#CJEU pushes for EU single fiscal territory in ban of Spanish 'cross-border' tax on unrealised capital gains (C-64/11 Commission v Spain)

In its Judgment of 25 April 2013 in case C-64/11 Commission v Spain (press release), the Court of Justice of the EU has pushed for the further consolidation of the EU single fiscal territory by preventing any discriminatory tax treatment between companies that transfer their place of residence inside a Member State (domestic transfer) and those that transfer it to another EU Member State (EU transfer).

In the case at hand, Spanish corporate taxation law makes unrealised capital gains form part of the basis of assessment for the tax year, where the place of residence or the assets of a company established in Spain are transferred to another Member State. This rule has been challenged by the Commission as a restriction of freedom of establishment in that it puts the companies which have exercised that freedom at a cash-flow disadvantage.


The CJEU has indeed found that the immediate taxation of unrealised capital gains on the transfer of the place of residence or of the assets of a company established in Spain to another Member State amounts to a restriction on the freedom of establishment since, in such cases, a company is penalised financially as compared with a similar company which carries out such transfers in Spanish territory--in respect of which capital gains generated as a result of such transactions do not form part of the basis of assessment for corporate taxation until the transactions are actually carried out.


The CJEU has struck down such restriction as disproportionate in considering that Spain could preserve its powers in taxation matters by means of measures which are less harmful to the freedom of establishment. The CJEU considers it possible, for example, to request payment of the tax debt following the transfer, at the point at which the capital gains would have been taxed if the company had not made that transfer outside of Spanish territory. Moreover, the mechanisms of mutual assistance which exist between the authorities of the Member States are sufficient to enable the Member State of origin to assess the veracity of declarations made by companies which opt to defer payment of the tax. Thus, the Court clearly finds that the right to the freedom of establishment does not preclude capital gains generated in a territory from being taxed, even if they have not yet been realised, but it does preclude a requirement that that tax be paid immediately.



In this Judgment, the CJEU is clearly pushing for a suppression of tax borders within the EU and for an effective treatment of corporate changes of residence within the single market as domestic transfers. The CJEU strongly relies on the effectiveness of the current mechanisms of administrative cooperation in the field of taxation (as sufficient to enable Member States to exercise effective monitoring of transferred companies). These cooperation mechanisms (timidly created in 1977 by Council Directive 77/799/EEC) were revamped in 2011 by means of Council Directive 2011/16/EU and its Implementing Regulation 1156/2012. 

Directive 2011/16 had to be transposed into national laws by 1 January 2013 but, as of today, several Member States have not yet communicated any implementing measures to the Commission--including Belgium, Czech Republic, Germany, Greece, Italy, Hungary, Poland and Portugal. This means that Member States need to get up to speed and effectively implement measures of administrative cooperation in tax matters if they want to keep (or improve) the effectiveness of their tax systems in the (growing) EU single fiscal territory.

As indicated in Directive 2011/16, Member States need to use their  'power to efficiently cooperate at international level to overcome the negative effects of an ever-increasing globalisation on the internal market'. Surely, developments and best practices generated in this inter-institutional cooperation setting will be relevant in the (likely?) future creation of a single EU tax authority.

Lack of an EU administrative #appeal does not broaden #GC and #CJEU review powers in #publicprocurement

In its Judgment of 24 April 2013 in case T‑32/08 Evropaïki Dynamiki v European Commission (Environment for Young Europeans), the General Court addressed a submission by (the ever more creative) Evropaïki Dynamiki whereby it was argued that the lack of a (pre-judicial) administrative appeal against the public procurement decisions of the EU Institutions required an extension of the scope of the judicial review conducted by the EU Courts.

According to Evropaïki Dynamiki, the procedure for the award of public contracts by the EU Institutions is different from the legislation applicable to the Member States, which provides for non-judicial remedies, thus reinforcing the principles of transparency and equal treatment between tenderers. And, consequently, the General Court should take account of the incomplete nature of the procedure for the award of public contracts by the EU Institutions by carrying out a thorough review of the assessments of the evaluation committee--since, otherwise, a restricted review, limited to declaring invalid manifest errors of assessment, diminishes the possibility of a detailed examination of the substance of the contested decision.

The GC clearly dismissed Evropaïki Dynamiki's contention and declared that:
The fact that the legislature did not establish an administrative appeal procedure, in the context of the procedure for the award of public contracts by the institutions of the European Union, cannot have any effect on the scope of the review carried out by the Courts of the European Union [which must be limited to checking that the rules governing the procedure and statement of reasons are complied with, the facts are correct and there is no manifest error of assessment or misuse of powers]. The existence or absence of such an appeal procedure is irrelevant to defining the scope of the Court’s review, since that review is different – both in its nature and the safeguards it presents – from an administrative appeal procedure (T-32/08 at 30).
I agree with the general principle that the existence or not of a prior administrative appeal does not alter the scope of judicial review, but I do not share the GC's (almost) obiter dictum that judicial review is that different from an administrative appeal procedure, at least as the substantive review tests go. I tend to disagree particularly because, even within administrative appeals, challenges against the assessments of the evaluation committees rarely imply a second assessment by a different team or by an independent adjudicator and, consequently, all public procurement litigation tends to be bound to the initial evaluation carried out by the evaluation committees.

Moreover, (administrative) judges are not in a good position to directly carry out technical assessments (afresh) and they must, by necessity, defer (at least to some extent) to the technical discretion of the evaluation committee / contracting authority--unless they can identify factual mistakes or manifest errors of assessment, in which case they tend to strike out the administrative decision, rather than substituting the incorrect technical assessment with their own. Courts cannot really use a finer sieve to separate gold from rocks. And that is why, even within administrative appeals systems, roughly the same standards of (gross) misrepresentation of the facts or the extraction of unsound conclusions / assessments are applied. 

Overall, in my opinion, the GC Judgment should be welcome and not seen as an attempt to duck its review responsibilities, nor as a source of defencelessness for tenderers for contracts of the EU Institutions. I think that few doubts can seriously be harboured as to the effectiveness of the review mechanisms already in place (as the long Evropaïki Dynamiki saga shows for itself).

Stock manipulation via twitter: The new frontier of securities regulation?

What happened yesterday with the US stocks should be more than a wake up call to what may be an unmanageable problem--which was anticipated some 4 years ago by @jonathanfields (and probably others, but which has not yet received serious attention).


The fact that anyone can attempt to manipulate stock prices by publishing false information on twitter definitely makes it a dangerous outlet. As useful as it is a tool to get real time information, it is also too good a platform to broadcast fake market intelligence. The fact that well-reputed twitter accounts can be hacked and used as a loud speaker for the fake news just complicates the scenario.

As a matter of principle, at least in the EU and the US, there are regulatory instruments in place to prohibit this manipulative type of conduct and to prevent the dissemination of false information with the purpose (or the foreseeable effect) of altering stock prices (hacking being dealt with by the criminal law of the relevant jurisdiction) [for general discussion, see R Söderström, Regulating Market Manipulation. An Approach to designing Regulatory Principles, Uppsala Faculty of Law Working Paper 2011:1]. 

In the US, the issue is dealt with in SEA section 9(a)(4) (with a requirement for the false information to be disclosed by a trading party (or a dealer or broker) that may limit its application to a case like yesterday's). In the EU, a 2003 Directive on insider dealing and market manipulation (reformed in 2008 and 2010) addresses this issue more broadly (and a proposal for stronger, criminal sanctions has been on the table since December 2012) and sets a mandate for EU Member States to prohibit any person from engaging in market manipulation (art 5), which under the relevant definition (art 2) includes
(c) dissemination of information through the media, including the Internet, or by any other means, which gives, or is likely to give, false or misleading signals as to financial instruments, including the dissemination of rumours and false or misleading news, where the person who made the dissemination knew, or ought to have known, that the information was false or misleading.

Notwithstanding the (theoretical) sufficiency of this regulatory framework (ie the law on the books, at least in the EU), it is just too obvious to point out that the enforcement problems are almost intractable when market manipulation takes place in social media--despite the recent efforts of financial authorities to provide updated guidance on these delicate issues (for instance, see the US SEC's guidance on the use of social media by issuers). Maybe it is time to set up a new task force (unless it is already in place, but I am not aware of it) to update the findings of IOSCO's 2000 Report on Investigating and Prosecuting Market Manipulation and adapt it to the very different social conditions that exist 13 years after its initial publication.


La multa de la @CNCompetencia a #Correos y sus implicaciones en #contrataciónpública: ¿está todo dicho?


La CNC ha impuesto una multa de 3,3 millones de Euros a Correos por abuso de su posición de dominio en el mercado de servicios mayoristas de acceso a la red postal pública y en el mercado de servicios minoristas de notificaciones administrativas, mediante su negativa injustificada a continuar suministrando servicios mayoristas de acceso a la red postal pública de notificaciones administrativas, en las condiciones establecidas por el artículo 59.2 de la Ley 30/1992 (nota de prensa).

La CNC ha considerado que:
gracias a los privilegios de los que dispone Correos, que ha disfrutado tradicionalmente de un monopolio legal en buena parte del mercado y que tiene en la actualidad la condición de operador designado del Servicio Postal Universal (SPU), resulta evidente que Correos dispone de una posición de dominio, tanto en el mercado mayorista de acceso a la red postal de Correos, donde tiene una cuota del 100%, como en el mercado minorista de prestación de servicios postales de notificaciones administrativas.
En este sentido, la CNC ha considerado como elemento determinante del abuso que:
la negativa de Correos a proporcionar servicios mayoristas de notificaciones administrativas supondría una barrera infranqueable a la entrada de otros operadores en la prestación de servicios de notificaciones administrativas a las Administraciones Públicas que exigen tal presunción en la contratación de sus servicios postales.
Esta conclusión de la CNC, que a priori parece incuestionable, tiene que revisarse a la vista de la doctrina administrativa del Tribunal Administrativo Central de Recursos Contractuales (TACRC), que analizó precisamente el impacto de la reserva de actividad correspondiente a las notificaciones administrativas en su Resolución nº 210/2012, de 26 de septiembre de 2012 [y que, en gran medida, basa su decisión en el previo Acuerdo 29/2011, de 15 de diciembre de 2011, del Tribunal Administrativo de Contratos Públicos de Aragón (TACPA) en un litigio prácticamente idéntico].

En el litigio que dio lugar a la resolución del TACRC, Unipost impugnó los pliegos de cláusulas administrativas y técnicas que establecían las condiciones que habían de regir la contratación del servicio postal generado en el ámbito de la Mutualidad General Judicial (MUGEJU). Uno de los requisitos que MUGEJU había introducido en los pliegos, precisamente en vista de la reserva de actividad de Correos en el mercado de notificaciones administrativas con presunción legal de veracidad, requería que los licitadores asumieran un “compromiso por escrito de depositar las notificaciones administrativas en los centros de admisión del operador encargado de la prestación del servicio postal universal [esto es, Correos], para que éste realice la entrega a los destinatarios de acuerdo con lo establecido en la sección 2ª del capítulo II del Reglamento por el que se regula la prestación de los servicios postales, aprobado por Real Decreto 1829/1999, de 3 de diciembre, modificado por el Real Decreto 503/2007, de 20 de abril”.

Unipost consideró que esta obligación de subcontratación de las notificaciones administrativas a Correos era restrictiva de la competencia en cuanto que reconocía a favor de Correos, un derecho exclusivo y excluyente a realizar las notificaciones administrativas que iba más allá de lo requerido por la legislación postal vigente—que permite que el resto de operadores postales lleven a cabo notificaciones administrativas, si bien su veracidad no se presume legalmente, sino que se debe probar por los medios generales reconocidos en el ordenamiento jurídico (y que, como dije aquí, quizá habría justificado la exclusividad de la contratación con Correos, si se hubiera superado el necesario análisis de proporcionalidad).

En su análisis del recurso, el TACRC realiza algunas consideraciones generales dignas de mención, al indicar que:
conviene recordar que, como ya ha señalado algún sector de la doctrina, la regulación de los contratos públicos ha dejado de poner el acento en la contemplación del interés público como elemento condicionante de la regulación de los contratos públicos para pasar a ponerlo en el cumplimiento de determinados principios entre los que destaca la garantía de la libre de concurrencia. Ello, que aparece consagrado en nuestro TRLCSP de modo expreso en los artículos 1 y 139, tiene su origen en las diferentes Directivas comunitarias, y, en lo que respecta al momento actual, en la Directiva 2004/18/CE del Consejo y el Parlamento Europeo. Pues bien, partiendo de la idea básica de que la regulación de los contratos públicos, ante todo debe garantizar la libre concurrencia de las empresas, tanto la Directiva como, en consecuencia, el TRLCSP, admiten la posibilidad de exigencia de títulos habilitantes para el ejercicio de actividades y que éstos sean requisito para poder contratar con un poder adjudicador. Pero este requisito, en la medida en que constituye una limitación al principio de libre concurrencia, así como al principio de igualdad de trato, debe ser interpretado de forma restrictiva. En consecuencia, la atribución a un único operador, en este caso Correos, de la posibilidad de realizar notificaciones administrativas debe ser interpretado de tal forma que la exigencia se ajuste al sentido literal de la norma que la establece. A tal respecto, de acuerdo con los preceptos de la Ley 43/2010 antes descritos, no puede entenderse que Correos sea el único operador postal que pueda realizar las notificaciones administrativas, sin perjuicio de las consideraciones que posteriormente realizaremos sobre la posibilidad de subcontratación del servicio, y que abundan en la necesidad de anular las cláusulas de los pliegos aquí impugnadas (FD 7º, énfasis añadido).
Ya en el análisis específico de la exigencia de subcontratación de la realización de las notificaciones administrativas, el TACRC acoge los previos criterios de su homólogo aragonés y considera que:
Es cierto que la Ley 43/2010 reconoce al operador dominante la facultad de presunción de veracidad y fehaciencia en la distribución, entrega y recepción o rehúse o imposibilidad de entrega de notificaciones de órganos administrativos y judiciales, tanto las realizadas por medios físicos, como telemáticos, y sin perjuicio de la aplicación, a los distintos supuestos de notificación, de lo dispuesto en la Ley 30/1992, de Régimen Jurídico de las Administraciones Públicas y del Procedimiento Administrativo Común. Sin embargo, las notificaciones practicadas por los demás operadores postales surtirán efecto de acuerdo con las normas de derecho común, y se practicarán de conformidad con el artículo 59 de la citada Ley procedimental administrativa.
Esto significa que, como consecuencia de dicho proceso liberalizador y de la apertura general del mercado a los operadores postales, y por tanto a la competencia, los operadores postales con autorización singular para la prestación del servicio postal universal, así como el operador postal designado a tal efecto, podrán practicar notificaciones de órganos administrativos y judiciales. En este sentido, y en virtud del artículo 22 de la Ley 43/2010, los operadores postales podrán prestar libremente dicho servicio, ya sea directamente, ya sea a través del operador postal designado, ya sea a través de otros operadores.
La diferencia en el actuar de los prestadores de servicios postales se encuentra en los efectos jurídicos atribuidos por la Ley a las notificaciones administrativas realizadas por los diferentes operadores postales. Por un lado, la actuación de notificación llevada a cabo por [Correos] ostentará por ley la presunción de veracidad y fehaciencia, en lo que respecta a la distribución, entrega y recepción o rehúse o imposibilidad de entrega de las notificaciones. Sin embargo, la actuación de notificación de órganos administrativos o judiciales llevada a cabo por el resto de operadores postales con autorización singular, tendrá efectos jurídicos de acuerdo con las normas de derecho privado, y en este sentido su realización carecerá de presunción de fehaciencia, debiéndose probar en el caso de ser cuestionado, por elementos probatorios de derecho privado.
Por lo expuesto, la previsión recurrida vulnera el artículo 22 de la Ley 43/2010, al obligar a los operadores postales adjudicatarios a realizar las notificaciones administrativas a través [de Correos], dado que impiden y penalizan que dichas notificaciones las realicen los operadores postales autorizados a través de sus propios medios, utilizando los mecanismos jurídicos pertinentes en orden a poder probar la realización de los diferentes actos hasta llegar a la notificación. Igualmente quedan vulnerados los artículos 2 y 37 de dicha Ley 43/2010, al desarrollarse la prestación del servicio postal en ausencia de libre competencia, dado que se impide que operadores distintos [de Correos] lleven a cabo ese tipo de notificaciones por sí mismos, haciendo uso de los mecanismos jurídicos que permitan acreditar frente a terceros su realización (FD 8º, énfasis añadido).
En definitiva, en sede de contratación pública, el TACRC y el TACPA consideran que existe una posibilidad efectiva de que operadores distintos de Correos realicen notificaciones administrativas (no fehacientes) y, de hecho, prohíben la inclusión de cláusulas que exijan que las notificaciones administrativas se subcontraten a Correos para beneficiarse de la presunción legal de veracidad. 

En cambio, en sede de aplicación de la normativa de competencia, la CNC considera que Correos dispone de una posición inexpugnable, dado que la mera reserva legal de la presunción de veracidad para las notificaciones administrativas que Correos lleve a cabo supone una barrera infranqueable a la entrada de otros operadores en la prestación de servicios de notificaciones administrativas a las Administraciones Públicas.

En mi opinión, estas dos posiciones son irreconciliables y será necesario que alguien (¿la Audiencia Nacional en el probable recurso de Correos contra la multa de la CNC?) diga una última palabra que aclare este importante aspecto (mal resuelto, por lo que se ve) de la liberalización postal en España. Mientras tanto, nos queda devanarnos los sesos buscando la cuadratura del círculo...


#CJEU confirms that #IPlaw violations belong to the sphere of the outstanding contractual relationship (Systran, C-103/11-P)

In its Judgment of 18 April 2013 in case C-103/11-P Commission v Systran SA, Systran Luxembourg SA (Systran), the CJEU has broadly followed the Opinion of AG Cruz Villalon and confirmed that, when confronted with liability claims, EU Courts must first determine whether there exists a genuine contractual context, linked to the subject-matter of the dispute, between the claimant and the defending EU institution. In that regard, according to the CJEU, if a preliminary analysis of those matters shows that it is necessary to interpret the content of one or more contracts concluded between the parties in question in order to establish whether the applicant’s claims are well founded, EU Courts are required at that point to halt their examination of the dispute and declare that they have no jurisdiction (press release). 

As anticipated here, this finding seems to have deep implications in the debate concerning the vis atractiva of contractual relationships when one of the parties subsequently engages in tortious behavior (in the case, for breach of IP rigths) and, consequently, the Systran Judgment deserves some careful thought. 

As the CJEU has clearly set out in Systran:
63 [...] when hearing an action for compensation, the Community Courts must, before ruling on the substance of the dispute, as a preliminary issue determine their jurisdiction by carrying out an analysis to establish the character of the liability invoked and thus the very nature of the dispute in question.
64 In doing that, those Courts cannot base their reasoning simply on the rules alleged by the parties.
65 In that regard, [...] the Court of Justice has already held that the mere invocation of legal rules not flowing from a contract relevant in the case, but which are binding on the parties, cannot have the consequence of altering the contractual nature of the dispute and thus removing it from the jurisdiction of the competent court. If it were otherwise, the nature of the dispute and, consequently, the competent court, could be changed at the whim of the rules invoked by the parties, which would go against the rules on the jurisdiction of the various courts ratione materiae (Guigard v Commission, paragraph 43).
66 However, the Community Courts are required to verify whether the action for compensation before them has as its subject-matter a claim for damages based objectively and overall on rights and obligations of a contractual nature or of a non-contractual nature. For those purposes, as the Advocate General has pointed out in points 49 and 50 of his Opinion, those Courts must examine, on an analysis of the various matters in the file, such as, for example, the rule of law allegedly infringed, the nature of the damage claimed, the conduct complained of and the legal relations between the parties in question, whether there exists between them a genuine contractual context, linked to the subject-matter of the dispute, the in-depth examination of which proves to be indispensable for the resolution of the said action.
67 If a preliminary analysis of those matters shows that it is necessary to interpret the content of one or more contracts concluded between the parties in question in order to establish whether the applicant’s claims are well founded, those courts are required at that point to halt their examination of the dispute and declare that they have no jurisdiction to rule thereon in the absence of an arbitration clause in the said contracts. In such circumstances, examination of the action for compensation directed against the Community would imply the assessment of rights and obligations of a contractual nature which, pursuant to Article 240 EC, cannot be removed from the jurisdiction of the national courts (C-103/11-P, paras 63 to 67, emphasis added).
More specifically, when analyzing the application of these principles by the General Court in the appealed decision, the CJEU stressed that
It is true [...] that it is not sufficient to allege simply any contractual relationship with the applicant or obligations of contractual origin not envisaging the conduct in dispute in order to be able to change the nature of the dispute by giving it a contractual basis. However, the fact remains that where, having regard to the content of the action for compensation against the Community, the interpretation of one or more contracts concluded between the parties in question appears to be indispensable in order to establish the legality or otherwise of the conduct by the institutions which is complained of, the dispute falls outside the jurisdiction of the Community Courts (C-103/11-P, para 80, emphasis added).
A summary reading of Systran indicates that, when the parties hold a previous or ongoing contractual relationship (which merits interpretation), claims for damages (due to breach of IPR-rights, or otherwise) should in principle be analysed within the sphere of those contracts and, only if no sufficient connection is found to the prior contractual bound, a 'purely' tortious claim will be allowed. Such a principle, which is developed in view of jurisdictional concerns, may have very significant substantive implications for contract and tort law in the EU (which precise delimitation seems to be permanently under debate)--unless the Systran Judgment is confined to a matter of procedural law (which, in my opinion, would be the wrong thing to do).


The general approach in Systran would imply that EU Courts retain jurisdiction for damages claims only in the absence of any (meaningful, sufficiently close) contractual relationship between the claimant and the defending EU institution (which, for instance, would leave them completely lacking of jurisdiction in the area of damages resulting from public procurement and the execution of the ensuing public contracts). 

It would also imply, more generally, that as a matter of EU Law, there is a principle of contractual absorption (vis atractiva contractus) that would extend the sphere of the contract, ie its scope (and, possibly, its effectiveness), to the damages inflicted by one party to the other due to tortious behaviour that may exceed the specific provisions of the contract (ie beyond strict breaches of contractual obligations). As a result of such vis atractiva--and given the different regulation of contractual and non-contractual claims in each of the Member States--different rules can apply to issues such as limitation periods, liquidated damages, penalty clauses, arbitration agreements, etc. 

And, in any case, given the difficulty in drawing a clear dividing line between contract and other areas of private law, the issue seems far from being finally sorted out, despite the creation of this type of rules of priority of contract law over non-contractual obligations, such as the one expressly included in the Draft Common Frame of Reference (VI.–1:103):
Should it, however, in fact come to a conflict between the values of contract law and non-contractual liability law in any particular case, whereby contract law denies liability which would subsist according to the provisions on noncontractual liability, then it is for the rules of contract law to assert priority if that is to be claimed in accord with the objective of the contract law rules. That is again the case if an application of the law on non-contractual liability in parallel with the corresponding contract law provision would deprive the latter of its effect. The contract law rule has priority so far as contract law actually claims it, whether expressly or merely by implication from the nature of things. Where contract law makes no such demand for the subsidiarity of non-contractual liability law, sub-paragraph (c) has no application and the principle of free concurrence of actions governs.
Therefore, the recognition (or not) of a general principle of the vis atractiva of contracts as a matter of EU law (in Systran) seems most relevant and deserves some further work in the future--particularly in view of the interrelationship between issues of substance and procedure (jurisdiction), which the CJEU has, as a matter of principle, prioritised in favour of contract law (and which also seems the default preferred option in the DCFR 2008).

Whatever is left of the #EUCouncil? #CJEU 'Pringle' and the 'single European patent' judgments set a moving target

The CJEU dismissed Spain's and Italy's actions against the Council’s decision authorizing enhanced cooperation in the area of the single European patent. 

This should not come as a surprise, since the bottom line criterion to take into consideration (as stressed by the CJEU in its Judgment) is that, despite the unanimity requirement in Council decision-making in certain areas of competence, recalcitrant Member States cannot block the development of initiatives that have been sufficiently discussed (in this case, for more than 10 years) and that, in the end, does not damage the internal market or the economic, social and territorial cohesion of the EU. Fair enough.

This Judgment, however, raises two sets of issues that I consider relevant. 

On the one hand, and in a general context, taken together with the recent Pringle Judgment, the Single European Patent Judgment questions the role of the Council as the true political arena and stage for the development of key areas of EU Law. Particularly in view of the growing deference given to less than fully inclusive decisions--which, however, are bound to have a clear effect (and not necessarily a positive one) on the non-included (or self-excluded) Member States. This may completely alter the negotiation dynamics within the Council, since vetoes do not seem to be that effective anymore and, consequently, second-best settlements seem ever more desirable than jumping from a moving wagon.

On the other hand, and in the specific field of the single European patent mechanism, it remains to be seen at what cost will Spain and Italy join the system they have so far opposed--since, at least in terms of credibility, there is clearly a premium to be paid. It seems clear that the disadvantages of not participating are too high for these two Member States to continue refraining to join in (although political stubbornness may have no limits). Again, it seems that, in the future, Member States will need to consider the effort required to jump onto a moving train in case they consider not participating in 'threatened' enhanced cooperation initiatives.


All in all, these are interesting developments in EU law that seem to reopen the never-ending debate about institutional design and balance in competence allocation. It remains to be seen whether Pringle and Single European Patent will be outliers, or if there is a stronger underlying trend that will prompt future changes.

El informe de la @CNCompetencia sobre el Anteproyecto de Ley de racionalización y sostenibilidad de la administración local #ALRASOAL


La Comisión Nacional de la Competencia publicó ayer su informe sobre el Anteproyecto de Ley de Racionalización y Sostenibilidad de la Administración Local.

El informe analiza el impacto de la reforma sobre la competencia en los mercados de prestación de servicios locales y, de manera clara, enfatiza la importancia de que los procesos de contratación pública y de privatización que se lleven a cabo en la fase de implementación de las reformas legales estén adecuadamente diseñados y promuevan una competencia efectiva para el acceso a la gestión indirecta de los servicios locales que sigan sujetos a reserva legal de actividad, así como para la asignación de las participaciones en el capital de las entidades instrumentales que vayan a privatizarse total o parcialmente. 

El informe también llama a una utilización excepcional de la figura de los convenios administrativos que podría haber sido todavía más restrictiva, en la medida en que la jurisprudencia comunitaria [Comisión c Alemania (gestión de residuos en Hamburgo) C-480/06] impone la aplicación de requisitos más estrictos que los mencionados por la CNC—que da a entender que se permite la celebración de convenios con un operador privado, mientras que la jurisprudencia comunitaria limita el mecanismo de colaboración a relaciones entre organismos públicos.

Adicionalmente, se echa de menos alguna advertencia sobre los efectos de esta colaboración público-pública, especialmente cuando produzca un efecto de agregación de demanda que permita a la administración el ejercicio de poder de mercado en sus decisiones de contratación o de prestación de servicios--aunque sean aspectos indirectamente cubiertos en relación con la garantía de la neutralidad competitiva y del análisis de impacto en el mercado que realiza la CNC de manera más general.

Creo que las recomendaciones generales de la CNC, pese a ser un tanto vagas y quizá algo permisivas, resultan pertinentes y que, sobre todo, habrá que evitar que este proceso de posible oleada de privatización y contratación de gestión de servicios públicos locales repita los errores que se están viendo recientemente en Madrid (que ya he criticado aquí y aquí), o que genere cambios profundos en la estructura de los mercados por el hecho de que muy pocas empresas estén en disposición de participar simultáneamente en un gran número de licitaciones o concursos para la asignación de participaciones en el capital de los entes instrumentales hasta ahora de propiedad pública.

Además, conviene tener en cuenta que este fenómeno de rediseño del modelo de prestación de servicios públicos locales no sólo se está dando en España, sino en buena parte de los países de la UE. Por ejemplo, en Reino Unido (donde el grado de privatización en la prestación de los servicios públicos es mayor que en España), la Office of Fair Trading ha incluido la supervisión de estos mismos procesos entre las prioridades de su plan estratégico 2013-14. Por tanto, se trata de un entorno en que el proceso español podrá beneficiarse de las experiencias en otras jurisdicciones, a efectos de evitar errores comunes.

Será, en todo caso, un área de interés para los juristas, economistas y politólogos interesados en el ámbito de prestación de los servicios locales, a la que se podrá añadir la necesidad de tener en cuenta las nuevas normas comunitarias de contratación pública de servicios sociales, en caso que se apruebe la propuesta realizada por la Comisión Europea en 2011.

Soft Administrative #EULaw? Some comments on Temple Lang's views on #DGComp Manual of Procedure


Prof. Temple Lang has published an interesting assessment of the European Commission's Antitrust Manual of Procedures: 'The strengths and weaknesses of the DG Competition Manual of Procedure' (2013) Journal of Antitrust Enforcement 1-30. In his very detailed account, Temple Lang identifies a rather lengthy list of shortcomings of the Manual. The most relevant are that:
The Manual does not deal with submissions made to other parts of the Commission. It says nothing about the need for impartiality, or the duty to respect the Charter of Fundamental Rights, or the need to expect judicial review of all decisions. It allows officials to hold meetings without keeping minutes. It says too little about interim measures, and does nothing to reduce the two basic flaws in the Commission's procedure: the same officials draft the statement of objections and the decision, and none of the Commissioners who formally take the decision have seen the evidence or read the arguments. There are several examples of failure to deal with difficult questions, which are precisely those on which guidance is needed.
Certainly, as Temple Lang further elaborates in the paper and despite the general administrative practices of DG Comp meeting a high standard of procedural requirements, there are some shortcomings that, given the increasing transparency of the competition investigation procedures, will most likely lead to actions for judicial review. 

Even if the Manual is only adopted as guidance (and only after the Commission was forced to do so, precisely as a result of Temple Lang's request to access the document under Regulation 1049/2001), it is easy to see how its content, its shortcomings and any instances of non-compliance will be exploited to the furthest possible extent by defendant companies, despite the Commission stressing that 'the fact that the [Manual is] in the public domain does not change [its] character as purely internal guidance to staff. The published modules therefore do not create or alter any rights or obligations arising under the competition rules of the Treaty' (which remains to be seen). As Temple Lang rightly points out 'It seems [...] that companies will be able to claim that they have legitimate expectations that their cases will be dealt with in accordance with the Manual, and that they will be treated equally in whatever way the Manual provides' (p. 15). Therefore, a proper understanding of the content of the Manual and a future correction of its shortcomings are much needed in order to avoid excessive litigation--potentially, on the basis of formalities without significant impact on the outcome of the cases (as Temple Lang acknowledges in p. 26).

In Temple Lang's view, the Manual is particularly lacking as regards the regulation of due process and impartiality, and he raises the issue that the 'principle of good administration' is not expressly discussed, whereas 'this is a legal rule with legal consequences and not merely an administrative standard' (p. 5). This point is relevant. However, the Manual does refer (once...) to the Code of Good Administrative Behaviour, which does analyse and impose compliance with the principle of good administration on all staff of the European Commission [see J Mendes, ‘Good Administration in EU Law and the European Code of Good Administrative Behaviour’, EUI Working Paper Law 2009/09]. A similar criticism is raised by Temple Lang in relation with the duty of sincere cooperation in Article 4(3) TEU (pp. 24-25), but it may equally be counter argued that this is an issue that applies across the broad and that DG Comp staff must know about it as a matter of general training.

Similarly, Temple Lang criticizes that the Manual fails to remind DG Comp officials about the Charter of Fundamental Rights and the European Convention of Human Rights, particularly as regards 'the possibility and intensity of judicial scrutiny' (p. 5). In this regard, the silence in the Manual may be understandable, given the heated debate that surrounds this issue [as I already discussed here]. I agree with Prof. Temple Lang that 'an introduction to the Manual calling attention to the Charter and the fundamental principles of due process would add much to the stature of the document, and to the professionalism of its approach' (p. 5). However, I also see how drafting such an introduction could backfire and could come to restrict the Commission's space for manoeuvre, particularly on the basis of the hardening of such soft law instruments due to the extensive application of the principle of legitimate expectations. Therefore, maybe such omission is not that negative after all.

Other than on these matters of principle, where the position of the Commission may be more justifiable than in Temple Lang's view, the rest of the detailed assessment that he carries out is very accurate and practically oriented, and definitely offers lessons and valuable recommendations for the review of the Manual--which the European Commission has endeavored to undertake 'from time to time'. As Temple Lang suggests, it would be desirable that they do so rather soon, and that they open a proper public consultation along the way. After all, every improvement that can be introduced in the procedures of the European Commission will increase the quality of its Decisions and will reduce the need for judicial scrutiny (as Temple Lang stresses in p. 21, with reference to the case law of the ECtHR)--and, consequently, is a worthy effort.

More generally, the publication of the Manual and the controversies that may arise from it come to support the need for a further development of a consistent set of 'hard' EU Administrative Law rules, particularly as regards infringement procedures against private parties, not only in Competition Law (as Temple Lang also supports, pp. 27-28). In that regard, there are some interesting projects carried out by the members of ReNEUAL.

Rejection of Abnormally Low and Non-Compliant Tenders in EU Public Procurement: A Comparative View on Selected Jurisdictions

In this new paper, I attempt a concise comparison of the rules applicable to the rejection of abnormally low and non-compliant tenders in a number of EU jurisdictions (namely, Denmark, France, Germany, Italy, Poland, Romania, Spain and the United Kingdom). 

In order to set the common ground for the analysis of such domestic rules, which are solely applicable to non-negotiated procedures, the paper first offers a description of the rules in the EU public procurement Directives and the case law of the European Courts (ie GC and CJEU), and then proceeds to compare them against this benchmark and amongst themselves. Where possible, the paper highlights innovative or different solutions, as well as potential deviations from EU law.

  • Sánchez Graells, Albert, Rejection of Abnormally Low and Non-Compliant Tenders in EU Public Procurement: A Comparative View on Selected Jurisdictions (April 11, 2013). European Procurement Law Series, Vol 6 (forth). http://ssrn.com/abstract=224859

Cheaters beware: GC enforces strict #suspension rules in EU #publicprocurement (T-87/11)

In its Judgment of 10 April 2013 in case T-87/11 GRP Security v Court of Auditors, the General Court of the EU (GC) has analysed some interesting features of the sanctions that EU institutions can apply to non-performing public contractors in order to prevent their participation in new public tenders for a given period of time (ie temporary exclusion, or suspension).

In the case at hand, GRP Security had been awarded a contract for the security of the premises of the Court of Auditors on the basis of falsified professional documentation--more specifically, the CV and professional qualifications of the security team leader called to oversee the proper working of the security activities. Upon discovery of such falsity, the Court of Auditors unilaterally decided to terminate the services contract and informed GRP Secutirty that it planned to claim damages and to enforce the available financial and administrative penalties. The company retorted that they were not aware of the illegal behaviour of their employee, whom they fired and sued for damages. 

The Court of Auditors' decision was unchanged, and the contract was terminated, together with a claim for €16,000 for moral and economic damages (which were deduced from the payments corresponding to the outstanding invoices for the services rendered before termination). Moreover, on the basis of article 96.2.a)  of the Financial Regulation applicable to the general budget of the European Communities, GRP Security was thus provisionally excluded from contracts and grants financed by the budget of the Union for a period of three months--which should be revised and could lead to an extension of the exclusion if the applicant did not provide evidence that it had taken appropriate internal corrective action to prevent similar events from happening again. It is worth stressing that the maximum period of exclusion is 10 years, and that the payment of financial penalties by the contractor can reach the full value of the contract in question [art 96.2.b)]--so it is clear that the sanctions imposed by the Court of Auditors were well below the maximum thresholds set in the Financial Regulation.

Within the set period of three months, GRP Security submitted a remedial plan to the satisfaction of the Court of Auditors and, consequently, no extension of the initial suspension was imposed. Afterwards, GRP Security initiated legal proceedings to challenge the unilateral termination of the contract by the Court of Auditors and announcing that it reserved the right to seek financial compensation (not least, for its temporary exclusion from EU procurement tendering).

One of the interesting points of law in the dispute is whether the EU Financial Regulation actually allows for a sanction of reviewable temporary exclusion or not. Article 96.2.a) of the Financial Regulation, coupled with article 134 ter of its Implementing Regulation, determine that

Without prejudice to the application of penalties laid down in the contract, candidates or tenderers and contractors who have made false declarations, have made substantial errors or committed irregularities or fraud, or have been found in serious breach of their contractual obligations may be excluded from all contracts and grants financed by the Community budget for a maximum of five years from the date on which the infringement is established as confirmed following an adversarial procedure with the contractor.
That period may be extended to 10 years in the event of a repeated offence within five years of the date referred to in the first subparagraph (emphasis added).
According to GRP Security, the system only foresees one-off exclusion decisions, but it does not allow for a set of rolling decisions dependent upon the adoption of remedial action on the part of the suspended contractor. The GC avoided answering this important point of law by relying on the specific circumstance that the Court of Auditors did not extend GRP Security's exclusion at the end of the initial 3-month period (paras. 67-71 of the T-87/11 Judgment). Therefore, legal uncertainty seems to remain concerning this possible reviewable or on-going application of the suspension regime.

In my view, however, such temporary suspension coupled with a compliance check fits within the system of  the Financial Regulation and its Implementing Regulation, and would be to the advantage of contractors--since, in the absence of such possibility to review, contracting authorities could clearly be tempted to impose longer exclusion periods from the beginning. Moreover, companies should be the first interested in implementing remedial action and, consequently, gaining some immediate benefits from that investment. Also, this would be in line with the current trend of recognition of the value of 'self-cleaning' efforts, such as in article 55 of the December 2011 proposal for a reviewed EU Directive.

GRP Systems also appealed the 3-month temporary suspension decision on the basis of an alleged lack of proportionality, which the GC easily dismissed, considering that
the applicant has seriously failed to meet its contractual obligations. In addition, it should be recalled that the Court of Auditors, which is one of the institutions of the Union, is dedicated to examining the legality and regularity of revenue and expenditure of the Union and any organ or body created by the EU and to ensure their sound financial management (Article 287, second subparagraph, TFEU). Particularly in view of these missions and the severity of the deficiencies attributable to the applicant, it should be considered that the latter, by his conduct undermined the image of the Court of Auditors and the European Union (T-87/11, para 81, own translation from French).
This part of the Judgment may be criticised on the basis that it seems to allow for an analysis of the gravity of the offence and the ensuing sanction on the basis of factors that are external to the offender (would the same actions be less reproachable had they been committed against an institution not entrusted with a financial audit or oversight mission?). However, it seems clear that the GC is prepared to uphold the highest standards of professional conduct in the field of EU public procurement and this more general message must be most welcome.



In general, this case highlights the need for some additional clarity and development of the system of suspension and debarment of non-performing contractors in EU public procurement which, in my view, should not only be created for EU's institutional procurement, but extended to the general rules applicable in the Member States.

If you fine me, I have the right to appeal ~ even if someone else foots the bill (C-652/11)

In its Judgment of 11 April 2013 in case C-652/11 Mindo, the Court of Justice of the EU (CJEU) has reversed a prior Judgment of the General Court (GC) whereby it denied active standing to appeal a competition fine to an undertaking that was jointly and severally liable for its payment, on the basis that the other jointly liable party had already paid the fine in full and had not seeked recovery of any amounts for a period of 5 years.

The CJEU Judgment is interesting because it comes to set the general principle that, as long as there is a possibility of being made to pay the amount of the fine (fundamentally, because the claim is not time-barred and there are no specific indemnity agreements between the jointly liable parties), there is always a residual benefit for the undertaking to appeal the fine.

I think that the Mindo Judgment must be welcome and the CJEU has rightly quashed the prior GC ruling, which was basically relying on a set of 'factual' assumptions that were too far fetched. As the CJEU clearly emphasises, the GC erred in law in assuming that, by simply waiting to claim, Mindo's co-debtor had waived its right to seek reimbursement of the fine (particularly in a scenario where there was a pending appeal and, on top of that, Mindo had filed for bankruptcy and was under administration in accordance with Italian law--which justify the 'wait and see' strategy adopted).

However, I think that the CJEU could have even gone one step further and set the broader principle that the addressee of a fine is always entitled to appeal it if there are sufficient legal grounds, regardless of who ends up paying the fine. Otherwise, in cases where there is a dissociation between the fined undertaking and the payee of the fine (not necessarily due to their joint liability), it could be that no one has standing to appeal. 

The CJEU ducked this issue by not addressing the second ground of appeal, submitted in the alternative, where it was alleged that denial of active standing to appeal would infringement Mindo’s right to a fair trial. The fact that the CJEU did not address this issue derives probably only from the fact that it was presented in the alternative. However, given that the CJEU made no reference to the right of a fair trial, this can also be read as an exercise of certain self-restraint on the part of the Court, and as an attempt to open that Pandora's box only when necessary (since, indeed, the extension of fair trial rights to companies in the setting of EU competition law is not without problems, as I have discussed in The EU’s Accession to the ECHR and Due Process Rights in EU Competition Law Matters: Nothing New Under the Sun?). Be it as it may, in general terms, the referral of the case back to the GC should be welcome.

CJEU strengthens #EULaw on #food #information: more #disclosure in the #consumers' interest

In the aftermath of the horse meat scandal, in its Judgment of 11 April 2013 in case Karl Berger v Freistaat Bayern, the European Court of Justice has clearly pushed for an expansive interpretation of EU food law that gives public authorities the appropriate tools to protect consumers' interests.

In Berger, the CJEU has clearly supported the fact that public authorities release information and food warnings concerning products that, despite not creating a health risk to humans, are unfit for human consumption. 

In the case, the manufacturer of nauseating food products (game meat processed in less than hygienic conditions) intended to claim damages for the loss of business derived from one such food warning. The manufacturer sued the relevant German food authority on the basis that, there not being a risk for human health, the authority exceeded its powers by disclosing that the products were not fit for human consumption.

In what should be welcome, the CJEU has interpreted that EU food law sets minimum mandatory requirements, but that public authorities can exceed them as long as they act proportionately and in the interest of consumers. In the CJEU's view, indeed:
35. In so far as a foodstuff is unacceptable for human consumption and accordingly unfit therefor, it does not fulfill the food safety requirements under Article 14(5) of Regulation No 178/2002, and is, in any event, such as to prejudice the interests of consumers, the protection of whom, as stated in Article 5 of that regulation, is one of the objectives of food law.
36. It follows from the above that, where food, though not injurious to human health, does not comply with the aforementioned food safety requirements because it is unfit for human consumption, national authorities may, as provided under the second subparagraph of Article 17(2) of Regulation No 178/2002, inform the public thereof in accordance with the requirements of Article 7 of Regulation No 882/2004 (emphasis added).
In my view, the Berger Judgment must be welcome and consumers should push for Member States' food agencies to make the most of their informative powers. Granted, they should only act on the basis of strong procedures and reliable evidence but, once they find products that are not fit for human consumption, they should promptly disclose this information. When the interests of the manufacturer and those of consumers clash, the CJEU seems to clearly side with consumers and, as a matter of general policy, this seems appropriate. This will create further incentives across the food supply chain to improve quality controls and, in the end, will result in safer food markets in the EU. So, in short, the expansive interpretation adopted by the CJEU in Berger is a most welcome development of EU food law.

#GAO reports that there is scope for more competition in #US Defense #procurement



The US Government Accountability Office (GAO) has published an interesting report on Defense Contracting: Actions Needed to Increase Competition, where it finds that the proportion of defense contracts subject to competition "declined over the past five fiscal years, from 62.6 percent in fiscal year 2008 to 57.1 percent in fiscal year 2012". Moreover, GAO also found that "the competition rate in fiscal year 2012 varied by specific DOD component with the Air Force having the lowest at 37.1 percent and the Defense Logistics Agency the highest at 83.3 percent. The majority of the noncompetitive awards cited the availability of only one responsible source to meet the government’s needs as the reason for using noncompetitive procedures". 

This overall reduction of 5.5 points has been provoked by a number of factors. "For example, reliance on an original equipment manufacturer throughout the life cycle of a program has been a long-standing challenge for DOD competition, and budget uncertainty can also hinder DOD’s ability to compete. Noncompetitive purchases that DOD makes on behalf of foreign governments can also affect DOD’s competition rate".

In a deeper analysis, GAO points out that the justifications provided for noncompetitive procurement are not always sufficient, despite procurement officials ticking all the boxes and meeting the regulatory requirements to proceed with direct awards. "Many of the noncompetitive justifications GAO reviewed included the required elements as defined by the Federal Acquisition Regulation; however, the level of insight into the reasons for noncompetitive awards varied. For example, some justifications included clear descriptions of market environments where only one source was available to meet the government’s needs or described planned actions that could help improve competition in the future. However, other justifications provided limited insight into the reasons for the noncompetitive award or did not fully describe actions that the agency could take to increase future competition. Without this information, DOD may be missing opportunities to gain a fuller understanding of why past acquisitions were not competitive and may be unable to apply those lessons to effectively facilitate competition for future acquisitions".

Interestingly, GAO stresses that "these factors are not always considered when setting DOD’s annual competition goals" and recommends that "DOD identify, track, and consider the specific factors that affect competition when setting competition goals; develop guidance to apply lessons learned from past procurements to help achieve competition in the future; and collect reliable data on one-offer awards".

For European readers, the report is interesting not only because it raises issues that sound familiar (such as the 'abuse' of void justifications when resorting to negotiated procedures or direct awards of contracts), but also because it stresses the importance of developing solid tools of procurement statistics, monitoring and intelligence in order to develop a continuous appraisal of public procurement activities and foster their increasingly pro-competitive development. 

Forthcoming, revised EU rules on public procurement should indeed promote such tools, with a particular focus on data collection and analysis (which was promoted by the European Commission, but which may be significantly reduced with the proposed suppression of article 84 of the 2011 Commission's proposal by the Council and the European Parliament in the current negotiation of future revisions of EU procurement rules). 

As I already said, I think that the general transatlantic message to carry home in the current revision of the EU rules is that more planning and more oversight / analysis are required. Otherwise, EU public procurement rules will still fall short from ensuring the development of a dynamic and growingly competitive set of tools that can deliver value for money.

Stubborn #publicprocurement #aggregation: #Madrid City Council insists in tendering macrocontracts

Last November, the City Council of Madrid tendered a single contract for waste collection. The contract was intended to aggregate and consolidate the prior 13 separate outstanding contracts, which would have given the awardee responsibility for waste collection throughout the municipality, with the only exception of the city centre (for some reason). The contract was worth €542 million and the Council expected to save €11 million in the 8 years it would last.

The tender was a massive failure. Current contractors opposed a contract consolidation strategy that would exclude most of them due to their limited size and waste processing capacity. There was a strike to protest a change of waste management strategy that trade unions anticipated would cut jobs. More generally, the financial structure of the contract was considered nonviable by experts. In fact, only the largest incumbent (FCC) submitted a bid, which was disqualified because it exceeded the maximum bidding price by 34%. The tender was declared deserted and prior contracts were extended.

The situation is very unsatisfactory, as contract extension is not without problems. Contractual conditions designed several years ago are no longer adjusted to reality. Waste collection is now bad business, as the economic crisis has generated a reduction of household waste (at least, that is environmentally encouraging) and that means reduced pay for waste collection companies, since they are paid by collected ton of waste. FCC itself has announced job cuts, which the Madrid City Council opposes on the basis that the number of employees is a contract compliance clause the contractor cannot breach, despite the contract having been extended beyond its original duration and the conditions having changed significantly (an scenario that actually may make judges side with the contractor if this issue got to court). Trade unions are again promoting a new strike to protest the situation, which will result in no waste collection in Madrid for an indefinite period starting on the 15th of April.

Cynically, we could say that Madrid city is facing a waste wave if the situation does not get sorted out soon. And the prospects are gloomy. According to today's press releases, the City Council has decided that, if you cannot solve a problem, better make it bigger.

The Council has stubbornly decided to go deeper and broader in its (failed) contractual consolidation strategy and to tender a single macrocontract to consolidate the 39 outstanding for all public service activities of cleaning and maintenance of public spaces and green areas of the capital. The new service would run for 8 years (with a possible extension for 2 more), and is valued at €2.3 billion. With this new formula, the Council expects savings of 10% of current cleaning and gardening costs (a rough equivalent of €256 million throughout the life of the contract without the extension). Does this sound familiar?

Interestingly enough, the largest players in the cleaning, gardening and maintenance business are the same as in the waste collection side. It do not think it will be anyone's surprise if we hear again that only one or a very limited few of them participate in this second macrocontract, or that they submit financial offers in excess of the (dreamy?) expectations of the Madrid City Council.

Now, the open question is why a city council of one of the largest capitals in the EU insists in a failed strategy for the tendering of local services of such relevance? Are there no better ideas available in their in-house group of experts? Are they so stubborn that they are trying to prove they were right in the prior instance by failing again?

Also, I think that the Madrid experience offers some lessons for other city councils facing similar challenges (ie, the need to find new management strategies for public services that allow them to reduce costs) and that are thinking about contract aggregation and consolidation. I think that the easier one is that you cannot aim to consolidate beyond the size your market structure can reasonably digest. The second one is that you cannot intend to award non-profitable contracts. And, the hardest one, that some creative thinking is needed. Would anyone publish a call for ideas? I would definitely be tempted to contribute.