New SSRN paper on State aid enforcement after the crisis

I have uploaded a new paper on the University of Leicester School of Law Research Paper SSRN Series. It is entitled "Digging Itself Out of the Hole? A Critical Assessment of the European Commission's Attempt to Revitalise State Aid Enforcement after the Crisis" and has the following abstract:

This paper aims to assess the likelihood that State aid enforcement can be revitalised in the post-crisis period as a result of the 2012-2014 State aid modernisation process (SAM). The paper takes the view that State aid enforcement was left in a difficult impasse as a result of the extraordinary measures the Commission implemented during and immediately after the 2008 economic breakdown, which left the Commission in a difficult position due to the unavoidable concessions and lowering of standards that dealing with the soaring volume of State aid required. The paper builds on this premise to critically assess whether a scenario of stronger enforcement can be foreseen under the modernised, post-2014 procedural framework of SAM. It pays particular attention to the need for the European Commission to (re)engage in a more substantive assessment of aid measures and to promote judicial (or private) enforcement of State aid rules in an effective manner. It concludes that revitalisation of State aid enforcement under SAM is highly unlikely.

I have attempted some statistical analysis to support my view that State aid enforcement is not being efficient. As a taster (full details in the paper), I argue that 'it seems conservative to estimate at around 100 billion Euros the amount of (non-investigated) illegally-granted State aid in the EU28 between 2008 and 2013' and that the Commission is accumulating a significant backlog of State aid cases (of around 500 in the same period), despite having expanded its State aid workforce by 53% between 2007 and 2011.

I also argue that the Commission's push for more transparency of the awards of State aid will not result in an actual involvement of private parties and society at large as stewards of EU State aid rules, in particular due to the restriction of the locus standi to submit (admissible) complaints to the Commission (following Sarc v Commission and the rules under the revised art 11a of reg 794/2004) and the compounded effect of the mandatory use of a standard form that requires significant information.

I will present a reworked version of this paper at the Antitrust Enforcement Symposium held by the Centre for Competition Law and Policy of the University of Oxford in June, where I am honoured to share a session on Competition and the State with such distinguished scholars and practitioners as Conor Quigley QC, Damien Geradin, James Cooper, David Szafram, Isabel Taylor, Angus Johnston and Ioannis Lianos. As you see, not the easiest audience. So all comments that can help me improve the paper are most welcome! I already thank my colleague Dr Paolo Vargiu for his first reactions.

The full citation for the paper is: A Sanchez Graells, "Digging Itself Out of the Hole? A Critical Assessment of the European Commission's Attempt to Revitalise State Aid Enforcement after the Crisis" (May 5, 2015) University of Leicester School of Law Research Paper No. 15-15. Available at SSRN: http://ssrn.com/abstract=2602798.

Contract notices under Reg. 49 Public Contracts Regulations 2015

Reg. 49 of the Public Contracts Regulations 2015 (PCR2015) transposes only half of the content of Article 49 of Directive 2014/24 and establishes that contract notices shall contain the information set out in part C of Annex 5 to Dir 2014/24 and shall be sent for publication in accordance with reg.51 PCR2015.

The missing bit that reg.49 PCR2015 fails to transpose is that contract notices shall be used as a means of calling for competition in respect of all procedures, without prejudice to the second sub-paragraph of Art 26(5) Dir 2014/24 [reg.26(9) and (10) PCR2015] on the possibility for that sub-central contracting authorities or specific categories thereof to make the call for competition by means of a prior information notice [reg.48 PCR2015, see here and here], and Art 32 Dir 2014/24 [reg.32 PCR2015] on the use of the negotiated procedure without prior publication, which obviously does not require a contract notice.

In my view, given the repetition of the content of the omitted part, which simply includes cross-referrals to special rules, there is not much lost in terms of legal certainty due to the economical approach taken in reg.49 PCR2015. Pedro's comments, pretty much along the same lines, are here.

Prior information notices under Reg. 48 Public Contracts Regulations 2015

Reg. 48 of the Public Contracts Regulations 2015 (PCR2015) transposes Article 48 of Directive 2014/24 on the subject of publication of prior information notices (PIN). 

Contracting authorities can resort to PINs to make known their intentions of planned procurements, and PINs can cover a maximum period of 12 months from the date on which the notice is transmitted for publication, except in the case of public contracts for social and other specific services, where the PIN may cover a period which is longer than 12 months. 

The rules in reg.48 PCR2015 are concerned with the content of the PIN and the possibility to publish it in either the buyer's profile or/and the Official Journal of the European Union. Technically, they do not deserve much comment.

However, despite Pedro's fondness for the use of PINs, my concern is that the use of PINs can have a significant effect on the level of transparency in the market and, consequently, on the likelihood of collusion between tenderers [for discussion, see A Sanchez Graells, "The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives" (November 2013) University of Leicester School of Law Research Paper No. 13-11].

 Announcing every 12 months the contracting opportunities that will arise facilitates the split of contracts between them, and even allows them to plan complex allocation strategies that imitate randomness, hence reducing the likelihood of detection. Consequently, contracting authorities would be well advised to use PINs carefully and not to obsess with them with the simple object of reducing the minimum time limits they need to respect for specific contracts. 

Using PINs with shorter durations, or reserving the flexibility to procure in terms and periodicity different than those announced in the PIN could also be useful tools. In the end, publishing a PIN does not bind the contracting authority to actually carry out the procurement, and the possibility to tender contracts no included in PINs is always available. Hence, contracting authorities should avoid situations of absolute foreseeability of their procurement projects for the next 12 (or even 6) months, and only use them where alerting the market of a particularly relevant opportunity or a significantly complex project is coming up, so that they can express interest and make sure that they have the resources needed to tender in due course.

Time limits under Reg. 47 Public Contracts Regulations 2015

Reg. 47 of the Public Contracts Regulations 2015 (PCR2015) establishes general requirements concerning the setting of time limits, beyond the minimum established in regs. 27 to 31 PCR2015 for each specific procedure, in accordance with Article 47 of Directive 2014/24.

Generally, and in order to comply with the principle of proportionality [reg.18(1) PCR2015], contracting authorities shall take account of the complexity of the contract and the time required for drawing up tenders when fixing the time limits for the receipt of tenders and requests to participate, which in any case cannot result in time limits below the minimum set out in regs. 27 to 31 PCR2015 [reg.47(1)]. This is a logical requirement and contracting authorities will have to pay special attention to the setting of time limits when there are potential risks of discrimination between potentially interested tenderers or candidates, either because some of them where involved in preliminary market consultations [reg.40 PCR2015], or otherwise. 

In that regard, it bears reminding the specific requirement that  contracting authorities take appropriate measures to ensure that competition is not distorted by the participation of candidates or tenderers previously involved, which includes the fixing of adequate time limits for the receipt of tenders [reg.41(2)(b) PCR2015]. As Pedro stressed in his critical remarks, "the problem is not the time per se as all economic operators would have to comply with the minimum time limits (although it would have been preferable to just block the use of accelerated or time-reduced procedures) but the fact one of the economic operators had access to information before everyone else and influenced the design of the tender documents". Hence, in my view, the time limit will have to be complemented with substantive assessments to ensure that additional delay (if any) has actually neutralised the first "knower" advantage.

Reg.47(2) PCR2015 establishes specific rules for time limits concerned with procedures that require site visits or on-the-spot inspections, in which case  the time limits for the receipt of tenders shall be fixed so that all economic operators concerned may be aware of all the information needed to produce tenders. In any case, and implicitly acknowledging that the 'standard' procedure regulated in the PCR2015 and Dir 2014/24 does not include such visits or inspections, reg.47(2) PCR2015 mandates that  the time limits set in these cases shall be longer than the minimum time limits set out in regs. 27 to 31 PCR2015.

Regs.47(3) to (6) PCR2015 finally establish rules concerning extension of time limits. It first determines two cases where contracting authorities must extend the time limits for the receipt of tenders so that all economic operators concerned may be aware of all the information needed. Reg.47(3) PCR2015 includes cases: (a) where, for whatever reason, additional information requested by an economic operator in good time, is however not supplied at the latest 6 days before the time limit fixed for the receipt of tenders [or 4 days in case of accelerated procedures, reg.47(5)]; and (b) where significant changes are made to the procurement documents.

In my view, the contracting authority always has the possibility to extend time limits for good reason, provided it does so in a way that is non-discriminatory and does not affect competition. For instance in case some tenderer has submitted a tender, an extension should imply the possibility for that tenderer to submit a revised tender in order to allow it to take advantage of the extension.

Reg.47(4) PCR2015 requires that the length of the extension be proportionate to the importance of the information or change, and reg.47(6) PCR2015 clarifies that contracting authorities are not required to extend the time limits where additional information has either not been requested in good time or its importance with a view to preparing responsive tenders is insignificant. 

Consequently, contracting authorities always have the possibility to make value judgments regarding the actual need or an extension of the initial time limits. In my view, however, in case of doubt (or explicit and reasonable request from tenderers), they should always adopt the default position of granting extensions (if nothing else, to avoid litigation risks, but more importantly, to avoid actually disadvantaging certain competitors).