CJEU consolidates push for overcompliance with EU public procurement rules in the provision of public services (C-446/14)

In its Judgment of 18 February 2016 in Germany v Commission (Zweckverband Tierkörperbeseitigung), C-446/14 P, EU:C:2016:97 (only in German and French), the Court of Justice of the European Union (CJEU) has supported the approach of the General Court (GC) in the assessment of the Altmark (C-280/00, EU:C:2003:415) conditions for the analysis of State aid regarding a system of financial support for a service of general economic interest (SGEI) consisting in the maintenance of reserve animal disposal capacity in the case of epizootic in a public abattoir in the state of Rhineland-Palatinate in Germany.

This appeal was against the GC's Judgment in T-295/12 (EU:T:2014:675, which is discussed by P Nicolaides here), but the analysis of the CJEU was highly relevant for the pending appeal against the GC Judgment in T-309/12 (EU:T:2014:676, discussed here), which has now been abandoned by the appellant (the abattoir, now in liquidation). The intricacies of the case are quite complex, and points of detail are too specific to discuss now. However, there are some general issues to note in view of the CJEU's Germany v Commission (Zweckverband Tierkörperbeseitigung) Judgment. 

From the outset, it must be stressed that the CJEU is following the GC in a trend that may well be modifying the scope of the Altmark test in a way that pushes for overcompliance with the EU public procurement rules as the only effective way in which Member States can achieve legal certainty in the way they organise their SGEIs. This requires to take a long view on some of the arguments in the case.

The CJEU has generally been very clear that 'the four conditions set out in Altmark ... are distinct from one another, each pursuing its own finality' (para 31, own translation from French). In particular, it stressed that the first condition requires 'that the recipient undertaking must actually be required to discharge public service obligations and those obligations must be clearly defined for such compensation to escape the classification as State aid' (para 26, own translation from French), while the fourth condition determines that 'when the choice of the undertaking which is to discharge public service obligations, in a specific case, is not in the framework of a public procurement procedure, the level of compensation needed must be determined based on an analysis of the costs which a typical, well run, undertaking would have incurred in discharging those obligations, taking into account the relevant receipts and a reasonable profit for discharging those obligations' (para 29, own translation from French). In that regard, these would seem to require separate, independent assessments of each of the Altmark conditions.

In contrast, in the challenged decision, the GC had determined that

as part of the review of the question whether the fourth Altmark criterion ... is satisfied, there is certainly room to take into consideration the nature of the service in question and the circumstances of the case, and it is therefore possible that this criterion, which requires a comparison of the costs and revenues directly related to the provision of the SGEI, can not be applied strictly to the present case (see, that effect, case BUPA ea / Commission (T-289/03, EU:T:2008:29) paragraph 246). Indeed, the Court has already held that ... although the conditions set out in Altmark ... concern without distinction all sectors of the economy, their implementation must take into account the specificity of a certain sector and, given the particular nature of the SGEI mission in specific sectors, it should be flexible in the application of the Altmark judgment ... in relation to the spirit and purpose that led to the establishment of said conditions, so that they are suitable to the particular facts of the case (see case of 7 November 2012 CBI / Commission, T-137/10 (EU:T:2012:584) paragraphs 85 and 86, and the cases cited) (T-295/12, para 131, own translation from French).

This was criticised by Germany as a conflation of the first and fourth Altmark conditions, particularly because the analysis supported by these general remarks implied dismissing the existence of an SGEI in the specific case in Rhineland-Palatinate, and a general consideration of the costs incurred by undertakings active in the same sector in other German states that, however, may have been subjected to different public service obligations or where no SGEI may have existed at all (T-275/12, para 130). In Germany's submission, this would have led the GC to a tautological conclusion. 

The CJEU dismisses the argument on the following basis:

... the Court cannot be criticized for having reached a tautological conclusion that would have linked the lack of satisfaction of that fourth condition to a finding of lack of qualification of maintaining a reserve capacity as a service of general economic interest [first condition]. Indeed, as is clear from paragraph 130 of the judgment, the Court, first, discussed the situation in which the maintenance of a reserve capacity in case of an outbreak could have validly received such qualification [of SGEI] and on the other hand, felt that, given the obligations of the competent public authorities in all German states to eliminate the largest quantity of substances ... received during an outbreak [regardless of the way they organised the discharge of that public obligation, and regardless of whether they defined an equivalent SGEI], it was necessary to take into account the existing situation in other German states to determine the necessary level of compensation on the basis of an analysis of the costs which a typical undertaking, well run and adequately equipped, would have incurred in meeting the public service requirements (C-446/14 P, para 35, own translation from French).

Thus, the general conclusion of the CJEU is that the GC did not err in law by conflating the different conditions established in Altmark. 

I disagree with the CJEU because, even if the conditions 'are distinct from one another, each pursuing its own finality', the logic in their application to a same set of factual circumstances requires that, once the scope of the economic activity that the Member State claims is an SGEI is properly established for the purposes of the judicial review (and regardless of whether the first condition is upheld or not in terms of whether those obligations are clearly defined), the analysis of the fourth condition (ie either procurement of that 'alleged' SGEI or analysis of the costs of a notional well-run undertaking providing that 'alleged' SGEI) needs to remain within that context.

Otherwise, the assessment of the notional, well-run undertaking's cost structure outside of the remit of the 'alleged' SGEI under dispute comes to basically neutralise the second alternative test in the fourth condition of Altmark by allowing the Commission and the GC (and ultimately the CJEU) to find any other comparator they deem to be sufficiently close to that economic activity, which nullifies the economic concept of the notional, well-run competitor. Immediately, this pushes Member States to try to avoid in this types of assessment, which can only be done by resorting to (certain types of) public procurement procedures under the first test in the fourth Altmark condition [for discussion, see A Sanchez-Graells, 'The Commission’s Modernization Agenda for Procurement and SGEI', in E Szyszczak & J van de Gronden (eds) Financing Services of General Economic Interest: Reform and Modernization, Legal Issues of Services of General Interest Series (The Hague, TMC Asser Press / Springer, 2012) 161-181]. 

This may well be cornering Member States in an impossible situation where, regardless of the way they conceive and delineate an SGEI [which they have exclusive competence to do, under Art 14 TFEU and Protocol No (26) therewith, and, currently, reminded in the provisions of Article 1(4) of Directive 2014/24], an assessment of the fourth Altmark condition only allows them to operate with sufficient legal certainty if they contract out the provision of that service in a way that complies with the EU public procurement rules (and not all of them, at that). This is certainly not a desirable outcome and, once more, the developments supported by the CJEU require a fundamental rethinking of the coordination of State aid and public procurement rules, in particular in the area of SGEIs [for discussion, particularly in the setting of procurement challenges, see A Sanchez-Graells, 'Enforcement of State Aid Rules for Services of General Economic Interest before Public Procurement Review Bodies and Courts' (2014) 10(1) Competition Law Review 3-34].

CJEU takes more refined approach to the 'separability of activities' in the definition of (public) undertakings for the application of EU competition law (C-185/14)

In its Judgment in EasyPay and Finance Engineering, C-185/14, EU:C:2015:716, the Court of Justice of the European Union (CJEU) assessed whether the grant by a Member State of an exclusive right to pay retirement pensions by money order to the national postal operator that formerly held the postal monopoly restricts the rights of alternative postal operators and is detrimental to free competition. The CJEU also assessed whether the granting of such exclusive right to pay retirement pensions by postal money order constitutes State aid or if it can be exempted on the basis that the activity constitutes a service of general economic interest (SGEI).

The case concerned Decree of the Bulgarian Council of Ministers adopted in the year 2000 whereby it ordered that retirement pensions had to be paid through the domestic banks and the post offices of the national postal operator ‘Balgarski poshti’ (BPoshti), which at the time was a single-member commercial company wholly owned by the State. Those postal money orders included the payment of retirement pensions at both the post offices and the address of the beneficiary by a postal worker, which was an activity covered by the universal postal service that only BPoshti was authorised to carry out.

A reform of the postal services act (PSA) to implement postal liberalisation determined that postal money orders are no longer included in the universal postal service and, consequently, under the postal legislation they should be services open to provision by alternative post operators in competition with BPoshti. However, the Council of Ministers maintained the reserve of this activity for BPoshti on the basis that 'the granting and payment of pensions form part of the exercise of State social security functions, which cannot be qualified as an economic activity. ‘Balgarski poshti’ was entrusted under a regulatory act with a public service activity which does not fall within the scope of competition law. The Council of Ministers adds that only that company has a branch network covering all of the territory of Bulgaria, including sparsely populated areas' (C-185/14, para 25). Privately-owned alternative postal operators challenged this reserve of activity under the both EU postal rules of Directive 97/67 (as amended) and Articles 106 and 107 TFEU.

The CJEU first addressed the point of coverage of postal money orders by the postal universal service and confirmed that 'money order services, which consist in making payments through the public postal network to natural or legal persons on behalf of and on the order of others, are not within the scope of Directive 97/67 (see judgment in Asempre and Asociación Nacional de Empresas de Externalización y Gestión de Envíos y Pequeña Paquetería, C-240/02, EU:C:2004:140, paragraph 34)' (C-185/14, para 32). Therefore, given the inapplicability of the sectoral postal regulation, the analysis of the reservation of this activity to BPoshti had to be assessed under the general rules in Articles 106 and 107 TFEU.

In this analysis, the CJEU returns to the definition of undertaking for the purposes of the application of competition law and stresses several aspects regarding the need for an inseparable connection with the national pensions system for an entity to escape the definition of undertaking on the basis that it operates within a system based on the principle of solidarity and oriented exclusively to perform a social function. In terms of the Judgment in EasyPay and Finance Engineering,

37 ... for the purposes of the application of EU competition law, an undertaking is any entity engaged in an economic activity, irrespective of its legal status and the way in which it is financed ...  any activity consisting in offering goods and services on a given market is an economic activity (see judgment in Compass-Datenbank, C-138/11, EU:C:2012:449, paragraph 35).

38 ... the organisations involved in the management of the public social security system fulfil an exclusively social function. That activity is based on the principle of national solidarity and is entirely non-profit-making. The benefits paid are statutory benefits bearing no relation to the amount of the contributions (see, to that effect, judgment in Poucet and Pistre, C-159/91 and C-160/91, EU:C:1993:63, paragraph 18).

39 It is for the referring court to ascertain whether or not the money order operations carried out by ‘Balgarski poshti’, enabling the payment of retirement pensions at issue in the main proceedings, is involved in the functioning of the public social security service and, accordingly, must or must not be regarded as an economic activity falling within the scope of Article 107(1) TFEU.

40 In that context, it must be recalled that, in order to avoid classification as an economic activity, that activity must, by its nature, its aim and the rules to which it is subject, be inseparably connected with the national pensions system (see, by analogy, judgment in Aéroports de Paris v Commission, C-82/01 P, EU:C:2002:617, paragraph 81). Thus, in the main proceedings, any inseparable connection thereto of the activity of money order operations must be taken into consideration.

41 In that regard, it is apparent ... that the old-age benefits granted in the State social security system form part of the task of the [National Social Security Institute] which, in carrying out that task, uses ‘Balgarski poshti’ solely to handle the payments of retirement pensions.

42 In addition ... payment of retirement pensions may also be made through banks. Thus, according to the information provided by the Institut ... approximately 53% of the total number of retirement pensions were paid by bank transfer. Accordingly, the money orders used by ‘Balgarski poshti’ are not actually the sole method of payment of the retirement pensions.

43 Those elements constitute an indication enabling the view to be taken that the activity of money order operations enabling the payment of retirement pensions may be separable from the national pensions system. It is for the national court to assess the relevance of those elements, in particular in the light of the other factual and legal elements before it (C-185/14, paras 37-43, emphasis added).

This is an interesting approach, because the CJEU seems to have deviated from the line of case law that was tending towards an excessively lenient analysis of the 'inseparable connection' between market services and the discharge of public services (see here and, for more details, here). However, the specific circumstances of the case may have prompted this  more nuanced or refined approach, particularly because the postal operator seems to be quite far removed from the core public function its (market) activity supports.

On the point of analysis of the reservation of the activity as an SGEI, which would exclude the existence of State aid under Article 106(2) TFEU, the CJEU focuses the analysis on the level of compensation that BPoshti receives for the discharge of the public service that triggers the reservation of activity. In that regard, it is worth noting that

45 ... a State measure regarded as compensation for the services provided by the recipient undertakings in order to discharge public service obligations, so that those undertakings do not enjoy a real financial advantage and the measure thus does not have the effect of putting them in a more favourable competitive position than the undertakings competing with them is not caught by Article 107(1) TFEU (see judgments in Libert and Others, C-197/11 and C-203/11, EU:C:2013:288, paragraph 84, and Altmark Trans and Regierungspräsidium Magdeburg, C-280/00, EU:C:2003:415, paragraph 87).

46 However, for such compensation to escape classification as State aid in a particular case, a number of conditions must be satisfied (judgment in Altmark, C-280/00, EU:C:2003:415, paragraph 88).

52 Where the undertaking which is to discharge the service of general economic interests ... is not chosen pursuant to a public procurement procedure, it is also for the referring court to make sure, in accordance with the fourth condition laid down in paragraph 93 of the judgment in Altmark (C-280/00, EU:C:2003:415), that the level of compensation is determined on the basis of an analysis of the costs which a typical undertaking, well run and adequately equipped, would have incurred in discharging those obligations, taking into account the relevant receipts and a reasonable profit for discharging the obligations (C-185/14, paras 45-46 and 52, emphasis added).

In the case at hand, the remuneration payable to BPoshti was set out in the Decree of the Council of Minister, which foresaw that the National Social Security Institute 'shall pay through its territorial divisions to the territorial divisions of the “Balgarski poshti” 8.5 thousandths of the pensions payable in the month in question for the work performed in connection with the payment of pensions through the postal network' (C-185/14, para 15). In my view, it seems unlikely that such a general figure established 15 years ago (coincidentally) matches the costs of a notional efficient postal competitor.

Thus, in general terms, the conclusion to be extracted from the Judgment in EasyPay and Finance Engineering is that the reservation of the activity of payment of pensions or any other benefits through postal money order (or equivalent) to incumbent postal operators (or any other undertakings) is very likely to fall foul of Articles 106 and 107 TFEU, unless the undertaking is chosen through a procurement procedure (which should be relatively easy to implement) or its remuneration is determined in strict accordance with the standard of a notional efficient postal competitor [for discussion, see A Sanchez-Graells, 'The Commission’s Modernization Agenda for Procurement and SGEI', in E Szyszczak & J van de Gronden (eds) Financing Services of General Economic Interest: Reform and Modernization (The Hague, TMC Asser Press / Springer, 2012) 161-181]. Let's hope that the domestic Bulgarian court follows the very clear cues given by the CJEU in that respect.

Is Altmark not applicable to ambulance services? Or is San Lorenzo & Croce Verde not very clear? (C-113/13)

In view of the Judgment in San Lorenzo and Croce Verde Cogema, C-113/13, EU:C:2014:2440, the rules applicable to the provision of emergency ambulance services is definitely clear as mud. In the case at hand, the applicants challenged an Italian law whereby emergency ambulance services must be awarded on a preferential basis and by direct award, without any advertising, to certain voluntary bodies (such as the Red Cross). This rule has, ultimately, constitutional protection in Italy, as 'the Italian Republic has incorporated into its constitution the principle of voluntary action by its citizens. Thus, the last paragraph of Article 118 thereof provides that citizens, acting individually or in an association, may participate in activities of public interest with the support of the public authorities, on the basis of the principle of subsidiarity' (para 9).

The applicants' argument was not necessarily of a constitutional level, but rather that freedom of establishment is unduly restricted by a preferential scheme that excludes the tendering out of those ambulance services. They brought forward arguments based on general free movement provisions, public procurement rules and competition rules. The latter are not examined because the CJEU considered that the public procurement analysis makes it unnecessary (para 64).

In my view, if read paragraph by paragraph, the reasoning of the CJEU is accurate and technically precise, but the overall Judgment is too timid in spelling out the conditions for the application of the 'public service exception' under art 106(2) TFEU (or otherwise) tot he direct award of emergency ambulance services to voluntary action associations. I will try to summarise my criticism and doubts as succinctly as possible. This is an area where more considered research is definitely needed.

On the bright side, I think that some positions of the CJEU can be clearly spelled out. 

(1) When fully applicable, both Dir 2004/18 and Dir 2014/24, preclude legislation such as that at issue in the main proceedings which provides that the local authorities are to entrust the provision of urgent and emergency ambulance services on a preferential basis and by direct award, without any advertising, to the voluntary bodies mentioned in the agreement (para 44). However, Dir 2004/18 does not automatically apply to ambulance services (see 2 below) and art 10(h) Dir 2014/24 clearly excludes these contracts from its scope of application (para 8). Hence, this clear position is not that useful in practice.

(2) Where the Directives are not fully applicable (ie where contracts can be tendered under part B services rules under dir 2004/18, or under the special regime for social services under arts 74-77 dir 2014/24), the general principles of transparency and equal treatment flowing from articles 49 TFEU and 56 TFEU would be applicable (para 45) if the contract is of cross-border interest (paras 46-50). In that case, it is also clear that such a preferential scheme would run contrary to the Directives, which are: 'intended to ensure the free movement of services and the opening-up to competition in the Member States which is undistorted and as wide as possible' (para 51). 

(3) Implicitly, then, where the Directives do not apply at all but the contract is still of cross-border interest (ie the new likely situation under art 10(h) dir 2014/24), the award of the contract is 'merely' subjected to the (residual/general) requirements of articles 49 TFEU and 56 TFEU. In that case (not expressly assessed in the San Lorenzo & Croce Verde Judgment), the contracting authority still would need to go through the applicable assessment under the market access test generally applicable to restrictions of freedom of establishment [for two thought provoking attempts to rationalise this test, see E Christodoulidis, 'The European Court of Justice and Total Market Thinking' (2013) 14 German Law Journal 2005; and MS Jansson & H Kalimo, 'De minimis meets “market access”: Transformations in the substance – and the syntax – of EU free movement law?' (2014) 51(2) Common Market Law Review 523].

Hence, there are always concerns and constraints derived from EU law (either general, or the specific rules of public procurement) if the contract is of cross-border interest. Nonetheless, they are of varying degrees of intensity and it looks as if upon the entry into force of Directive 2014/24, the award of service contracts for emergency ambulance services  (either exclusively, or for most of their value if the contracts include other sorts of ambulance services) will exclusively be governed by the general rules on freedom of establishment.

On the shady side, though, once the potential incompatibility with EU public procurement or general free movement law is established (and, really, there seems to be no escape to 1-3 above except if the contract has no cross-border interest whatsoever--and, on that, see the  Ancona issue here), the CJEU will apply a Sodemare-like test because the provision of ambulance services falls within the (very broad) remit of the organisation of healthcare and social security systems (paras 55-59). In that case, then, it will particularly important that "EU law does not detract from the power of the Member States to organise their public health and social security systems" (para 55), but that "it is for the Member States, which have a discretion in the matter, to decide on the degree of protection which they wish to afford to public health and on the way in which that degree of protection is to be achieved" (para 56). So far, so good.

On the dark side, however, and significantly departing from the more developed approach in Altmark for SGEIs (is the CJEU implicitly recognising--without analysis--that ambulance services are per se SSGIs?), the CJEU has created an economically oriented safeguard that leaves too much room for maneuver by ruling that

Having regard to the general principle of EU law on the prohibition of abuse of rights (see, by analogy, judgment in 3M Italia, C‑417/10, EU:C:2012:184, paragraph 33), the application of that legislation cannot be extended to cover the wrongful practices of voluntary associations or their members. Thus, the activities of voluntary associations may be carried out by the workforce only within the limits necessary for their proper functioning. As regards the reimbursement of costs, it must be ensured that profit making, even indirect, cannot be pursued under the cover of a voluntary activity and that volunteers may be reimbursed only for expenditure actually incurred for the activity performed, within the limits laid down in advance by the associations themselves (C-113/13, para 62, emphasis added).

In my view, this is way too timid. Indeed, the CJEU constructs a rather weak safeguard by not focussing at all in the economic efficiency of the voluntary activities (which, even on a non-profit, reimbursement basis can be extremely inefficient) and imposes a sort of 'anti-fraud' test that, in my view, misses the point. In order to ensure compatibility with State aid provisions (which should not have been set aside so quickly in para 64), an efficiency based test like the one existing in the fourth condition of Altmark should have been imposed [for discussion, see A Sanchez Graells, “The Commission’s Modernization Agenda for Procurement and SGEI”, in E Szyszczak & J van de Gronden (eds) Financing SGEIs: State Aid. Reform and Modernisation, Legal Issues of Services of General Interest Series (The Hague, TMC Asser Press / Springer, 2012) 161-181]. 

Indeed, the analysis of the applicability of Art 106(2) TFEU to the case is totally missing and this is strange. It looks like the difference between SGEIs and SSGIs will haunt all of us also under the 2014 Directives and revised guidance from the European Commission is becoming urgently needed, given the implicit vacuum that can exist if Member States maximise the possibilities of direct award under art 10(h) dir 2014/24, but equally under its arts 74-77 (and particularly, the latter).

As briefly mentioned, this is an area where more research is needed. I hope I can convince some colleagues to put together a research project on this soon. Interested contributors, please feel free to contact me at asanchezgraells@gmail.com.

GC pushes for overcompliance with EU public procurement rules in the provision of public services (T-309/12)

In its Judgment in Zweckverband Tierkörperbeseitigung v Commission, T-309/12, EU:T:2014:676, the GC has assessed the compatibility with EU State aid rules of a system of financial support to the maintenance of reserve animal disposal capacity in the case of epizootic. It is a very long and complicated Judgment and its reading is not easy, as the only available versions are in French and German. However, it is a case that should not go unnoticed. In my view, it raises two very fundamental questions where the position of the GC (and the Commission) is at least highly contentious and it will be good to see if a further appeal to the CJEU opens a door to some clarification in this area of EU economic law.

 

The first contentious issue is the economic or non-economic character of the activity at stake. In para 86 of the Judgment [and relying by analogy on the reasoning in FENIN, C-205/03, EU:C:2006:453 at para 26 and in Mitteldeutsche Flughafen and Flughafen Leipzig-Halle v Commission, C-288/11 P, EU:C:2012:821 at para 44 (but quoting its own argument in T-443/08 at para 95, which the CJEU later endorsed)] the GC concludes that "even if it is true that the applicant was required to maintain a reserve capacity in the event of an epidemic (rectius, epizootic), it does not mean that the implementation of this obligation by the applicant was related to the exercise of the prerogatives of public power" (emphasis added). In my view, and for reasons that I still need to articulate fully, this does not make good sense. However, this is a point I would like to reserve for the near future.

 

The second contentious issue is that, in the overall assessment of the GC, the fact that the arrangement between the affected German lander (and a multiplicity of regional and local authorities) and the public undertaking providing the reserve animal disposal capacity in the case of epizootic was covered by exceptions to the EU public procurement rules (either under the Teckal in-house exception or the Hamburg public-public cooperation exception, which is not entirely clear in the case) did not have any effect on the application of the Altmark criteria to the case. I know that this is an issue riddled with nuances and jargon stemming from public procurement rules, but I will try to disentangle it in a way that shows the difficulty created by the GC finding, as I see it.

 

Under the Altmark criteria (4th condition), compliance with applicable public procurement rules is a requirement for State aid granted to the provider of services of economic interest (acknowledgely, an issue related with the first point) to be compatible with Articles 107(1) and 106(2) SGEI (rectius, for State aid not to exist due to the lack of economic advantage) [for discussion, see A Sánchez Graells (2013), "The Commission’s Modernization Agenda for Procurement and SGEI" in E  Szyszczak & J van de Gronden (eds.), Financing SGEIs: State Aid Reform and Modernisation, Series Legal Issues of Services of General Interest (TMC Asser Press/Springer) 161-181]. In the absence of procurement procedures for the selection of the provider, the level of economic support needs to be "determined on the basis of an analysis of the costs which a typical undertaking, well run and adequately provided with [material means] so as to be able to meet the necessary public service requirements, would have incurred in discharging those obligations, taking into account the relevant receipts and a reasonable profit for discharging the obligations". This is a fiendish exercise and, generally speaking, procurement is a much easier road. Hence, structurally, there is a clear pressure on public authorities to resort to procurement procedures in order to be on the safe side re compliance with State aid rules.

 

At the same time, however, it should be highlighted that public authorities have no obligation to resort to the market in order to discharge their (public service) missions and they are fundamentally free to either cooperate with other public authorities (Hamburg) or entrust the execution of those activities in-house (Teckal). This is an area where the clash between EU Institutions and Member States has been evident and the recently approved Directive 2014/24 tries to provide a compromise solution in Art 12 by recognising that in those cases a public procurement procedure is not required (and allowing for the instrumental entities used to even carry out market activities up to a 20% of their average total turnover). 

 

In my view, the fact that public procurement rules allow for the avoidance of public tenders in the award of public contracts [including those for the provision of public services (broadly defined)] to public undertakings or other contracting authorities, creates a difficulty from a State aid/procurement interaction perspective. The basic difficulty derives from the fact that a perfectly legal decision to keep certain activities within the public sector creates very significant difficulties for the funding of that activity as soon as there is any (potential) interaction with the market--which, at least under the new rules in Art 12 of Dir 2014/24, is also a perfectly legal situation. This is a structural problem of coordination of both sets of rules that comes to put pressure on the viability of keeping the Altmark criteria untouched.

 

Indeed, following the general reasoning of the GC in Zweckverband Tierkörperbeseitigung, the absence of a procurement procedure (despite the fact that it was not required) excludes the possibility to benefit from the presumption set out in the 4th Altmark condition and creates a significant risk of breach of EU State aid rules. From the perspective of the consistency of the procurement system and the effectiveness of the general consensus that the procurement rules "should [not] deal with the liberalisation of services of general economic interest, reserved to public or private entities, or with the privatisation of public entities providing services" [Rec (6) Dir 2014/24] , this is problematic. The increased risks of infringement of State aid rules brings a very important limitation on the contracting authorities' actual freedom to resort to schemes covered by Art 12 of Directive 2014/24 and creates a clear incentive for overcompliance with public procurement rules.

 

Regardless of the benefits that more compliance with procurement rules and public tenders could bring about, the clear limits that EU constitutional rules (and the principle of neutrality of ownership in Art 345 TFEU in particular) create need to be respected and duly acknowldeged. Hence the difficulty in coordinating all these sets of provisions in a manner that is respectful with both the split of competences between Member States and the EU, and the effectiveness of EU State aid rules.

 

In my view, the CJEU should use the opportunity to clarify these complicated issues in case the GC's Zweckverband Tierkörperbeseitigung Judgment is further appealed. In the meantime, there are lots of issues that require further thought and, in particular, how to exactly reach the adequate balance in the coordination of both sets of rules.