CJEU clarifies obligation of national supreme and constitutional courts to refer preliminary questions (C-322/16)

In its Judgment of 20 December 2017 in Global Starnet, C-322/16, EU:C:2017:985, the Court of Justice of the European Union (CJEU) followed the Opinion of AG Wahl and clarified that a national court of last instance is under an Art 267 TFEU obligation to refer a question for preliminary ruling to the CJEU even if the constitutional court of that Member State has already assessed the constitutionality of national rules in the light of regulatory parameters with content similar to rules under EU law.

The case concerned the amendment of the terms of licences for the online operation of gaming during their term, and the challenge was based on principles of legal certainty and protection of legitimate expectations, which are common to EU law and to the constitutional frameworks of the EU's Member States (in this case, Italy). From that perspective, the Global Starnet Judgment can be particularly relevant for cases involving claims based on the EU Charter of Fundamental Rights and could create a push for a more significant role for the CJEU as a constitutional court for the Union.

There are a few passages of the Global Starnet Judgment that I find particularly interesting:

... a national court which, in a case concerning EU law, considers that a provision of national law is not only contrary to EU law, but also unconstitutional, does not lose the right, or escape the obligation under Article 267 TFEU, to refer questions to the Court of Justice on the interpretation or validity of EU law by reason of the fact that the declaration that a rule of national law is unconstitutional is subject to a mandatory reference to the constitutional court. The effectiveness of EU law would be in jeopardy if the existence of an obligation to refer a matter to a constitutional court could prevent a national court hearing a case governed by EU law exercising the right conferred on it by Article 267 TFEU to refer to the Court questions concerning the interpretation or validity of EU law in order to enable it to decide whether or not a provision of national law was compatible with that EU law ...

... the effectiveness of EU law would be impaired and the effectiveness of Article 267 TFEU diminished if, as a result of there existing a procedure for review of constitutionality, the national court were precluded from referring questions to the Court for a preliminary ruling and immediately applying EU law in a manner consistent with the Court’s decision or case-law ...

Furthermore, although it is true that the procedure laid down in Article 267 TFEU is an instrument for cooperation between the Court of Justice and the national courts, by means of which the former provides the latter with the points of interpretation of EU law necessary in order for them to decide the disputes before them, the fact remains that when there is no judicial remedy under national law against the decision of a court or tribunal of a Member State, that court or tribunal is, in principle, obliged to bring the matter before the Court of Justice under the third paragraph of Article 267 TFEU where a question relating to the interpretation of EU law is raised before it ...

The fact that the [domestic Constitutional Court] gave a ruling on the compatibility of the provisions of national law ... with the provisions of the [national] Constitution which the referring court regarded as constituting, in essence, the same regulatory parameters as [EU law] has no bearing on the obligation, laid down in Article 267 TFEU, to refer questions concerning the interpretation of EU law to the Court of Justice (C-322/16, paras 21 & 23-25, references omitted and emphases added).

Paper on Public Procurement & "Core" Human Rights

I have uploaded a new paper on SSRN, which is a draft chapter for a forthcoming book: O Martin-Ortega & C M O’Brien (eds), Public Procurement and Human Rights: Risks, Dilemmas and Opportunities for the State as a Buyer (Edward Elgar). In my chapter 'Public Procurement and "Core" Human Rights: A Sketch of the EU Legal Framework', I sketch the main mechanisms for the implementation of a "core" human rights-orientated public procurement policy foreseen in the 2014 EU Public Procurement Package.

In particular, I discuss the main constraints for the inclusion of human rights-related considerations in the procurement process through the following instruments: exclusion grounds; use of labels; award criteria; and contract performance requirements. I conclude by offering a sceptical view of the effectiveness of any of these mechanisms due to policy fuzziness and significant resource constraints, and query their desirability due to the implicit trade-offs they impose on the general effectiveness of the procurement function.

This is still very much work-in-progress, so any comments or feedback would be most welcome: a.sanchez-graells@bristol.ac.uk. The full paper is available on SSRN as: A Sanchez-Graells, 'Public Procurement and "Core" Human Rights: A Sketch of the EU Legal Framework' (January 16, 2018), to be published in O Martin-Ortega & C M O’Brien (eds), Public Procurement and Human Rights: Risks, Dilemmas and Opportunities for the State as a Buyer (Edward Elgar, forthcoming): https://ssrn.com/abstract=3103194.

Discretion in public procurement—notes of a very energising workshop

I have the great privilege and pleasure of participating in a research project on ‘Discretion in public procurement’ funded by the Swedish Competition Authority and led by Profs Groussot, Hettne and Bogojević of the Universities of Lund and Oxford. In the context of the project, a workshop was held at Lady Margaret Hall (Oxford) on 3 November. The discussions brought together leading general EU law, environmental law and public procurement law academics, and this created a very open-minded atmosphere conducive to very productive discussions.

The results of the research project will be published in due course by Hart, as part of the series Studies of the Oxford Institute of European and Comparative Law (IECL). For now, I am happy to share my notes of the seminar. Needless to say, all valuable insights should be attributed to relevant colleagues, and any errors or misunderstandings are my own responsibility. I hope these notes serve to promote further debate.

Public Procurement and Internal Market

Prof Phil Syrpis used his previous discussion of the two constitutional visions on the interaction between primary and secondary EU law (see P Syrpis, ‘The relationship between primary and secondary law in the EU’ (2015) 52(2) Common Market Law Review 461) to assess the extent to which such primary-secondary interaction shapes the spaces for the exercise in the field of public procurement (see P Syrpis, ‘RegioPost—A Constitutional Perspective’, in A Sanchez-Graells (ed), Smart Public Procurement and Labour Standards. Pushing the Discussion after RegioPost (Hart, 2018) ch 2).

In particular, he discussed RegioPost (C-115/14, EU:C:2015:760), and how the interaction of Art 56 TFEU, the Posted Workers Directive and the rules in Directive 2004/18/EC shaped the space for the exercise of discretion concerning the imposition of minimum wage requirements in the execution of public contracts—emphasising that this is an area of non-exhaustive EU harmonisation, thus triggering EU primary law analysis. Phil criticised the conflation of primary law (Art 56 TFEU) and secondary law (Posted Workers Directive), and the ‘horizontal interaction’ between directives in which the RegioPost case resulted (where the interpretation of the procurement rules hinged on the interpretation of the Posted Workers Directive), as muddling the constitutional position on the value of the sources.

The discussion raised issues concerning the blurry lines around exhaustive/non-exhaustive harmonisation areas, and whether there is displacement or rather procedural juxtaposition of primary and secondary law. Whether a hierarchical approach already contains the seeds of heteronormative interpretation of EU primary law was also considered—in particular in view of the open textured and permeable nature of EU Treaty provisions, and the tendency of the CJEU to consider secondary law as a source of inspiration for the interpretation of primary law, sub silentio. The discussion also raised issues of the potential impact of Art 4(2) TEU (respect for national identities) on the scope for discretion at national level.

Prof Stephen Weatherill used the image of public procurement law as ‘internal market law made better’ and discussed the way in which EU internal market law has generally been developed to constrain the exercise of discretion of (public and private) national actors, and compared the situation in the field of procurement with general internal market law—thus reaching the conclusion that procurement law is more developed and perfected (in constraining national discretion more tightly), and in particular in the area of remedies, which creates a significantly different enforcement scenario and possibly more effectiveness of procurement law compared to general internal market rules (which is jeopardised by the procedural obstinacy of the Member States). He also reflected on the contradiction between the existence of that dense legal framework regulating public procurement in the internal market, and the enduring fragmentation of that market along uncompetitive national lines.

The discussion concentrated on issues surrounding the difficulties in bringing together the analysis in the area of free movement of goods and services, in particular services of general economic interest, the wiggle room for the CJEU to shy away or not from addressing specific cases by using jurisdictional criteria (cfr Comune di Ancona (C-388/12, EU:C:2013:734) and Tecnoedi Costruzioni (C-318/15, EU:C:2016:747)), as well as issues concerning the extent to which the 2014 Public Procurement Package, by creating more discretion or flexibility, may have eroded the component of ‘internal market law made better’ and potentially make public procurement move back to the median (effectiveness) of EU internal market law.

Prof Jörgen Hettne discussed public procurement and technical standards, and whether the specific rules constituted mechanisms to limit discretion or rather a democratic threat. He discussed the multi-faceted nature of technical standards as potential technical barriers, or rather trade facilitators or trade promoters—and focussed on the latter under the new approach to EU standards (CE mark) and the presumption of compliance embedded in the rules on technical specifications in the 2014 Public Procurement Package. He also concentrated on the quasi-binding nature that technical standards are acquiring (eg Nordiska Dental (C-288/08, EU:C:2009:718), James Elliot Construction (C-613/14, EU:C:2016:821)—and see also Medipac - Kazantzidis (C-6/05, EU:C:2007:337), and Commission v Greece (C-489/06, EU:C:2009:165)).

He wondered whether the obligation to respect the CE mark in the context of public procurement is problematic due to its requirement of ‘blind trust’ in the harmonisation system, and whether this is a democratic threat—in particular due to the way in which broad participation is (not) working in the context of standard-setting. He also discussed the constraints in an alternative approach based on the flexibility around the use of functional requirements embedded in Art 44(6) of Directive 2014/24/EU.

Public Procurement Discretion: Limits and Opportunities

Prof Chris Bovis reflected on the drivers and boundaries of discretion in the award of public contracts. He discussed the evolution of the regulatory space left to discretion throughout the five generations of EU procurement directives, and raised issues concerning the scale or structural dimension of discretion, in particular due to the different nature of the issues left to the discretion of the Member States (system-level issues) or the contracting authorities (procurement/procedure-level issues). His reflections also prompted discussion on the dynamics and interaction between exposure to competition, accelerating market dynamics (eg regarding innovation) and exercise of (administrative) discretion.

Dr Dieter Klaus explored the lessons that can be learnt from an analysis of the constraints on discretion in the public procurement setting, as a case study of broader issues concerning the regulation of discretion under EU law. He started with conceptual remarks on ‘discretion’ and the general approach to discretion (deplorable exception or rather a valuable instrument?) and the tension between different pulls and levers in EU law (flexibility, subsidiarity, harmonisation, compliance and potential over-regulation risks). He also stressed the risks and difficulties in EU level concept-building around (eponymous) notions that carry specific connotations in the context of national legal systems, which triggers risks of possible misunderstandings—as well as the interaction between spheres of discretion and intensity of judicial review of (discretion-based) executive decisions.

He used examples that compared case law on gambling (eg Politanò (C-225/15, EU:C:2016:645), Unibet International (C-49/16, EU:C:2017:491) or Vereniging Hoekschewaards Landschap (C-281/16, EU:C:2017:774)) and case law on public procurement (TNS Dimarso (C-6/15, EU:C:2016:555), LitSpecMet (C-567/15, EU:C:2017:736) or Borta (C-298/15, EU:C:2017:266)), with a particular emphasis on the intensity of judicial scrutiny for the justifications backing up discretionary decisions by the Member States. In concluding his reflections, he wondered whether there is something that makes procurement law special within the framework of EU internal market rules—which he thought probably not, in particular if one considers the fact that discretion works in different ways in different areas of EU internal market law, and that EU public procurement law displays the whole range of scenarios where discretion is subjected to different constraints.

The discussion raised the issues of whether the discretion under analysis (in the case law) is only that exercised by the contracting authority in executive decisions, or whether macro/systemic issues are subjected to the same issues and constraints. It also raised issues on the interaction between incompleteness of the regulatory system and (unforeseen) sources of discretion. The discussion also raised the point of whether Art 18 Dir 2014/24 is the natural ‘home’ of discretion within the system (as a horizontal issue), or whether the Directives somehow operate on the basis of a more undercover position for discretion.

In my presentation, I discussed the extent to which the general principles in Article 18(1) of Directive 2014/24/EU set out the relevant constraints on the exercise of executive discretion in the context of procurement and, in particular, the role that the prohibition for contracting authorities to artificially narrow down competition can be used to create effective substantive and/or procedural tests to control the exercise of such discretion.

Following up on my previous proposals (mainly, in Public Procurement and the EU Competition Rules, 2nd edn (Hart, 2015) ch 5) I suggested that Article 18(1)II Dir 2014/24/EU provides the basis for a competition-orientated or competition driven adaptation of a general proportionality test. I suggested that the existing case law of the CJEU, in particular concerning anti-circumvention rules, can form the basis for a substantive test oriented towards the consideration of the counterfactual decision adopted by a diligent contracting authority. I acknowledged that such a test may be difficult to craft in a way that does not create risks of ex post facto reassessment of decisions that would have originally not been seen as restrictive of competition.

I also suggested that a procedural test may be preferable, in the sense of creating a presumption of conformity with the requirements of the Directive where the contracting authority can provide an adequate paper trail (ex Art 84(2) Dir 2014/24) demonstrating having given due consideration to competition impacts of the decisions taken along the procurement design and implementation phase. My preliminary idea is that the procedural test would create a rebuttable presumption of conformity and that, in case of indicia to the contrary, the substantive test would then be applied.

The ensuing discussion concerned challenges on my claim about the competition-orientatedness of the regime in Directive 2014/24/EU and the 2014 Public Procurement Package more generally, discussion of the different concepts of competition (either as a mechanism or as a benchmark demanding economic efficiency in absolute terms) and the links that could be drawn before the substantive test I propose and the more general test of abuse of EU internal market law.

Environmental and Social Clauses

Dr Marta Andrecka discussed limits of contracting authority discretion in the pursuit of sustainability, and drew from previous analysis on her recently edited monographic issue of the European Procurement & Public Private Partnership Law Review (2017) 12:3. Her reflections concerned the balance between the flexibility created to support sustainability goals in procurement through the ‘toolbox approach’ in the 2014 Public Procurement Package and ensuing Commission guidance, on the one hand, and the necessary checks and balances, on the other—in particular by reference to the interpretation of Art 18(2) of Directive 2014/24/EU and difficulties to fit different understandings of ‘public interest’ at EU and national level in this context. She gave significant weight to the addition of sustainability as a strategic goal of procurement under the new rules, very much in line with the European Commission’s approach in the October 2017 Communication on ‘Making public procurement work in and for Europe’. She also mapped out emerging obligations to include sustainability considerations in the context of other (horizontal) EU policies with an impact on procurement—such as the current proposal for a European Accessibility Act.

The ensuing discussion concerned the boundaries of the concepts of public interest and public policy within the context of EU internal market law, and the extent to which that is directly applicable and/or transferable to the interpretation and enforcement of the 2014 Public Procurement Package. It also concerned the link between the increasing sophistication and complications derived from sustainability-orientated procurement and emerginginitiatives on professionalization and capacity building as part of the broader procurement strategy.

Dr Sanja Bogojević mapped environmental contestation points in EU procurement law and policy, as a way of bringing attention to problems and opportunities for the pursuit of environmental policies in the context of public procurement. She recreated the discourse on green procurement through the case law of the CJEU after Concordia Bus Finland (C-513/99, EU:C:2002:495) and EVN and Wienstrom (C-448/01, EU:C:2003:651), and compared it to the discourse in broader internal market case law, to finally arrive to the current expressions of green public procurement aims and goals in policy documents, such as the 7th Environmental Action Plan or the Europe 2020 Strategy. Concentrating on Directive 2014/24/EU, her discussion considered the way green procurement is presented in relation to technical standards, labels and life-cycle costing rules.

Once the mapping was complete, she identified 5 points of contestation: (1) role of sustainable development and the risk it creates of squeezing environmental protection act; (2) reviewability of environmental models used in life-cycle costing (eg as exemplified in the litigation leading to R (ClientEarth) [2016] EWHC 2740); (3) what is the nature of the obligation in Art 11 TFEU (‘environmental protection requirements must be integrated into the definition and implementation of the Union policies and activities’ – is this solely a procedural minimum?); (4) discretionary climate change policy and ways in which policy can be used to create obligations (eg along the lines of the Dutch Urgenda case); and (5) the role of EU public procurement law in non-EU countries looking to access the EU (eg Serbia) or on the way out (UK). Ultimately, she made a compelling case for more interdisciplinary work and efforts of legal imagination to try to find workable legal solutions to global challenges.

Dr Jeremias Prassl discussed means, ends and conflicts in attempting to carry out social procurement. He introduced the clash between labour rights and internal market rules and restrictions (ie a clash of the economic vs the social)—which underlies calls for broad exemptions from internal market law from scholars such as Prof Alan Bogg ('Viking and Laval: The International Labour Law Perspective', in M R Freedland & J Prassl (eds), Viking, Laval and Beyond (Hart, 2016) ch 3)—and considered whether public procurement is more sensitive or atuned to labour law considerations than general internal market. He also reflected on whether the relevant clash was not one between economic and social rights, but rather between social rights of different collectives. He then developed each of the different narratives to see how they have shaped law and policy in the context of EU social and procurement law—in particular around the Posted Workers Directive.

His discussion provided insights on how the application of the internal market logic and its broader normativity comes to water down labour law’s protective effects (building on the analysis of L Rodgers, ‘The Operation of Labour Law as the Exception: The Case of Public Procurement’, in A Sanchez-Graells (ed), Smart Public Procurement and Labour Standards. Pushing the Discussion after RegioPost (Hart, 2018) ch 8). He assessed these issues of normativity and exception from Viking (C-438/05, EU:C:2007:772) and Laval (C-341/05, EU:C:2007:809) to the more recent cases of Bundesdruckerei (C-549/13, EU:C:2014:2235) and RegioPost. He also relied on Prof Weatherill’s approach ('Viking and Laval: The EU Internal Market Perspective', in M R Freedland & J Prassl (eds), Viking, Laval and Beyond (Hart, 2016) ch 2; see also S Weatherill, The Internal Market as a Legal Concept (OUP, 2017)) to criticising the insensitivity of internal market case law to legitimate and democratically expressed national priorities—which Jeremias considers is currently softening, as the CJEU approach in RegioPost indicates.

He also critically reflected on whether the seeming growing scope for labour policies in the context of procurement is likely to generate the maximum practical effects that would be desirable. In closing his paper, he wondered whether the heterogeneity of workers and the conflicts between different groups of workers (insiders vs outsiders) would provide a better narrative and analytical perspective to reassess this topic. In doing that, he drew on Prof Catherine Barnard’s contrast between the equal treatment logic of the procurement rules and the differentiation logic of the traditional rules on posting of workers, which is now being tamed in the revision of the Posted Workers Directive (see C Barnard, ‘Fair’s Fair: Public Procurement, Posting and Pay’, in A Sanchez-Graells (ed), Smart Public Procurement and Labour Standards. Pushing the Discussion after RegioPost (Hart, 2018) ch 10).

The ensuing discussion concentrated on how attempts to integrate social and environmental considerations in a public procurement regime that already tried to address other goals—mainly, economic and internal market-orientated—triggers issues around the extent to which social and environmental considerations should be a more intrinsic element of internal market law generally, as a sort of ‘softer market’, rather than an issue to be addressed sectorially.

Prof Xavier Groussot and Ms Angelica Ericsson wrapped up the discussions with a reflection on the tension between discretion and proportionality in the use of social clauses in procurement. They discussed (i) the elements of discretion, (ii) the application of procedural proportionality to control discretion—and in particular from the perspective of transparency—and (iii) whether recent case law seemingly deviating from the principle of proportionality creates a problem, mainly in light of the application of covert proportionality through consistency in RegioPost (contra P Bogdanowicz, ‘Article 56 TFEU and the Principle of Proportionality: Why, When and How Should They be Applied After RegioPost?,’ in A Sanchez-Graells (ed), Smart Public Procurement and Labour Standards. Pushing the Discussion after RegioPost (Hart, 2018) ch 3). In the first part of the discussion, they explored the connections between the application of discretion under EU law and under ECHR law, and how that comparison can be best assessed using a variation of the framework set out by Tridimas (‘Proportionality in Community Law. Searching for the Appropriate Standard of Scrutiny’, in E Ellis (ed), The Principle of Proportionality in the Laws of Europe (Hart, 1999) 65 ff), and the additional issue of harmonisation raised by Thym (‘The Constitutional Dimension of Public Policy Justification’, in P Koutrakos, N Nic Shuibhne, & P Syrpis, Exceptions from EU Free Movement Law: Derogation, Justification and Proportionality (Hart, 2016) ch 9): (1) the interest, (2) the proceeding, and (3) the level of harmonization (cfr Opinion of AG Cruz-Villalon in dos Santos Palhota and Others (C-515/08, EU:C:2010:589)).

In the second part, they discussed discretion and procedural proportionality, and reflected about ‘what would a high level of discretion mean for a proportionality assessment’ both in theory and in practice. They stressed that the level of discretion and the intensity of proportionality review should theoretically be inversely proportionate (much along the lines presented by Dr Kraus earlier in the day, but with inverted causality), and that this is demonstrated in practice in the area of public procurement (such as in Politanò), where the CJEU shows more deference to administrative discretion (ie a lighter-touch proportionality analysis) where a higher level of discretion exists ex ante. Specifically in the context of procedural proportionality (eg Beentjes v State of the Netherlands (C-31/87, EU:C:1988:422)), and in the context of transparency obligations, they suggested that procurement is a good testing ground for the correlation between higher discretion and more limited proportionality scrutiny by the CJEU (eg in RegioPost, where regulatory transparency may have saved the social clause). They concluded that (i) high level policy discretion for Member States must not translate into unfettered discretionary/arbitrary decision-making by contracting authorities, (ii) procedural scrutiny is spreading beyond public procurement (R Caranta, ‘Public Procurement Law: Limitations, Opportunities and Paradoxes’ in U Neergaard, C Jacqueson & GS Ølykke (eds), XXVI FIDE Congress in Copenhagen, vol 3 (DJØF, 2014), where he claims principles of procurement becoming general principles of EU administrative law more generally), (iii) EU law principles (eg transparency) may be fuelled by different justifications than (eponymous) national ones.

Finally, in the third part, and drawing from French administrative law, they explored the possibilities of developing a taxonomy of CJEU case law that would distinguish between a procedural approach (controle minimum), substantive approach (controle normal) and a balancing approach (controle maximum).

The discussion concentrated mostly on the boundaries of the procedural proportionality approach and the categories that could most usefully be used to create a taxonomy of approaches by the CJEU. This was linked to the discussion to the standard of review of decisions in other areas of EU law—eg competition law, where the connection between EU and ECHR standards has been questioned (eg Menarini, as discussed in extenso in A Sanchez-Graells, ‘The EU’s Accession to the ECHR and Due Process Rights in EU Competition Law Matters: Nothing New Under the Sun?’, in Kosta, Skoutaris & Tzevelekos (eds), The Accession of the EU to the ECHR (Hart, 2014) 255-70).

Alternative Procurement Models

Dr Ohad Graber-Soudry presented the procurement rules of European Research Infrastructure Consortia (ERICs) under the specific regulatory framework of Council Regulation 723/2009/EC, which creates significant space for each ERIC to adopt its own procurement rules. His presentation concentrated on the uncertainties derived from the treatment of ERICs as international organisations and the impact these have on ERICs’ discretion to develop their own procurement rules, as well as the treatment of discretion within those (self-developed) rules.

The ensuing discussion mainly concerned the limits and effects of Art 7(3) of Regulation 723/2009, whereby ‘[a]n ERIC is an international organisation within the meaning of Article 15(c) of Directive 2004/18/EC’, which now corresponds to Article 9(1)(b) of Directive 2014/24/EU.

Closing the workshop, Prof Ulf Bernitz discussed the peculiarities of the Swedish system, and stressed the particular use and weight of transparency obligations in that jurisdiction.

Are the EU Institutions (about to start) breaching Art 50 TEU & EU public procurement law in the context of Brexit?

The Financial Times has reported that "Brussels starts to freeze Britain out of EU contracts ~ Commission memo tells staff to prepare to ‘disconnect’ UK". According to the FT, an internal European Commission memorandum urges its senior officials to start introducing Brexit considerations in their decision-making, seemingly to avoid “unnecessary additional complications”. As public procurement is concerned, the FT indicates that 

Where legally possible, the [C]ommission and its agencies will be expected in all activities to “take account” of the fact that Britain may be “a third country” within two years, including in appointing staff and in awarding billions of euros of direct contracts for research projects or services.

“Apart from the legal requirement for a contracting party to be established in the EU, there may be political or practical reasons that speak in favour of contracting parties established in a specific member state, not only at the conclusion of the contract, but also throughout the duration of the contract,” the note states.

The FT piece lacks the necessary detail for a full legal assessment and the caveat that this strategy should be undertaken "where legally possible" may well deactivate it [in legal terms]. However, at least in its thrust, this is a rather clear breach of Article 50(3) TEU.

Inasmuch as it states that "The Treaties shall cease to apply to [a withdrawing Member] State ... from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification" (given by the UK on 29 March 2017), unless this period is extended unanimously by the European Council; Art 50(3) TEU does not allow for any anticipatory effects of a decision to withdraw. Until withdrawal and its terms are actually agreed and legally effective, both the withdrawing Member State and the EU Institutions remain bound by EU law in its supremacy, direct effect and the mandate to respect the rule of law (Art 2 TEU). This is an appropriate measure aimed at the preservation of the rule of law in the form of compliance with EU law during the withdrawal negotiations, not least because nobody knows if withdrawal is legally irreversible and unavoidable -- and, quite frankly, every day that goes by without the EU Institutions (as well as the UK) seeking clarification from the Court of Justice of the European Union is a missed opportunity and another blow to the foundations of the rule of law in the EU.

Such prohibition of anticipatory effect goes both in the direction of preventing the 'freeing up' of the withdrawing Member State from compliance with EU law (which is obvious from Art 50(3) TEU itself), as well as in the opposite direction of preventing the EU Institutions from discriminating against the withdrawing Member State. It is clear to me that EU law will always bind the EU Institutions vis-a-vis a withdrawing Member State all the way up to the point of legal withdrawal - and from then onward, the legal regime setting up mutual duties will be that of any transitory arrangements created by the withdrawal agreement, and/or the legal regime governing the "the framework for [the withdrawing Member States'] future relationship with the Union". Violating the absolute mandate of subjection to EU law up to the point of withdrawal would be an infringement of Art 50(3) TEU by the EU Institutions -- if not by itself, certainly in combination with the duty of non-discrimination and equal treatment between Member States of Art 4(2) TEU, as well as the duty of sincere cooperation of Art 4(3) TEU.

In the specific area of public procurement, just as it was illegal for the UK's Department for International Trade to tender contracts screening contractors on the basis of their commitment to support the delivery of Brexit as a cultural fitness criterion (see here), it is also illegal for the EU Institutions to tender contracts on the basis of "political or practical reasons that speak in favour of contracting parties established in a specific member state, not only at the conclusion of the contract, but also throughout the duration of the contract". Article 102 of the Financial Regulation governing the award of contracts by EU Institutions clearly establishes that "All public contracts financed in whole or in part by the [EU] budget shall respect the principles of transparency, proportionality, equal treatment and non-discrimination". Imposing requirements around the Member State of incorporation, registration or sit of a public contractor runs against these general principles.

There may be some specific circumstances or projects (the FT piece mentions the Galileo project) where it would not be possible for public contractors to be based outside the EU, but these are clearly exceptional and need to be subjected to a very strict proportionality analysis. In most cases, particularly for services and research contracts, there is no need for any physical presence in the EU (or elsewhere). This is clearly demonstrated by the coverage of a good number of Brexit-sensitive services markets in the EU's market access concessions under the World Trade Organisation's Government Procurement Agreement (albeit on a reciprocal basis, for obvious trade policy reasons).

Moreover, the extent to which it would be impossible for UK-based contractors to complete the execution of public contracts post-Brexit depends on the existence or not of transitory arrangements, as well as the framework for the future EU-UK relationship (which may well imply mutual coverage of services procurement in WTO GPA terms). Therefore, a decision made now that determined such impossibility and thus served as the basis for the exclusion of UK tenderers from procedures carried out by the EU Institutions would be legally defective.

Beyond these technical issues, it is shocking and worrying to see the EU Institutions engage in what can be seen as trade war by erecting non-tariff barriers against a withdrawing Member State, just as it was worrying and unacceptable to see the UK do that. If both parties to the withdrawing negotiations "prepare" for a disorderly Brexit in this manner, this will be a self-fulfilling prophecy. And the only stopper to such noxious developments is to be found in the rule of law and the EU's and the withdrawing Member States' obligations under the Treaties to comply with EU law until the withdrawal is effective in terms of Art 50(3) TEU. If the European Commission is itself not able to abide in this manner, then my pessimism about the irreversible effects of Brexit on EU law can only plummet even further....

[Input sought] Access to procurement remedies and reciprocity in EU/EEA Member States

I have been thinking for a while about a comparative procurement law question on which I would appreciate your help and input (please comment below or send me an email to a.sanchez-graells@bristol.ac.uk if you have information about your jurisdiction that you can share, for which I would be most grateful). The question concerns the extent to which contracting authorities in the EU/EEA Member States apply an access filter for bids coming from non-EU/non-GPA covered states -- that is, whether contracting authorities check that the tenderer/tender are covered by trade-liberalising instruments or not at the initial stages of a procurement process -- and the extent to which that filter or its absence may then carry on to the access of non-EU/non-GPA tenderers to domestic remedies in those jurisdictions -- that is, whether remedies are limited to EU/GPA tenderers or are more broadly available.

My interest in this topic comes from the fact that, one of the issues that keep arising in the context of the Brexit debate (particularly in view of Prof Arrowsmith's proposals, which I criticised here, and Pedro Telles also criticised here) concerns the future access for UK tenderers/candidates to domestic remedies in the EU27/EEA jurisdictions in case of no deal with the EU and the UK resorting to GPA rules. This links to the broader question of which tenderers/candidates have access to procurement processes and to domestic remedies in the EU27/EEA jurisdictions, as mentioned above.

In my view, Member States can either control coverage by EU/GPA rules at the start of the process or not, and this may result from either an obligation to check or discretion to check. Later, in relation to the point on remedies, there are probably only four relevant (legal) options:

(a) all tenderers/candidates have access to all domestic remedies regardless of their nationality (ie totally open remedies system).

(b) all tenderers/candidates have access to some domestic remedies regardless of their nationality, but only EU/EEA tenderers/candidates have access to 'premium' remedies mandated by EU law (ie those with standstill, etc) (ie open EU+ remedies system).

(c) only tenderers/candidates covered by GPA/WTO, EU/EEA or bilateral FTAs have access to all domestic remedies (ie trade-led remedies system).

(d) only tenderers/candidates covered by GPA/WTO, EU/EEA or bilateral FTAs have access to some domestic remedies, but only EU tenderers/candidates have access to 'premium' remedies mandated by EU law (ie those with standstill, etc) (ie trade-led EU+ remedies system).

I am interested in writing a short paper on this issue and would really appreciate your input on: (i) whether there is some other legally-compliant model I may have overlooked and, (ii) more importantly, what is the model in your jurisdiction (specially if you are based in an EU27/EEA country). So far, the information I have been able to gather is as follows [apologies to those of you who have helped me with this if I have misinterpreted it -- corrections welcome; when reading this, please bear in mind that the content evolves as I discuss these issues with national experts and explore the ideas further, particularly in terms of the contours between models (a) and (c)]:

1. Austria (thanks to Michael Fruhmann): Federal Procurement Law states, that procurement procedures shall be carried out in compliance with the fundamental principles of EU Law, the principles of free and fair competition and the equal treatment of all applicants and tenderers. However, different treatment of applicants and tenderers on grounds of their nationality or of the origin of goods which is permissible under international law remains unaffected by this obligation. The (legal) consequence is, that if no union or international obligations (re latter: this depends on the existence and scope of FTAs, RTAs also) exist to open PP procedures to foreign bidders, contracting authorities are free to admit participation or to deny the participation of such bidders. However, if such bidders are allowed to participate they have the same standing as national/EU bidders (also as regards remedies). In practice this comes down to the question, whether the contracting authority wants such bidders to participate. This is a case by case decision depending i.a. on the subject matter of the contract, the interest to intensify/safeguard competition in a given procedure. This decision (no admittance) can of course be reviewed (and has been reviewed) but the courts confirmed that without any EU/international obligation it's fully within the competence of the contracting authority to decide either way. Generally, this points towards the model being generally (c), but with the possibility of going beyond that and getting closer to (a) depending on the contracting authority's discretion.
2. Belgium (thanks to Baudoin Heuninckx): a contracting authority may reject the request to participate or tender by undertakings from countries outside of EU/WTO or without an FTA, so there is a potential "filter" at the very beginning of the procedure. In terms of remedies, every candidate or tenderer has access to all remedies regardless of nationality. Potentially, this leads to the remedies model being (c).
3. Czech Republic (thanks to Jaroslav Mencik): contracting authorities may not restrict participation in public tenders of suppliers from the EU, the EEA, Switzerland, or other states with which the Czech Republic or the EU has concluded international agreements which guarantee that suppliers from such a state will have access to the public contract being awarded. It follows that contracting authorities are required neither to check the nationality of tenderers nor exclude non-EU/non-GPA tenderers (but may choose to do so). Remedies follow model (a), all tenderers participate on equal terms.
4. Denmark (thanks to Carina Risvig Hamer): it is not foreseen in legislation, but contracting authorities can decide not to allow participation from non-EU/non-GPA tenderers. All candidates and tenderers have full access to remedies. Potentially, this leads to the remedies model being (c). 
5. Estonia (thanks to Mari Ann Simovart): remedies are available to any "interested party" without any restriction based on the country of origin. In short, model (a) applies. However, a contracting authority can restrict access to a particular procurement procedure for tenderers of EU/EEA/WTO only - in which case, tenderers outside EU/EEA/WTO can be regarded as having no "interest" towards the particular procurement and thus no standing to claim review.
6. Finland (thanks to Kirsi-Maria Halonen): contracting authorities would not always check whether a tenderer is covered by the agreements, but could do so at the beginning of the tendering procedure. If accepted to participate/tender, the candidate/tenderer would likely have access to all domestic remedies. This leads to the remedies being closer to model (c), but it is possible that de facto, contracting authorities may be granting equal treatment beyond GPA/EU/FTA coverage in sui generis basis (model (a)). It is in the contracting authorities' discretion whether to even look into the matter/exclude. If tenderers are not excluded, they'll have equal rights for remedies. However, it is worth bearing in mind that this is untested in the courts.
7. Germany (thanks to Gabriella Gyori): not taking into account decentralized matters (due to the differences among the "Bundesländern"), according to the federal public procurement legislation related to above threshold procedures, tenderers from outside of Germany are allowed to participate, treated equally and have equal rights. Remedies follow model (a). 
8. Greece (thanks to Marios Skiadas): in order to be eligible to participate in a public tender, economic operators must be based in an EU, EEA, GPA or other countries which have signed bilateral or multilateral agreements with the EU in matters related to public procurement procedures. Contracting authorities have a first chance of checking this requirement when they assess the ESPD or equivalent documentation. Additionally, during the final stage of the awarding phase, the winning bidder is required to submit all legal documents regarding company establishment, operation and representation. Therefore, the contracting authority will in practice have a “second chance” to check conformance. Access to remedies applies to all parties with an interest in being awarded a public contract. By combining this to the eligibility criteria stated above,Greece follows model (c).
9. Hungary (thanks to Gabriella Gyori): economic operators shall be excluded from participating in the procedure as a tenderer, candidate, subcontractor or an organization participating in the certification of suitability, if have their fiscal domicile in a country outside the EU, the EEA or the OECD or in a non WTO/GPA country or outside the overseas countries specified in the TFEU or in a country which has not signed any agreement with Hungary on avoiding double taxation or which has not signed a bilateral agreement with the EU concerning public procurement. Claims can be submitted by a contracting authority, a tenderer(s) or any other interested person whose right or legitimate interest is being harmed or risks being harmed by an activity or default which is in conflict with the procurement legislation. This brings the remedies system close to model (c).
10. Ireland (thanks to James Farrell): based on long-standing practices, there are not requirements of EU/EEA/GPA membership as a qualifying requirement for tenderers, or references to different treatment of tenderers emanating from non-EU/EEA/GPA countries in any policy or guidance documents issued by the relevant Irish authorities. The general approach, driven by Ireland's open trading policy, is to take value wherever it can be found. There have been no court challenges in Ireland where an unsuccessful tenderer sought to argue that a winning tender should be disqualified because of the country of origin/registration/domicile of the tendering entity. Regarding remedies, apart from reliefs arising under the Remedies Directive there are also domestic reliefs such as Judicial Review, Injunctions etc that would be available to tendering entities regardless of nationality. Therefore, Ireland follows model (a).
11. Italy (thanks to Roberto Caranta): only tenderers/candidates from MS/parties to GPA/WTO, EU/EEA or bilateral FTAs are eligible to bid. Eligible suppliers then have access to all domestic remedies; so the systems follows model (c).
12. Lithuania (thanks to Deividas Soloveičik): there is no obligation for contracting authorities to check non-EU/ non-GPA suppliers. Remedies follow model (a), all suppliers participate on equal terms.
13. Netherlands (thanks to Tim Beukema): Dutch law states that a contracting authority shall not grant any advantage in regard to the tender and the contract that is not granted to parties from countries within the EU. In regard to rejection of participants, contracting authorities may reject the request to participate by undertakings from countries outside of the GPA, EU or FTA. Entities operating in the water, energy, transport and postal services sectors (special sectors) have the possibility to reject a participation or tender if the goods that a party provides consists of more than 50% from countries on which the EU has no obligation to, i.e. countries outside the GPA, EU or FTA. A special sector company has the obligation to decline an offer of such party in the case of an equal bid from a undertaking within the GPA, EU or FTA that has less than 50% of the goods from within these countries. Claims can be submitted by parties who are interested in the tender in the case that his rights are being harmed or could be harmed because of the fact that the tender procedure breaches the procurement rules, which is a remedies system in accordance with model (c).
14. Norway (thanks to Eirik Rise): follows model (c); only tenderers/candidates covered by GPA/WTO, EU/EEA or bilateral FTAs have access to domestic remedies, and only to the extent that it is covered in the relevant FTA.
15. Poland (thanks to Paweł Nowicki and Piotr Bogdanowicz):  There is a newly introduced obligation to comply with WTO GPA and other international agreements to which the EU is a party, and there is no explicit obligation to exclude non-EU/non-GPA tenderers. Remedies follow model (a).
16. Portugal (thanks to Pedro Telles): [not clear yet whether there is an initial filter]. Remedies follow model (a).
17. Romania (thanks to Dacian Dragos): [not clear yet whether there is an initial filter]. Remedies follow model (a).
18. Slovenia (thanks to Njives Prelog): suppliers from all over are allowed to participate, treated equally and have equal rights. Remedies follow model (a). 
19. Spain: at the initial stage, contracting authorities have an obligation to check coverage by EU/GPA rules or to require confirmation of reciprocal access for Spanish tenderers in the country of origin of non-EU/non-GPA tenderers (which are also required to have a branch office in Spain). Remedies follow closely model (a) because remedies are open to all those admitted to tender procedures [ie go beyond (c), but are still somehow trade-led due to reciprocity requirement].
20. Sweden (thanks to Andrea Sundstrand): there is no check at the start of the procedure and suppliers from all over are welcome to participate on equal terms. Remedies follow model (a) and all suppliers have access to exactly the same remedies regardless of whether they are from countries that Sweden has trade agreements with.
21. United Kingdom (thanks to Aris Christidis and Pedro Telles for discussions): The UK system replicates the EU Directive in terms of extending equal treatment (which can be seen to include access) to economic operators covered by EU law, the WTO GPA, or other international agreements by which the EU is bound (see reg. 25 PCR2015). The remedies system is limited to those economic operators to which contracting authorities are legally taken to owe a duty to comply with public procurement rules. Effectively, this is limited to economic operators from the EEA, GPA signatories (provided the procurement is covered) and countries with bilateral agreements in force (see regs. 89 and 90 PCR2015).

This initial scoping exercise seems to indicate clustering around models (a) and (c). It would be amazing if we could collectively cover most of the EU27/EEA and complete the exercise, not only in order to gain a better understanding of this issue, but also because this will be relevant for Brexit negotiations around procurement in the immediate future. Your contribution will, of course, be duly acknowledged and gratefully received.

Collaborative Cross-Border Procurement in the EU: Future or Utopia?

I have uploaded a new paper on SSRN, which I will be presenting at the workshop on ‘Collaborative Efficiency in Government: The Trend, The Implications’ during the forthcoming ECPR Joint Sessions, Scuola Superior Sant’Anna and University of Pisa, 24-28 April 2016. 

The paper is entitled 'Collaborative Cross-Border Procurement in the EU: Future or Utopia?' and, in short, tries to conceptualise and look critically at the immensely complex legal issues that Directive 2014/24 has left unresolved. In order to conceptualise the political, economic and legal issues, I use a theoretical scenario that looks like this (so maybe it needs to be read with pen and paper, apologies!):

As the abstract explains in more detail:

Collaborative public procurement has been gaining traction in recent years and could be considered at the spearhead of public procurement reform and innovation. The 2014 reform of the EU public procurement rules (mainly Directive 2014/24) has expanded the tool-kit available to contracting authorities willing to engage in joint or centralised procurement activities, and in particularly in cross-border procurement collaboration. In a push forward, and as part of the Strategy for a deeper and fairer single market in its larger context, the European Commission is developing a policy to facilitate and promote cross-border collaborative public procurement in the European Union.

This paper adopts a sceptical approach and critically assesses the political, economic and in particular legal factors that can facilitate or block such development. To do so, it focuses on a case study based on a theoretical scenario of cross-border collaboration between centralised purchasing bodies in different EU Member States. The paper ultimately aims to establish a blueprint for future legal research in this area, in particular regarding the emergence of trans-EU public law.

This is an area where much more thoughtful legal research is needed, and I intend to do so in a paper I am just starting on the 'The emergence of trans-EU public law. Public procurement as a case study'. For now, though, the exploratory paper is out and comments would be most welcome!

The full paper is available: A Sanchez-Graells, Collaborative Cross-Border Procurement in the EU: Future or Utopia? (February 18, 2016). Available at SSRN: http://ssrn.com/abstract=2734123.

CJEU requires EU law compliant interpretation of national principles of res iudicata (C-505/14)

In its Judgment of 11 November 2015 in Klausner Holz Niedersachsen, C-505/14, EU:C:2015:742, the Court of Justice of the European Union (CJEU) has reiterated that the requirement of effectiveness (effet utile) of EU law is incompatible with national principles and rules of finality of judicial decisions (res iudicata) that would prevent a court from drawing all the consequences of a breach of the EU State aid rules in Art 107(1) and 108(3) TFEU because of a (related, previous) national judicial decision which has become definitive.

The case does not set any new principle of EU law. The CJEU has repeatedly stressed that the effectiveness of EU law trumps res iudicata considerations under the domestic rules of the Member States--which has led some of them to develop a progressive approach to determining the finality of judicial decisions when not doing so would result in an infringement of EU law [regarding Italy, see Impresa Pizzarotti, C-213/13, EU:C:2014:2067 and comments here]. 

However, in my view, the case is interesting because the CJEU expands its case law as far as the application of the principle of consistent or harmonious interpretation is concerned, by indicating that domestic courts must try to reinterpret the principle of res iudicata itself in accordance with EU law so as not to impar its effectiveness and, only where that consistent interpretation is not possible, then proceed to a strict analysis of the principle of res iudicata under the principle of effectiveness of EU law.

In Klausner Holz Niedersachsen, the CJEU starts its reasoning by reiterating its settled case law on the duty of consistent interpretation and its limits. 

30 While accepting that the principle of res judicata, as construed in national law, has certain objective, subjective and temporal limitations and certain exceptions, the referring court notes that that law precludes not only re-examination, in a second action, of the pleas already expressly settled definitively, but also the raising of questions which could have been raised in an earlier action and which were not so raised. 
31 In that regard, it is appropriate to recall that it is for the national courts to interpret, as far as it is possible, the provisions of national law in such a way that they can be applied in a manner which contributes to the implementation of EU law (judgment in Lucchini, C-119/05, EU:C:2007:434, paragraph 60).
32 It is true that this principle of interpreting national law in conformity with EU law has certain limitations. Thus the obligation on a national court to refer to the content of EU law when interpreting and applying the relevant rules of domestic law is limited by general principles of law and it cannot serve as the basis for an interpretation of national law contra legem (see to that effect, judgments in Impact, C-268/06, EU:C:2008:223, paragraph 100, and Association de médiation sociale, C-176/12, EU:C:2014:2, paragraph 39).
...
34 In that regard, it must be borne in mind that the principle that national law must be interpreted in conformity with EU law also requires national courts to do whatever lies within their jurisdiction, taking the whole body of domestic law into consideration and applying the interpretative methods recognised by it, with a view to ensuring that EU law is fully effective and to achieving an outcome consistent with the objective pursued by it (see, to that effect, judgment in Dominguez, C-282/10, EU:C:2012:33, paragraph 27 and the case-law cited).
35 Thus, it is for the referring court to ascertain, on that basis, whether it can find such an interpretation ... (C-505/14, paras 30-35, emphasis added).

The CJEU then proceeds to extend the analysis where an EU law compliant interpretation of the principle of res iudicata is not possible. Unsurprisingly, it resorts to the principle of effectiveness of EU law, and reasons as follows:

38 If such a measure or interpretation should, however, prove not to be possible, attention should be drawn to the importance, both in the legal order of the European Union and in national legal systems, of the principle of res judicata. In order to ensure stability of the law and legal relations, as well as the sound administration of justice, it is important that judicial decisions which have become definitive after all rights of appeal have been exhausted or after expiry of the time-limits provided for in that regard can no longer be called into question (see judgments in Fallimento Olimpiclub, C-2/08, EU:C:2009:506, paragraph 22, and Târșia, C-69/14, EU:C:2015:662, paragraph 28).

39 Therefore, EU law does not always require a national court to disapply domestic rules of procedure conferring finality on a judgment, even if to do so would make it possible to remedy a breach of EU law by the decision at issue (see judgments in Kapferer, C-234/04, EU:C:2006:178, paragraph 22, Fallimento Olimpiclub, C-2/08, C:2009:506, paragraph 23, Commission v Slovak Republic, C-507/08, EU:C:2010:802, paragraph 60, Impresa Pizzarotti, C-213/13, EU:C:2014:2067, paragraph 59, and Târșia, C-69/14, EU:C:2015:662, paragraph 29).

40 In the absence of EU legislation in this area, the rules implementing the principle of res judicata are a matter for the national legal order, in accordance with the principle of the procedural autonomy of the Member States. However, such procedural rules must not be less favourable than those governing similar domestic situations (principle of equivalence) and must not be framed in such a way as to make it in practice impossible or excessively difficult to exercise the rights conferred by EU law (principle of effectiveness) (see judgments in Fallimento Olimpiclub, C-2/08, EU:C:2009:506, paragraph 24, and Impresa Pizzarotti, C-213/13, EU:C:2014:2067, paragraph 54 and the case-law cited).

41 As regards application of the principle of effectiveness, the Court has held that every case in which the question arises as to whether a national procedural provision makes the application of EU law impossible or excessively difficult must be analysed by reference to the role of that provision in the procedure, its conduct and its special features, viewed as a whole, before the various national bodies. In that context, it is necessary to take into consideration, where relevant, the principles which lie at the basis of the national legal system, such as the protection of the rights of the defence, the principle of legal certainty and the proper conduct of the proceedings (see, to that effect, judgments in Fallimento Olimpiclub, C-2/08, EU:C:2009:506, paragraph 27, and Târșia, C-69/14, EU:C:2015:662, paragraphs 36 and 37 and the case-law cited).

42 In that regard, it must be noted that an interpretation of national law ... can have the consequence, in particular, that effects are attributed to the decision of a national court ... which frustrate the application of EU law, in that they make it impossible for the national courts to satisfy their obligation to ensure compliance with the third sentence of Article 108(3) TFEU. 

43 It follows therefrom that both the State authorities and the recipients of State aid would be able to circumvent the prohibition laid down in the third sentence of Article 108(3) TFEU by obtaining, without relying on EU law on State aid, a declaratory judgment whose effect would enable them, definitively, to continue to implement the aid in question over a number of years. Thus, in a case such as that at issue in the main proceedings, a breach of EU law would recur ... without it being possible to remedy it.

44 Furthermore, such an interpretation of national law is likely to deprive of any useful effect the exclusive power of the Commission ... to assess, subject to review by the EU Courts, the compatibility of aid measures with the internal market. If the Commission, to which the Federal Republic of Germany has in the meantime notified the aid measure constituted by the contracts at issue, should conclude that it is incompatible with the internal market and order its recovery, execution of its decision must fail if a decision of the national court could be raised against it declaring the contracts forming that aid to be 'in force' (C-505/14, paras 38-44, emphasis added).

The CJEU concludes that a significant obstacle to the effective application of EU law and, in particular, a principle as fundamental as that of the control of State aid cannot be justified either by the principle of res judicata or by the principle of legal certainty (C-505/14, para 45). The final result leaves the open question of whether the initial analysis under the duty of consistent interpretation was at all necessary.

In my view, the CJEU tried to show deference towards the general principles of law of the national domestic orders of the Member States, while at the same time reaffirming the supremacy of the general principles of EU law. And in doing so, indicated to the Member States' courts that they should try to mediate any possible conflict by recourse to the duty of consistent interpretation, so as to 'domesticate' the requirement of effet utile of EU law. It will be interesting to see to what extent that leads to a reinterpretation of the German principle of res iudicata, which may well become 'progressive' all'Italiana. Who said that debates on general EU law were a thing of the past?

A network of papers on competition in public procurement: What a summer

If anyone has followed my SSRN account over the summer, they could not be blamed for thinking that I have been uploading quite a number of relatively similar papers on the interaction of competition and public procurement rules, and particularly the interpretation of Article 18(1) of Directive 2014/24. Given that this is something I explore in detail in Public Procurement and the EU Competition Rules, 2nd end (Oxford, Hart, 2015) 195-237 (generously made freely available by Hart Publishing here), the reader may wonder what else was there to say about this.

It is true that some of these papers touch upon connected issues and even have some overlapping sections. This could indeed lead readers to think that the papers are a simple iteration of the same ideas and, consequently, there is no point in reading them. This post explains how these papers interact and relate to each other--and it will hopefully clarify that I have not simply engaged in a massive exercise of self-plagiarism (or at least not willingly!). The papers address different specific issues or have different overall aims, which I hope makes them interesting to different scholars and practitioners for different reasons.

(1) The paper with a more general view is 'Competition Law and Public Procurement', which explores two of the areas in which antitrust prohibitions and public procurement law interact. This forms part of a larger project led by Dr Jonathan Galloway of the Newcastle Law School, which researches the way in which antitrust law (ie arts 101 and 102 TFEU) has developed through its interaction with other sets of economic law rules, both in the public and private law sphere. Thus, the paper provides an overview of the areas where the antitrust rules and EU public procurement law overlap, and zooms in to propose that the principle of competition in Art 18(1) of Dir 2014/24 may serve as a transmission belt to bring competition considerations and analysis to the public procurement sphere.

(2) With a similar general approach, I have updated 'Public Procurement and Competition: Some Challenges Arising from Recent Developments in EU Public Procurement Law' (originally drafted in 2013), to be included in Professor Chris Bovis' Research Handbook on European Public Procurement (Edward Elgar, forthcoming). This paper aims to map some of the challenges for a better integration of competition and public procurement rules that remain after the adoption of Dir 2014/24, and pays attention to issues related to eProcurement and the need of further professionalization of procurement. The paper points at research questions that may lead to further research, so it will hopefully be relevant to academics and postgraduate students looking for not so trodden paths to further our knowledge in this area of EU economic law.

(3) The most recent paper 'A Deformed Principle of Competition? – The Subjective Drafting of Article 18(1) of Directive 2014/24' provides a contextual analysis of the legislative process that led to the adoption of Dir 2014/24. Again, this paper forms part of a larger project led by Dr Grith Skovgaard Ølykke and myself that explores broader issues of the EU legislative process and the interaction of the EU Institutions involved, using the 2011-2014 EU public procurement reform as a case study. From this perspective, the paper focuses on the EU legislative process that led to the consolidation of the principle of competition in Art 18(1) of Dir 2014/24, as well as the modifications that its drafting suffered as a consequence of the negotiations between the Member States at the Council and the further amendment proposals by the European Parliament in preparation of the trialogue with the European Commission. This is, on its whole, a 'law and political science' paper--which is a methodological approach that we are trying to embrace as part of the project.

(4) Following this approach of assessing the interaction between law and policy, 'Truly Competitive Public Procurement as a Europe 2020 Lever: What Role for the Principle of Competition in Moderating Horizontal Policies?' tackles the implications of the principle of competition for the pursuit of horizontal policies as part of the broader Europe 2020 strategy. The paper takes the view that the principle of competition in Art 18(1) of Dir 2014/24 is the main tool in the post-2014 procurement toolkit and the moderating factor in the implementation of any horizontal (green, social, innovation) policies under the new rules — that is, that competition remains the main consideration in public procurement and that the pursuit any horizontal policies, including those aimed at delivering the Europe 2020 strategy, need to respect the requirements of undistorted competitive tendering. This is part of a broader discussion on the position and role of public procurement in the Europe 2020 strategy with Dr Richard Craven, Dr Sylvia de Mars and Dr Rike Kraemer at the forthcoming UACES conference.

(5) Finally, adopting a different perspective, 'Assessing Public Administration’s Intention in EU Economic Law: Chasing Ghosts or Dressing Windows?' looks at public procurement and State aid rules as two examples of areas of EU economic law subjected to interpretative and enforcement difficulties due to the introduction, sometimes veiled, of subjective elements in their main prohibitions. The paper explores the main thesis that such intentional elements need to be ‘objectified’, so that EU economic law can be enforced against the public administration to an adequate standard of legal certainty. Thus, the paper does not delve into the substantive implications of the principle of competition in Art 18(1) of Dir 2014/24, but on the technical aspects implied in its apparent requirement of assessing the intention of contracting authorities whose procurement activities are covered by the EU rules.

Overall, in my view, the papers offer quite a complementary set of perspectives on the general issue of the interaction between competition law and public procurement (1, 2), the way in which this interaction is fleshed out in the EU legislative process (3), the way in which diverging and conflicting policy goals can be balanced-out in a pro-competitive way (4) and the broader implications of the development of EU administrative law issues within these fields of EU economic law (5). Their common theme or common denominator is the permanent main focus on the principle of competition consolidated in Art 18(1) of Dir 2014/24. However, when taken as a whole, that is solely the conduit for the exploration of broader issues. Thus, I hope they will still be relevant for interested readers. From now on, I will focus on different issues. Enough of this topic, at least for the summer!

When the CJEU opens the umbrella, lawyers and economists get ready for a warm shower of damages claims (C-557/12)

In its Judgment in Kone, C-557/12, EU:C:2014:917, the Court of Justice of the European Union (CJEU) has followed the highly controversial proposal of AG Kokott (see my criticism here) and has bought into the theory of 'umbrella damages', hence determining that "Article 101 TFEU must be interpreted as meaning that it precludes the interpretation and application of domestic legislation enacted by a Member State which categorically excludes, for legal reasons, any civil liability of undertakings belonging to a cartel for loss resulting from the fact that an undertaking not party to the cartel, having regard to the practices of the cartel, set its prices higher than would otherwise have been expected under competitive conditions."

In my opinion, this Judgment must be strongly criticised and shows a very dangerous path of judicial activism that the CJEU is for some reason willing to engage with in the area of private law, but that it avoids in the area of public law and fundamental rights (see my remarks on the CJEU's total lack of will to effectively become EU's constitutional court here). Only on this asymmety of approach towards the development of EU rights in the public law / private law area (or, more bluntly, in the fundamental rights/economic rights divide) should give us all some food for thought about the role of the CJEU.
 
Further than the general criticism already spelled out against AG Kokott's Opinion, I think that the Judgment gives rise to even more specific arguments against the findings of the CJEU on the basis of the 'umbrella damages' theory of harm. I am lucky to have colleagues such as Dr Sebastian Peyer with whom to discuss these issues and, on this occassion, we clearly  coincide in our negative reading of the case. In this post, we put together our thoughts. Mine are slightly more general, so they will come first. Sebastian will then follow on with more specific and ellaborate points on the basis of his expertise in private enforcement of EU competition law.

My own criticism

From a general perspective of EU law and its effectiveness, the Kone Judgment really makes no sense and potentially impinges on the Member States' competences to regulate non-contractual liability and tort remedies [this point is common to previous criticisms against the EU's competence to regulate in the area of damages actions, as Francisco Marcos and myself stressed in “Towards a European Tort Law? Damages Actions for Breach of the EC Antitrust Rules: Harmonising Tort Law through the Back Door?” (2008) 16(3) European Review Private Law 469-488].

 

 

Quite simply, in my view, Kone has carried the application of the principle of supremacy and effectiveness of EU law too far and the contrast between the findings in Kone and its original application to the competition law damages field in Courage and Crehan [C-453/99 EU:C:2001:465, paras. 23 and ff] is simply abysmal. Courage 'just' made the point clear that damages actions should not be impossible and that they were governed by the general principles of equivalence and effectiveness of remedies (para. 29). This general mantra has been repeated over and over but, in its repetition, the effectiveness part has been gaining relevance and, at least in Kone, the CJEU has completely disregarded the principle of equivalence (despite mentioning it in para. 25).

 

Given the split of competences between the EU and the Member States in many areas of the law and, in particular, in many areas that govern the remedies available for breaches of EU (and domestic) rules, the principle of equivalence needs to be understood as a functional tool to provide effectiveness to EU rights without altering the Member States' competences. In that regard, it seems uncontroversial that, as even an undergraduate student of law can clearly express in an effective way: "The principle of equivalence ensures that EU rights receive the same protection as domestic ones" [David Murray, "EU law rights and national remedies: an uneasy partnership?" (2010) Diffusion 6(1)]. There is no reason to suggest that, in the absence of EU regulatory competences or specific EU remedies, EU rights should receive more intense protection than domestic ones.

 

However, the CJEU disregards this plain understanding of the general requirements of EU law and its supremacy and goes on to state that:

32 [...] it is, in principle, for the domestic legal system of each Member State to lay down the detailed rules governing the application of the concept of the ‘causal link’. However,  [...] national legislation must ensure that European Union competition law is fully effective (see, to that effect, VEBIC EU:C:2010:739, paragraph 63). Those rules must therefore specifically take into account the objective pursued by Article 101 TFEU, which aims to guarantee effective and undistorted competition in the internal market, and, accordingly, prices set on the basis of free competition. In those circumstances [...] national legislation must recognise the right of any individual to claim compensation for loss sustained.
33 The full effectiveness of Article 101 TFEU would be put at risk if the right of any individual to claim compensation for harm suffered were subjected by national law, categorically and regardless of the particular circumstances of the case, to the existence of a direct causal link while excluding that right because the individual concerned had no contractual links with a member of the cartel, but with an undertaking not party thereto, whose pricing policy, however, is a result of the cartel that contributed to the distortion of price formation mechanisms governing competitive markets.

In my view, this is truly far away from a pondered and acceptable balancing of the competing demands of the principles of equivalence and effectiveness and amounts to a suppression of the equivalence element that is essential to the test for compliance by Member States with their duty to ensure the effet utile of EU law under Article 4(3) TFEU and the existing case law.

Moreover, it prevents Member States from adopting clear and streamlined rules that avoid the need to engage in very complicated and costly case by case assessments of every claim, regardless of any indication of remoteness or weakness of basic causality links. Hence, the Kone Judgment should clearly be rejected and its implications limited (ie undone) by the CJEU itself at the closest opportunity.

What Sebastian has to say
The Court's judgement does not only show some dangerous judicial activism, as my colleague and host Dr Albert Sanchez Graells has pointed out, it also raises more questions than it answers.

What do we talk about when we talk about umbrella pricing? In a standard cartel case the damages claimant, typically a direct customer of the cartel, has to show that the defendant overcharged him. For umbrella pricing the situation is different. The claimant has not purchased from the cartelist but from another firm in the affected market. Consequently, the claimant should demonstrate that the market price was inflated due to the cartel and that he suffered harm due to the higher market price. In European jurisdictions this is basically a question of causation and a question of the proof that is required by the courts whereas US courts deal with these issues under ‘antitrust injury’. In Kone, the Court has stated that national courts cannot categorically reject a causal link between the cartel and inflated market prices charged by non-cartelists (para. 34):

“Consequently, the victim of umbrella pricing may obtain compensation for the loss caused by the members of a cartel […] where it is established that the cartel at issue was, in the circumstances of the case and, in particular, the specific aspects of the relevant market, liable to have the effect of umbrella pricing being applied by third parties acting independently, and that those circumstances and specific aspects could not be ignored by the members of that cartel.”

The Court addresses the two issues related to umbrella pricing (Was there an effect on the market? Did the market effect cause damage to the claimant?) in one sentence and merges them into one “be liable” test. It is left to the Member States to establish the rules and standards for proving these effects. The Court also seems to introduce some element of knowledge on part of the cartelist ("could not be ignored"). This may turn out to be impossible to prove.

 

Sadly, the ruling fits into the line of recent cases that appear to be claimant-friendly but may not contribute much to the effectiveness of enforcement. On the face of it, cases such as Pfleiderer [C-360/09, EU:C:2011:389] or Donau Chemie [C-536/11, EU:C:2013:366] have opened the gates to private damages claims, allegedly improving the effectiveness of competition law enforcement through access to documents. But I think this does not hold true. In those rulings the court replaced categorical rules with a case by case approach. So far, this has not really helped claimants but forced courts to justify why they have decided to, for example, deny access to leniency material (Pfleiderer). With regards to umbrella pricing, the CJEU has followed this approach replacing a 'fixed rule' with a case by case approach. We shall see if the claimants can get anything out of this apart from more complicated litigation.

 

Overall, the CJEU’s decision is extremely short for a ruling that could turn out to be expensive for both claimants and defendants. The cost associated with proving and calculating umbrella pricing could be prohibitive and adds to the generally high litigation costs of follow-on damages actions. I would expect most umbrella claimants to fail at the quantification stage, even if they have actually managed to master the causation hurdles.

The implications of this judgement for national causation rules are also worrying. Member States are supposedly able to govern causation and remoteness of damages under the procedural autonomy principle the Court stressed in the Kone ruling but also in Courage, Manfredi, Pfleiderer and Donau Chemie. However, in AG Kokott (see her opinion in Kone) and the Court disregard earlier statements that it is for the domestic legal system to regulate a causal relationship. So, what does this mean for the domestic legal systems?

 

Regarding the UK, I could imagine that the autonomous decision of a third party not to undercut the cartel is an intervening event breaking the chain of causation. It could also become a struggle to show that damages were foreseeable because they depend on the buyer's decision to contract with a non-cartelist and on the non-cartelist’s decision to charge an inflated price in the shadow of the cartel. However, the TheWagon Mound (No1) holds that only the kind of damage has to be foreseeable, not the extent of it. The CJEU’s decision in Kone has certainly created many more questions. Now, the ball is in the national courts.

CJEU: vertical effect of Directives goes both ways (C-425/12)

The Judgment of the CJEU of 12 December 2013 in case C-425/12 Portgás may appear to be of interest only for public procurement aficionados (and, even then, only for hardcore ones), as it deals with the potential applicability of the old 1993 utilities procurement Directive (no longer current) to a company entrusted with a gas distribution concession in Portugal. Hardly a topic bound to spur heated debates. Hence, it seems a case doomed to receive very little attention amongst EU lawyers...

 

However, it contains one of the very few potential (r)evolutions in the theory of Directives' direct effect since Mangold and Kücükdeveci by holding that their vertical direct effect goes both ways (i.e. both up and down). In my view, Portgás should become the new Foster and claim a main spot in general EU law (text)books.

 

I think that the Portgás Judgment indeed develops the existing law on Directives' vertical effect. Implicitly, that theory was always concerned with upwards vertical effect, in the sense of allowing particulars to claim EU law protection against the infringing Member State. The theory has clearly been conceptualised on the basis of an (implicit) bottom up claim.

 

However, it is not at all clear whether a downwards application of the theory is at all possible. In general terms, however, the canon (as an extension of the no-horizontal direct effect declared in Marshall) would dictate that such a vertical direct effect cannot go down because the infringing Member State cannot rely on the (non-transposed or deffectively transposed) Directive to affect the legal position of particulars (just as one particular cannot do it against another one).

 

The Foster line of extension of the "standard" upwards vertical direct effect of Directives started to tackle what we may now call 'mezzanine' situations, where a particular did not want to claim protection against the State itself, but against one of its 'emanations' (as a way to circumvent the harshness of the no-horizontal direct effect dogma). In that case, the CJEU was clear to stress that the upwards dimension of Directives' direct effect reaches such a mezzanine situation and declared, as is well known, that particulars can rely on EU law protection under certain circumstances.

 

In Portgás the situation is the opposite. The CJEU was asked to determine whether in a comparable 'mezzanine' situation, the State could claim downwards direct effect of a non-transposed Directive against one of its Foster-emanations. The first bet may be that the principle of legitimate expectations may prevent such an extension of the doctrine. However, such a position has now been rejected by the CJEU.

 

In the passages that deserve more attention in the Portgás Judgment, the CJEU analyses the possibility for the Portuguese government to claim financial recovery of amounts paid to Portgás to finance the acquisition of equipment (gas meters) due to the fact that the undertaking did not tender the contract in accordance with the requirements of the 1993 utilities procurement Directive. However, at the time of the purchase of the equipment, Portugal had not implemented the Directive. Consequently, Portgás raised the defence that Portugal cannot require compliance with a set of rules it had not itself transposed. The CJEU, however, takes a different approach based on the effet utile of EU law and argues that:

33 [...] although the Court has held that unconditional and sufficiently precise provisions of a directive may be relied on by individuals against a body which has been given responsibility, under the control of the State, for a public-interest service and which has, for that purpose, special powers (see, to that effect, Foster and Others, paragraphs 18 and 20, and Dominguez, paragraphs 38 and 39 and the case-law cited), the case in the main proceedings has arisen in a context different from the context of that case-law.

34 In the context of the present case, it should be recalled that, according to the case-law of the Court, the obligation on a Member State to take all the measures necessary to achieve the result prescribed by a directive is a binding obligation imposed by the third paragraph of Article 288 TFEU and by the directive itself. That duty to take all appropriate measures, whether general or particular, is binding on all the authorities of the Member States (see Case C‑129/96 Inter-Environnement Wallonie [1997] ECR I‑7411, paragraph 40 and the case-law cited) as well as on bodies which, under the control of those authorities, have been given responsibility for a public-interest service and which have, for that purpose, special powers. It follows that the authorities of the Member States must be in a position to ensure that such bodies comply with the provisions of Directive 93/38.

35 It would be contradictory to rule that State authorities and bodies satisfying the conditions set out in paragraph 24 of the present judgment [Foster conditions] are required to apply Directive 93/38, while denying those authorities the possibility to ensure compliance, if necessary before national courts, with the provisions of that directive by a body satisfying those conditions when that body must itself also comply with Directive 93/38.

36 Furthermore, the Member States would be able to take advantage of their own failure to comply with European Union law in failing correctly to transpose a directive into national law if compliance with the provisions of Directive 93/38 by such bodies could not be ensured on the initiative of a State authority.

37 Lastly, that approach would make it possible for a private competitor to rely on the provisions of Directive 93/38 against a contracting entity which satisfies the criteria set out in paragraph 24 of the present judgment [Foster conditions], whereas State authorities could not rely on the obligations flowing from that directive against such an entity. Consequently, whether or not such a contracting entity would be required to comply with the provisions of Directive 93/38 would depend on the nature of the persons or bodies relying on Directive 93/38. In those circumstances, Directive 93/38 would no longer be applied in a uniform manner in the domestic legal system of the Member State concerned.

38 It follows that a private undertaking, which has been given responsibility, pursuant to a measure adopted by the State, for providing, under the control of the State, a public-interest service and which has, for that purpose, special powers going beyond those which result from the normal rules applicable in relations between individuals, is obliged to comply with the provisions of Directive 93/38 and the authorities of a Member State may therefore rely on those provisions against it (C-425/12 at paras 33-38, emphasis added).

I think that it is plain to see that Portgás is somehow the mirror image of Foster. Its practical implications may seem small in that the number of Foster-emanations that Member States hold is probably relatively small. However, in the area of public procurement and, more generally, of EU economic law, it is not hard to imagine a relatively important number of potential 'Portgás' entities that can see their rights and (financial) interests compromised as a result of the 'sandwich' situation that this latest CJEU Judgment creates. And this may be a situation that triggers litigation on the basis of the protection of legitimate expectations, rights to property or other fundamental rights by those companies (which stresses the relevance of rethinking the current trends of granting of 'corporate human rights'--see some discussion here).

 

What may be more controversial is to claim, as I would, that this is the last frontier before the full recognition of Directives' direct effect. All in all, as the law currently stands, there is a very limited field where Directives are not directly effective (after their period of transposition) and that, by itself, may justify a simplification (repeal?) of the no-horizontal direct effect dogma. It remains to be seen if the CJEU will ever be willing to cross that bridge.

Is Costa v Enel forgotten? CJEU trips over supremacy and direct effect in case concerning Art 41(2)(c) CFREU (C-313/12)

In its Judgment of 7 Movember in case C-313/12 Romeo, the Court of Justice of the EU issued an important ruling concerned with the extension of the obligation to state reasons derived from Article 41(2)(c) of the Charter of Fundamental Rights of the EU in purely domestic situations.

 

In the case at hand, the CJEU was especifically presented with a query regarding the compatibility with Article 41(2)(c) CFREU (and, more generally, with the case law on the duty to state reasons) of an Italian rule whereby faulty administrative decisions would not be quashed if the authorities supplemented their statement of reasons in subsequent court proceedings.

 

In my view, the reasons offered by the CJEU to decline jurisdiction to respond to the questions referred by the Italian court show a poor understanding of (or a lack of willingness to give effect to) the changed nature of the Charter after the entry into force of the Treaty of Lisbon. As very clearly stated, 'the EU Charter of Fundamental Rights is now legally binding, having the same status as primary EU law' [for discussion, see S Douglas-Scott, 'The European Union and Human Rights after the Treaty of Lisbon' (2011) Human Rights Law Review 11(4): 645-682].

 

In that regard, keeping in mind that Article 6(1) of the Treaty on European Union now very clearly indicates that 'The Union recognises the rights, freedoms and principles set out in the Charter of Fundamental Rights of the European Union of  [...] which shall have the same legal value as the Treaties' (emphasis added), it is very hard to understand how the CJEU can have unblinkingly held that:

it cannot be concluded that [...] Article 41(2)(c) of the Charter or indeed other rules of European Union law concerning the obligation to state reasons for acts have been made directly and unconditionally applicable (sic), as such, by [the relevant Italian rules], so that internal situations and situations relating to European Union law are treated in the same way. Therefore it must be held that, in the present case, there is no clear European Union interest in a uniform interpretation of provisions or concepts taken from European Union law, irrespective of the circumstances in which those provisions or concepts are to apply (C-313/12 at para 37, emphasis added).

I cannot get my head around the fact that, as no one would doubt, the CJEU has kept for time immemorial the position that the Treaties (now including the Charter of Fundamental Rights  for these purposes) are supreme and directly effective without any need for internal measures that receive them or recognise that they are directly and unconditionally applicable in all EU Member States--and, yet, it shows a stark resistance to apply these principles to the Charter (see also C-482/10 Cicala).

 

As very clearly summarised in Costa v Enel,

A Member State's obligation under the [Treaty], which is neither subject to any conditions nor, as regards its execution or effect, to the adoption of any measure either by the States or by the Commission, is legally complete and consequently capable of producing direct effects on the relations between Member States and individuals. Such an obligation becomes an integral part of the legal system of the Member States, and thus forms part of their own law, and directly concerns their nationals in whose favour it has created individual rights which national courts must protect (6/64, summary, point 7).

This, together with Art 6(1) TEU surely determines the supremacy and direct effect of the Charter--as also supported by an a contrario interpretation of Protocol No 30 on the Application of the Charter of Fundamental Rights of the European Union to Poland and the United Kingdom (what would be the purpose of the Protocol if not precisely to exclude such supremacy and direct effect regarding the UK and Poland?). Then, if the CJEU has not forgotten Costa v Enel, the only relevant question is: how are Judgments like Cicala and Romeo possible? Why is the CJEU (suddenly) so averse to (continuying to) act as constitutional court at EU level?

Neutrality of ownership is not unconditional: CJEU sets red lines for privatisation prohibitions (C-105/12 to C-107/12)

In its Judgment of 22 October 2013 in Joined Cases C-105/12 to C-107/12 Essent and Others, the Court of Justice of the EU has explored the boundaries of Article 345 TFEU--which has, so far, remained (and still is) an obscure provision of the Treaties [see B Akkermans & E Ramaekers, 'Article 345 TFEU (ex Article 295 EC), Its Meanings and Interpretations' (2010) European Law Journal 16(3): 292-314].

 

In Essent, the CJEU was concerned with the compatibility with EU law of an absolute privatisation ban. More specifically, it had to analyse a Dutch rule whereby shares in companies that operate distribution networks of electricity and gas can be transferred only within the circle of public authorities, ie cannot be privatised (for a comment, see here).

 

Advocate General Jaaskinen had considered the absolute ban on privatisation compatible with both Article 345 TFEU and Article 63 TFEU on free movement of capital (see his Opinion, not available in English, here). The CJEU has reached the same conclusions.

 

In my view, one of the most interesting legal points of the Essent Judgment is that Article 345 TFEU does not write Member States a blank check when they regulate their property systems or, put othewise, that the principle of neutrality of ownership enshrined in that provision is not unconditional.

 

Hence, the reasoning of the CJEU should be seen as an exercise to draw some red lines that Member States cannot overstep when designing their property systems and that, fundamentally, boil down to full compliance with the rules on free movement of capital.

29 Article 345 TFEU is an expression of the principle of the neutrality of the Treaties in relation to the rules in Member States governing the system of property ownership.
30 In that regard, it is apparent from the Court’s case-law that the Treaties do not preclude, as a general rule, either the nationalisation of undertakings (see, to that effect, Case 6/64 Costa [1964] ECR 585, at 598) or their privatisation (see, to that effect, Case C‑244/11 Commission v Greece [2012] ECR I‑0000, paragraph 17).
31 It follows that Member States may legitimately pursue an objective of establishing or maintaining a body of rules relating to the public ownership of certain undertakings.
32 […] the prohibition of privatisation, within the meaning of the national legislation at issue in the main proceedings, allows, in essence, the transfer of shares held in a distribution system operator only to the authorities and to legal persons owned, directly or indirectly, by those authorities, since any transfer which has the result that the shares become the property of persons other than such authorities and legal persons is prohibited.
33 It follows that the prohibition of privatisation precludes ownership by any private individual of shares in an electricity or gas distribution system operator active in the Netherlands. Its objective is therefore to maintain a body of rules relating to public ownership in respect of those operators.
34 Such a prohibition falls within the scope of Article 345 TFEU. […]36 However, Article 345 TFEU does not mean that rules governing the system of property ownership current in the Member States are not subject to the fundamental rules of the FEU Treaty, which rules include, inter alia, the prohibition of discrimination, freedom of establishment and the free movement of capital (see, to that effect, Case 182/83 Fearon [1984] ECR 3677, paragraph 7; Case C‑302/97 Konle [1999] ECR I‑3099, paragraph 38; Case C‑452/01 Ospelt and Schlössle Weissenberg [2003] ECR I‑9743, paragraph 24; Case C‑171/08 Commission v Portugal [2010] ECR I‑6817, paragraph 64; Case C‑271/09 Commission v Poland [2011] ECR I‑0000, paragraph 44; and Commission v Greece, paragraph 16).
37 Consequently, the fact that the Kingdom of the Netherlands has established, in the sector of electricity or gas distribution system operators active in its territory, a body of rules relating to public ownership covered by Article 345 TFEU does not mean that that Member State is free to disregard, in that sector, the rules relating to the free movement of capital (see, by analogy, Commission v Poland, paragraph 44 and the case‑law cited).
38 Accordingly, the prohibition of privatisation falls within the scope of Article 63 TFEU and must be examined in the light of that article […] (C-105/12 ti C-107/12 at paras 29-38, emphasis added).

This finding of the CJEU effectively subjects the principle of neutrality of ownership to a proportionality test and, generally, seems to restrict its scope--actually, it seems to me that the Essent Judgment makes Article 345 TFEU less than neutral in that it imposes a justification burden on the ownership systems designed at Member State level.

This may be an opening door for a stricter control of ownership rules in the Member States and, once more, for an implicit redistribution of competences between the EU and the Member States [see the interesting discussion by F Losada Fraga et al, 'Property and European Integration: Dimensions of Article 345 TFEU' (2012) Helsinki Legal Studies Research Paper No. 17]. However, more clarification will be necessary, particularly in cases where the public interest justifications for restrictions of (private) ownership are less clear cut than in the Essent case and that, consequently, will be likely to result in an effective restriction of domestic rules on (public) ownership.

European Procurement Law Series

Allow me some marketing of the European Procurement Law Series that a group of colleagues and I are developing. The latest issue (fifth) on the Award of Contracts in EU Procurements is in print and will be available shortly. In my opinion, it provides an interesting overview of practical issues concerned with the award of public contracts, as the abstract stresses:

The award phase is of crucial importance for the outcome of the competition for the contract and it is therefore not surprising that it has been considered in thousands of public procurement disputes in the Member States of the EU.
The subject of this book has for obvious reasons already received scholarly attention in the many books and articles on EU public procurement law. However, the existing literature has seldom been based on a comparative approach covering a broad range of Member States of the European Union with diversified national approaches to EU public procurement law. The present publication is original in this sense and consequently provides the reader with an insight that cannot be found elsewhere.

Rejection of Abnormally Low and Non-Compliant Tenders in EU Public Procurement: A Comparative View on Selected Jurisdictions

In this new paper, I attempt a concise comparison of the rules applicable to the rejection of abnormally low and non-compliant tenders in a number of EU jurisdictions (namely, Denmark, France, Germany, Italy, Poland, Romania, Spain and the United Kingdom). 

In order to set the common ground for the analysis of such domestic rules, which are solely applicable to non-negotiated procedures, the paper first offers a description of the rules in the EU public procurement Directives and the case law of the European Courts (ie GC and CJEU), and then proceeds to compare them against this benchmark and amongst themselves. Where possible, the paper highlights innovative or different solutions, as well as potential deviations from EU law.

• Sánchez Graells, Albert, Rejection of Abnormally Low and Non-Compliant Tenders in EU Public Procurement: A Comparative View on Selected Jurisdictions (April 11, 2013). European Procurement Law Series, Vol 6 (forth). http://ssrn.com/abstract=224859

CJEU strengthens #EULaw on #food #information: more #disclosure in the #consumers' interest

In the aftermath of the horse meat scandal, in its Judgment of 11 April 2013 in case Karl Berger v Freistaat Bayern, the European Court of Justice has clearly pushed for an expansive interpretation of EU food law that gives public authorities the appropriate tools to protect consumers' interests.

In Berger, the CJEU has clearly supported the fact that public authorities release information and food warnings concerning products that, despite not creating a health risk to humans, are unfit for human consumption. 

In the case, the manufacturer of nauseating food products (game meat processed in less than hygienic conditions) intended to claim damages for the loss of business derived from one such food warning. The manufacturer sued the relevant German food authority on the basis that, there not being a risk for human health, the authority exceeded its powers by disclosing that the products were not fit for human consumption.

In what should be welcome, the CJEU has interpreted that EU food law sets minimum mandatory requirements, but that public authorities can exceed them as long as they act proportionately and in the interest of consumers. In the CJEU's view, indeed:

35. In so far as a foodstuff is unacceptable for human consumption and accordingly unfit therefor, it does not fulfill the food safety requirements under Article 14(5) of Regulation No 178/2002, and is, in any event, such as to prejudice the interests of consumers, the protection of whom, as stated in Article 5 of that regulation, is one of the objectives of food law.

36. It follows from the above that, where food, though not injurious to human health, does not comply with the aforementioned food safety requirements because it is unfit for human consumption, national authorities may, as provided under the second subparagraph of Article 17(2) of Regulation No 178/2002, inform the public thereof in accordance with the requirements of Article 7 of Regulation No 882/2004 (emphasis added).

In my view, the Berger Judgment must be welcome and consumers should push for Member States' food agencies to make the most of their informative powers. Granted, they should only act on the basis of strong procedures and reliable evidence but, once they find products that are not fit for human consumption, they should promptly disclose this information. When the interests of the manufacturer and those of consumers clash, the CJEU seems to clearly side with consumers and, as a matter of general policy, this seems appropriate. This will create further incentives across the food supply chain to improve quality controls and, in the end, will result in safer food markets in the EU. So, in short, the expansive interpretation adopted by the CJEU in Berger is a most welcome development of EU food law.

Avoiding gold plating in the transposition of #EUlaw: A distinctive UK approach?

The Department for Business, Innovation and Skills has recently published its March 2013 'Gold-plating review' as a Report on the Operation of the Transposition Principles in the Government’s Guiding Principles for EU Legislation. The Report covers 88 proposals to implement EU measures over the eighteen-month period, from 1 July 2011 to 31 December 2012.

In my view, the Report clearly shows resistance to the prompt incorporation of EU Law into the UK legal system, as clearly indicated by the fact that "in 95% of cases over the eighteen-month period Departments have implemented on or after the transposition deadline, with only four examples where Departments sought agreement to implement measures early" (emphasis added).

Most remarkably, the UK Government is not shy to acknowledge the infringement of EU Law that belated transposition implies. And this should be worrying, not least because it can trigger the initiation of infringement procedures by the European Commission.

In my view, it is legitimate for Member States to take advantage of the transposition periods as they consider in their best interest. But it cannot be in the (national) public interest to breach EU Law by belatedly transposing Directives into the UK legal system. Even taking into consideration the interest of the UK in eventually renegotiating its terms of membership of the EU, only an exquisite compliance strategy will build a solid negotiating platform.

Therefore, contrary to the generally positive conclusion of the Report, I think that the UK Government should implement an effective strategy to make sure that no Directive gets transposed after its transposition deadline. That is a clear requirement for the proper transposition of EU Law. And it should not be overseen.

An interesting assessment of the enforcement of EU procurement rules: Pelkmans & Correia De Brito (2012) Enforcement in the EU Single Market

In their forthcoming book Enforcement in the EU Single Market (http://ssrn.com/abstract=2160236) Jacques Pelkmans and Anabela Correia De Brito provide an interesting overview of the laws and regulations of the single market of the European Union, the current EU enforcement landscape and its functioning, with a particular focus on compliance with public procurement rules. This is a very topical and relevant field of inquiry and their book sheds some interesting insights into the actual level of compliance with EU public procurement rules and the potential gains to be obtained if the current modernization process is correctly driven towards simplifying and promoting compliance.

As the authors rightly indicate,

Among all types of EU single market legislation, the problems with public procurement are undoubtedly the harder ones. The potential market is huge: there is still an enormous potential of cross-border competition for contracts and the economic welfare gains can be very substantial. The European Commission’s proposals of December 2011 should be of some help. There should be more harmonization, including in the national review and remedies systems.

In their book, Pelkmans and Correia De Brito offer a short but useful typology of enforcement barriers that stress some of the main areas of difficulty, such as administrative barriers [which include include "the incorrect application of EU directives, conformity assessment barriers and enforcement issues in (intra-EU) public procurement, especially non-publication (when above the value thresholds in EU law)] or the maybe more implicit restrictions derived from gold plating and an improper application of the rules controlling technical requirements in public procurement procedures.

Further than that qualitative analysis of the enforcement landscape, some of the data provided by Pelkmans and Correia De Brito is also worth highlighting. They provide a statistic of the cases handled by the Commission concerning the enforcement of public procurement rules (p. 89, please note that the most recent year is to the left, which makes the reading of the table slightly counter intuitive): 

As the authors derive from those numbers:

[...] the number of public procurement infringement files handled by the European Commission each year has progressively decreased in the period 2007-10 (155 in 2010, 258 in 2009, 333 in 2008 and 344 in 2007). Most of the files opened by the Commission were closed during the pre-administrative/administrative phase of the infringement procedure (76, 127, 163 and 142, respectively). However, in comparative terms, the number of cases referred to the Court of Justice of the European Union increased slightly in 2010 (7.5% of the cases in 2010 had been reported to the CJEU, compared with 2.3% of the cases in 2009, 2.4% in 2008 and 3.5% in 2007).

Even if the number of infringement procedures opened by the Commission in the reported period had decreased in relation to previous years, the case load of public procurement infringement complaints still remains high and indicates that compliance levels should be improved in a number of member states.

In my opinion, the analysis of the data also offers other  interesting hints, since it shows that there seems to be a significant amount of backlog piling up in the Commission's docket (ie the number of cases closed is less than 50% of those open for any year in the 2007-10 period) and that only a small fraction of those cases are referred to the CJEU (which means that political negotiation remains the paramount enforcement tool in the public procurement field).

I also find it interesting to compare the relatively low number of public procurement cases based on Article 258 TFEU and the increasing number of Judgments of the CJEU and the GC in the field of public procurement. A quick search for the words "public procurement" with the case-law search engine of the curia webpage retrieves over 730 documents, most of which were produced after the adoption of the current 2004 Directives. Such a contrast in numbers indicates that public procurement enforcement is running trough two very different roads when one compares its enforcement based on the "law in the books" (Commission enforcement) and the "law in action" (references for preliminary rulings and challenges to procurement decisions of the European Institutions). This seems, then, a worthy area were to focus future research efforts.

In their conclusions, Pelkmans and Correia De Brito find that the source of the massive litigation in public procurement is basically the heterogeneity of the rules. They submit that:

There are still numerous ‘barriers’, real and perceived, in the internal public procurement market. Member states have (too) much regulatory discretion because the procurement directives are ‘coordination’ directives, with insufficient harmonization. The ‘regulatory heterogeneity’ in the area is far too costly for the businesses interested in cross-border or even EU-wide operation. More harmonization and/or disciplines of national ‘special or extra’ rules and requirements should urgently be pursued. Also, the national review and remedies systems are vastly different in terms of rules, procedures, ease-of-access and effectiveness. Such complications go squarely against the justified desire of business to have prior confidence in cross-border tenders. Quick access to national reviews of public procurement is an asset, but its utility is dramatically diminished by the overly fragmented arrangements that confuse business and undermine a level playing field. Harmonization here is tough given the incorporation in national legal systems, but EU-wide performance criteria might be introduced to enhance confidence for cross-border entrepreneurs (pp. 130-131).

This may be a call for a shift from having public procurement Directives to the adoption of proper public procurement Regulations (although many scholars, such as Arrowsmith or Treumer, have already indicated that the EU public procurement directives just fall shy from being disguised regulations due to their high degree of prescriptiveness). 

Be it as it may, the findings of the authors may be worth taking into consideration in the last steps of the modernization process of EU public procurement rules, which still seems to be scheduled for completion before Summer of 2013. Having enforcement considerations in the back of the policymakers' heads when finalizing the drafting of the new rules seems definitely desirable.