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.

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. 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
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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
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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
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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
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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 (*)
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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
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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)
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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
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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
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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
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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
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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
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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
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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
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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)
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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
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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
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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]‑
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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
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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. 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
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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
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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
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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
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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
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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
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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
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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
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30. Further reading
Session 2: Recent ECJ case-law 30
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31. Thank you for your attention
Be in touch
a.sanchez-graells@bristol.ac.uk
www.howtocrackanut.com
@asanchezgraells
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