No obligation to revise prices payable under public contracts. OK, but for the wrong reasons? (C-152/17)

In its recent Judgment of 19 April 2018 in Consorzio Italian Management e Catania Multiservizi,
C-152/17, EU:C:2018:264, the Court of Justice of the European Union (CJEU) clarified that EU public procurement law (in this case, the 2004 Utilities Directive) does not create an obligation to review prices after the award of a public services contract. This seems largely uncontroversial, not least due to the lack of concern of the pre-2014 EU procurement rules with contract execution. However, the reasons given by the CJEU to exclude mandatory price revision and, beyond that, the mistrust it places on price review clauses, are dubious. The way in which the CJEU refers back to Finn Frogne (see here) should also set off some alarm bells.

The case at hand (N.B. Defective English version of the Judgment)

In this case, Rete Ferroviaria Italiana (RFI) had awarded a services contract to Consorzio Italian Management and Catania multiservizi (CIMCM) for the cleaning, maintenance and ancillary services at stations, installations, offices and workshops at various sites throughout the region of Cagliari. The contract included a clause limiting price review. Despite that, and as a result of increasing staff costs, CIMCM requested RFI to review the prices payable under the contract (ie the claim seemed to be a statutory claim contra the explicit terms of the public contract). RFI rejected the request for the price revision, which triggered the underlying dispute. Establishing the legal architecture underlying the claim requires some legal funambulism.

The award of the contract had been subject to the rules of the 2004 Utilities Directive, as well as domestic law transposing it. At the relevant time, the Italian procurement code (Legislative Decree No 163/2006) established that in 'the absence of any express provisions' in the procurement rules, the Italian Civil Code (Codice Civile, CC) would provide default rules for contractual arrangements between contracting authorities or entities and their contractors. It is important to clarify that the Italian procurement code had a two-tier approach whereby it established a full regime applicable to general procurement (tier 1) and then specified a sub-set of rules applicable to utilities procurement (tier 2, Art 206 Legislative Decree No 163/2006). Tier 2 set a numerus clausus of provisions applicable to contracts linked to the activities referred to in Articles 3 to 7 of the 2004 Utilities Directive.

Concerning the review of contractual prices, Art 115 of the Italian procurement code established that '[a]ll contracts for the supply of goods or services on an ongoing basis must include a clause providing for periodic review of the price'. This provision was however inapplicable to public contracts in the utilities sectors [N.B. despite the English version of the Judgment (para 11), where it is indicated that 'Article 115 of that Legislative Decree was one of the provisions which, under Article 206 thereof, were applicable to public contracts', this is contradicted by eg the French ('L’article 115 de ce décret législatif ne figurait pas ...') and Italian ('L’articolo 115 di tale decreto legislativo non era indicato ...') versions of the Judgment, as well as the logic of the decision]. It is thus worth taking into account that, where Art 115 was not applicable, the default rule in the Italian Civil Code would provide for price revision linked to circumstances of 'hardship' (ie cost increases above 10% of the overall price agreed; Article 1664 CC).

The dispute between CIMCM and RFI is fundamentally concerned with a domestic issue of contractual and statutory interpretation. However, given that the scope of application of the domestic rules is pegged to the scope of application of the 2004 Utilities Directive, it acquired EU relevance.

At first instance, the challenge was dismissed by the regional administrative tribunal on the basis that 'the supply of cleaning services at stations, installations, offices and workshops was ancillary to the performance of activities covered by special sectors, in that those services related to elements forming an essential part of the rail transport network' (C-152/17, para 16, emphasis added). This justified the subjection of the contract to the tier 2 procurement regime, and thus excluded the mandatory price review clause of Art 115 of the Italian procurement code. Beyond that, the regional administrative court reached the additional finding that 'price review was not mandatory under Article 1664 of the Civil Code, as the parties to a contract may derogate from that provision by inserting in the contract a contract term limiting price review, which was the case in the main proceedings' (ibid). 

Given the implicit reference to Art 5 of the 2004 Utilities Directive in terms of scoping the applicability of the relevant rules, which was challenged in the appeal of the first instance decision, the dispute required clarification from the CJEU. Moreover, the claimants raised a challenge of validity against the 2004 Utilities Directive by arguing that, should it allow for the award of contracts excluding price revision, it would infringe Articles 3(1) TEU, Articles 26, 56 to 58 and 101 TFEU, and Article 16 of the Charter, ‘in the light of the unfairness, disproportionality and distortion of contractual balance and, therefore, of the rules governing an efficient market’ (C-152/17, para 19). The reasoning of the CJEU on these two matters (scope of application and validity of the 2004 Utilities Directive) is interesting.

Functional scope of application

The issue here seems simply to require an understanding of the functional approach followed b y the CJEU in determining the scope of application of the 2004 Utilities Directive. In that regard, the CJEU stressed that

... as regards the interpretation of Directive 2004/17 and of the underlying general principles, the referring court considers that the contract at issue in the main proceedings falls within the scope of that directive, since it was awarded by a contracting authority within the meaning of that directive, namely RFI, and that it is functionally linked to rail transport operations falling within the scope of that directive.

In that regard, it follows from the Court’s case-law that Directive 2004/17 in fact applies not only to contracts awarded in the sphere of one of the activities expressly listed in Articles 3 to 7 thereof, but also to contracts which, even though they are different in nature and could as such normally fall within the scope of Directive 2004/18/EC ..., are used in the exercise of activities defined in Directive 2004/17. Consequently, where a contract awarded by a contracting entity is connected with an activity which that entity carries out in the sectors listed in Articles 3 to 7 of that directive, that contract is subject to the procedures laid down in that directive (C-152/17, paras 25-26, references omitted and emphasis added).

This creates the functional criterion that ancillary activities are covered by the Utilities procurement regime because, as a matter of determining the scope of the activities listed in Arts 3 to 7 of Dir 2004/17, EU procurement law also comprises ancillary activities.

No 'EU law' obligation to revise prices

Beyond that, the CJEU also stressed that 

... it is not apparent from any provision of that directive that it must be interpreted as precluding rules of national law, such as Article 115, in conjunction with Article 206, of Legislative Decree No 163/2006, which do not provide for periodic review of prices after contracts are awarded in the sectors covered by the directive, since the latter does not impose any specific obligation on Member States to lay down provisions requiring the contracting entity to grant its contractual partner an upwards review of the price after the contract has been awarded (C-152/17, para 29, emphases added)

In my view, this is correct, and there is no question that the 2004 Utilities Directive did not create an 'EU law' obligation to include contract review clauses. However, the reasons given by the CJEU on the basis of the general principles of procurement should raise some eyebrows. Indeed, the CJEU found that

... the general principles underlying Directive 2004/17, in particular the principle of equal treatment and the consequent obligation of transparency enshrined in Article 10 of that directive do not preclude such rules either. On the contrary, it cannot be ruled out that a price review after the contract has been awarded may run counter to that principle and that obligation (see, by analogy, judgment of 7 September 2016, Finn Frogne, C‑549/14, EU:C:2016:634, paragraph 40). Indeed, as the Commission points out in its written observations, the contract price is an element of great importance in the assessment of tenders by a contracting entity, as well as in its decision to award the contract to an operator. This is also clear from the reference to the price in both of the criteria for the award of contracts mentioned in Article 55(1) of Directive 2004/17. In those circumstances, rules of national law which do not provide for periodic price review after the award of contracts in the sectors covered by that directive are, in fact, likely to encourage compliance with those principles.

It follows from those considerations that Directive 2004/17 and the general principles that underlie it are to be interpreted as not precluding national rules, such as those at issue in the main proceedings, which do not provide for periodic price review after a contract has been awarded in the sectors covered by that directive (C-152/17, paras 30-31, emphases added).

Wrong reasons?

The reasoning of the CJEU is certainly hard to share, in particular in view of the precise reasoning of Finn Frogne--unless read in an extreme manner. It is also hard to reconcile with Art 72(1)(a) of Directive 2014/24 and Art 89(1)(a) of Directive 2014/25.

The reasoning of the CJEU is hard to reconcile with the fact that the relevant Italian rules (Art 115) established that price revision clauses had to be included in the relevant contract (but did not prescribe their content) and had to establish that the price 'revision shall be carried out on the basis of an investigation by the managers responsible for the acquisition of goods and services on the basis of the data' regulated in other parts of the Italian procurement code (C-152/17, para 11). How this is incompatible with Finn Frogne is beyond me, as the Court stated there that the position that 'following the award of a public contract, a material amendment cannot be made to that contract without a new tendering procedure ... would be different only if the contract documents provided for the possibility of adjusting certain conditions, even material ones, after the contract had been awarded and fixed the detailed rules for the application of that possibility' (C-549/14, para 40, emphasis added). Two thoughts come to mind here. First, that a review clause compliant with Art 115 of the Italian procurement code would meet precisely the requirements of Finn Frogne. Second, that the issue whether the exclusion or limitation of price review under the specific contract was allowable rested solely on the point of determination of the scope of application of the 2004 Utilities Directive, so why did the CJEU feel the need to include this obiter dictum?

Looking forward, it is difficult to understand what the CJEU has in mind concerning equal treatment, transparency and price revision clauses. While in Finn Frogne --and, incidentally, in Art 72(1)(a) of Directive 2014/24 and Art 89(1)(a) of Directive 2014/25-- the position is that contractual price revision clauses are perfectly compliant with EU procurement rules and the principles of transparency and equal treatment; in Consorzio Italian Management the CJEU seems to be of the opposite view and stress that 'rules of national law which do not provide for periodic price review after the award of contracts ... are, in fact, likely to encourage compliance with those principles' (C-152/17, para 30). Of course, taken in isolation, both approaches make sense, but I would struggle to reconcile them if there was a claim that a contractual price revision clause was discriminatory because it either had different impact on different potential contractors, or because its interpretation could favour some suppliers over others. What is more objective, to have a contractual price review clause or not to have it? In addition, what is the problem with having legislative requirements for those clauses, as was the case in Art 115 of the Italian procurement code?

What about Art 16 of the Charter?

Another point worth mentioning is the CJEU's approach to the analysis of the compatibility of the inexistence of a right to price revision with Art 16 of the Charter, enshrining the freedom to conduct a business. Here, it would seem possible to expect from the CJEU an analysis of whether the inexistence of such a right as a matter of EU law is in compliance with the Charter. However, the CJEU refused to answer that question on the grounds that it was hypothetical (see paras 37-40). However, the CJEU did engage on the analysis of compatibility within the context of the first question, and almost as a matter of jurisdictional rather than substantive analysis. In that regard, the CJEU stressed that

... as regards the interpretation of Article 16 of the Charter, it must be recalled that, under Article 51(1) of the Charter, its provisions are addressed to the Member States only when they are implementing EU law. Under Article 51(2) of the Charter, the Charter does not establish any new power or task for the Union, or modify powers and tasks as defined in the Treaties. Accordingly, the Court is called upon to interpret EU law, in the light of the Charter, within the limits of the powers conferred on it ...

In that regard, it should be borne in mind that the concept of ‘implementing Union law’ within the meaning of Article 51 of the Charter presupposes a degree of connection between the measure of EU law and the national measure at issue. In particular, the Court has ruled that fundamental European Union rights could not be applied in relation to national legislation because the provisions of EU law in the area concerned did not impose any specific obligation on Member States with regard to the situation at issue in the main proceedings ...

In the present case, since it is apparent from paragraphs 29 and 30 above that neither Directive 2004/17 nor its underlying general principles impose on Member States a specific obligation to lay down provisions requiring the contracting entity to grant its contractual partner an upwards price review after the award of a contract, the provisions of Legislative Decree No 163/2006 at issue in the main proceedings, in so far as they do not provide for periodic price review within the sectors covered by that directive, do not have any connection with that directive and cannot, therefore, be regarded as implementing EU law (C-152/17, paras 33-35, references omitted and emphases added).

First, it is worth stressing that it is hard to imagine a legal strategy that will make the CJEU engage with the compatibility of secondary EU legislation with the Charter, in particular in relation to the absence of guarantees, as compared to its review concerning positive obligations for the addressees of the domestic implementing measures. Normatively, this is undesirable for the limited engagement the CJEU shows with substantive Charter-based analysis. And even from a positive perspective, this approach is criticisable. I find the CJEU's logic puzzling.

In a situation (maybe different from the case at hand, where the absence of the price revision guarantee ultimately results from a rule on the delimitation of applicable EU law regimes, rather than the direct implementation of a specific, single regime) where the claim was that the domestic rules implementing EU law failed to create a Charter-compliant (or rather Charter-mandated) guarantee not imposed by the implemented Directive, the CJEU would probably also take this route and argue that the absence of creation of an obligation at domestic level which is not required by EU rules is not connected with the EU rules in a manner that triggers the analysis of compatibility with the Charter. Would this make sense? I would not think so, but I guess we will have to wait for the relevant case to see whether the CJEU sticks to this analysis.

Can Member States prohibit or restrict the use of in-house arrangements? [guest post* by Dr Deividas Soloveičik]

This new guest post by Dr Deividas Soloveičik provides interesting background on another reference for a preliminary ruling to the CJEU by the Supreme Court of Lithuania. On this occasion, the case raises interesting questions around the balance between procurement and competition law, but also about the regulatory and self-organisation space left to Member States in the context of the EU regulation of in-house provision arrangements. It will be interesting to keep an eye on the case, as it brings an opportunity for the CJEU to expand its case law after its recast in eg Art 12 of Directive 2014/24/EU.

NOTHING LEFT TO SAY ABOUT THE IN-HOUSE EXEMPTION? THINK TWICE

On April 13, 2018 the Supreme Court of Lithuania (SCoL) decided to stay proceedings and refer a question for preliminary ruling to the Court of Justice of the European Union (CJEU) in a case that raises new questions related to the in-house exemption (civil case No. e3K-3-120-469/2018). This time, the SCoL wishes to find out if Member States are allowed to limit or even ban the use of the in-house exemption, as is the case in Lithuania. Besides, the SCoL seeks clarification on the balance to be struck between public procurement and competition law. In particular, the SCoL wishes to know whether the in-house exemption may be applicable where the same supply of goods or services can be delivered by the market. In other words, whether the contracting authority can buy in-house when there is available supply in the market. These are challenging issues and the CJEU’s views will be much awaited. Before providing an overview of the facts of the case, it is worth noting the Lithuanian legal background, which influenced the decision of the SCoL to refer the case to the CJEU, as well as the whole legal problem.

Lithuanian legal background

The in-house exemption has been regulated in the public procurement law of Lithuania since 2010. The criteria for its use were those set by the CJEU in Teckal and the subsequent case-law on the subject. Since then, in-house contracts became very common in particular at local level. Many contracting authorities and entities used them with their controlled companies, and in many cases the exemption became the general rule. However, this practice became both a legal problem and a national political scandal when it was noticed that the in-house exception was implemented in order to support a modus operandi whereby contracting authorities used the in-house exemption to award contracts to their subsidiaries, so that the latter did not have to hold themselves as contracting authorities and could thus buy services and supplies from the market like private operators. This created a situation where contracting authorities circumvented the public procurement rules just by using an intermediary (their subsidiaries) that triggered the in-house exemption. This practice even generated the Litspecmet case (C-567/15, EU:C:2017:736), already decided by the CJEU (see a comment here).

As a result of these abuses, the implementation of the 2014 EU Public procurement directives led Lithuania to practically ban the in-house mechanism. The new Lithuanian procurement law states that any governmental authority and / or private companies directly controlled or owned by the State shall have no right to enter into in-house agreements of whatsoever nature. Other contracting authorities, such as municipalities and their controlled companies, have the privilege of the in-house exemption. However, this only applies in cases when there is either (i) no supply from the market, or (ii) there are no possibilities to buy good quality in a way that guarantees the quality, availability or continuity of the services and (iii) if the awardee is a contracting authority itself. Moreover, the Competition Council became very active in tracing each contracting authority that uses the in-house exception and seeking the judicial repeal of such agreements on the basis of the Law on competition, which inter alia states that neither the State, governmental or other official authorities may have any privilege against any other market player (ie sets out a principle of competitive neutrality). Therefore, in fact, on the few occasions where in-house agreements are not forbidden by the Lithuanian Law on public procurement, they will most likely be challenged by the Competition Council on the basis of the Lithuanian Law on competition. Thus, in practice the possibility for the award of public contracts in-house is either excluded or very risky.

The Irgita case

In the case the SCoL has now referred to the CJEU, a Municipality concluded a public contract for the upkeep of green areas with economic operator Irgita. It was specified in the contract that the volume of services was a maximum and that the contracting authority was not obliged to buy all the services. The Municipality was to solely pay for the services actually provided according to the rates specified in the contract. Thus, the final price payable to the service provider depended on the volume of services rendered by the latter. In case the services required by the contracting authority exceeded the maximum amount specified in the contract, a separate procurement would be arranged.

Later on, the contracting authority approached the Public Procurement Office in order to get approval to conclude an in-house contract regarding the same services with another economic operator that (i) is a contracting authority itself, (ii) is controlled by the contracting authority (Municipality) and (iii) receives 90 percent of its income from the contracting authority (Municipality). Such approval was granted, and the contracting authority concluded the in-house contract with its controlled economic operator.

After the in-house contract was concluded, Irgita filed a claim by which it argued that the decision of the Municipality was unlawful, on the basis of the following arguments: (i) the contracting authority was not in a position to enter into the in-house contract because, at the time of its conclusion, the public contract with the claimant was still in force; (ii) the disputed decision and the in-house contract did not meet the requirements set in the Law on public procurement and the Law on competition of Lithuania, as it distorts free and fair competition between economic operators because the contracting authority’s contractual partner is being granted privileges while the other (private) economic operators are being discriminated against.

The court of first instance did not establish a breach of competition, while the Court of Appeals considered that the in-house contract was unlawful, in particular because it reduced the volume of services available for provision by Irgita in the first place. In deciding to refer the case to the CJEU, the SCoL started its reasoning by the stating that this was the first time it had an opportunity to examine the balance between public procurement and competition law in the context of in-house arrangements. The SCoL found that it was very likely that the concept of in-house agreement in the realm of public procurement law was a category of EU law and thus not open to separate interpretation under national legislation. If that was the case, then it would be very dubious that Member States were entitled to limit the right of the contracting authority to engage in this kind of transactions.

The SCoL held that:

• The CJEU has substantiated the in-house doctrine as an exemption from compliance with otherwise applicable public procurement requirements;
• The CJEU has repeatedly held that since the concept of a public contract does not refer to the national legal regulation of the Member States, the notion and the whole concept of in-house agreement must be regarded as falling exclusively within the scope of EU law and must be interpreted without regard to national law (Jean Auroux Case, C-220/05). In this matter, the SCoL stated that CJEU case-law implies a possibility of treating the in-house exemption as an independent legal norm of EU law;
• From the case-law of the CJEU, it is clear that the in-house exemption does not infringe the rights of private economic operators, they are not discriminatory, because the economic operators controlled by the contracting authorities do not enjoy any privileges (Sea, C-573/07; Carbotermo ir Consorzio Alisei, C-340/04; Undis Servizi, C-553/15). In other words, the SCoL emphasized that if it is deemed that the in-house agreements are legitimate, then it hardly can be that they limit and distort the competition in all cases. Otherwise, they would not be allowed pursuant to the long-standing jurisprudence of the CJEU.

On the basis of the above-mentioned considerations, the SCoL considered that there is a need to address the following questions to the CJEU for a preliminary ruling:

1.    In circumstances such as those in the present case, where the procedure for the conclusion of the in-house contract was initiated under Directive 2004/18, but the contract itself was concluded on 19 May 2016, does the in-house contract fall within the scope of Directive 2014/18 or Directive 2014/24 in case of an invalidity?

2.    Assuming that the disputed in-house contract falls within the scope of Directive 2004/18:

(a)  must Article 1(2)(a) of this Directive (but not limited to this provision), in accordance with the judgments of the CJEU in Teckal (C-107/98), Jean Auroux and Others (C-220/05) and ANAV (C-410/04) etc be understood and interpreted in such a way that the concept of in-house falls within the scope of EU law and the content and application of that concept is not affected by the national law of the Member States, inter alia, restrictions on the conclusion of such contracts, such as the condition that public service contracts cannot guarantee the quality, availability or continuity of the services provided?

(b)  If the answer to the preceding question is negative, i.e. the concept of in-house in part or in full falls within the scope of the national law of the Member States, is the abovementioned provision of the Directive 2004/18 to be interpreted as meaning that the Member States have the discretion to impose restrictions or additional conditions for the establishment of the in-house contract (in comparison with EU law and the interpretation of the CJEU case-law), but it can be implemented only by specific and clear rules of the substantive law on public procurement ?

3.    Assuming that the disputed in-house contract falls within the scope of Directive 2014/24:

(a)    must Article 1(4), Article 12 and Article 36 of the Directive, jointly or severally (but not limited to), in accordance with the judgments of the CJEU in Teckal (C-107/98), Jean Auroux and Others (C-220/05) and ANAV (C-410/04) etc be understood and interpreted in such way that the concept of in-house falls within the scope of EU law and that the content and application of this concept are not affected by the national law of the Member States, inter alia, restrictions on the conclusion of such contracts, such as the condition that public service contracts cannot guarantee quality, availability or continuity of the services provided?

(b)    If the answer to the preceding question is negative, i.e. the concept of in-house is partly or fully covered by the national law of the Member States, must the provisions of Article 12 of Directive 2014/24 be interpreted in such way that the Member States have the discretion to impose restrictions or additional conditions for the establishment of in-house contracts (in comparison with EU law and the interpretation of the CJEU case-law), but it can be implemented only by specific and clear rules of the substantive law on public procurement?

4.    Irrespective of which of the directives covers the in-house contracts, must the principles of equality, non-discrimination and transparency (Article 2 of the Directive 2004/18, Article 18 of Directive 2014/24), the general prohibition of discrimination on grounds of nationality (Article 18 TFEU), freedom of establishment (Article 49 TFEU) and freedom to provide services (Article 56 TFEU), the possibility of granting exclusive rights to undertakings (Article 106 TFEU), and the case-law of the CJEU (Teckal, ANAV, Sea, Undis Servizi etc) be understood and interpreted as meaning that an in-house contract concluded by a contracting authority and another distinct legal entity which is controlled by the contracting authority in a manner similar to its own departments and where part of such legal entity’s activities is in the interest of the contracting authority, is per se lawful, and that it does not infringe the rights of the other economic operators to fair competition, to not being discriminated against and for no privileges to be provided to the controlled legal entity that has concluded the in-house contract?

The enquiry made by the SCoL shows that it basically wishes to clarify a few very interesting and important legal points, which will influence the development of the in-house exception. Firstly, the SCoL tries to understand whether the in-house exemption is an autonomous concept of EU law or not. Because if it really is, then naturally there will be less discretion left to the Member States in terms of in-house procurement regulation. In other words, Member States would not be allowed to limit the in-house agreement possibility and only the case-law would be the source of the in-house legality in each particular case. Secondly, the SCoL tries to understand, at least indirectly, what are the dynamics between competition law and the law on public procurement.

The situation where, on the one hand, public procurement law allows for in-house arrangements but, on the other hand, the Competition Council and its application of the rules of the Law on competition will be waiting around the corner, is not acceptable. The SCoL correctly noted that such situations jeopardise the legitimate expectations of economic operators and contracting authorities and make the whole legal ecosystem related to this issue very blurry. Without a doubt, the now much anticipated answers from the CJEU will have a strong impact on the application of the in-house exception. In Lithuania it might even mean, in case of positive answers given by the CJEU to most of the questions, that half of Art. 10 of the Law on public procurement, which regulates the “remainders” of in-house exemption, will be inapplicable due to the supremacy of the EU law and will have to be amended by the legislator.

Dr. Deividas Soloveičik, LL.M

Dr Deividas Soloveičik is a Partner and Head of Public Procurement practice at COBALT Lithuania. He represents clients before national courts at all instances and arbitral institutions in civil and administrative cases, provides legal advice to Lithuanian and foreign private clients and contracting authorities, including the European Commission , on the legal aspects of public procurement and pre-commercial procurement.

Dr Soloveičik is an Associate Professor and researcher in commercial law at Vilnius University and a contributor to legal publications. He also closely cooperates with globally recognized academic members of the legal profession. Since 2011, MCIArb. Dr Soloveičik is a member of the Chartered Institute of Arbitrators; since 2016, he is a member of the European Assistance for Innovation Procurement – EAFIP initiative promoted by the European Commission and a recommended arbitrator at Vilnius Court of Commercial Arbitration.

* Guest blogging at HTCAN: If you would like to contribute a blog post for How to Crack a Nut, please feel free to get in touch at a.sanchez-graells@bristol.ac.uk. Your proposals and contributions will be most warmly welcomed!

Brexit & Procurement: Transitioning into the Void?

Dr Pedro Telles and I are putting the last touches to a new paper on Brexit and procurement (see here for an earlier analysis). In this working paper, we concentrate on the implications of the draft transition agreement of March 2018, as well as some of the aspects of a potential future EU-UK FTA. The abstract of the paper, which is available on SSRN and on which we sincerely invite any feedback, is as follows:

On 29 March 2017, the UK notified its intention of leaving the EU. This activated the two-year disconnection period foreseen in Article 50 TEU, thus resulting in a default Brexit at the end of March 2019. The firming up of a draft agreement on a transition period to run until 31 December 2020 can now provide a longer timescale for the Brexit disconnection, as well as some clarity on the process of disentanglement of the UK’s and EU’s legal systems. The draft transition agreement of 19 March 2018 provides explicit rules on public procurement bound to regulate ‘internal’ procurement trade between the UK and the EU for a period of over 15 months. However, the uncertainty concerning the future EU-UK relationship remains, and the draft agreement does not provide any indication on the likely legal architecture for future EU-UK trade, including through public procurement. The draft agreement has thus not suppressed the risk of a ‘cliff-edge’ disconnection post-Brexit, but rather solely deferred it. The transition is currently not into an alternative system of procurement regulation, but rather into the void. There have also been very limited developments concerning the UK’s and EU’s repositioning within the World Trade Organisation Government Procurement Agreement (WTO GPA), which creates additional legal uncertainty from the perspective of ‘external’ trade in procurement markets due to the absence of a ‘WTO rules’ default applicable to public procurement.

Against the backdrop of this legal uncertainty, this paper critically assesses the implications for public procurement of the March 2018 draft transition agreement. In particular, the paper identifies three shortcomings that would have required explicit regulation: first, the (maybe inadvertent) exclusion from the scope of coverage of the of the draft transition agreement of procurement carried out by the EU Institutions themselves; second, the continued enforcement of the rules on contract modification and termination; and third, the interaction between procurement and other rules. The paper also and flags up some of the areas for future EU-UK collaboration that require further attention. The paper then goes on to revisit the continued uncertainty concerning the EU’s and UK’s position within the WTO GPA. It concludes that it is in both the UK’s and the EU’s interest to reach a future EU-UK FTA that ensures continued collaboration and crystallises current compliance with EU rules, and to build on it to reach a jointly negotiated solution vis-a-vis the rest of WTO GPA parties.

The full details of the paper are as follows: P Telles & A Sanchez-Graells, 'Brexit and Public Procurement: Transitioning into the Void?' (April 20, 2018) SSRN working paper https://ssrn.com/abstract=3166056.

Why call it essential national interest when you mean control? Thoughts on the converging exceptions to the EU procurement rules a propos the Austrian passports case (C-187/16)

In its Judgment of 20 March 2018 in Commission v Austria (Imprimerie d'État), C-187/16, EU:C:2018:194, the Court of Justice of the European Union (CJEU) assessed the extent to which Austria could rely on claims of national security interest and/or essential national interest to justify the direct award of several contracts for the printing of passports and other secure documents to the former Austrian national printing office (ÖS). In rejecting this possibility, the CJEU followed AG Kokott’s strict approach to the interpretation of derogations of the EU public procurement rules (as discussed here) and, crucially, determined that ‘a Member State which wishes to avail itself of those derogations must establish that the protection of such interests could not have been attained within a competitive tendering procedure as provided for by’ the relevant EU public procurement rules (para 79).

The case is interesting, but hardly novel, in the narrow approach taken by the CJEU in the interpretation of exceptions from competitive tendering under the EU procurement rules (paras 69-96), as well as in relation to the standard of proof required to justify the existence of a ‘certain cross-border interest’ in the tendering of contracts not covered by the EU rules (paras 103-111, which largely follow the recent case of Tecnoedi, see here). However, I think that the case is also interesting for the ‘forward continuity’ and systemic convergence it shows amongst the different exceptions to the EU public procurement rules, which requires an appreciation of the case in the context of the evolution of EU public procurement law. I explore this idea in this post.

It is worth stressing that the case was decided in relation to the third and fourth generation of EU procurement rules, as Directives 92/50/EEC and 2004/18/EC were applicable to the case ratione temporis. Differently from the current Directive 2014/24/EU, both the 1992 and the 2004 version of the EU procurement rules preceded the adoption of Directive 2009/81/EC on defence and security procurement, as well as the development (Dir 92/50) and consolidation (Dir 2004/18) of the in-house providing and public-public cooperation exemptions (as Teckal dates back to 1999 and Commission v Germany (Hamburg waste) dates back to 2009). This is relevant in the interpretation of their exemptions based on security or essential national interests.

‘Forward continuity’ in the treatment of security or essential interest-based exemptions

Dir 92/50 foresaw the possibility for Member States to exempt the direct (or less than fully competitive) award of contracts for the provision of ‘services which are declared secret or the execution of which must be accompanied by special security measures in accordance with the laws, regulations or administrative provisions in force in the Member State concerned or when the protection of the basic interests of that State’s security so requires’ (Art 4(2), emphasis added). Similarly, Dir 2004/18 contained an equivalent exemption for ‘public contracts when they are declared to be secret, when their performance must be accompanied by special security measures in accordance with the laws, regulations or administrative provisions in force in the Member State concerned, or when the protection of the essential interests of that Member State so requires’ (Art 14, emphasis added).

This functionally-equivalent exemption under the 1992 and 2004 versions of the EU public procurement rules could have been used, for example, to justify the direct award of a contract to an entity controlled (or heavily influenced/supervised?) by the contracting authority in order to protect the relevant essential / security national interest through an organic governance relationship rather than through contract. In fact, this seems to be the thrust of the justifications put forward by Austria in the case now decided by the CJEU, given that most of the arguments are (rather implicitly based) on the ‘special relationship’ that Austria has established with ÖS (or rather, kept after ÖS’ privatisation). These exemptions would, in the end, possibly be seen as simple clarification that the existence of the EU public procurement rules did not require the contractualisation (and prior award) of the management of this type of services—provided that the existence of the security/essential national interest existed and the exemption from EU procurement rules passed muster under a (strict) proportionality assessment—although this approach to exemption based on the relationship between the contracting authority and the service provider seems to now be clearly within the functional realm of the in-house and public-public collaboration exemptions, rather than that of defence-related exemptions (see below).

Since its regulation in Dir 92/50 (and to a large extent, Dir 2004/18), the possibility to avoid contractualising (and tendering) the entrustment of the provision of services involving security or essential interests (through contracts or other types of ‘written agreements’, of which domestic administrative law regulates a garden variety) and/or the tendering of such public contracts has since evolved in two meaningful ways. First, Dir 2009/81 has come to establish a clearer instrument for the regulation of procurement involving defence and security interests and I argue that the subjection of a contract not covered by that specific instrument to the general rules of Dir 2014/24 will be largely dependent on a strict analysis similar to that carried out by the CJEU in the case against Austria, as Art 15(2) Dir 2014/24 echoes the wording of the Judgment. This will ensure ‘forward continuity’ in the assessment of these matters under EU procurement law.

Indeed, in relation to the pre-2014 rules, the CJEU has found that a ‘Member State which wishes to avail itself of those derogations must show that such derogation is necessary in order to protect its essential security interests’ (para 78) and that ‘the protection of such interests could not have been attained within a competitive tendering procedure’ (para 79), which assessment needs to take into account that ‘the requirement to impose an obligation of confidentiality does not in itself prevent the use of a competitive tendering procedure for the award of a contract’ (para 89) and that this is compatible with ‘the confidential nature of data can be protected by a duty of secrecy, without it being necessary to contravene public procurement procedures’ (para 90). Moreover, the exemption of a direct award needs to overcome a strict proportionality based on the absence of less intrusive measures, such as the possibility of establishing effective control mechanisms (para 86) and screening the trustworthiness of potential service providers based in a different Member State (para 87).

This is mirrored by the 2014 Directive’s requirement that it ‘shall not apply to public contracts and design contests … to the extent that the protection of the essential security interests of a Member State cannot be guaranteed by less intrusive measures, for instance by imposing requirements aimed at protecting the confidential nature of information which the contracting authority makes available in a contract award procedure as provided for in this Directive’ (Art 15(2) emphases added). This basically comes to ‘consolidate’ or sum up the requirements set by the CJEU in the Judgment in Commission v Austria, which is thus fully aligned with the rules in Dir 2014/24. In that regard, there will be a clear continuity in the analysis of these situations despite the approval of Dir 2009/18 in the intervening period.

Convergence with exemptions based on control of the service provider

Second, and maybe less self-evidently, the interpretation of the exemptions in Dir 92/50 and Dir 2004/18 need to be coordinated with the consolidation of the in-house and public-public cooperation exemptions in the case law of the CJEU to date—which may however experience further transformation in the future, as the rules in Dir 2014/24 start being interpreted by the CJEU.

It seems clear that, as a result of the Teckal and Hamburg doctrines, and even before their ‘recast’ in Art 12 of Dir 2014/24, Member States could have exempted the direct award of contracts for the printing of passports—or any other contracts involving security/essential national interests—not on those grounds, but on the basis of the ‘special’ relationship between the contracting authority and the provider of those ‘sensitive’ services. Where the relationship was one of ‘administrative mutualism’, the direct award could be exempted under the public-public exemption. Where the relationship was one of ‘similar control’ by the contracting authority, the exemption could be justified on the in-house providing doctrine.

In either of the cases, the relationship underlying the exemption requires a certain element of intuitu personae (to put it that way) between the entities participating in the non-tendered (contractual) arrangement. The existence of that ‘special nexus’ would justify a conceptualisation of the decision to award the contract as subjected to organic relationships and administrative governance, rather than contractualised mechanisms based on market-based governance and competition-based checks and balances. Conversely, where the contracting authority decided to contractualise the management of the relationship, and in the absence of special links with the arm’s length provider of the services, the contracting authority had to comply with the EU procurement rules.

The Commission v Austria case is interesting in that, underlying the reasoning of the Court (as well as the analysis of AG Kokott in her Opinion, see here) is an element of dismissiveness of the ‘special relationship’ created between Austria and ÖS. To put it in rather simple and tentative terms, my reading of the Judgment is that the CJEU is reluctant to recognise the exemption of a direct award where the mechanisms set up by the Member State to administer the security/essential national interest implicit in the provision of the services are fungible, in the sense that they could be easily recreated in relation to an alternative provider (or providers).

This is clear in the same paragraphs where the CJEU demonstrates the lack of proportionality of the direct award of the contract for the printing of passports (mainly, paras 80-94), where the Court repeatedly stresses the possibility for the Austrian authorities to have created adequate safeguards through contractual mechanisms aimed at: (i) ensuring the centralised execution of the contract (paras 81-83), (ii) the establishment of effective administrative supervision mechanisms (paras 84-86), (iii) guarantee of supply (para 87), (iv) the screening of the trustworthiness of the provider and confidentiality of sensitive information (paras 88-94).

This is compatible with the fact that, under the in-house and public-public cooperation doctrines, the entrustment of the provision of services to entities lacking that intuitu personae or special nexus—ie those governed by contract rather organic relationships—must comply with EU public procurement rules. This excludes the exemptability of direct awards such as that attempted by Austria, which is implicitly what the CJEU has established here by stressing the replicability with a suitable alternative provider of the ‘control’ or influence/oversight mechanisms that Austria has over ÖS—which would then fail to justify both (or either) exemption under the defence/essential interest doctrine and the in-house/public-public cooperation approach.

In my view, this is welcome as it reflects internal functional convergence across exemptions from compliance with EU public procurement rules on the basis of a distinction between the governance of relationships based on organic/administrative relationships and those based on markets and a competition logic. I think that this is a perspective worthy of further consideration, and it will be interesting to see of the CJEU makes this more explicit in future judgments.

Becoming a digital scholar -- some thoughts

This post is based on a session of the South West Doctoral Training Partnership (SWDTP) 2017/18 student conference, and will also soon be published in its student-run journal.

The increasing digitisation of the world we live in is producing pervasive changes on the object of social science scholarship (both teaching and research) and on the ways in which scholarship across all fields is conducted, published and disseminated (for detailed analysis, see Daniels & Thistlethwaite, 2016). It is thus no wonder that PhD and early career researchers (ECRs) have developed a keen interest in understanding what this all means and in developing effective strategies to become ‘digital scholars’. This is not to say that scholars that have been in the game a bit longer have all gone digital, and ‘technology-averse’ or ‘technology-averting’ scholars are still very much present. However, as with many other entry requirements to the academic profession, it now seems that access to an academic job is almost conditional on establishing (or having established) a digital presence.

Against this background, I think it was a good call for the organisers of the SWDTP Student Conference to include a session on this topic as part of the programme dedicated to reflecting on ‘Research in a Changing World: Critical Encounters’. I am not so sure they chose the best facilitator for the session, but it was my great pleasure to exchange views and experiences with a great group of PhDs and ECRs. The following is a summary of the most salient points I took home from the discussion, which may or may not provide some useful guidance to scholars approaching their ‘digital transformation’.

1. There are different levels of engagement for ‘digital scholars’, and everyone can find an intensity with which they find themselves comfortable

Almost everyone employed by a higher education institution, research centre, public sector or private services provider will have some ‘involuntary’ online presence—if nothing else, due to the creation of a (possibly pictureless) personal profile page in their institutional website. Beyond that, developing a digital presence can mean different things to different people. Some will be comfortable with having their papers available in open access repositories (be they institutional, or general like SSRN), other people will take the additional step of blogging (again, either in institutional or specialised blogs, or in their own—which can be easily created with blogger, wordpress or my favourite squarespace), and the most enthusiastic will create profiles in social networks—either professional (academia, linkedin) or mixed (facebook, snapchat)—and/or engage with twitter (as well as some of the more techy-oriented add-ons, such as tweetdeck or hashtagify). I am not sure whether this would count as supporting one’s digital presence or goes beyond that, but there also are increasing possibilities to share presentations (slideshare, prezi) and videos (youtube) in digital platforms, which are used in different ways by academics and academic institutions.

It is important to decide ‘how far to go digital’ depending on one’s personal circumstances, but also bearing in mind that for a digital presence to be effective and convey the right messages (of being active and engaged, of having interwoven digital interactions as part of general academic activities), it will be necessary to keep a certain level of update or activity. While posting new papers on SSRN can hardly require any specific timing for updates and contributing guest posts to institutional or other blogs can also be done sporadically, running your own blog will require something between 3 and 10 posts a month, and having a ‘satisfied’ following on twitter will probably require some daily activity.

Therefore, it is important to consider how much time and energy it is possible to spend in these activities and how they fit around daily/weekly routines. Conversely, though, it also seems to me important to have very good reasons not to engage in non-recurring activities such as facilitating open access to scholarly publications and writing up more accessible blogs—as these can generate clear advantages (see below) and do not create an on-going commitment with the ‘digital world’. Thus, I would wholeheartedly invite everyone reading this to try to create a blog post on the basis of their most recently completed piece of research (Prof Dunleavy offers great tips on how to do so). The exercise will not be in vain, as it will help you reflect on your writing and, once you have your blog post, you will be one step closer to creating or boosting your digital presence (eg, by sending the blog post to a suitable platform in your field of expertise).

2. There can be great gains from nurturing a visible digital presence, but they may come late and most of them are rather serendipitous

Other than for those that genuinely enjoy those interactions, or those that use digital tools as part of their research method, the main advantage of engaging with the ‘digital world’ is probably not for the academic, at least in the short term, but rather for society at large. A big part of the content and effort that is put into developing the digital presence (eg blogs, active twitter interactions, etc) will primarily be for the benefit of the audience to which it is addressed—and, ultimately, for anyone engaging with those insights, with the knowledge, as a public good. Scholars will only benefit from making the content accessible to such broader audience—which would otherwise largely ignore academic research behind pay walls or solely disseminated in academic circles—to the extent that there is an engagement with the research and, in particular, if that research is adopted or followed by relevant stakeholders and policy-makers. Therefore, the main role that digital scholarship can have is that of supporting the core academic endeavour of pursuing and exchanging knowledge both for its own sake and for the bettering of society.

From a more utilitarian perspective, in my view, there are two additional important points to bear in mind here. One, that while one has control over his or her own digital strategy, the availability of content and one side of the engagement efforts, there is always an uncontrollable element in that ‘shouting at the internet’ does not mean that anyone is necessarily listening. This should not detract from the value of putting ourselves and our research ‘out there’ because we never know when someone might start listening. Second, it is worth stressing that impact (in particular in REF terms) can hardly be fabricated, but it can be facilitated. And, in an environment where most people (including professional researchers, journalists and policy-makers) are getting their information online (Google knows it all), having a digital presence can make a big difference in terms of being noticed and benefiting from important opportunities.

In my own personal experience, it has taken a long time of sustained effort in building a digital presence until it has generated some tangible benefits—but these have been rather substantial. I started blogging in 2011 in Spanish and then switched to English in 2012 when I joined UK academia. It took the best part of three years of blogging regularly to get my personal blog positioned as the blog of reference in my core area of expertise (EU public procurement law). But once the blog’s presence and reputation (and mine, indirectly) were established, a few high-profile opportunities emerged, such as the possibility of acting as an expert for the European Court of Auditors (2014), the European Commission (since 2015), being invited to submit evidence to the House of Lords (2016) and to engage with the Department for International Trade (2018). I am thanked regularly by practitioners for the update and insight provided by the blog, and I have also been contacted by journalists who had identified me as an expert in the areas they were intending to report about (sometimes rightly, sometimes not). Of course, this is not solely the result of my blogging and tweeting activities, but had my ‘deeper’ research or my ‘standard’ expertise not been disseminated through the blog, twitter and SSRN, they probably would have gone largely unnoticed. I think my experience may serve as an indication that there is value in being digitally present, even if it is not clear whether anyone is watching or listening, and even if the advantages are not immediate (or even observable). Thus, the investment of time and energy in blogging, tweeting or otherwise being active in social networks needs to be seen as cumulative and for the long term.

Of course, it must be acknowledged that more digital exposure also means more space for criticism or even trolling, in particular if one engages with controversial topics and/or holds controversial views (such as the ones I held concerning Brexit or the Catalan independence challenge). While constructive criticism should always be welcome (and digital exchanges are great at facilitating timely feedback), trolling or even online abuse can be quite annoying. That said, unless one becomes an ‘academic celebrity’, it is also fairly unlikely that dealing with the less pleasing side of twitter or other interactions cannot be restrained by simply ignoring or blocking a few trolls—who also tend to lose interest rather quickly.

3. What and how much to show?

A final point bearing some consideration before embarking in the construction or reconstruction of one’s digital presence is to consider how to balance academic (or professional) and personal aspects. Some people will not make a hard distinction between personal and academic personas (I do not, although I have a separate twitter handle for my blog and for myself), while others will prefer to keep their digital presence purely academic. This is certainly a matter of personal choice and I can see advantages and disadvantages in both approaches.

On the one hand, it may be that the audience one is trying to address is rather formal or even institutional, so that content or interaction based on personal experiences, hobbies or non-expert opinions is not necessary, welcome or even frowned upon. On the other hand, however, and within limits, it seems interesting to know more about the researcher/academic and his or her world view. Moreover, some distinctions can be somehow artificial. While I would have no problem in refraining from tweeting about jazz music or bread-making if I wanted to keep my twitter account ‘academic’, I would not be sure where to draw the line when I engage with current events, exchange political views, or discuss issues outside my core area of expertise.

I think that there will not be a right or wrong approach (although it is always good to consider whether we would be happy to share personal details and information with perfect strangers in a face-to-face interaction, which can help deflate a certain ‘online hype of anonymity’), but it is worth considering this issue at the outset and to keep a consistent approach, and with which one feels comfortable.

Wrapping up

On the whole, I think there is plenty that researchers and academics can happily embrace in the process of becoming digital scholars or building up a digital presence. I think that everyone should be pushing open-access agendas as far as possible and blogging about their research, with no exception. Other steps, which require more energy and time, will appeal to different people at different levels of intensity. The only advice I would venture is to consider those demands in advance and, if in doubt, to step into the digital world incrementally. I think that doing so and disseminating research to the widest possible audiences has value in and of itself. I also think that it can generate significant benefits for researchers and academics in the long run, which should influence the level of investment in time and energy and provide some comfort when the effort may seem to be lost. Finally, like in everything else, we need to decide what persona to project in the digital sphere, and the one certainty is that there is no one size fits all.