A hot potato? CJEU faces questions on rules applicable to cross-border procurement litigation (C-480/22)

The Court of Justice has received a very interesting preliminary reference from the Austrian Supreme Administrative Court (Verwaltungsgerichtshof) concerning international conflict of laws issues relating to cross-border public procurement involving contracting entities from different Member States (Case C-480/22, EVN Business Service and Others, hereafter the ‘EVN II’ case). The preliminary reference covers issues of judicial competence and applicable procedural law to cross-border challenges of procurement decisions.

Interestingly, the case concerns a negative conflict of jurisdiction, where neither the Bulgarian nor the (first instance) Austrian courts consider themselves competent. The case thus seems to be a bit of a hot potato—although the referring (higher) Austrian court seems interested in nipping the issue in the bud, presumably to avoid a situation of deprivation of procurement remedies that would ultimately violate EU procurement rules and general requirements of access to justice under the Charter of Fundamental Rights (though this is not explicit in the preliminary reference).

The root of the problem is that the conflict of laws dimension of the administrative review of procurement decisions involving contracting authorities from different Member States is not explicitly addressed in the 2014 Procurement Directives. Although the case concerns the interpretation of Article 57 of Directive 2014/25/EU, it is of direct relevance to the interpretation of Article 39 of Directive 2014/24/EU, as the wording of provisions is near identical (with the exception of references to contracting entities rather than contracting authorities in Art 57 Dir 2014/25/UE, and the suppression of specific public sector rules on awards under framework contracts that are not relevant to this case).

I have been interested in the regulatory gaps left by Art 39 Dir 2014/24/EU for a while. In this post, I address the first two questions posed to the CJEU, as the proposed answers would make it unnecessary to answer the third question. My analysis is based on my earlier writings on the topic: A Sanchez-Graells, ‘The Emergence of Trans-EU Collaborative Procurement: A “Living Lab” for European Public Law’ (2020) 29(1) PPLR 16-41 (hereafter Sanchez-Graells, ‘Living Lab’)); and idem, ‘Article 39 - Procurement involving contracting authorities from different Member States’ in R Caranta and A Sanchez-Graells (eds), European Public Procurement. Commentary on Directive 2014/24/EU (Edward Elgar 2021) 436-447 (hereafter Sanchez-Graells, ‘Art 39’).

The ‘EVN II’ case

Based on the facts of the preliminary reference, the legal dispute originates in a ‘public house’ environment within the Austrian EVN group. The Land of Lower Austria owns 51% of EVN AG, which in turn indirectly wholly owns both (i) EVN Business Service GmbH (‘EBS GmbH’), an Austrian central purchasing body (CPB), and (ii) Elektrorazpredelenie YUG EAD (‘EY EAD’), a Bulgarian utilities company. EBS GmbH had the task of procuring services on behalf of and for the account of EY EAD through a framework agreement on the performance of electrical installation works and related construction and dismantling works divided into 36 lots, the place of performance being located in Bulgaria.

Notably, in the invitation to tender, the Landesverwaltungsgericht Niederösterreich (Regional Administrative Court, Lower Austria) was named as the competent body for appeal proceedings/review procedures. Austrian law is stated as the law applicable to the ‘procurement procedure and all claims arising therefrom’, and Bulgarian law as the law applicable to ‘the performance of the contract’.

Two Bulgarian companies unsuccessfully submitted tenders for several lots and subsequently sought to challenge the relevant award decisions. However, those claims were dismissed by the Austrian Regional Administrative Court on grounds of lack of competence. The Court argued that a decision on whether a Bulgarian undertaking may conclude a contract with a contracting entity located in Bulgaria, which is to be performed in Bulgaria and executed in accordance with Bulgarian law, would interfere massively with Bulgaria’s sovereignty, thereby giving rise to tension with the territoriality principle under international law. Moreover, the Court argued that it is not apparent from the Austrian Federal Law on public procurement which procedural law is to be applied to the review procedure.

The case thus raises both an issue of the competence for judicial review and the applicable procedural law. The conflict of jurisdiction is negative because the Bulgarian Supreme Administrative Court confirmed the lack of competence of the Bulgarian procurement supervisory authority.

An avoidable gap in the 2014 Directives

The issue of cross-border use of CPB services is regulated by Art 57(3) Dir 2014/25/EU, which in identical terms to Art 39(3) Dir 2014/24/EU, establishes that ‘The provision of centralised purchasing activities by a central purchasing body located in another Member State shall be conducted in accordance with the national provisions of the Member State where the central purchasing body is located.’

The main contention in the case is whether Article 57(3) of Directive 2014/25 must be interpreted as covering not only the procurement procedure itself, but also the rules governing the review procedure. The argument put forward by the Bulgarian challengers is that if the CPB is required to apply Austrian law from a substantive point of view, the appeal proceedings before the Austrian review bodies must also be conducted in accordance with Austrian procedural law.

As mentioned above, conflict of laws issues are not regulated in the 2014 Procurement Directives, despite explicit rules having been included by the European Commission in the 2011 proposal for a new utilities procurement directive (COM(2011) 895 final, Art 52) and the 2011 proposal for a new public sector procurement directive (COM(2011) 896 final, Art 38). With identical wording, the proposed rule was that

Several contracting [authorities/entities] may purchase works, supplies and/or services from or through a central purchasing body located in another Member State. In that case, the procurement procedure shall be conducted in accordance with the national provisions of the Member State where the central purchasing body is located [Art 52(2)/Art 38(2) of the respective proposals].

Decisions on the award of public contracts in cross-border public procurement shall be subject to the ordinary review mechanisms available under the national law applicable [Art 52(8)/Art 38(8) of the respective proposals].

The 2011 proposals would thus have resolved the conflict of laws in favour of the jurisdiction where the CPB is based. Reference to subjection ‘to the ordinary review mechanisms available under the national law applicable’ would also have encompassed the issue of applicable procedural law. The 2011 proposals also included explicit rules on the mutual recognition and collaboration in the cross-border execution of procurement review decisions (for discussion, see Sanchez-Graells, ‘Living Lab’, 25-26).

However, the 2014 Directives omit such rules. While there are indications in the recitals that the ‘new rules on cross-border joint procurement … should determine the conditions for cross-border utilisation of central purchasing bodies and designate the applicable public procurement legislation, including the applicable legislation on remedies’ (rec (82) Dir 2014/25/EU and, identically, rec (73) Dir 2014/24/EU), this is not reflected in the provisions of the Directives. While the position in the recitals could be seen as interpretive guide to the effect that the system of conflict of laws rules implicit in the Directives is unitary and the location of the CPB is determinative of the jurisdiction and applicable law for the review of its procurement decisions, this is not necessarily a definitive argument as the CJEU has made clear that recitals may be insufficient to create rules [see C-215/88, Casa Fleischhandel v BALM, EU:C:1989:331, para 31; Sanchez-Graells, ‘Art 39’, para 39.26. For discussion, see S Treumer and E Werlauff, ‘The leverage principle: Secondary Community law as a lever for the development of primary Community law’ (2003) 28(1) European Law Review 124-133].

Questions before the CJEU — and proposed answers

Given the lack of explicit solution in the 2014 Procurement Directives, the CJEU now faces two relevant questions in the EVN II case. The first question concerns the scope of the rules on the provision of cross-border CPB services, which is slightly complicated by the ‘public house’ background of the case. The second question concerns whether the rules subjecting such procurement to the law of the CPB extend to both the legislation applicable to review procedures and the competence of the review body.

Question 1 - contracting authorities/entities from different Member States

In the EVN II case, the CJEU is first asked to establish whether Art 57(3) Dir 2014/25/EU (and, implicitly Art 39(3) Dir 2014/24/EU) should be interpreted as meaning that the provision of centralised purchasing activities by a CPB located in another Member State exists where the contracting entity – irrespective of the question as to the attribution of the control exercised over that contracting entity – is located in a Member State other than that of the CPB. The issue of attribution of control arises from the fact that, in the case at hand, the ‘client’ Bulgarian contracting entity is financially controlled by an Austrian regional authority—which, incidentally, also controls the CPB providing the centralised purchasing services. This raises the question whether the client entity is ‘truly’ foreign, or whether it needs to be reclassified as Austrian on the basis of the financial control.

While I see the logic of the question in terms of the formal applicability of the Directive, from a functional perspective, the question does not make much sense and an answer other than yes would create significant complications.

The question does not make much sense because the aim of the rule in Art 57(3) does not gravitate on the first part of the article: ‘The provision of centralised purchasing activities by a central purchasing body located in another Member State shall be conducted in accordance with the national provisions of the Member State where the central purchasing body is located.’ Rather, the relevance of the rule is in the extension of the law of the CPB to ‘(a) the award of a contract under a dynamic purchasing system; [and] (b) the conduct of a reopening of competition under a framework agreement’ by the ‘client’ (foreign) contracting authority or entity. The purpose of Art 57(3) Dir 2014/25/EU is thus the avoidance of potentially conflicting rules in the creation of cross-border CPB procurement vehicles and in the call-offs from within those vehicles (Sanchez-Graells, ‘Art 39’, paras 39.13-39.15).

Functionally, then, the logic of the entirety of Art 57(3) (and Art 39(3)) rests on the avoidance of a risk of conflicting procurement rules applicable to the cross-border use of CPB services, presumably for the benefit of participating economic operators, as well as in search of broader consistency of the substantive legal framework. Either such a risk exists, because the ‘client’ contracting entity or authority would otherwise be subjected to a different procurement legislation than that applicable to the CPB, or it doesn’t. That is in my view the crucial functional aspect.

If this approach is correct, the issue of (potential) Austrian control over the Bulgarian contracting entity is irrelevant, as the crucial issue is whether it is generally subjected to Bulgarian utilities procurement law or not when conducting covered procurement. There is no information in the preliminary reference, but I would assume it is. Primarily because of the formal criteria determining subjection to the domestic implementation of the EU Directives, which tends to be (implicitly) based on the place of location of the relevant entity or authority.

More fundamentally, if this approach is correct, the impingement on Bulgarian sovereignty feared by the Austrian first instance court is a result of EU procurement law. There is no question that the 2014 Directives generate the legal effect that contracting authorities of a given Member State (A) are bound to comply with the procurement legislation of a different Member State (B) when they resort to the services of that State (B) CPB and then implement their own call-off procedures, potentially leading to the award of a contract to an undertaking in their own Member State (A). This potentially puts the legislation of State B in the position of determining whether an undertaking of State A may conclude a contract with a contracting entity located in State A, which is to be performed in State A and executed in accordance with the law of State A. It is thus not easily tenable under EU law that this represents a massive interference with State A’s sovereignty—unless one is willing to challenge the EU’s legal competence for the adoption of the 2014 Directives (see Sanchez-Graells, ‘Living Lab’, 31-33).

A further functional consideration is that the cross-border provision of CPB services does not need to be limited to a two-country setting. If the CPB of country B is eg creating a framework agreement that can be used by contracting authorities and entities from countries A, C, D, and E, the applicability of Art 57(3) Dir 2014/25/EU (and Art 39(3) Dir 2014/24/EU) could not vary for entities from those different countries, or from within a country, depending on a case-by-case analysis of the location of the entities controlling the ‘client’ authorities and entities. In other words, Art 57(3) Dir 2014/25/EU (and Art 39(3) Dir 2014/24/EU) cannot reasonably be of variable application within a single procurement.

Taking the facts of the EVN II case, imagine that in addition to EY EAD, other Bulgarian utilities were also able to draw from the (same lots of the) framework agreement put in place by EBS GmbH. How could it be that Art 57(3) controlled the procurement for the ‘clearly’ Bulgarian utilities, whereas it may not be applicable for the Bulgarian utility controlled by an Austrian authority?

In my view, all of this provides convincing argumentation for the CJEU to answer the first question by clarifying that, from a functional perspective, the need to create a unitary legal regime applicable to procurement tenders led by CPBs where there is a risk of conflicting substantive procurement rules requires interpreting Art 57(3) Dir 2014/25/EU (and Art 39(3) Dir 2014/24/EU) as applicable where the location of ‘client’ contracting authorities or entities is in one or more Member States other than that where the CPB is itself located.

Question 2 - presumption of jurisdiction and applicable law

The second question put to the CJEU builds on the applicability of Art 57(3) Dir 2014/25/EU and asks whether its ‘conflict-of-law rule … according to which the “provision of centralised purchasing activities” by a [CPB] located in another Member State is to be conducted in accordance with the national provisions of the Member State where the [CPB] is located, also cover[s] both the legislation applicable to review procedures and the competence of the review body’. Other than on the basis of the interpretive guide included in the recitals of Dir 2014/25/EU (and Dir 2014/24/EU) as above, I think there are good reasons to answer this question in the affirmative.

The first line of arguments is systematic and considers the treatment of conflict of laws situations within Art 57 Dir 2014/25/EU (and 39 Dir 2014/24/EU; see Sanchez-Graells, ‘Living Lab’, 21-24). In that regard, while there is a hard conflict of laws rule in Art 57(3) (and 39(3)) that selects the law of the CPB to the entirety of the procurement procedure, including ‘foreign’ call-offs, the situation is very different in the remainder of the provision. Indeed, when it comes to occasional cross-border joint procurement, in the absence of a binding international agreement, the choice of the applicable substantive procurement legislation is left to the agreement of the participating contracting authorities or entities (Art 57(4) Dir 2014/25/EU, and Art 39(4) Dir 2014/24/EU). Similarly, where the cross-border procurement is carried out through a joint entity, including European Groupings of territorial cooperation, the participating contracting authorities have a choice between the law of the Member State where the joint entity has its registered office, or that of the Member State where the joint entity is carrying out its activities (Art 57(5) Dir 2014/25/EU, and Art 39(5) Dir 2014/24/EU). This indicates that the choice of law rule applicable to the cross-border provision of CPB services leaves much less space (indeed, no space) to the application of a substantive procurement law other than that of the CPB. An extension of this argument supports answering the question in the affirmative and extending the choice of law rule to both the legislation applicable to review procedures and the competence of the review body.

A second line of argument concerns the effectiveness of the available procurement remedies. Such effectiveness would, on the one hand, be increased by a reduced judicial burden of considering foreign procurement law where the location of the CPB determines jurisdiction and procedural applicable law, which can also be expected to be coordinated with substantive procurement law. On the other hand, answering the question in the affirmative would require economic operators to challenge decisions concerning potential contracts with a domestic contracting authority or entity in a foreign court. However, given that the substantive rules are those of the foreign jurisdiction and that they were expected to tender (or tendered) in that jurisdiction, the effect may be relatively limited where the CPB decisions are being challenged—as compared to a challenge of the call-off decision carried out by their domestic contracting authority or entity, but subject to foreign procurement law. In my view, the last set of circumstances is very unlikely, as the applicability of the ‘foreign’ law of the CPB generates a very strong incentive for the CPBs to also carry out the call-off phase on behalf of the client authority or entity (Sanchez-Graells, ‘Art 39’, 39.14).

Overall, in my view, the CJEU should answer the second question by clarifying that the reference to the national provisions of the Member State where the CPB is located in Art Art 57(3) Dir 2014/25/EU (and 39(3) Dir 2014/24/EU, also covers both the legislation applicable to review procedures and the competence of the review body.

Some further thoughts

Beyond the specific issues before the CJEU, the EVN II case raises broader concerns around the flexible contractualised approach (not to say the absence of an approach) to conflict of laws issues in the 2014 Procurement Directives—which leave significant leeway to participating contracting authorities and entities to craft the applicable legal regime.

While the situation can be relatively easy to sort out with an expansive interpretation of Art 57(3) Dir 2014/25/EU and Art 39(3) Dir 2014/24/EU in the relatively simple case of the cross-border provision of CPB services (as above), these issues will be much more complex in other types of procurement involving contracting authorities from (multiple) different Member States. The approach followed by the first instance Austrian court in EVN II seems to me reflective of more generalised judicial approaches and attitudes towards unregulated conflict of laws situations where they can be reluctant to simply abide by whatever is published in the relevant procurement notices—as was the case in EVN II, where the invitation to tender was explicit about allocation of jurisdiction and selection of applicable procedural law and, that notwithstanding, the first instance court found issues on both grounds.

This can potentially be a major blow to the ‘contractualised’ approach underpinning the 2014 Procurement Directives, especially where situations arise that require domestic courts of a Member State to make decisions imposing liability on contracting authorities of another Member State, and the subsequent need to enforce that decision. The issue of the conflict of laws dimension of the administrative review of procurement decisions involving contracting authorities from different Member States will thus not be entirely addressed by the Judgement of the CJEU in EVN II, although the CJEU could hint at potential solutions, depending on how much it decided to rely on the 2011 proposals as a steppingstone towards an expansive interpretation of the current provisions—which is by no means guaranteed, as the suppression of explicit rules could as easily be interpreted as a presumption or as a rejection of those rules by the CJEU.

It seems clearer than ever that the procurement remedies Directives need to be reformed to create a workable and transparent system of conflict of laws dimension of the administrative review of procurement decisions involving contracting authorities from different Member States, as well as explicit rules on cross-border enforcement of those decisions (Sanchez-Graells, ‘Living Lab’, 39-40).

Recording of webinar on 'Digitalization and AI decision-making in administrative law proceedings'

The Centre for Global Law and Innovation of the University of Bristol Law School and the Faculty of Law at Universidade Católica Portuguesa co-organised an online workshop to discuss emerging issues in digitalization and AI decision-making in administrative law proceedings. I had the great pleasure of chairing it and I think quite a few important issues for further discussion and research were identified. The speakers kindly agreed to share a recording of the session (available here), of which details follow:

Digitalization and AI decision-making in administrative law proceedings

This is a hot area of legal and policy development that has seen an acceleration in the context of the covid-19 pandemic. Emerging research finds points of friction in the simple transposition of administrative law and existing procedures to the AI context, as well as challenges and shortcomings in the judicial review of decisions supported (or delegated) to an AI.

While more and more attention is paid to the use of AI by the public sector, key regulatory proposals such as the European Commission’s Proposal for an Artificial Intelligence Act would largely leave this area to (self)regulation via codes of practice, with the exception of public assistance benefits and services. Self-regulation is also largely the approach taken by the UK in its Guide to using artificial intelligence in the public sector, and the UK courts seem reluctant to engage with the technology underpinning automated decision-making. It is thus arguable that a regulatory gap is increasingly visible and that new solutions and regulatory approaches are required.

The panellists in this workshop covered a range of topics concerning transparency, data protection, automation of decision-making, and judicial review. The panel included (in order of participation):

• Dr Marta Vaz Canavarro Portocarrero de Carvalho, Assistant Professor at the Faculty of Law of Universidade Católica Portuguesa, specialising in administrative law, and member of the Centro de Arbitragem Administrativa (Portuguese Administrative Law Arbitration Centre).

• Dr Filipa Calvão, President of the Comissão Nacional de Proteção de Dados (Portuguese Data Protection Authority) since 2012, and Associate Professor at the Faculty of Law of Universidade Católica Portuguesa.

• Dr Pedro Cerqueira Gomes, Assistant Professor at Universidade Católica Portuguesa and Lawyer at Cerqueira Gomes & Associados, RL, specialising in administrative law and public procurement, and author of EU Public Procurement and Innovation - the innovation partnership procedure and harmonization challenges (Edward Elgar 2021).

• Mr Kit Fotheringham, Teaching Associate and postgraduate research student at the University of Bristol Law School. His doctoral thesis is on administrative law, specifically relating to the use of algorithms, machine learning and other artificial intelligence technologies by public bodies in automated decision-making procedures.

Where does the proposed EU AI Act place procurement?

Thinking about some of the issues raised in the earlier post ‘Can the robot procure for you?,’ I have now taken a close look at the European Commission’s Proposal for an Artificial Intelligence Act (AIA) to see how it approaches the use of AI in procurement procedures. It may (not) come as a surprise that the AI Act takes an extremely light-touch approach to the regulation of AI uses in procurement and simply subjects them to (yet to be developed) voluntary codes of conduct. I will detail my analysis of why this is the case in this post, as well as some reasons why I do not find it satisfactory.

Before getting to the details, it is worth stressing that this is reflective of a broader feature of the AIA: its heavy private sector orientation. When it comes to AI uses by the public sector, other than prohibiting some massive surveillance by the State (both for law enforcement and to generate a system of social scoring) and classifying as high-risk the most obvious AI uses by the law enforcement and judicial authorities (all of which are important, of course), the AIA remains silent on the use of AI in most administrative procedures, with the only exception of those concerning social benefits.

This approach could be generally justified by the limits to EU competence and, in particular, those derived from the principle of administrative self-organisation of the Member States. However, given the very broad approach taken by the Commission on the interpretation and use of Article 114 TFEU (which is the legal basis for the AIA, more below), this is not entirely consistent. It could rather be that the specific uses of AI by the public sector covered in the proposal reflect the increasingly well-known problematic uses of (biased) AI solutions in narrow aspects of public sector activity, rather than a broader reflection on the (still unknown, or still unimplemented) uses that could be problematic.

While the AIA is ‘future-proofed’ by including criteria for the inclusion of further use cases in its ‘high-risk’ category (which determines the bulk of compliance obligations), it is difficult to see how those criteria are suited to a significant expansion of the regulatory constraints to AI uses by the public sector, including in procurement. Therefore, as a broader point, I submit that the proposed AIA needs some revision to make it more suited to the potential deployment of AI by the public sector. To reflect on that, I am co-organising a webinar on ’Digitalization and AI decision-making in administrative law proceedings’, which will take place on 15 Nov 2021, 1pm UK (save the date, registration and more details here). All welcome.

Background on the AIA

Summarising the AIA is both difficult and has already been done (see eg this quick explainer of the Centre for Data Innovation, and for an accessible overview of the rationale and regulatory architecture of the AIA, this master class by Prof Christiane Wendehorst). So, I will just highlight here a few issues linked to the analysis of procurement’s position within its regulatory framework.

The AIA seeks to establish a proportionate approach to the regulation of AI deployment and use. While its primary concern is with the consolidation of the EU Single Digital Market and the avoidance of regulatory barriers to the circulation of AI solutions, its preamble also points to the need to ensure the effectiveness of EU values and, crucially, the fundamental rights in the Charter of Fundamental Rights of the EU.

Importantly for the purposes of our discussion, recital (28) AIA stresses that ‘The extent of the adverse impact caused by the AI system on the fundamental rights protected by the Charter is of particular relevance when classifying an AI system as high-risk. Those rights include ... right to an effective remedy and to a fair trial [Art 47 Charter] … [and] right to good administration {Art 41 Charter]’.

The AIA seeks to create such a proportionate approach to the regulation of AI by establishing four categories of AI uses: prohibited, high-risk, limited risk requiring transparency measures, and minimal risk. The two categories that carry regulatory constraints or compliance obligations are those concerning high-risk (Arts 8-15 AIA), and limited risk requiring transparency measures (Art 52 AIA, which also applies to some high-risk AI). Minimal risk AI uses are left unregulated, although the AIA (Art 69) seeks to promote the development of codes of conduct intended to foster voluntary compliance with the requirements applicable to high-risk AI systems.

Procurement within the AIA

Procurement AI practices could not be classified as prohibited uses (Art 5 AIA), except in the difficult to imagine circumstances in which they deployed subliminal techniques. It is also difficult to see how they could fall under the regime applicable to uses requiring special transparency (Art 52) because it only applies to AI systems intended to interact with natural persons, which must be ‘designed and developed in such a way that natural persons are informed that they are interacting with an AI system, unless this is obvious from the circumstances and the context of use.’ It would not be difficult for public buyers using external-facing AI solutions (eg chatbots seeking to guide tenderers through their e-submissions) to make it clear that the tenderers are interacting with an AI solution. And, even if not, the transparency obligations are rather minimal.

So, the crux of the issue rests on whether procurement-related AI uses could be classified as high-risk. This is regulated in Art 6 AIA, which cross-refers to Annex III AIA. The Annex contains a numerus clausus of high-risk AI uses, which is however susceptible of amendment under the conditions specified in Art 7 AIA. Art 6/Annex III do not contain any procurement-related AI uses. The only type of AI use linked to administrative procedures concerns ‘AI systems intended to be used by public authorities or on behalf of public authorities to evaluate the eligibility of natural persons for public assistance benefits and services, as well as to grant, reduce, revoke, or reclaim such benefits and services’ (Annex III(5)(a) AIA).

Clearly, then, procurement-related AI uses are currently left to the default category of those with minimal risk and, thus, subjected only to voluntary self-regulation via codes of conduct.

Could this change in the future?

Art 7 AIA establishes the following two cumulative criteria: (a) the AI systems are intended to be used in any of the areas listed in points 1 to 8 of Annex III; and (b) the AI systems pose a risk of harm to the health and safety, or a risk of adverse impact on fundamental rights, that is, in respect of its severity and probability of occurrence, equivalent to or greater than the risk of harm or of adverse impact posed by the high-risk AI systems already referred to in Annex III.

The first hurdle in getting procurement-related AI uses included in Annex III in the future is formal and concerns the interpretation of the categories listed therein. There are only two potential options: nesting them under uses related to ‘Access to and enjoyment of essential private services and public services and benefits’, or uses related to ‘Administration of justice and democratic processes’. It could (theoretically) be possible to squeeze them in one of them (perhaps the latter easier than the former), but this is by no means straightforward and, given the existing AI uses in each of the two categories, I would personally be disinclined to engage in such broad interpretation.

Even if that hurdle was cleared, the second hurdle is also challenging. Art 7(2) AIA establishes the criteria to assess that an AI use poses a sufficient ‘risk of adverse impact on fundamental rights’. Of those criteria, there are three that in my view would make it very difficult to classify procurement-related AI uses as high-risk. Those criteria require the European Commission to consider:

(c) the extent to which the use of an AI system has already caused … adverse impact on the fundamental rights or has given rise to significant concerns in relation to the materialisation of such … adverse impact, as demonstrated by reports or documented allegations submitted to national competent authorities;

(d) the potential extent of such harm or such adverse impact, in particular in terms of its intensity and its ability to affect a plurality of persons;

(e) the extent to which potentially harmed or adversely impacted persons are dependent on the outcome produced with an AI system, in particular because for practical or legal reasons it is not reasonably possible to opt-out from that outcome;

(g) the extent to which the outcome produced with an AI system is easily reversible …;

Meeting these criteria would require for the relevant AI systems to basically be making independent or fully automated decisions (eg on award of contract, or exclusion of tenderers), so that their decisions would be seen to affect the effectiveness of Art 41 and 47 Charter rights; as well as a (practical) understanding that those decisions cannot be easily reversed. Otherwise, the regulatory threshold is so high that most likely procurement-related AI uses (screening, recommender systems, support to human decision-making (eg automated evaluation of tenders), etc) are unlikely to be considered to pose a sufficient ‘risk of adverse impact on fundamental rights’.

Could Member States go further?

As mentioned above, one of the potential explanations for the almost absolute silence on the use of AI in administrative procedures in the AIA could be that the Commission considers that this aspect of AI regulation belongs to each of the Member States. If that was true, then Member States could further than the code of conduct self-regulatory approach resulting from the AIA regulatory architecture. An easy approach would be to eg legally mandate compliance with the AIA obligations for high-risk AI systems.

However, given the internal market justification of the AIA, to be honest, I have my doubts that such a regulatory intervention would withstand challenges on the basis of general EU internal market law.

The thrust of the AIA competential justification (under Art 114 TFEU, see point 2.1 of the Explanatory memorandum) is that

The primary objective of this proposal is to ensure the proper functioning of the internal market by setting harmonised rules in particular on the development, placing on the Union market and the use of products and services making use of AI technologies or provided as stand-alone AI systems. Some Member States are already considering national rules to ensure that AI is safe and is developed and used in compliance with fundamental rights obligations. This will likely lead to two main problems: i) a fragmentation of the internal market on essential elements regarding in particular the requirements for the AI products and services, their marketing, their use, the liability and the supervision by public authorities, and ii) the substantial diminishment of legal certainty for both providers and users of AI systems on how existing and new rules will apply to those systems in the Union.

All of those issues would arise if each Member State adopted its own rules constraining the use of AI for administrative procedures not covered by the AIA (either related to procurement or not), so the challenge to that decentralised approach on grounds of internal market law by eg providers of procurement-related AI solutions capable of deployment in all Member States but burdened with uneven regulatory requirements seems quite straightforward (if controversial), especially given the high level of homogeneity in public procurement regulation resulting from the 2014 Public Procurement Package. Not to mention the possibility of challenging those domestic obligation on grounds that they go further than the AIA in breach of Art 16 Charter (freedom to conduct a business), even if this could face some issues resulting from the interpretation of Art 51 thereof.

Repositioning procurement (and other aspects of administrative law) in the AIA

In my view, there is a case to be made for the repositioning of procurement-related AI uses within the AIA, and its logic can apply to other areas of administrative law/activity with similar market effects.

The key issue is that the development of AI solutions to support decision-making in the public sector not only concerns the rights of those directly involved or affected by those decisions, but also society at large. In the case of procurement, eg the development of biased procurement evaluation or procurement recommender systems can have negative social effects via its effects on the market (eg on value for money, to mention the most obvious) that are difficult to identify in single tender procurement decisions.

Moreover, it seems that the public administration is well-placed to comply with the requirements of the AIA for high-risk AI systems as a matter of routine procedure, and the arguments on the need to take a proportionate approach to the regulation of AI so as not to stifle innovation lose steam and barely have any punch when it comes to imposing them on the public sector user. Further, to a large extent, the AIA requirements seem to me mostly aligned with the requirements for running a proper (and challenge proof) eProcurement system, and they would also facilitate compliance with duties of good administration when specific decisions are challenged.

Therefore, on balance, I see no good reason not to expand the list in Annex III AIA to include the use of AI systems in all administrative procedures, and in particular in public procurement and in other regulatory sectors where ex post interventions to correct market distortions resulting from biased AI implementations can simply be practically impossible. I submit that this should be done before its adoption.

ECJ extends justiciability of procurement infringements: No need to review the Remedies Directive? (C-391/15)

In its Judgment of 5 April 2017 in Marina del Mediterráneo and Others, C-391/15, EU:C:2017:268, the European Court of Justice (ECJ) issued another preliminary ruling on the scope of the Remedies Directive. The case required clarification on the concrete type of decisions that interested tenderers can challenge under the Remedies Directive.

In particular, the case sought clarification on whether the review procedures mandated by Art 2(1), and applicable to "decisions taken by the contracting authorities" (as per Art 1(1) Remedies Directive), had to allow a tenderer to challenge a decision by which the contracting authority allowed another economic operator to submit a tender in a public procurement procedure. That is, whether the Remedies Directive created standing to challenge exclusion and selection decisions that concerned other tenderers.

This issue can be seen as controversial because there are two ways in which the analysis can be framed. Firstly, it can be considered that a decision not to exclude (or to select) a competing tenderer does not necessarily produce adverse legal effects for other tenderers--and, consequently, there are no subjective rights to be protected at this stage. Secondly, and to the contrary, it can be considered that a decision that determines the number of competing tenderers among which the contracting authority needs to choose the awardee of the contract produces legal effects on all tenderers involved--and, consequently, there can be (soft?) subjective rights meriting protection both in decisions to exclude (vis-a-vis the excluded tenderer) and not to exclude (vis-a-vis all other tenderers).

The first approach to this issue would be closer to a strict interpretation of the procedural rights implicit in the participation in a procurement process--ie that unless a decision makes it impossible for a tenderer to continue its participation in the tender, there is no decision for which revision it has a legitimate interest / legal standing. The second approach is probably closer to a substantive interpretation of those same procedural rights, as well as supportive of a system of private oversight of compliance with (EU) public procurement law through private actions, where challenges on the basis of the illegality of exclusion and selection decisions are easier to accommodate.

In Marina del Mediterráneo, the relevant Spanish rules followed the first approach, and determined that: "the following acts may be the subject of the application [for judicial review]: (a) Contract notices, specifications and contractual documents laying down the conditions which will govern the procurement procedure; (b) Preparatory acts adopted in the tendering procedure, provided that they decide, directly or indirectly, the award of the contract, make it impossible to continue the procedure or to put up a defence, or cause irreparable harm to legitimate rights or interests. Acts of the procurement board which decide to exclude tenderers will be considered preparatory acts which make it impossible to continue the procedure; (c) Award decisions adopted by the contracting authorities" (C-391/15, para 11, emphasis added).

Thus, under Spanish law, a decision to exclude a tenderer can be challenged 'there and then' by the excluded tenderer, but a decision not to exclude (or to select) that tenderer can only be challenged by other tenderers at the end of the procedure (ie during standstill) and only on the basis of the illegality of the decision to award the contract to that particular tenderer and/or any of the preparatory acts for that decision. 

Therefore, by challenging the Spanish rule, the preliminary reference fundamentally--but rather implicitly--concerned the extent to which Arts 1(1) and 2(1) of the Remedies Directive can be transposed/interpreted in a way that limits the procurement decisions open to (separate, immediate) review to those that negatively affect the subjective rights of a tenderer (in a narrow construction), or whether those provisions create a catch-all category that makes (virtually) all decisions taken by the contracting authority along the procurement processes susceptible of (separate and particularised) review.

That not absolutely all decisions need to be subjected to the review procedures of the Remedies Directive was suggested on the basis of Commission v Spain (C‑214/00, EU:C:2003:276, para 80), where the Commission challenged the same Spanish rule for failing to ‘allow review to be sought of all decisions adopted by the contracting authorities, including all procedural measures, during the procedure for the award of public contracts’, and the ECJ rejected that maximalist approach on the basis that ‘the Commission has not established that that legislation does not provide adequate judicial protection for individuals harmed by infringements of the relevant rules of [Union] law or of the national rules transposing that law’. This could be seen as a decision purely on the (lack of) evidence adduced by the Commission. However, even if a wider reading of the ECJ decision is adopted to the effect that there may be procurement decisions that do not harm individual rights in a manner that merits (separate, immediate) review, the boundaries of the categories of decisions covered by the Remedies Directive remained all but fuzzy, and the extent to which Arts 1(1) and 2(1) of the Remedies Directive had to be interpreted in a restrictive or an expansive way required clarification.

It is worth stressing that AG Bobek (Opinion of 8 September 2016, C-391/15, EU:C:2016:651) was convinced by the first approach outlined above (ie a restrictive interpretation of the Remedies Directive) because constructing the remedies system "in such a broad and rather limitless way would mean that every single decision, however marginal and ancillary, could be immediately attacked, and the award procedure effectively halted. Yet, ... a reasonable balance must be struck between the different interests at stake in public procurement procedures, namely, the right of access to court and judicial review to challenge aspects of the procedure, on the one hand, and effectiveness of the overall procedure and judicial expediency, on the other" (para 34, footnote ommitted). 

Therefore, in an Opinion that seemingly tried to avoid declaring the necessary justiciability of (every) exclusion and selection decision, invited the ECJ to declare that national procedural rules could avoid subjecting those decision to direct (and specific) review provided that: "(a) the national legislation does not hinder immediate review of preparatory acts that produce adverse legal effects on undertakings; and (b) a plea of illegality of preparatory acts that do not produce adverse legal effects on undertakings, such as a decision to admit a candidate to a tendering procedure, can be made in support of an action against the final decision awarding the contract taken on the basis of those preparatory acts" (para 67) . 

In short, the ECJ disagreed with AG Bobek and found that, where there are allegations that a decision allowing a tenderer to participate in a procurement procedure was adopted in breach of EU public procurement law or the national legislation transposing it, national rules must class such decision among the preparatory acts of a contracting authority which may be subject to an independent judicial review--or, in simpler terms, that exclusion and selection decisions concerning other tenderers are open to the review procedures of the Remedies Directive. the reasons given by the ECJ are primarily that:

[the] broad construction of the concept of a ‘decision’ taken by a contracting authority is confirmed by the fact that Article 1(1) of [the Remedies Directive] does not lay down any restriction with regard to the nature or content of the decisions it refers to. Moreover, a restrictive interpretation of that concept would be incompatible with the terms of Article 2(1)(a) of that directive which requires Member States to make provision for interim relief procedures in relation to any decision taken by the contracting authorities (para 27).

And that:

... although [the Remedies Directive] has not formally laid down the time from which the possibility of review, as provided for in Article 1(1), must be open, the objective of that directive, as referred to in the preceding paragraph, does not authorise Member States to make the exercise of the right to apply for review conditional on the fact that the public procurement procedure in question has formally reached a particular stage ...  the fact that the national legislation at issue ... requires, in all cases, a tenderer to wait for a decision awarding the contract in question before it may apply for a review of a decision allowing another tenderer to participate in that procurement procedure infringes the provisions of [the Remedies Directive] (paras 31 and 34).

In my view, even if there are issues of consistency with previous case law that may require some additional fine tuning, there is no question that the ECJ has taken a very expansive approach to the interpretation of the Remedies Directive on this occasion, and that the thrust of the Marina del Mediterráneo Judgment reflects a wide approach to the provision of procurement remedies.

This puts significant pressure on domestic review procedures to ensure that virtually all decisions taken by a contracting authority can be challenged, and that the challenge is available as soon as possible -- and definitely before the award of the contract because as expressed in the "first and second recitals, [the Remedies Directive] is intended to strengthen the existing mechanisms, both at national and EU levels, to ensure the effective application of the directives relating to public procurement, in particular at a stage when infringements can still be corrected" (para 30). This is particularly relevant in view of the (unnecessary) declaration by the ECJ that "Articles 1(1) and 2(1)(a) and (b) of [the Remedies Directive have direct effect" (para 41), which will provide robust legal foundation to challenges against existing domestic rules on access to review procedures.

This approach is bound to further judicialise public procurement oversight through expanded justiciability of (exclusion, but not only) decisions, and puts renewed pressure on the development of more robust procurement review procedures by the Member States--possibly requiring a reform of the Remedies Directives themselves, as I discuss at length in "'If It Ain't Broke, Don't Fix It'? EU Requirements of Administrative Oversight and Judicial Protection for Public Contracts",  in S Torricelli & F Folliot Lalliot (eds), Administrative oversight and judicial protection for public contracts (forthcoming). In my view, this is not necessarily a blueprint for desirable regulatory reform and more thought needs to go into the balance between public compliance oversight and private enforcement of the EU public procurement rules. However, it seems out of the question that legal reform will be necessary (in Spain and elsewhere) and, in my view, that the European Commission abandoned the revision of the Remedies Directives too quickly.

ECJ avoids providing guidance on intensity of judicial review of procurement decisions by sticking to strictly formalistic approach: The Gaping hole remains (C-171/15)

In its Judgment of 14 December 2016, Connexxion Taxi Services, C-171/15, EU:C:2016:948, the European Court of Justice (ECJ) has provided clarification on whether contracting authorities can decide to subject their decisions to exclude economic operators from procurement procedures to a proportionality assessment even where such assessment would deviate from the strict rules created in the tender documentation by the contracting authorities themselves.

In the case at hand, a Dutch contracting authority had published tender documents that seemed to create an automatic obligation to exclude by stating that: 'A tender to which a ground for exclusion applies shall be set aside and shall not be eligible for further (substantive) assessment'. However, the contracting authority subsequently sought to rely on generally applicable Dutch administrative law (in particular, the Explanatory Memorandum of the law transposing the 2004 public procurement Directive) to subject the exclusion decision to a proportionality assessment. On the basis of that proportionality analysis, the contracting authority decided not to exclude the tenderer and to award it the contract.

This triggered the challenge by a competing tenderer, which claimed that, having found that the tenderer had been guilty of grave professional misconduct, the contracting authority was not in a position to make an assessment of proportionality. That assessment would have already been carried out by including the misconduct as an absolute ground for exclusion in the descriptive document. Given the wording of the latter, it was argued that it would be contrary to the principles of public access, transparency and equality in matters of administrative procurement for the contracting authority to have the power to assess the proportionality of the ground for exclusion.

The Dutch referring court asked the ECJ to consider whether Art 45(2) of Directive 2004/18/EC precluded a contracting authority from being obliged to assess under national law, and in accordance with the principle of proportionality, whether a tenderer which had been guilty of grave professional misconduct should be excluded from a contract. The referring court put particular stress on the fact that the ECJ had not adjudicated on the importance to be attached to the fact that, in the tender conditions, the contracting authority had provided for the rejection, without any examination of the substance, of any tender to which a ground of exclusion applies. In answering those questions, the ECJ decided to stick very closely to two of its lines of case law that, ultimately, create a very difficult (dis)functional situation.

First, following precedents in La Cascina and Others, C‑226/04 and C‑228/04, EU:C:2006:94, and in Consorzio Stabile Libor Lavori Pubblici, C‑358/12, EU:C:2014:2063, the ECJ reiterated that the discretionary exclusion grounds regulated in Art 45(2) Dir 2004/18 (and now in art 57(4) Dir 2014/24) do 'not provide for uniform application at EU level of the grounds of exclusion it mentions, since the Member States may choose not to apply those grounds of exclusion at all or to incorporate them into national law with varying degrees of rigour according to legal, economic or social considerations prevailing at national level. In that context, the Member States have the power to make the criteria laid down in Article 45(2) less onerous or more flexible' (C-171/15, para 29). This led the ECJ to establish that

31 As far as concerns the grounds for excluding a tenderer which has been guilty of grave professional misconduct from a contract, it is clear from the order for reference that [Dutch] legislation requires the contracting authority concerned, which establishes that the tenderer has been guilty of such misconduct, to determine, in accordance with the principle of proportionality, whether the tenderer should in fact be excluded.

32 Thus, it appears that that assessment of the proportionality of the exclusion makes the application of the ground of exclusion relating to grave professional misconduct laid down in Article 45(2)(d) of Directive 2004/18 more flexible ... Furthermore, it follows from recital 2 thereof that the principle of proportionality applies in a general manner to public procurement procedures (C-171/15, paras 31-32, emphasis added).

Ultimately, then, national legislation which requires a contracting authority to assess, in accordance with the principle of proportionality, whether it is in fact appropriate to exclude from a public contract a tenderer which has been guilty of grave professional misconduct is compatible with EU public procurement law (C-171/15, para 33).

Second, and in stark contrast with this seemingly functional and principles-oriented interpretation of the rules in Directive 2004/18/EC, the ECJ then moved on to adopt a very formalistic approach when considering the specific situation where the contracting authority would have excluded the possibility of such proportionality assessment in the tender documentation by establishing that exclusion on specific grounds would not be subjected to any substantive assessment. It may have been relevant at this point to know with more precision whether that would have been illegal under Dutch law for the tender documentation could be seen as contra legem (as, in my view, it would have been eg under Spanish law due to the public administration's duty to conduct its business with subjection to the applicable laws and regulations).

Be it as it may, the ECJ framed the issue in the following terms:

 36 It is conceivable that, when the contract documents are drafted, the contracting authority concerned may take the view, in accordance with the nature of that contract, the sensitive nature of the services which are its subject, and the requirements of professional honesty and reliability of the economic operators which arise from that, that the commission of grave professional misconduct must result in the automatic rejection of the tender and the exclusion of the tenderer at fault, provided that the principle of proportionality is observed when the seriousness of that misconduct is assessed.

37 Such a clause, inserted into the contract documents in unambiguous terms ... enables all economic operators which are reasonably well informed exercising ordinary care to be apprised of the requirements of the contracting authority and the conditions of the contract so they may act accordingly (C-171/15, paras 36-37, emphasis added).

I find these passages, and in particular para 36, very confusing. It seems to indicate that the contracting authority, despite the discretion it has in deciding to include as applicable the ground of discretionary exclusion due to grave professional misconduct in the tender documentation or not, remains bound to ensure that 'the principle of proportionality is observed when the seriousness of that misconduct is assessed'. That would, in and of itself, exclude the possibility of predetermining that the exclusion on that ground will be absolute and not subjected to any further (substantive) assessment. Therefore, making this be followed by para 37, where the contrary underlying position exists in the determination that setting a clause of automatic exclusion in unambiguous terms provides tenderers with a clear view of the requirements, is at least disconcerting.

The ECJ then decided to follow very formalistic precedents whereby 'the contracting authority must comply strictly with the criteria which it has itself laid down (see, to that effect, judgment of 10 October 2013, Manova, C‑336/12, EU:C:2013:647, paragraph 40 and the case-law cited) in the light, in particular, of Annex VII A, paragraph 17, to Directive 2004/18' (C-171/15, para 38). It also added that, following its more recent Judgment in Pizzo, C‑27/15, EU:C:2016:404, 'the principle of equal treatment requires tenderers to be afforded equality of opportunity when formulating their tenders, which therefore implies that the bids of all tenderers must be subject to the same conditions' and that 'the obligation of transparency requires that all the conditions and detailed rules of the award procedure must be drawn up in a clear, precise and unequivocal manner in the contract notice or specifications so that, first, all reasonably informed tenderers exercising ordinary care can understand their exact significance and interpret them in the same way and, second, the contracting authority is able to ascertain whether the tenders submitted satisfy the criteria applying to the contract in question' (for discussion, see here).

On the basis of this, the ECJ creates an argument whereby tenderers from different Member States will be less likely to submit tenders when they are affected by an exclusion ground because they may not be aware of the possibility of their exclusion actually being subjected to a proportionality assessment despite the explicit terms of the tender documents, which the ECJ considers domestic tenders would do. From that, the ECJ concludes that 'the assessment of the exclusion at issue in the light of the principle of proportionality, where the tender conditions of the contract concerned provide for the rejection of tenders which are covered by such an exclusion clause without any assessment of that principle, is liable to place the economic operators concerned in an uncertain position and adversely affect the principle of equal treatment and compliance with the obligation of transparency' (see C-171/15, paras 41-43). Ultimately, then, the ECJ considers that the decision to subject the decision whether to exclude the tenderer to a proportionality assessment despite the explicit terms of the tender documents was contrary to EU public procurement law.

Critical remarks

I find the Connexxion Taxi Services Judgment very confusing because it seems to answer two interconnected questions about the relevance and effectiveness of the general principles of public procurement in an intrinsically contradictory manner, and it seems to me that the ECJ has taken another step down the formalist road. In the case at hand, and following the proposals of Advocate General Campos Sánchez-Bordona (see here), I considered that it must be right that contracting authorities are always under a general obligation to act in a proportionate manner and, consequently, each decision they adopt needs to be proportionate under the circumstances and pro-competitive, and that ultimately 'a contracting authority must retain the power to assess, on a case-by-case basis, the gravity of the circumstances that would lead to exclusion of the tenderer. And ... it must also balance them against the effects that such exclusion would have on competition' [see A Sanchez-Graells, Public procurement and the EU competition rules, 2nd edn (Oxford, Hart, 2015) 293, references omitted].  

Despite the fact that the Connexxion Taxi Services Judgment sticks to the traditional formalist approach whereby the Court does not allow contracting authorities to deviate from the strictures of the published tender documentation, and this must at this stage not come as a surprise, the decision strikes as particularly odd because the ECJ does not seem to give much weight to the general principle of proportionality--either as enacted under the disputed Dutch rules, or more generally under the EU public procurement rules themselves--despite having accepted that the general principle can (and should?) control all procurement decisions. Remarkably, the ECJ deviated from the more progressive and flexible approach advanced by the AG and also created a strange focus of analysis by moving from the assessment of the decision of the contracting authority to the potential incentives of participation for non-domestic economic operators in a way that I also find very formalistic and potentially misguided.

Considering Connexxion Taxi Services, Manova and other precedents together, what seems clear is that contracting authorities can only reduce the scope of their discretion by self-imposed restrictions published in the tender documents. Thus, they would be better off by publishing bare bones tender documents and then exercising administrative discretion subject only to compliance with general principles of public procurement, as well as applicable domestic rules. However, this would fly on the face of Pizzo where the way the contracting authority justifies its decisions does not result immediately from the tender documents, which then gives contracting authorities the contrary incentive to reiterate all domestic rules in the tender documentation.

Other than contradictory, these sets of case law are also extremely formalistic and ultimately built on a non-functional obsession with the integration of the single market that can get on the way of the development of sound public procurement practice. Ultimately, the general principles of public procurement should be there to create sufficient checks and balances and, in their generality, they should rank higher than tender documents. Actually, it is not foreign to the ECJ case law to consider that tender requirements that are disproportionate or discriminatory cannot be included in the tender documentation (or need to be set aside, or ultimately determine the ineffectiveness of the procurement exercise). Thus, it would be desirable for that logical hierarchy to remain a constant, even if it means that cross-border participation in procurement processes does not come at zero transaction costs and that interested undertakings need to make themselves familiar with the domestic rules of the jurisdiction in which they are tendering.

Beyond that, it also seems to me that the ECJ is inadvertently creating an absolute need for an exclusion-related special procedural phase, where tenderers other than those affected by potential exclusion have a justiciable right to force the contracting authority to review the circumstances of other tenderers. This is not necessarily an overall undesirable development, but it can be problematic in many ways, not least because the EU substantive and procedural rules are not adapted to that function [see A Sanchez-Graells, “‘If It Ain't Broke, Don't Fix It'? EU Requirements of Administrative Oversight and Judicial Protection for Public Contracts”, in S Torricelli & F Folliot Lalliot (eds), Administrative oversight and judicial protection for public contracts (Larcier, 2017) forthcoming]. 

Last, but not least, it is also worth noting that, by answering in the way it has, the ECJ has avoided the need to provide clarification on the requirements of intensity of judicial review of public procurement decisions at Member State level, on which AG Campos Sánchez-Bordona had put together a rather stringent and not uncontroversial proposal (see here). Unfortunately, then, given the ECJ's unwillingness to answer that question, we will continue puzzledly looking at the gaping hole that Prof Caranta identified in the ECJ's jurisprudence concerning public procurement remedies [see R Caranta, 'Many Different Paths, but Are They All Leading to Effectiveness?', in S Treumer & F Lichère (eds), Enforcement of the EU Public Procurement Rules, vol 3 European Procurement Law Series (Copenhagen, DJØF Publishing, 2011) 53, 84].

New paper on the need to review the Remedies Directive

I have uploaded a new paper on SSRN: ‘If it Ain't Broke, Don't Fix It’? EU Requirements of Administrative Oversight and Judicial Protection for Public Contracts, to be published in S Torricelli & F Folliot Lalliot (eds), Administrative oversight and judicial protection for public contracts (Larcier, 2017) forthcoming.

As detailed in the abstract: 

EU public procurement law relies on the specific enforcement mechanisms of the Remedies Directive, which sets out EU requirements of administrative oversight and judicial protection for public contracts. Recent developments in the case law of the CJEU and the substantive reform resulting from the 2014 Public Procurement Package may have created gaps in the Remedies Directive, which led the European Commission to publicly consult on its revision in 2015. One year after, the outcome of the consultation has not been published, but such revision now seems to have been shelved. This chapter takes issue with the shelving of the revision process and critically assesses whether the Remedies Directive is still fit for purpose. 

The chapter focuses on selected issues, such as the interplay between the Remedies Directive and the Charter of Fundamental Rights, and with the general administrative law of the Member States. It also assesses the difficulties of applying the Remedies Directive ‘as is’ to some of the new rules of the 2014 Public Procurement Package, which creates uncertainty as to its scope of application, and gives rise to particular challenges for the review of exclusion decisions involving the exercise of discretion. The chapter also raises some issues concerning the difficulties derived from the lack of coordination of different remedies available under the Remedies Directive and briefly considers the need to take the development of ADR mechanisms into account. Overall, the chapter concludes that there are important areas where the Remedies Directive requires a revision, and submits that the European Commission should relaunch the review process as a matter of high priority.

The paper is freely downloadable at http://ssrn.com/abstract=2821828. As always, comments welcome.

AG delineates boundaries of administrative proportionality assessments and intensity of judicial review requirements under EU public procurement law (C-171/15)

In his Opinion of 30 June 2016 in Connexxion Taxi Services, C-171/15, EU:C:2016:506, Advocate General Campos Sánchez-Bordona has addressed two important issues concerning the judicial review of a decision not to exclude an economic operator that had potentially incurred in serious professional misconduct despite the tender documentation indicating that 'A tender to which a ground for exclusion applies shall be set aside and shall not be eligible for further (substantive) assessment'.

The preliminary reference sent to the Court of Justice of the European Union (CJEU) mainly raises two issues: firstly, whether it was possible for the contracting authority to apply a proportionality assessment before proceeding to exclude the economic operator--or, in the circumstances of the case, in order to decide not to exclude. And, secondly, whether EU law precluded national courts from solely engaging in ‘marginal’ review as to whether the contracting authority could reasonably have come to the decision not to exclude a tenderer notwithstanding the fact that that it was guilty of grave professional misconduct, rather than carrying out an ‘unrestricted’ judicial review of the assessment conducted on the basis of the principle of proportionality. Both are interesting issues. Both were to be decided under the 2004 EU public procurement rules, but both are clearly relevant under the revised 2014 package.

Again on the interaction between general (administrative) law and tender documentation

The first issue fundamentally stems from the fact that applicable Dutch law and its interpretative guidance foresee that 'the assessment of whether a tenderer must actually be excluded, having regard to the general principles of Directive 2004/18, must always be proportional and be carried out in a non-discriminatory manner' (Opinion in C-171/15, para 10). In the Connexxion Taxi Services case, the contracting authority engaged in such proportionality assessment despite having published tender documentation that seemed to create an automatic obligation to exclude by stating that: 'A tender to which a ground for exclusion applies shall be set aside and shall not be eligible for further (substantive) assessment'. As a result of the proportionality analysis, it decided not to exclude a tenderer competing with Connexxion , according to which 'the contracting authority [was] not in a position to make an assessment of proportionality having found that the tenderer [had] been guilty of grave professional misconduct. That assessment [had] already been carried out by inclusion of the misconduct as a ground for exclusion in the descriptive document. Given the wording of the latter, it would be contrary to the principles of public access, transparency and equality in matters of administrative procurement for the contracting authority to have the power to assess the proportionality of the ground for exclusion.' (para 30). 

Somehow, this raises a question that can be seen as the mirror image of the controversy underlying the recent Pizzo Judgment (C-27/15, EU:C:2016:404, see comments here). In Pizzo, the contracting authority sought to rely on generally applicable administrative law rules to exclude economic operators. The CJEU ruled against that possibility and created a middle-path whereby a contracting authority seeking to engage in that exclusion would need to provide the tenderer an opportunity to regularise its position and comply with that general obligation within a period of time set by the contracting authority. Conversely, in Connexxion Taxi Services, the CJEU is expected to rule on whether reliance on generally applicable administrative law rules can be used to deactivate specific exclusion choices established in the tender documentation. AG Campos submits that the Court should answer in the affirmative and that this is not contrary to Pizzo. I agree.

In his Opinion, AG Campos stresses that

51. The requirement included in paragraph 3.1 of the descriptive document (‘a tender to which a ground for exclusion applies must be set aside’), precisely because of its quasi-regulatory nature, must, in my view, be read in the light of the interpretative rules applicable to all subordinate legal rules, which cannot disregard the more general rules which govern them. If the [applicable rule] provides that exclusion on the ground of grave professional misconduct requires that the contracting authority examine each particular case ‘on the basis of the nature and size of the public contract, the type and scope of the misconduct and the measures taken in the meantime by the undertaking’, the fact that the descriptive document is silent as to that necessary and individual application of the principle of proportionality cannot result in that principle being disregarded.

52. That approach is confirmed from the perspective of EU law. The case-law of the Court on the optional grounds for exclusion, rejecting their automatic application, confirms the need for that consistent interpretation. It follows from the judgment in Forposta and ABC Direct Contact that automatic exclusion (of a tenderer guilty of grave misconduct) could go beyond the discretion conferred on Member States by Article 45(2) of Directive 2004/18 (Opinion in C-171/15, paras 51-52, references omitted and emphasis added).

In my view, it must be right that contracting authorities are always under a general obligation of acting in a proportionate manner and, consequently, each decision they adopt needs to be proportionate under the circumstances and pro-competitive, and ultimately 'a contracting authority must retain the power to assess, on a case-by-case basis, the gravity of the circumstances that would lead to exclusion of the tenderer. And it is submitted that it must also balance them against the effects that such exclusion would have on competition' [see A Sanchez-Graells, Public procurement and the EU competition rules, 2nd edn (Oxford, Hart, 2015) 293, references omitted]. Thus, the final consideration of AG Campos seems entirely correct when he stresses that

In the invitation to tender at issue, the conditions and the selection procedure, the same for all applicants, were not modified. The contracting authority checked that their tenders satisfied the criteria applicable to the contract and applied no ground for exclusion which was not provided for in the descriptive document. The fact that, in order to assess one of those grounds for exclusion expressly included in that document it applied the criterion of proportionality, which was not expressly referred to in the descriptive document but is required by the general ... rules on public procurement (as well as by the case-law of the Court), is, in my view, consistent with the principle of equal treatment and its corollary, the obligation to act transparently (Opinion in C-171/15, para 58, references omitted and emphasis added).

The more difficult issue of the standard of (intensity) of judicial review

The second question fundamentally focuses on the fact that, given the contracting authority's engagement in a proportionality analysis, a mere 'marginal' review of the decision in order to ascertain whether the contracting authority could reasonably have come to the decision not to exclude a tenderer could fall short of meeting the requirements of the Remedies Directive.

After some interesting remarks on the gradual increase in the requirements of intensity of judicial review in areas of EU substantive law where there has been a harmonisation of remedies--which, consequently, reduce the scope of limitations derived from the general principle of procedural autonomy--AG Campos enounces what he considers should be covered by a mechanism of review compliant with the Remedies Directive. In his view,

the judicial review imposed by Directive 89/665 requires something more [than a mere 'marginal' review, or solely assessing whether or not the contested decision was arbitrary] to deserve that name. The assessment by the court cannot end with a mere assessment of the ‘reasonableness’ of the contested decisions, especially as those decisions must comply with detailed rules covering formal and substantive matters. A court hearing an application in this field will have to assess whether the disputed award observed the rules of the invitation to tender and whether the successful tenderer’s application can withstand the critical analysis which its competitors present in the action. That assessment will require, in many cases, verification of the decisive facts (which the administration may have determined incorrectly), as well as evidence concerning the relative merits of the various applications. It will also involve gauging whether the administrative action is duly reasoned and whether it is in line or at variance with the objectives which underlie it (in other words, whether there is evidence of misuse of powers) and the other legal provisions which govern it. Examination of all that evidence goes beyond, I repeat, a mere assessment of the ‘reasonableness’ of the contested measure and involves matters of fact and law of a more ‘technical’ and usually more complex nature, which every court having jurisdiction to review administrative acts usually carries out (Opinion in C-171/15, para 73, emphasis added). 

This leads him to suggest to the Court to declare that 

Articles 1 and 2 of Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts are not compatible with legislation, or the usual practice, of a Member State which limits the scope of the review procedures to a review merely of the reasonableness of the decisions of contracting authorities (Opinion in C-171/15, para 85, emphasis added).

On principle, this seems unobjectionable and, as AG Campos suggests, it would also be compatible with the CJEU decision in Croce Amica One Italia (C-440/13, EU:C:2014:2435, see comment here), where it effectively clarified that

Article 1(1) of Directive 89/665 requires the decision of the contracting authority withdrawing the invitation to tender for a public contract to be open to a review procedure, and to be capable of being annulled, where appropriate, on the ground that it has infringed EU law on public contracts or national rules transposing that law (para 34).

The question is whether (all) the specific details of the full review advanced by AG Campos in para 73 of his Opinion are necessary in order to allow the review body or court to assess compatibility of procurement decisions with EU law and domestic transposing measures. As I read his Opinion, he advocates for three main components: (1) a review of the decisive facts, (2) a review of the relative merits of the offers, (3) a review of the reasons given by the contracting authority for its choices and the soundness of those reasons (or, in his own words, to check that there has been no misuse of powers). In my view, elements (1) and (3) are relatively uncontroversial. However, element (2) is very likely to create difficulties if the review body or court is expected (or empowered) to second guess the technical evaluation of the tenderers and their tenders. I think that the risk of allowing review courts and bodies to substitute the contracting authority's discretion for their own would be going a step too far. Thus, while the minimum requirements of the review procedures mandated by the Remedies Directive clearly seem to indicate the need to go beyond a mere assessment of arbitrariness and engage in a full review of legality, it also seems clear to me that the review cannot go as far as to allow for a second-guessing of the contracting authority's discretion. 

This is clearly an area where drawing bright lines is complicated or, as AG Fennelly put it writing extra judicially,

There remains a somewhat imprecise formulation of the standard of substantive review. Respect, to the extent appropriate, is paid to the discretion of the awarding authority. Nonetheless, the cases show that the intensity of scrutiny is greater than in traditional cases, where judges have been very slow to substitute their own evaluation of the facts for that of the decision-maker. In tendering, it is natural, other things being equal, to expect the contract to be awarded to the lowest price. Even where the criterion adopted is the “most economically advantageous,” there will usually be an identifiable lowest price. It will normally be incumbent on the authority to claim that other things are not equal and to show why. Thus, the substantial justification for the decision shades into the adequacy of the reasons, even if sufficiency of reasons is usually treated as a separate ground of judicial review (emphasis added). 

It may well be that this discussion is more about the semantics than substance of how to describe the standard for judicial review. Be it as it may, however, it will be interesting to await for the final decision of the Court in the Connexxion Taxi Services case, which hopefully will bring some clarity on the specific requirements of intensity of judicial review that stem from the Remedies Directive.

The saga of Mr Brouillard and the EU Courts (F-148/15, T-420/13, C-298/14 ... and C-590/15 P)

By Dr Andrea Gideon (NUS Singapore and University of Liverpool).

Mr Brouillard has indeed kept the EU Courts busy in the last couple of years. Apparently keen to find his dream job, this Belgian national legally trained in France applied to the Court as a lawyer-linguist in an EPSO competition, he tried to become a linguist for the Court of Justice of the European Union (the CJEU, or the Court) through another company tendering in a procurement procedure of the Court, and he applied to become a legal secretary at the Belgian Cour de Cassation.

Unfortunately for Mr Brouillard, he was rejected every time due to his vocational master’s degree by the University of Poitiers in France (which he received following completion of a correspondence course in law, economics and management, private law, lawyer-linguist specialism) not being deemed a sufficient qualification for the positions in question.

Mr Brouillard, determinedly, initiated proceedings against the decisions in each case [cases Brouillard v Commission (F-148/15, EU:F:2016:4, only in French), Brouillard v Court of Justice (T-420/13, EU:T:2015:633, only in French) and Brouillard (C‑298/14, EU:C:2015:652) respectively]. The ‘saga of Mr Brouillard’ brings to light some inconsistencies in the EU Courts’ approach to the assessment of (university) qualifications in different settings, which is the focus of this comment.  

F-148/15 Brouillard v Commission is still pending. So far only the interim measure applied for by Mr Brouillard that, while the case is pending, he would be allowed to the next stage of the concours has been rejected.

C‑298/14 Brouillard adopted a preliminary ruling in the case where Mr Brouillard challenged his rejection from the competitive procedure to become a legal secretary at the Belgian Cour de Cassation. The ruling of the CJEU in this case was in itself not very surprising. The Court reaffirmed that Article 45 TFEU applies to situations where a national of the Member State in question (here a Belgian national participating in a selective procedure in Belgium) seeks recognition of a qualification he has obtained abroad. Yet, the CJEU further stated that such a situation cannot fall under Article 45(4) TFEU since the person in question still is a national. The Court then set out that ‘legal secretary’ is not a regulated profession and, therefore, only Article 45 TFEU rather than Directive 2005/36/EC applies. Finally, the Court restated the principle in Vlassopoulou (C‑340/89, EU:C:1991:193) by deciding that

Article 45 TFEU must be interpreted as meaning that it precludes […] the selection board for a competition for recruitment […] from making […] participation contingent on the possession of diplomas required by the legislation of that Member State or the recognition of academic equivalence of a master’s degree awarded by the university of another Member State, without taking into consideration all of the diplomas, certificates and other qualifications, and the relevant professional experience of the person concerned, by comparing the professional qualifications attested by those qualifications with those required by that legislation (C-298/14, para 67, emphasis added).

Therefore, the CJEU indirectly (but quite clearly) required the Belgian court to remedy the rejection of Mr Brouillard from the selective process to become a legal secretary (or at the very least, to have his application reassessed) on the basis that his master’s degree was not the only relevant qualification.

Interestingly, though, the Court did not seem to like the taste of its own medicine when it came to Mr Brouillard’s intent to provide the Court services as a freelance lawyer linguist. Indeed, in its own procurement decision, the Court has not held itself to the standard expected of the Member States. Instead the Court required Mr Brouillard to be excluded from a tender for the provision of translation services for not having completed a full legal education of at least five years (his master's was only partially legal and included other content, such as linguistic training). Remarkably, the Court did so without checking if other qualifications and professional experiences could be regarded equivalent.

These issues emerged in T‑420/13 Brouillard v Court of Justice (i.e. the judgment on the challenge of that decision) where the General Court (GC) lengthily establishes that the master’s degree Mr Brouillard holds is in itself not equivalent to a full five year law study, without taking anything else into consideration (para 71 seq). The GC justifies this difference in approach by saying that none of the applicant’s arguments were able to demonstrate the existence of an obstacle to the freedom of workers or freedom of establishment and that therefore it is not appropriate to apply the Vlassopoulou case law. In particular, he had not been rejected because he graduated from a French university, but because his degree did not represent five years of (exclusively) legal study. In any event, an argument that additional qualifications had to be taken into account (à la C- 298/14 Brouillard) should also be dismissed because the Court did not have the information needed to examine equivalence through other qualifications and experiences (para 96).

Yet, national authorities seem to be held to a different standard because they still have to take other degrees and experiences into account cumulatively and offer the possibility of an equivalence test, without being able to say that they did not have the information or that the applicant did not prove a hindrance to his free movement rights. This seems to indicate an internal inconsistency in the Courts’ approach to fundamentally the same issues (how to recognise or give value to a specific university qualification) in different settings.

In the eyes of the GC, the difference potentially lies in the fact that T‑420/13 Brouillard concerned a procurement decision and not rules applicable to the general access to a profession, since it emphasises the fact that decisions on professional qualification are more complex for contracting authorities:

La comparaison des diplômes effectuée par le système de la directive 2005/36 étant réalisée aux fins de l’accès à certaines activités règlementées dans les différents États membres, une telle appréciation ne saurait être confondue avec l’appréciation complexe, par un pouvoir adjudicateur, de la valeur universitaire respective des titres obtenus dans les différents États membres, dans le but de garantir que les personnes qui seront engagées dans la prestation des services faisant l’objet du marché disposent de la capacité technique suffisante (T-420/13, para 81, emphasis added).

However, the Court omits to explain why this is more complicated for a contracting authority.

One could potentially argue that professional recognition in order to gain access to a profession in another Member State on a more permanent basis makes it more proportionate to justify an extensive examination of the qualifications of an individual than the more temporary nature of a public contract. However, the Court has held a similar standard applicable in the area of freedom to provide services in the recent case X-Steuerberatungsgesellschaft (C-342/14, EU:C:2015:827). In this case a tax service company established in the UK with seats in the Netherlands and Belgium wanted to provide a tax consultancy service for a tax return to a German customer, but was hindered by the tax authorities since it had not been authorised under German law. The German law made authorisation dependent on certain qualifications. Service providers from other Member States could, however, seek such authorisation if they were providing temporal services in Germany, but only if that involved physical travel of the provider to Germany. In cases such as this, where only the service travelled, but neither the recipient nor the provider, this was not possible.

The Court thus established an infringement and, while regarding fear of tax evasion as well as consumer protection as legitimate justification grounds, it did not find this restriction proportionate here because there was no possibility of authorisation at all in such cases (i.e. did not provide any possibility of the qualification obtained by the providers to be ‘accorded its proper value and being duly taken into account’). In so far this case is following the Vlassopoulou case law despite it only concerning short term services. X-Steuerberatungsgesellschaft would thus lead any argument that the length of the services would justify a difference ad absurdum, since in this case the service provided was a single tax return.

Overall, it seems difficult to conceive why an examination of equivalence should be less burdensome for a national authority than for the Court (acting as a contracting authority), which, by its very nature as a European institution filled with lawyers from various Member States, seems in fact more likely to be able to assess equivalence of qualifications. Furthermore, on a more general level, one might just wonder why the Court does not use the opportunity to set a positive example by applying its own case law. However, the Court still has the opportunity to do just that because, not content with the General Court’s decision, Mr Brouillard has brought an appeal before the Court (case Brouillard v Court of Justice, C-590/15 P). And so the saga continues …

CJEU confirms its jurisdiction to review procurement decisions linked to EU's external action (C‑439/13 P)

In its Judgment in Elitaliana v Eulex Kosovo, C-439/13 P, EU:C:2015:341, the Court of Justice of the European Union (CJEU) has followed the Opinion of Advocate General Jääskinen (discussed here) and considered that it has jurisdiction to review procurement procedures conducted by external missions of the European Union as part of the Common foreign and security policy (CFSP) because they functionally fall within its competences linked to the execution of the EU budget.

The CJEU clearly indicated that, despite the fact that it does not, in principle, have jurisdiction with respect to the provisions relating to the CFSP or with respect to acts adopted on the basis of those provisions (para 41), any restrictions on its competence to interpret the EU Treaties needs to be narrowly construed and, consequently, it must assert jurisdiction when CFSP matters affect the EU budget. More specifically, the CJEU indicated that

47 ... it is not disputed that the Eulex Kosovo Mission is civilian in nature and that the expenditure relating to the helicopter-support service for the Eulex Kosovo Mission was to be allocated to the European Union budget.

48 Therefore, the measures at issue, whose annulment was sought on the basis of an infringement of the rules of EU public procurement law, related to the award of a public contract which gave rise to expenditure to be charged to the European Union budget. Accordingly, the contract at issue is subject to the provisions of the Financial Regulation.

49 Having regard to the specific circumstances of the present case, the scope of the limitation, by way of derogation, on the Court’s jurisdiction ... cannot be considered to be so extensive as to exclude the Court’s jurisdiction to interpret and apply the provisions of the Financial Regulation with regard to public procurement.

50 Consequently, the General Court and, in the case of an appeal, the Court of Justice have jurisdiction to hear this case (C-439/13 P, paras 47-50, emphasis added).

In my view, this is the correct decision. However, as indicated earlier (here), the question that remains open, then, is to what extent there is a need to revise the EU's Financial Regulation to include provisions on mixed civil-military/defence procurement along the lines of the regime foreseen in Directive 2009/81, so that compliance with the rules is not too burdensome for external missions, at least in their early stages. To be fair, running the external missions of the European Union is clearly challenging and procurement probably does not rank very high in the priorities of bodies and agents that need to make it happen. And, in those circumstances, it is fair to say that the regime for urgent procurement can still be rather limiting, particularly as challenges and protests are concerned. Hence, this may be an area that needs regulatory reform.

Other than that, and from the strict perspective of the scope of competence of the Union courts in the field of public procurement, it may also be a good occasion to rethink the role of the General Court and the CJEU as public procurement review bodies. In my opinion, developments such as the Elitaliana v Eulex Kosovo case point to the need to either create a specialized review chamber parallel to the EU Civil Service Tribunal, or to subject procurement review processes to alternative dispute resolution mechanisms. Maybe this is a second area in need of regulatory reform/institutional redesign.

AG Jääskinen confirms GC and CJEU jurisdiction to review procurement decisions linked to EU's external action: Time to rethink? (C‑439/13 P)

In his second Opinion of 21 May 2015 in case Elitaliana v Eulex Kosovo, C-439/13 P, EU:C:2015:341 (not available in EN), AG Jääskinen has submitted that the EU Courts have competence for the review of decisions awarding public contracts financed by the EU budget in the context of the EU's external action.

In the case at hand, the challenge concerned the award of a services contract for helicopter emergency medical services [transportation] and air ambulance services tendered by the European Union Rule of Law Mission in Kosovo (Eulex Kosovo), which is the largest civilian mission ever launched by the European Union under the Common Security and Defence Policy (CSDP) by means of Joint Action 2008/124 (as amended).

AG Jääskinen's Opinion could not be clearer in stressing that "insofar as it relates to public contracts awarded in the context of the external action of the European Union, [the challenge] certainly comes within the scope of the budgetary provisions of EU law", which makes the General Court and the Court of Justice of the European Union competent. I fully agree with his view.

The point of departure that the AG takes is to stress that, under what is now Article 41 TEU, CSDP missions "are funded by the Member States based on their gross national product (GNP) when it comes to military operations, while civil and military expenses are borne by the European Union" (para 38, own translation). And, more specifically, that Art 16 of Joint Action 2008/124 determines that "all the costs of Eulex Kosovo are managed in accordance with the rules and procedures applicable to the general budget of the European Union" (para 39, own translation). Consequently, the "jurisdiction of the Court of Justice follows from the budgetary commitment made ​​by the Union and the adoption of decisions that aim to ensure its implementation within the framework of the functions exercised by entities established pursuant to the acts of the CFSP" (para 41, own translation). 

This leads AG Jääskinen to reject the arguments against the CJEU's jurisdiction based on the "extraneousness" of public procurement rules to the CFSP/CSDP (as submitted by the Commission), or the "political gravitas" of CFSP/CSDP acts, which would require the CJEU to refrain from exercising jurisdiction (as submitted by Eulex Kosovo).

In his Opinion, the AG stresses that there is no doubt whatsoever about the applicability of the relevant EU financial regulation to the contracts awarded in the execution of CSDP missions, in as far as they are financed by the EU Budget--as clearly indicated in the practical guide on contracting procedures applying to all EU external actions financed from the EU general budget and the European Development Fund published by the European Commission (see  2014 version).

At this point, the AG examines the only exception to the previous rules, stressing that

although the jurisdiction of the General Court and the Court of Justice to hear the dispute over public contracts awarded in the context of the external action of the Union has been established, the conclusion of such contracts could however escape the jurisdiction of the Union courts if the contracts include military action. Indeed ... in the light of Article 41 TEU, operations that have an impact on the fields of the military or defense are borne by the budgets of Member States, unless the Council decides otherwise. However, with regard to public procurement of a civil nature, the competence of the Court is indisputable (para 60, own translation).

In view of all the above, AG Jääskinen concludes that: "the courts of the European Union cannot avoid future disputes concerning the insufficient protection of the rights of individuals in the context of external action. Thus, the debate on the status of missions and their personnel, to the extent that they benefit from privileges and immunities, must be accompanied by the provision to individuals of legal means to challenge the acts of the missions that affect their rights and obligations" (para 66, own translation).

The question that remains open, then, is to what extent there is a need to revise the EU's Financial  Regulation to include provisions on mixed civil-military/defence procurement along the lines of the regime foreseen in Directive 2009/81, so that compliance with the rules is not too burdensome for CSDP missions, at least in their early stages. To be fair, running the CSDP missions is clearly challenging and procurement probably does not rank very high in the priorities of bodies and agents that need to make it happen. And, in those circumstances, it is fair to say that the regime for urgent procurement can still be rather limiting, particularly as challenges and protests are concerned. Hence, this may be an area that needs regulatory reform.

Other than that, and from the strict perspective of the scope of competence of the Union courts in the field of public procurement, it may also be a good occasion to rethink the role of the General Court and the CJEU as public procurement review bodies. In my opinion, developments such as the Elitaliana v Eulex Kosovo case (if the CJEU follows AG Jääskinen, of course) point to the need to either create a specialized review chamber parallel to the EU Civil Service Tribunal, or to subject procurement review processes to alternative dispute resolution mechanisms. Maybe this is a second area in need of regulatory reform/institutional redesign.

The best way to deal with a petition to the European Parliament? Admit it and then we'll see (C-261/13)

In its Judgment in case Schönberger v Parliament, C-261/13, EU:C:2014:2423, the CJEU has assessed the limits of the right to petition the European Parliament under art 227 TFEU, as informed by art 44 of the EU Charter of Fundamental Rights. In a case that confirms a previous Judgment by the GC [EU:T:2013:111, not available in English], the CJEU has clarified the controls, checks and balances applicable to a rejection of a petition and, maybe more counterintuitively, the lack of controls applicable to the admission of a petition. This may sound absurd and unnecessary, given that there would seem to be no need to control the reasons why the European Parliament admits petitions.

 

However, the discussion seems to actually not have been about how to control de admission of petitions, but the actions that the European Parliament decides to engage in once the petition is admitted. On this point, and showing a very clear deference for the political process involved in the right to petition, the CJEU has stressed that

it is clear from the provisions of the TFEU and from the rules adopted by the Parliament for the organisation of the right of petition that, where the Parliament takes the view that a petition meets the conditions laid down in Article 227 TFEU, it has a broad discretion, of a political nature, as regards how that petition should be dealt with. It follows that a decision taken in that regard is not amenable to judicial review, regardless of whether, by that decision, the Parliament itself takes the appropriate measures or considers that it is unable to do so and refers the petition to the competent institution or department so that that institution or department may take those measures (C-261/13, para 24, emphasis added).

The question at this point is how to interpret this passage, which seems to either not require any reaction at all from Parliament, or a very minimum 'referral' of the petition to a different institution or department. Ie, in the best case scenario, all the Parliament needs to do is to pass the hot potato onto somebody else. In the worst case, it may just decided that there is nothing that can be done.

 

 

The lack of appetite for a control of the actions that follow a petition is understandable. However, an extreme reading of Schönberger v Parliament would simply result in the European Parliament never rejecting any petition in the future (that would be open to judicial review) and instead admitting them and immediately declaring that there is nothing they can do (with, or without further referral). Whether this provides any meaningful effectiveness to art 44 EUCFR and art 227 TFEU is at least debatable. However, there is nothing I can say about this. Hopefully the experts will.

What's left of the 'new limb' of Art 263(4) TFEU after Inuit and Telefonica? (C-274/12 P)

In its Judgment of 19 December in case C-274/12 P Telefonica v Commission, the CJEU has continued to define (and minimise) the scope of Article 263(4) TFEU and, particularly, the 'new' third limb introduced by the Treaty of Lisbon according to which 'Any natural or legal person may [...] institute proceedings against [...] a regulatory act which is of direct concern to them and does not entail implementing measures.'

 

The restrictive approach adopted in the interpretation of this provision is largely based on the (substitutive) potential reliance on requests for a preliminary ruling under Article 267 TFEU against the measures not susceptible of a direct challenge by 'non-qualified' applicants. Therefore, the CJEU has now (almost) completed the reinterpretation of the post-Lisbon mechanisms for judicial review, where it seems clear that Article 263(4) TFEU, and particularly its last limb, is bound to have (or continue having) a marginal role.

 

In Inuit, the CJEU made it clear that legislative measures are not covered by the concept of 'regulatory act'. However, that negative approach to the definition of 'regulatory act' left some questions unanswered (are those only legislative measures derived from the ordinary legislative procedure as the GC had found, or are there all legislative measures, independently from their ultimate legal basis?). It was also not considered what 'implenting measures' meant. This has now been addressed in Telefonica.

 

The arguments provided by the CJEU are worth reading carefully:

27 As the Advocate General has observed in points 40 and 41 of her Opinion, the concept of a ‘regulatory act which … does not entail implementing measures’, within the meaning of the final limb of the fourth paragraph of Article 263 TFEU, is to be interpreted in the light of that provision’s objective, which, as is clear from its origin, consists in preventing an individual from being obliged to infringe the law in order to have access to a court. Where a regulatory act directly affects the legal situation of a natural or legal person without requiring implementing measures, that person could be denied effective judicial protection if he did not have a direct legal remedy before the European Union judicature for the purpose of challenging the legality of the regulatory act. In the absence of implementing measures, natural or legal persons, although directly concerned by the act in question, would be able to obtain a judicial review of that act only after having infringed its provisions, by pleading that those provisions are unlawful in proceedings initiated against them before the national courts.

28 It should be explained in this regard, first, that where a regulatory act entails implementing measures, judicial review of compliance with the European Union legal order is ensured irrespective of whether those measures are adopted by the European Union or the Member States. Natural or legal persons who are unable, because of the conditions governing admissibility laid down in the fourth paragraph of Article 263 TFEU, to challenge a regulatory act of the European Union directly before the European Union judicature are protected against the application to them of such an act by the ability to challenge the implementing measures which the act entails.

29 Where responsibility for the implementation of such acts lies with the institutions, bodies, offices or agencies of the European Union, natural or legal persons are entitled to bring a direct action before the European Union judicature against the implementing acts under the conditions stated in the fourth paragraph of Article 263 TFEU, and to plead in support of that action, pursuant to Article 277 TFEU, the illegality of the basic act at issue. Where that implementation is a matter for the Member States, those persons may plead the invalidity of the basic act at issue before the national courts and tribunals and cause the latter to request a preliminary ruling from the Court of Justice, pursuant to Article 267 TFEU (Case C-583/11 P Inuit Tapiriit Kanatami and Others v Parliament and Council [2013] ECR I-0000, paragraph 93).

30 Second, as the Advocate General has observed in point 48 of her Opinion, the question whether a regulatory act entails implementing measures should be assessed by reference to the position of the person pleading the right to bring proceedings under the final limb of the fourth paragraph of Article 263 TFEU. It is therefore irrelevant whether the act in question entails implementing measures with regard to other persons.

31 Third, in order to determine whether the measure being challenged entails implementing measures, reference should be made exclusively to the subject-matter of the action and, where an applicant seeks only the partial annulment of an act, it is solely any implementing measures which that part of the act may entail that must, as the case may be, be taken into consideration (C-274/12 P at paras 27 to 31, emphasis added).

The Judgment could be criticised in view of the fact that it includes implementing measures to be adopted by the Member States within the definition of 'regulatory acts...' in Article 263(4) TFEU--which (under a more generous approach) could have been limited to acts that require implementing measures by the European Institutions, but not those that require implementation by the Member States. However, the logic of the Judgment is clear and the strong push to 'redirect' litigation towards Article 267 TFEU is clear and consistent.

 

It is also clear from the Inuit and Telefonica Judgments that the CJEU is keeping the 'Plaumann test' alive and kicking when it comes to the interpretation of 'direct and individual concern' under the second limb of Article 263(4) TFEU.

 

Finally, it is also cleat that the CJEU sees no violation of Articles 6 and 13 of the European Convention on Human Rights or Article 47 of the Charter of Fundamental Rights of the EU as a result of its restrictive interpretation of the locus standi criteria in Article 263(4) TFEU (see paras 56 to 61, where the CJEU stresses once again that 'Judicial review of compliance with the European Union legal order is ensured, as can be seen from Article 19(1) TEU, by the Court of Justice and the courts and tribunals of the Member States. To that end, the FEU Treaty has established, by Articles 263 TFEU and 277 TFEU, on the one hand, and Article 267 TFEU, on the other, a complete system of legal remedies and procedures designed to ensure judicial review of the legality of European Union acts, and has entrusted such review to the European Union judicature', at 57).

 

Bottom line, the CJEU is clearly stressing that domestic courts of the Member States are EU courts for all purposes. In my view, from the perspective of the design and manageability of the system, this is certainly the only sensible and viable strategy.

Lack of an EU administrative #appeal does not broaden #GC and #CJEU review powers in #publicprocurement

In its Judgment of 24 April 2013 in case T‑32/08 Evropaïki Dynamiki v European Commission (Environment for Young Europeans), the General Court addressed a submission by (the ever more creative) Evropaïki Dynamiki whereby it was argued that the lack of a (pre-judicial) administrative appeal against the public procurement decisions of the EU Institutions required an extension of the scope of the judicial review conducted by the EU Courts.

According to Evropaïki Dynamiki, the procedure for the award of public contracts by the EU Institutions is different from the legislation applicable to the Member States, which provides for non-judicial remedies, thus reinforcing the principles of transparency and equal treatment between tenderers. And, consequently, the General Court should take account of the incomplete nature of the procedure for the award of public contracts by the EU Institutions by carrying out a thorough review of the assessments of the evaluation committee--since, otherwise, a restricted review, limited to declaring invalid manifest errors of assessment, diminishes the possibility of a detailed examination of the substance of the contested decision.

The GC clearly dismissed Evropaïki Dynamiki's contention and declared that:

The fact that the legislature did not establish an administrative appeal procedure, in the context of the procedure for the award of public contracts by the institutions of the European Union, cannot have any effect on the scope of the review carried out by the Courts of the European Union [which must be limited to checking that the rules governing the procedure and statement of reasons are complied with, the facts are correct and there is no manifest error of assessment or misuse of powers]. The existence or absence of such an appeal procedure is irrelevant to defining the scope of the Court’s review, since that review is different – both in its nature and the safeguards it presents – from an administrative appeal procedure (T-32/08 at 30).

I agree with the general principle that the existence or not of a prior administrative appeal does not alter the scope of judicial review, but I do not share the GC's (almost) obiter dictum that judicial review is that different from an administrative appeal procedure, at least as the substantive review tests go. I tend to disagree particularly because, even within administrative appeals, challenges against the assessments of the evaluation committees rarely imply a second assessment by a different team or by an independent adjudicator and, consequently, all public procurement litigation tends to be bound to the initial evaluation carried out by the evaluation committees.

Moreover, (administrative) judges are not in a good position to directly carry out technical assessments (afresh) and they must, by necessity, defer (at least to some extent) to the technical discretion of the evaluation committee / contracting authority--unless they can identify factual mistakes or manifest errors of assessment, in which case they tend to strike out the administrative decision, rather than substituting the incorrect technical assessment with their own. Courts cannot really use a finer sieve to separate gold from rocks. And that is why, even within administrative appeals systems, roughly the same standards of (gross) misrepresentation of the facts or the extraction of unsound conclusions / assessments are applied. 

Overall, in my opinion, the GC Judgment should be welcome and not seen as an attempt to duck its review responsibilities, nor as a source of defencelessness for tenderers for contracts of the EU Institutions. I think that few doubts can seriously be harboured as to the effectiveness of the review mechanisms already in place (as the long Evropaïki Dynamiki saga shows for itself).

EU's accession to the ECHR and due process rights: Nothing new under the sun?

I have just posted a new paper on SSRN about the potential implications of the EU's accession to the European Convention on Human Rights (ECHR), particularly in terms of the scope and intensity of judicial review of enforcement decisions in competition law cases.

In light of the ongoing discussion on the potential need for reform of the enforcement system of EU competition law to make it compliant with Article 6(1) ECHR, the aim of the paper is to contribute to the debate in a threefold manner by: i) sketching the peculiarities of the enforcement of competition law (in general, but with a focus on EU competition law), which basically derive from the complex and data intensive economic assessments required in most cases; ii) critically appraising the requirements of Article 6(1) ECHR in the field of EU competition law in view of those peculiarities; and, finally, iii) assessing the impact of those requirements in terms of the potentially necessary amendments to the EU competition law enforcement system upon the EU’s accession to the ECHR.

The basic contention of the paper is that, given the specific architecture of the EU competition law enforcement system under Regulation 1/2003 (and the domestic competition laws of Member States) — which have crystallized in a network of highly specialised and independent administrative agencies that, generally, offer procedural guarantees equivalent (or superior) to those of most tribunals in other areas of the law — and as long as an effective (soft or marginal) judicial review mechanism is available to the undertakings affected by sanctions due to EU competition law infringements, no significant changes are required in order to make the system comply with Article 6(1) ECHR. This position is further supported by the express normative assumption that undertakings (or companies) deserve a relatively more limited protection than individuals under the ECHR and, more specifically, under Article 6(1) ECHR — at least as regards non-core due process guarantees, such as the applicable standard of review (and as opposed to ‘core’ due process guarantees such as the presumption of innocence, the principle of equality of arms, the right to have full access to the evidence, or the right not to suffer undue delays).

The full paper is available here: http://ssrn.com/abstract=2156904.