Competition infringer: You don't want the EU Commission as your banker (T-564/10)

In its Judgment in Quimitécnica.com and de Mello v Commission, T-564/10, EU:T:2014:583, the General Court has addressed a rather strange issue concerning the interest rates applicable by the European Commission when undertakings that have breached competition law choose to (partially) defer the payment of their fines.

The main dispute derives from the fact that, under the 2002 Financial Regulation, unsecured outstanding amounts are subject to an interest rate of ECB+3.5%, whereas secured debts go down to ECB+1.5%. It is a rather important point to note that the Financial Regulation indicates that the deferral of payments is subject to the condition that "the debtor lodges a financial guarantee covering the debt outstanding in both the principal sum and the interest, which is accepted by the institution's accounting officer" (emphasis added).
 
In the case at hand, Quimitecnica and JMS requested their fine to be payable in three annual instalments and offered to provide a bank guarantee by a given Portuguese bank. The Commission's accounting officer agreed to the deferred payment plan, subject to them providing a guarantee  issued "by a bank rated as long-term AA", which the proposed guarantor was not.
 
The undertakings failed to obtain such guarantee and challenged the "long-term AA" requirement before the GC (in the case that has now been decided). They did not provide any other bank guarantee. However, during the procedure, the undertakings met all deadlines in the agreed (but unsecured) financial plan and eventually settled all their debt with the Commission. However, at this stage, the Commission requested the payment of  additional interest in view of their failure to provide satisfactory guarantees for the credit (now effectively extinct).
 
There are may interesting passages in the Judgment, such as the attitude displayed by the Commission in its argument that the appeal had now become void of content (due to the debt having been paid in full) despite the dispute of over 36,000 Euro in interest being on the table. The arguments against the standing of the undertakings to challenge the measure on the basis that it could not change their legal situation simply do not hold water, regardless of the technicalities in which the Commission and the GC engage.
 
More importantly, the way in which the GC accepts the position of the Commission and does not engage in any significant assessment of the proportionality of the "long-term AA" rating is troubling. Indeed, the arguments raised by the undertakings on the inconsistency incurred by the Commission should have been given more weight. It is definitely irrational for the Commission to be criticising rating agencies and proposing their regulation, while at the same time stubbornly relying on their ratings and not being willing to negotiate the conditions of acceptability of guarantees issued by other banking institutions.
 
Furthermore, from a functional perspective, the case does not make much sense and there is an element of estoppel that I am finding difficult to pin down, but puzzles me. If the furniture of the bank guarantee was a condition for the acceptance of the payment plan, absent the guarantee, the Commission should have insisted on payment of the debt immediately and in full.

Reversely, by accepting partial payments according to the plan, and leaving its credit completely unsecured during the proceedings before the GC (could an interim measure not have been requested?), the behaviour of the European Commission could be seen as amounting to a waiver of the guarantee requirement. Somehow, I think that the Commission is having its cake and eating it too. And I am not sure that the same behaviour by a private creditor would be tolerable, which makes the findings of the GC all the more troubling.
 
In any case, it is very likely that the cost of this procedure far exceeds the 36,000 Euro at stake, which makes me wonder if this is the best possible use of the Commission's and the GC's resources.

It Won't Last Long? CJEU takes a functional, competition-based approach to in-house provision that questoins the criteria in the new EU procurement directives (C-574/12)

In its Judgment in Centro Hospitalar de Setúbal and SUCH, C-574/12, EU:C:2014:2004, the Court of Justice of the EU (CJEU) has issued a new decision concerned with the in-house exception to the application of the EU public procurement rules (for a previous summary of the doctrine, see here). The Judgment is concerned with Directive 2004/18, but the findings are already relevant for the interpretation of the revised in-house exception in Directive 2014/24.
 
In the case at hand, a Portuguese hospital awarded a services contract for the provision of meals to patients and staff to a non-profit organisation (SUCH) which membership included public entities (such as other hospitals) as well as private social solidarity institutions carrying out non-profit activities. The hospital considered it an in-house provision situation and, relying in the Teckal doctrine (recently revisited and affirmed by the CJEU, see here), did not comply with the transparency obligations of Directive 2004/18.

However, a competitor of SUCH challenged the award on the basis that the Hospital did not exercise a control over the non-profit organisation that qualified for such an exemption, particularly according to the requirements of Stadt Halle and RPL Lochau, C-26/03, EU:C:2005:5, according to which "the investment, however small, of a private undertaking in the capital of an undertaking of which the awarding authority also forms part prevents, in any event, the awarding authority from being able to exercise a control over it similar to that which it exercises over its own departments" (C-574/12, at para 13).
 
The main point of law for the CJEU to interpret was, consequently, whether only participation of private for profit undertakings excluded the in-house exception or if, on the contrary, participation of any other sort of non-profit entities triggered the same effect. Following a commendable functional approach to the in-house exception based on the avoidance of distortions of competition, the CJEU opted for the second solution. Indeed, according to the C. H. de Setúbal and SUCH Judgment,
35 […] it must be pointed out that the exception concerning the in-house awards is based on an approach according to which, in such cases, the awarding public authority can be regarded as using its own resources in order to accomplish its tasks in the public interest.
36 One of the reasons which led the Court to the findings established in the judgment in Stadt Halle [...] was based not on the legal form of the private entities forming part of the contractor or on their commercial purpose, but on the fact that those entities obeyed considerations particular to their private interests, which were different in nature from that of the objectives of public interest pursued by the awarding authority. For that reason, that authority could not exercise control over the contractor similar to that which it exercised over its own services (see, to that effect, Stadt Halle [...] paragraphs 49 and 50).
37 Having regard to the fact, pointed out by the referring court, that SUCH is a non-profit association and the private partners which formed part of that association at the time of the award of the contract at issue in the main proceedings were private social solidarity institutions, all of them also non-profit, it must be noted that the fact that the Court referred, in the judgment in Stadt Halle [...], to concepts such as that of ‘undertaking’ or ‘share capital’ is due to the specific facts of the case which gave rise to that judgment and does not mean that the Court intended to restrict its findings to those cases alone where commercial for-profit undertakings form part of the contractor.
38 Another reason which led the Court to the findings in the judgment in Stadt Halle [...] is that the direct award of a contract would offer a private undertaking with a capital presence in that contractor an advantage over its competitors (see, to that effect, Stadt Halle [...] paragraph 51).
39 In the main proceedings, SUCH’s private partners pursue interests and objectives which, however positive they may be from a social point of view, are different in nature from the public interest objectives pursued by the awarding authorities which are at the same time partners of SUCH.
40 In addition, as the Advocate General noted in point 37 of his Opinion, the private partners of SUCH, despite their status as social solidarity institutions carrying out non-profit activities, are not barred from engaging in economic activity in competition with other economic operators. In consequence, the direct award of a contract to SUCH is likely to offer an advantage for the private partners over their competitors (C-574/12, at paras 35-40, emphasis added).
In my view, the CJEU has applied good logic and has incorporated the likely distortions of competition in the market for the provision of meals that could result from non-profit partners of SUCH having preferential (direct) access to the supply to the public sector. This functional approach is economically sound and deserves all praise.

The only difficulty that the C. H. de Setúbal and SUCH Judgment creates is its compatibility/coordination with the new rules under Art 12(1)(c) and 12(3)(c) of Directive 2014/24, which recast the in-house provision exception but modify the Teckal/Stadt Halle doctrine by relaxing the requirement that there is no private participation whatsoever--so that, in the future, the in-house exception can be applied provided "there is no direct private capital participation in the controlled legal person with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the controlled legal person" (emphasis added).
 
The explanation provided for such a change in recital (32) of Directive 2014/24 is as follows:
The exemption should not extend to situations where there is direct participation by a private economic operator in the capital of the controlled legal person since, in such circumstances, the award of a public contract without a competitive procedure would provide the private economic operator with a capital participation in the controlled legal person an undue advantage over its competitors. However, in view of the particular characteristics of public bodies with compulsory membership, such as organisations responsible for the management or exercise of certain public services, this should not apply in cases where the participation of specific private economic operators in the capital of the controlled legal person is made compulsory by a national legislative provision in conformity with the Treaties, provided that such participation is non-controlling and non-blocking and does not confer a decisive influence on the decisions of the controlled legal person. It should further be clarified that the decisive element is only the direct private participation in the controlled legal person. Therefore, where there is private capital participation in the controlling contracting authority or in the controlling contracting authorities, this does not preclude the award of public contracts to the controlled legal person, without applying the procedures provided for by this Directive as such participations do not adversely affect competition between private economic operators (emphasis added).
These two justifications for the relaxation of the Teckal/Stadt Halle/SUCH  absolute prohibition of private participation will prove controversial, given that they can give rise to situations where an effective market advantage is derived from the (apparent) in-house award. Indeed, the drafting of the condition in Art 12(1)(c) and 12(3)(c) of Directive 2014/24 seems quite open and it is possible to anticipate the need to conduct an assessment of proportionality between the objectives pursued by the national law imposing private participation and the carve-out that it creates in the application of the EU procurement rules. It will then be for the CJEU to either stick to its functional, competition-based approach to the in-house doctrine, or to defer to the quite express will of the EU legislator (fundamentally, in this case, the Member States). I would personally want it to tilt the balance in favour of the first option, but I can see the difficulties now that the text of the Directive is so clear.

Could Intel challenge its 1bn Euro fine on grounds of 'corporate human rights'?

After last week's General Court Judgment in Intel v Commission, T-286/09, EU:T:2014:475, the 2 month period for Intel to appeal the confirmation of its 1bn Euro fine before the Court of Justice of the EU on points of law is ticking. I guess that few doubts can be harboured as to the likelihood of such an appeal, given the very significant financial implications for the company. However, the more interesting question is whether Intel will eventually appeal the fine before the European Court of Human Rights on the basis that its 'corporate human rights' have been violated.
 
At first thought, the claims could be two-fold. On the one hand, Intel could argue procedural issues related to the enforcement and decision-making processes at the European Commission (art 6 ECHR, on fair trial). On the other hand, Intel could try to challenge the volume of the fine on the basis of the protection of its right to private property (art 1 protocol 1 ECHR, on property).
 
In my view, such an appeal would be undesirable, but it would at least offer the ultimate test case for the jurisdiction and actual ability of the Strasbourg court to deal with highly-complex (third) competition reviews. I have been arguing that due process rights in competition law enforcement against corporate defendants should be limited [“The EU’s Accession to the ECHR and Due Process Rights in EU Competition Law Matters: Nothing New Under the Sun?”, in Kosta, Skoutaris & Tzevelekos (eds), The Accession of the EU to the ECHR, Oxford, Hart Publishing, 2014, forthcoming] and, more generally, together with Francisco Marcos, that 'corporate human rights' should be limited if not totally abolished ["'Human Rights' Protection for Corporate Antitrust Defendants: Are We Not Going Overboard?" (February 2, 2014). University of Leicester School of Law Research Paper No. 14-04]. For previous entries in this blog, see here and here.
 
In a very timely fashion, the June 14(1) Antitrust Chronicle of Competition Policy International [Spring 2014, Volume 6 Number 1] "highlights a number of recent developments adding fuel to the fire: the ECtHR's ruling in Menarini and other cases, whether the concept of a "corporate human rights" principle should be applicable [... and] conclude(s) with an insightful discussion of impartiality" (including a summary of our thoughts, for which Francisco and myself are honoured and grateful).
 
Also in good time, these issues will be soon discussed at ASCOLA's conference on "Procedural fairness in competition proceedings", where Francisco will be presenting our paper. Hopefully, these discussions will shed light on the problems that the (excessive) protection of 'corporate human rights' can create. In our view, a reduction in the effectiveness of both competition law enforcement and human rights protection (for humans) itself.
 
In my personal view, all these debates (and the eventual Intel case before Strasbourg) should result in a significant restriction of corporate human rights protection, if not their abolition. I know that this is not a 'popular' position, so I expect heated debate in the coming months...

GC sets burden of proof of conflicts of interest in procurement too high (T-4/13)

In its Judgment in Communicaid Group v Commission, T-4/13, EU:T:2014:431, the General Court (GC) decided another appeal against EU Institution's public procurement decisions. In this case, the procurement was for language training services for staff of the institutions, bodies and agencies of the European Union in Brussels, and the appellant challenged the rejection of its tender on several grounds, including violations of the principles of transparency and equal treatment.
 
The case raises a number of issues, but I think that it can be particularly interesting from the perspective of conflicts of interest in the evaluation of tenders, since the appellant submitted that "one of the seconded national experts who had been employed by the Commission in its Directorate-General (DG) for human resources (‘Commission unit B.3’) in the months prior to publication of the contract notice at issue and who had sat on a tender evaluation committee in a similar award procedure was now employed by the successful tenderer, and had played a role in the preparation of the latter’s tenders." In the appellants view, this situation resulted in a breach of the principle of equal treatment and, in the end, should be sufficient grounds for the annulment of the negotiated procedure for language training services framework contracts.

The GC framed the analysis of this situation in the following way:
53 [...] according to the case-law, the fact that a tenderer, even though he has no intention of doing so, is capable of influencing the conditions of a call for tenders in a manner favourable to himself constitutes a situation of a conflict of interests. In that regard, the conflict of interests constitutes a breach of the equal treatment of candidates and of equal opportunities for tenderers (Joined Cases C‑21/03 and C‑34/03 Fabricom [2005] ECR I‑1559, paragraphs 29 and 30, and Case T‑160/03 AFCon Management Consultants and Others v Commission [2005] ECR II‑981, paragraph 74).

 However, that situation is slightly different from the one at hand in Communicaid, given that the advantage that the tenderer would have had would not derive from the ability to influence the terms of the call (as was the issue in Fabricom), but from the fact that it had access to 'privileged'/'insider' information about how to respond to the tender. Hence, this creates a factually different scenario, which analysis will be interesting.
 
Before looking at the analysis that the GC carried out, and further to the precedent concerned with the prior involvement of consultants that then become tenderers in Fabricom, Joined cases C-21/03 and C-34/03, EU:C:2005:127 [for discussion see S Treumer, "Technical Dialogue and the Principle of Equal Treatment: Dealing with conflicts of Interests after Fabricom" (2007) Public Procurement Law Review, No. 2, 99-115]; it is worth noting that conflicts of interest are now regulated in Art 24 of Directive 2014/24 (not directly applicable to EU institutions procurement, but with a clear potential to work as guidance for the EU courts in the future). According to this new provision:
Member States shall ensure that contracting authorities take appropriate measures to effectively prevent, identify and remedy conflicts of interest arising in the conduct of procurement procedures so as to avoid any distortion of competition and to ensure equal treatment of all economic operators.
The concept of conflicts of interest shall at least cover any situation where staff members of the contracting authority or of a procurement service provider acting on behalf of the contracting authority who are involved in the conduct of the procurement procedure or may influence the outcome of that procedure have, directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement procedure.
The new rules, then, seem to set out a rather demanding obligation to avoid conflicts of interest in the members of evaluation teams. Under the 'minimum' definition in the second paragraph of Art 24 dir 2014/24, it is clear that contracting authorities must avoid Fabricom-like conflicts of interest. However, the case of Communicaid was concerned with a 'bordeline' situation of potential conflict of interest, which subsumption under the 'minimum' definition of conflicts of interest will need to be tested. I would argue that they are caught by the general mandate of the first paragraph, but I am sure that there is scope for much discussion on the interpretation of this provision [and recital (16) dir 2014/24 does not shed any bright light: "Contracting authorities should make use of all possible means at their disposal under national law in order to prevent distortions in public procurement procedures stemming from conflicts of interest. This could include procedures to identify, prevent and remedy conflicts of interests."].
 
In my view, however, given the permissive treatment applied by the GC in Communicaid, these situations are unlikely to be effectively covered by Article 24 of Directive 2014/24--unless the CJEU develops a more stringent approach when it interprets that provision. Indeed, the GC considered that:
57 The applicant also argues that the successful tenderer enjoyed an unfair advantage because of the former seconded national expert’s participation in a previous call for tenders as a member of the evaluation committee.
58 In that respect, it must be pointed out that, according to the Commission, the applicant has not proved that the former seconded national expert participated in the drafting of the successful tenders for Lots 1 to 9. In order to prove that he did, the applicant has produced statements prepared by three of its employees, describing conversations they had with the former seconded national expert at the dinner on 13 November 2012 [...]. However, it must be noted that those statements do not show conclusively that the former seconded national expert participated in the drafting of the successful tenders for Lots 1 to 9, since the impressions of the applicant’s employees as to whether that was the case have been expressly contradicted by the person concerned himself. In any event, even if those statements did prove such participation by the former seconded national expert, it must be noted that their probative value is weak since they were made by the applicant’s employees, who have a particular interest in the contract being awarded to the applicant.
59 In the present case, even supposing that the former seconded national expert did participate in the drafting of the successful tenders, it must be pointed out that the applicant, by the evidence which it has submitted, has proved neither the participation of the former seconded national expert in the preparation of the call for tenders at issue, nor the unfair advantage that the successful tenderer allegedly enjoyed because its new employee was a member of a tender evaluation committee in a previous, similar procurement procedure. Furthermore, as the Commission rightly points out, the applicant has provided language training services to the EU institutions since 2008 and collaborated with the Commission in the context of the contract previous to the call for tenders at issue, with the result that it had information on the needs and requirements of the European institutions, notwithstanding the fact that the contract previous to the call for tenders at issue, contrary to the present call for tenders, did not include blended learning.
60 It follows from all the foregoing that the applicant has not proved that the fact that one of the successful tenderer’s employees worked at the Commission as a seconded national expert gave it an unfair advantage in the procurement procedure at issue of such a kind as to infringe the principles of non-discrimination and of equal treatment. Nor, moreover, has the applicant proved the infringement of the principle of transparency (T-4/13 at paras 57-60, emphasis added).
In my view, the GC has applied an excessively demanding burden of proof of not only the existence of a conflict of interest, but of its effects (ie of the existence of an actual de facto advantage derived from the existence of the conflict of interest). Such a high burden will result in a very weak effectiveness of the rules on conflicts of interest, given that they tend to involve the need to resort to indirect methods of proof and to indicia of advantage. Hence, this should not be welcome as a functional approach to adjudication of instances of (evident) conflict of interest and, at some point, it would have been necessary to resort to the techniques of presumption of advantage or, at least, reversal of the burden of proof. When conflicts of interest are concerned, it is worth remembering that Caesar's wife must be above suspicion...

Pervasive Legal Instrumentalism and Scholarly Herd Behaviour in Law: A Short Reflection on van Gestel & Micklitz (2014)

In their interesting paper "Why Methods Matter in European Legal Scholarship" (2014) European Law Journal 20(3): 292-316, which I read following Steven Vaughan's recommendation on twitter (@lawvaughan), Rob van Gestel and Hans-Wolfgang Micklitz write a compelling criticism against the instrumentalisation of law and legal research (ie the excessively policy-driven approach to legal research that mixes up normative and empirical questions), not least because:
"[it] decreases the attention for methodology, for theory building, and for keeping enough professional distance to one’s object of research. This threatens to result in a creeping process of herd behaviour, in copy pasting the methodology of judicial lawmaking to legal scholarship and in a lack of transparency and methodological justification in scholarly legal publications".
 
Indeed, the part of their paper that I find really interesting (and brave) is the discussion on the risk of herd behaviour in legal research, where they warn about the risks of uncritically focussing legal research on 'hot topics' and the items in the agenda of policymakers/regulators (such as the European Commission) or financing/sponsoring bodies, instead of pursuing an independent ranking of relevant topics with intrinsic research/doctrinal value (pp. 305-307)--and which I remain convinced definitely supports their argument in favour of raising the methodological awareness in European doctrinal legal research.
 
In short, they submit that "the best response to growing heterogeneity of legal sources should be matched with a strengthening of theoretical and methodological components, where possible drawn from the common European heritage in legal theory and spurred by transnational scholarly legal communities" (p. 312). Moreover, they formulate some broad implications of their proposal and launch some open questions, which they intend to focus future debates about (the specifics of legal methods), particularly in view of the Europeanisation of legal education (see some related comments here).
 
I agree with them in that methodological discussions about legal research are becoming of paramount importance and that it is fundamental to base any piece of legal research on a methodology that is not limited to the very narrow confines of (classical) black-letter legal analysis. This is particularly important if one is to embark into any sort of normative recommendation, which requires a benchmark of underlying values and evidence that law cannot provide.
 
Personally, I find the interaction between law and economics particularly important and I have some specific views as to what sort of methodology should be used in the study of European economic law [see A Sánchez Graells, "A Short Note on Methodology: An Eclectic and Heuristic Multi-Disciplinary and Functional Approach to EU Law" (2011)]. Ultimately, I praise and share the words of O Wendell Holmes in "The Path of the Law" (1897) 10 Harvard Law Review 457:
"I look forward to a time when the part played by history in the explanation of dogma shall be very small, and instead of ingenious research we shall spend our energy on a study of the ends sought to be attained and the reasons for desiring them. As a step toward that ideal it seems to me that every lawyer ought to seek an understanding of economics".
This is not to say that economics should drive, control or even dictate the objectives of legal research, nor that efficiency must necessarily be accepted as the ultimate normative value. However, legal research that disregards economic theory and its insights and (willingly or inadvertently) runs against them will have a very limited (if any) value. Moreover, the same is equally applicable to other social sciences and, as van Gestel & Micklitz stress
"this should not imply that we want to turn law students [or law scholars, for that matter] into amateur social or political scientists or economists, but they should at least be able to understand (some of) the language and methods that other (social) sciences apply in order to learn more about the value, validity and reliability of non-doctrinal research methods and techniques" (p. 315).

In any case, beyond the specifics of the methodology employed and the field of (other) science considered more relevant in order to achieve informed and sound outcomes-- which surely needs to be tailored to the specific research question that one attempts to answer--I could not stress enough the importance of having A sound  methodology when one undertakes legal research. In that regard, I fully share and welcome van Gestel & Micklitz's call for further discussion. As they say in their paper, to be continued...

State aid and (university) software licensing: who's interested? (T-488/11)

In its Judgment of 12 June 2014 in case Sarc v Commission, T-488/11, EU:T:2014:441, the General Court of the EU (GC) has assessed an interesting case concerned with the licensing of software developed at a Dutch university from a State aid perspective.
 
In the case at hand, staff of the Delft University had developed source code usable in the development of software for ship design and ship loading (a highly commercial application). Those members of staff then left university and created a start-up company 'Delftship' that entered into a licensing agreement with the Delft University. According to competitor Scheepsbouwkundig Advies- en Rekencentrum BV ('Sarc'), the terms of the licensing agreement where too advantageous and implied State aid. Crucially, Sarc claimed that the royalty payable by Delftship to the University was lower than the market price, which allowed it to offer software at a low rate.
 
However, after a preliminary examination under Article 108(2) TFEU, the Commission decided that the licence agreement for the use of the software source code did not constitute State aid, as the level of the royalties payable to the University had been negotiated intensely and ended up reflecting market prices--so that the licensing agreement did not grant Delftship an advantage within the meaning of Article 107(1) TFEU. Sarc appealed the decision before the GC.
 
The appeal has been opposed by both the University and the Dutch state on several grounds. Remarkably, the active standing of Sarc to bring proceedings has been challenged. In its analysis of the applicant’s standing to bring proceedings, the GC focussed on the competitive position of the applicant--following the settled case-law under art 263(4) TFEU that an applicant can only challenge a (State aid) Decision addressed to another party if it is of direct and individual concern, which requires proof that its market position is significantly affected, see paras 31-35 [for discussion, see F Pastor Merchante, "On the Rules of Standing to Challenge State Aid Decisions Adopted at the End of the Preliminary Phase" (2012) European State Aid Law Quarterly 3: 601-610].
 
These considerations are extremely important, as they indicate a very restrictive test and impose a substantial burden of proof on any challengers of State aid decisions not addressed to them. In my view, it is worth stressing that the GC and has found that
43 [...] it should be noted, first, that the applicant has not provided the Court with the main information relating to the structure of the relevant market establishing its competitive position in that market. In particular, the applicant has not provided information about the relevant geographic market, its share of that market and the share of its competitors and any shift in market shares since the measure at issue was granted.

44 It should be pointed out, secondly, that the applicant has not provided the Court with any evidence which could lead to the conclusion that the grant of the measure at issue had significantly affected its competitive position given, in particular, the specific nature of that measure, the length of the period for which it was granted and any circumstances making it impossible to circumvent the adverse effects of that measure.

45 In those circumstances, it is to be found that the applicant has not established that its competitive position was significantly affected within the meaning of the case-law set out in paragraph 33 above.

46 The six arguments which the applicant raises in that regard cannot invalidate the finding set out in paragraph 45 above.
The GC then goes on to discard each of the arguments, which were concerned with: 1) the lack of need to define the relevant market and the sufficiency to focus on competitive constraints, 2) the existence of a very close competitive relationship, given that the beneficiary of the aid and the claimant sell the same products/services to the same clients, 3)the fact that the applicant held 80% of the market share in the Netherlands (and, consequently, was bound to be affected by the entry of a new competitor that could undercut prices), 4) the fact that the value of the measure at issue was between 6 and 12 times above the de minimis threshold, 5) the specific loss of customers to the beneficiary of the aid, which was argued as proof of loss of market share, and 6) a price comparison that showed that the beneficiary was able to offer very low prices due to it not being required to recoup the costs of software development (which had been financed by the University prior to entering into the licensing agreement). 
 
In my view, most of the arguments and information supplied by the applicant and, if nothing else, taking them all into global consideration, should have led the GC to conclude that its competitive position was bound to be significantly affected by the measure at issue. However, adopting such a strict approach and imposing such a high (almost impossible to discharge) burden of proof of significant alteration of its competitive position, the GC only recognises the applicant's standing to protect its procedural rights, which fundamentally limits the possibility for competitors to challenge State aid decisions unless they were involved in the procedure leading to the Commission's Decision.
 
Hence, this is a decision bound to disincetivise competitors from challenging State aid decisions, unless they were involved in the procedure from the beginning--and always conditional upon any of their procedural rights having been breached. In my view, not a positive interpretation of the rules on active standing under Art 263(4) TFEU and one that is definitely difficult to square with the over-enthusiastic approach of the CJEU to the effectiveness of EU competition law rules in other areas (such as cartels...).

When the CJEU opens the umbrella, lawyers and economists get ready for a warm shower of damages claims (C-557/12)

In its Judgment in Kone, C-557/12, EU:C:2014:917, the Court of Justice of the European Union (CJEU) has followed the highly controversial proposal of AG Kokott (see my criticism here) and has bought into the theory of 'umbrella damages', hence determining that "Article 101 TFEU must be interpreted as meaning that it precludes the interpretation and application of domestic legislation enacted by a Member State which categorically excludes, for legal reasons, any civil liability of undertakings belonging to a cartel for loss resulting from the fact that an undertaking not party to the cartel, having regard to the practices of the cartel, set its prices higher than would otherwise have been expected under competitive conditions."

In my opinion, this Judgment must be strongly criticised and shows a very dangerous path of judicial activism that the CJEU is for some reason willing to engage with in the area of private law, but that it avoids in the area of public law and fundamental rights (see my remarks on the CJEU's total lack of will to effectively become EU's constitutional court here). Only on this asymmety of approach towards the development of EU rights in the public law / private law area (or, more bluntly, in the fundamental rights/economic rights divide) should give us all some food for thought about the role of the CJEU.
 
Further than the general criticism already spelled out against AG Kokott's Opinion, I think that the Judgment gives rise to even more specific arguments against the findings of the CJEU on the basis of the 'umbrella damages' theory of harm. I am lucky to have colleagues such as Dr Sebastian Peyer with whom to discuss these issues and, on this occassion, we clearly  coincide in our negative reading of the case. In this post, we put together our thoughts. Mine are slightly more general, so they will come first. Sebastian will then follow on with more specific and ellaborate points on the basis of his expertise in private enforcement of EU competition law.

My own criticism
From a general perspective of EU law and its effectiveness, the Kone Judgment really makes no sense and potentially impinges on the Member States' competences to regulate non-contractual liability and tort remedies [this point is common to previous criticisms against the EU's competence to regulate in the area of damages actions, as Francisco Marcos and myself stressed in “Towards a European Tort Law? Damages Actions for Breach of the EC Antitrust Rules: Harmonising Tort Law through the Back Door?” (2008) 16(3) European Review Private Law 469-488].
 
 
Quite simply, in my view, Kone has carried the application of the principle of supremacy and effectiveness of EU law too far and the contrast between the findings in Kone and its original application to the competition law damages field in Courage and Crehan [C-453/99 EU:C:2001:465, paras. 23 and ff] is simply abysmal. Courage 'just' made the point clear that damages actions should not be impossible and that they were governed by the general principles of equivalence and effectiveness of remedies (para. 29). This general mantra has been repeated over and over but, in its repetition, the effectiveness part has been gaining relevance and, at least in Kone, the CJEU has completely disregarded the principle of equivalence (despite mentioning it in para. 25).
 
Given the split of competences between the EU and the Member States in many areas of the law and, in particular, in many areas that govern the remedies available for breaches of EU (and domestic) rules, the principle of equivalence needs to be understood as a functional tool to provide effectiveness to EU rights without altering the Member States' competences. In that regard, it seems uncontroversial that, as even an undergraduate student of law can clearly express in an effective way: "The principle of equivalence ensures that EU rights receive the same protection as domestic ones" [David Murray, "EU law rights and national remedies: an uneasy partnership?" (2010) Diffusion 6(1)]. There is no reason to suggest that, in the absence of EU regulatory competences or specific EU remedies, EU rights should receive more intense protection than domestic ones.
 
However, the CJEU disregards this plain understanding of the general requirements of EU law and its supremacy and goes on to state that:
32 [...] it is, in principle, for the domestic legal system of each Member State to lay down the detailed rules governing the application of the concept of the ‘causal link’. However,  [...] national legislation must ensure that European Union competition law is fully effective (see, to that effect, VEBIC EU:C:2010:739, paragraph 63). Those rules must therefore specifically take into account the objective pursued by Article 101 TFEU, which aims to guarantee effective and undistorted competition in the internal market, and, accordingly, prices set on the basis of free competition. In those circumstances [...] national legislation must recognise the right of any individual to claim compensation for loss sustained.
33 The full effectiveness of Article 101 TFEU would be put at risk if the right of any individual to claim compensation for harm suffered were subjected by national law, categorically and regardless of the particular circumstances of the case, to the existence of a direct causal link while excluding that right because the individual concerned had no contractual links with a member of the cartel, but with an undertaking not party thereto, whose pricing policy, however, is a result of the cartel that contributed to the distortion of price formation mechanisms governing competitive markets.
In my view, this is truly far away from a pondered and acceptable balancing of the competing demands of the principles of equivalence and effectiveness and amounts to a suppression of the equivalence element that is essential to the test for compliance by Member States with their duty to ensure the effet utile of EU law under Article 4(3) TFEU and the existing case law.

Moreover, it prevents Member States from adopting clear and streamlined rules that avoid the need to engage in very complicated and costly case by case assessments of every claim, regardless of any indication of remoteness or weakness of basic causality links. Hence, the Kone Judgment should clearly be rejected and its implications limited (ie undone) by the CJEU itself at the closest opportunity.

What Sebastian has to say
The Court's judgement does not only show some dangerous judicial activism, as my colleague and host Dr Albert Sanchez Graells has pointed out, it also raises more questions than it answers.

What do we talk about when we talk about umbrella pricing? In a standard cartel case the damages claimant, typically a direct customer of the cartel, has to show that the defendant overcharged him. For umbrella pricing the situation is different. The claimant has not purchased from the cartelist but from another firm in the affected market. Consequently, the claimant should demonstrate that the market price was inflated due to the cartel and that he suffered harm due to the higher market price. In European jurisdictions this is basically a question of causation and a question of the proof that is required by the courts whereas US courts deal with these issues under ‘antitrust injury’. In Kone, the Court has stated that national courts cannot categorically reject a causal link between the cartel and inflated market prices charged by non-cartelists (para. 34):

“Consequently, the victim of umbrella pricing may obtain compensation for the loss caused by the members of a cartel […] where it is established that the cartel at issue was, in the circumstances of the case and, in particular, the specific aspects of the relevant market, liable to have the effect of umbrella pricing being applied by third parties acting independently, and that those circumstances and specific aspects could not be ignored by the members of that cartel.”

The Court addresses the two issues related to umbrella pricing (Was there an effect on the market? Did the market effect cause damage to the claimant?) in one sentence and merges them into one “be liable” test. It is left to the Member States to establish the rules and standards for proving these effects. The Court also seems to introduce some element of knowledge on part of the cartelist ("could not be ignored"). This may turn out to be impossible to prove.
 
Sadly, the ruling fits into the line of recent cases that appear to be claimant-friendly but may not contribute much to the effectiveness of enforcement. On the face of it, cases such as Pfleiderer [C-360/09, EU:C:2011:389] or Donau Chemie [C-536/11, EU:C:2013:366] have opened the gates to private damages claims, allegedly improving the effectiveness of competition law enforcement through access to documents. But I think this does not hold true. In those rulings the court replaced categorical rules with a case by case approach. So far, this has not really helped claimants but forced courts to justify why they have decided to, for example, deny access to leniency material (Pfleiderer). With regards to umbrella pricing, the CJEU has followed this approach replacing a 'fixed rule' with a case by case approach. We shall see if the claimants can get anything out of this apart from more complicated litigation.
 
Overall, the CJEU’s decision is extremely short for a ruling that could turn out to be expensive for both claimants and defendants. The cost associated with proving and calculating umbrella pricing could be prohibitive and adds to the generally high litigation costs of follow-on damages actions. I would expect most umbrella claimants to fail at the quantification stage, even if they have actually managed to master the causation hurdles.

The implications of this judgement for national causation rules are also worrying. Member States are supposedly able to govern causation and remoteness of damages under the procedural autonomy principle the Court stressed in the Kone ruling but also in Courage, Manfredi, Pfleiderer and Donau Chemie. However, in AG Kokott (see her opinion in Kone) and the Court disregard earlier statements that it is for the domestic legal system to regulate a causal relationship. So, what does this mean for the domestic legal systems?
 
Regarding the UK, I could imagine that the autonomous decision of a third party not to undercut the cartel is an intervening event breaking the chain of causation. It could also become a struggle to show that damages were foreseeable because they depend on the buyer's decision to contract with a non-cartelist and on the non-cartelist’s decision to charge an inflated price in the shadow of the cartel. However, the TheWagon Mound (No1) holds that only the kind of damage has to be foreseeable, not the extent of it. The CJEU’s decision in Kone has certainly created many more questions. Now, the ball is in the national courts.

Directive 2014/23 on concessions and the 'Frankenstein effect'

The more one analyses the content of Directive 2014/23 on concessions (the Concessions  Directive), the more one realises that it is full of unnecessary complexities and that it is (unfortunately) a horrible example of the 'Frankenstein effect' that the EU legislative procedure sometimes generates.
 
I am in particular puzzled by Arts 1(2), 6 and 7 of the Concessions Directive, which aim to determine its (personal) scope of application. The difficult exercise attempted in the Concessions Directive is to combine or merge the scope of application of both the Public Sector Directive (2014/24) and the Utilities Directive (2014/25) and, at first sight, looking at Article 1(2), it seems like it achieves that goal (as Richard Craven concludes in his piece on the Concessions Directive about to be published in the Public Procurement Law Review).
 
A cursory look at that provision indeed confirms that both 'contracting authorities' subjected to the Public Sector Directive and the 'contracting entities' covered by the Utilities Directive are within the scope of the Concessions Directive, as its Article 1(2) determines that: "This Directive applies to the award of works or services concessions, to economic operators by: (a) Contracting authorities; or (b) Contracting entities, provided that the works or services are intended for the pursuit of one of the activities referred to in Annex II".
 
However, that is not the end of the story, as Articles 6 and 7 define contracting authorities and contracting entities respectively and create an unnecessary split of the category of contracting authorities that I find unnecessary. The following is a draft comment on Article 6 of the Concessions Directive on which I am working and, as it will probably be evident, this keeps me quite confused...
 
On Article 6
6. Contracting authorities
01. With the exception of the excluded contracting authorities mentioned at the end of paragraph 1, this provision is identical to the Public Sector Directive Article 2(1) subparagraphs 1 and 4 and Article 2(2). For a commentary, see those provisions.
 
6.1. Excluded contracting authorities, which become contracting entities
01. One of the elements of the definition of the personal scope of application of the Concessions Directive with which it is difficult to come to terms is the treatment of certain contracting authorities (as per their classic definition in the Public Sector Directive) as contracting entities. More specifically, the exclusion is triggered when entities that would otherwise be contracting authorities engage in activities listed in Annex II (ie utilities activities except those related to water, see Article 12 and commentary to Article 1) and award a concession for the pursuit of one of those activities. The exclusion refers to the treatment of those ‘contracting authorities’ (by nature) as ‘contracting entities’ (by reason of their activity) under Article 7, which comes to mean that the carrying out of one of the activities in Annex II by means of a concession will only be subjected to the regime applicable to contracting entities, whereas the carrying out of any other concession-related activity (unless excluded from the Directive or subjected to a special regime) will be subjected to the rules applicable to contracting authorities. In case the contracting authority/contracting entity carries out both types of activities and awards a concession that covers both types of activities, the rules to determine the applicable legal regime will be those in Article 22 and, generally, will imply that the concession is subject to the rules applicable to the activity for which it is principally intended [Article 22(2)]. However, if it is objectively impossible to determine for which activity the contract is principally intended, the obscure provision in Article 22(3)(a) of the Concessions Directive will be applicable, which indicates that “the concession shall be awarded in accordance with the provisions of this Directive applicable to concessions awarded by contracting authorities, if one of the activities for which the contract is intended is subject to the provisions of this Directive applicable to concessions awarded by contracting authorities and the other is subject to the provisions of this Directive applicable to concessions awarded by contracting entities”. Hence, in case of significant difficulty (rectius, objective impossibility) in determining the applicable legal regime, the one corresponding to contracting authorities will be preferred.

02. However, the exclusion in Article 6 and inclusion in Article 7 are superfluous in connection with most of the specific obligations and duties regulated in the Concessions Directive, which establishes a regime that is fundamentally homogeneous to concessions awarded by contracting authorities and those awarded by contracting entities. At least in the case of contracting authorities ‘by nature’, the justification for the creation of the dual legal regime on the basis of the activity they pursue is difficult to understand and is likely to have a very limited effect in practice that can hardly justify the complexity it brings about (think exclusively of the convoluted drafting that the Concessions Directive has adopted in order to accommodate such minimal nuances). Indeed, comparing both regimes, it is only possible to identify a very limited number of discrepancies in legal regime (which are almost exclusively concerned with the potential exclusions of coverage from the directive) and primarily include the following rules:
·        Recital 66: only mentions contracting authorities when it indicates the possibility of including social requirements that directly characterise the product or service affected by a concession in the technical specifications. However, the omission of contracting entities seems to be an error, as there is no reason to prevent contracting entities from doing so, as long as they comply with the requirements imposed in the case law of the ECJ.
·         Article 10(1): covering an exclusion for concessions awarded to a contracting authority on the basis of an exclusive right, although the exclusion is extended to a contracting entity as referred to in point (a) of Article 7(1), which effectively nullifies the different in treatment for these purposes.
·         Article 11: covering a specific exclusion in the field of electronic communications whereby the Concessions Directive shall not apply to concessions for the principal purpose of permitting the contracting authorities to provide or exploit public communications networks, or to provide to the public one or more electronic communications services. However, the restriction of this exclusion to contracting authorities may have very limited effects in view of the alternative exclusion available for contracting entities when their activities are subject to competition (Article 16 below), given that most electronic communications exploited commercially are actually exposed to competition as a requirement of sectorial regulation.
·         Articles 13 and 14, and Article 17, which set out different rules for (quasi) in-house exclusions depending on whether they relate to contracting authorities or contracting entities. However, the functional requirements are rather similar, so there is no significant difference in the rules allowing for the award of concessions without compliance with competitive tendering requirements (effective control, 80% of turnover generated in the in-house sphere, etc; see commentary below).
·         Article 15, which creates an additional duty of information on contracting entities in favour of the Commission in case certain exclusions under Articles 13 and 14 apply.
·         Article 16: which restricts the exclusion available for activities directly exposed to competition to contracting entities—and that, in any case, would be very difficult to apply to contracting authorities because they do not tend to participate directly in the provision of services subjected to effective competition.
·         Article 23: on concessions including activities subjected to diverse legal regimes and that set out a preference for the regime applicable to contracting authorities over the one applicable to contracting entities as a residual rule.
·         Article 38(4) in fine: which sets higher evidentiary standards for contracting entities that are not (improper) contracting authorities wishing to exclude from participation any economic operators affected by the grounds of mandatory exclusion foreseen in Article 38(4) of the Concessions Directive (see that provision for commentary). This also applies to other aspects of Article 38, where the degree of compliance with rules on mandatory or discretionary compliance can be modulated differently by Member States depending on whether the concession is awarded by a contracting authority (or an improper contracting entity) or by a (proper) contracting entity. However, given the discretion left to Member States in this area, it is hard to foresee whether this will generate any meaningful differences in practice.
03. Moreover, the inclusion of contracting authorities as contracting entities by virtue of the activities in which they engage creates significant difficulty in the treatment of contracting entities in the Concessions Directive, as some provisions are addressed to all contracting entities and others are only addressed to ‘proper’ contracting entities (ie those that are not contracting authorities ‘by nature’) which forces the drafting to resort to convoluted expressions such as “contracting authorities and contracting entities as referred to in point (a) of Article 7(1)” or “contracting entities other than those referred to in point (a) of Article 7(1)”. Indeed, in most cases where there is any meaningful difference, contracting entities as referred to in point (a) of Article 7(1) receive the same legal treatment as contracting authorities under Article 6 (which seems like the logical thing to do). All in all, then, given the (very) minor differences in legal regime (which are almost non-existent other than in terms of coverage of the directive), a much more simplified regime for contracting authorities would definitely have been preferable.
* * * * *
 
More than ever, I wish that the 'Sanity clause' scene of the Marx Bros' A Night at the Opera was just a figment of a crazy imagination... 

The elusiveness of academic integrity and its value: some musings against any relaxation of standards

One of the most complicated and elusive elements in the day to day of a professional academic have to do with some form of academic integrity and, particularly, with the keeping of academic standards. This is a fundamental part of our role in two main dimensions: peer review and student assessment.

In the peer review area, this relates to editorial functions (such as the blind review of manuscripts before publication in academic journals, or the publication of book reviews) as well as to the active participation in research debates (such as conferences, seminars or, these days, twitter and blog platforms).

In student assessment, the array of activities is even broader, from marking (and second marking) of undergraduate work, to external examining in other institutions, to supervision of postgraduate students and, maybe with the highest significance, the examination of PhD theses. The indivisible connection between assessment and academic standards can hardly be overstated (see The Quality Assurance Agency for Higher Education's position here).
 
In my view and (still limited) experience, all these processes feed into each other and the only sensible strategy for a professional academic concerned with academic integrity and the keeping of academic standards (which are the only value that universities should really protect above any other) is to try to remain actively involved in both dimensions (ie peer review and assessment) and to resist the permanent pressures to lower standards here and there. It may sound slightly self-important, but I think that professional academic need to perceive ourselfs as a gatekeepers and resist calls to open the doors too often or too easily.
 
 
It is also very important for us, as a community, to be able to communicate to society that this is the core, most fundamental function that we develop and the most significant value we add in return for the (always too limited, always too insecure) funding of our activities. Hence, when there are debates about the purpose and function of higher education institutions and their (core) employees, we should always make sure to stress that we uphold academic integrity and enforce academic standards. It may sound too vague, but this is the most important function we can possibly perform. And it is also the most distinctive.
 
Otherwise, if we fail to keep academic integrity, the ensuing dillution of academic standards will end up resulting in a scenario where academic qualifications are completely irrelevant because they no longer tell anyone how much of an expert somebody is, or how qualified to develop activities in a field that requires scientific knowledge. It will also be impossible to distinguish one university from another on the basis of any valuable merits-based metric and, in the end, academic excellency will fade away.
 
Of course, keeping academic integrity is difficult to do and usually comes (sooner or later) at a personal cost. Nobody likes to tell someone else that their work/research is not up to the applicable standard and we all tend to get upset when we hear it. Nobody likes rejection or failure. However, professional academics need to be able to swallow that bitter pill every now and then, and make sure that standards are kept despite colleagues, peers or students getting upset or frustrated. Hopefully, their (academic) maturity will make those feelings go away and the objectiveness of the academic assessment will be recognised sooner or later.
 
In this time of the year, with so many assessments going on and so many pressures coming from rakings based on student satisfaction as yesterday's Guardian 2015 University Guide tables, it is worth reminding ourselves of the value and long-term relevance of what we do. We cannot always please everyone if that means that academic integrity is jeopardised. And, most importantly, we must not do it. If we sacrifice academic standards in the altar of satisfaction, the importance and long-term viability of higher education institutions will be doomed. Clearly, a bitter pill to swallow.
 

Why are NHS Commissioners 'undertakings' and, consequently, subject to competition law?

Some months ago, I held an interesting email exchange with some readers of my paper New Rules For Health Care Procurement in the UK. A Critical Assessment from the Perspective of EU Economic Law. They basically challenged my understanding of the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013 on the basis that NHS Commissioners could not be considered undertakings and, hence, their decisions should remain outside the scope of application of competition rules.
 
However, I thought and still think that NHS Commissioners are 'undertakings' for the purposes of (EU) competition law enforcement. These are the main reasons why I think so (apologies to non-competition law readers for the amount of 'slang' in this post, which reproduces parts of the email exchange.
 
* * * * *
 
Regarding the treatment of NHS commissioners as undertakings, I think that the FENIN/Selex exemption is inapplicable and probably I should have made this clear in my paper (I simply assumed that this would not be controversial). As you probably know better that myself, the reason for that is basically that (most) GPs are engaged in economic activity as self-employed providers of services to the NHS (http://www.nhscareers.nhs.uk/explore-by-career/doctors/pay-for-doctors/) under the so-called General Medical Services Contract (http://www.nhsemployers.org/PayAndContracts/GeneralMedicalServicesContract/Pages/Contract.aspx). Indeed, they hold contracts for the provision of those services and, consequently, everything that they procure or commission needs to be assessed in light of such ‘downstream’ or parallel economic activity (which, in my view, immediately deactivates the FENIN/Selex exemption). Moreover, GPs located in a given area are in competition between themselves in order to attract patients and retain them, and that has an impact on their level of remuneration by the NHS. All this indicates that they do engage in economic activity ‘downstream’ or in parallel to the services and goods that they commission and purchase in their public procurement (‘upstream’?) activities. That is enough to justify the direct applicability of competition law (EU and domestic) to their activities.
In my view, this conclusion is robust even if those services are generally not directly paid for by the end users in most of the cases, since that should not affect either: 1) their inclusion within the scope of application of EU internal market law (C-372/04 Watts, dealing particularly with the NHS, although with hospital care provision), or 2) the fact that GPs are undertakings, as the requirement of provision of services in the market for remuneration does not require direct payments; under the classic formulation of the concept of an undertaking, it encompasses every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed. So, I guess that the largest point of disagreement between us is that you may consider that GPs (individually or collectively as part of a Clinical Commissioning Group, CCG) are not engaged in economic activity. However, as self-employed providers of services, I think that that assessment would not be in line with the generally functional approach to the concept of undertaking and that it is not covered by the FENIN/Selex case law. I do not think that GPs would be covered by the ‘social’ exclusion for systems based on solidarity either, given that the system in the UK promotes choice and competition and, by itself, that goes against the requirements of mandatory participation that the CJEU has included in its sickness funds-relate case law.
Finally, I also think that there would be a possibility of circumventing any possible exclusion of the (direct) applicability of the rules to the GPs and CCGs as undertakings (or groupings/associations of undertakings) via a State action doctrine approach (basically, on the basis of Cipolla) given that the UK as a State has delegated economic decisions on a type of organs (CCGs) that are in a structural (mild?) conflict of interest when they adopt commissioning (economic) decisions and, consequently, liability (of the UK) could be found on the basis of Art 4(3) + 101 TFEU. That would clearly justify the consideration and application of EU competition rules by Monitor as the ultimate watchdog in charge of ensuring compliance with (EU and UK) competition rules—as it is indeed co-competent with the new CMA in the healthcare sector. Again, you may consider this a weak legal basis, but I would disagree with that.

An Opportunity for a 21st Century Spanish Republic? The King has abdicated, long live the Republic!

Today's news that King Juan Carlos I is stepping down and abdicating the Spanish Crown in compliance with Art 57.5 of the Spanish Constitution is bound to prompt significant speculation about the future of Spain as a State.

With all (regional) nationalist tensions on the rise and a massive loss of support of the royal family in recent years, it should come as no surprise that many Spaniards would like to have a referendum on the basic structure of the State. I am certainly one of them.
 
In my view, only a Republic can seriously ensure that we are all equal under the law (in the Spanish case, this would suppress the aberration in Art 56.3 of the Constitution, whereby "The person of the King is inviolable and shall not be held accountable"). In the 21st Century, this simply makes no sense and undermines the basic principle of equality (recognised in Art 14 of the Spanish Constitution). As put in a rather extreme and poetic manner by Diderot, “Men will never be free until the last king is strangled with the entrails of the last priest.” This remains true, particularly in Spain. But there is a pacific way out now.
 
Moreover, a referedum on the structure of the State would most certainly allow for a deep discussion of the internal organization of the Spanish State and strengthen the importance of its belonging to the European Union (two points not addressed in the current Constitution: the first one, due to the delicate balances that were necessary to overcome the dictatorship and, the second one, due to a lack of maturity of the political system when Spain joined the EU). Most internal unbalances could be settled and the structure of the State could be adapted to the needs of the 21st Century, with much more local devolution, a streamlined and simplified federal government, and a clarification of the regional inclusion in the European puzzle.
 
Some will say that Spain is not ready for such type of debate and that it would only bring a risk of fracture of the State. If they manage to persuade the citizenship that continuying in the status quo and welcoming Felipe VI is the adequate way forward, then Spain will have a King it will deserve... but this will mean that Spanish society keeps rooted in a value base that does not really encompass modernity and is definitely not in sink with the advanced country it aims to be.  However, I hope this will not be the case and that there will be debate, a referedum, and a significant reform of the State. The King has abdicated, long live the Republic!