ECJ extends the Manova principles to the submission of samples & clarifies the scope of Remedies Directive in a Utilities Procurement setting (C-131/16)

In its Judgment of 11 May 2017 in Archus and Gama, C-131/16, EU:C:2017:358, the European Court of Justice (ECJ) issued two sets of clarifications concerning the rules applicable to utilities procurement, which are however of general relevance, due to the identity of the relevant provisions under the general and the utilities procurement rules.

First, the ECJ explicitly extended the Manova and Slovensko line of case law to utilities procurement and in relation to the submission of samples, thus trying to clarify the boundaries of the possibility for contracting entities to request  and/or accept clarifications or additional documentation (and samples) from tenderers while still complying with the principles of equal treatment, non-discrimination and the obligation of transparency. This first part of the Archus and Gama Judgment will thus be relevant to the interpretation and application of Art 76(4) of Directive 2014/25/EU (which is identical to Art 56(3) of Directive 2014/24/EU). 

Second, the ECJ also provided clarification of the rules on standing to challenge procurement decisions under Art 1(3) of the Utilities Remedies Directive (which is identical to Art 1(3) of the general procurement Remedies Directive), and clarified that having or having had an interest in the award of the contract extends to situations where the remedy sought by the challenger cannot result in the award of such contract, but is likely to concern the initiation of a new award procedure for the award of a (different) contract with the same subject matter.

Extension of Manova to the submission of samples

In the case at hand, tenderers were required to submit samples of micro-filmed material together with their tenders. The "quality of the microfilm sample was to be assessed according to the ‘satisfies/does not satisfy’ rule, it being stipulated that if the sample was not satisfactory the offer was to be rejected" (para 14). After submission of their tender and during the evaluation phase, joint tenderers Archus and Gama sent the contracting authority a request for a correction of their tender, arguing that "there had been an inadvertent mistake [... and] seeking to substitute a new microfilm sample for that annexed to their tender, which did not conform to the tender specifications" (para 17). The contracting authority accepted the substitution of the microfilm but requested further clarification from the tenderers because it considered that "they had not provided information on the method for microfilming the sample and the [relevant] technical parameters" (para 18). The contracting authority eventually rejected the tender as non-compliant.

In a rather convoluted drafting influenced by the question referred by the domestic court, the ECJ established that the legal issue arising from these circumstances required it to determine "whether the principle of equal treatment ... must be interpreted as precluding ... a contracting authority from inviting tenderers to provide the required declarations or documents which were not supplied by them within the prescribed period for the submission of tenders or to correct those declarations or documents in case of errors, without that contracting authority also being required to point out to those tenderers that they are prohibited from altering the content of the tenders submitted" (para 24). However, there are two factual elements that seems missing here: first, the fact that the initiative for the correction initiated from the tenderers; and, second, the fact that the correction concerned a sample rather than a declaration or document, and therefore it was not information-based. Disappointingly, none of these important details feature with much prominence in the ECJ's analysis (despite para 35 referring to the fact that "it was [the] tenderers who sent the contracting authority a request for their tender to be corrected"). 

Indeed, in this part of the Judgment (paras 29-33), the ECJ provides a summary of the Manova and Slovensko line of case law and, in simplified terms, reiterates that "the principle of equal treatment does not preclude the correction or amplification of details of a tender, where it is clear that they require clarification or where it is a question of the correction of obvious clerical errors, subject, however, to the fulfilment of certain requirements" (para 29, emphasis added), such as:

• a request for clarification of a tender cannot be made until after the contracting authority has looked at all the tenders and must, as a general rule, be sent in an equivalent manner to all undertakings which are in the same situation and must relate to all sections of the tender which require clarification (para 30)
• that request may not lead to the submission by a tenderer of what would appear in reality to be a new tender (para 31)
• as a general rule, when exercising its discretion as regards the right to ask a tenderer to clarify its tender, the contracting authority must treat tenderers equally and fairly, in such a way that a request for clarification does not appear unduly to have favoured or disadvantaged the tenderer or tenderers to which the request was addressed, once the procedure for selection of tenders has been completed and in the light of its outcome (para 32)

The ECJ also reiterated that "a request for clarification cannot, however, make up for the lack of a document or information whose production was required by the contract documents, the contracting authority being required to comply strictly with the criteria which it has itself laid down" (para 33, emphasis added). 

When trying to apply these general principles to the situation at hand, the ECJ established that "a request sent by the contracting authority to a tenderer to supply the declarations and documents required cannot, in principle, have any other aim than the clarification of the tender or the correction of an obvious error vitiating the tender. It cannot, therefore, permit a tenderer generally to supply declarations and documents which were required to be sent in accordance with the tender specification and which were not sent within the time limit for tenders to be submitted. Nor can it ... result in the presentation by a tenderer of documents containing corrections where in reality they constitute a new tender" (para 36); ultimately leaving it to the "referring court to determine whether ... the substitution made by Archus and Gama remained within the limits of the correction of an obvious error vitiating its tender" (para 38, emphasis added).

I find this reasoning of limited assistance in assessing the legal issue at hand. It would seem to me that the fact that the tenderers unilaterally sought to modify their tender in relation with a sample of the output of the services they were offering should have been given more weight (as this did not result from the observation of an obvious shortcoming or mistake by the contracting authority), and the difficulties in establishing objectively what is obviously wrong with a sample probably should have been enough relevance to provide a more conclusive answer against the acceptability of the substitution of samples.

From that perspective, confronted with a defective sample, the contracting authority could simply observe a deviation from the tender requirements, but it could hardly establish whether the defect resulted from an obvious mistake (ie whether the tenderer mistakenly submitted the wrong sample, as they claimed), or establish a way of clarifying the reasons for the defectiveness of the sample without allowing for the submission of a sample equivalent to the submission of a different tender. Differently from documents and declarations, or from the inclusion of insufficient details or mistakes in an offer, a sample is meant to evidence the product to be supplied or to result from the provision of the services. It is difficult to imagine circumstances under which a contracting authority could meet the strictures of the Manova-Slovensko case law while prompting the tenderer to submit an alternative sample. Moreover, under the rules applicable to the tender, it seems clear that a defective sample should trigger rejection of the tender, without any further analysis, which the ECJ does not seem to give much relevance to either.

Overall, I think that there is enough to justify the rejection of the possibility to substitute samples (in particular at the initiative of the tenderers) within the confines of the Manova-Slovensko test. However, I find this part of the Archus and Gama Judgment slightly confusing due to its open ended wording and, more importantly, to the practical difficulties in applying a test originally meant to correct missing or obviously erroneous information in documents to issues concerning the manifestation of technical aspects in a sample.

On this occasion, I tend to think that the ECJ has possibly pushed too far in trying to create procedural flexibility. While the absence of a sample could have allowed for the contracting authority to request the submission of one (because the problem with the tender would have been obvious), an attempt by the tenderers to substitute a previously submitted sample raises a whole host of other issues. In cases such as this, it may be preferable to have a clear cut rule against the possibility to substitute the sample. Moreover, given that the tender documents had explicitly indicated that rejection of the sample would also imply the rejection of the offer, it is difficult to understand why the ECJ has deviated from its previous approach to imposing compliance with the specific rules created in the tender documentation by the contracting authority itself (not that I find it always or generally convincing (see eg here), but a deviation from that approach seems to create inconsistency). Thus, I do not think this part of the Archus and Gama Judgment deserves a positive assessment.

Clarification of the scope of active standing under the remedies directive

In relation to a rather distinct aspect of the same case, the ECJ was also asked to clarify "whether Article 1(3) of [the Utilities Remedies Directive] must be interpreted as meaning that the concept of ‘a particular contract’ ... refers to a specific public procurement procedure or the actual subject matter of the contract which is to be awarded following a public procurement procedure, in a situation where only two tenders have been submitted and where the tenderer whose tender has been rejected may be regarded as having an interest in seeking the rejection of the tender of the other tenderer and, as a result, the initiation of a new public procurement procedure" (para 47).

Maybe in simpler words, the question concerned whether the EU rules grant legal standing to challenge a procurement decision to disappointed tenderers that are found to be properly excluded and, rather than seeking a remedy concerning the award of the contract as part of the procedure where the dispute arose (which would not be possible), may rather be interested in the cancellation of that procedure and the start of a fresh tender. In the end, the clarification concerned the tenability under EU law of a position that interpreted that "an economic operator who has submitted a tender in a public procurement procedure does not, where his tender is rejected, have an interest in bringing proceedings against the decision awarding the public contract" (para 48).

The answer provided by the ECJ is narrowly tailored to the specific circumstances of the case, as it established that "in a situation ... in which ... two tenders have been submitted and the contracting authority has adopted two simultaneous decisions rejecting the offer of one tenderer and awarding the contract to the other, the unsuccessful tenderer who brings an action against those two decisions must be able to request the exclusion of the tender of the successful tenderer, so that the concept of ‘a particular contract’ within the meaning of Article 1(3) of [the Utilities Remedies Directive] may, where appropriate, apply to the possible initiation of a new public procurement procedure" (para 59).

This interpretation seems generally uncontroversial and follows the same path of extension of the justiciability of exclusion and qualitative selection grounds as the recent Marina del Mediterráneo Judgment (see here). However, it also seems very limited to circumstances that may be difficult to meet in practice in a large number of procedures, such as the fact that only two tenderers participated in the procedure, or that the decisions to reject one tender and award the contract to the other were adopted simultaneously. In that regard, the ECJ could have been slightly bolder and simply clarified that retaining the possibility of being awarded a contract under the same (administrative) procedure is not a pre-requisite for the recognition of active standing to challenge procurement procedures under the EU rules. I would have preferred this broader approach, which could have saved future preliminary references on the basis of cases with minor variations of the underlying factual scenario.

ECJ creates randomness in right to challenge procurement decisions by excluded tenderers (C-355/15)

In its Judgment of 21 December 2016 in Technische Gebäudebetreuung and Caverion Österreich, C-355/15, EU:C:2016:988, the European Court of Justice (ECJ) offered additional interpretation of the rules on active standing to challenge public procurement decisions under the Remedies Directive (RD) and, in particular, its Article 1(3), according to which 'Member States shall ensure that the review procedures are available, under detailed rules which the Member States may establish, at least to any person having or having had an interest in obtaining a particular contract and who has been or risks being harmed by an alleged infringement'.

This provision had been interpreted in broad terms ('favor revisionis') in Fastweb (C‑100/12, EU:C:2013:448, see here), where the ECJ strengthened the right of non-compliant tenderers to challenge procurement decisions. It is in comparison to Fastweb that Technische Gebäudebetreuung and Caverion Österreich raises some tricky issues--and, once more, it is surprising that this ECJ judgment was adopted without an Advocate General opinion.

In the case at hand, and given the wording of the Austrian transposition of Art 1(3) RD granting active standing to 'An[y] undertaking which had an interest in the conclusion of a contract...', the legal question for the ECJ concerned a new aspect of the concept of 'any person having or having had an interest in obtaining a particular contract', as it relates to economic operators that have participated in the tender, but are no longer under active consideration by the contracting authority.

The interpretive difficulty stemmed in part from the contrast between the open wording of Art 1(3) RD and the seemingly more limited concept that could be extracted from Art 2a(2) RD, when it establishes a standstill obligation in relation only to concerned tenderers, which are defined as those who 'have not yet been definitively excluded. An exclusion is definitive if it has been notified to the tenderers concerned and has either been considered lawful by an independent review body or can no longer be subject to a review procedure'. Given that Art 2a(1) RD establishes that 'Member States shall ensure that the persons referred to in Article 1(3) have sufficient time for effective review of the contract award decisions taken by contracting authorities, by adopting the necessary provisions respecting the minimum conditions set out in paragraph 2 of this Article', the link between the general rule on active standing in Art 1(3) RD and the more limited rule on standstill in Art 2a(2) that aims to make that active standing effective does raise some complex issues.

In Technische Gebäudebetreuung and Caverion Österreich, the question arose from the fact that the challenger of the procurement decision had been excluded from the procedure by a decision of the contracting authority that had become final (after two appeals) at the time of the challenge. The Austrian review courts considered that the finality of the exclusion extinguished the right to challenge the award decision because 'the rights of a tenderer whose bid has been properly excluded cannot be infringed by illegalities relating to the procedure followed to select another bid for the purposes of awarding the contract' (C-355/15, para 16).

In order to determine the compatibility of this position with EU law, the ECJ broke down the issue in two parts. It first distinguished the current case from Fastweb. It then proceeded to clarify the purpose of the challenge rights provided by Art 1(3) RD. While each of the two parts of the reasoning make some sense independently, their lack of coordination can create difficult cases under spurious circumstances.

In distinguishing the cases, the ECJ indicated that

29 ...  the judgment of ... Fastweb ... gave concrete expression to the requirements of the third subparagraph of Article 1(1) and Article 1(3) of Directive 89/665 in a situation in which, following a public procurement procedure, two tenderers bring an action for review, each seeking the exclusion of the other. In such a situation, both of the tenderers have an interest in obtaining a particular contract.

30      However, the situation at issue in the main proceedings is very clearly distinguishable from the situations at issue in the two cases giving rise to the judgments of ... Fastweb and ... PFE (C‑689/13, EU:C:2016:199).

31      First, the bids of the tenderers concerned in [Fastweb and PFE] had not been the subject of an exclusion decision of the contracting authority, unlike the bid submitted by the consortium in the main proceedings in the present case.

32      Secondly, it was in the course of the same, single set of review proceedings relating to the award decision that, in both cases, each tenderer challenged the validity of the other tenderer’s bid, each competitor having a legitimate interest in the exclusion of the bid submitted by the other, which may lead to a finding that the contracting authority is unable to select a lawful bid ... In the main proceedings in the present case, by contrast, the consortium brought an action, first, against the exclusion decision adopted in respect of it and, secondly, against the award decision, and it is in the course of that second set of proceedings that it contends that the successful tenderer’s bid is unlawful.

33      It follows that the principle of case-law stemming from the judgments of [Fastweb and PFE] does not apply to the procedure and litigation at issue in the main proceedings (C-355/15, paras 29-33, references omitted).

Despite being very formalistic and relying on procedural aspects of the litigation rather than on the material situation (ie, tenders with only two bidders in which each holds an interest in the exclusion of the other so that, in case of dual exclusion, the contracting authority is obliged to re-run the procedure and, thus, each has a fresh opportunity to participate), this is not an unreasonable approach and the ECJ seems clear in establishing an implicit condition for active standing that requires the contracting authority itself to not have excluded the tenderer (or its offer) at the time where the challenge of the award decision takes place. This is however a restriction of the (potential) widest interpretation of Art 1(3) RD. And this restriction brings complications in light of the second part of the analysis carried out by the ECJ in Technische Gebäudebetreuung and Caverion Österreich.

Indeed, in addressing the specific issue of the finality of exclusion decisions that exclude the right to challenge under Art 1(3) RD, the ECJ considered that

34 ... as is apparent from Article 1(3) and Article 2a of Directive 89/665, that directive ensures effective review of unlawful decisions adopted in the context of a public procurement procedure, by enabling any excluded tenderer to challenge not only the exclusion decision, but also, as long as that challenge has not been resolved, the subsequent decisions which would harm it if its exclusion were annulled.

35 In those circumstances, Article 1(3) of that directive cannot be interpreted as precluding a tenderer such as the consortium from being refused access to the review of the award decision, provided that it must be considered a definitively excluded tenderer within the meaning of the second subparagraph of Article 2a(2) of that directive (C-355/15, paras 29-33, emphases added).

In my view, this interpretation is criticisable both in own terms, and due to the effects it creates. The ECJ has adopted an interpretation of Art 1(3) that is conditioned by Art 2a(2)--that is, a sort of systemic interpretation where the special rule may be seen to exclude or restrict the general rule--without first addressing the possible coordination of both provisions without the second altering the scope of application of the first one--ie, in a true systemic interpretation.

This excludes an alternative, broader interpretation of the rules on active standing in the Remedies Directive that I would have much rather preferred, which would have determined that all economic operators having had an interest in the award of the contract (included definitely excluded ones) have the right to challenge the award decision under Art 1(3) RD, even if only those that are concerned tenderers or candidates benefit from the facilitative procedural measures derived from standstill under Art 2a(2) RD [see A Sanchez-Graells, Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 439-441]. This would have respected the fact that, in the revision of the RD in 2007 (when Art 2a(2) was introduced), the wording of the relevant part of Art 1(3) was not amended. It would also not diminished or altered the effectiveness of Art 2a(2) RD, as the standstill period would in any case not benefited excluded tenderers ro candidates, who would have to overcome the additional burden of following the tender procedure very closely when they intended to challenge the final award decision.

Additionally, the position adopted by the ECJ in Technische Gebäudebetreuung and Caverion Österreich creates an element of randomness derived from the uncertainty around decision times for challenges, appeals (and further appeals) of exclusion decisions. Thus, in swift jurisdictions where exclusion decisions can very quickly become final, the rights to challenge award decisions by tenderers excluded by the contracting authority can be effectively suppressed. In contrast, in slower jurisdictions where finality of exclusion decisions takes longer to reach, tenderers excluded by the contracting authority will still have the opportunity to challenge award decisions. In either case, there is no requirement for a coordination of both procedures, so it could well be that the challenge brought by an excluded tenderer is decided before an eventual confirmation of the exclusion decision, which seems to create an undesirable situation under the logic of the ECJ in Technische Gebäudebetreuung and Caverion Österreich. Overall, this Judgment creates this element of randomness in the recognition or not of active standing to challenge award decisions to tenderers excluded by the contracting authority, which is undesirable.

More generally, this case indicates once more the shortcomings of the system created by the Remedies Directive, which is patchy and incomplete, and requires a fundamental revision [see A Sanchez-Graells, "If It Ain't Broke, Don't Fix It'? EU Requirements of Administrative Oversight and Judicial Protection for Public Contracts", S Torricelli & F Folliot Lalliot (eds), Administrative oversight and judicial protection for public contracts (Larcier, 2017) forthcoming]. If nothing else, to clarify whether this is solely about justiciability of review rights of economic operators that can have an interest in being awarded that specific contract under the conditions in which it is tendered (a narrow interpretation), or whether it serves broader purposes of control and review of procurement activity, as a substitute for faltering public oversight of this important public sector function (a broad interpretation). There are arguments both ways, but not having this very basic and foundational aspect clear does create problems as the case law of the ECJ continues shaping the system one preliminary reference at a time...

Another State aid decision by GC follows restrictive approach to standing of interested parties (T-118/13)

Following its previous restrictive case law on the granting of active standing to challenge State aid decisions to competitors of their beneficiaries (see here), the General Court (GC) of the Court of Justice of the European Union (CJEU) reiterated this position in its Judgment of 22 June 2016 in case Whirlpool Europe v Commission, T-118/13, EU:T:2016:365.

The case at hand is a long-lasting saga where producers of large household appliances (Electrolux and by Whirlpool) have been challenging France's restructuring aid to one of their competitors (Fagor France). In this iteration of the approval of the aid and its ensuing challenge, the Commission has adopted the strategy of challenging on of the competitors' standing. Whirlpool has opposed this approach on several basis, including the fact that its legal standing had not been challenged in the previous iteration of approval / challenge, that its market share is affected by keeping Fagor in the market, and due to Whirlpool's very close involvement in the case throughout.

The Commission dismisses all arguments. In the Commission's view,

the fact that an undertaking’s views were heard and that the conduct of the procedure was largely determined by its observations, although a factor which is relevant to the assessment of locus standi, does not relieve that undertaking of having to show that the aid at issue is liable to result in its market position being ‘substantially affected’. As regards that ‘substantial effect’, the Commission states that, in accordance with the case-law, it cannot suffice, in order to prove that the undertaking at issue is individually concerned, to establish that the aid at issue may exercise ‘an influence’ on the competitive relationships and that the undertaking concerned is in a competitive relationship with the addressee of the aid. On the contrary, it should be demonstrated that the applicant was particularly affected by the aid in relation to its competitors (T-118/13, para 28, emphasis added).

In short, the GC has accepted the Commission's arguments and, in particular, stressed that

44 Where an undertaking calls into question the merits of the decision appraising the aid ... the mere fact that it may be regarded as concerned within the meaning of Article 108(2) TFEU cannot suffice to render the action admissible. It must go on to demonstrate that it has a particular status within the meaning of the judgment of 15 July 1963 in Plaumann v Commission (25/62, EU:C:1963:17) ... That applies in particular where its market position is substantially affected by the aid to which the decision at issue relates (see, to that effect, judgment of 13 December 2005 in Commission v Aktionsgemeinschaft Recht und Eigentum, C‑78/03 P, EU:C:2005:761, paragraph 37 and the case-law cited).

45 In that regard, not only the undertaking in receipt of the aid but also the undertakings competing with it which have played an active role in the procedure initiated pursuant to Article 108(2) TFEU in respect of an individual aid have been recognised as individually concerned by the Commission decision closing that procedure, provided that their position on the market is substantially affected by the aid which is the subject of the contested decision. An undertaking cannot therefore rely solely on its status as a competitor of the undertaking in receipt of aid but must additionally show, in the light of its participation in the procedure and the magnitude of the harm to its position on the market, that its factual circumstances distinguish it in a similar way to the undertaking in receipt of the aid (see order of 7 March 2013 in UOP vCommission, T‑198/09, not published, EU:T:2013:105, paragraphs 25 and 26 and the case-law cited; see also, to that effect, judgment of 28 January 1986 in Cofaz and Others v Commission, 169/84, ECR, EU:C:1986:42, paragraph 25, and order of 27 May 2004 in Deutsche Post and DHL v Commission, T‑358/02, EU:T:2004:159, paragraphs 33 and 34).

46 As regards establishing such an effect, the Court of Justice has had occasion to explain that the mere fact that a measure such as the contested decision may have some influence on the competitive relationships existing on the relevant market and that the undertaking concerned was in a competitive relationship with the addressee of that measure cannot in any event suffice for that undertaking to be regarded as individually concerned by that measure (see, to that effect, judgments of 10 December 1969 in Eridania and Others v Commission, 10/68 and 18/68, EU:C:1969:66, paragraph 7, and 22 December 2008 in British Aggregates v Commission, C‑487/06 P, EU:C:2008:757, paragraph 47).

47 According to settled case-law, the applicant must provide evidence to establish the particularity of its competitive situation (order of 27 May 2004 in Deutsche Post and DHL v Commission, T‑358/02, EU:T:2004:159, paragraph 38, and judgment of 10 February 2009 in Deutsche Post and DHL International v Commission, T‑388/03, EU:T:2009:30, paragraphs 49 and 51) and demonstrate that its competitive position is substantially affected in comparison with the other undertakings competing in the market at issue (see, to that effect, order of 27 May 2004 in Deutsche Post and DHL v Commission, T‑358/02, EU:T:2004:159, paragraph 41; see also, to that effect, judgments of 10 February 2009 in Deutsche Post and DHL International v Commission, T‑388/03, EU:T:2009:30, paragraph 51; 13 September 2010 in TF1 v Commission, T‑193/06, EU:T:2010:389, paragraph 84; 15 January 2013 in Aiscat v Commission, T‑182/10, EU:T:2013:9, paragraph 68; 5 November 2014 in Vtesse Networks v Commission, T‑362/10, EU:T:2014:928, paragraph 55; and 3 December 2014 in Castelnou Energía v Commission, T‑57/11, EU:T:2014:1021, paragraphs 35 to 37) (T-118/13, paras 44 to 47, emphasis added).

Once more, the substantive analysis in which the GC engages in Whirlpool Europe v Commission results in a threshold of 'comparatively more adverse substantive negative competitive impact' that is almost impossible to discharge. This is bound to keep on restricting the number of State aid cases that can be successfully challenged, which will continue to contribute to a reduction in the effectiveness of the State aid control system [as criticised in A Sanchez-Graells, 'Digging itself out of the hole? A critical assessment of the Commission’s attempt to revitalise State aid enforcement after the crisis' (2016) 4(1) Journal of Antitrust Enforcement 157-187]. Thus, this Judgment must also receive criticism for its disproportionately restrictive assessment of the conditions to grant active standing to challenge State aid decisions under Art 263 TFEU.

AG Sharpston rightly opposes use of financial guarantees as pre-requisite for procurement challenges (C-439/14 and C-488/14)

In Opinion of 28 April 2016 in joined cases Star Storage and Max Boegl România and Construcții Napoca, C-439/14 and C-488/14, EU:C:2016:307, AG Sharpston considered 'whether EU law precludes a Member State from requiring an applicant to lodge a ‘good conduct guarantee’ in order to access review procedures for public procurement decisions by contracting authorities' or,  'how far can the Member States set up financial requirements for challenging contracting authorities’ decisions in order to reduce the risk of frivolous challenges, that is to say, challenges that are inherently likely to be unsuccessful and whose purpose is merely to impede the public contract award procedure?'.

The case comes on the back of a challenge against Romanian procedural rules whereby undertakings seeking the review of procurement decisions need to lodge such a 'good conduct guarantee' of 1% of the estimated value of the contract (with progressive caps at €10k, €25k and €100k), and contracting authorities retain the good conduct guarantee where the body competent to review their decisions rejects the challenge or where the applicant abandons it. For the sake of completes, the Opinion also assesses whether a guarantee that was returned to the applicant regardless of the outcome of the case would be compatible with EU law.

AG Sharpston's Opinion is interesting because it covers arguments linked both to the right to an effective remedy before a tribunal recognised by Article 47 of the EU Charter of Fundamental Rights (which is clearly of prominence in this area; see Fastweb, C-19/13, EU:C:2014:2194), and to the more precise rights to access to rapid and effective review procedures and remedies in the field of public procurement under the Remedies Directive (and the identical provisions of the Utilities Remedies Directive).

After a very detailed assessment (see below), AG Sharpston unsurprisingly concludes that the Remedies Directive and the Utilities Remedies Directive, 'read in the light of Article 47 of the Charter, preclude national legislation ... which requires an applicant to lodge a ‘good conduct guarantee’ in order to obtain access to review of a contracting authority’s decisions relating to public procurement and under which the contracting authority must retain that guarantee if the challenge is rejected or withdrawn, regardless of whether or not the challenge is frivolous'. Equally, that 'the same provisions of EU law also preclude national legislation which requires an applicant to lodge a ‘good conduct guarantee’ in order to obtain access to review of a contracting authority’s decisions and under which that applicant automatically gets back the guarantee at the end of the challenge, whatever its outcome'.

These issues generally concern the delineation of the locus standi to challenge procurement decisions, which I have submitted needs to be interpreted in broad terms because 'the adoption of open or broad rules on active standing is a crucial element—particularly because, in this area, one of the major problems is the reluctance of public contractors and offerors to initiate litigation' [see A Sanchez-Graells, Public procurement and the EU competition rules, 2nd edn (Oxford, Hart, 2015) 439-441]. AG Sharpston's Opinion is clearly in line with such general expansive interpretation of rules recognising active standing in procurement review procedures. Therefore, her Opinion must be welcome and it is submitted that the Court of Justice should follow it. However, I also submit that she could have been bolder in assessing these issues in the broader context of the use of financial guarantees in public procurement. From this perspective, I think that some of the specific elements of Sharpston's analysis are interesting in their detail.

AG Sharpston's analysis on the basis of art 47 charter

When setting the legal background to the dispute, AG Sharpston emphases that the right under Art 47 of the Charter is not absolute, but that it can only be limited subject to the principle of proportionality and only if the limitation is necessary and genuinely meets objectives of general interest recognised by the EU, or the need to protect the rights and freedoms of others [as per Art 52(1) Charter]. She also stresses that under Art 1(1) of the Remedies Directive, Member States must 'ensure that ... decisions taken by the contracting authorities may be reviewed effectively and, in particular, as rapidly as possible ... on the grounds that such decisions have infringed [EU] law in the field of public procurement or national rules transposing that law', and that under Art 1(3) of the Remedies Directive, 'the review procedures [shall be] available, under detailed rules which the Member States may establish, at least to any person having or having had an interest in obtaining a particular contract and who has been or risks being harmed by an alleged infringement'.

AG Sharpston also clearly stresses that the Remedies Directive only sets 'minimum conditions which the review procedures under domestic law must satisfy in order to comply with EU public procurement law [so that if] no specific provision governs the matter, it is for each Member State to lay down the detailed rules of administrative and judicial procedures governing actions for safeguarding rights which individuals derive from EU public procurement law' (para 30, references omitted). Thus, given that the Remedies Directive 'contains [no] rules on financial requirements which economic operators may have to fulfil in order to obtain access to review procedures against decisions of contracting authorities. National provisions ... fall within the procedural autonomy of the Member States, subject to the principles of equivalence and effectiveness' (para 31).

However, AG Sharpston raises two relevant issues: 'First, can [the principle of effectiveness] be limited to verifying that a national procedural requirement ... renders practically impossible or excessively difficult the exercise of the right to review procedures set out in [the Remedies Directive]? Or is it broader in that it requires any national rule which undermines those provisions to be set aside?' (para 33, emphasis in the original). To which she answers that 'what matters ultimately is to ensure that the rights which EU law confers on individuals receive more, rather than less, protection. [The Remedies Directive gives] specific expression to the right to an effective remedy. It is therefore not possible to limit the analysis of the principle of effectiveness to whether a procedural requirement such as that in issue in the main proceedings is liable to render practically impossible or excessively difficult the exercise of that right. Rather, in that specific context, the effectiveness test must surely involve examining whether such a requirement is liable to undermine the right to effective review procedures which those provisions guarantee' (para 35, emphasis in the original).

'Second, what impact does the fundamental right to an effective remedy under Article 47 of the Charter have on the principle of effectiveness as a limit to the procedural autonomy of the Member States?' (para 36). And, in that regard, she clearly explains that 'Article 47 of the Charter applies in the main proceedings. Providing the good conduct guarantee is a pre-condition for getting any challenge examined. That requirement therefore constitutes a limitation on the right to an effective remedy before a tribunal within the meaning of Article 47. Such a limitation can therefore be justified only if it is provided for by law, if it respects the essence of that right and, subject to the principle of proportionality, if it is necessary and genuinely meets objectives of general interest recognised by the EU or the need to protect the rights and freedoms of others. That test is similar to the test that the Strasbourg Court applies when it examines whether financial restrictions on access to courts are compatible with Article 6(1) of the ECHR' (para 37, references omitted).

This is an interesting analytical approach, which leads to the further consideration that the rules are underpinned by a legitimate purpose. In Sharpston's words, 'the national provisions establishing the good conduct guarantee are intended in essence to protect ... from frivolous challenges which economic operators (including those who are not tenderers) might initiate for purposes other than those for which the review procedures were established. Such an objective is undeniably legitimate. In particular, discouraging frivolous challenges enables the bodies in charge of reviewing decisions of contracting authorities to concentrate on ‘genuine’ challenges. That is likely to contribute to satisfying the requirement that Member States must ensure that decisions of contracting authorities may be reviewed effectively and, in particular, as rapidly as possible where it is claimed that such decisions infringe EU public procurement law or national rules transposing that law' (para 44, references omitted).

AG Sharpston also considers that the possibility of loosing significant amounts (up to €25k or €100k depending on the type of contract) meets the requirement that the rules are capable of achieving that objective because 'costs of that magnitude are such as to deter the lodging of frivolous challenges because the latter are, by their very nature, likely to be rejected and, therefore, to result automatically in loss of the entire good conduct guarantee and the associated costs' (para 47).

However, she submits that the rules on 'good conduct guarantees' do not meet the requirements of the principle of proportionality as derived from Art 52(1) of the Charter because there is no indication that they do no go further than is necessary to attain their objective. She assesses the situation in two scenarios. First, where the guarantee is automatically forfeited in case the challenge is rejected or withdrawn. In this case, there is no question that the rule is not proportionate because '[w]here a challenge was rejected or withdrawn, the ... competent court might for example have been given latitude to ascertain whether that challenge was frivolous or not, taking into account all relevant circumstances, and to decide in consequence whether retaining (all or part of) the good conduct guarantee was justified' (para 50, references omitted). Second, where the the applicant gets back the good conduct guarantee irrespective of the challenge’s outcome (which was a transitional regime proposed by Romania), AG Sharpston considers 'that such a procedural requirement does not protect contracting authorities adequately from frivolous challenges. Under the transitional regime, the contracting authority has to return the good conduct guarantee to the applicant within five days following the date on which the decision ... or the judgment has become final, even where the applicant manifestly abused his right to access review procedures. The costs which the transitional regime involves may therefore not be such as to discourage an economic operator from lodging a challenge that pursues an objective other than those for which the review procedures are established — for example, harming a competitor. They may nevertheless prove an obstacle to an economic operator with an arguable claim but limited means' (para 56). Therefore, she also considers it contrary to EU law.

scope for a bolder approach?

In my view, AG Sharpston is right on all issues she discusses, particularly given the framework of analysis she creates. However, the Opinion leaves space for Member States to still develop mechanisms whereby they require the submission of 'bid protest guarantees' that will only be forfeited in case of spurious litigation and on a case by case assessment. Broadly, this is not in line with the normative position that the use of financial guarantees in public procurement (primarily, at bidding stage, but also at review stage) needs to be minimised and only used where there is an actual risk against which the contracting authority cannot (self)protect by other means--which will very rarely be the case [see my Public procurement and the EU competition rules (2015) 326-327 & 425-426]. In my view, the risks derived from litigation are a given for the public sector and, consequently, unless there is a special circumstance that raises the possibility of damage to the public sector above abnormal levels, the need for the financial guarantee can be doubted.

A less restrictive alternative would be to devise a system of penalties which public procurement review bodies and courts could apply in case of spurious litigation. That would avoid front-loading the financial burden and would dissipate negative effects on access to review procedures. Conversely, it would leave the public sector exposed to bankruptcy risk in case the frivolous challengers did not have the ability to pay the fine. But this is not different from the general risk the public sector (and society at large) faces in terms of the effects of bankruptcy on the effectiveness of administrative sanctions. Thus, once more, the risk does not seem to be specific enough as to justify the requirement of specific 'bid protest guarantees' and, from that perspective, I submit that AG Sharpston could have been bolder in her Opinion in Star Storage and Max Boegl România and Construcții Napoca. However, on balance, her Opinion is certainly a positive step.

CJEU protects right to challenge public procurement decisions by non-compliant tenderers (C-100/12)

In its Judgment of 4 July 2013 in case C-100/12 Fastweb, the Court of Justice of the European Union (CJEU) has strengthened the effectiveness of the public procurement remedies system by protecting the right to challenge (illegal) award decisions by tenderers that do not comply with all the (technical) requirements imposed by the tender documentation themselves.

In the case at hand, a disappointed tenderer challenged the award decision on the basis that none of the two awardees in a framework agreement complied with the technical specifications set by the contracting authority. The awardees of the contract intervened in the procedure and raised a counterclaim stating that the challenger did not comply with the technical specifications (either). Under Italian law, the counterclaim had to be analysed first and, if successful, would bar the challenge on the basis of a lack of locus standi of the disappointed tenderer (who could not have been awarded the contract anyway and, consequently, would be prevented from challenging the outcome of the procedure).

The CJEU found such an interpretation of the rules on active standing contrary to the EU public procurement remedies directives (as amended by dir 2007/66), inasmuch as 'the aim of [those directives] is to ensure that decisions made by contracting authorities in breach of European Union law can be effectively reviewed' (C-100/12 at para 25). Following a functional approach that deserves praise, the CJEU found that:

a counterclaim filed by the successful tenderer cannot bring about the dismissal of an action for review brought by a tenderer where the validity of the bid submitted by each of the operators is challenged in the course of the same proceedings and on identical grounds. In such a situation, each competitor can claim a legitimate interest in the exclusion of the bid submitted by the other, which may lead to a finding that the contracting authority is unable to select a lawful bid (C-100/12 at para 33).

Consequently, the CJEU has determined that the counterclaim concerning the locus standi of a tenderer that should have been excluded (or whose tender should have been rejected) cannot preempt the analysis of the legality of the award decision adopted by the contracting authority. 

By (implicitly) adopting such a broad interpretation of the concept of 'any person having or having had an interest in obtaining a particular contract and who has been or risks being harmed by an alleged infringement' [art 1(3) dir 2007/66], the CJEU has increased the chances of attaining effective and substantive review of the award decisions adopted by contracting authorities, regardless of the specific procedural rules within each of the EU Member States (as mandated by the principle of effectiveness of EU law) and seems to point clearly towards a principle or criterion of 'favor revisionis', so that review bodies and courts tend to assess the material conditions of award decisions, despite the presence of apparent procedural difficulties to carry out such an assessment. 

In my opinion, this is a favourable development of EU public procurement law and one that is conducive to ensuring an absence (or correction at review stage) of distortions of competition. As argued elsewhere [A Sanchez Graells, Public Procurement and the EU Competition Rules (Oxford, Hart, 2011) pp. 353-355], my view is coincidental with the approach adopted by the CJEU in that 

the best reading of the standing requirements imposed by Directive 2007/66 is that Member States have to adopt a broad approach to the setting of detailed rules regulating active standing to access bid protests and review procedures, and that they have to do so attending both to the criterion of participation in the tender, and to the criterion of the effects actually or potentially generated by the alleged infringement—so that bid protest and review procedures are open to any party that has taken part in the tender or that can otherwise prove that it has been harmed or risks being harmed as a result of the alleged infringement, regardless of its actual participation (or lack of it) in the specific tender that gave rise to it.

Who is an interested undertaking in procurement and State aid cases? (T-182/10)

The recent Judgment of the General Court of 15 January 2013 in case T-182/10 Aiscat v Commission (not available in English) raises a relevant question for the EU system of oversight of public procurement procedures that may have State aid implications--in the case at hand, due to the direct award of a works concession contract, as well as in view of the terms of the remuneration paid to the works concessionaire. 

In particular, the Aiscat Judgment establishes who is to be considered an "interested undertaking" and, consequently, who can act as complainant before the Commission and, eventually, challenge its Decisions in a State aid procedure based on Regulation 659/1999. In my view, a detailed analysis of the position of the GC in Aiscat shows certain inconsistencies between the (broad) concept of "disappointed bidder" under the EU public procurement regime and the concept of "affected undertaking" under State aid rules--which can diminish the effectiveness of a coordinated enforcement of both sets of rules.

In Aiscat, the Italian association of road concessionaires challenged the direct award of a works concession in the Padua region. The complaint submitted to the European Commission had a dual set of legal grounds. On the one hand, a "pure" public procurement claim that challenged the legality of the direct award of the contract under the in-house provision doctrine (which the Commission dismissed by considering that the awardee was in fact a "Teckal" entity controlled by the Italian contracting authorities). And, on the other hand, a State aid claim whereby the (illegal) direct award of the works concession contract and its terms of remuneration were considered an undue economic advantage in breach of Article 107 TFEU (which was also dismissed by the European Commission on the basis of the previously declared legality of the award and the absence of "direct" public funding).

Aiscat challenged the State aid decision of the Commission before the GC, which the Commission opposed on the basis of lack of active standing on the part of the association. In my view, the analysis conducted by the GC regarding the standing of the association to challenge the direct award of the contract is particularly relevant:

61 [...] with respect to the area of ​​State aid, persons other than the recipients who question the merits of the decision appraising the aid are considered individually concerned by that decision if their market position is substantially affected by the aid analysed in the decision in question (see, to that effect, Cofaz/ Commission [169/84, ECR p. 391] paragraphs 22 to 25, and Commission / Aktionsgemeinschaft Recht und Eigentum, [C-78/03, ECR I-10737] paragraphs 37 and 70).
62 This issue should be examined separately with respect to each of the two measures challenged by the applicant before the General Court, namely the award of the concession contract of the Passante without competitive bidding and increasing toll on the Tangenziale [which was the undue advantage identified by the appellant].
- The award without competitive bidding for the concession on the Passante

63 In the absence of any indication of the parties on the relevant market, it must be identified as that of motorway concessions in Italy, a market in which the 23 members of the applicant association that operate toll roads represent the demand, while the the State, represented by ANAS, which awards grants, represents the offer. According to statistics presented by the applicant, in November 2009, the toll road network in Italy extended over about 5,500 km.

64 As regards the determination of a substantial impairment of the market position, the Court of Justice has observed that the mere fact that an act such as the contested decision could influence the competitive relationships existing in market in question, and that the affected undertaking is in a competitive relationship of any kind with the beneficiary of that act does not suffice to conclude that it is of concern to that undertaking (see, to that effect, Case Justice of 10 December 1969, Eridania and others / Commission, 10/68 and 18/68, ECR p. 459, paragraph 7, the order of the Court of Justice of 21 February 2006, Deutsche Post and DHL Express / Commission, C-367/04 P, not published in the ECR, paragraph 40, and the judgment of the Court of 22 November 2007, Spain / Lenzing, C-525/04 P, ECR p. I-9947 , paragraph 32).

65 Therefore, an undertaking cannot rely solely on its status as a competitor of the beneficiary, but must also prove that it is in a factual situation that individualises it just as much as the beneficiary (judgment of the Court of May 23, 2000, Comité d'entreprise de la Société française de production and others / Commission, C-106/98 P, ECR p. I-3659, paragraph 41; Deutsche Post and DHL Express / Commission, cited in paragraph 64 above, paragraph 41, and judgment in Spain / Lenzing, cited in paragraph 64 above, paragraph 33).

66 However, the evidence that the position of a competitor in the market was significantly affected cannot be limited to the presence of certain elements indicating a worsening of its commercial or financial results, but may result from demonstrating the existence of a loss of revenue or less favorable business evolution than would have taken place had such aid not been granted (judgment in Spain / Lenzing, cited in paragraph 64 above, paragraph 35).

67 In the present case, in what respects the substantial affectation of the market position of the members of the applicant association due to the award of the concession on the Passante without competitive bidding, it should be noted that the applicant states in the claim the reasons why it considers that such direct award constitutes a breach of the principle of prohibition of State aid. As part of its observations on the objection of inadmissibility, the applicant claims an interest of its 23 members, as they were allegedly deprived from the opportunity to participate in a public tender for the award of the contract for the management and exploitation of the Passante.

68 However, in a market that consists of 5,500 km of toll roads, although the award without competitive bidding for the concession on a stretch of highway of about 32 km may have some impact on competition because other operators have not had the opportunity to increase the length of the networks that each exploits, it cannot be regarded that as such, this constitutes a substantial impairment of the competitive position of those other operators. Therefore, the applicant association has not demonstrated that the contested decision affected its members differently than all other operators wishing to exploit the concession on the Passante.

69 Consequently, the Court concludes that, with respect to the award of the concession on the Passante without competitive bidding, the contested decision did not affect the individual members of the applicant association. Consequently, they are not entitled to bring an action themselves to that effect and the applicant association also lacks standing to bring an action on behalf of those interests. (T-182/10, paras 61 to 69, own translation, emphasis added).

This is a very narrow analysis of the actual interest of potential bidders to participate in a tender and it follows a "de minimis-like approach" that does not match (easily) the requirements of Art 1(3) of Directive 2007/66/EC on public procurement remedies, which requires that "Member States shall ensure that the review procedures are available, under detailed rules which the Member States may establish, at least to any person having or having had an interest in obtaining a particular contract and who has been or risks being harmed by an alleged infringement". In my view [Sanchez Graells, Public Procurement and the EU Competition Rules (Oxford, Hart Publishing, 2011) 354], this means that

Directive 2007/66 requires Member States to adopt a broad approach to the setting of detailed rules regulating active standing to access bid protests and review procedures (as clearly indicated by the requirement of making these procedures available ‘at least’ to potentially affected parties—which seems to be oriented towards not excluding systems granting universal standing); and to do so attending both to the criterion of participation in the tender, and to the criterion of the effects generated or potentially generated by the alleged infringement.

To be sure, an alternative reading could suggest a more restrictive approach, requiring a potential challenger to meet simultaneously participation and harm requirements in order to have standing in bid protest and review procedures. However, from a logical perspective, configuring both requirements in a cumulative manner seems superfluous—since it would be very difficult to envisage a situation where a person having had an interest in obtaining a particular contract would not risk being harmed by an alleged infringement of public procurement rules. Moreover, it would seem an overly restrictive measure—particularly in cases where compliance with the first criterion is factually impossible, eg because a given contract was awarded without tender. Along the same lines, a systematic interpretation of Directive 2007/66 seems to exclude the possibility of restricting the standing for review to the candidates and tenderers that have participated in the tender, which are defined as ‘tenderers and candidates concerned’ [art 2a(2) dir 89/665 and art 2a(2) dir 92/13 (both as amended by dir 2007/66)]. The use of a much broader wording as regards the rule on standing [art 1(3) dir 89/665 and art 1(3) dir 92/13 (both as amended by dir 2007/66)] seems to clearly depart from its narrow construction. Moreover, it is submitted that such a restrictive approach would be undesirable from the perspective of guaranteeing the effectiveness of EU public procurement directives in general—and the embedded principle of competition in particular—and, therefore, would be contrary to the main goal of Directive 2007/66. Therefore, as anticipated, in our view, the best reading of the standing requirements imposed by Directive 2007/66 is that Member States have to adopt a broad approach to the setting of detailed rules regulating active standing to access bid protests and review procedures, and that they have to do so attending both to the criterion of participation in the tender, and to the criterion of the effects actually or potentially generated by the alleged infringement—so that bid protest and review procedures are open to any party that has taken part in the tender or that can otherwise prove that it has been harmed or risks being harmed as a result of the alleged infringement, regardless of its actual participation (or lack of it) in the specific tender that gave rise to it.

Therefore, by requiring a "singular" negative effect of the direct award on a complainant to allow it to raise a challenge on the basis of State aid rules generates frictions in the system. In some scenarios, it is not hard to see how an undertaking may be unable to challenge a direct award of a contract both under "pure" public procurement and State aid rules. And, certainly, this is not a situation that leads to effective enforcement of either of these important sets of EU economic law.

 

In my view, a revision of the Aiscat Judgment by the CJEU would be desirable in order to broaden the active standing of "disappointed bidders" (broadly conceived), and would also give the CJEU an opportunity to clarify its unclear decision in case C-496/99 Succhi di Frutta [2004] ECR I-3801 (where it seemed to adopt a similarly restrictive approach to active standing contrary to the posterior criteria of Directive 2007/66/EC).