OPINION OF ADVOCATE GENERAL
MAZAK
delivered on 19 February 2009 (1)
Case C‑480/06
Commission of the European Communities
v
Federal Republic of Germany
(Public service contracts – Scope of Directive 92/50/EEC – Procedure for the award of public service contracts – Technical reasons)
Introduction
1. In this case, brought under Article 226 EC, the Commission of the European Communities is asking the Court to declare that the Federal Republic of Germany has failed to fulfil its obligations under the combined provisions of Article 8 and Titles III to VI of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts, (2) on the ground that the Landkreise (administrative districts) Harburg, Rotenburg (Wümme), Soltau-Fallingbostel and Stade directly concluded with the refuse collection services of the City of Hamburg a contract for waste disposal without there having been a call for tenders in the context of an open or restricted tendering procedure at Community level for that services contract.
2. The rules on procedures for the award of public service contracts introduced by Directive 92/50 constitute one of the measures intended to establish the internal market by contributing to the removal of barriers to the freedom to provide services. It cannot be denied that they constitute measures which benefit both providers of services and their recipients.
3. In the present case, refuse disposal is a service the recipients of which are four administrative districts. In reality, the number of recipients is much greater. The administrative districts in fact are only intermediaries for their inhabitants who are the final recipients of that service. It is worth pointing out that, should it become apparent that a service provider had been chosen contrary to the requirements of Community law, it is those inhabitants whose interests would be harmed most.
I – Legal context
4. Pursuant to Article 1(a) of Directive 92/50, ‘public service contracts’ are contracts for pecuniary interest concluded in writing between a service provider and a contracting authority, to the exclusion of the contracts listed in paragraphs (i) to (ix) of that provision.
5. Article 1(b) of Directive 92/50 provides:
‘“contracting authorities” shall mean the State, regional or local authorities, bodies governed by public law, associations formed by one or more of such authorities or bodies governed by public law.
“Body governed by public law” means any body:
– established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character, and
– having legal personality and
– financed, for the most part, by the State, or regional or local authorities, or other bodies governed by public law; or subject to management supervision by those bodies; or having an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities or by other bodies governed by public law.
...’
6. Under Article 1(c) of Directive 92/50, a ‘service provider’ means any natural or legal person, including a public body, which offers services.
7. Under Article 8 of Directive 92/50, contracts which have as their object services listed in Annex IA are to be awarded in accordance with the provisions of Titles III to VI of that directive. Annex IA covers, under category No 16 ‘sewage and refuse disposal services; sanitation and similar services’.
8. The structure of Article 11 of Directive 92/50 shows clearly that contracting authorities are to award their service contracts using the open procedure or the restricted procedure, apart from in the cases set out in paragraphs 2 and 3 of that article, where contracting authorities may award their public service contracts either by negotiated procedure, with prior publication of a contract notice (the case referred to in paragraph 2) or a negotiated procedure without prior publication of a contract notice (the case referred to in paragraph 3).
9. Under Article 11(3)(b) of Directive 92/50, contracting authorities may award public service contracts by negotiated procedure without prior publication of a contract notice where, for technical or artistic reasons, or for reasons connected with the protection of exclusive rights, the services may be provided only by a particular service provider.
II – Facts
10. The Commission’s action concerns a contract concluded between the administrative districts of Harburg, Rotenburg (Wümme), Sotau-Fallingbostel and Stade (‘the districts’) on the one hand and the City of Hamburg refuse disposal services on the other (‘the contract in dispute’).
11. The districts and the City of Hamburg refuse disposal services are bodies governed by public law responsible for waste disposal.
12. The Land of Lower Saxony, in which the districts are situated, the Land of Schleswig-Holstein and the Free and Hanseatic City of Hamburg make up the Hamburg Metropolitan Region.
13. The contract in dispute was concluded on 18 December 1995 directly, without an open or restricted tendering procedure at Community level. It is apparent from the preamble to the contract that the refuse disposal services of the City of Hamburg offered the districts, by letter of 30 November 1994, a partial capacity of 120 000 tonnes per year of the total annual capacity of the waste incineration plant at Rugenberger Damm (‘the Rugenberger Damm plant’) and the districts accepted that offer by letter of 6 January 1995.
14. In the contract in dispute, the City of Hamburg refuse disposal services agreed to make available to the districts a capacity of 120 000 tonnes per year for the purpose of the incineration of waste in the Rugenberger Damm plant and the districts agreed to pay the City of Hamburg refuse disposal services an annual fee, part of which was fixed and part of which depended on the amount delivered.
15. The contract in dispute provided that its duration was to be 20 years from 15 April 1999 since, at the time the contract was concluded, work on the Rugenberger Damm plant was at the planning stage.
III – Pre-litigation procedure and procedure before the Court
16. The Commission decided to act following a complaint from a citizen who considered that he was paying excessive charges for waste management.
17. Since it took the view that, by directly concluding a contract for waste disposal in which the contracting parties were the districts and the City of Hamburg refuse disposal services without a call for tenders or tendering procedure at Community level, the Federal Republic of Germany might have infringed the combined provisions of Article 8 and Titles III to VI of Directive 92/50, the Commission, on 30 March 2004, sent a letter of formal notice to the Federal Republic of Germany pursuant to Article 226 EC.
18. The Federal Republic of Germany replied by letter of 30 June 2004. It stated that, from its perspective, the contract in dispute was an agreement on the shared performance of a public service which was the responsibility of the districts and the City of Hamburg and that it was a question of cooperation at local district level.
19. Being dissatisfied with the comments of the Federal Republic of Germany, the Commission sent it a reasoned opinion dated 22 December 2004 in which it declared that the contract in dispute fell within the scope of Directive 92/50 and that, consequently, the direct conclusion of the contract between the districts and the City of Hamburg refuse disposal services had infringed that directive.
20. Notwithstanding the arguments set out by the Federal Republic of Germany in its answer to the reasoned opinion of 25 April 2005, the Commission brought the present action, by which it asked the Court to declare that the Federal Republic of Germany had failed to fulfil its obligations under the combined provisions of Article 8 and Titles III to VI of Directive 92/50 and to order the Federal Republic of Germany to pay the costs.
21. On the basis of arguments set out in its defence and rejoinder, the Federal Republic of Germany requested the Court to dismiss the action and to order the applicant to pay the costs.
22. By order of the President of the Court of 14 June 2007, the Kingdom of the Netherlands and the Republic of Finland were given leave to intervene in this case in support of the form of order sought by the Federal Republic of Germany. However, the Republic of Finland has not lodged a statement in intervention.
23. The Federal Republic of Germany requested a hearing. That hearing took place on 11 November 2008 in the presence of the agents of the Federal Republic of Germany and of the Commission.
IV – Analysis
24. In its application, the Commission starts from the hypothesis that the districts are contracting authorities within the meaning of Article 1(b) of Directive 92/50, that the City of Hamburg refuse disposal services are service providers for the purposes of Article 1(c) of Directive 92/50 and that the contract in dispute concluded between the districts and the City of Hamburg refuse disposal services is a public service contract for the purposes of Article 1(a) of Directive 92/50. Since the object of the contract in dispute is a service listed in Annex IA to Directive 92/50 and that it is not one of the cases which would warrant the award of that contract using the negotiated procedure with prior publication of a contract notice (Article 11(2) of Directive 92/50) or use of the negotiated procedure without prior publication of a contract notice (Article 11(3) of Directive 92/50), the contract in dispute could only have been concluded by using, as appropriate, the open procedure or the restricted procedure, in accordance with Article 11(4) of Directive 92/50.
25. I intend to examine the merits of the Commission’s complaint in the light of the arguments put forward by the Federal Republic of Germany, in which it does not deny that the contract in dispute was not the subject of a call for tenders, but seeks to establish that the districts were not obliged to issue a call for tenders for the purposes of concluding the contract in dispute, on four grounds.
26. First, the contract in dispute is an example of cooperation between State bodies and, thus, concerns only internal relationships of the organisation of the State in the performance of public tasks. It follows that it does not fall under Directive 92/50. Secondly, the contract in dispute does not constitute a contract within the meaning of Article 1(a) of that directive. Thirdly, even if the contract at issue should be regarded as a contract for the purposes of Directive 92/50, there is a technical reason, within the meaning of Article 11(3)(b) thereof, on the grounds of which the contract could have been concluded using a negotiated procedure without prior publication of a contract notice. Fourthly, in accordance with Article 86(2) EC, it was not necessary to initiate an open or restricted procedure, given that such a procedure would have prevented the districts and City of Hamburg refuse disposal services from carrying out their duties.
A – Scope of Directive 92/50
27. In defence of its position, the Federal Republic of Germany submits that the contract in dispute was a transaction internal to the State which, as a general rule, does not fall within the scope of Directive 92/50. It submits, like the Netherlands Government, that that directive concerns the award of tenders to undertakings and applies only where the State has decided that it does not want to carry out a task itself but to procure the corresponding service on the market.
28. In this connection, the Court has held that the directives on public procurement (3) are, in general, applicable in the case where a contracting authority plans to conclude a contract for pecuniary interest with an entity which is legally distinct from it, whether or not that entity is itself a contracting authority. (4) Likewise, that directive applies both where a contract is awarded for the purposes of fulfilling the task of meeting needs in the general interest and where it is unrelated to that task. (5)
29. However, according to the Court there is an exception to that general rule. The directives on public procurement are not applicable, even if the contracting party is an entity legally distinct from the contracting authority, where two conditions are met. First, the public authority, which is a contracting authority, must exercise over the distinct entity in question a control which is similar to that which it exercises over its own departments and, secondly, that entity must carry out the essential part of its activities with the local authority or authorities which control it. (6)
30. It is moreover in accordance with that derogation that the Court has held that it is impossible automatically to exclude relations established between public law institutions from the scope of those directives on public procurement, regardless of the nature of those relations. (7)
31. In the present case, it is obvious that, as the Federal Republic of Germany states, the contract in dispute is a means of cooperation between State bodies. It does not follow from that fact alone, however, that the contract in dispute does not fall within the scope of Directive 92/50. The opposite finding would be possible only were it to be established that the two conditions set out for the first time in the judgment in Teckal are met.
32. As the Federal Republic of Germany correctly points out, there is another option for a public authority falling within the definition of a ‘contracting authority’ for the purpose of Article 1(b) of Directive 92/50 to avoid the application of that directive. That is a situation in which a public authority performs the tasks conferred on it in the public interest by using its own administrative, technical and other resources, without being obliged to call on outside entities not forming part of its own departments. Since in such a case there can be no question of a contract for pecuniary interest concluded with an entity legally distinct from the contracting authority, there is therefore no need to apply the Community rules in the field of public procurement. (8)
33. That means that public authorities are not obliged, when performing tasks in the public interest, to turn to the market to obtain the provision of a service. They have the option of choosing between using their own resources (in which case, Directive 92/50 is not applicable) or turning to the market.
34. In this respect, I do not share the opinion held by the Federal Republic of Germany that, in the present case, cooperation between two distinct State bodies can be considered to amount to the use of the resources of the contracting authority. The City of Hamburg refuse disposal services cannot be regarded as the resources of the districts concerned, which are the contracting authorities.
B – Public service contracts for the purposes of Article 1(a) of Directive 92/50
35. The Federal Republic of Germany takes the view that the contract in dispute is not a public service contract within the meaning of Article 1(a) of Directive 92/50 for three reasons. (9) First, the contract is an internal measure of wider cooperation between State bodies covered by the Hamburg Metropolitan Region. Secondly, the refuse collection services of the City of Hamburg are not, in relation to the contract, service providers but, on the other hand, as the public body responsible for waste disposal, offer administrative assistance to the districts, who also deal with waste disposal. Thirdly, as regards its content, the contract goes beyond a contract for current services.
36. I am of the opinion that those arguments are not such as to cast doubt on the conclusion that the contract entered into between, on the one hand, the four districts and, on the other, the City of Hamburg refuse disposal services is a public service contract within the meaning of Article 1(a) of Directive 92/50.
37. It is apparent from the Court’s case-law that the existence of a contract for the purpose of Article 1(a) of Directive 93/36 requires an agreement between two separate persons. (10)
38. That condition is indeed fulfilled in the present case. Moreover, the subject-matter of the contract in dispute, that is, the incineration of waste, falls within the services covered by category No 16 of Annex IA to Directive 92/50.
39. Since the City of Hamburg refuse disposal services cannot be regarded as the districts’ own resources, (11) the application of Directive 92/50 could only be excluded if the two cumulative conditions for the application of the exception which I referred to in point 29 of this Opinion were fulfilled.
40. Thus, it is necessary to examine whether the districts exercise over the City of Hamburg refuse disposal services a control which is similar to that which they exercise over their own departments and whether the City of Hamburg refuse disposal services carry out the essential part of their activities with the districts.
41. The Court has been required on several occasions to consider the condition relating to ‘similar control’. It is clear from its case-law that, in order to determine whether a public authority exercises over the other party to the contract a control similar to that which it exercises over its own departments, it is necessary to take account of not only all the legislative provisions but also the relevant circumstances. It must result from that examination that a contracted body is subject to a control which enables the contracting authority to influence that body’s decisions. That must be a power of decisive influence over both strategic objectives and significant decisions of that entity. (12)
42. The Federal Republic of Germany submits, in this connection, that the condition of similar control was fulfilled, since the districts concerned exercise a reciprocal control over one another at the level of the Hamburg Metropolitan Region.
43. On this issue, there is nothing to indicate that the districts participate in the City of Hamburg refuse disposal services and thus exercise control over them.
44. Besides, as the Commission correctly observes, the refuse disposal services do not perform their activities for the districts under statute or other public law provisions, but on the basis of a contract. The contract in dispute represents the only legal connection between the districts and the City of Hamburg refuse disposal services and that contract does not make it possible for the districts to exercise control.
45. In my opinion, a general reference to common objectives is clearly insufficient; in order for control to exist, there must be something more substantial.
46. The principle of ‘something given for something received’, on which cooperation in Hamburg Metropolitan Region is founded according to the Federal Republic of Germany, allows the districts to exercise, at the most, an indirect control over the City of Hamburg refuse disposal services.
47. Since the first condition for the application of the exception is not, in my view, fulfilled, it is unnecessary to examine whether the second has been met. I note, however, that waste disposal represents only part of the activities of the City of Hamburg refuse disposal services.
48. In the light of the foregoing, I can find nothing which indicates that the contract in dispute does not constitute a public service contract for the purpose of Directive 92/50. That means that it could only lawfully have been awarded in accordance with that directive.
C – Negotiated procedure without prior publication of a contract notice as an exception to the general rule for the award of public service contracts
49. In its defence, the Federal Republic of Germany also submits that the only party with which the districts could conclude the contract in dispute was the City of Hamburg refuse disposal services, who had a guaranteed site for the construction of a waste incineration plant. The fact that in the Hamburg Metropolitan Region no other site was available for the construction of such plants and that the existing plants did not have enough capacity available constitutes a technical reason within the meaning of Article 11(3)(b) of Directive 92/50 which would justify the award of a public service contract using the negotiated procedure without prior publication of a contact notice.
50. It is evident from the structure of Article 11 of Directive 92/50 that paragraph 3 is an exception to the general rule in paragraph 4, according to which contracting authorities must award their service contracts using the open procedure or the restricted procedure.
51. In this respect, as an exception to the rules seeking to guarantee the effectiveness of the rights granted by the EC Treaty in the public service contracts sector, Article 11(3) of Directive 92/50 must be interpreted strictly, and the burden of proving the existence of exceptional circumstances justifying a derogation lies on the person seeking to rely on those circumstances. (13)
52. The Court has already had to consider the existence of ‘technical reasons’ in Joined Cases C‑20/01 and C‑28/01 Commission v Germany. (14) The Court ruled that a technical reason relating to environmental protection might, in certain circumstances, be taken into consideration in order to assess whether the contract at issue could be awarded to a given supplier. Admittedly, in that judgment the Court did not give an exhaustive definition of technical reasons, but it did define them negatively by stating the facts which did not constitute technical reasons for the purposes of Article 11(3) of Directive 92/50.
53. In Commission v Greece, (15) the Court held, concerning Article 20(2)(c) of Council Directive 93/38/EEC of 14 June 1993 coordinating the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors, (16) which includes a rule similar to that set out in Article 11(3) of Directive 92/50, that the application of that provision was subject to two cumulative conditions, namely, first, that there are technical reasons connected to the works which are the subject-matter of the contract and, secondly, that those technical reasons make it absolutely necessary to award that contract to a particular contractor.
54. I am of the view that, having regard to the case-law cited, the Federal Republic of Germany has not proven that the use of Article 11(3) of Directive 92/50 was justified in the present case.
55. If we were to accept the Federal Republic of Germany’s line of argument, which is based on Council Directive 75/442/EEC on waste, (17) that would mean that that directive would deprive Directive 92/50 of its full effect.
D – Directive 92/50 as a factor preventing the districts from performing the task of waste disposal
56. The Federal Republic of Germany also submits that the only way in which the districts and City of Hamburg refuse disposal services, as public law bodies charged with waste disposal, could undertake their duties was by concluding the contract in dispute. Directive 92/50 obliges the districts to award a contract to the service provider offering the lowest prices or the most economically advantageous offer in an open or restricted procedure. Thus, the obligation stemming from Directive 92/50 to issue the call for tenders in an open or restricted tendering procedure would prevent performance of the duties which the districts and City of Hamburg refuse disposal services are obliged to undertake. By virtue of Article 86(2) EC, it does not apply, as such, to the districts and City of Hamburg refuse disposal services.
57. Article 86(2) EC provides that undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly must be subject to the rules contained in the Treaty, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The Court has ruled that, in the case of a provision which allows, in certain circumstances, derogation from the rules of the Treaty, that article is to be interpreted strictly (18) and that it was incumbent on the Member State or the undertaking which sought to rely on that provision to show that the conditions for its application were fulfilled. (19)
58. I am of the opinion that the Federal Republic of Germany has not satisfied the burden of proof imposed on it.
59. It appears that the Federal Republic of Germany’s line of argument is based, as regards this issue, on two premisses. First, if the contract in dispute had not existed, neither the districts not the City of Hamburg refuse disposal services would have been able to carry out their duties in relation to waste disposal. The Rugenberger Damm plant was built only as a result of that contract. Secondly, the contract in dispute would not have been concluded if the districts had carried out a call for tenders as part of an open or restricted tendering procedure because, in such a procedure, it would have been necessary to award the contract to the service provider with the lowest prices or the offer which was most economically advantageous.
60. In my opinion, both the first and the second premiss are incorrect.
61. I am not convinced that the contract in dispute was the only means of enabling the performance of the duties in relation to waste disposal. As the Commission correctly points out, the City of Hamburg refuse disposal services could also have offered their available facilities to other takers. (20)
62. Nor do I consider that the application of the open or restricted procedure would have precluded the conclusion of such a contract, in the form in which it was concluded between the districts and the City of Hamburg refuse disposal services, given that, in those procedures, a tender must be awarded to the service provider with the lowest prices or the most economically advantageous offer.
63. The Court has already held that in order to award contracts the contracting authority may rely, where the tender is awarded to the most economically advantageous offer, on various criteria which may change according to the tender at issue, and that each of the award criteria used by the contracting authority to identify the most economically advantageous offer need not necessarily be of a purely economic nature. (21) The Court has explicitly stated that the contracting authority could take into account criteria relating to the preservation of the environment at the various stages of a public procurement procedure. (22)
V – Conclusion
64. In the light of the foregoing, I propose that the Court should rule as follows:
– declare that the Federal Republic of Germany has failed to fulfil its obligations under the combined provisions of Article 8 and Titles III to VI of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts, on the ground that the Landkreise of Harburg, Rotenburg (Wümme), Soltau-Fallingbostel and Stade directly concluded with the City of Hamburg refuse collection services a contract for waste disposal and that there had been no call for tenders in the context of an open or restricted tendering procedure at Community level for that services contract;
– order the Federal Republic of Germany to pay the costs;
– order the Kingdom of the Netherlands, as intervener, to pay its own costs.