After having confirmed that public authorities can invoke the direct effect of provisions of directives,
the Court of Justice specifies some control conditions for in-house contracts and states that a common objective is a key element for horizontal cooperation between public authorities.
Facts
The public housing company Société de logement de service public Sambre et Biesme (SLSP S&B) and the municipality of Farciennes entered into a framework procurement agreement to create an ‘eco-district’ comprising 150 public and private housing units in the municipality. Under this agreement, a contract for project management assistance, legal advice and environmental services was awarded directly to Igretec, which is also a public entity.
Igretec is comprised exclusively of legal persons governed by public law. Under Igretec’s articles of association, most of the votes and the chairmanship of the various management bodies are reserved for the municipalities.
At the time of the facts, a councillor from Farciennes, who was also a director of SLSP S&B, was on Igretec’s board of directors. SLSP S&B bought a single share in Igretec in order to benefit from its services.
The oversight authority responsible for supervising public housing development companies cancelled the agreement, considering that the conditions for a direct award were not met. SLSP S&B and Farciennes challenged this cancellation.
This caused the Belgian Council of State to refer questions to the Court of Justice (Court) for a preliminary ruling that the Court answered in its judgment of 22 December 2022 (joined cases C-383/21 and C-384/21).
Direct effect of Article 12(3) and (4) of Directive 2014/24
According to Article 12(3) of Directive 2014/24 on public procurement, a contracting authority may award a public contract ‘in-house’ without competitive tendering where the conditions set out in the provision are met. The main condition is that the contracting authority (or several contracting authorities) must exercise control over a tenderer that has been awarded the public contract.
The exclusion of the application of Directive 2014/24 provided for in paragraph 4 of Article 12 is based on cooperation among contracting authorities between which no relationship of control exists.
At the time of the facts, the Belgian law incorporating Directive 2014/24 into domestic law was not yet in force, even though the time limit for its transposition had already expired.
Therefore, the Court first had to answer whether both provisions should be interpreted as having direct effect in disputes between public law bodies concerning the direct award of public contracts.
Firstly, the Court began by pointing out the two main conditions that need be met for a provision of a directive to have direct effect. The provision must be unconditional and sufficiently precise.
Secondly, the Court stated that public authorities can invoke the direct effect of provisions of directives.
Finally, the Court concluded that both provisions have direct effect.
The control condition of point (i) of the second subparagraph of Article 12(3) of Directive 2014/24
The second question that the Court had to answer was whether point (i) of the second subparagraph of Article 12(3) of Directive 2014/24 should be interpreted as meaning that, in order to establish that a contracting authority exercises joint control with other contracting authorities over the contracting legal person similar to that which they exercise over their own departments, the requirement referred to in that provision that a contracting authority should be represented on the decision-making bodies of the controlled legal person is satisfied solely if the representative of another contracting authority who is also a member of the board of directors of the first contracting authority sits on the board of directors of that legal person.
Firstly, the Court stated that the contracting authority’s control over the contracting legal person may not be indirect.
Secondly, the Court pointed out that in order to analyse whether a contracting authority exercises control over the legal person similar to that which it exercises over its own departments, the factors to be considered are the factual circumstances, the applicable legislation and, in particular, the control mechanisms provided for by the articles of association of that legal person.
Thirdly, the Court found that a contracting authority cannot be considered using its own resources and acting on its own when it is not able to intervene in the decision-making bodies of the legal person to which the public contract is awarded through a representative who acts on behalf of that contracting authority itself.
Finally, the Court concluded that in this case, the control condition of point (i) of the second subparagraph of Article 12(3) of Directive 2014/24 was not met.
The common objective of horizontal cooperation under Article 12(4) of Directive 2014/24
The last question answered by the Court was whether Article 12(4) of Directive 2014/24 should be interpreted as meaning that a public contract whereby public service tasks are entrusted to a contracting authority that form part of a cooperative relationship between other contracting authorities is excluded from the scope of that directive.
The Court found that a key element of horizontal cooperation is that the collaboration between the parties should be intended to achieve objectives common to all of them.
Such an objective common to all contracting authorities is lacking where, in carrying out its tasks under the public contract concerned, one of the contracting authorities does not seek to achieve objectives which it would share with the other contracting authorities but confines itself to contributing to the achievement of objectives which only those other contracting authorities have in common.
In this case, the Court found that Igretec’s objectives differed from the objectives of SLSP S&B and Farciennes.
Please contact Peter Teerlinck or Raluca Gherghinaru for further information about this case and/or for general legal advice relating to public procurement law.