Ms 91 Kuypers

QUASI IN HOUSE EXEMPTION IN THE EU: A NEW
DEAL IN THE 2014 EU DIRECTIVES?

Pieter Kuypers*
* Pieter Kuypers, Ph.D., is a full professor, Radboud
University Nijmegen and partner in the law firm AKD
(www.akd.eu) in Brussels and practicing EU public
procurement and competition law. His teaching and
research interests are in the field of EU and Dutch public
procurement law, in particular in the field of public
procurement and competition.
ABSTRACT.
In 1999 the European Court of Justice
handed down the well-known Teckal judgment. The CJEU
exempted in this judgment certain public public contracts
from the obligation to tender on the condition that the
contracting authority has control over the contracting
party and at the same time an essential part of the
activities of the contracting party is carried out with the
contracting authority or authorities. After this landmark
judgment, many cases followed and in 2014 the European
legislator decided to codify this exemption in Directive
2014/24/EU and widen it further. In this paper the CJEU
case law 1999 2016 will be compared with Article 12
Directive 2014/24/EU that governs since 18 April 2016 the
quasi in-house procurement contracts. This comparison
should assist research scholars and practitioners to
understand better the interpretation of Article 12
Directive 2014/24/EU and predict where possible future
developments in EU case law.
1. INTRODUCTION
The importance of rules regulating public procurement
in the European Union has become more apparent to the
eyes of the European Union relatively late in the
development of EU law. But the last decades it is apparent
that the EU legislator and EU policymakers pay more
attention to public procurement. This has triggered
several reforms of the public procurement rules by the

European legislator. The latest development being three
new EU directives on public procurement (contracts and
concessions) which entered into force on 17 April 2014.
They should have been transposed in the national legal
order by 18 April 2016.1 Part from this reform, the case
law of the Court of Justice of the European Union (CJEU)
over the last 15 years has contributed as well with
extensive case law to the clarification and evolution of
public procurement rules.
The main aim of the European public procurement
rules is to open the market for public contracts and
concessions to competitors across the European Union
and to preclude the distortion of competition on the
internal market.2
To achieve this goal, the public procurement rules have
created a general tendering obligation. Contracting
authorities that are planning to award a contract that falls
within the scope of one of the public procurement
directives need to start a tender procedure complying to
the rules of the applicable directive. Through such a
tendering procedure, economic operators from all EU
member states get a chance to compete for these
contracts. In this paper I shall in particular refer to the
Directive 2004/18/EC and 2014/24/EU regarding public
contracts, of which the last is currently in force 3. Both
Directives are applicable if three cumulative conditions
are fulfilled:
2
3
The public contract has to be concluded in writing

for pecuniary interest concerning public works,
supplies or services.
The public contract has to be concluded between a

contracting authority and en economic operator. 4
These two concepts are further defined in Article
Directives 2014/23/EU (public concessions), 2014/24/EU (public contracts)

and 2014/25/EU (special sector contracts).
CJEU 10 November 1998, C-360/96 (BFI Holding), par. 41.
Reference is made to Directive 2004/18/EC, because most Member States
did not transpose Directive 2014/24/EU timely.
Article 1(2)(a) of Directive 2004/18/EC.
1(9) respectively Article 1(8) of Directive 2004/18

and Article 2(1) sub (1) and (10). Given the
importance of the obligation to tender for
achieving the aim of the public procurement rules,
the CJEU has ruled that the concept of 'contracting
authority' has to be interpreted broadly.5
The value of the contract must also be above a

certain threshold, which is regularly amended. 6 The
current threshold lies at 135.000 euro for public
supply and services contracts awarded by central
authorities, at 209.000 euro for public supply and
services contracts awarded by other contracting
authorities and at 5.255.000 euro for public works
contracts.7
All contracts that fulfil these criteria need to be

tendered according to the rules of the Directive, unless
exempted explicitly. The CJEU ruled that only contracts
that are expressly mentioned in the Directive as
exceptions exclude contracting authorities from this
obligation to tender. The CJEU held that the exceptions
exhaustive.8
These Articles and case lead to a certain tension for
public public contracts. On the one hand the obligation to
tender applies to all contracts that fall within the scope of
the Directive and encompasses all public contracts,
including public - public contracts. This broad scope,
including the public public contracts, follows from Article 2
(1) sub (5) and (10) Directive 2014/24/EU 9:
5
6
7
8
9
Examples for this broad interpretation: CJEU 15 January 1998, C-44/96

(Mannesmann), par. 25; CJEU 3 October 2000, C-380/98 (University of
Cambridge), par. 43; CJEU 1 February 2001, C-237/99
(Commission/France), par. 43; CJEU 13 December 2007, C-337/06
(Bayerischer Rundfunk), par. 60.
Article 7 Directive 2004/18/EC.
Commission Regulation (EU) 2015/2342 of 15 December 2015 amending
Directive 2004/18/EC of the European Parliament and of the Council in
respect of the application thresholds for the procedures for the award of
contracts.
CJEU 18 November 1999, C-107/98 (Teckal), par. 43.
Article 1 (1) and (8) contain similar definitions which lead to
the same conclusion.
(5) public contracts means contracts for

pecuniary interest concluded in writing
between one or more economic operators and
one or more contracting authorities and having
as their object the execution of works, the
supply of products or the provision of services;
(10) economic operator means any natural or
legal person or public entity or group of such
persons
and/or
entities,
including
any
temporary association of undertakings, which
offers the execution of works and/or a work, the
supply of products or the provision of services
on the market;
These contracts fall within the scope of the Directives,
hence the definition of economic operator is covers also
public entities.10 Furthermore, the Directives have not
exempted this kind of contracts in one of its Articles. The
CJEU came not surprisingly to the conclusion that there is
no such thing as a general exemption from the obligation
to tender for contracts between public entities. 11
Therefore public contracts awarded to a different public
entity are governed by the Directives.
On the other hand, public authorities are in principle
free to organize the execution of their public tasks by
themselves. They are allowed to use their own
administrative, technical and other resources to execute
their public tasks. In the event that a public authority
decides to perform the obligations by means of its own
resources, the authority is not obliged to rely on distinct
entities. In this situation the authority the public
procurement rules cannot be applicable. 12 This situation is
regarded as a 'real in-house' situation. 13 Public authorities
therefore enjoy the freedom to make a so-called 'make-orbuy decision' before the possible award of a public
10
11
12
13
Article 1(8) of Directive 2004/18/EC.

CJEU 11 January 2005, C-26/03 (Stadt Halle), par. 48.
S. Arrowsmith, The law of public and utilities procurement
Regulation in the EU and UK, Sweet&Maxwell 2014, Volume I,
3rd edition, p. 498.
contract.14 It is notable that tension arises from these two

principles: On the one hand, contracting authorities enjoy
the freedom to organize the execution of their public
tasks with their own resources, but they are obliged to
tender contracts to ensure an open market for public
contracts even if they use public resources from other
public entities. This tension opened up the discussion for
the question whether there are not situations conceivable
in which public public contracts remain outside the scope
of the Directives. Since Member States are in principle
free to determine their own procedural rules 15, are public
authorities of these Member states free to determine the
legal form of the organisation of their public tasks
together with other public entities?
The CJEU acknowledged in the Teckal case as first EU
institution the possibility that certain public public
contracts can be exempted from the public procurement
rules, even though they are not explicitly exempted under
the Directive.16 With this judgment, the CJEU has opened
the doors for situations where public public contracts are
not necessarily subject to the obligation to tender.
However, the CJEU has limited these possibilities by
determining that every exception to the general
obligation to tender should be interpreted strictly. 17 The
CJEU accepted sofar only two types of (non-legislative)
exemptions in its case law: The 'quasi in-house' exemption
and the 'public-public cooperation exemption'. In the
Teckal case18, the CJEU accepted that contracting
authorities have the freedom to award contracts to a legal
entity that is formally, but legally distinct but
subordinated. This exemption is commonly referred to as
'quasi in-house'. It is however not the same as an inhouse situation, because the person is a distinct entity
14
15
16
17
18
W. A. Janssen, 'The Institutionalised and Non-Institutionalised

Exemptions from EU Public Procurement Law: Towards a More
Coherent Approach?', Utrecht Law Review 2014, number
10(5), p. 183.
CJEU 7 January 2004, C-201/02 (Wells).
CJEU 18 November 1999, C-107/98 (Teckal).
from the contracting authority. For the 'quasi in-house'

exemption the contracting party needs to be an entity
that is legally distinct from the contracting authority, but
under control of the contracting authority. According to
the Teckal judgment: the contracting authority must to be
in a position to exercise control over the entity that is
similar to the control over its own departments. The
controlled entity needs secondly to exercise the essential
part of its activities for the benefit of the contracting
authority.19 The CJEU has further defined and clarified
these criteria in later judgments. 20
The CJEU accepted a second exception of the
obligation to tender public public contracts in its judgment
Stadtreinigung Hamburg.21 The EU court established that
public authorities are exempted from their obligation to
tender in the event that public entities cooperate with
other public entities to execute a common public task.
Since the CJEU based its judgment in Stadtreinigung
Hamburg only on the specific facts of the case, there was
confusion after this judgment as to whether the court had
actually acknowledged a new exception in this ruling.
However, the CJEU confirmed this exception in later
judgments and furthermore defined a set of general
criteria for the application of this exemption.22 There are
different terms describing this exemption, such as 'publicpublic cooperation', 'horizontal cooperation', 'public
collaboration' or 'non-institutionalized cooperation'. In this
paper I shall use the term horizontal cooperation' to
distinguish from the quasi in-house exception which is
essentially a vertical public public cooperation. Public
public cooperation is in my view the best overall term to
describe the subject of this paper and entails both. The
general term 'public-public cooperation' for both
situations is also used by the EU Commission. 23
19
20
21
22
23

For example in the following judgments: CJEU 11 January 2005, C-26/03
(Stadt Halle); CJEU 11 May 2006, C-340/04 (Carbotermo); CJEU 29
November 2012, C-182/11 and C-183/11 (Econord).
CJEU 9 June 2009, C-480/06 (Stadtreinigung Hamburg).
CJEU 19 December 2012, C-159/11 (Azienda Sanitaria Locale di Lecce);
CJEU 13 June 2013, C-386/11 (Piepenbrock).
Commission Staff Working Paper concerning the application of EU public
In this paper I consider therefore quasi in-house and

horizontal public cooperation as two distinct types of
exemption of the obligation to tender 24 The decisive
difference between the exeptions is the fact that the
contracting authority controls the body as if it were one of
its own departments in the first exception. This
relationship between the concerned entities is the key
difference between the two exemptions. This hierarchical
controlling relationship is a factor that misses in horizontal
cooperation, where there is no internal link between the
entities or hierarchy, but cooperation between equals. The
difference therefore lies in the type of relationship of the
entities: hierarchical or real cooperation.
The main
thought behind the 'quasi in-house' construction is the
hierarchical relationship in which the controlled entity is
supposed to have no will of its own and to only execute
the will of its controlling entity. 25 Such a relationship can in
turn hardly be called cooperation.
The case law of the CJEU and the developments
regarding quasi in-house exception is more extensive
and complex than about horizontal cooperation. Or this
reason I focus in this paper on the quasi in-house
exception. In the next paragraph I shall examine the
development of this exemption by the CJEU and
summarize its current status. I examine the EU case law,
but leave outside the scope of the research the national
case law, because there are significant differences
between the EU member states with regard to the existing
quasi in-house structures and ultimately (through
preliminary rulings) the national case law should converge
at EU level as a result of the case law of the CJEU.
2. THE QUASI IN-HOUSE EXEMPTION AS DEVELOPED
IN THE CASE LAW OF THE CJEU
24
25
procurement law to relations between contracting authorities ('public-public

cooperation'), SEC(2011) 1169 final; C. Bovis, EU public procurement law,
Edward Elgar Publishing 2012, 2nd edition.
Opinion of Advocate-General Mengozzi of 23 January 2014, C-13/15
(Datenlotsen).
Opinion of Advocate-General Mengozzi of 23 January 2014, C-13/15
(Datenlotsen), par. 43.
2.1. General
The 'quasi in-house' exemption is an exemption that
applies in situations in which the contracting authority
awards a contract to a person that is materially not
distinct from it. It is 'quasi' an in-house relationship in
which a contract is needed between the entities for the
reason that the contracting party is formally distinct from
the contracting authority but depending on the
contracting authority that is similar to the relationship
that the contracting authority shares with its own
departments. This exemption was first affirmed in the
CJEU's judgment in the Teckal case.26
The CJEU ruled first that the only exceptions to the
application of the public procurement rules are the ones
that are mentioned expressly in the applicable
directives.27 The CJEU then established that there is no
such general exemption from the public procurement
rules for contracts between contracting authorities. 28 The
CJEU follows in its decision the opinion of AdvocateGeneral Cosmas29 that there can only be a public contract
in the event that there is an actual agreement between
'two separate persons'.30 To be a separate person, in the
meaning of the Directive, the contracting party needs to
be legally distinct from the contracting authority. The CJEU
proceeded with two criteria for determining that the
contracting party is actually not a legally distinct person.
The contracting authority can make an exception:
'only in the case where the local authority
exercises over the person concerned a control
which is similar to that which it exercises over
its own departments and, at the same time,
that person carries out the essential part of its
26
27
28
29
30

Opinion of Advocate-General Cosmas, C-107/98 (Teckal), par. 53.
activities with the controlling local authority or

authorities'.31
The CJEU created in one sentence an exception that
did not exist in the Directive 93/36/EEC 32, was not
incorporated in Directive 2004/17/EC, did not apply in the
case at hand by using two vague criteria for the
application of this exemption: the 'similar control'-criterion
and the 'activities'-criterion. The CJEU did not explain in
the Teckal judgment the meaning of these criteria.
Nevertheless, there were judgments after Teckal in which
the CJEU defined and clarified. The Teckal judgment is an
example of the important role of the CJEU in law making
in the field of public procurement. The legislator did not
foresee any exception the field of public - public contracts,
but the CJEU created this exception on its own. This is
surprising, because exemptions to the obligation to tender
public contracts other than those listed in the directives at
the time had been subject of discussion, but had never
been acknowledged by the European legislator before.
Advocate-General Cosmas voiced his fear that this
judgment would open floodgates for public authorities
which intend to escape from the obligation to tender. It
would enable new forms of evasion and undermine the
aim of the public procurement rules. 33 Since this
judgment, there have indeed been cases in which
contracting authorities tried to make use of the
exemption. However, the CJEU determined that the
exemption should be interpreted strictly and disrupt the
objectives of the public procurement rules. 34 Nevertheless
Advocate-General Cosmas predicted well what would
happen: the exemption has since been used by public
authorities frequently, the CJEU broadened in later
judgments the exception and the EU legislator extended
the exception further in Article 12 Directive 2014/24/EU.
2.2.
31
32
33
34
The 'similar control'-criterion

The special sector Directive preceding the Directives 2004/17/EC and
2014/25/EU.
Opinion of Advocate-General Cosmas, C-107/98 (Teckal), par. 65.
2.2.1. Development in case law CJEU

The first criterion for an quasi in-house' holds that the
contracting authority exercises over the contracting party
(economic operator) a control similar to that which it
exercises over its own departments. This criterion aims at
the functional dependence of the contracting party.
Advocate-General Mengozzi described the idea of this
criterion as the controlled party being similar to a
department of the contracting authority in the sense that
the controlled entity does not have its own will. It is solely
lead by the will of the controlling entity (contracting
authority).35 This idea seems to be confirmed by the CJEU
in the judgment in the case Stad Halle.36 The CJEU
answered in a request for a preliminary ruling with a strict
interpretation of the exemption.37 The Court reminded first
of all that the 'quasi in-house' exemption is based on the
presumption that European public procurement rules do
not seek to restrict the freedom of public authorities to
perform their public tasks by means of using their own
resources.38 The court held in that respect that any
participation of a private undertaking in the capital of the
contracting party, however small, excludes the possibility
of the contracting authority exercising the necessary
control over the contracting party. 39 The court based this
conclusion on the reasoning that in the relationship
between a contracting authority and its own departments,
all decisions are governed solely by the pursuit of
objectives of public interest. Private capital investments,
however, follow considerations of private interest, even if
the private stake in the contracting party is limited. Any
undertaking with private capital or private investments,
even if these are the minority, is not governed by public
interests exclusively.40 Furthermore, the award of a
contract without a tendering procedure to an undertaking
35
36
37
38
39
40
Opinion of Advocate-General Mengozzi from 23 January 2014, C-13/15

CJEU 11 January 2005, C-26/03 (Stadt Halle).
in which there is private capital participation would put

the private investor in an advantageous position over its
competitors on the market, which would be contrary to
the aims of the public procurement rules. 41 The CJEU
therefore established that the similar control criterion
could never be fulfilled if there was any private capital
participation in the contracting party. The interpretation of
the similar control criterion is therefore important to
prevent public authorities from distorting competition.
The CJEU further defined the control criterion in its
judgment in the case Parking Brixen 42 which was
according to the CJEU a service concession and therefore
excluded from the scope of the procurement directive
which was in force at the moment of the award of the
concession.43 The court stated that a direct award without
any prior advertising and opening to competition was
violating the obligations of the municipality which
followed from EU primary law and the obligation of
transparency as established in its earlier Telaustria
judgment.44 Although it is not relevant for the obligation of
transparency whether there exists in fact a contract
between the contacting authority and a legally distinct
entity, the CJEU decided in the light of the freedom of
public entities to perform their tasks with their own
resources that the obligation of transparency is not
applicable in 'quasi in-house' situations. 45 The CJEU
argued that all legislative provisions and relevant
circumstances need to be taken into account in the
assessment of the control-criterion.46 In an unusual
detailed analysis of the facts of the case in the judgment,
especially emphasising the conversion of the special
undertaking to a company limited by shares, the
broadening of the company's objectives, the obligatory
opening of the company to other capital, the expansion of
the geographical area of the company's activities and,
41
42
43
44
45
46

CJEU 13 October 2005, C-458/03 (Parking Brixen).
CJEU 13 October 2005, C-458/03 (Parking Brixen), par. 40.
CJEU 13 October 2005, C-458/03 (Parking Brixen), par. 46-52.
CJEU 13 October 2005, C-458/03 (Parking Brixen), par. 60 and 61.
especially, the considerable powers of the Administrative

Board, which in principle excludes any management
control by the municipality, the court came to the
conclusion that the Stadtwerke Brixen enjoyed such a
high degree of independence that it was not possible for
the municipality to exercise the necessary control over
the company.47 The court emphasised that the control that
the municipality could exercised was essentially limited to
the measures which the national company law assigned
to the majority of the shareholders. 48 The CJEU established
in its judgment as a new element in the similar control
criterion that a contracting authority must have a 'power
of decisive influence over both strategic objectives and
significant decisions' of the contracting party to fulfil the
control-criterion.49
With this judgment, the CJEU made in general clear
that Stadtwerke Brixen became market-oriented, which
rendered the municipality's control tenuous. This is from a
competition view an important element that could receive
more emphasis: as soon as the contracting entity
becomes market oriented, the similar control criterion is
no longer applicable. This is the flip side of the coin that
this exception is meant to carry out public service and not
competition with private companies. The CJEU defined
also more precisely the control-criterion, establishing that
the criterion must not be interpreted functionally.
In line with the functional approach, the CJEU did
initially not give any quantitative conditions for the
interpretation of the control-criterion, if the contracting
entity was a company limited by shares. However, it can
be said that the court has found the percentage of the
capital that the contracting entity holds in the contracting
party to be an indicator for the existence of control. In its
judgment in the case Coname, the CJEU was asked
whether a direct award of a service concession to a
company with predominantly public capital was violating
primary EU law.50 The capital of the contracting entity was
47
48
49
50
CJEU 13 October 2005, C-458/03 (Parking Brixen), par. 67 and 70.

CJEU 21 July 2005, C-231/03 (Coname).
held by contracting authorities. However, the contracting

authority that intended to award the concession held only
0.97% of the capital. The court decided that this
percentage was so small that it precluded the
municipality from having the control over it that is
necessary to qualify for the 'quasi in-house' exemption. 51
At the same time the CJEU ruled that the possibility that
the contracting entity is open to private capital, is
sufficient to conclude that there is no similar control 52. To
a certain extent the CJEU went further than in Parking
Brixen: already the possibility that private shareholders
can participate is enough to conclude that the similar
control criterion is not fulfilled.
One year later an Italian national court asked the CJEU
anew for more clarity about the similar control-criterion. 53
A contracting authority started a tendering procedure for
a contract concerning the supply and maintenance of
heating installations. However, before awarding the
contract to one of the tenders, the contracting authority
suspended the call for tenders and directly awarded the
contract to a joint stock company in which a holding 54
held 100% of the capital. The great majority of shares in
the capital of the holding, to be precise: 99,98%, were
held by the contracting authority. The remainder of
holding's capital was held by nearby municipalities. 55 The
national court asked the court whether the fact that the
municipality held 99.98% of the shares in the holding was
enough to assume that the similar control-criterion was
fulfilled.56 The CJEU answered that if the contracting
authority held all the shares of the contracting entity, this
would indicate control similar to that which it exercises
over its own departments. However, this is only an
indication and not decisive.57 Secondly, it may not be
forgotten that the (similar) control that is relevant for the
51
52
53
54
55
56
57
CJEU 21 July 2005, C-231/03 (Coname), par. 24.

CJEU 11 May 2006, C-340/04 (Carbotermo).
Named: AGESP
CJEU 11 May 2006, C-340/04 (Carbotermo), par. 10-25.
CJEU 11 May 2006, C-340/04 (Carbotermo), par. 30.
quasi in-house exemption needs to be exercised over the

contracting entity. The contracting authority exercised
only indirect control over the contracting entity via the
holding company. I shall come back later on the concept
of indirect control.
In its judgment in the case Asemfo, the CJEU gave an
insightful example for the fulfillment of the similar controlcriterion.58 In Spain Tragsa was a state company which
provided agricultural services to public authorities. The
Spanish law excluded tasks that public authorities
conferred on Tragsa from the obligation to procure
through a tender. A private company targeted the
dominant position that Tragsa took on the Spanish
forestry market and claimed that assignments to Tragsa
needed to be tendered. The national court therefore
referred
to
the
CJEU
questions
about
public
procurement.59 The CJEU took into account several
provisions of Spanish law according to which Tragsa was
required by force of law to carry out all assignments given
to it by the Spanish state administration and the
participating municipalities, for a tariff that was not at the
discretion of the state company. The CJEU held that in the
event that Tragsa actually had no choice in either the
acceptance of tasks from the competent authorities or in
the establishing of the tariffs for its services, there could
be no contractual relationship with a legally distinct
person.60 The similar control criterion does not mean that
the usual contractual relationship entails an obligation to
contract. The contracting entity may enjoy the freedom to
accept assigments.
The CJEU presented more indications to the
interpretation of the control-criterion in its judgment in
the case Coditel.61 After an unsuccesful tender for the sale
of its television network, the municipality of Uccle decided
to become a member of Brutl, an inter-municipal
cooperative society, not open to private participants. The
municipality entrusted Brutl (contracting entity) directly
58
59
60
61
CJEU 19 April 2007, C-295/05 (Asemfo).

CJEU 19 April 2007, C-295/05 (Asemfo), par. 24.
CJEU 13 November 2008, C-324/07 (Coditel).
with the management of its cable television network. 62

The national court was reluctant in establishing whether
the municipality Uccle was exercising the necessary
control over Brutl. According to Brutl's statutes, its
governing council enjoyed the widest powers. In the
judgment Stadtwerke Brixen the CJEU found this situation
an indicator for a high degree of independence. 63
However, the governing council consisted entirely of
representatives of the contracting municipalities and was
appointed by the general assembly, which in turn
consisted only of representants of the municipalities as
well. The CJEU ruled that Brutl's decision making bodies
consisted solely of these public authorities which showed
that they were 'able to exert decisive influence over both
Brutl's strategic objectives and significant decisions'.64
Since Brutl took the form of an inter-municipal
cooperative society governed by the law on intermunicipal cooperatives and has as its object the pursuit of
municipal interest, the fact that its governing council,
consisting of the municipalities' representatives, enjoyed
the widest powers did not seem to indicate a degree of
independence that would preclude the municipalities to
exercise control over it.65 This case is a reminder that
indications are not decisive, but that all legislation and
relevant circumstances need to be taken into account to
determine the possible fulfilment of the similar controlcriterion. The CJEU declared that the control exercised by
the contracting authority must be similar to the control
which it exercises over its own departments, however it
does not need to be identical in all aspects. Nevertheless,
the control exercised must be effective.66
In the last judgment to be mentioned in this respect is
Datenlotsen/HIS.
Somewhat
surprising
the
court
presented a new condition for the interpretation of the
control-criterion.67 The Technical University of Hamburg
62
63
64
65
66
67
CJEU 13 November 2008, C-324/07 (Coditel), par. 13.

CJEU 13 November 2008, C-324/07 (Coditel), par. 35-39.
CJEU 8 May 2014, C-15/13 (Datenlotsen).
had directly awarded a supply contract regarding IT

systems to HIS, a limited company governed by private
law. There was clearly no relationship of control between
the University of Hamburg and HIS, but the national court
wondered whether this situation might still be seen as an
'quasi in-house' situation, because the city of Hamburg
could be considered to have sufficient control over both
HIS and the University of Hamburg. Therefore the
situation might be excluded from the obligation to tender.
Without actually affirming the existence of the 'horizontal
quasi in-house' exemption, the CJEU ruled that the city of
Hamburg did not exercise 'similar control' over the
University of Hamburg anyway. The rationale behind this
answer to the request for a preliminary ruling was that the
city of Hamburg was able to exercise control solely on
matters of procurement, whereas the university enjoyed
broad discretion in other fields, such as (its main duties)
education and research.68 It is therefore presumable that
the CJEU interprets the control as such that it must extend
to all of the controlled (contracting) entity's activities.
However, having regard to the specific circumstances and
in particular the relationship between the city of Hamburg
and the university instead of the relationship between the
university and its actual contracting partner (HIS), it
remains unclear whether this condition is meant to be a
part of the interpretation of the general control-criterion.
It could also be seen as a more specific condition peculiar
to the 'horizontal in-house' situation.
2.2.2. Private capital participation
One of the corner stones for the similar control
criterion is the obligation to exclude private capital. The
CJEU introduced in the judgment Stadt Halle the rule that
any participation of private capital in the contracting
party precludes the contracting authority from having the
necessary control over that entity. 69 The rationale behind
this approach is that private entities have their own
(commercial) interests, which differ from the interest of
public entities. According to the CJEU, the participation of
68
69
CJEU 8 May 2014, C-15/13 (Datenlotsen), par. 31 and 32.

private capital precludes the decisions of the contracting

party to be solely guided by considerations in the public
interest. Although situations might be imaginable in which
the participation of private capital would not actually
disturb the purely public considerations of an entity 70, the
CJEU decided not to examine the private participation on
a case-by-case basis. From the judgment it can be learned
that distortion of competition is the main reason for not
accepting any private capital71:
, the award of a public contract to a semipublic company without calling for
tenders would interfere with the objective of
free and undistorted competition and
the principle of equal treatment of the persons
concerned, referred to in Directive
92/50, in particular in that such a procedure
would offer a private undertaking with
a capital presence in that undertaking an
advantage over its competitors.
There is a zero tolerance and the CJEU accepted this
very strict quantitative approach in consecutive case
law.72 The clearness of this condition leads to a high
degree of legal certainty. Excluding any kind of private
capital participation, regardless of how small the
percentage is, provides a clear standard. Nevertheless,
there is uncertainty about situations in which a contract
was awarded to an entity that was privatized shortly after
the award, is potentially open to private capital or which
was opened up for the possibility of private capital
participation.
The CJEU first was confronted with a privatisation in
the case Stadt Mdling.73 This city had created a private
70
71
72
73
Arrowsmith, p. 513.
See for examples CJEU 10 November 2005, C-29/04 (Stadt Mdling); CJEU
6 April 2006, C-410/04 (ANAV); CJEU 10 September 2009, C-573/07 (Sea).
CJEU 10 November 2005, C-29/04 (Stadt Mdling).
company as a legally separate body to carry out the city's

waste management obligations. A contract conferring the
waste management to this company for an unlimited
period and a fixed remuneration was concluded on 15
days before the city of Mdling decided to sell 49% of the
shares in the company to a private company. Since the
conclusion of the waste management contract occurred
when the company was still fully owned by the city of
Mdling, the city held that the award of the waste
management contract was a 'quasi in-house' situation.
The CJEU declared that in principle, for reasons of legal
certainty, the relevant date for the application of the
public procurement rules should be the date on which the
public contract is awarded. However, particular
circumstances of a case could require to take into account
the events which took place subsequently to the award as
well.74 The court took in particular in consideration that
the company was opened to private capital shortly after
the award of the waste management contract and the
start of the operations after the opening to private
capital.75 The CJEU ruled that this situation was an
artificial construction to award a public contract to a semipublic company while evading the obligations under EU
public procurement law. The court established that when
assessing the lawfulness of the award of a public contract,
all stages and their purpose must be taken into account
instead of basing the analysis only on the strictly
chronological order. The objective of the public
procurement rules would be jeopardised if it were
permissible to evade the obligation to tender by means of
such an artificial construction.76 Interesting is that the
CJEU held again that without this rule competition would
be distorted:
The award of a public contract to a semi-public
company without calling for tenders would
interfere with the objective of free and
undistorted competition and the principle of
equal treatment of the persons concerned,
74
75
76
CJEU 10 November 2005, C-29/04 (Stadt Mdling), par. 38.

CJEU 10 November 2005, C-29/04 (Stadt Mdling), par. 41 and 42.
referred to in Directive 92/50, in that such a

procedure would offer a private undertaking
with a capital presence in that undertaking an
advantage over its competitors.77
In its judgment in the case Parking Brixen, the CJEU
examined the control that the municipality of Brixen
possibly exercised over Stadtwerke Brixen AG. One of the
deciding factors that the court based its negative decision
on was the fact that the municipality had transformed
Stadwerke Brixen from a municipal body into a company
limited by shares. The court took into account the national
legislation under which this kind of company is obliged to
open its capital up to private investors in the short term.
Among other reasons, this made the court decide that the
control-criterion was not fulfilled.78
The CJEU followed this line of reasoning in its judgment
in the ANAV case.79 The municipality of Bari (Italy)
awarded a service contract for public transport to AMTAB
Servizio. This company wholly was owned and controlled
by the municipality. However, the municipality had
allegedly planned to open the company up to private
capital before it the contract was awarded. The
municipality of Bari had also allegedly started a call for
tenders for a (majority) private partner a few months after
the contract with AMTAB entered into force. 80 The CJEU
declared, in a more general wording, that if the capital of
AMTAB were to open for private shareholders during the
contract, the effect would be the same as if the contract
had been awarded to a semi-public company without any
call for competition. This would go against the aims
pursued by community law.81 Although the CJEU presents
a general rule that is not only related to the facts of the
case at hand, it also creates uncertainty. To what extent
should the contracting authority forecast the future?
Which intentions must be taken into account when the
contracting authority awards an 'quasi in-house' contract?
77
78
79
80
81

CJEU 6 April 2006, C-410/04 (ANAV).
CJEU 6 April 2006, C-410/04 (ANAV), par. 27.
CJEU 6 April 2006, C-410/04 (ANAV), par. 30.
Another unanswered question is whether there must

actually be private capital participation shortly after the
award of the contract. Is the sole possibility of future
private capital sufficient to exclude similar control? All
questions that are important for the relationship with
competition.
The next step in the development of case law came in
the matter of referred to as the case Sea. 82 The
municipality di Ponte Nossa (Italy) decided to become a
minority shareholder in Setco, a company limited by
shares, owned by a number of municipalities. Directly
after becoming a shareholder, the municipality awarded a
service contract concerning waste disposal to Setco
without any call for tenders. The national judge was
uncertain whether the situation at hand really qualified for
the application of the 'quasi in-house' exemption. The
underlying reason for the preliminary reference were the
articles of association of Setco, which contained the
possibility of opening the capital up to private
participation. The companys capital had, however, not
actually been opened up to private capital (yet). The CJEU
ruled that the relevant date for the examination of private
participation in the capital should be the date on which
the contract in question is awarded. 83 As a matter of
exception in special circumstances, also events after the
award may be taken into account.84 The CJEU held that
the principle of legal certainty did not allow the mere
possibility of future private participation to stand in the
way of the determination of the public nature of the
capital.85 The opening of capital of a company that has
been awarded a public contract may therefore not be
taken into account, unless there exists, at the time of the
award of the contract, 'a real prospect in the short term of
such an opening'.86 The sole possibility that the company
potentially can open its capital to private investors is not
82
83
84
85
86
CJEU 10 September 2009, C-573/07 (Sea).

CJEU 10 September 2009, C-573/07 (Sea), par. 47.
enough to preclude the fulfilment of the control-criterion. 87

On the other hand, the CJEU confirmed that in the
event that a company did open up its capital during a
public contract that was validly awarded to it without a
call for tenders, this would constitute an alteration of the
fundamental conditions of the contract. The opening for
private capital has therefore the effect that a new
contract has to be awarded in accordance with the public
procurement rules.88
The direct award of a public contract to a company
that afterwards opens its capital to private investors
therefore only has retroactive effect, if the award is part
of a construction meant to evade the public procurement
rules. If there is no such construction involved, the
opening merely creates obligations for the contracting
authority ex nunc unlike the evasion situation.
2.2.3. Indirect control
The control-criterion can only be fulfilled if the
contracting authority exercises over the contracting party
a control similar to that which it exercises over its own
departments. The wording of this phrase seems to
indicate that the contracting authority must exercise
control directly. However, the CJEU accepted that a
contracting authority can exercise influence through
another entity that it controls.
Would a construction in which the controlling authority
exercises similar control over an entity that in turn
controls the contracting party suffice to fulfil the controlcriterion? The CJEU received a chance to answer this
question in the case Carbotermo. 89 The CJEU declared
that 'the intervention of such an intermediary may,
depending on the circumstances of the case, weaken any
control possibly exercised by the contracting authority'.90
The CJEU then decided, on basis of the indirect control
and other facts on the case such as the considerable
87
88
89
90

freedom of the management of the company, that the

control-criterion was not fulfilled in this matter. 91 Indirect
control seems to be an indication of weakened control.
However, it does not absolutely preclude the fulfilment of
the control-criterion. Therefore any situation of indirect
control does not exclude similar control, but the
construction needs to be assessed on a case-by-case
basis.
After the Teckal judgment, the CJEU extended the
freedom of contracting authorities to perform their tasks
by means of their own resources to situations in which the
contracting authorities realize their tasks via formally
distinct entities. This extension fed speculation about
quasi in-house situations that might also fit within the
rationale of the case law of the CJEU. Situations that have
gathered attention are the horizontal in-house situation
and the reverse vertical in-house situation. 92 There has
even been discussion about situations in which cousin
entities award contracts to each other.
This discussion certainly leads to the question of how
far the quasi in-house exemption can be stretched. Does
the current case law of the CJEU define the limits of the
exemption or are its boundaries yet to be explored? The
CJEU held repeatedly that all exemptions to the obligation
to tender need to be interpreted strictly. On the other
hand it seemed to be constantly expanding the range of
situations that may be exempted. Unfortunately the CJEU
has not given clarity on any in-house exemptions other
than those within the Teckal doctrine.
2.2.4. Scope
quasi
in-house: horizontal
situation
in-house
The term horizontal in-house refers to a situation in

which a contracting authority awards a public contract to
an entity which is formally and legally distinct from it, but
in which both the contracting authority and the
contracting party are subject to similar control exercised
91
92

cooperation'), SEC(2011) 1169 final, p. 12.
by another contracting authority that is higher in the

hierarchy. Contracting authority A is controlled by its
mother entity contracting authority B. Both contracting
authority A and contracting party C
are daughter
entities of authority B and could therefore be described as
sister entities. According to Advocate-General Mengozzi,
there are horizontal in-house situations imaginable that
would align with the rationale behind the quasi in-house
exemption which is vertical by nature. The rationale
behind the quasi in-house exemption is that the
controlled entity has no own will that could deviate from
the will of the controlling authority.93
According to
Advocate-General Mengozzi, it would be a logical
exception that falls in the scope of the quasi in-house
doctrine, if one entity that acts only according to the will
of its controlling entity, awarded a contract to another
entity that also acts solely according to the will of that
same controlling entity. In that case, there would still be
only one will of mother B that guides the execution of
the contract.94 Under certain conditions, the existence of a
horizontal in-house exemption would therefore be a
plausible extension of the quasi in-house exemption.
The CJEU was recently presented with an opportunity
to clarify the possible existence of the so-called
horizontal quasi in-house situation in the case
Datenlotsen.95 A German national court asked the CJEU if
the obligation to tender would not be applicable in case of
a horizontal in-house exemption. The question had risen
in
proceedings
between
Datenlotsen,
a
private
undertaking developing IT systems, and the Technical
University of Hamburg (Germany). This university had
directly awarded a supply contract to HIS, a company
limited by shares which was owned jointly by the German
state and the German provinces, and the city of
Hamburg.96 Between the university and HIS existed no
93
94
95
96

(Datenlotsen), par. 42 and 43.
Hamburg is a so-called Stadtstaat, a province consisting (nearly) only of a
relationship of control whatsoever. Nevertheless, the

university acted under the assumption of lawfully
awarding the contract without a prior call for tenders,
since the university and HIS were both under the control
of the city of Hamburg.97 The national court inquired about
the possibility of the horizontal in-house exemption. The
CJEU neither denied nor confirmed the existence of the
horizontal in-house exemption in its judgment. It
declared that there was no relationship of control between
the university and HIS and that, in any event, the city of
Hamburg was not in a position to exercise control over the
university. The city of Hamburg was only capable of
influencing
the
universitys
decisions
concerning
procurement, but not in other areas. The court proclaimed
that there was therefore no need to examine whether the
exception concerning in-house awards is capable of
applying to so-called horizontal in-house transactions.98
The CJEU therefore expressly left the question of the
existence
of
a
horizontal
in-house
exemption
unanswered. The CJEU did not answer this question so far.
2.2.5. Other quasi in-house situations
The idea of a reverse vertical in-house situation came
up aswell. This term describes a situation in which a
contracting authority directly awards a public contract to
an entity by which it is controlled: an assignment from
daughter to mother. It could therefore be described as the
reverse situation of the normal quasi in-house
situation.99 There are ideas that go even further. In the
event that reverse in-house and horizontal in-house
exemptions are possible, the limits of the exemption can
be stretched further: Would it also be plausible for an
entity to award a contract to its grandmother, an entity
which controls the awarding contracting entity via for
example a holding construction? Constructions in which
an entity has indirect control over two entities and one of
97
98
99
single city, therefore holding the title of city and province at once.
CJEU 8 May 2014, C-15/13 (Datenlotsen), par. 12.
CJEU 8 May 2014, C-15/13 (Datenlotsen), par. 33.
them awards a contract to the other might also be

justifiable. In the absence of clarification by the CJEU, the
limits of the in-house exemption are uncertain, but
neither of these situations has been accepted by the CJEU
to fall within the quasi in-house exception. In all these
examples the similar control criterion, has not been
fulfilled. Therefore in the next paragraph the similar
control criterion shall be further examined.100
2.2.6. Outstanding questions
The CJEU contributed without doubt to the clarity of
the control-criterion after it handed down its judgment in
the Teckal case. Nevertheless there remains uncertainty
to the criterion, partly because the CJEU did not promote
legal certainty in several judgments. The approach that
the court chose in Carbotermo about indirect control did
not clarify the scope nor the consequences of indirect
control.
Arrowsmith even believes that a further condition for
the assessment of the control-criterion was established by
the CJEU.101 Another example is the judgment in Sea,
where the CJEU held that the market-oriented nature of an
entity may preclude contracting entities to have sufficient
control over the entity. 102 Later this condition was not
repeated, and one could question whether it still has to be
taken into account.
2.3.
The 'activities'-criterion
2.3.1. Development in case law

The CJEU decided in the Teckal judgment103 that the
contracting party 'carries out the essential part of its
activities with the controlling local authority or
authorities'.104 The aim of this criterion is to establish the
economical dependence of the contracting party on the
contracting authority. But more important, it aims to
100
101
102
103
104
The activities criterion must be fulfilled aswell, but that a separate test that
must be aswell.
Arrowsmith, p. 509.
ensure that the public procurement rules stay applicable

in the event that the contracting party is an active
competitor on the market. The CJEU seems to try to avoid
with this criterion that the contracting party does not
have an advantage in the competition with private
entities.105 The vagueness of the criterion 'the essential
part of its activities' brought uncertainty regarding the
conditions to establish whether the criterion is fulfilled. 106
The CJEU interprets this criterion in a functional manner
instead of a quantitative approach.
The CJEU was confronted with questions about the
activities-criterion in the Carbotermo case107. The court
decided that the strict interpretation of exemptions to the
public procurement law also exists for the activitiescriterion. The court furthermore took its chance to clarify
the rationale behind the activities-criterion. The CJEU
explained that even in the event that the control-criterion
is fulfilled, the controlled entity is not necessarily deprived
of the freedom to act if it still is able to carry out a large
part of its economic activities with other operators. For
the 'quasi in-house' exemption to be justified, it is
therefore necessary that the controlled entity's activities
are for the most part intended for the controlling
authority.108 The court further clarified that the activitiescriterion can only be fulfilled in the event that the entity's
activities are in principle devoted to the controlling
authority and any activities for other operators are merely
of marginal significance.109
The CJEU decided that all the facts of the case must be
105
106
107
108
109

It is surprising however how little clarification the CJEU gives as an answer
to the confusion over this vague criterion. The reason for this lack of
clarification seems to lie in the fact that the preliminary questions are usually
asked about both criteria. The 'in-house' exemption usually strands on the
first criterion, the control-criterion, therefore the CJEU usually does not feel
obliged to look at the activities-criterion as well.
taken into account, both qualitative and quantitative. 110

When facing the question of which turnover should be
taken into account for the assessment, the court
answered that the decisive turnover is that which the
entity in question earns through the execution of
contracts awarded by the supervisory authority,
regardless of who the ultimate beneficiary of these
activities may be. The CJEU deems the territorial
operating range of the activities irrelevant to the
assessment.111 The CJEU did not fix quantitative limit. In
the Carbotermo judgment, the court decided against an
analogical application of the 80% treshold of Article 13
Directive 93/38.112 Later, in the Asemfo case, the court
only assessed the quantitative facts and came to the
conclusion that 90% of the activities were enough to fulfil
the activities-criterion.113 Although these judgments shed
light on the qualitative criterion, the CJEU did so far not
establish a fixed, quantitative threshold. A fixed
quantitative condition is also in the future unlikely,
because it would be against the case-by-case approach.
2.3.2. Outstanding questions
The CJEU assesses the activities criterion on a caseby-case basis and does not really set clear criteria for a
national court to determine whether the criterion is
fulfilled. This leads to legal uncertainty and the chance of
every national court to apply its own standards that might
differ per court and per member state. The CJEU did not
set standards that lead to a uniform interpretation of how
much of the activities are sufficient to fulfil the criterion.
Furthermore the CJEU did not clarify for whom exactly
the activities must be carried out. The CJEU has given an
indication of which activities have to be taken into
account. However, this indication does not provide too
much clarity. In her opinion in the Asemfo case, AdvocateGeneral Stix-Hackl raised the question which activities
need to be taken into account the ones that the entity is
110
111
112
113

obliged to exercise or the ones that it actually executes.

She hesitates whether all activities should be taken into
account or only the sector-specific ones. 114 The court has
to date not shed light on these questions. Arrowsmith
raised the question whether a new contract would need to
be awarded in the event that the activities-criterion
ceases to be fulfilled during the quasi in-house
assignment.115 The CJEU already ruled that the opening up
to private capital precludes the fulfilment of the controlcriterion. In my view it seems self-explanatory that the
same would be true for the activities-criterion. However,
the CJEU did not address this issue yet, and there are no
indications yet on the views of the CJEU.
2.3.3. Joint control
2.3.3.1.
Introduction
In the doctrine the CJEU established in Teckal, by adding

'or authorities', the court opened up the possibility for the
'quasi in-house' criteria to be fulfilled by multiple
contracting authorities that cooperate jointly. 116 This
possibility is not surprising, in many countries (semi)
public bodies are used to structure the cooperation
between public entities.
2.3.3.2.
Joint
criterion
control-
The CJEU confirmed the possibility that a contracting

authority can exercise sufficient control over an entity,
even if it shares the ownership with other contracting
authorities.117 However the court did not elaborate on
further conditions for the joint fulfilment of the controlcriterion in this judgment. In its judgment in the case
Asemfo, the CJEU assessed the relationship between
Tragsa and the public authorities, which were jointly
controlling it. Although the Spanish central administration
held the vast majority of Tragas capital with 99% of the
114
115
116
117
Opinion of Advocate-General Stix-Hackl in C-340/04 (Asemfo), par. 101103.

Arrowsmith, p. 512.
shares and the Autonomous Communities possessed each

only a part of the remaining 1%, the CJEU still found the
Autonomous Communities to have joint control over
Tragsa. According to the CJEU, Tragsa could not be
regarded as a third party in relation to the Autonomous
Communities, because Tragsa was obliged to comply with
every order that an Autonomous Community gave to the
undertaking, without being able to influence the tariffs for
the execution of these activities. 118 Regardless of the
small part the Autonomous Communities held in Tragsas
capital, which was 0,25% for a single participant, they still
were able to exercise effective functional control over
Tragsa. In my view this is a quite surprising judgment in
the light of the Coname case, and this view has possibly
be abandoned in the Econord case.
The CJEU was faced with preliminary questions looking
for further clarification of the principle of joint control in
the Coditel case.119 The national court had asked in a
preliminary ruling whether the control-criterion could also
be fulfilled in the event that all decisions concerning the
controlled contracting party were taken by all members of
the society together. The national court inquired also
whether every individual member (it was an public
cooperation with members) of the company needed to
fulfil the control-criterion or whether it was sufficient that
the members jointly exercised control over the entity. 120
The CJEU declared that the control exercised over the
contracting party needs to be effective, but that it is not
essential that it is exercised individually. 121 The court
continued that it is usually not even possible for single
authorities in a jointly controlled undertaking to exercise
individual control. The CJEU regarded the procedure for
adopting decisions in the controlled entity irrelevant for
the assessment of control.122
The CJEU clarified later that the Coditel ruling was not
118
CJEU 19 April 2007, C-295/05 (Asemfo), par. 60 and 61.
119
120
121
122
CJEU 13 November 2008, C-324/07 (Coditel).

CJEU 13 November 2008, C-324/07 (Coditel), par. 50 and 51.
contradictory to the decision in Coname. In the judgment

in the Coname case, the court had found that the
contracting authority holding 0.97% of the shares of its
contracting party precluded the authority from exercising
sufficient control over it.123 However, the CJEU justifies this
finding with the fact that the court did not consider the
possibility of exercising control jointly in that case. 124 The
CJEU affirmed this rationale in Sea and held that every
shareholder of a company limited by shares which has
only public capital is considered to exercise sufficient
control in the case that all shareholders jointly exercise
control.125 If controlling authorities jointly fulfil the controlcriterion, there are no requirements for the individual
contracting
authorities
within
this
joint
control
relationship. This is a strange reasoning, because the
control criterion is meant to imply decisive influence over
the controlled entity. If the controlling party has no
influence in the joint control decision making, it can barely
be considered to have influence over the controlled entity.
In the Econord case the CJEU seemed to have changed
its position.126 The municipality of Varese had set up
Aspem, an undertaking almost completely owned by the
municipality Varese. A very small remaining part of
Aspem's capital was divided between 36 other
municipalities. Two of these other municipalities were the
municipalities of Cagno and Solbiate. These two
municipalities awarded a service contract to Aspem
directly after acquiring their shares, without any prior call
for tenders. Considering that these two municipalities only
had acquired one share each and had hardly any decisive
influence over the decisions and activities of Aspem, the
national court asked the CJEU to clarify if the position of a
controlling entity in a jointly owned undertaking was really
irrelevant. The CJEU repeated that in principle the joint
control of all contracting authorities together is enough to
fulfil the control-criterion. However, whereas it is not
necessary that every authority in such a cooperative body
123
124
125
126

CJEU 29 November 2012, joined cases C-182/11 and C-183/11 (Econord).
has individual control over the entity, the control

exercised over that entity cannot be based solely on the
controlling power of the public authority with a majority
holding in the capital of the entity concerned.127
Therefore a contracting authority that holds a position in
the controlled entity that does not provide it with the
slightest possibility to participate in the control over that
entity, it would give public entities the possibility to evade
their obligation to tender.128 The CJEU came to conclusion
that the control-criterion could only be fulfilled in a joint
control relationship, if the contracting authority did not
only hold capital in the controlled entity, but also is able
to have influence over the management. 129 The CJEU
therefore seemed to have taken a more strict approach
and withdrew from the absolute freedom it had assigned
before to contracting authorities in joint control relations.
In my view the CJEU could better have reasoned that in
the Econord case no joint control existed, because the
municipality of Varese had the absolute majority to take
decisions solely independent of the views of the other 35
municipalities.
2.3.3.3. Activities for controlling entities
Not only the control-criterion but also the activitiescriterion has been redefined in case of joint control to the
special nature of such a relationship. In its judgment in
the Carbotermo case the CJEU held that in the event that
the contracting party is held jointly by several authorities,
the contracting entity does not necessarily need to
exercise its activities with the controlling entity in
question. It is sufficient if the controlled entity carries out
the essential part of its activities with all the controlling
authorities together.130 Therefore, the activities for all the
controlling authorities may be taken into account for the
assessment of the activities-criterion, if there is joint
127
128
129
130
CJEU 29 November 2012, joined cases C-182/11 and C-183/11 (Econord),

par. 30.
par. 31.
par. 33.
control.
2.3.3.4. Open questions

The CJEU has recently restricted its formerly very light
regime on the position of contracting authorities within
joint control in the case Econord. 131 However, while the
light regime seemed to contain an absolute and clear rule,
this new restriction brings new legal uncertainty with it.
Where exactly lies the limit on how much control the
specific contracting authority needs to have within the
joint control? The CJEU only left a vague restriction that
still needs further clarification.
2.4.
Overview of the quasi in-house exemption
The quasi in-house exemption was initially created by

the CJEU in the Teckal case. 132 Background of this
exception to the obligation to tender public contracts is
the rationale that contracting authorities are free to
organise the performance of their public tasks by means
of own resources. Own resources are first of all own
departments (in-house). It may also happen by means of
a contract with an entity that is distinct from the
contracting authority, but functionally and formally
distinct from the contracting authority (quasi in-house).
The two criteria for the in-house exemption are:
1. The contracting authority exercises over the
contracting party control that is similar to that
which it exercises over its own departments; and
a. This control must be effective;
b. The contracting authority must have power
of decisive influence over both strategic
objectives and significant decisions of the
controlled entity;
c. The participation of private investors in the
capital of the contracting party, regardless
the size or influence resulting from the
131
132

participation, precludes the contracting

authority from exercising similar control over
that entity:
Private capital participation after the

conclusion of the contract can only
have retroactive effect in the event
that at the time of the conclusion
there were indications for the opening
up to private capital in the short term
In the event that the controlled entity

opens up to private capital within the
duration of the contract, the contract
needs to be awarded anew in
accordance
with
the
public
procurement rules
d. All relevant legal provisions, including the

articles of association or statutes of the
contracting party, and circumstances must
be taken into account for the assessment of
the criterion;
e. The percentage of shares that the
contracting authority holds in the entity in
question can be an indicator for the
existence of control;
f. A quasi in-house construction in which the
contracting authority indirectly exercises
control over the contracting partner will
generally weaken the exercised control.
g. The similar control criterion may be fulfilled
jointly by two or more
contracting
authorities. In that situation, the relevant
activities are the activities that the
contracting party carries out for all the
controlling entities together.
h. The control-criterion may also be fulfilled
jointly and it is not necessary that the
individual contracting authority exercises
similar control. However, the individual
controlling entity must at least have the

possibility to influence the controlled entitys
management to be able to exercise joint
control.
2. The controlled entity carries out the essential part
of its activities with the contracting authority
a. The assessment must take into account
qualitative and quantitative aspects;
b. There is no fixed threshold for the part of
activities to be carries out for the contracting
authority, but about 90% seems to be an
essential part;
c. The activities of the controlled entity must be
intended for the controlling entity and
activities for other entities may only be
marginal.
3.
3.1.
THE QUASI IN-HOUSE EXEMPTION UNDER

DIRECTIVE 2014/24/EU
Introduction
Three new EU public procurement Directives were

adopted in 2014: Directive 2014/25/EU, covering the
utilities sector, Directive 2014/23/EU, concerning public
concessions, and Directive 2014/24/EU, which presents
the general public procurement rules. The latter is the
only Directive that will be discussed in this paper.
Directive 2014/24/EU was introduced with the aim to
simplify the public procurement rules and to make them
more flexible.133 To achieve this goal, the Directive offers
clarification and changes to old rules, but also establishes
new regimes on topics such as e-procurement. More
important, it codifies rules that had so far only been
based on case law of the CJEU, like quasi in-house. The
aim is to attribute a proper legal status and therefore
legal certainty to these doctrines. The member states
were required to have transposed the Directives into their
133
F. Lichere, R. Caranta and S. Treumer, Modernising Public Procurement: the

new directive, Copenhagen: Djlf publishing 2014, p. 5.
national legislation by 18 April 2016. 134 So far only three

member states transposed the directives in time.
One of the innovations is Article 12 Directive
2014/24/EU. This Article bears the title 'Public contracts
between entities within the public sector'. It introduces
the exemptions from the obligation to tender for public
public contracts in line with de case law of the CJEU. The
case law will now be part of EU secondary legislation. This
Article is considered to be a very important addition to the
public procurement directives.135 In fact, the Article has
even been called a milestone of EU public procurement
law, since the European legislator has officially confirmed
the discretionary power of public authorities to freely
decide upon the delivery and organisation of services in
the public interest.136 The inclusion of Article 12 Directive
2014/24/EU setting rules concerning the case law
exemptions is aimed at clarifying the 'considerable legal
uncertainty' about the obligation to start tendering
procedures for public public contracts. One could question
the usefulness of the transposition of case law into the
procurement directives. From a legal point of view the
codification is rather useless: case law is part of primary
EU law, Directives are secondary. However, by codifying
the case law of the CJEU, the new Directives are supposed
to prevent different interpretations across the EU member
states of the doctrines developed by the CJEU. 137
Article 12 is considered to be a codification of the
different doctrines that the CJEU developed following its
judgments in Teckal and Stadtreinigung Hamburg. 138 It is
134
135
136
137
138
Article 90 of Directive 2014/24/EU makes an exception for the eprocurement rules.

M. Burgi, 'Contracting authorities, in-house services and public authorities
cooperation', in: F. Lichere, R. Caranta and S. Treumer, Modernising Public
Procurement: the new directive, Copenhagen: Djlf publishing 2014, p. 51.
W. Janssen, 'The Institutionalised and Non-Institutionalised Exemptions
from EU Public Procurement Law: Towards a More Coherent Approach?',
Utrecht Law Review, Volume 10, Issue 5 (December) 2014, p. 171.
Recital 31 of Directive 2014/24/EU.
Lichere, Caranta and Treumer 2014, p. 6; W. Janssen, 'Public Procurement
Law and In-House Delivery of Public Services: Improving a Paradox', in: A.
McCann and others, When Private Actors Contribute to Public Interests: A
Law and Governance Perspective, Den Haag: Eleven Publishing 2014, p. 22.
noticeable that the European legislator followed the

CJEU's
doctrines
closely,
setting
out
that
the
interpretation of Article 12 should be guided by the EU
court's case law and partly even adopting the letter of the
CJEU's judgments word by word.139 However, by taking a
closer look at Article 12, the provision is not a simple
codification of the doctrines as established by the CJEU.
The provision brings considerable changes to these
doctrines. The European legislator even adds complete
new provisions for public public contracts to the public
procurement rules and widens further the exception for
public public contracts not yet subject to case law of the
CJEU.140 Overall the European legislator seeks an
improvement of legal certainty concerning the exemption
for public public contracts by codifying the doctrines and
by elaborating further on aspects that have not been
sufficiently subject of CJEU case law.141 However, my fear
is that the European legislator did not contribute much to
the legal certainty with this Article. 142 Codification of case
law of the CJEU does not increase legal certainty, even if it
is done word by word, and the new exceptions will without
doubt give rise to new case law.
Hereinafter will follow an overview of Article 12
Directive 2014/24 and the rules it establishes. It will
compare the rules of Article 12 Directive 2014/24/EU to
the judgments which established the case law of the CJEU,
as discussed in the previous paragraph. In this
comparison the codification will be highlighted, as well as
the changes and novelties that Article 12 Directive
2014/24/EU provides.
3.2.
3.2.1.
Article 12 (1)
Introduction
The first paragraph of Article 12 Directive 2014/24/EU

139
140
141
142
Recital 31 Directive 2014/24/EU.

See for example Article 12(2) Directive 2014/24/EU.
Arrowsmith, p. 501.
W. Janssen, 'Public Procurement Law and In-House Delivery of Public
Services: Improving a Paradox', in: A. McCann and others, When Private
Actors Contribute to Public Interests: A Law and Governance Perspective,
Den Haag: Eleven Publishing 2014, p. 22.
codifies the general vertical 'in-house' exemption as the

CJEU has established in Teckal.143 The first paragraph
begins as follows:
'A public contract awarded by a contracting
authority to a legal person governed by private or
public law shall fall outside the scope of this
Directive where all of the following conditions are
fulfilled:'144
This paragraph therefore concerns situations in which
a contracting authority awards a public contract to a
formally distinct person. Situations in which the entity is
not distinct do not fall under this provision. In that
situation there is no public contract in the meaning of
Article 2 (5) Directive 2014/24/EU. There is no need for a
public contract, because normally an instruction or order
will be given to the department responsible for the
execution of the assignment. Directive 2014/24/EU will
not be applicable.145 It is a straightforward in-house'
situation. Article 12 (1) Directive clarifies that the other
party to an 'in-house' contract is not necessarily a public
entity. The European legislator therefore clarifies the
scope of the exemption and seems to have chosen for a
broad definition. This indicates a functional approach to
the contracting parties, since the public or private status
of the contracting entity becomes irrelevant. However,
even if the contracting party is formally a private entity,
materially it must still be a public body governed by
public law in the meaning of Article 2 (4) Directive
2014/24/EU. In other words, there must meet the
activities criterion, which means that it must carry out its
activities primarily for that entity.
Article 12 (1) Directive 2014/24/EU requires unlike
the case law of the CJEU - three cumulative criteria to be
fulfilled for the 'in-house' exemption to be applicable.
3.2.2.
143
144
145
Article 12 (1) (a)

Article 12 (1) Directive 2014/24/EU.
Article 1(1) jo. 1(2) jo. Article 2(1) jo. 2(4) jo. 2(5) jo. 2(10) Directive
2014/24/EU.
The first condition for an exemption on the basis of the

'quasi in-house' exemption in Article 12 is the 'controlcriterion'. The exemption may only be applied in the event
that 'the contracting authority exercises over the legal
person concerned a control which is similar to that which
it exercises over its own departments'.146
This subparagraph is a copy of the control-criterion as established
by the CJEU in the Teckal case. 147 However, this criterion
certainly leaves much room for different interpretation,
since it does not constitute very precise or strict
conditions. For this reason, the CJEU had to clarify its
criterion in many preliminary procedures after the Teckal
judgment, as illuminated in paragraph 2.
This provision does not contain any material change
compared to the case law of the CJEU. Later on in the
same provision the European legislator added the
following phrase about similar control:
'A contracting authority shall be deemed to exercise
over a legal person a control similar to that which it
exercises over its own departments within the
meaning of point (a) of the first subparagraph where
it exercises a decisive influence over both strategic
objectives and significant decisions of the controlled
legal person. Such control may also be exercised by
another legal person, which is itself controlled in the
same way by the contracting authority.' 148
To fulfil the control-criterion, the contracting authority
therefore needs to be able to exercise influence over the
decision-making process as well as the strategy of the
controlled entity. It is noticeable that this clarification is a
word-by-word copy of the wording in judgments of the
CJEU in the case Parking Brixen. 149 It is therefore safe to
say that the European legislator chooses the same
functional approach to control as the CJEU in its case law.
It is also self-explanatory that the control-criterion, which
asks for decisive influence, therefore requires actual and
146
147
148
149
Article 12(1)(a) Directive 2014/24/EU.

Article 12(1), last sentence of paragraph Directive 2014/24/EU.
effective control over the controlled entity.

A second element that the European legislator
included in this clarification in Article 12 (1) is the
confirmation of the possibility of indirect control over the
contracting party. The European legislator therefore allows
that the control-criterion may also be fulfilled indirectly.
This contracting authority must exercise over that third
entity control that fulfils the requirements of the controlcriterion as well.
The basis of this provision in Article 12 (1) seems the
Carbotermo judgment, in which a contracting authority
claimed to exercise indirect control over the contracting
party through intermediation of a holding company which
it controlled as a shareholder.150 In Carbotermo, the CJEU
did not seem to be positive about the possibility to
exercise control via a holding company, because
essentially a shareholder has limited control over a
holding company. In fact, it is normally the board of
directors that is deciding at the level of the contracting
party, because generally the board of directors of the
mother company is entitled to vote in the general
meeting of shareholders. However, the CJEU did not
exclude the possibility either. The CJEU established that
the fact that control is only exercised indirectly could form
an obstacle to fulfilling the similar control criterion,
depending on the facts of the case. 151 A new phrase
regarding the control by the intermediary party is
controlled in the same way. I is not clear what is meant,
because it can both refer to control of the intermediary
party, or the decisive influence on strategic objectives
and significant decisions. The latter interpretation seems
better, because the control should not necessarily be the
same, as long as the contracting authority can exercise
decisive influence on the granddaughter.
Although the European legislator adopted part of the
CJEU's doctrine concerning the similar control criterion
word by word, this does not lead to the conclusion that
the European legislator meant to follow the CJEU's
150
151

interpretation. Article 12 (1) contains an affirmation of

parts of the CJEU's judgments. However, the case law of
the CJEU defining and clarifying the similar control
criterion is more elaborate than the European legislator
provided in Article 12 (1) Directive 2014/24/EU. This
makes the binding force of the uncodified portions of the
case law unclear. The exact copying of certain
considerations could indicate that the European legislator
intended to adopt the interpretation of the CJEU
completely and unconditionally. This view is supported by
recital 31 Directive 2014/24/EU which states that the
clarification of the exemptions should be guided by the
relevant case law of the CJEU. 152 Contracting authorities
are invited in recital 31 to look to the existing case law of
the court for guidance in situations that are not clear from
the Directive. On the other hand, the fact that only parts
of the case law have been used in Article 12, could also
be interpreted as an intentional choice of the European
legislator. The absence in Article 12 (1) of other
clarifications in the case law of the CJEU about the similar
control criterion, could be seen as an intentional
exclusion of these clarifications. In that case, looking to
the case law of the CJEU would even go against the
intention of the European legislator. Therefore uncertainty
remains about the status of the case law clarifications of
the control-criterion that have not been adopted into the
Directive. However, in my view recital 31 should be read
in its entirety. The problem was that the case law of the
CJEU was not interpreted in the same way in the EU
member states, and therefore codification was deemed to
be necessary. The intention of the European legislator is
therefore to codify, but not to deviate from the CJEU case
law.
For indirect control Article 12 (1) seems to be less
reluctant than the CJEU decided in Carbotermo, which
held that indirect control might under certain
circumstances be a possibility without allowing the
possibility in general. The wording of the judgment of
CJEU was very cautiously and depended primarily on the
precise facts of the case and later judgments do not exist.
152
The European legislator on the other hand expressly

confirmed as a general rule that indirect control is
possible. While such a confirmation should enhance the
legal certainty concerning indirect control, the clarification
is formulated widely. While the CJEU was very cautious
and declared only that the indirect control does not
necessarily exclude similar control, the European
legislator accepted that similar control may also be
exercised by another controlled entity. It is however
uncertain whether this possibility of indirect control is
dependent on certain conditions.
One could even
conclude that it is under Article 12 (1) completely
irrelevant for the fulfilment of the similar control criterion
whether the control is exercised directly or indirectly. The
latter interpretation would go against the case law of the
CJEU. That would be a point of view which is hard to
defend in the light of recital 31 and the general attitude of
the CJEU to interpret strictly any exception to obligation to
tender. Secondly it would go against the cautious
interpretation of the CJEU, which correctly made a
difference between direct and indirect control.
3.2.3.
Article 12 (1) (b)
The second criterion of Article 12(1) Directive

2014/24/EU is the activities-criterion. For the 'in-house'
exemption to be applicable, it is necessary that:
'more than 80% of the activities of the controlled
legal person are carried out in the performance of
tasks entrusted to it by the controlling contracting
authority or by other legal persons controlled by
that contracting authority'.153
In recital 32 Directive 2014/24/EU, the European
legislator has furthermore specified that for the fulfilment
of the activities-criterion, the beneficiary of those
activities under the contract with the contracting
authority is irrelevant (regardless of the beneficiary of
the contract performance).
In this provision the first noticeable change compared
to the CJEU case law a quantitative mark for the activities153
Article 12 (1) (b) Directive 2014/24/EU.
criterion of 80%. More than 80% of the activities that the

controlled entity carries out must be based on an
assignment of the controlling authority. The European
legislator specifies carrying out an activity for the
controlling authority as performing a task that the
controlling authority has entrusted to the controlled entity.
The European legislator stretched this provision to
situations that the task is entrusted by entities that are
controlled by the contracting authority. Which entity is at
the receiving end of this task is irrelevant for the
determination of the activities. Especially in social
services or services of general economic interest the
receiving party is generally not the contracting authority.
This interpretation seems therefore inevitable, as long as
the public contract is drawn up with a contracting
authority and the consideration paid by the contracting
authority. The fixed percentage constitutes a novelty for
the 'quasi in-house' exemption. The CJEU never wanted to
set a fixed quantitative mark in its case law. On the
contrary, the court chose a case-by-case based approach,
which included taking quantitative as well as qualitative
factors into account.
The European legislator changed this approach by
taking a purely quantitative threshold as criterion,
abandoning qualitative elements. Legal certainty gained
with this solution.
The European legislator included more precise
specifications of the conditions of this criterion, therefore
enhancing
the
legal
certainty
concerning
the
interpretation of this criterion. The 80%-mark for the
activities that have to be carried out for the controlling
authority has this effect. The European legislator replaced
the uncertain case-by-case test applied by the CJEU with a
clear and unconditional condition that is less open for any
differing interpretations by contracting authorities or
national courts. The flip side of the coin is that it also
diminishes flexibility. This more case oriented approach is
what the CJEU must have desired, when it chose to take
quantitative as well as qualitative facts into account in its
assessment of the relevant activities. Since the CJEU has
been consistent in its case law concerning the activities-
criterion and the required case-by-case approach, the

question arises whether the codification results in the
absence of qualitative factors. This would be an apparent
deviation from the court's case law. This radical change
neither be justified on the basis of Article 12 (1) (b)
Directive 2014/24/EU nor based on recital 32. Therefore it
seems likely that qualitative factors will still play a role in
future case law of the CJEU.
The European legislator affirmed furthermore the
possible involvement of an indirect assignment for the
fulfilment of the activities-criterion. The relevant activities
for the fulfilment of the criteria are tasks that have been
entrusted to the entity in question by the contracting
authority itself or by other legal persons controlled by
that authority. After indirect control also indirect
activities is now accepted. Therefore the activities
(services, works or supplies) may be carried out for third
controlled entities as well. The control by the relevant
contracting authority must be examined on the basis of
Article 12 (1) (a) Directive 2014/24/EU. Effect of this
change is that the controlling authority is now indirectly
benefiting from the arrangement. This possibility to
indirectly fulfil the activities-criterion is a novelty brought
by Article 12 Directive 2014/24/EU and widens the scope
of the quasi in-house exemption. Now activities may be
carried out for other entities controlled by the same
authority, there contracting entities and economic
operators will encounter the same kind of difficulties and
uncertainties that have been illuminated for indirect
control. How far stretches the possibility to indirectly fulfil
the activities-criterion? Does the provision make it
irrelevant whether the activities are carried out directly
for the contracting authority or indirectly for controlled
entities, especially if there is no full control? Or is
fulfilment of the activities-criterion more difficult if it is
carries out indirectly? Furthermore, a holding construction
may be a conceivable situation in which the activitiescriterion could be fulfilled indirectly. However, the
contracting authority might also control entities that are
not involved with the contract in question, such as sisteror cousin-entities. Does the potential field of clients
therefore include every entity that is controlled by the

contracting authority, even granddaughters and great
granddaughters? In the event that this question has to be
answered affirmatively, that would significantly broaden
the scope of the activities-criterion. Therefore it would
widen the scope of the 'quasi in-house' exemption as a
whole.
3.2.4.
Article 12 (1) (c)
The third criterion of Article 12 (1) concerns the

participation of private capital in the controlled entity.
Contracting authorities may only make use of the 'quasi
in-house' exemption in the event if:
'there is no direct private capital participation in
the controlled legal person with the exception of
non-controlling and non-blocking forms of private
capital
participation
required
by
national
legislative provisions, in conformity with the
Treaties, which do not exert a decisive influence
on the controlled legal person'.
The participation of private investors in the capital of
the controlled entity therefore may lead to the
inapplicability of the exemption. It is apparent from this
sub-paragraph that the European legislator accepts
unlike the CJEU - certain kinds of private participation in a
controlled entity. While the provision contains a general
prohibition of direct private capital participation, it
implicitly allows indirect private capital participation.
Secondly, there is room left for direct participation of
private capital under special circumstances. Direct
participation is allowed in the event that the participation
does not grant the private investor controlling or blocking
powers in the controlled entity. Furthermore, the opening
to direct private investments needs to be required by
national legislation and this legislation needs to be in
accordance with the rules of the EU Treaties. In any
circumstance the private capital may not exert a decisive
influence on the controlled entity. Overall this provision
seems to be a revolution compared to the EU case law
that radically prohibited private capital in the controlled

entity.
3.2.4.1.
Indirect
private
participation
capital
Since Article 12 (1 )(c) Directive 2014/24/EU only

excludes 'direct' private capital participation. It is
tempting to believe that 'indirect' private capital
participation in the controlled entity is not an obstacle to
the
applicability
of
the
'in-house'
exemption.
Unfortunately, the European legislator has neither
explicitly confirmed this conclusion nor has it explicitly
defined the concept of 'indirect' private capital
participation.
In recital 32 Directive 2014/24, the European legislator
further clarifies that only direct private participation in the
controlled entity is decisive for the applicability of the
'quasi in-house' exemption. The European legislator then
adds that private capital participation in one or several
controlling authorities, instead of participation in the
controlled entity, therefore does not preclude the
application of the 'quasi in-house' exemption. This
conclusion is based on the assumption that such
participation in a controlling authority does not negatively
affect the competition between private economic
operators.154 One can also deduct from recital 32 that
only the direct participation in the controlled entity being
relevant and private participation in the controlling
authority not being an obstacle to the exemption.
The approach chosen by the European legislator in
Article 12 (1 )(c) differs significantly from the strict
approach that the CJEU has continued to this date:
154
the prohibition of private participation was only a

condition for the fulfilment of the control-criterion
in the case law of the CJEU, but given the fact that
the European legislator has given this condition its
own sub-paragraph, it is assumable that the
prohibition of private capital participation is now a
stand-alone criterion for the 'in-house' exemption
under the new Directive.
The CJEU strictly prohibited any kind of private

participation in the controlled entity, regardless of
its form and of the effect it actually had on the
controlled entity. The European legislator does not
exclude private participation completely, leaving a
possibility for indirect private capital participation
and for direct participation that fulfils the specific
criteria of the sub-paragraph.
The European legislator explains the underlying

rationale of these exceptions to the prohibition in recital
32 of the Directive. The reason behind a general
prohibition of direct private capital participation is that it
would put the private investor in an advantageous
position over its private competitors. However, according
to the European legislator, no private operator would be
put in such a position in the event that the participation of
private capital only happens in an indirect matter or in the
event that the cumulative specific criteria for direct
participation are fulfilled. The European legislator does
not present a reason as to why this would not create an
advantageous position for private partners participating in
the controlled entity.
It is conceivable that the European legislator has
actually brought about less change with this subparagraph than initially assumed. In the event that the
allowed indirect participation only refers to participation in
the controlling authorities, this would arguably not
necessarily be contrary to the jurisprudence of the CJEU.
The CJEU only excludes participation in the controlled
authority itself. There has not been a judgment of the
CJEU concerning the 'quasi in-house' exemption in which it
prohibits private participation in the controlling authority
as well. The only change contained in the provision would
be the specific exception to the prohibition of direct
participation.
The codification of the CJEU's case law treats the
private capital participation as a third stand-alone
criterion of the 'in-house' exemption. This raises the
question whether the similar control criterion, which was
formerly dependent on the absence of private capital in

the controlled entity, may be fulfilled under the rules of
the new Directive, even in the event that there is private
capital participation in the controlled entity. However, this
question is probably irrelevant for the obligation to
tender, hence the criteria for the 'in-house' exemption are
cumulative. With its absolute prohibition of private capital
participation in the controlled entity, the CJEU had
established a very clear and transparent rule which
provided a great amount of legal certainty. It might
therefore be expected that by making the prohibition less
absolute and by broadening its scope, the European
legislator has decreased the legal certainty of this
criterion.
Another question concerning the broadened scope of
the third criterion becomes conceivable when considering
the rationale of the criterion that the European legislator
has explained in recital 32. The direct private capital
participation in the controlled entity is generally
prohibited because it might put the private investor in an
advantageous position over his competitors. Indirect
private capital participation and the specific case stated in
the sub-paragraph are excluded from this prohibition,
because the European legislator believes that these forms
of participation will not provide such an advantageous
position to the private investor.
3.3.
3.3.1.
Article 12 (2)
Introduction
The second paragraph of Article 12 confirms the

existence of two new types of 'in-house' situations which
had yet to be adopted by the CJEU: the 'reverse vertical
in-house' and the 'horizontal in-house' situations.
According to the letter of Article 12 (2) Directive
2014/24/EU, the 'in-house' exemption as established in
paragraph 1 of Article 12 Directive 2014/24/EU, applies
also in situations:
'where a controlled legal person which is a
contracting authority awards a contract to its
controlling contracting authority, or to
another legal person controlled by the same

contracting authority'.155
The possible situations that may fall within the scope
under the 'quasi in-house' exemption under the rules of
Directive 2014/24/EU include the situation in which a
daughter awards a contract directly to its mother entity
and not the other way round. This kind of situation may
also be described as a reverse variation of the (normal)
'vertical in-house' situation. This situation may normally
not be justifiable as an 'quasi in-house' situation, because
a daughter entity does by definition not have control over
its mother entity. Nevertheless, the European legislator
affirmed this situation as a justifiable variation on this
exemption. The 'reverse vertical in-house' situation is a
situation that has not been addressed by the CJEU yet.
The European legislator is therefore the first to include
this situation in the quasi in-house exemption confirming
that this situation is an exemption from the obligation to
tender.
The other situation that the European legislator
officially accepted in Article 12 Directive 2014/24/EU is
the situation in which a contracting authority directly
awards a public contract to an entity that the contracting
authority itself does not control, but which is controlled by
the same entity that also controls the contracting entity.
One might imagine a situation in which a controlled entity
awards a contract directly to its sister controlled entity,
both controlled by the same mother. The 'horizontal inhouse' situation was already brought to the attention of
the CJEU.156 The CJEU neither denied nor confirmed the
existence of the exemption, but did not give rise to
acceptance of a horizontal in-house exception. The
European legislator is therefore the first to affirm this
situation as an accepted form of the 'quasi in-house'
exemption. This certainly creates legal certainty
concerning the question whether the described situation
may be excluded from the obligation to tender. However,
when it comes to the question what precisely these
155
156

circumstances may be, the provision could have been

more precise. It is for example unclear whether the
control should be in its entirety or may be limited to
certain areas such as the contracts in question.
3.3.2.
The conditions of Article 12(2)
Article 12 (2) Directive 2014/24/EU refers back to

Article 12(1) Directive 2014/24/EU, indicating that the first
paragraph is also applicable in the situations described in
the second paragraph. This creates the impression that
the conditions of paragraph one would also be applicable
for the assessment of the exemptions in paragraph two.
However, one might also interpret this reference as
referring only to the 'quasi in-house' exemption in
general, excluding the two situations from the obligation
to tender.157 This would lead to the two exemptions of
Article 12(2) having their own criteria for their assessment
and not the criteria of Article 12 (1) a c Directive
2014/24/EU. The European legislator actually included a
condition for the applicability of these two exemptions:
These two situations may only be exempted from the
rules of Directive 2014/24/EU:
'provided that there is no direct private capital
participation in the legal person being awarded
the public contract with the exception of noncontrolling and non-blocking forms of private
capital
participation
required
by
national
on the controlled legal person'.158
At first glance the European legislator seems to just
repeat the private capital participation-criterion from
paragraph one. However, if one looks at the condition
more in detail, the criterion in paragraph two differs
slightly from the criterion in the first paragraph one. The
first paragraph of Article 12 prohibits the existence of
direct private participation in the controlled entity. The
controlled entity happens to coincide with the contracting
157
158
This interpretation could be based on the first paragraph of Article 12 (1)

Directive 2014/24/EU.
party in the classical 'quasi in-house' situation. However,

the controlled entity in both of the situations described in
Article 12 (2) Directive would be the contracting authority
itself. Article 12(2) therefore targets the 'person being
awarded the public contract' instead. Article 12(2)
therefore prohibits the direct participation of private
capital in the mother-entity respectively the sister-entity.
From the letter of Article 12(2), it does not become
clear whether the conditions of Article 12(1) are
applicable to the situations of the second paragraph in
addition to the criterion that is stated in the second
paragraph itself. It is obvious that the control-criterion of
the first paragraph of Article 12 cannot be fulfilled
between the contracting authority and the contracting
party in both of the described situations. The second
paragraph does require similar control from the motherentity over the daughter entity or entities. It is also
unclear whether the activities-criterion is applicable to the
paragraph 2-situations, although there arguably seems to
be no apparent reason why the contracting entities in
these situations should be freed from having to carry out
the essential part of their activities with their controlling
entity.159
In the event that the European legislator did clarify
that the conditions of Article 12(1) are also meant to be
applicable to the situations of Article 12(2), the 'reverse
vertical in-house' and 'horizontal in-house' situations
would have a set of four criteria: The mother-entity would
be required to exercise control over the daughter entity or
entities similar to the control it exercises over its own
departments. Secondly, the contracting authority, and
probably the contracting party as well in the 'horizontal inhouse' situation, would need to exercise at least 80% of
its activities with the mother-entity (or other entities
controlled by the mother-entity). Thirdly, direct private
capital participation would be prohibited in the controlled
entity, meaning in this case the contracting authority,
except for the specific situation described in Article 12(1)
(c). Lastly, direct private capital participation would also
159
Arrowsmith, p. 519.
be prohibited in the party receiving the contract, meaning

either the mother-entity itself or the sister-entity. While
this seems to be an elaborate set of criteria, it does raise
some questions. The situations described in Article 12(2)
are special situations that differ from the classical 'quasi
in-house' situation, but in which an 'in-house' award may
nevertheless be justifiable. Allowing these situations to be
exempted as 'quasi in-house' exemptions inevitably
broadens the scope of said exemption. AG Mengozzi
therefore argued in his opinion in the case Datenlotsen
that broadening the scope of the 'quasi in-house'
exemption may only be justifiable under very strict special
circumstances.160 The European legislator does not seem
to take these special circumstances into account, though.
This raises the question whether Article 12(2) might
broaden the scope of the 'in-house' exemption
significantly.
Furthermore, the CJEU had specified in its judgment in
the Datenlotsen case that the controlling entity may not
only have influence over parts of the decisions of the
controlled entity, but must be able to influence all
decisions on all fields of activities of the controlled entity.
As established, the CJEU never clarified whether this
condition only applied to the similar control that the
controlling entity has to exercise over both of her
daughter-entities in a 'horizontal in-house' situation, or
whether it applied to the similar control-criterion of the
'in-house' exemption in general. The fact that this
condition is mentioned neither in Article 12 (1) nor in
Article 12(2), or in fact anywhere in the new Directive,
makes it safe to assume that the Directive has not added
to legal certainty.
3.3.3.
Article 12(3)
3.3.3.1. Introduction
Article 12 (3) Directive 2014/24/EU deals with
situations in which the criteria of the 'quasi in-house'
exemption are fulfilled jointly by two or more contracting
authorities. According to the European legislator, 'a
160
Opinion of Advocate-General Mengozzi dated 23 January 2014, C-13/15

(Datenlotsen).
contracting authority, which does not exercise over a

legal person governed by private or public law control
within the meaning of paragraph 1, may nevertheless
award a public contract to that legal person without
applying this Directive where all of the following
conditions are fulfilled'.
The European legislator opens the possibility for a
contracting authority that does not fulfil the criteria of the
'in-house' exemption as established in Article 12 (1) to
award a contract without being obliged to start a
tendering procedure, if the contracting authority is able to
fulfil the criteria of the 'quasi in-house' exemption in
cooperation with other contracting authorities.
The
European legislator starts the 'quasi joint in-house'
exemption with the premise that this exemption is only
applicable in the event the single contracting authority in
question does not fulfil the criteria of the 'quasi in-house'
exemption (as laid down in Article 12 (1). Under that
condition the contracting authority has nevertheless the
possibility to award a 'quasi in-house' contract by
cooperating with other contracting authorities. In the
event that a cooperating contracting authority does fulfil
the criteria by itself, Article 12(1) would simply be
applicable instead. The European legislator defined for
this purpose in Article 12(3) in which ways the contracting
authorities may fulfil the 'quasi in-house' criteria jointly.
3.3.3.2.
Article 12(3)(a)
For the 'quasi joint in-house' exemption to be

applicable, Article 12(3) firstly requires the contracting
authorities to exercise joint control over the contracting
party. The contract may only be awarded directly, if the
contracting authority exercises jointly with other
contracting authorities control over the contracting party
which is similar to that which they exercise over their own
departments'. This similar control criterion resembles to
a large extent the doctrine established by the CJEU,
allowing for contracting authorities to exercise control
over the contracting party jointly. Both the case law of
the CJEU and Article 12(3)(a) are open criteria and not
very detailed. Probably for this lack of precision the
European legislator added a clarification at the end of

Article 12 (3). The European legislator introduces three
cumulative sub-conditions for the fulfilment of the
criterion of quasi joint control. The first condition reads
as follows:
'the decision-making bodies of the controlled
legal person are composed of representatives of
all participating contracting authorities. Individual
representatives may represent several or all of
the participating contracting authorities'.
This condition should guarantee that all contracting
authorities that are part of the structure of public
authorities need to be represented in the decision-making
body of the controlled entity, either individually
representing itself or being represented by a collective
representative. There are not more detailed rules. The
notion that every authority needs to be represented in the
decision-making body of the controlled entity is an
indication that the European legislator wishes that all the
cooperating authorities are in a position in which they are
able to exercise effective influence over the controlled
entity's decisions. This interpretation is in alignment with
more recent case law of the CJEU, in which the court
decided that in order to exercise joint control over its
contracting party, a contracting authority needs to have
the capacity to influence the controlled entity's
management. Would it be possible for example that all
entities are represented by the same person, rendering
the decision-making process simple? In my view not,
because decision making is in a cooperative structure a
consensus matter. Without discussion the participants
have too little influence over the decisions at the
controlled entity level.
This condition in Article 12 (3) (i) could indicate that all
public authorities that participate in the cooperation of
public authorities need to be represented in the decisionmaking body of the controlled entity. Another
interpretation could be that all contracting entities
participating in the contract have to be represented,
because only the contracting authorities participating the
the contract need to effectively control the entity. Given

the concept of joint control, which enables a contracting
authority that is not able to exercise effective control
itself, but is still able to exercise control by joining a group
of public authorities, it is more likely that the European
legislator has the intention that all entities that are part of
the cooperating construction have to be represented in
the decision-making body of the controlled entity.
The second condition reads as follows:
'those contracting authorities are able to jointly
exert decisive influence over the strategic
objectives and significant decisions of the
controlled legal person'.
This condition is materially the same as the condition
that the European legislator has used in Article 12 (1) to
clarify the similar control-criterion. The only difference is
that the contracting authorities have to exercise this form
of control jointly. The European legislator therefore
requires of joint control that it should be effective, like the
CJEU required of joint control in its case law.
The
clarification furthermore adopts the CJEU's doctrine
concerning similar control word by word. However, the
CJEU has only applied this particular specification of the
similar control-criterion in cases concerning the normal
'quasi in-house' exemption. The European legislator is
therefore following materially the case law of the CJEU by
requiring the contracting authorities to be able to
influence the strategic objectives as well as the significant
decisions of the joint controlled entity.
The third condition entails that:
'the controlled legal person does not pursue any
interests which are contrary to those of the
controlling contracting authorities'.
This is a new condition which does not exist in case
law and has not been connected to joint control by the
CJEU. The European legislator establishes that the
exercise of joint control is dependent on the fact that the
controlled person may not pursue its own interests that do
not align with the interests of the controlling authorities.
This certainly seems to align with the rationale behind the

'quasi in-house' exemption in general, which arguably is
based on the idea that the effectively controlled entity
does not act out of its own will, but is carrying out the will
of its controlling authority.
It is noticeable that the
European legislator prohibits the controlled entity from
pursuing any interests that do not align with the interests
of the controlling authorities, whereas it does not set this
as a condition for the fulfilment of the control-criterion in
Article 12 (1). The reason for this difference is unknown.
The European legislator also does not define pursuing
interests contrary to the interests of the contracting
authorities any further. It leaves legal practice
furthermore puzzled with the reason which situations the
European legislator had in mind. How can a controlled
entity pursue interest against the will of its participants?
What contradictions are proportional to believe that this
condition is not met?
By adding its clarification to Article 12 (3 (a), the
European legislator's explanation of joint control is
actually more extensive than the definition developed in
the CJEU's case law. With Article 12 (3) (a), the European
legislator affirms that control over the contracting party
may also be exercised jointly by a number of public
entities. The European legislator gave further clarity by
adding the last part of Article 12(3). The first condition
introduces a new aspect to the principle of joint control
and could be seen as the European legislator's further
specification of the Econord judgment.161 The CJEU ruled in
the Econord judgment that the contracting authority must
have such a position that it is potentially able to exercise
influence on the management of the controlled entity. By
requiring that all participating authorities must be
represented in the controlled entity's decision-making
body, the European legislator arguably insists that the
contracting authorities must be potentially able to
exercise influence over the controlled entity's decisions.
Representation of all participating authorities is an
objective requirement that leaves little room for differing
161
interpretations. The European legislator created more

legal certainty by requiring the contracting authorities to
jointly be able to exercise decisive influence over the
strategic objectives and significant decisions of the
controlled entity. While it seemed a well thought
conclusion that joint control should have the same degree
of effectiveness as sole control, the CJEU never confirmed
the content of joint control. The precise content of the
terms 'decisive influence', 'strategic objectives' and
'significant decisions' remains open.
With the third condition, the European legislator has
added one further condition that had not been mentioned
before in the case law of the CJEU. It is arguable if this
adds to legal certainty, because the condition is
formulated in an open manner and not further specified. It
is not clear what can be seen as contrary to the interests
of the contracting authorities. Neither is specified which
interests of the contracting authorities are relevant. Does
this condition concern all interests that the controlling
contracting authorities have? This seems to be a very
broad range, because participating contracting authorities
have without any doubt shared, but also differing
interests. This would have as effect that the more
contracting authorities are jointly exercising control, the
less interests the controlled entity would be allowed to
pursue.
3.3.3.3.
Article 12(3)(b)
The second criterion for the application of the 'joint

quasi in-house' exemption is related to the activities
carried out by the contracting (joint controlled) party. A
public contract may only be directly awarded to an entity
in the event that:
'more than 80% of the activities of that legal
person are carried out in the performance of tasks
entrusted to it by the controlling contracting
authorities or by other legal persons controlled by
the same contracting authorities'.
Like the joint control-criterion, the joint activitiescriterion is materially the same as the activities-criterion
of Article 12 (1) (b). The contracting party must exercise

more than 80% of its activities with the contracting
authority, which shows the same quantitative approach of
this criterion by the European legislator. The difference
here is, again, that the contracting party is not required to
carry out this percentage of its activities with one
contracting authority, but it is sufficient to carry out the
activities with any of the authorities participating in the
cooperating constellation. Not only are activities relevant
that the controlled entity carries out for any of the
controlling authorities, but also the activities it carries out
for other entities controlled by the controlling contracting
authorities.
The CJEU has never addressed something like the
possibility to fulfil the joint activities-criterion in an
indirect manner, therefore the European legislator is
introducing a new widening of the joint quasi in-house
exception.
With introducing the 80%-mark to the joint activitiescriterion, the European legislator contributes to the legal
certainty concerning the essential part of activities. Just
like with the activities-criterion of the 'quasi in-house'
exemption, the provision abolishes the legal uncertainty
and possibility of differing interpretations that had been
the result of the CJEU's case-by-case based assessments.
On the other hand it eliminates flexibility for the joint
activities-criterion. Article 12 (3) (b) Directive 2014/24/EU
broadens the scope of the 'joint quasi in-house' exemption
by allowing the activities to be carried out with entities
that are controlled by the participating contracting
authorities. In line with the similar provision in Article 12
(1) (b), this extension is not surprising. However, it leaves
also questions open:
Does this widening entail that
activities carried out with any entity that is controlled by
the contracting authorities are relevant for the 80%
criterion? Furthermore, does this include only entities
jointly controlled by the same constellation of contracting
entities, or is any entity that is controlled by any of the
participating entities included? All in all this provision is
likely to broaden the range of relevant activities.
3.3.3.4.
Article 12(3)(c)
The third criterion for the applicability of the 'joint inhouse' exemption concerns the participation of private
capital in the contracting party. A contracting authority
may only award a contract directly to a jointly controlled
entity in the event that:
'there is no direct private capital participation in
the controlled legal person with the exception of
non-controlling and non-blocking forms of private
capital
participation
required
by
national
on the controlled legal person'.
The third criterion for the 'joint in-house' exemption is
therefore word-for-word the same criterion as the third
criterion for the classical 'in-house' exemption as
established in Article 12 (1) (c). It should be interpreted in
the same way as the criterion in Article 12 (1) (c). This
criterion is therefore subject to the same legal certainty
and uncertainties as discussed in paragraph 3.2.4.
One of the issues that raised discussion is the question
whether the joint fulfilment of the 'quasi in-house' criteria
is also applicable to the situations described in Article 12
(2). The European legislator has not expressed explicitly
whether the situations in Article 12(2) may be exempted,
if the criteria for the 'quasi in-house' exemption are
fulfilled only jointly. Article 12 (2) seems only to be applied
in sole 'quasi in-house' constellations, because the
paragraphs (2) and (3) in Article 12 only refer back to
Article 12(1), but not to each other. The exclusion of joint
control in 'horizontal in-house' situations would be
supported by the consequences: such an interpretation
will broaden the scope of the 'quasi in-house' exemption
significantly. It can furthermore hardly be accepted that
public contracts between sister-entities in large joint
control situations to be the expression of only one will of
the joint controlling contracting authorities. Therefore the
joint fulfilment of the criteria of the 'horizontal in-house'
and also of the 'reverse vertical in-house' exemptions is
not acceptable, even though not explicitly excluded by
the European legislator.

4 THE FUTURE OF THE QUASI IN-HOUSE
EXCEPTION AND ARTICLE 12 DIRECTIVE 2014/24/EU
4.1
Introduction
Article 12 Directive 2014/24/EU was intended to codify

the doctrines concerning the exemptions as developed in
the case law of the CJEU. It was supposed to prevent
different interpretations of the exemptions in the various
member states of the European Union and to dissolve all
legal uncertainty that was left by the CJEU's doctrines in
their current state.162 However, the new EU legislation left
some questions unanswered. And questions concerning
the new exemptions will be necessary to understand the
contents. The resulting legal uncertainty and possible
misuse of the exemptions will with high probability lead to
new proceedings in public procurement cases in which the
CJEU will be asked to clarify the questions that have been
left open or remained unanswered by the European
legislator. The specification and interpretation of the new
rules will therefore be for the CJEU to decide upon. It is
impossible to foresee with certainty the judgments that
the CJEU will hand down in these future cases.
Sanchez suggests that one of the main goals of the
public procurement rules is the protection of competition,
as the CJEU has repeatedly stated that the purpose of
public procurement rules 'is to develop effective
competition in the field of public contracts'. According to
case law of the CJEU, public procurement rules were
created to promote the establishment of an internal
market. Freedom of movement should be ensured and
restrictions on competition be limited. Based on his
observations of the former generations of EU public
procurement legislation and of case law of the CJEU,
Sanchez suggests that EU public procurement law should
be built around a 'competition principle'. He sees this
principle reaffirmed in Article 18 (1) Directive 2014/24/EU.
The recognition of such a principle, which according to
162
Recital 31 Directive 2014/24/EU.
Sanchez already exists implicitly in current public

procurement law, would lead to the application and
interpretation of the rules being focused on not hindering,
limiting or distorting the competition. The public
procurement rules would therefore be interpreted by the
CJEU in order to avoid restrictions or distortions of
competition and free movement. Exceptions from the
public procurement rules can be justified as long as the
exception does not interfere with the free movement of
persons, capital and goods or competition on the internal
market. It therefore seems that the CJEU is most likely to
base its decisions on considerations concerning possible
danger to unified interpretation of EU law, the freedom of
movement and competition. For this reason I will examine
the possible future developments in the light of these
considerations.
4.2
Article 12(1)
4.2.1 Article 12(1)(a)

Article 12(1)(a) Directive 2014/24/EU does not indicate
any restrictions on the indirect control of the contracting
party. This leads to the question what impact precisely
this paragraph will have on similar control. Although the
CJEU did not per se exclude indirect fulfilment of the
similar control criterion in its case law, the CJEU held that
indirect control could be an obstacle to similar control.
The CJEU ruled that the indirect nature of the controlrelationship actually stands in the way of similar control
by taking into account all relevant circumstances of the
case before it. Article 12 (1) (a) opens the possibility to
fulfil the control-criterion either directly or indirectly
without explicitly differentiating between these two
possibilities. The question arises whether indirect control
remains relevant to the CJEU.
While the wording of Article 12 (1) seems to indicate
that the European legislator does not make any difference
between direct and indirect control, it does not explicitly
go against the view of the CJEU in its judgment in the
Carbotermo case.163 Hence the CJEU has explicitly
163
expressed its view that the indirect control may weaken

the control that a contracting authority has over an entity
and the new Directive does not explicitly contradict this
point, the CJEU is likely to follow its own view about
indirect control. It is therefore probable that the court will
continue to see indirect control as a possible obstacle to
the fulfilment of the similar control criterion. However,
just as in the Carbotermo case, the indirectness will not
automatically preclude the existence of similar control.
This view is supported by the wording of Article 12 (1) (a)
that generally holds that the contracting authority must
exercise control over the contracting party which is similar
to the control over his own departments. The assessment
according to this paragraph must be the control over the
party that is carrying out the assignment. It is possible
that in situations of indirect control, for example in case of
a board which is independent towards the owner or
shareholder, that indirect control does not exist. The
CJEU's interpretation of indirect control will therefore most
likely not be affected by Article 12(1)(a) of Directive
2014/24/EU.
4.2.2 Article 12 (1) (b)
According to Article 12 (1) (b) Directive 2014/24/EU,
the 'quasi in-house' exemption is only applicable in
situations where the controlled entity carries out more
than 80 percent of its activities with the controlling
contracting authority. With this paragraph, the European
legislator has given a quantitative mark for the fulfilment
of the activities-criterion. Nevertheless, it is obvious that
this 'activities-criterion' does not correspond completely
to the 'activities-criterion' developed in the jurisprudence
of the CJEU. While the CJEU did take quantitative factors
into account, the court did never accept a specific
(minimum) percentage to define 'the essential part of
activities'. Furthermore, the CJEU deemed qualitative as
well as quantitative factors important to determine this
'essential activities part'. The question is therefore if the
CJEU will change its approach and no longer take
qualitative factors into account when deciding whether
the part of activities carried out for the controlling
contracting authority is essential.
The European legislator has not straightforward

adopted the activities-criterion of the CJEU word-by-word,
as has been done with other criteria. The criterion has
been remodelled from requiring an 'essential part' of
activities to requiring 80 percent. Since the criterion is no
longer dependent of a concept as 'essential part', but only
on a quantitative condition, the letter of Article 12 (1) (b)
Directive 2014/24/EU leaves no room for qualitative
factors besides the quantitative mark. The CJEU would
have to go against the changed approach in Article 12
Directive 2014/24/EU which no longer is based on
essential activities, but a threshold. It seems unlikely that
the CJEU will go against this will of the European legislator
so far as to take a point of view contradicting the new
approach. Hence the CJEU seemed strict in its approach
of the similar activities criterion, it is likely that the
assessment of 80 % will be strict aswell. Article 12(5)
Directive points out that the activities must be
determined on the basis of turnover or an alternative
activity based measure. The CJEU is likely to be reluctant
in acceptance of these alternative calculations and might
still look the essential nature of the activities. Costs are in
itself not a clear indicator for the extent of the activities,
because in the public sector cost calculation is done on a
different basis than in companies and in many cases it is
hard to attribute costs directly to activities.
The European legislator has furthermore introduced a
novelty to the activities-criterion by deciding that the
criterion may be fulfilled indirectly as well. Opening up
the possibility of fulfilling the activities-criterion indirectly
leads to similar legal uncertainty that exists about indirect
control. Is the circumstance that the criterion is only
fulfilled in an indirect manner relevant for the fulfilment of
the criterion? The CJEU did never address the possibility of
the activities-criterion carries out indirectly taking into
account the activities that are not carried out for the
contracting authority, but for an entity that is also
controlled by the contracting authority. The opinion of the
CJEU on this topic is therefore not known. However, the
CJEU has explicitly been restrictive concerning the indirect
fulfilment of the control-criterion. It seems likely that the
CJEU would treat the indirect fulfilment of another

criterion in the same framework (quasi in-house
situations) as restrictively. There is no apparent reason as
to why the court should approach the indirect fulfilment of
the activities-criterion differently than the indirect
fulfilment of the control-criterion. Both criteria are meant
to establish that the party to the contract is dependent on
the contracting authority, in an economic respectively
managerial way. Secondly it prevents the contracting
party from distorting competition. The positioning of a
third party (or third parties) in the relationship between
the contracting authority and the contracting party will
always contribute to a weakening of the link between
these two entities. Dependence decreases and the
contracting party is less relying on the contracting
authority. It seems therefore likely that the CJEU will deem
the fact that the activities are not directly carried out for
the contracting authority itself a possible obstacle to the
fulfilment of the activities-criterion.
Further legal uncertainty is entailed in the scope of the
potential circle of clients for which the controlled entity is
allowed to carry out its activities. The new provision does
not only take the activities into account that are carried
out for the contracting authority directly, but also allows
to include activities that are carried out for entities that
are also controlled by the contracting authority. Since the
European legislator did not specify any restrictions, the
provision might be interpreted as covering any activities
carried out for any entity that is under the contracting
authority's control. Will the CJEU interpret Article 12 (1)
(b) in such a extensive way? Such a wide scope might
broaden the number of entities for which the controlled
entity (contracting party) is free to carry out activities
significantly. The idea behind the activities-criterion is to
establish that the controlled entity is economically
dependent on the contracting authority. However, by
taking into account all activities carried out for a broader
varieties of entities, albeit controlled by the contracting
authority, can the economic dependence of the
contracting party really be established? It seems more
plausible that the CJEU will approach the variety of
entities that can be taken into account for the activities

restrictively by including in the assessment an economic
dependency of the controlled entity.
4.2.3 Article 12 (1 ) (c)
The European legislator excludes situations from the
scope of the 'quasi in-house' exemption in the event that
there is direct private capital participation in the
controlled entity, except for the very specific situation
described in Article 12 (1) (c) Directive 2014/24/EU. Since
only direct participation of private capital is excluded, this
leaves room for indirect participation of private capital.
The European legislator explains in recital 32 Directive
2014/24/EU that the participation of private capital in the
contracting authority does not preclude the 'quasi inhouse' exemption from being applicable. However,
Directive 2014/24/EU does not clarify when private
participation in the contracting authority is considered to
be 'indirect participation'. This leaves room for the CJEU to
interpret this concept. The CJEU prohibited on the one
hand strictly any participation of private capital in the
controlled entity. On the other hand, the court has never
out against participation of private capital in the
contracting authority. It therefore seems likely that the
CJEU will gladly make use of the opportunity to strictly
interpret indirect participation as participation in the
controlling authority instead of the controlled authority.
This would result in private participation still being
banned from controlled entities, except for the specific
exception that the European legislator has created.
Secondly there is a possibility of joint ventures in case of
indirect participation. An intermediary public entity could
have a minority shareholder. Although the CJEU never
ruled on this situation, it seems that it this situation is
undesirable from a similar control and competition point
of view. Private capital in the intermediary party creates
deviating public and private interests.
The European legislator justified the exclusion of
private capital in Article 12(1)(c) on the ground that in
that situation, no private investor will gain an undue
advantageous position over his competitors. 164 However,

it is conceivable that such a position might also exist, if
indirect participation is chosen and competition is
distorted by putting a private party in a better position,
e.g. because the participation does not result from a
public tender.
It is therefore possible to justify the
existence of more situations that are not explicitly
described in Article 12 (1) (c) on the same basis. Should
such situations be allowed to be exempted from the public
procurement rules? The CJEU has prohibited structurally
private participation in the controlled entity in the past. It
seems therefore unlikely that the court will exempt any
situations in which there is private participation that have
not been specifically described in the provision.
It could be argued that the court only aims to protect
the competition and that there are situations conceivable
in which the competition would not be distorted by private
participation in an 'quasi in-house' entity. One could
assume that the CJEU would approach these cases on a
case-by-case basis and will decide on the base of whether
the facts of the case if there is danger of distortion of
competition. It seems advisable that the CJEU should
follow the approach that seems to guarantee the least
legal certainty with clear rules on participation, as it did in
the past. The basis for its case law can be Article 12(1)(c)
and the principle of effective and fair competition.
4.3
Article 12 (2)
Article 12(2) confirms the existence of two new

exemptions, the 'horizontal in-house' exemption and the
'reverse vertical in-house' exemption. While explaining
which two types of situations may be exempted from the
public procurement rules, the paragraph mentions only
one condition for the applicability of the exemptions. It
appears as though the only criterion for the applicability
of the exemptions is that there is no direct private
participation in the contracting party. However, hence the
second paragraph declares the first paragraph applicable
in the situations described in paragraph two, it could be
argued that the conditions in Article 12 (1) are also
164
Recital 32, second paragraph.
applicable to the situations in Article 12 (2). There is some

confusion about the criteria for the application of the
exemptions. It seems likely that the CJEU will clarify the
criteria for the applicability of the 'horizontal in-house'
and 'reverse vertical in-house' exemptions with a strict
approach. It is clear that in both situations the scope of
the quasi in-house exemption will be widened, which will
in turn probably make the CJEU cautious. It is unlikely that
these two situations, even though they have not been
acknowledged by the CJEU as such further extensions of
the quasi in-house exemption, will be submitted to less
conditions for being exempted than the Teckal based
'quasi in-house' exemption. Therefore, the CJEU is likely to
interpret Article 12 (2) as requiring the lack of direct
private participation in the entity that is awarded the
contract as an additional criterion to the three criteria
established in Article 12 (1).
Since the criteria in Article 12 (1) are applied to a
different kind of situation, the criteria need to be adapted
to the exemptions of Article 12 (2). The four criteria for
the applicability of the 'horizontal in-house' exemption or
the 'reverse vertical in-house' exemption might interpret
as follows. There need to be an authority that exercises
control over the contracting authority similar to that which
it exercises over its own departments. In the 'horizontal
in-house' situation the contracting authority needs to
exercise such control over all contracting parties. In the
'reverse vertical in-house' situation, the entity that is
awarded the contract is required to exercise such control
over the contracting authority.
Secondly, the contracting authority is required to carry
out more than 80% of its activities for its controlling
entity. In the 'reverse vertical in-house' scenario, this
means that the contracting authority must carry out more
than 80% of its activities for its mother entity or entities
over which it exercises control. Since the 'horizontal inhouse' exemption finds its roots in the argument that both
entities involved in the contract are quasi in-house
entities, it seems self-explanatory that the entity which is
awarded the contract is required to carry out more than
80% of its activities with the controlling entity as well.
Thirdly, Article 12 (1) prohibits the direct participation of

private capital in the controlled legal person (except for
the specific exception).
In both of the two special
situations, that has as effect that private participation in
the contracting authority is prohibited. Additionally, this
prohibits equally private participation in the entity that is
awarded the contract in a 'horizontal in-house' situation.
This entity is controlled by the shared contracting
authority as well, and a horizontal contract might place a
private shareholder in an advantageous position. To
guarantee that no private investor profits unduly from a
contract, Article 12(2) adds a new fourth criterion. There
may be no private participation in the entity that is
awarded the contract. In a 'reverse vertical in-house'
situation, this has as effect that the contracting authority
cannot have private investors, which is a step stricter
than Article 12 (1) (c) which is focussed on private capital
in the controlled legal person.
The CJEU established in the Datenlotsen judgment that
the control-criterion cannot be fulfilled in the event that
the controlling entity controls only some parts of the
controlled entity's actions.165 However, it is not clear
whether the CJEU intended its ruling on parlty control to
be a general condition to the control-criterion or whether
this was meant only to apply to 'horizontal in-house'
situations. This question has not been solved by the
European legislator. The judgment in the Datenlosen case
was delivered after adoption of Directive 2014/24/EU.
Hence the CJEU established that similar control may not
just be partial in a judgment that was handed down after
publication of Directive 2014/24/EU, it is safe to assume
that the CJEU will uphold this condition even though it is
not mentioned in Directive 2014/24/EU. Outside the
situation of horizontal in-house the question arises if
partly control contrary to control over all areas in which
the controlled entity is active became a general
condition for similar control. One could imagine that it is
just a condition for the special situations of Article 12 (2).
The CJEU has gradually clarified criterion of 'similar
control' in its judgments and has defined it as a control
165
that does not necessarily need to the same as the control

over the contracting authority's own departments, but as
a control of the contracting party that needs to be
effective. The CJEU has constantly interpreted the controlcriterion restrictively in requiring decisive influence over
both strategy and important decisions of the controlled
entity.
In this approach fits a requirement that the
decisive influence has to be exercised over all areas that
the controlled entity is active in. This practice would also
align with the views of Advocate-General Megnozzi, who
considers the classic 'in-house' exemption to be justified
on the ground that a contract between a contracting
authority and an authority under its control is not formed
by two separate wills, but by one and the same will, since
the controlled entity cannot be seen as having a will of its
own. It is therefore very likely that the CJEU will continue
to apply this condition in all future cases concerning
'quasi in-house' exemption regardless whether they
depend on Article 12 (1) or (2).
4.4
Article 12(3)
Similar to the activities-criterion of Article 12 (1), the

European legislator allows for the activities-criterion of
Article 12 (3) to be fulfilled in an indirect manner as well.
Since this paragraph concerns structures in which several
public authorities control an entity jointly, the activities
that may be taken into account for the activities-criterion
are not only those that are carried out for the contracting
authority and entities controlled by it, but the European
legislator also leaves room for activities carried out for the
other controlling (contracting) authorities and entities that
are under their control. The European legislator has not
been very precise about the field of potential candidates
for activities of the controlled entity. It is not clear
whether the Article allows to take into account any
activity that is carried out for any entity that is controlled
by any of the cooperating public authorities or whether it
only considers activities carried out for entities that are
controlled jointly by all of the same public authorities as
relevant for the activities-criterion.
It seems likely that the CJEU will interpret the indirect

fulfilment of the activities-criterion of Article 12 (1) (c)
very restrictively. There are no reasons to distinguish
between the activities-criterion of Article 12 (3) (b) and
Article 12 (3) (b). The only difference between these two
criteria is that the indirect fulfilment of the activitiescriterion in paragraph 3 might render the potential
number of parties for the controlled entity even broader.
In the event that the activities carried out for any entity
that is controlled by one of the cooperating public
authorities, the number of entities that the contracting
party may carry out activities for might significant. One
may think of the situation of the case Datenlotsen, in
which the contracting party was an entity that was jointly
held by the German state and the 16 Lnder. With 17
controlling public authorities that are certain to have
numerous entities under their control, it might be hard to
define the contracting party as economically dependent.
In the case of joint constructions of contracting
authorities, it therefore seems even less likely that the
CJEU would accept such a broad range of relevant entities
for the activities-criterion.
Joint constellations of 'reverse vertical in-house' and
'horizontal in-house' exemptions are even more difficult
from a control point of view. Directive 2014/24/EU
confirmed with Article 12(3) what the CJEU had already
established in its case law: In the event that a contracting
authority does not fulfil the criteria alone, they can be
fulfilled
jointly
by
several
public
authorities.
Unfortunately, neither the CJEU nor the European
legislator clarified whether this is equally true for
extensions of the 'quasi in-house' exemption, such as the
situations described in Article 12 (2). May the criteria for
these two 'quasi in-house' variations be fulfilled jointly as
well? The CJEU did not provide us with clear guidance on
this question. However, Advocate-General Mengozzi
advised against the possibility of jointly fulfilling the
'horizontal in-house' exemption. According to him, a
contract between entities that are both controlled by the
same public authority, but that are at the same time
controlled by other contracting authorities, cannot be
considered as the expression of a single will, which seems

to be the decisive factor for an 'in-house' situation. The
special nature of this exemption, in which the authority
that awards the contract does not directly control the
party that is awarded the contract, requires exclusive
control by the mother-entity over the two parties to the
public contract. The European legislator did not follow the
CJEU's doctrine of the possibility that the criteria of the
'quasi in-house' exemption may be fulfilled jointly, but
instead created for the 'joint in-house' situation a
separate paragraph in Article 12 (3). In my view European
legislator distinguishes between the classic 'in-house' and
the 'joint in-house' exemption. The wording of Article 12
(2) seems to oppose aswell by referring to a single
controlling authority. Although the CJEU did not provide
us with its opinion on the question, it seems probable that
the CJEU will go along with the opinions of Mengozzi and
the European legislator, because not allowing the criteria
of the two extensions to the 'quasi in-house' exemption to
be fulfilled jointly would be the most restrictive
interpretation of Article 12 (3).
5 CONCLUSION
Public public cooperation was initially not foreseen as
exception to the EU public procurement rules. The quasi
in-house doctrine was developed first and became an
important part of the case law of the CJEU. Over the years
the CJEU expanded the quasi in-house doctrine, for
example by adding the possibility of joint and indirect
control. Article 12 Directive 2014/24/EU contains partly a
codification but entails also new elements, such as the
reverse vertical quasi in-house exemption.
Although it is not possible to forecast future EU case
law, it seems very likely that the court will choose an
overall restrictive approach to the widened rules of Article
12 Directive 2014/24/EU. It remains to be seen whether
the CJEU will continue to follow its lines of reasoning on
quasi in-house contracts. However, to have more legal
certainty, it will be necessary to wait for clarification in
future cases before the CJEU. Since the case must be
based on facts that have happened after the transposition

deadline of 18 April 2016, it will take several years until
we may expect the first judgments concerning these
questions. Meanwhile best guesses should be made on
the intentions of the European legislator with the
introduction of Article 12 Directive 2014/24/EU. This paper
should hopefully contribute to that. By all means it is not
a revolution, but more a new deal with an increased
emphasize on public public cooperation, which fits well in
the present tendency in the EU loose a bit of believe in
the proper functioning of the markets in public
procurement procedures.
NOTES
REFERENCES
Bovis 2012
C. Bovis, EU public procurement law, Edward Elgar
Publishing 2012, 2nd edition.
Noguellou 2013
R. Noguellou, 'Scope and Coverage of the EU Procurement
Directives', in: M. Trybus, R. Caranta & G. Edelstam, EU
Public Contract Law: Public Procurement and beyond,
Brussels: Bruylant 2013.
Arrowsmith 2014
S. Arrowsmith, The law of public and utilities procurement
Regulation in the EU and UK, London: Sweet&Maxwell
2014, Volume I, 3rd edition.
Clarke 2015
C. M. Clarke, The CJEU's evolving interpretation of 'Inhouse' arrangements under the EU Public Procurement
rules: A functional or formal approach?', EPPPL 2/2015,
p. 111 125.
Janssen, Eleven Publishing 2014
W.
Janssen, 'Public Procurement Law and In-House

Delivery of Public Services: Improving a Paradox', in: A.
McCann and others, When Private Actors Contribute to

Public Interests: A Law and Governance Perspective,
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Janssen, Utrecht Law Review 2014
W.
A. Janssen, 'The Institutionalised and NonInstitutionalised

Exemptions
from
EU
Public
Procurement Law: Towards a More Coherent
Approach?', Utrecht Law Review 2014, number 10(5).
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F. Lichre, R. Caranta & S. Treumer, Modernising Public
Procurement: The New Directive, Copenhagen: Djlf
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De Koninck, Ronse & Timmermans 2015
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QUASI IN HOUSE EXEMPTION IN THE EU: A NEW

DEAL IN THE 2014 EU DIRECTIVES?

several reforms of the public procurement rules by the

The public contract has to be concluded in writing

The public contract has to be concluded between a

Directives 2014/23/EU (public concessions), 2014/24/EU (public contracts)

1(9) respectively Article 1(8) of Directive 2004/18

The value of the contract must also be above a

All contracts that fulfil these criteria need to be

Examples for this broad interpretation: CJEU 15 January 1998, C-44/96

(5) public contracts means contracts for

Article 1(8) of Directive 2004/18/EC.

contract.14 It is notable that tension arises from these two

W. A. Janssen, 'The Institutionalised and Non-Institutionalised

from the contracting authority. For the 'quasi in-house'

CJEU 18 November 1999, C-107/98 (Teckal), par. 50.

In this paper I consider therefore quasi in-house and

procurement law to relations between contracting authorities ('public-public

CJEU 18 November 1999, C-107/98 (Teckal).

activities with the controlling local authority or

The 'similar control'-criterion

CJEU 18 November 1999, C-107/98 (Teckal), par. 50.

2.2.1. Development in case law CJEU

Opinion of Advocate-General Mengozzi from 23 January 2014, C-13/15

in which there is private capital participation would put

CJEU 11 January 2005, C-26/03 (Stadt Halle), par. 51.

especially, the considerable powers of the Administrative

CJEU 13 October 2005, C-458/03 (Parking Brixen), par. 67 and 70.

held by contracting authorities. However, the contracting

CJEU 21 July 2005, C-231/03 (Coname), par. 24.

quasi in-house exemption needs to be exercised over the

CJEU 19 April 2007, C-295/05 (Asemfo).

with the management of its cable television network. 62

CJEU 13 November 2008, C-324/07 (Coditel), par. 13.

had directly awarded a supply contract regarding IT

CJEU 8 May 2014, C-15/13 (Datenlotsen), par. 31 and 32.

private capital precludes the decisions of the contracting

company as a legally separate body to carry out the city's

CJEU 10 November 2005, C-29/04 (Stadt Mdling), par. 38.

referred to in Directive 92/50, in that such a

CJEU 10 November 2005, C-29/04 (Stadt Mdling), par. 48.

Another unanswered question is whether there must

CJEU 10 September 2009, C-573/07 (Sea).

enough to preclude the fulfilment of the control-criterion. 87

CJEU 10 September 2009, C-573/07 (Sea), par. 51.

freedom of the management of the company, that the

The term horizontal in-house refers to a situation in

CJEU 11 May 2006, C-340/04 (Carbotermo), par. 40.

by another contracting authority that is higher in the

Opinion of Advocate-General Mengozzi from 23 January 2014, C-13/15

relationship of control whatsoever. Nevertheless, the

them awards a contract to the other might also be

2.3.1. Development in case law

ensure that the public procurement rules stay applicable

Commission Staff Working Paper concerning the application of EU public

taken into account, both qualitative and quantitative. 110

CJEU 11 May 2006, C-340/04 (Carbotermo), par. 64.

obliged to exercise or the ones that it actually executes.

In the doctrine the CJEU established in Teckal, by adding

The CJEU confirmed the possibility that a contracting

Opinion of Advocate-General Stix-Hackl in C-340/04 (Asemfo), par. 101103.

shares and the Autonomous Communities possessed each

CJEU 19 April 2007, C-295/05 (Asemfo), par. 60 and 61.

CJEU 13 November 2008, C-324/07 (Coditel).