JUDGMENT OF THE COURT (Fifth Chamber)

2 December 1999 (1)

(Directive 92/50/EEC — Public service contracts — Proof of standing of theservice provider — Possibility of relying on the standing of another company)

In Case C-176/98,

REFERENCE to the Court under Article 177 of the EC Treaty (now Article 234EC) by the Tribunale Amministrativo Regionale per la Sardegna, Italy, for apreliminary ruling in the proceedings pending before that court between

Holst Italia SpA

and

Comune di Cagliari,

intervener:

Ruhrwasser AG International Water Management,

on the interpretation of Council Directive 92/50/EEC of 18 June 1992 relating tothe coordination of procedures for the award of public service contracts (OJ 1992L 209, p. 1),

THE COURT (Fifth Chamber),

composed of: J.C. Moitinho de Almeida, President of the Sixth Chamber, acting asPresident of the Fifth Chamber, L. Sevón, C. Gulmann, J.-P. Puissochet(Rapporteur) and M. Wathelet, Judges,

Advocate General: P. Léger,

Registrar: L. Hewlett, Administrator,

after considering the written observations submitted on behalf of:

—    Holst Italia SpA, by C. Colapinto, of the Rimini Bar, P. Leone, of the RomeBar, and A. Tizzano and G.M. Roberti, of the Naples Bar,

—    the Municipality of Cagliari, by F. Melis and G. Farci, of the Cagliari Bar,

—    Ruhrwasser AG International Water Management, by M. Vignolo andG. Racugno, of the Cagliari Bar, and R.A. Jacchia, of the Milan Bar,

—    the Italian Government, by Professor U. Leanza, Head of the ContentiousDiplomatic Affairs Department in the Ministry of Foreign Affairs, acting asAgent, assisted by F. Quadri, Avvocato dello Stato,

—    the Netherlands Government, by T.T. van den Hout, acting Secretary-General of the Ministry of Foreign Affairs, acting as Agent,

—    the Austrian Government, by W. Okresek, Sektionschef in the FederalChancellor's Office, acting as Agent,

—    the Commission of the European Communities, by P. Stancanelli, of itsLegal Service, acting as Agent,

having regard to the Report for the Hearing,

after hearing the oral observations of Holst Italia SpA, represented byC. Colapinto, P. Leone, G.M. Roberti and F. Sciaudone, of the Naples Bar; of theMunicipality of Cagliari, represented by F. Melis and G. Farci; of Ruhrwasser AGInternational Water Management, represented by M. Vignolo and R.A. Jacchia; ofthe Italian Government, represented by F. Quadri; and of the Commission,represented by P. Stancanelli, at the hearing on 20 May 1999,

after hearing the Opinion of the Advocate General at the sitting on 23 September1999,

gives the following

Judgment

1.

    By order of 10 February 1998, received at the Court on 11 May 1998, the TribunaleAmministrativo Regionale per la Sardegna (Regional Administrative Court forSardinia) referred to the Court for a preliminary ruling under Article 177 of the ECTreaty (now Article 234 EC) a question on the interpretation of Council Directive92/50/EEC of 18 June 1992 relating to the coordination of procedures for theaward of public service contracts (OJ 1992 L 209, p. 1).

2.

    That question was raised in proceedings between Holst Italia SpA ('Holst Italia‘)and the Municipality of Cagliari concerning the award by the latter to RuhrwasserAG International Water Management ('Ruhrwasser‘), by negotiated tenderprocedure, of a contract for the collection and purification of domestic waste water.

The Community legislation

3.

    Directive 92/50 lays down qualitative selection criteria for the determination ofcandidates admitted to take part in procedures for the award of a public servicecontract.

4.

    Article 31 of that directive provides:

'1.    Proof of the service provider's financial and economic standing may, as ageneral rule, be furnished by one or more of the following references:

(a)    appropriate statements from banks or evidence of relevant professional riskindemnity insurance;

(b)    the presentation of the service provider's balance sheets or extractstherefrom, where publication of the balance sheets is required undercompany law in the country in which the service provider is established;

(c)    a statement of the undertaking's overall turnover and its turnover in respectof the services to which the contract relates for the previous three financialyears.

2.    The contracting authorities shall specify in the contract notice or in theinvitation to tender which reference or references mentioned in paragraph 1 theyhave chosen and which other references are to be produced.

3.    If, for any valid reason, the service provider is unable to provide thereferences requested by the contracting authority, he may prove his economic and

financial standing by any other document which the contracting authority considersappropriate.‘

5.

    Article 32 of Directive 92/50 is in the following terms:

'1.    The ability of service providers to perform services may be evaluated inparticular with regard to their skills, efficiency, experience and reliability.

2.    Evidence of the service provider's technical capability may be furnished byone or more of the following means according to the nature, quantity and purposeof the services to be provided:

(a)    the service provider's educational and professional qualifications and/orthose of the firm's managerial staff and, in particular, those of the personor persons responsible for providing the services;

(b)    a list of the principal services provided in the past three years, with thesums, dates and recipients, public or private, of the services provided;

    —    where provided to contracting authorities, evidence to be in the formof certificates issued or countersigned by the competent authority,

    —    where provided to private purchasers, delivery to be certified by thepurchaser or, failing this, simply declared by the service provider tohave been effected;

(c)    an indication of the technicians or technical bodies involved, whether or notbelonging directly to the service provider, especially those responsible forquality control;

(d)    a statement of the service provider's average annual manpower and thenumber of managerial staff for the last three years;

(e)    a statement of the tool, plant or technical equipment available to the serviceprovider for carrying out the services;

(f)    a description of the service provider's measures for ensuring quality and hisstudy and research facilities;

(g)    where the services to be provided are complex or, exceptionally, arerequired for a special purpose, a check carried out by the contractingauthority or on its behalf by a competent official body of the country inwhich the service provider is established, subject to that body's agreement,on the technical capacities of the service provider and, if necessary, on hisstudy and research facilities and quality control measures;

(h)    an indication of the proportion of the contract which the service providermay intend to subcontract.

3.    The contracting authority shall specify, in the notice or in the invitation totender, which references it wishes to receive.

4.    The extent of the information referred to in Article 31 and in paragraphs1, 2 and 3 of this Article must be confined to the subject of the contract;contracting authorities shall take into consideration the legitimate interests of theservice providers as regards the protection of their technical or trade secrets.‘

6.

    Article 25 of Directive 92/50 further provides:

'In the contract documents, the contracting authority may ask the tenderer toindicate in his tender any share of the contract he may intend to subcontract tothird parties.

This indication shall be without prejudice to the question of the principal serviceprovider's liability.‘

7.

    Lastly, Article 26 of Directive 92/50 provides:

'1.    Tenders may be submitted by groups of service providers. These groupsmay not be required to assume a specific legal form in order to submit the tender;however, the group selected may be required to do so when it has been awardedthe contract.

2.    Candidates or tenderers who, under the law of the Member State in whichthey are established, are entitled to carry out the relevant service activity, shall notbe rejected solely on the grounds that, under the law of the Member State in whichthe contract is awarded, they would have been required to be either natural or legalpersons.

3.    Legal persons may be required to indicate in the tender or the request forparticipation the names and relevant professional qualifications of the staff to beresponsible for the performance of the service.‘

The main proceedings

8.

    In 1996 the Municipality of Cagliari conducted a negotiated tendering procedurefor the award, on the basis of the most advantageous tender submitted, of a three-year contract for the management of water purification and sewage disposal plants.

9.

    The invitation to tender, published in the Official Journal of the EuropeanCommunities on 3 January 1997, provided that interested undertakings were toprovide proof, in particular, of (a) an average annual turnover equal to or greaterthan ITL 5 000 million during the period from 1993 to 1995 in the field of themanagement of water purification and sewage disposal plants and (b) actualmanagement of at least one domestic waste water purification plant for a periodof two consecutive years during the previous three years, and that, in the absenceof such proof, such undertakings were to be excluded from the tenderingprocedure.

10.

    Ruhrwasser, which had been registered as a company since only 9 July 1996, wasunable to show any turnover whatsoever for the period from 1993 to 1995 or toshow that it had actually managed at least one domestic waste water purificationplant during the previous three years.

11.

    In order to establish its standing to take part in the tendering procedure, on theconclusion of which it was awarded the contract, Ruhrwasser provideddocumentation relating to the financial resources of another entity, the Germanpublic-law body Ruhrverband. That body is the sole shareholder in the undertakingRWG Ruhr-Wasserwirtschafts-Gesellschaft, which, together with five othercompanies, set up Ruhrwasser as a joint venture undertaking in the form of acompany limited by shares and governed by German law, owned as to one sixth byeach of the parent companies, the object of which is to enable those companies towin contracts abroad for the collection and treatment of water.

12.

    Holst Italia also took part in the procedure, but its offer was regarded as lessadvantageous by the committee awarding the contract. It thereupon broughtproceedings before the Tribunale Amministrativo Regionale per la Sardegna forannulment of the decision of the Cagliari Municipal Council approving the awardof the contract to Ruhrwasser, on the ground that the latter had not produced thedocumentation needed in order to be eligible to submit a tender.

13.

    Ruhrwasser intervened in the proceedings before the Tribunale and lodged aninterlocutory application for a declaration that the invitation to tender was illegalin so far as it prohibited a candidate undertaking from producing referencesconcerning another undertaking with a view to establishing its own standing tosubmit a tender.

14.

    Following examination of the relationship between Ruhrwasser and the companiesby which it had been formed, the Tribunale considered that there was a 'closeconnection between Ruhrverband and Ruhrwasser which allows the latter to availitself of the facilities and organisation of the former‘. In those circumstances, ittook the view that it was necessary to verify whether Directive 92/50 was to beinterpreted as meaning that references concerning an entity connected with thecandidate undertaking could be accepted as proof of the latter's standing.

15.

    According to the Tribunale, although the Court accepted, in its judgments in CaseC-389/92 Ballast Nedam Groep v Belgian State [1994] ECR I-1289 ('Ballast NedamGroep I‘) and Case C-5/97 Ballast Nedam Groep v Belgian State [1997] ECR I-7549('Ballast Nedam Groep II‘) that an undertaking may prove that it has the necessarystanding by furnishing references in respect of other companies within the samegroup, the situation at issue in those judgments is to be distinguished from that inthe present case, inasmuch as, first, it concerned public works contracts governedby Council Directive 71/304/EEC of 26 July 1971 concerning the abolition ofrestrictions on freedom to provide services in respect of public works contracts andon the award of public works contracts to contractors acting through agencies orbranches (OJ, English Special Edition 1971 (II), p. 678) and Council Directive71/305/EEC of 26 July 1971 concerning the co-ordination of procedures for theaward of public works contracts (OJ, English Special Edition 1971 (II), p. 682), andnot public service contracts, and, second, the company concerned in Ballast NedamGroep I and Ballast Nedam Groep II, unlike Ruhrwasser, enjoyed a dominantposition within the group of companies which, it claimed, had the requisite standingas the parent company of its subsidiaries.

16.

    In order to ascertain whether, despite those differences of law and fact, thedecision reached by the Court in its previous judgments was also applicable to asituation such as that in issue in the main proceedings, the TribunaleAmministrativo Regionale per la Sardegna decided to stay proceedings and to referthe following question to the Court for a preliminary ruling:

'Does Council Directive 92/50/EEC of 18 June 1992 relating to the coordinationof procedures for the award of public service contracts permit a company to provethat it possesses the technical and financial qualifications laid down forparticipation in a procedure for the award of a public service contract by relyingon the references of another company which is the sole shareholder of one of thecompanies having a holding in the first-mentioned company?‘

The question referred for a preliminary ruling

17.

    According to Holst Italia, references concerning an entity other than the candidateundertaking may be relied on, in the context of Directive 92/50, only if thatcompany can show the existence of a clear structural link connecting it with thecompany possessing the standing needed for performance of the contract.

18.

    Such a structural link, constituting, according to the plaintiff in the mainproceedings, a fundamental guarantee for the contracting authority, presupposes,according to the Court's case-law, that the company submitting the tender exertsa dominant influence on the entity whose references it uses and actually has at itscomplete disposal all the latter's resources. That is not the case where the tenderermerely relies on obligations of a commercial nature entered into by an entity

indirectly holding a minority share of its capital. To accept, in such circumstances,that the standing of a third party may be taken into account would mean that thestanding claimed would cease to be personal in character.

19.

    The Italian Government likewise doubts that a subsidiary indirectly owned by anentity is capable of claiming that it has at its disposal the technical and financialresources of that entity. It acknowledges, however, that it is for the national courtto assess the evidence provided in that connection by the tenderer.

20.

    By contrast, Ruhrwasser, like the Netherlands and Austrian Governments, considersthat the legal nature of the link established between associated undertakings cannotin any circumstances be asserted against those undertakings as a ground forrefusing to take into account, in favour of one member of the group, the standingof another member. Irrespective of the nature of the organisation found to exist,the only relevant consideration is the consequences to which it gives rise in termsof the availability of its resources.

21.

    It follows, according to Ruhrwasser, that where, in addition to structural linksrelating, in particular, to possession of the capital, there exist mandatory obligationsrequiring resources to be made available to the subsidiary participating in thetendering procedure, that effectively proves actual possession of the resourcesneeded to perform the contract.

22.

    According to the Commission, the basic ruling arrived at by the Court in itsjudgments in Ballast Nedam Groep I and Ballast Nedam Groep II is applicable byanalogy to a situation such as that in the present case. However, it emphasises thata tenderer cannot be presumed actually to have at its disposal the resourcesnecessary for the performance of the contract, whatever the nature of its legalrelationship with the members of the group of which it forms part, and that theavailability of those resources must be the subject of a careful examination by thenational court of the evidence which the party concerned is required to provide. The order for reference does not conclusively show that any such examination hasbeen carried out in the main proceedings on the basis of adequate documentation.

23.

    The Court observes first of all that, as is apparent from the sixth recital in thepreamble thereto, Directive 92/50 is designed to avoid obstacles to freedom toprovide services in the award of public service contracts, just as Directives 71/304and 71/305 are designed to ensure freedom to provide services in the field of publicworks contracts (Ballast Nedam Groep I, paragraph 6).

24.

    To that end, Chapter 1 of Title VI of Directive 92/50 lays down common rules onparticipation in procedures for the award of public service contracts, including thepossibility of subcontracting part of the contract to third parties (Article 25) andof the submission of tenders by groups of service providers without their beingrequired to assume a specific legal form in order to do so (Article 26).

25.

    In addition, the criteria for qualitative selection laid down in Chapter 2 of Title VIof Directive 92/50 are designed solely to define the rules governing objectiveassessment of the standing of tenderers, particularly as regards financial, economicand technical matters. One of those criteria, provided for in Article 31(3), allowstenderers to prove their financial and economic standing by means of any otherdocument which the contracting authority considers appropriate. A furtherprovision, contained in Article 32(2)(c), expressly states that evidence of the serviceprovider's technical capability may be furnished by an indication of the techniciansor technical bodies, whether or not belonging directly to the service provider, onwhich it can call to perform the service (see, to the same effect, as regardsDirective 71/305, Ballast Nedam Groep I, paragraph 12).

26.

    From the object and wording of those provisions, it follows that a party cannot beeliminated from a procedure for the award of a public service contract solely onthe ground that that party proposes, in order to carry out the contract, to useresources which are not its own but belong to one or more other entities (see, tothe same effect, as regards Directives 71/304 and 71/305, Ballast Nedam Groep I,paragraph 15).

27.

    It is therefore permissible for a service provider which does not itself fulfil theminimum conditions required for participation in the procedure for the award ofa public service contract to rely, vis-à-vis the contracting authority, on the standingof third parties upon whose resources it proposes to draw if it is awarded thecontract.

28.

    However, such recourse to external references is subject to certain conditions. Asstated in Article 23 of Directive 92/50, the contracting authority is required to verifythe suitability of the service providers in accordance with the criteria laid down. That verification is intended, in particular, to enable the contracting authority toensure that the successful tenderer will indeed be able to use whatever resourcesit relies on throughout the period covered by the contract.

29.

    Thus, where, in order to prove its financial, economic and technical standing witha view to being admitted to participate in a tendering procedure, a company relieson the resources of entities or undertakings with which it is directly or indirectlylinked, whatever the legal nature of those links may be, it must establish that itactually has available to it the resources of those entities or undertakings which itdoes not itself own and which are necessary for the performance of the contract(see, to the same effect, as regards Directives 71/304 and 71/305, Ballast NedamGroep I, paragraph 17).

30.

    It is for the national court to assess the relevance of the evidence adduced to thateffect. In the context of that assessment, Directive 92/50 does not permit theexclusion, without due analysis, of specific types of proof or the assumption that the

service provider has available to it resources belonging to third parties merely byvirtue of the fact that it forms part of the same group of undertakings.

31.

    Consequently, the answer to be given to the question referred must be thatDirective 92/50 is to be interpreted as permitting a service provider to establish thatit fulfils the economic, financial and technical criteria for participation in atendering procedure for the award of a public service contract by relying on thestanding of other entities, regardless of the legal nature of the links which it haswith them, provided that it is able to show that it actually has at its disposal theresources of those entities which are necessary for performance of the contract. It is for the national court to assess whether the requisite evidence in that regardhas been adduced in the main proceedings.

Costs

32.

    The costs incurred by the Italian, Netherlands and Austrian Governments and bythe Commission, which have submitted observations to the Court, are notrecoverable. Since these proceedings are, for the parties to the main proceedings,a step in the action pending before the national court, the decision on costs is amatter for that court.

On those grounds,

THE COURT (Fifth Chamber),

in answer to the question referred to it by the Tribunale Amministrativo Regionaleper la Sardegna by order of 10 February 1998, hereby rules:

Council Directive 92/50/EEC of 18 June 1992 relating to the coordination ofprocedures for the award of public service contracts is to be interpreted aspermitting a service provider to establish that it fulfils the economic, financial andtechnical criteria for participation in a tendering procedure for the award of apublic service contract by relying on the standing of other entities, regardless ofthe legal nature of the links which it has with them, provided that it is able toshow that it actually has at its disposal the resources of those entities which arenecessary for performance of the contract. It is for the national court to assesswhether the requisite evidence in that regard has been adduced in the mainproceedings.

Moitinho de Almeida Sevón Gulmann Puissochet Wathelet

Delivered in open court in Luxembourg on 2 December 1999.

R. Grass

D.A.O. Edward

Registrar

President of the Fifth Chamber

1: Language of the case: Italian.