Can you ask for what you already have? GC tightens access to documents of EU institutions (T-221/08)

©European Commission.

In its Judgment of 26 April 2016 in case Strack v Commission, T-221/08, EU:T:2016:242 (not available in English, not even the official extracts) the General Court (GC) of the Court of Justice of the European Union decided some interesting practical issues related to the rules on access access to European Parliament, Council and Commission documents under Regulation 1049/2001. The point I consider most interesting is whether documents to which the claimant has had previous access by means other than the rights provided by Reg 1049/2001 can be excluded from an access request. Or, in other words, whether Reg 1049/2001 allows you to ask for what you already have.

This point is important because different "access routes" to the documents imply different uses for those documents, particularly if the applicant intends to reveal them to third parties or to the general public. As the applicant in the case submitted to the court,

Only a transmission on the basis of [Reg 1049/2001] would make the document automatically available to third parties and would enable the applicant to achieve his goal, that is, to provide the public, in a fully legally-compliant form, with information on how his complaint was handled by OLAF (T-221/08, para 124, own translation from French).

In the case at hand, the applicant required access to voluminous documentation held by OLAF. Among those documents were correspondence between OLAF and the applicant and OLAF and a mediator, which had previously been disclosed to the applicant (in the course of that correspondence or in relation to mediation efforts). OLAF excluded those documents from the request for access on the basis that they were previously disclosed (PD documents). The applicant challenged this exclusion from his request.

Interestingly, the GC deals with this issue in a rather comprehensive manner and determines that

128 The purpose of Regulation 1049/2001 is to ensure that documents of the institutions are accessible to the general public ... and ... a document disclosed under that regulation document enters the public domain.

129 This result is also reflected in Article 9, paragraph 2, point e) of the annex to the Rules of Procedure of the Commission on the provisions relating to the application of Regulation 1049/2001 ... under which documents already disclosed in response to a previous [Reg 1049/2001] request will be "automatically" provided on [further] request.

130 It is true that ... in the case Miettinen v Council (T-303/13, EU:T:2014:48, paragraphs 17 to 19) the Court stated that, since the applicant was granted access to the requested document, it had obtained the only result that its action could provide. However, contrary to what happens in this case, in the Miettinen v Council case ... the requested document had been released to the public, so it can not be inferred from that decision that the mere fact that the person concerned had had access to the document requested for any reason would prevent her, in every case, to request access to the same document on the basis of Regulation no 1049/2001, when such document has not been disclosed to the public.

131 It is therefore apparent that the first decision of OLAF, insofar as it refused the applicant access to [PD documents] on the basis of Regulation no 1049/2001, prevents those documents being considered public, which is precisely what the applicant claims and which corresponds to the objective pursued by Regulation 1049/2001, which is to grant the widest possible access to documents with a view to greater openness, to ensure greater participation of citizens in the process of decision making, and greater legitimacy, effectiveness and accountability of government to citizens in a democratic system ...

132 Consequently, the fact that the applicant already had the documents concerned by his request for access and that the objective of the latter was not, therefore, to give him access to their content but rather to disclose them to third parties is indifferent, especially because the reasons for applicant's decision to submit such a request are irrelevant, since Regulation 1049/2001 does not require that the person concerned motivates her request for access to documents, and the reasons for such a request cannot have any impact on its admission or refusal ... (T-221/08, paras 128 to 132, references omitted, own translation from Spanish and emphasis added).

This is quite an important clarification because, in my view, it will force European Institutions to tighten their procedures under Reg 1049/2001 and always assess access to documents requests on their merits. Importantly as well, the Judgment comes to clarify in very strong terms that documents disclosed under Reg 1049/2001 enter the public domain and, consequently, there can be no restrictions on their further use by the applicant or any third parties.

In the area of public procurement, this means that the European Institutions, when they act as contracting authorities, need to be particularly careful in the way they assess requests that concern documents which can impact on the commercial interests of economic operators, including intellectual property, which once made available will become part of the public domain--and may need to start (re)considering ways in which to ensure appropriate protection of business secrets along the lines of the standards created by the new Directive on trade secrets, even if it will not be directly applicable. Once again, this is linked to the issue of the level of transparency in public procurement and the need to seek a difficult balance between transparency and competition in procurement processes, and a more market-oriented approach such as that emerging in the UK may be a good example to take into consideration.

Interesting political science theories I would like to use in Future "Law and ..." research

Participating in the ECPR 2016 Joint Sessions of Workshops in Pisa this week is giving me the opportunity to exchange ideas with political scientist, public administration scholars, management researchers and other social scientists, and to get exposed to new (political science) theories yet unknown to me,--which I am starting to think can be used very fruitfully in the assessment of public procurement policy design and public procurement legal reform.

This is an area of growing interest for me, particularly after editing a collection on a "law and political science" approach to the reform of EU public procurement rules by means of the 2014 public procurement package--to be soon published as GS Ølykke & A Sanchez-Graells (eds), Reformation or deformation of the EU Public Procurement Rules (Edward Elgar Publishing, 2016).

In particular, I am finding these theories very thought-provoking:

• Garbage can policy-making model. As aptly summarised by Prof Cairney (here and here), this theory derives from the 1972 seminal work of Cohen et al, 'A Garbage Can Model of Organizational Choice', and "contrasts with ‘comprehensively rational’ policymaking in which – in this order – policymakers identify problems (or their aims), bureaucracies perform a comprehensive analysis to produce various solutions (or ways to meet those aims), and policymakers select the best solution. Instead, [under the garbage can model] policymaker aims and policy problems are ambiguous and bureaucrats struggle to research issues and produce viable solutions quickly. Sometimes people wait for the right time to present their ready-made solutions. Sometimes aimless policymakers just want to look busy and decisive. So, Cohen et al suggest that the problem identification, solution production, and choice are ‘relatively independent streams.' The garbage can is where a mix of problems, solutions and choices are dumped" (emphasis added). This is a very interesting theoretical framework in which to rethink the way public procurement policy gets constructed, and one which I would like to link to my recent criticism of the push for collaborative cross-border procurement in the EU.
   
• Bureau-shaping model. This theory was developed by Prof Dunleavy in his 1991 book Democracy, Bureaucracy and Public Choice: Economic Approaches in Political Science and, at its basics, proposes a line of analysis that deviates from the previous consensus that "the main interest of senior bureaucrats is in maximizing the budgets of their bureau because a larger budget will mean greater status and higher salaries for the bureaucrats ... In contrast, the bureau-shaping model takes issue with this emphasis on budget maximization, arguing that senior bureaucrats are most interested in maximizing the status and quality of their work. In particular, Dunleavy contends that senior civil servants are most interested in their policy advisory functions: when high-ranking officials are faced with institution-wide cuts, they reshape their bureaux into small staff agencies in order both to protect themselves and their agencies, and to allow themselves to concentrate on the policy-advisory role which they prefer" [as summarised by Marsh, Smith & Richards (2000), emphasis added]. I also find this interesting and difficult to assess in public procurement, where the effect of the financial crisis may well prove Dunleavy right in terms of the creation of specialised (centralised) agencies that gain policy-making clout. However, it is also my intuition/observation that (centralised) agencies are also indicating traits of strict budget maximisation (or empire building, to link this with corporate governance literature) in that these agencies aim to achieve more and more (theoretical) economies of scale that are definitely size-related. Thus, I would like to explore this issues in relation with the ascendancy of central purchasing bodies and, in particular, those of a more commercial orientation.
   
• The role of the European Commission as a policy innovator. This is fundamentally an extension of Dunleavy's model and was developed by Alexopoulos in his 2000 'The European Commission as Policy Innovator: Bureaucratic politics in Perspective', where he developed the analysis of the Commission's activity under the bureau-shaping model in relation with maritime and tourism policy. I would be most interested in trying to replicate the study 15 years after and in the area of public procurement, and possibly try to complement it or reconcile insights offered by the garbage can model mentioned above.

I am not sure when I will have time to push these ideas further, but if anyone is interested in collaborating in any of these (or related issues) involving a "law and political science"--or "law and political economy", or "law and economics" to widen the spectrum to the "law and ..." of public procurement research--please be in touch.

Would a Brexit significantly change the way the English public sector buys supplies and services?

With two months to go for the all important UK referendum on EU membership, I thought it was about time to open the Brexit can of worms. This is a blog post I wrote for wider dissemination through the University of Bristol engagement channels. Comments welcome!

There has been some serious thought put into the potential implications of Brexit for the ways in which the UK public sector buys supplies and services—or, in technical terms, on the Brexit implications from a public procurement perspective. Academics, such as Dr Pedro Telles, and practitioners such as Michael Bowsher QC, Peter Smith, Roger Newman or Kerry Teahan have started to reflect on the likely consequences from a legal and business case perspective.

The overwhelming consensus is that a Brexit is highly unlikely to result in any significant substantive changes of the rules applicable to the public sector’s buying activity and that existing ‘EU-based regulation’ (notably, the Public Contracts Regulations 2015, as already amended by the Public Procurement (Amendments, Repeals and Revocations) Regulations 2016) is very likely to be replaced by an almost identical ‘English-reimagined regulation’. Economic studies, such as that carried out by Global Counsel, have also considered the likely impact of Brexit on public procurement as moderate—although in the economic area there is less consensus, as pointed out by Procurious.

Overall, it may seem that public procurement is an area where a Brexit would be unlikely to create much more than legal uncertainty and some economic costs (which are for the UK population to evaluate) and that, after a suitable (possibly long) period of time, new rules would be in place and the sector would carry on as usual. Optimists may identify an opportunity to improve existing rules once the EU requirements are set aside and a distinct English-reimagined regulation can be adopted and implemented (if that is at all possible, which most commentators reject). I would like to entertain that possibility for a second and consider to what extent the creation of a significantly better English-reimagined public procurement regulation is likely to materialise.

At the risk of being considered a pessimist or excessively critical, I do not think this possible at all, much less in a tight time-scale of around two years. I think that the process of transposition of the most recent EU rules (notably Directive 2014/24/EU) into the Public Contracts Regulations 2015 is a cautionary tale. That process of transposition required a reform of UK public procurement rules and had a two-year timeline, so the regulatory reform scenario could not be more similar and timely.

When the modernisation of the pre-existing EU procurement rules was first proposed, the Cabinet Office set out a clear negotiation strategy with ambitious goals, which mainly revolved around the creation of space for employee led organisations/mutuals to enable employees to gain experience of running public services prior to full and open competition, the shortening of procedures and reduction of red tape, the flexibilisation of the rules in order to allow for better commercial practices, and measures to enhance SME access to public procurement. All of this was achieved and the Cabinet Office was clear in stressing that the ‘revised [EU] package represents an excellent overall outcome for the UK, with progress achieved on all of our priority objectives’.

After having successfully secured most of the UK desired reforms during the 2011-2014 negotiation process, and in order to benefit from them as soon as possible, the Public Contracts Regulations 2015 were very quickly adopted in under a year. However, in part as a result of such rush to secure the benefits mentioned above, and possibly also as a side effect of the self-imposed restriction derived from ‘the government’s policies on “copy-out” of European Directives (where available) and avoidance of “gold-plating”, [which] further limit[ed] the extent to which Cabinet Office can deviate from the wording of the EU directive when casting the national UK implementing regulations’, the new UK procurement legislation is rather defective (as discussed in this podcast).

The 2015 reform was a significant opportunity to improve the regulation of public procurement in the UK and to rethink a system based on the flexible alternatives now included in the 2014 EU public procurement package, but it was misused and is now lost. By not adding domestic detailed rules to the EU framework, or developing significant guidance (there is some in selected areas, such as public-public contracts or contract modification), and by rushing an insufficiently developed transposition, the Cabinet Office created a situation where procurement practice is very likely to carry on as usual unless old rules are now barred (most are still compatible with the revised framework, though) or the specific contracting authority identifies any clear advantage in adopting new practices. Piece meal legal reform, piece meal guidance and piece meal procedural innovation is unlikely to result in any deep transformation of the way the UK public sector buys supplies and services.

In my view, this is a cautionary tale because fundamentally rethinking the public procurement function and its processes, and then designing a coherent system of rules that effectively support them, is a very hard thing to do (and one to which I intend to dedicate significant effort in the coming years). Moreover, the policy priorities expressed by the UK during the process of modernising the EU framework are now embedded in the revised EU and UK procurement rules. This seems to leave nothing left for the UK to want to push for in any subsequent legal reform, so there is no actual public interest or clear public policy driver for any additional reform of current rules—bar the need for technical adjustments. Thus, overall, a Brexit is very unlikely to result in any significant change in the way the English public sector buys supplies and services. Not because of EU impositions—then as a trade requirement rather than a regulatory obligation—but due to the lack of internal drive and practical need for an English-reimagined public procurement regulation.

Study on administrative capacity to manage public procurement in the EU - some critical remarks on public procurement transparency

The European Commission has published the study 'Stock-taking of administrative capacity, systems and practices across the EU to ensure the compliance and quality of public procurement involving European Structural and Investment (ESI) Funds' (PwC, Jan 2016), which offers an interesting perspective on the existing administrative capacity to manage public procurement in the EU. In its own terms, '[the] study offers a unique and unprecedented overview of the current state of administrative capacity in the field of public procurement in the EU with a special focus on the implementation of the European Structural and Investment (ESI) Funds. It looks at the systems and structures in the individual Member States and provides valuable information as to how to improve the quality of public procurement and ensure more efficiency, transparency and regularity, in line with the Investment Plan for Europe and the EU budget focused on results initiative'.

The study has country-specific profiles with 'recommendations regarding specific needs identified in the 28 Member States and the areas where they could improve performance and effectiveness of public procurement benefiting from the cases of good practice contained in the study'. Such recommendations build up on a general section on 'good practices', where the study focuses on  seven categories of issues that PwC considers relevant for the proper administration of a well-functioning public procurement system, including:

• Ad hoc support [to contracting authorities having issues with procurement rules or practice];
• Guidance documents for contracting authorities;
• Professionalisation of public procurement practitioners;
• Initiatives which ensure the quality of public procurement;
• Review processes;
• Measures for simplification and efficiency;
• Data monitoring and practices fostering transparency.

Some of these recommendations are already shaping EU policy in the public procurement field. In particular, the 'good practices' on ad hoc support are informing the Commission's project to set up and roll-out a 'voluntary ex ante assessment mechanism of the procurement aspects of certain large-scale infrastructure projects' (as included in the 2015 Strategy for the upgrade of the internal market), which may well result in the creation of a help-desk or hotline structured around the existing experiences in France, Slovenia, Finland of the Netherlands; see pp. 72-74 of the PwC report).

Similarly, the considerations around good practices concerning public procurement transparency (pp. 85-86) are also likely to inform the Commission's project to encourage Member States to create centralised public procurement registers as part of its commitment to pursue '[i]nitiatives for better governance of public procurement through the establishment of contract registers, improved data collection and a networking of review bodies' (as also included in the 2015 Strategy for the upgrade of the internal market; for discussion, see here and here). In that regard, it is worth looking closely at what the PwC report considers good practices in this area. According to the report,

The online publication of detailed and regularly updated public procurement data is a key component of an effective monitoring and transparency system. This can benefit to a wide range of stakeholders, from the public authorities who can use this data to monitor and evaluate their own purchasing activities to economic operators who can better assess the public sector markets. Besides, the publication of public procurement data also helps civil society groups to conduct their oversight activities on public spending.

Key success factors: Comprehensive and quality data covering various aspects of procurement (e.g. number, economic value, procedure); User-friendly and intuitive websites to easily access the data; Data made available online should be comparable, freely released, and downloaded in usable format; Regular update of the data published.

At this level of generality, the report is not massively useful because it leaves important issues of detail about the information to be published, whether access needs to be unrestricted and universal (I submit it should not) or different stakeholder should have access to different levels of information and at different times, etc. Moreover, the report makes some general statements that can be strongly contested. For instance, the report emphasises that

There is ... a benefit in collecting and publicising information not directly related to a specific procedure. For example, some [Member States], such as Latvia, Spain and Slovakia, require contracting authorities to publish pipelines of up-coming contracts, which can be invaluable tools for bidders to manage their businesses plans and prepare their most competitive officers. 

This is very problematic because this is the sort of excessive transparency that can easily result in cartelisation of (future) tender procedures and, in my view, there is no need whatsoever for this type of advance publication of contract opportunities if contracting authorities are willing to provide reasonable tender preparation times [for broader discussion, see A Sanchez-Graells, Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 73-75, and ibid., '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' (2013)]. Thus, a more nuanced and careful consideration of these issues would be needed before simply presenting more transparency as always and intrinsically positive, and as a 'good practice' that should be disseminated throughout the 28 EU Member States--which it simply is not.

When it comes to the assessment of specific cases, the PwC report includes five short case studies in this area: Spain (Public Contracts Registry), Lithuania (Monitoring and publication of data on framework agreements), Slovenia ("Supervizor" transparency tool), Portugal (BASE Public Contracts Portal) and Slovakia (Single-stop online portal for public procurement analysis). All these case studies stress that publication of procurement information is positive, and indicate that there are issues of quality of the data published and of accessibility and machine-readability that need to be addressed. On the basis of that, the report goes on to recommend that Member States:

• Integrate interoperability with the online publication system into the national eprocurement system so that the relevant data is automatically uploaded to the public website, minimising delays in publication;
• Incorporate a comprehensive and user friendly search engine in any online database so that users can identify the information that is relevant to them;
• Allow users to download search results in at least one commonly used and machine readable format such as CSV or Excel;
• Contracting authorities should be required to submit preliminary data on upcoming projects, either via an annual procurement plan, or an advanced notification requirement for major and recurring contracts. 

I would personally take issue with the final recommendation and challenge it as an instance of detrimental public procurement practice. Elaborating a procurement is probably a good governance tool. Publishing it is a very ill-informed decision. Not in vain, one of the recommendations included in the OECD's Guidelines for Fighting Bid Rigging in Public Procurement (2009) is for contracting authorities to avoid predictability and, in particular, to '[a]void predictability in your contract requirements: consider aggregating or disaggregating contracts so as to vary the size and timing of tenders'.

Thus, engaging in the type of advanced disclosure advocated by the PwC report is simply contrary to this recommendation and creates excessive predictability and certainty of demand for both major and recurring contracts. Simply put, this is an ill-informed recommendation and one that the Commission and the Member States should ignore. It will be particularly important for this not to feed into the Commission's initiatives under the 2015 Strategy for the upgrade of the internal market. Any development of rules on public procurement registers needs to be much more nuanced and informed by economic theory.

In my view, the main normative recommendations (ie 'good practices') on which public procurement registers should be based are as follows:

• Public contract registers should not be fully available to the public. Access to the full registry should be restricted to public sector officials under a strong duty of confidentiality protected by appropriate sanctions in cases of illegitimate disclosure.
• Even within the public sector, access to the full register should be made available on a need to know basis. Oversight entities, such as the audit court or the competition authority, should have full access. However, other entities or specific civil servants should only access the information they require to carry out their functions.
• Limited versions of the public contract registry that are made accessible to the public should aggregate information by contracting authority and avoid disclosing any particulars that could be traced back to specific tenders or specific undertakings.
• Representative institutions, such as third sector organisations, or academics should have the opportunity of seeking access to the full registry on a case by case basis where they can justify a legitimate or research-related interest. In case of access, ethical approval shall be obtained, anonymization of data attempted, and specific confidentiality requirements duly imposed.
• Delayed access to the full public registry could also be allowed for, provided there are sufficient safeguards to ensure that historic information does not remain relevant for the purposes of protecting market competition, business secrets and commercial interests.
• Tenderers should have access to their own records, even if they are not publicly-available, so as to enable them to check their accuracy. This is particularly relevant if public contract registries are used for the purposes of assessing past performance under the new rules.
• Big data should be published on an anonymised basis, so that general trends can be analysed without enabling ‘reverse engineering’ of information that can be traced to specific bidders.
• The entity in charge of the public contracts registry should regularly publish aggregated statistics by type of procurement procedure, object of contract, or any other items deemed relevant for the purposes of public accountability of public buyers (such as percentages of expenditure in green procurement, etc).
• The entity in charge of the public contracts registry should develop a system of red flag indicators and monitor them with a view to reporting instances of potential collusion to the relevant competition authority.

My full discussion and reasons for these recommendations are available here.

Open season for new EU public procurement rules: direct effect, indirect effect and State liability

18 April 2016 marks the end of the transposition period for the 2014 Public Procurement Package, including Directive 2014/23 on concessions, Directive 2014/24 on public sector procurement and Directive 2014/25 on procurement in the utilities sector. As of close of business on 15 April 2016, only 7 Member States (the UK, Denmark, France, Germany, Spain, Lithuania and Hungary) had notified implementing measures for Directive 2014/24 to the European Commission—although some of them are only partial (such as the case of Spain)—which means that in most Member States, the Directives are effective from today despite the (total or partial) lack of domestic transposition measures (for some previous initial thoughts, see here). Even in those Member States that have transposed, should there be any interpretative doubts as to the compatibility of the transposing measures with the 2014 Public procurement package, it is now uncontroversial that the new EU public procurement Directives trump any domestic rules and must be given full effectiveness.

This post explores in streamlined terms the three avenues open for economic operators and, more importantly, for public administrations and entities carrying out public procurement activities to guarantee the effectiveness of the 2014 Public Procurement Package under general EU law—and explores in particular detail the obligation for Member States’ courts and administrative authorities to ensure its effectiveness under the doctrine of indirect effect—as well as the residual possibility to claim State liability.

Direct effect

Where the 2014 Public Procurement Package creates individual rights (a number of important provisions spring to mind, eg new rules on exclusion and self-cleaning, new rules on contract modification and contract termination, use of the European Single Procurement Document ESPD, etc), these are susceptible of enforcement under the doctrine of direct effect of EU law, which ensures that ‘a directive has direct effect when its provisions are unconditional and sufficiently clear and precise and when the EU country has not transposed the directive by the deadline’ (Van Duyn, C-41/74, EU:C:1974:133). This will be a viable enforcement route for the provisions of the 2014 Public Procurement Package that establish identifiable individual rights, so that an interested undertaking (or public administration) can rely on them despite the lack of transposition. However, in my view, this need not be the main (and definitely not the only) enforcement strategy in the period prior to the (delayed) transposition of the 2014 Public Procurement Package because the doctrine of indirect effect is a much more powerful tool.

Indirect effect

The Court of Justice of the European Union (CJEU) has clearly established a general obligation for Member States to interpret and to enforce national legislation according to the principles of the TFEU and other principles and basic objectives of EU rules. According to this principle of consistent interpretation (harmonious interpretation, convergent construction or interprétation conforme) and as a ramification of the positive duties imposed by the TFEU, Member States’ courts and authorities are to interpret national law so as to ensure that the objectives of the directives are achieved and that national law is consistent with the relevant provisions of EU law [Case 14/83 Von Colson and Kamman [1984] ECR 1891 para 26; and Case 79/83 Harz [1984] ECR 1921 para 26. Specifically in the field of public procurement, see Case 103/88 Costanzo [1989] ECR 1839 paras 28-33; and, more recently, Case C-357/06 Frigerio Luigi [2007] ECR I-12311 paras 28-29; and Joined Cases C-147/06 and C-148/06 SECAP [2008] ECR I-3565 para 22]—hence, giving it indirect effect through the interpretation and enforcement of domestic law [on the extension of these duties not only to national courts, but also and notably to national authorities, see J Temple Lang, ‘The Duty of National Courts under Community Constitutional Law’ (1997) 22 European Law Review 3; and ibid, ‘The Duty of National Authorities under European Constitutional Law’ (1998) 23 European Law Review 109, 114].

In other words, in applying national law, national courts and authorities are required, as far as possible, to interpret the national law (whether adopted before or after the directive) in the light of the wording and the purpose of the directive in order to achieve its intended results [see Case C-160/01 Mau [2003] ECR I-4791 para 34; Joined Cases C-397/01 to C-403/01 Pfeiffer and others [2004] ECR I-8835 paras 113-114; Case C-212/04 Adeneler [2006] ECR I-6057 paras 108-111; and Joined Cases C-187/05 to 190/05 Agorastoudis and others [2006] ECR I-7775 para 43]. The principle of consistent interpretation also requires that settled domestic case law is reinterpreted in light of the directives, so that not only statutory legislation, but also judge-made law, is constructed in a convergent manner with EU law [Case C-456/98 Centrosteel [2000] ECR I-6007 para 17].

In principle, the EU case law has held that this obligation of courts and national authorities of the Member States is not absolute, and certain limits could be found (i) in the initially restrictive approach towards horizontal direct effect of directives, (ii) in the prohibition of contra legem interpretation of domestic laws, and (iii) in the necessary respect of certain time limits generally applicable to the transposition of directives. However, a closer analysis of these general restrictions on the duty of consistent interpretation shows that they have been construed in very narrow terms in the case law. As a result, none of these apparent limits actually restricts in a significant manner the duty of Member States to ensure consistent construction of domestic legislation with EU rules—and, as of 18 April 2016, their obligation to ensure that their existing public procurement rules, interpreting case law and administrative doctrine are aligned with the 2014 Public Procurement Package.

As just mentioned, a first apparent limit to consistent interpretation might be encountered in the lack of horizontal direct effect of the directives’ provisions, and so consistent interpretation may be restricted if it could lead to the imposition on an individual of an obligation laid down by a directive which has not been transposed into domestic law, at least if such a result is unacceptable in the light of the general principles of law (particularly, the principles of legal certainty and non-retroactivity). Nonetheless, the interpretation conducted by the case law of the requirements that the imposition on individuals is (i) of obligations ‘as such’ and (ii) by the directive ‘of itself’ has followed a restrictive approach, with the result that this apparent restriction falls short of preventing the application of the doctrine of convergent construction in every case in which the legal position of an individual is negatively affected [Case C-177/88 Dekker [1990] ECR I-3941; and Case C-180/95 Draehmpaehl [1997] ECR I-2195, where the CJEU applied the doctrine of consistent interpretation even if the legal position of the individuals concerned was significantly altered. Along the same lines, see Case C-456/98 Centrosteel [2000] ECR I-6007 para 19 and Joined Cases C-240/98 to C-244/98 Océano [2000] ECR I-4491 paras 31-32].

It follows that, in the end, consistent interpretation of national legislation with EU law can generate (indirect or ancillary) negative effects on the legal position of individuals, as long as the result is acceptable in light of the general principles of law—ie, unless it runs contrary to fundamental legal guarantees provided by these principles to individuals, which now include the need to respect the limits derived from the right to good administration under Article 41 of the Charter of Fundamental Rights of the European Union [which is triggered , see Åkerberg Fransson, C-617/10, EU:C:2013:105; and Siragusa, C-206/13, EU:C:2014:126], and which will impose particular obligations to motivate any change of rules or the (in)direct application of the 2014 Public Procurement Package in the absence of domestic transposing measures [for discussion, see see P Craig, ‘Article 41 – Right to Good Administration’ in S Peers, T Hervey, J Kenner and A Ward (eds), The EU Charter of Fundamental Rights: A Commentary (Oxford, Hart, 2014) 1069-98]. However, having in mind the content of the 2014 Public Procurement Package, it is highly unlikely that any individual is affected in intolerably negative terms, particularly if the application of the new rules is adopted progressively (eg ‘for the next phase’ of ongoing public procurement procedures).

Another apparent limit could be found in that national courts and authorities are not obliged to make a contra legem interpretation of the relevant provisions of national legislation. Nevertheless, this limit does not seem to constrict significantly the result of the convergent construction of domestic and EU law, in so far as national courts and authorities are obliged to disapply the provisions of national law that frontally contradict EU law, by virtue of the principle of supremacy—and so the same final results are generally achieved [see K Lenaerts and P van Nuffel, Constitutional Law of the European Union, 2nd edn (London, Thomson/Sweet & Maxwell, 2005) 775-778]. Once more, in the case of the 2014 Public Procurement Package, it is very unlikely that any rules in the domestic systems explicitly and openly prohibit actions now allowed under the more flexible approach of the new rules (and if they do, they need be set aside and not applied), which thus significantly erodes the relevance of this theoretical limitation.

Finally, a waiting period is in principle also applicable to the duty of consistent interpretation—that is, the obligation of harmonious interpretation of national legislation arises only after the time-limit for the transposition of the directive has expired—which is precisely the event that the calendar triggered today.

Therefore, given that the limits of the principle of consistent interpretation remain somewhat blurry and that the CJEU has adopted an expansive approach to the issue of the obligation of Member States to guarantee the effectiveness of directives, the limits of legal construction of Member States’ law with conformity to EU directives should be interpreted restrictively in order to favour to the maximum extent the (indirect) effectiveness of EU law and the goals pursued by EU directives. This is all the more necessary in view of recent developments of the rules of construction developed by the CJEU that are superseding the traditional boundaries of the theory of direct effect and point towards a more general doctrine of ‘legality review’ of the legislative actions of Member States, and towards the expansion of the boundaries of legal interpretation that conform to the TFEU and secondary rules The limit seems to lie where consistent interpretation requires national courts and authorities to overcome ‘merely’ interpretative functions (broadly defined) and to assume legislative functions. Nonetheless, drawing the dividing line will usually be a difficult task and, as already mentioned, the clear prevalence of a pro communitate interpretative principle must be identified in the relevant case law.

To sum up, Member States are under an almost absolute obligation to guarantee that domestic legislation is interpreted and applied in a manner that is consistent with EU law and, in particular in the case of directives, to ensure that their goals and intended effects are attained through national legislation—regardless of whether that legislation was adopted for the sake of transposing those directives, and regardless of the proper or improper transposition of those directives. If this is taken seriously, in my submission, all contracting authorities of non-transposition Member States should better start operating as if the 2014 Public Procurement Package had been transposed through a (UK-inspired) copy-out approach [for further analysis with reference to the specific direct and indirect effect of the competition principle consolidated in Art 18(1) Dir 2014/24], see A Sanchez Graells, Public procurement and the EU competition rules, 2nd edn (Oxford, Hart, 2015) 215-223].

State liability

Finally, it may be worth reminding that the lack of transposition by the 18 April 2016 deadline is a manifest and grave infringement of EU law that can give raise to Francovich State liability of the non-transposing Member States if, despite the arguments provided above, they reject their duty to give the 2014 Public Procurement Package full (indirect) effect and in doing so cause a recoverable damage on individual undertakings (for a basic summary of applicable rules, see here).

Some reflections on competition implications of new procurement developments

ERA annual public procurement conference 2016 from Albert Sanchez Graells

Later this week at ERA's Annual Conference on Public Procurement 2016, I am presenting some of my thoughts about the competition and other practical implications of two main recent developments in public procurement policy and practice.

On the one hand, I will reflect on centralisation and collaboration in procurement and the increasingly commercial activity of central purchasing bodies. My remarks will be focused on two main issues: the legal difficulties that a policy on (cross-border) collaborative procurement faces, as well as the competition law implications of CPBs going commercial full tilt.

On the other hand, I will explore my concerns about the trend of creation of public (online) central registries of public contracts and the excessive transparency they can create in procurement intensive markets, which may result in severe anticompetitive implications  (see here and here).

These are the slides I will use, with references to further reading.

CJEU offers further clarification on rules for reliance on third party capacities and the possibility to impose restrictions thereof(C-324/14)

 In its Judgment of 7 April 2016 in PARTNER Apelski Dariusz, C-324/14, EU:C:2016:214, the Court of Justice of the European Union (CJEU) has provided further clarification on the rules applicable to reliance on third party capacities under Directive 2004/18 (for previous case law, see here), but also included references to the new rules in Directive 2014/24 that merit some close analysis.

In the case at hand, the contracting authority rejected a tenderers' decision to rely on the technical capacity of a third party despite having submitted a commitment by that third party to make its capacity available to the main tenderer for the period of execution of the contract -- thus meeting the (formal and substantive?) requirement in Art 48(3) Dir 2004/18, and also in Art 63(1) Dir 2014/24.

The key issue for the assessment of whether the way in which the cooperation foreseen between the main tenderer and the third party was acceptable rested on the fact that the third party (PUM) 'made its capacities available to Partner [the main tenderer], in particular, its consulting services including, among others, training for Partner’s employees and help to resolve any problems which might arise at the performance stage of the contract. Partner also stated that, for the purposes of the performance of the contract that cooperation was to be governed by a contract between the two undertakings' (C-324/14, para 23). The contracting authority was dissatisfied because 'it took the view that PUM’s knowledge and experience could not be made available without the personal, actual participation of that company in the performance of the contract at issue' (ibid, para 25, emphasis added). This decision implied Partner's exclusion from the tender procedure, which gave rise to the challenge.

After reiterating its general case law on the possibility to rely on third party capacities for the purposes of participating in a public tender (paras 33-35), the CJEU stressed that

36 ... the fact that, under Article 48(3) of Directive 2004/18, an economic operator may rely on the resources of other entities ‘where appropriate’ cannot be interpreted as the referring court, in particular, appears to suggest, as meaning that it is only exceptionally that such an operator may rely on the resources of third party entities.

37 That being said, it must be stated, first, that, although it is free to establish links with the entities on whose resources it relies, and to choose the legal nature of those links, the tenderer is nonetheless required to produce evidence that it actually has available to it the resources of those entities or undertakings, which it does not itself own, and which are necessary for the performance of the contract (see to that effect, judgment in Holst Italia, C‑176/98, EU:C:1999:593, paragraph 29 and the case-law cited).

38 Thus, in accordance with Articles 47(2) and 48(3) of Directive 2004/18, a tenderer may not rely on the resources of other entities in order to satisfy in a purely formal manner the conditions required by the contracting authority (C-324/14, paras 36-38, emphasis added).

This seems to establish a proper general principle that requires a substantive assessment of the relationship between the main tenderer and third parties [for discussion, see A Sanchez-Graells, Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 315 and ff]. Beyond that, the CJEU continued to note that

39 Second, ...the provisions of Directive 2004/18 do not preclude the exercise of the right established in Articles 47(2) and 48(3) thereof from being limited in exceptional circumstances (see, to that effect, judgment in Swm Costruzioni 2 and Mannocchi Luigino, C‑94/12, EU:C:2013:646, paragraph 36).

40 It is conceivable that there may be works with special requirements necessitating a certain capacity which cannot be obtained by combining the capacities of more than one operator, which, individually, would be inadequate. In such circumstances, the contracting authority would be justified in requiring that the minimum capacity level concerned be achieved by a single economic operator or, where appropriate, by relying on a limited number of economic operators, in accordance with the second subparagraph of Article 44(2) of Directive 2004/18, as long as that requirement is related and proportionate to the subject matter of the contract at issue (judgment in Swm Costruzioni 2 and Mannocchi Luigino, C‑94/12, EU:C:2013:646, paragraph 35).

41 Likewise, it is conceivable that, in specific circumstances, having regard to the nature and objectives of a particular contract, the capacities of a third party entity, which are necessary for the performance of a particular contract, cannot be transferred to the tenderer. Accordingly, in such circumstances, the tenderer may rely on those capacities only if the third party entity directly and personally participates in the performance of the contract concerned (C-324/14, paras 39-41, emphasis added).

This is interesting because this line of reasoning explicitly endorses the changes introduced by Art 63(1) Dir 2014/24, which establishes that '[w]ith regard to criteria relating to ... the relevant professional experience, economic operators may ... only rely on the capacities of other entities where the latter will perform the works or services for which these capacities are required'. Therefore, the Judgment in Partner is relevant because it anticipates the interpretation of the future rules [for discussion, see A Sanchez-Graells & GS Olykke, 'Under the political science magnifying glass: reformation or deformation of the EU public procurement rules in 2014?', in ibid (eds), Reformation or Deformation of the EU Public Procurement Rules in 2014 (Cheltenham, Edward Elgar Publishing, 2016) forthcoming].

Looking closer at the assessment of the CJEU under the circumstances of the case, it is worth stressing that

42 ... the referring court expresses doubts as to whether PUM’s capacities may genuinely be transferred to Partner so that the resources necessary for the performance of the contract at issue in the main proceedings may be placed at Partner’s disposal ..., given the fact that the resources in that case are made available simply by providing consultation and training services, without any direct participation by PUM in the performance of that contract.

43 In that connection, it must be observed that the public contract at issue in the main proceedings ... is for the comprehensive mechanical cleansing of the roadways of Warsaw in winter and summer for four consecutive years.

44 In particular, as regards winter cleansing, it is apparent ... that that service requires specific skills and a detailed knowledge of the topography of the city of Warsaw and, above all, the ability to react immediately in order to attain specific maintenance standards for the roadways within a specific period.

45 Furthermore, that service is based on the use of specific technology requiring a level of experience and a high degree of skill in using it, which alone enables the contract at issue in the main proceedings to be performed properly while avoiding dangerous consequences for road traffic.

46 In those circumstances, the actual performance of such a contract requires the involvement of experienced staff who, inter alia, by directly observing the state of the surface of the roadways and carrying out on-the-spot tests are able to anticipate or, in any event, respond appropriately to the specific needs of that contract.

47 Taking account of the subject matter of the contract at issue in the main proceedings and its objectives, it is conceivable that PUM’s proposed involvement, consisting simply in the provision of consultation and training services, cannot be regarded as sufficient in order to guarantee that Partner would have at its disposal the resources necessary for the performance of that contract ... (C-324/14, paras 42-47, emphasis added).

I find these considerations very relevant because it seems that the CJEU is willing to engage in a substantive analysis, but not necessarily subject it to a strict proportionality test. In any case, contracting authorities willing to request tenderers or third parties on which they rely to carry out certain activities directly will be well advised to make this particularly clear in the tender documentation, not least if they also want to complement this substantive requirement with additional rules on liability, as foreseen in Art 63(2) Dir 2014/24.

Interesting paper on political contestability and public contracts' rigidity [Beuve, Moszoro & Saussier (2016)]

In their interesting paper 'Political Contestability and Contract Rigidity: An Analysis of Procurement Contracts', Beuve, Moszoro & Saussier 'argue that a significant part of the contractual rigidity difference between purely private and public contracts [is] due to the specific nature of public contracts which are more permeable to the political environment'. This main claim is very interesting (and potentially controversial) because it implies that public contracts are per se more prone to ex ante formalisation and ex post modification and renegotiation.

Beuve, Moszoro & Saussier's argument lies in good measure in the insight that 'public contracts are characterized by intrinsic differences stemming from the fact that a substantial amount of supervision and control is done by political contesters and interest groups who have a stake in challenging and disrupting the contractual relationship. Thus, although politics is normally not necessary to understand private contracting, it becomes fundamental to understanding public contracting' (p. 2).

Furthermore, they stress that '[p]ublic contracting is characterized by formalized, standardized, bureaucratic, and rigid procedures, partly because politics must be secured against opportunistic third parties. What we call “contract rigidity” refers to rule-based (bureaucratic) implementation; i.e., the addition of contractual provisions and specifications that impose ex post stiff enforcement, intolerance to adaptation, and penalties for deviation'; and that '[m]oreover, when faced with unforeseen or unexpected circumstances, private parties— as long as the relationship remains worthwhile—adjust their required performance without the need for costly and formal renegotiation ... Conversely, public agents will be more likely to have these contractual changes formalized in amendments. The same insulation mechanism that triggers higher rigidity of public contracts compared to purely private contracts induces formalization of renegotiations through written amendments' (ibid).

They derive three propositions: 'First, public contracts are more rigid than equivalent transactions governed under private contracting. Second, contracts signed with public authorities in politically contestable jurisdictions are characterized by more rigid procedures than other public contracts; i.e., public authorities subject to third-party challenges increase the proceduralization of contractual agreements to insulate themselves from plausible politically motivated challenges. Third, public contracts renegotiations are more frequently formalized through amendments because of their initial rigidity (i.e., no relational adaptation) and as a means to avoid charges of discretionary misuse of public funds' (pp. 2-3).

They test these propositions using a rich database of car park contracts contracts signed between 1985 and 2009 in France. Remarkably, their dataset is quite unique in that they analyse contracts 'signed between one private operator and 24 private procurers ... and between the same private operator and 152 public authorities'. This allows them to isolate certain idiosyncratic characteristics of public contracts.  In their terms: 'Because there is only one contractor and car parks arguably entail a standardized product and service, a large part of the contractual heterogeneity comes from the procurers’ characteristics and time-varying political contestability' (p. 3).

Rather controversially, at least when confronted with the received wisdom that (public) contract renegotiation can derive from opportunism or even corruption [see, from a legal perspective, eg GM Racca & R Cavallo Perin, 'Material Amendments of Public Contracts during their Terms: From Violations of Competition to Symptoms of Corruption' (2013) 4 EPPPL 279-293], they submit that their 'results suggest that previous studies that surfaced public contracts’ inefficiencies related to high renegotiation rates ... might be somewhat misleading. Frequent renegotiations observed in public contracts can be understood as a consequence of their specific nature instead of a manifestation of opportunism: “In a sense, [...] the frequency of contract renegotiation may provide concessions a ‘relational’ quality” ... An important corollary is that the perceived inefficiency of public contracting is largely the result of contractual adaptation to different inherent hazards and thus is not directly remediable' (p. 4, emphasis added). Or, as they venture in their conclusions, '[w]hat can be interpreted, at first glance, as a sign of weakness (i.e., frequent amendments) might well be good news indicating that the contracting parties can make the contract adaptable through time' (p. 23).

I find Beuve, Moszoro & Saussier's a very thought-provoking claim and one that will be very relevant for the scholarship dealing with the challenges derived from the new rules on contract modifications included in Art 72 of Directive 2014/24--and the complex rules in which they will necessarily derive in their transposition into Member States' domestic legal systems. Thus, I think that this is a paper worth reading and its insights should be taken into account when shaping domestic modification controls, particularly in terms of oversight.

Public procurement keeps steady in CJEU's 2015 Annual Report--A quick look

The Court of Justice of the European Union has made available a preliminary version of its 2015 Annual Report (see here). It offers data that consolidates public procurement as a very significant area of activity, continuing with the trend identified since 2012 (and in 2014), and likely to be boosted by the need to interpret the new rules of the 2014 public procurement package, which enter into force in less than two weeks (on 18 April 2016), despite most Member States not having transposed. Pending a more detailed assessment of the data, some figures have caught my attention.

When it comes to the CJEU itself, in 2015, it opened 26 new public procurement cases (including 22 direct actions) and decided 14 cases (of which 12 were judgments and 2 were orders), thus also continuing the increasing trend of accumulated backlog of cases in this important area of EU law. It also reviewed two appeals against interim measures and denied both of them.

On its part, the General Court (GC), also in 2015, opened 23 new procurement cases and took 22 decisions (including 12 judgments and 10 orders), thus managing to cope with a balanced input/output of new workload, but probably not absorbing the backlog accumulated in previous years (which remains at 35 pending cases as of 31 December 2015, in line with the 36 pending in 2013 and the 34 pending in 2014). Regarding interim measures, the GC reviewed 7 applications and granted 3 of them. Of the 4 GC decisions appealed before the CJEU decided in 2015, 3 were upheld.

Overall, unfortunately, the same conclusion as in previous years seems clear: the CJEU and the GC are struggling to keep pace with their public procurement workload, and this is likely to get worse in the coming few years, particularly if preliminary questions regarding the direct effect of the 2014 public procurement package mushroom as a spillover of the late transposition in the Member States. In any case, also as in previous years, this quantitative information needs to be taken with a pinch of salt, as there are many qualitative nuances that cannot be identified at this level.

Non ci facciano perdere tempo... CJEU axes barriers to effective judicial review or procurement challenges and stresses 'obligation' to follow preliminary rulings (C-689/13)

Blogging from Turin, this case seems a bit too rightly timed

In its Judgment of 5 April 2016 in PFE, C-689/13, EU:C:2015:693, the Court of Justice of the European Union (CJEU) has confirmed the jurisprudential line started with Fastweb , C-100/12, EU:C:2013:448 (see comment here), and adopted a very clear position against procedural barriers that could prevent the effective review of public procurement challenges. It has also stressed the 'obligation' incumbent upon last instance courts to  ensure respect for (ie application of) the interpretation of EU law derived from the CJEU's answer to a reference for a preliminary ruling, or the previous case-law of the CJEU that already provides a clear answer to that question.

The case at hand concerned several procedural rules and practices applicable to the review of public procurement challenges in Italy and their compatibility with the Remedies Directive [Art 1(3)], as well as Art 267 TFEU and of the principles of effectiveness and the primacy of EU law.

The factual situation was different, but the technical setting was identical to Fastweb in that the challenger of the procurement decision (PFE) was confronted with a counterclaim by the would-be awardee of the contract (GSA) on the basis that PFE 'had no legal interest in bringing the proceedings as it did not fulfil the eligibility requirements for the tendering procedure and should therefore have been excluded from the procedure' (C-689/13, para 14). The first review court assessed GSA's counterclaim first and, finding in GSA's favour, dismissed PFE's main claim without a full review. 

Thus, the case once more concerns the Italian rule that 'if a counterclaim has been brought challenging the main action on the ground that it is inadmissible, the counterclaim must be given precedence and examined before the main action. Under the national legal system, such a counterclaim is classified as ‘exclusive’ or ‘paralysing’ on the basis that, where the counterclaim is deemed well founded, the court seised is required to dismiss the main action as inadmissible without assessing its merits' (C-689/13, para 15).

Despite the existence of the Fastweb Judgment, which explicitly opposes such procedural path, the Consiglio di Stato felt compelled to send the request for a preliminary reference because while 'in the case which gave rise to that judgment, only two undertakings submitted tenders and both of them had conflicting interests in the main action for annulment brought by the undertaking whose bid had been unsuccessful and in the counterclaim brought by the successful tenderer, ... in the [PFE] case, more than two undertakings submitted bids, even though only two of them have brought proceedings' (C-689/13, para 17).

It is not clear whether the Consiglio di Stato was attempting to prompt the CJEU to reconsider its Fastweb case law. Or maybe the case was just an 'excuse' to seize the CJEU en passant for a clarification of a different (arguably internal) matter about the Independence with which different chambers and divisions within the Consiglio di Stato operate for the purposes of sending references for preliminary rulings t the CJEU. In particular, and in the simplified terms adopted by the CJEU, the core of the second question was whether 'where a question concerning the interpretation or validity of EU law arises, a chamber of a court of final instance must, if it does not concur with the position adopted by decision of that court sitting in plenary session, refer the question to the plenary session and is thus precluded from itself making a request to the Court of Justice for a preliminary ruling' (C-689/13, para 31).

On the 'generality' of Fastweb

Unsurprisingly, the CJEU very clearly reaffirmed the position and clarified that Fastweb is a general ruling or, in more detailed terms:

28 The interpretation given by the Court in Fastweb ... is applicable in a context such as that of the main proceedings. First, each of the parties to the proceedings has a legitimate interest in the exclusion of the bids submitted by the other competitors. Second ... it cannot be ruled out that one of the irregularities justifying the exclusion of both the successful tenderer’s bid and that of the tenderer challenging the contracting authority’s decision may also vitiate the other bids submitted in the tendering procedure, which may result in that authority having to launch a new procedure.

29      The number of participants in the public procurement procedure concerned as well as the number of participants who have instigated review procedures and the differing legal grounds relied on by those participants are irrelevant to the question of the applicability of the principle established by the Fastweb (C‑100/12, EU:C:2013:448) case-law.

30      In the light of the foregoing considerations, the answer to the first question is that the third subparagraph of Article 1(1) and Article 1(3) of Directive 89/665 are to be interpreted as meaning that a main action for review brought by a tenderer with an interest in obtaining a particular contract who has been or may be adversely affected by an alleged breach of EU public procurement law or rules transposing that law, with a view to excluding another tenderer, cannot be dismissed as inadmissible under national procedural rules which provide that the counterclaim lodged by the other tenderer must be examined first (C-689/13, paras 28-30, emphasis added).

On the bounless access to the CJEU

Further to that, and in relation with the second question, the CJEU also unsuprisingly was unwilling to recognise any limitation of the possibility or duty for domestic courts to send cases for a preliminary ruling (see here). In clear terms, the CJEU confirmed that

32 ... national courts have the widest discretion in referring questions to the Court involving interpretation of relevant provisions of EU law ..., that discretion being replaced by an obligation for courts of final instance, subject to certain exceptions recognised by the Court’s case-law ... A rule of national law cannot prevent a national court, where appropriate, from using that discretion, ... or complying with that obligation.

33      Both that discretion and that obligation are an inherent part of the system of cooperation between the national courts and the Court of Justice established by Article 267 TFEU and of the functions of the court responsible for the application of EU law entrusted by that provision to the national courts.

34      As a consequence, where a national court before which a case is pending considers that a question concerning the interpretation or validity of EU law has arisen in that case, it has the discretion, or is under an obligation, to request a preliminary ruling from the Court of Justice, and national rules imposed by legislation or case-law cannot interfere with that discretion or that obligation.

35      In the present case, a provision of national law cannot prevent a chamber of a court of final instance faced with a question concerning the interpretation of Directive 89/665 from referring the matter to the Court of Justice for a preliminary ruling (C-689/13, paras 32-35, references omitted and emphasis added).

On the need to follow-up and 'ask responsibly'

Maybe to compensate for the boundless access to the preliminary ruling procedure, the CJEU also sent a 'friendly' warning to (all, but mainly the Italian) national courts of last instance in what could be considered a reenactment of the boundaries of the acte claire doctrine (see here).

 38 ... a judgment in which the Court gives a preliminary ruling is binding on the national court, as regards the interpretation or the validity of the acts of the EU institutions in question, for the purposes of the decision to be given in the main proceedings ... Accordingly, the national court which, adjudicating as court of final instance, has complied with its obligation to make a reference to the Court for a preliminary ruling under the third paragraph of Article 267 TFEU, is bound, for the purposes of the decision to be given in the main proceedings, by the interpretation of the provisions at issue given by the Court and must, if necessary, disregard any national case-law which it considers inconsistent with EU law ...

39      It should also be noted that the effectiveness of Article 267 TFEU would be impaired if the national court were prevented from forthwith applying EU law in accordance with the decision or the case-law of the Court.

40      A national court which is called upon, within the exercise of its jurisdiction, to apply provisions of EU law is under a duty to give full effect to those provisions, if necessary refusing of its own motion to apply any conflicting provision of national legislation, even if adopted subsequently, and it is not necessary for the court to request or await the prior setting aside of such provision by legislative or other constitutional means.

41      Any provision of a national legal system and any legislative, administrative or judicial practice that might impair the effectiveness of EU law by withholding from the national court with jurisdiction to apply such law the power to do everything necessary at the moment of its application to set aside national legislative provisions that might prevent EU rules from having full force and effect are incompatible with those requirements, which are the very essence of EU law (C-689/13, paras 38-41, references omitted and emphasis added).

Difficulties derived from the asymmetrical economic integration in the EU: some reflections on the way forward? – re Bieling, Jäger & Ryner (2016)

In their recent paper ‘Regulation Theory and the Political Economy of the European Union’ (2016) 54(1) Journal of Common Market Studies 53-69, Bieling, Jäger & Ryner critically assess ‘how regulation theory has interpreted the single market, financial liberalization and EMU as a suppression of alternatives to neoliberal post-Fordism, or finance-led accumulation, in Europe’.

Their paper focuses on a high-level discussion of two selected economic crises (the 1970s and the ongoing crisis started in 2008) and uses it to situate the EU’s regulatory responses within a Gramscian analytical framework, thus arguing that ‘understanding the EU’s current conjecture of Eurozone crisis management requires a neo-Gramscian extension of regulatory theory, stressing transnational patterns of capitalist accumulation and power relations’.

The paper is interesting because they claim that the ‘implemented institutional and regulatory reforms can be interpreted as the manifestation of what Gramsci [Selections from the prison notebooks of Antonio Gramsci (Int’l Pub, 1971) 104] called a “passive revolution”, i.e. of power-preserving piecemeal changes “from above” without active mass politics … the passive revolution within the EU is, however, unlikely to become successful. At least for the time being, it is in trouble because central contradictions of accumulation and the latent overaccumulation crisis remain unsolved. The rift between the core and the periphery is deepening and uneven development in the European Union is very likely to remain a severe threat for the future of European integration’ (Bieling, Jäger & Ryner, 2016: 65).

Their observation of the overall trend and current weakness of the European integration strategy can hardly be contested and it seems clear that more fundamental changes are necessary for the European (but not only) economic crisis to be cured at its roots. Their paper clearly puts the European financial capitalism model at such root position – which is relatively uncontroversial. One of the passages of their analysis I find particularly relevant is that they stress that part of the causes that fuelled the ‘financialization’ of the (European) economy was a change in economic structural conditions three decades ago.

As they point out. ‘[s]ince the 1990s, European integration has … been characterized not only by intensified – institutional and regulatory – competition and a rather restrictive monetary and financial policy setting, but also by the transition towards a European financial capitalism … This transition took place against the background of structural over-accumulation of capital, so that, in view of missing fields of productive investment, increasing amounts of profits and savings were absorbed by banks and institutional investors, both trying to exploit prospected yields offered by deregulated financial markets … some other processes stimulated finance-dominated accumulation as well, such as rising public debt; the privatization of public enterprises such as industrial conglomerates, banks, insurance companies or providers of other public services and infrastructure; and, most importantly, the introduction and promotion of (private) capital market-based pension schemes’ (Bieling, Jäger & Ryner, 2016: 62).

Their paper is clear in stopping at the level of identifying the issues that support the insufficiency of the (current version) of the European financial capitalism model to offer a solution for the future, and laying out a research agenda for the future. However, in my view, their approach already seems to clearly suggest a need for a reversal of some of the trends that led to the (current version) of the European financial capitalism model. If that is the case, then I would disagree with that path of development, at least at the regulatory level.

The difficulties derived from liberalisation and competition-based reliance in the market cannot only be overcome by abandoning the path of development of the European (financial) capitalism model, which is not constrained to neoliberal post-Fordism. An alternative view of Bieling, Jäger & Ryner’s account is that the difficulties derived from the asymmetrical economic integration in the EU result not from too much centralisation of economic decision-making and regulation-based liberalisation, but from too little economic integration and solid regulatory and oversight mechanisms.

Thus, the alternative system for the future need not lie too far from neoliberal post-Fordism, and can well be developed on the basis of a properly understood liberal economic model based on sound public policy (and, possibly, a further federalisation of the European Union) – or what has been termed a (neo)-ordoliberal approach to European economic integration and regulation [for background discussion, see I Herrera Anchustegui, 'Competition law through an Ordoliberal Lens' (2015) 2 Oslo Law Review 139-174].

Doing otherwise would presume that the State can be a better manager of economic growth, technological development and social wealth than it (has been) a monitor of private arrangements building up to social preferences. I do not think this to be a solid point of departure and could hardly see the public sector directly developing the activities needed to overcome current challenges when it is hardly able to react and reconduct their spillovers.

Looming security issues aside for the purposes of this discussion, there are areas where the State clearly needs to revisit its role and policy – and taxation and social welfare are the two obvious priorities in my view, together with a reconstruction of the system of independent regulatory agencies and a clear push for an effective use of information technologies to improve all of these roles. Other than that, the issue of the de-financialization of the European economy seems beyond the reach of the State, exception made of the use of taxation to create incentives in that direction.

In this day and age, it is hard to see how claims of the existence of ‘a “passive revolution”, i.e. of power-preserving piecemeal changes “from above” without active mass politics’ talk to reality. Mass politics have not disappeared, they have simply morphed into mass apathy (or wilful ignorance), and the politics of the day are of social media window-dressing activism, coupled with non-acknowledged consumerist hypocrisy. The real challenge is for each of us to really start putting our money where our mouth is or, conversely, to be honest and put our mouths where our money is. But, quite simply, the State cannot do it for us and should not substitute our liberty for its discretion. All it can do is create mechanisms that constrain our choices, both directly (taxation) and indirectly (market regulation, including the imposition of desirable environmental and social standard throughout the economy).

More specifically from the perspective of my pet topic of public procurement law, the State needs to stop pretending to act as a ‘good citizen’ by buying green and social, or coming up with any new wave of ‘smart’ procurement policies that only apply to 20% of GDP  – thus allowing it to resort to the same window-dressing strategy to cover its broader regulatory failures (the bulk of the economy, 80% cannot be reoriented or changed merely ‘by example’) that we enjoy in covering our poor consumerist choices with social media activist stunts – and start focusing on the proper use of public procurement as a tool to channel the ever scarcer public funds in the most effective way possible.

In my view, this is the progressive approach that is required in order to overcome the difficulties derived from the asymmetrical economic integration in the EU and the (current version) of the European financial capitalism model. Aborting the project of transformation of the European state from a 19th century model towards a true 21st century model half way through would be unwise. I will not be surprised if this triggers more criticism as a neoliberal scholar, though ....