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Recent ECJ public procurement case law on selected topics

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This presentation discusses recent trends in the case law of the European Court of Justice in relation to three public procurement issues: the exemption for in-house provision and public-public cooperation, the requirements derived from general principles of procurement law, and the rules on discretionary exclusion and self-cleaning.

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Recent ECJ public procurement case law on selected topics

  1. 1. 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 neuvottelupäivät Helsinki, 1-2 June 2017 2 June 2017 1Session 2: Recent ECJ case-law
  2. 2. 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
  3. 3. 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 Session 2: Recent ECJ case-law 3 2 June 2017
  4. 4. 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) Session 2: Recent ECJ case-law 4 2 June 2017
  5. 5. 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 Session 2: Recent ECJ case-law 5 2 June 2017
  6. 6. 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 (*) Session 2: Recent ECJ case-law 6 2 June 2017
  7. 7. 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 Session 2: Recent ECJ case-law 7 2 June 2017
  8. 8. 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) Session 2: Recent ECJ case-law 8 2 June 2017
  9. 9. 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 Session 2: Recent ECJ case-law 9 2 June 2017
  10. 10. 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 Session 2: Recent ECJ case-law 10 2 June 2017
  11. 11. 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 Session 2: Recent ECJ case-law 11 2 June 2017
  12. 12. 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 Session 2: Recent ECJ case-law 12 2 June 2017
  13. 13. 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 Session 2: Recent ECJ case-law 13 2 June 2017
  14. 14. 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 Session 2: Recent ECJ case-law 14 2 June 2017
  15. 15. 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 Session 2: Recent ECJ case-law 15 2 June 2017
  16. 16. 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) Session 2: Recent ECJ case-law 16 2 June 2017
  17. 17. 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 Session 2: Recent ECJ case-law 17 2 June 2017
  18. 18. General principles of procurement— main issues in their application • 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 often Session 2: Recent ECJ case-law 18 2 June 2017
  19. 19. General principles of procurement— main issues in their application • 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]‑ Session 2: Recent ECJ case-law 19 2 June 2017
  20. 20. 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 Session 2: Recent ECJ case-law 20 2 June 2017
  21. 21. General principles of procurement— main issues in their application • 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 21 2 June 2017
  22. 22. General principles of procurement— main issues in their application • 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] Session 2: Recent ECJ case-law 22 2 June 2017
  23. 23. General principles of procurement— main issues in their application • 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) Session 2: Recent ECJ case-law 23 2 June 2017
  24. 24. General principles of procurement— main issues in their application • 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] Session 2: Recent ECJ case-law 24 2 June 2017
  25. 25. General principles of procurement— main issues in their application • 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) Session 2: Recent ECJ case-law 25 2 June 2017
  26. 26. 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 Session 2: Recent ECJ case-law 26 2 June 2017
  27. 27. Exclusion of economic operators— Responsibility to ensure a level playing field • 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? 27 2 June 2017
  28. 28. Exclusion of economic operators— Responsibility to ensure a level playing field • 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 Session 2: Recent ECJ case-law 28 2 June 2017
  29. 29. 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
  30. 30. Further reading Session 2: Recent ECJ case-law 30 2 June 2017
  31. 31. Thank you for your attention Be in touch a.sanchez-graells@bristol.ac.uk www.howtocrackanut.com @asanchezgraells Session 2: Recent ECJ case-law 31 2 June 2017

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