EUROPEAN PROCURMENT LAW

Question 1: The structure of public procurement law is getting even more important for municipalities. What do the municipalities need to consider when they wish to transfer some of their duties or public services, either by themselves or together with other municipalities, to companies structured according to the private law?

European Court of Justice ruled that, in some cases, work can be regarded as made in-house even when is carried out not by the contracting authority itself but by any other legal entity that is controlled by the contracting authority. Sometimes these are referred to as quasi-in-house arrangements. But, for this kind of arrangements to be in-house, according to TECKAL ruling (ECJ, judgment dated 18.11.1999 RS C. 107/98), there are two conditions to be met and therefore observed by the municipalities when they wish to transfer some of their duties or public services, either by themselves or together with other municipalities, to companies structured according to the private law namely: , The contracting authority to exercise over the legal entity awarded with the arrangement a control which is similar to that which its exercises over its departments. Also, as ruled in the case Parking Brixen this requires a power of decisive influence over both strategic objectives and significant decision of the entity awarded with the contract; The entity awarded with the arrangement carries out the essential part of its activity for the controlling entity (contracting authority).

Since the TECKAL rules have been interpreted by the European Court of Justice the municipalities, when intends to proceed as in the question above, will be better to have in consideration that: Any private interest in the legal entity awarded with the contract, even to an small extent, in any case excludes the possibility of the public procurement authority exercising control over such a company to a degree similar to the control enjoyed over its own branches, organizational parts and people (ECJ, judgment dated 11.01.2005, Case C 26/03, Stadt Halle); The fact that the public procurement authority holds, by itself or jointly with other public entities, all the shares of the contracting company, indicates without being decisive that he exercises control over said company in the meaning of side number 50 of the Teckal ruling, to a degree comparable to the control enjoyed over his own branches (ECJ, decision dated 11.5.2006 Rs C 340/04, Carbotermo) Direct control over specific decision-making is required for the company to be considered inhouse entity, even when it is 100% owned by the contracting authority( Parking Brixen Case); In order to fulfill the requirement of control as over an own branch, one can also look to the control that the public entities, which hold the shares in the contracting entities, exercise jointly over those entities. The control must be effective, but need not be individually accessible. As the case may be, a majority decision may be sufficient to exercise control (ECJ, ruling dated 13.11.2008 RsC-324/07, Coditel) The in-house rule cannot be relied when an authority sets up a separate entity that it controls it with the intention of privatizing it one it has been given the work under the in-house rule (Case C- 29/04, Commision v Austria Modling).

Question 2: The EU Commission determines new thresholds values for classical areas of public procurement. Due to upcoming election and ongoing campaigning, Germany failed to adopt these new thresholds values. The new thresholds of the EU are lower than the thresholds fixed in Germany. A bidder starts review proceedings, which are dismissed by the public procurement authority because the thresholds values have not been reached. The bidder argues that the thresholds value of the non-adopted EU directives has been reached, and that threshold is authoritative. a. Which regulations contains the thresholds values for the classical procurement area? b. Is the public procurement authority correct or the bidder? State reasons for your answer.

a. Which regulations contains the thresholds values for the classical procurement area? The Regulation containing the thresholds value for the classical procurement area, valid upon 31.12.2011, is COMMISSION REGULATION (EC) No 1177/2009 of 30 November 2009 amending Directives 2004/17/EC, 2004/18/EC (classical Directive) and 2009/81/EC of the European Parliament and of the Council in respect of their application thresholds for the procedures for the award of contracts (Text with EEA relevance), was published in the Official Journal of the European Union (OJEU 1.12.2009 L 314/64). Starting with 01 January 2012 the Regulation containing the thresholds value for the classical procurement area, valid upon 31.12.2011, is COMMISSION REGULATION (EC) No 1251/2011 of 30 November 2011 amending Directives 2004/17/EC, 2004/18/EC (classical Directive) and 2009/81/EC of the European Parliament and of the Council in respect of their application thresholds for the procedures for the award of contracts.

b. Is the public procurement authority correct or the bidder? State reasons for your answer.

Since, in our case:

We are speaking of new adopted thresholds values for classical procurement area; The new thresholds of the EU are lower than the thresholds fixed in Germany; European Law supersedes National Law. the Bidder is correct when he argues that the thresholds value of the non-adopted EU directives has been reached, and that threshold is authoritative.

Question 3: The Austrian legislator has as opposed to the German legislator, expressly regulated the judicial review process for the area below the thresholds value. The constitutional courts of both countries have issued decision in this question.

a. Briefly sketch the main arguments that the courts discussed;

German Constitutional court: BVerfG, Judgement dated 13 June 2006 - 1 BvR 1160/03. Justification: Under the limit thresholds values there is no subjective right; This unequal treatment in awarding public contract has an objective justification; The unequal treatment in awarding the public contracts it is not justified on the membership to a certain group but on the value of the contract. This criteria is purely referring to a state of things; A strict criteria of assessing is justified mainly when a legal provision leads to differentiation between group of persons and not state of things; The indirect unequal treatment is also not justified here; The award of this kind of contract has to be measured only under the general principle of equality; A breaching of the equality principle can be accepted by the Court only in case for the legal provision in discussion and the unequal treatment cause by it is not objective justification; In this field the ruler has a wide range of possibility in assessing in the issue of limit threshold value;

VfGH Austria, Judgement dated 30 of November 2000 - G 110/99

Justification: Ruling the threshold values in accordance with the principle of community law cannot justify it from the point of constitutional law; The rulings has to be in accordance both to the community and constitutional law; The Court agrees that in case of contract with a smaller value to have fast and simple procedures, which does not involve big costs, but there is not objective justification in case of under limit thresholds, to deprive the bidders of any minimum protection measures; In this field the ruler doesnt have a wide range of possibility to assess the issue of limit thresholds value. There is no justification for contracts after a certain value to rule and for contracts under that limit to rule nothing.

b. Which concept is preferable and why?

As we saw there are different approaches for the area below the thresholds value, and the Constitutional Courts of both countries, Austria and Germany, have issued decision in this respect, both with interesting arguments.

Anyhow, considering the arguments presented by Austrian Constitutional Court we think that is preferable this concept. The reason for this concept to be preferable is based on the fact that the participants in a under thresholds value award procedure benefices of minimum guarantees of this procedure. In other terms there is a primary legal protection of the participants contrary to what is in Germany where there is not such a protection.

Therefore even we speak about a procedure where the value of the contracts is smaller and there is a justification for different treatment, such as: smaller cost for the procedure, faster procedure, etc. there is also in the interest of all participant that minimum requirements and guarantees to be drafted by the Ruler (Gesetzgeber).