recent ecj public procurement case law on selected topics

Recent ECJ procurement case law on in-house & public-public cooperation, general principles and exclusion of economic operators

Dr Albert Sanchez-Graells

Hankinta- ja logistiikka-alan neuvottelupäivätHelsinki, 1-2 June 2017

2 June 2017

1Session 2: Recent ECJ case-law

Agenda

• The purpose of this more targeted session is to discuss specific issues concerning ECJ case law• In-house and public-public exemptions from

compliance with the EU public procurement rules• General principles of procurement• Exclusion of economic operators and self-cleaning

Session 2: Recent ECJ case-law 2

2 June 2017

In-house and public-public cooperation—basics of the system

• Art 12 Dir 2014/24/EU consolidates both the Teckal and Commission v Germany exemptions from compliance with procurement rules• They raise both issues concerning elements of control or

inter-administrative links, and issues concerning the acceptable threshold of market activities

• The extent to which centralised procurement bodies (CPBs) can fit within one of the exceptions is unclear


2 June 2017

In-house exemption• In terms of control

• Situations of single control over an in-house entity are relatively clear, but jointly owned entities create challenges

• The in-house exemption applies where the contracting entity can demonstrate that it “not only holds capital in that entity, but also plays a role in its managing bodies” [Econord, C 182/11 and C 183/11, EU:C:2012:758 [33], see ‑ ‑ here]

• Art 12(2) & (3) Dir 2014/24/EU significantly expand the scope of the public house—triggering the need to analyse indirect control of type foreseen in Teckal (C-107/98, EU:C:1999:562)


2 June 2017

http://www.howtocrackanut.com/blog/2012/12/in-house-providing-and-minimum.html

Econord, C 182/11 & C 183/11, ‑ ‑EU:C:2012:758

• Contracting authorities merely entered into "a shareholders’ agreement conferring on them the right to be consulted, to appoint a member of the supervisory council and to nominate a member of the management board, in agreement with the other authorities concerned”• ECJ required analysis of whether this “enable[d] those

municipal councils to contribute effectively to the control of” the in-house entity


2 June 2017

In-house exemption

• In terms of limited market activities• “any activity … which is devoted to persons other than those

which control it, namely persons without any relationship of control in regard to that entity, including public authorities, must be regarded as being carried out for the benefit of a third party”—Undis Servizi, C-553/15, EU:C:2016:935 [34]

• The 80/20 threshold created by the Directive is a maximum level of tolerance. Given that the ECJ has consistently insisted on a narrow interpretation of the exemption, a rule that reduces that threshold is not contrary to EU law (*)


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Undis Servizi, C-553/15, EU:C:2016:935

• Case where the province, which did not control the in-house entity, entrusted the provision of services for municipalities that were not shareholders of the in-house entity• ECJ stressed the need for the entrusting authority

(the province) and(/or) the beneficiaries of the services to hold control over the in-house entity


2 June 2017

In-house exemption—why is a tighter approach not contrary to EU law?

• Rationale for the exemption is clear• Ensure that EU PP rules remain applicable in the event that an

in-house undertaking is active in the market—Undis [33]• Ensure alignment of interests between contracting authority

and in-house entity (including shareholders)—C. H. de Setúbal & SUCH, C-574/12, EU:C:2014:2004 (see here)

• Ensure that accumulation of exemptions from procurement rules do not result in public sector-facing commercial activity not subjected to any controls (by analogy, OAG LitSpecMet)


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http://www.howtocrackanut.com/blog/2014/06/cjeu-takes-functional-competition-based.html

C. H. de Setúbal & SUCH, C-574/12, EU:C:2014:2004

• A Portuguese hospital awarded a services contract for the provision of meals to patients and staff to a non-profit organisation which membership included public entities (such as other hospitals) as well as private social solidarity institutions carrying out non-profit activities• ECJ held that non-profit nature of private members of in-

house entity was irrelevant for the purposes of avoiding the exclusion of the applicability of the exemption


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In-house exemption—why is a tighter approach not contrary to EU law?

• Test is compatible with competition law• Tighter link between economic/non-economic activities Easy-

Pay & Finance Engineering, C-185/14, EU:C:2015:716 (here)• Test aims to avoid situations of cross-subsidisation

• Including distortions of competition based on a de facto dominant position (in the public market)

• To what extent is this applicable to CPBs?• Test aims to avoid situations of opaque State aid

• In particular through direct award of favourable contracts


2 June 2017

http://www.howtocrackanut.com/blog/2015/11/new-paper-with-extended-comments-on.html

EasyPay & Finance Engineering, C-185/14, EU:C:2015:716

• Case concerning the Bulgarian reservation of activity consisting in the payment through postal remittance of social security pensions• ECJ adopted an approach more refined than FENIN-Selex

(where purchasing was considered non-economic) and indicated that test is likely to shift towards needs for ‘inseparable connection’ of activities

• This is potentially particularly relevant for CPBs


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Public-public cooperation exemption

• The scope of the cooperation raises some questions, in particular due to the ‘cooperative requirement’ for the participating entities to ensure “that public services they have to perform are provided with a view to achieving objectives they have in common” (Art 12(4)(a))• Does this exclude accumulation of in-house?• Where is the ‘outer limit’ of the cooperative mechanism? Cfr

Art 1(6) Dir 2014/24/EU—Remondis, C-51/15, EU:C:2016:985


2 June 2017

Remondis, C-51/15, EU:C:2016:985• Transfer of competence from contracting authorities to

a jointly-established entity, where the entity kept increasing share of market activity• Formation of a special-purpose association with legal

personality governed by public law and transfer of competences does not constitute a ‘public contract’ … if it concerns both the responsibilities associated with the transferred competence and the powers that are the corollary thereof, so that the newly competent public authority has decision-making and financial autonomy


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Must the public-public cooperation involve (services) covered by the Directive?

• Must the analysis of Art 12(4) & (5) be followed in all cases, or solely where the authorities seek to collaborate for services covered by the Directive?• In my view, the underlying services need to be covered by the

Directive—e.g. in ambulance services, the exemption in Art 10(h) Dir 2014/24 only covers emergency services provided by non-profit organisations. Thus, public-public cooperation for the provision of those services (or non-emergency ones) should be assessed under public-public cooperation rules


2 June 2017

Must the public-public cooperation involve (services) covered by the Directive?

• (con’t)• However, even where the Directive does not apply (or does

not apply in full—old B services and new light touch regime), an analysis still needs to be carried out to assess whether the contract is of cross-border interest and, if so, an analysis of the justification (and proportionality) for the direct award to another public entity may be appropriate


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General principles of procurement—main issues in their application

• General principles of procurement law have been consolidated in Art 18(1) Dir 2014/24/EU

• Case law of the ECJ on the basis of general principles usually tends to modulate the interpretation of existing rules (e.g. interaction of transparency and rules on award criteria, recently in TNS Dimarso, C-6/15, EU:C:2016:555)


2 June 2017

TNS Dimarso, C-6/15, EU:C:2016:555

• Case concerned the obligation of contracting authorities to disclose evaluation methods prior to the opening of the tenders• ECJ declared that there is no such obligation if there are

circumstances that justify impossibility of disclosure• But also stressed that the determination by of the method of

evaluation after the publication of the contract notice or the tender specifications cannot have the effect of altering the award criteria or their relative weighting


2 June 2017


• In my view, the requirements derived from general principles are not sufficiently precise to allow a Member State to run a (below-threshold) procurement system solely on their basis

• Similar issues arise with the GPA or UNCAC• General principles serve as control on discretion,

but require reinventing the wheel oftenSession 2: Recent ECJ case-law 18

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• Equal treatment / non-discrimination• “the principle of equal treatment requires tenderers to be

afforded equality of opportunity when formulating their tenders, which therefore implies that the tenders of all tenderers must be subject to the same conditions”—Pizzo, C 27/15, EU:C:2016:404 [36]‑


2 June 2017

Pizzo, C 27/15, EU:C:2016:404‑• Exclusion of tenderers on the basis of lack of payment

of an administrative fee which obligatory nature was not obvious (derived from general interpretation of administrative law)• ECJ allowed the contracting authority to provide an

opportunity to satisfy the formal requirement before proceeding to the exclusion of the tenderers

• In my view, this should have gone further and the ECJ should have made it a requirement


2 June 2017


• Equal treatment / non-discrimination• Its application is oftentimes complicated by the risk

of falling into a trap of tender-specific reasoning• It ultimately boils down to (strict) proportionality

assessments and the contracting authority will have be particularly careful to follow its pre-published own rules

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• Transparency• [corollary of the principle of equal treatment] “implies that all

the conditions and detailed rules of the award procedure must be drawn up in a clear, precise and unequivocal manner in the contract notice or specifications so that, first, all reasonably informed tenderers exercising ordinary care can understand their exact significance and interpret them in the same way and, second, the contracting authority is able to ascertain whether the tenders submitted satisfy the criteria applying to the contract in question”—Pizzo [36]


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• Transparency• Contracting authorities need to allow economic

operators to gain information on contract opportunities, to get a fairly detailed idea of the tender procedure and a precise idea of participation requirements, technical specifications and award criteria—as well as the possibility to seek reasons for any decision (ie both ex ante & ex post transparency)


2 June 2017


• Combined effect• “the principles of transparency and equal treatment which

govern all procedures for the award of public contracts require the substantive and procedural conditions concerning participation in a contract to be clearly defined in advance and made public, in particular the obligations of tenderers, in order that those tenderers may know exactly the procedural requirements and be sure that the same requirements apply to all candidates”—Pizzo [37]


2 June 2017


• Competition (modulation of proportionality)• Contracting authorities must not unduly restrict

competition for public contracts (this is also linked to any domestic principle of value for money)

• Equally proportionate decisions need to be competition-oriented, so that restrictions are minimised where a least restrictive option is available (in line with free movement analysis)


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Exclusion of economic operators—Responsibility to ensure a level playing field

• Contracting authorities have an increasing discretion (and duty) concerning the exclusion of economic operators• Art 57(4) is particularly relevant• Art 57(6) can create new challenges in terms of

assessment of corporate compliance programmes implemented as part of self-cleaning measures


2 June 2017


• Contracting authorities will increasingly find themselves in a position where they require specialised support• E.g. from tax authorities or competition authorities, in

particular in order to assess self-cleaning measures• Are the administrative structures prepared for that

collaboration?• Is there a central register? Does it work?

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• It is also important to stress that the existence of a discretionary exclusion ground cannot be simply disregarded, but must be assessed in light of the general discretion of the authority, as well as of the duty to provide reasons• Two important recent cases

• Connexxion Taxi Services, C-171/15, EU:C:2016:948• Marina del Mediterráneo, C-391/15, EU:C:2017:268


2 June 2017

Connexxion Taxi Services, C-171/15, EU:C:2016:948

• Dutch authorities indicated that tenderers affected by exclusion grounds would be excluded without further assessment, and then relied on proportionality assessment not to exclude• Reverse situation from Pizzo re general law• ECJ insisted that the contracting authority must

comply strictly with the criteria which it has itself laid down in the tender documentationSession 2: Recent ECJ case-law 29

2 June 2017

recent ecj public procurement case law on selected topics

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