In its Judgment of 14 January 2016 in Ostas celtnieks, C-234/14, EU:C:2016:6, the Court of Justice of the European Union (CJEU) stressed the flexibility that the EU public procurement rules on teaming and reliance on third party capacity impose on contracting authorities.
In the case at hand, the Latvian municipality of Talsi had approved tender documents requiring tenderers relying on the capacities of other contractors to 'mention all those contractors and provide evidence that it has the necessary resources at its disposal. If that tenderer is to be awarded the contract, it must have concluded a cooperation agreement with the contractors concerned before the award and forwarded this to the contracting authority'. One of the main obligations under such agreement would have been to include 'a clause stipulating that each party is to be jointly and severally liable for the performance of the contract'. The requirement for a pre-award agreement was challenged.
In an unsurprising decision, the CJEU stressed that the relevant rules (then Arts 47 and 48 Dir 2004/18), precluded a contracting authority from imposing on a tenderer which relies on the capacities of other entities the obligation, before the contract is awarded, to conclude a cooperation agreement with those entities or to form a partnership with them. Indeed, the CJEU recalled that it is settled case law that 'Articles 47(2) and 48(3) of Directive 2004/18 recognise the right of every economic operator to rely, for a particular contract, upon the capacities of other entities, "regardless of the nature of the links which it has with them", provided that it proves to the contracting authority that it will have at its disposal the resources necessary for the performance of the contract' (para 23, with reference to Swm Construzioni, C-94/12, EU:C:2013:646; see here). The CJEU stressed that such 'interpretation ... is consistent with the aim of the widest possible opening-up of public contracts to competition pursued by the relevant directives to the benefit not only of economic operators but also of contracting authorities. In addition, that interpretation also facilitates the involvement of small- and medium-sized undertakings in the contracts procurement market' (para 24).
This was clearly set out in the pre-existing case law of the CJEU and therefore, hardly deserves any comment. However, in proceeding with its reasoning, the Court engaged in a clarification that can raise significant doubts as to the interpretation of the new rules on teaming and group bidding in Arts 19 and 63 of Dir 2014/24. The CJEU stressed that 'the tenderer is free to choose ...the legal nature of the links it intends to establish with the other entities on whose capacities it relies in order to perform a particular contract and, on the other, the type of proof of the existence of those links' (para 28, emphasis added).
On the basis of this freedom of organisation recognised by the CJEU (which rings of the freedom to conduct a business under Art 16 of the EUCFR, even if it is not mentioned), the CJEU determined that '[i]n the present case, ... the contracting authority requires a tenderer ... which relies on the capacities of other entities for the performance of the contract concerned, to establish links of a precise legal nature with those entities, so that only those particular links are capable, in the eyes of the contracting authority, of proving that the contract does in fact have the resources necessary to perform that contract ... a rule such as that ... of the tender specifications manifestly deprives the provisions of Articles 47(2) and 48(3) of Directive 2004/28 of their effectiveness' (paras 30 and 33, emphasis added).
The reason I find the Judgment in Ostas celtnieks troubling for the interpretation of Arts 19 and 63 of Dir 2014/24 is that, going beyond the requirements and limits of Arts 47 and 48 Dir 2004/18, a new provision in Art 63 Dir 2014/24 now establishes that despite the fact that groups of economic operators, including temporary associations, may participate in procurement procedures and they shall not be required by contracting authorities to have a specific legal form in order to submit a tender or a request to participate [Art 19(2)], and that contracting authorities may require groups of economic operators to assume a specific legal form only once they have been awarded the contract, and to the extent that such a change is necessary for the satisfactory performance of the contract [Art 19(3)], Art 63(1) in fine Dir 2014/24 foresees that '[w]here an economic operator relies on the capacities of other entities with regard to criteria relating to economic and financial standing, the contracting authority may require that the economic operator and those entities be jointly liable for the execution of the contract.'
In view of the Judgment in Ostas celtnieks, it seems clear that either the enforcement of Art 63 Dir 2014/24 will require a change of tack in the development of the flexible case law applicable to teaming agreements, or Art 63 Dir 2014/24 will trigger a potential nightmare of legal discussion about the limits of the possibility to request assurances to guarantee that the economic operator and those entities on which financial and economic capacities it relies be jointly liable for the execution of the contract, while not forcing it to 'establish links of a precise legal nature with those entities, so that only those particular links are capable, in the eyes of the contracting authority, of proving that the contract does in fact have the resources necessary to perform that contract'.
This builds up on my previous criticism of the liability requirement created by Art 63 Dir 2014/24, which was along different lines:
... the ... requirement of joint liability for the execution of the contract can make it very difficult to reach subcontracting agreements or similar arrangements for the reliance on third parties for the partial execution of a minor part of the contract. Moreover, it can result in complicated structures of side letters of indemnity that raise the legal costs linked to participation. In my opinion, in relation to both requirements, the contracting entity should be satisfied with the liability of the main contractor and, if need be, ‘self-protect’ through requirements for adequate professional risk indemnity insurance under article 58(3) of Directive 2014/24. Therefore, a pro-competitive interpretation of these rules requires subjecting their use to very strict proportionality tests in order to avoid unnecessary restrictions of the ability of tenderers to rely on third party capacities in ways that fall short of teaming and bidding jointly for contracts [ A Sanchez Graells, Public procurement and the EU competition rules, 2nd edn (Oxford, Hart, 2015) 317-18].
In my view, the Judgment in Ostas celtnieks strengthens the argument for a very exceptional use of Art 63(1) in fine Dir 2014/24 by contracting authorities.
