On 31 May and 1 June 2017, I had the pleasure of attending a conference on the transposition of the concessions directive (Dir 2014/23) organised at the Law Faculty of the University of Brescia. The discussions formally covered the transposition in Belgium, Spain, the UK, the Netherlands and Italy, and colleagues from other jurisdictions provided additional views from Denmark, Romania and beyond. After two days of debates and rather detailed discussions (and amazing food, wine and weather, all be said), I have jotted down some rough thoughts on the issues and challenges resulting from the initial transposition efforts in these jurisdictions—which may result in litigation and case law in the future. All views are my own and any misunderstandings of the rules in any of these jurisdictions are solely mine, and are probably influenced by my previous views on the concessions directive (see here and here).
Conceptual / Scoping Issues
01. The word concession remains a dangerous misnomer in countries with a tradition of using this label for extractive concessions (coal, gas, etc), domain concessions (ie authorisations to use public spaces or infrastructure) or for activity concessions (rectius, authorisations or permits), which sometimes have experienced an independent legislative evolution in parallel (or even rather separately) from the discipline of public contracts. This creates some interesting (and difficult) trends of resistance and influence (or deformation) in the transposition of the concessions directive, as well as continuing (perceived) lack of clarity in the contours of the concept of concession.
02. It seems that there could have been an alternative approach had the EU decided to use a different (new) term without historical connotations or domestic implications for the purposes of establishing the scope of the rules, and thus allowed Member States to choose their nomenclature / domestic legal institution that better matched the EU definition / concept. Given that this was not the case, at the current juncture, it seems that a further development at EU level of the concept of authorisation/licence, and a more consistent and technically accurate use of the (EU) terms concession and authorisation/licence at domestic level could be a solution for the future—although this can have an impact on the (previously) homonymous domestic institutions and could continue to create some irritation (in the sense of the comparative law literature on legal transplants).
03. The controversy surrounding the legal nature of concessions as either public contracts, special (private) contracts or a tertium genus also remains on the table. This does not seem clearly conducive to functional regulation, in particular in terms of post-award remedies. Similarly, some jurisdictions (such as Spain) establish special rules for concessions involving the provision of services directly to the end user / citizen, which also introduces conceptual difficulties by establishing different types of service concessions on the basis of non-EU criteria. The extent to which this is in line with the need to keep homogeneous concepts in the transposition of the concessions directive remains an open question.
04. Other issues around the concept of concession (proper), and notably the issue of the transfer of significant operating risk so as to expose the concessionaire to the vagaries of the market, are creating quite some puzzling analyses in some jurisdictions, at least in academic circles. It seems that there are difficulties in integrating an economic/financial understanding of risk with more traditional categories of risk as understood by lawyers (sometimes taken as almost a synonym of liability) and related to the position of the concessionaire as an agent, delegate or substitute of the public administration, as well as to the transfer or not of public powers as part of the concession relationship.
05. The requirement for risk transfer is sometimes presented as an implicit condition for the public administration’s decision to stop directly exercising public powers and rather resort to the market for the provision of public infrastructure and/or services (almost as if the risk had to be created in order to have the option of resorting to the concession mechanism)—whereas, in my view, this is rather related to the more limited coverage of concession contracts in the 2004 rules (ie exclusion of services concessions) and the softer-touch regulatory regime in the 2014 package (which influenced the ECJ’s development of the concept of concession so far), and which rather rest on the need to allow for the existence of a closer (contractual) relationship between concessionaire and procuring entity, rather than the other way around. I have this idea in the back of my head that some of the peculiarities of the concessions regime derive from a sort of need to allow for an intuitu personae to be created, which would run contrary to the idea of risk transfer as a sort of market-making or market-incentivising device (which, however, will take me some time to formulate in full).
06. There is talk of ‘hot’ and ‘cold’ concessions, or concessions ‘in the light’ and ‘in the shadows’, or ‘unilateral’, ‘bilateral’ or ‘triangular’ concessions … depending on the sources of revenue/turnover for the concessionaire—which (unnecessarily) complicates issues of analysis of risk transfer (and about the existence of risks, even at a more basic level). In some cases, this leads to difficulties in the setting of boundaries between concession contracts and other forms of public-private partnering or collaboration, which continues to create issues of compatibility of legal regime and normative coordination that could otherwise be avoided through a clearer operationalisation of the procedural flexibility applicable to complex contracts as a more general category.
07. There are also issues concerning the identification of cross-border interest for concessions below the value threshold in the concessions directive—and in line with the ECJ case law, notably in Comune di Ancona—and this raises an additional element of fuzziness of the scope of application of the directive. Given that it is structured as principle-based regulation and that below threshold concessions of cross-border interest are subjected to compliance with general principles (see below), this creates further uncertainty as to the limits of its substantive scope of application. In some jurisdictions (notably the Netherlands), this is particularly clear due to the consolidation into domestic law of the ECJ case law on general principles applicable to below-threshold concessions, and where there is an erosion of the requirement of cross-border interest and substantive convergence between EU and domestic homonymous principles (notably, non-discrimination and equal treatment). This is bound to reduce the scope/risk for reverse discrimination and could simplify the existing multiplicity of (formally) distinct principles-based obligations, and the Dutch experience seems to offer a good case study of substantive consolidation in the area of procurement, in my opinion.
08. Despite the existence of these conceptual and boundary issues, most jurisdictions operate on the same underlying assumption as the 2014 Public Procurement Package and establish a separate legal regime for the award of concession contracts (either within the same statutory framework, such as in the Netherlands or in the Spanish draft legislation, or in a separate instrument, such as in the UK). In my view, this masks the underlying incentives for compliance with general procurement rules in order to avoid situations of ex post realisation that the concessions regime was inapplicable—eg due to the distribution of risk resulting from negotiations or successive rounds of renewed offers, or due to the (limited) extent of potential losses in view of the final financial make-up of the concession contract. In general, a cautious approach to comply with the general procurement rules when in doubt may well neutralise most of the efforts in creating a separate legal regime for ‘covered concessions’ and other concessions, which perpetuates the situation prior to the adoption of the concessions directive.
09. In general, given the uncertainties in pinning-down the specific instances in which a concession contract will remain squarely and solely within the scope of application of the concessions directive, there is an uncomfortable feeling that this process may just be much ado about nothing because the number of contracts that will be solely subjected to this legal regime is likely to be limited, if not residual. However, this once more depends on the domestic interpretation of the scope of application of the rules (and, notably, the concept of concession of a cross-border interest) and the emerging trends show quite some differences, with Italy having advertised in the OJEU over 120 concessions and the UK almost 60, while the Netherlands have advertised around 15 and Denmark only 10 in the first year of effectiveness of the concessions directive.
Gold plating and distinct legal regime
10. The avoidance of gold plating in the transposition of the concessions directive (ie not going beyond what is strictly required by the directive) may be creating practical difficulties due to a copy out (or direct copy+paste) of the EU rules (notably, in the UK, but also in other jurisdictions such as, to some extent, Italy). This results in the insufficient development of an overarching system or mechanism for the award of concession contracts, which mirrors the excesses (or rather shortcomings) of Art 30 and recital (68) Dir 2014/23, and may leave contracting authorities to their own devices and risking the reinvention of the wheel every time they undertake a concession project. In my personal opinion, this may be an instance of improper/insufficient transposition, as the lack of development of the rules applicable to the award of concession contracts leave potentially interested undertakings none the wiser concerning the general framework applicable in the given jurisdiction.
11. In my view, the position underlying a lack of development of the bare bone rules of the concessions directive reflects a rather extreme understanding of Art 30(1) Dir 2014/23 where it indicates that, when tendering a concession, “the contracting authority or contracting entity shall have the freedom to organise the procedure leading to the choice of concessionaire subject to compliance with this Directive”. This seems to be read as mandating unrestricted freedom for each contracting authority or entity—as a sort of (quasi) subjective right to freedom from intervention or constraint in the running of tenders for concession contracts—and thus preventing Member States from creating a limited set of choices or even a default standard procedure for the award of concession contracts. However, the Netherlands seems to take an approach that deviates from this by indicating that Art 30 does not provide unrestricted freedom and that compliance with the general rules may be a way of ensuring compliance with the minimum requirements of the concessions directive.
12. Such an extreme understanding of Art 30(1) Dir 2014/23 does not make much sense, either from the perspective of respecting the principle of free administration by public authorities foreseen in Art 2 thereof (which aims to respect decisions on organisation taken by national, regional and local authorities in conformity with national and Union law), or from facilitating administrative efficiency and oversight possibilities. It also creates legal uncertainty and confusion as to the rules applicable to the tendering of concession contracts, which runs contrary to the stated aims of the concessions directive (see recital (1)) and therefore does not fit with a teleological interpretation of its provisions.
13. Interestingly, though, despite the scarcity of detail in the regime applicable to the tendering of concessions, some jurisdictions (eg in Romania, Belgium, and tendentially the Netherlands too) seem to be moving rather close to the general rules of the public sector directive (Dir 2014/24, either applicable directly or mutatis mutandis) where the concessions directive contains an insufficient regime, which reinforces the idea that there was no need whatsoever for a different instrument and that the flexibility sought for the award of this type of contracts could have been created by a few special provisions under the general directive (as was the Dutch position, and which has influenced transposition in that jurisdiction). Other jurisdictions are opting to move away from statutory rules and rather establishing soft law with the same goal of creating flexibility (possibly at the cost of legal certainty or justiciability, such as in Italy).
14. I also find it interesting that no argument is raised concerning any difficulties in awarding (works) concession contracts under the rules and procedural requirements of the 2004 EU Directives, which begs the question why was it necessary to create such exceptionality or flexibility—particularly in choice of procedures—in the 2014 revision. There are discussions about the special propensity of concession contracts to being modified during their term (both due to their complexity and duration), but interestingly enough, there is not much of a difference in flexibility in the regime of contractual modification in the concessions directive and in the general procurement directive. Overall, then, both the need and the operationalisation of a full-functioning legal regime for the award of concession contracts seems to still carry significant shortcomings when the concessions directive is transposed.
General principles and general administrative law
15. The relevance of general principles for ‘below threshold’ concessions is a muddy terrain and given the largely principles-based approach of the regulation in the concessions directive, it is difficult to establish clear differences in the substantive legal regime for concessions above thresholds and for other concessions with a cross-border interest—which are subject to the general administrative law principles of those jurisdictions that have an established corpus of regulation of unilateral administrative acts (such as Belgium), as well as the obvious application of the general principles of EU (procurement) law across the board.
16. Concession contracts create significant difficulties of interaction with general requirements of the procurement system of some jurisdictions. Eg in Belgium, the principles of fixed price for public contracts (which left all risks linked to the execution of the contract with the public contractor), or of services done and accepted (which controls public expenditure and prevents the making of payments in advance)—which has required the creation of some exemptions from such general rules in order to create flexibility. Similar things happen in Spain with the concepts of ius variandi, factum principis and restoration of the financial equilibrium of concessions. And the same applies to coordination with general administrative law principles in Romania. Thus, countries with a longer-lasting tradition of regulation of concessions under general administrative law may have peculiar difficulties of integration of the new EU regime within their general administrative law frameworks.
A few other issues
17. There are doubts as to the feasibility and conditions for carrying out preliminary market consultations for concessions contracts in keeping with substantive guarantees equivalent to the rules in Arts 40 and 41 Dir 2014/24. The difficulty in this case may derive from the fact that, in the absence of a defined procedure (see above), the issue of carrying out ‘pre-procurement’ activities becomes rather blurry and, in the end, is only restricted by the general requirement in Art 30(2) Dir 2014/23 to comply with the general principles of procurement and, in particular, “during the concession award procedure, [for] the contracting authority or contracting entity … not [to] provide information in a discriminatory manner which may give some candidates or tenderers an advantage over others”.
18. Issues concerning the interaction between rules on rescue/expropriation of concessions and their termination are also popping up, at least where the creation or existence of termination grounds based on the public interest are in conflict with rules on modification of contracts (ie in situations where impossibilities to modify the contract may lead to a rescue, as compared to situations in which a modification may trigger termination). This has an impact on an assessment of the transfer of risk to the concessionaire, which would bring the discussion back to the issue of the concept of concession and scope of application of the directive. In some jurisdictions (eg the UK) the possibility to regulate post-termination or post-ineffectiveness consequences via contractual provisions also muddies the effects of some of the rules in the concessions directive and raise questions as to the compatibility with the remedies directive.