Procurements falling outside the scope of the EU Directives The issue of cross-border interest

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1 Procurements falling outside the scope of the EU Directives The issue of cross-border interest Nicolas Pourbaix, Counsel 5 March 2015 EJTN / ERA Training on EU Public Procurement Law for Judges

2 Outline What procurements are we talking about? The starting point the Treaty and the Telaustria formula When is a contract of cross-border interest? What about utilities? What will tomorrow look like? 2

3 What procurements are we talking about? Today Contracts below the thresholds Contracts for services listed in Annex II B of Directive 2004/18 "Part B services contracts" Service concessions Tomorrow Contracts below the thresholds or some of them! Anything else? Far from insignificant 17.7% of total EU procurement spend only is covered by the EU Directives 3

4 The starting point (1) Public Sector Directive (Directive 2004/18/EC) recital 2 "The award of contracts concluded in the Member States on behalf of the State ( ) is subject to the respect of the principles of the Treaty and in particular to the principle of freedom of movement of goods, the principle of freedom of establishment and the principle of freedom to provide services and to the principles deriving therefrom, such as the principle of equal treatment, the principle of non-discrimination, the principle of mutual recognition, the principle of proportionality and the principle of transparency." 4

5 The starting point (2) Case C-324/98 Telaustria (2000) the Telaustria formula Although service concessions are excluded from the scope of the Public Procurement Directives, contracting authorities are, nonetheless, bound to comply with the fundamental rules of nondiscrimination on the ground of nationality in particular. That principle implies an obligation of transparency which consists in ensuring, for the benefit of any potential tenderer, a degree of advertising sufficient to enable the services market to be opened up to competition and the impartiality of the procurement procedures to be reviewed. 5

6 The starting point (3) Court of Justice confirmed that the Telaustria formula applies to: Part B services contracts: Case C-507/03 Commission v Ireland ('An Post') Below threshold contracts: Case C-147/06 SECAP v Commune di Torino When? If those contracts are of cross-border interest 6

7 When is a contract of cross-border interest? Evolving test swing of the pendulum Various concepts Real or potential interest? Certain or uncertain? Direct or indirect? Various indicators / evidence 7

8 From a fairly stringent test An Post case 2 basic requirements Show a certain cross-border interest An interest that is certain No presumption of cross-border interest Infraction case: Commission has to prove it Existence of a complaint is not enough Show that lack of advertisement resulted in an undertaking located in another Member State being unable to bid Does this imply a requirement to show actual intent? 8

9 To a less stringent test Case C-91/08 Wall AG v Stadt Frankfurt Relaxation of test Court dropped the word 'certain' - enough that the contract "may be of interest" to bidder located in another Member State Court dropped the requirement to show that undertaking from another Member State was unable to bid 9

10 Direct or indirect interest? (1) What type of connection with another Member State is needed? An Post & Case C-147/06 SECAP Relates to intent of firms located in other Member States to bid Suggests only direct interest is relevant Excludes interest of firms established in same Member State but which would sub-contract to suppliers in another Member State Better for legal certainty However, a large part of cross-border trade in procurement is through sub-contracting 10

11 Direct or indirect interest? (2) Inconsistency with case-law on purely internal situations? Case C-458/03 Parking Brixen Argument that TFEU did not apply because all persons involved in dispute including complainant were Italians in Italy rejected Court considered that potential recourse to sub-contractors in another Member State is sufficient 11

12 Indicators of cross-border interest Sufficient evidence of cross-border interest Contract was advertised in OJEU (Case C-226/09 Commission v Ireland) Tenderers from other Member State actually bid (Case C-226/09) Tender documents referred to the issue of proof of payment of tax and social security contributions in Denmark but also in Member State of establishment (Case C-336/12 Manova) Relevant but not decisive Modest contract value (Case C-147/06 SECAP) Geographic location and proximity to border (SECAP) 12

13 What about Utilities? Utilities Directive (2004/17/EC) applies to: Contracting authorities Public undertakings Private undertakings operating on the basis of special or exclusive rights when awarding contracts intended to enable them to carry out a relevant utility activity General Treaty principles apply to: Contracting authorities and public undertakings Private undertakings only when they are 'emanations of the State' 13

14 What will tomorrow look like? New Public Sector Directive (Directive 2014/24/EU) Basic thresholds unchanged The end of Part B services now fully covered New 'light regime' for social and other specific services Clear list in Annex XIV by reference to CPV codes Higher threshold of EUR 750,000 'Light regime' specifically applies general Treaty principles Below EUR 750,000: presumption of no cross border interest unless concrete indications to the contrary New Concessions Directive (Directive 2014/23/EU) Works and services concessions above EUR 5,186,000 now covered 14

15 National Reports 15

16 Nicolas Pourbaix nicolas.pourbaix@hoganlovells.com Hogan Lovells has offices in: Alicante Amsterdam Baltimore Beijing Brussels Budapest* Caracas Colorado Springs Denver Dubai Dusseldorf Frankfurt Hamburg Hanoi Ho Chi Minh City Hong Kong Houston Jakarta* Jeddah* Johannesburg London Los Angeles Luxembourg Madrid Mexico City Miami Milan Monterrey Moscow Munich New York Northern Virginia Paris Philadelphia Rio de Janeiro Riyadh* Rome San Francisco São Paulo Shanghai Silicon Valley Singapore Tokyo Ulaanbaatar Warsaw Washington DC Zagreb* "Hogan Lovells" or the "firm" is an international legal practice that includes Hogan Lovells International LLP, Hogan Lovells US LLP and their affiliated businesses. The word "partner" is used to describe a partner or member of Hogan Lovells International LLP, Hogan Lovells US LLP or any of their affiliated entities or any employee or consultant with equivalent standing. Certain individuals, who are designated as partners, but who are not members of Hogan Lovells International LLP, do not hold qualifications equivalent to members. For more information about Hogan Lovells, the partners and their qualifications, see. Where case studies are included, results achieved do not guarantee similar outcomes for other clients. Attorney Advertising. Hogan Lovells All rights reserved. *Associated offices