Before awarding contracts that fall within the scope of Public Procurement Directive 2014/24, contracting authorities have to assess the economic and financial standing of potential contractors. Despite such checks, these authorities may, in some cases, award contracts to operators that go on to be declared insolvent and are therefore no longer able to perform said contracts.
This raises the question of whether the early replacement of the insolvent contractor means that a new tender procedure needs to be organised.
In this respect, it follows from the “pressetext” ruling of 19 June 2008 that the substitution of a contractor during the execution of the contract generally amounts to a substantial, and thus prohibited, modification of said contract. As a result, such a modification may not occur without a new tender procedure.
This case law was subsequently transposed into Directive 2014/24. Nevertheless, the EU legislature also provided that, by derogation, a new tender procedure was not required in a range of situations. Under Article 72(1)(d)(ii) of the Directive, these situations include the “universal or partial succession into the position of the initial contractor, following corporate restructuring, including takeover, merger, acquisition or insolvency, of another economic operator that fulfils the criteria for qualitative selection initially established provided that this does not entail other substantial modifications to the contract and is not aimed at circumventing the application of this Directive”.
In the Advania Sverige judgment of 3 February 2022, the Court of Justice clarified the scope of this provision.
In this case, a Swedish authority had awarded framework contracts to two operators, Dustin and Misco. Misco was declared insolvent during the execution of these contracts. Misco’s insolvency administrator then signed a contract with a third operator, Advania, providing for the transfer of Misco’s framework agreements, which was accepted by the Swedish contracting authority.
Dustin opposed this transfer in the Swedish courts, arguing that said transfer did not fall within the exception to the obligation to organise a new tender procedure provided for in Article 72(1)(d)(ii) of Directive 2014/24. In support of this argument, Dustin underlined that Advania had only taken over Misco’s rights and obligations arising from the transferred framework agreements. However, in Dustin’s view, the condition of the existence of a “universal or partial succession into the position of the initial contractor, following corporate restructuring”, within the meaning of Article 72(1)(d)(ii), could not be fulfilled without the transfer of the branches of business concerned by the framework agreements at issue.
In its judgment, the Court of Justice rejected Dustin’s interpretation. The Court ruled that an economic operator which, following the insolvency of the initial contractor that led to its liquidation, has only taken over the rights and obligations of the initial contractor arising from a framework agreement concluded with a contracting authority, must be regarded as having “succeeded in part” into the position of that initial contractor, “following corporate restructuring”, within the meaning of Article 72(1)(d)(ii).
Therefore, a new procurement procedure is not required in such a situation.
To reach this conclusion, the Court considered, in line with its Advocate General’s opinion, that the terms “universal or partial succession”, within the meaning of Article 72(1)(d)(ii) of Directive 2014/24, could be interpreted, in substance, as including the transfer of even a single public contract.
In addition, the Court considered that the concept of “insolvency”, under the same provision, does not presuppose the new contractor taking over all or part of the business falling within the scope of the framework agreement at issue. Indeed, in accordance with the “usual sense” of this concept, “insolvency” may lead to the dissolution of the insolvent company. Therefore, and in order not to deprive it of its effectiveness, the concept of “insolvency” should not be understood as being limited to situations where the business of the original contractor which enables the performance of the public contract is pursued, at least in part. As a result, corporate “restructuring”, within the meaning of Article 72(1)(d)(ii) of Directive 2014/24, encompasses “structural changes to the original contractor, in particular insolvency which includes insolvency resulting in liquidation”.
Finally, the Court underlined that this interpretation was in line with the objective of the legal provisions under assessment, namely to introduce a degree of flexibility in the application of the public procurement rules in order to respond pragmatically to all the extraordinary instances, such as the insolvency of the successful tenderer, that prevent it from performing the public contract at issue.
Please contact Peter Teerlinck or Raluca Gherghinaru for further information about this case and/or for general legal advice relating to public procurement law