting authority must determine the estimated value in accordance with general public procurement rules, considering the actual needs and the duration of the framework agreement.

It is also important to verify how product origins are tracked throughout the framework agreement and how changes regarding the manufacturer or place of production are handled, specifically, whether the replacement of a product alters the economic balance or the scope of the contract.

Public procurement and foreign investment screening are two distinct filters

Regulation 2025/1197 regulates access to public procurement. The foreign direct investment (FDI) regime is aimed at control, shareholdings, or assets in sectors relevant to security and public order. A company from a third country may be subject to both regimes, even though at different times: when participating in a public procurement procedure and when acquiring or establishing a company, a factory, a distributor, or medical infrastructure in Romania.

In Romania, the GEO no. 46/2022 mandates prior authorization for FDI, new investments, and, under certain conditions, investments made by investors from the European Union or third countries in the medical sector. The investments in question fall within the scope of CSAT Decision no. 73/2012 as well as the FDI Regulation and are subject to screening by the Commission for Screening of Foreign Direct Investments (CEISD).

At the EU level, the framework for screening foreign direct investments has been revised through Regulation (EU) 2026/1386. The new regulation strengthens the European cooperation mechanism and imposes clearer obligations on Member States regarding the screening of foreign investments in various sensitive sectors, technologies, and infrastructures.

A key factor for companies in the medical sector is that the new European framework includes investments made through entities established in the European Union but controlled by non-EU investors. Consequently, using a European subsidiary will not automatically eliminate the requirement to analyse the origin of economic control, particularly when the transaction involves assets, technologies, or infrastructure relevant to security or public order.

For companies in the medical sector, the practical implication is the need for a coordinated analysis of economic origin, control structure, and the supply chain.

Growing risk of challenges

The origin of the bidder and the origin of the products can become grounds for challenge before the CNSC and the courts.

Disputes may arise regarding the application of the EUR 5 million threshold, establishing the economic operator's origin, the qualification of a European subsidiary, the calculation of the 50% share, or the treatment of bids submitted by groups of companies.

Conclusion

Implementing Regulation (EU) 2025/1197 marks a significant development in public procurement law. In the procedures concerned, the origin of the economic operator and the origin of the medical devices are no longer merely commercial details; they become elements with legal force influencing access to the procedure and the execution of the contract.

For contracting authorities, this change requires adjustments to procurement documentation, contractual clauses, and verification mechanisms.

For economic operators, it entails better documentation of supply chains, product origins, and control structures. In the medical sector, these obligations must be viewed in conjunction with the evolving regime for screening foreign direct investments.

Although the IPI (International Procurement Instrument) and FDI (Foreign Direct Investment) screening are distinct legal instruments, they reflect the same European trend: the integration of economic security criteria into the analysis of commercial, contractual, and investment operations. This article is for information purposes and expresses a general legal opinion.

Any analysis applicable to a specific procedure or investment must be conducted with reference to the documentation, the structure of the transaction, and the legislation in force at the time of the assessment.