Some additional thoughts on the interaction between procurement remedies and the principle of State liability—re Fosen-Linjen (E-16/16) and Nuclear Decommissioning Authority ([2017] UKSC 34)

After I published some comments on the EFTA Court’s Judgment in Fosen-Linjen AS v AtB AS (E-16/16, see here) some three weeks ago, I have had some interesting exchanges and discussions with some academic colleagues (Dr K-M Halonen, Dr R Vornicu, Dr P Bogdanowicz, Prof R Caranta, Dr A Georgopoulos, Dr Herrera Anchustegui and Aris Christidis) and with policy-makers and practitioners (which mostly wish to remain anonymous). I am grateful to all of them for forcing me to think harder about some of the issues that derive from the Fosen-Linjen case and, in particular, for their repeated invitations to consider it by comparison to the Judgment of the UK Supreme Court in Nuclear Decommissioning Authority v EnergySolutions EU Ltd (now ATK Energy Ltd) [2017] UKSC 34 (the ‘NDA’ judgment; for my views on an interim decision at the start of the litigation, see here).

Indeed, comparing those cases is interesting, for the Fosen-Linjen and NDA judgments offer diametrically opposed views of the interaction between the use of damages as a procurement remedy and the principle of State liability for breach of EU law, in particular concerning the threshold for liability under the so-called second Francovich condition—ie whether liability arises from a ‘sufficiently serious breach’ of EU public procurement law, or from any (unqualified) infringement of the rules.

In this post, (1) I compare the approach to the procurement remedies-State liability interaction in both judgments, to then offer some brief reflections on (2) the implications of minimum harmonization of this subject-matter through the Remedies Directive (ie, Dir 89/665/EEC, as amended by Dir 2007/66/EC; see its consolidated version), (3) the possibility to reform the Remedies Directive so as to achieve maximum harmonization, and (4) the potential implications of a damages-based procurement enforcement strategy in the context of the emergence of EU tort law. This post is meant, more than anything, as an invitation for further discussion.

(1) Opposing approaches to the procurement remedies-State liability interaction

One of the contended issues in academic, and now also judicial, debate around public procurement remedies is the relationship between, on the one hand, the liability in damages derived from the Remedies Directive (art 2(1)(c), requiring a power for review bodies or courts to ‘award damages to persons harmed by an infringement’ of relevant EU public procurement rules) and, on the other, the liability derived from the general principle of State liability for breaches of EU law (following Francovich and Others, C‑6/90 and C‑9/90, EU:C:1991:428, and Brasserie du Pêcheur and Factortame, C‑46/93 and C‑48/93, EU:C:1996:79).

This is an issue that the Court of Justice of the European Union (ECJ) explicitly addressed in Combinatie Spijker Infrabouw-De Jonge Konstruktie and Others, C-568/08, EU:C:2010:751 ('Spijker'), when it stated that Art 2(1)(c) of the Remedies Directive

… gives concrete expression to the principle of State liability for loss and damage caused to individuals as a result of breaches of EU law for which the State can be held responsible …

… as regards state liability for damage caused to individuals by infringements of EU law for which the state may be held responsible, the individuals harmed have a right to redress where the rule of EU law which has been infringed is intended to confer rights on them, the breach of that rule is sufficiently serious, and there is a direct causal link between the breach and the loss or damage sustained by the individuals. In the absence of any provision of EU law in that area, it is for the internal legal order of each member state, once those conditions have been complied with, to determine the criteria on the basis of which the damage arising from an infringement of EU law on the award of public contracts must be determined and estimated, provided the principles of equivalence and effectiveness are complied with (Spijker, paras 87 and 92, emphases added).

However, maybe surprisingly, Spijker is not (yet) universally seen as having settled the issue of the interaction between the actions for damages under the Remedies Directive and the Francovich doctrine.

As mentioned above, the main point of contention rests on what could be seen as a lex specialis understanding of the interaction between the two regulatory frameworks (which could formally match a literal reading of para 87 of Spijker, but is more difficult to square with its para 92)—ie a view that the general condition for there to be a ‘sufficiently serious breach’ of EU law under Francovich is relaxed by the Remedies Directive by solely mentioning the need for an (unqualified) infringement as sufficient ground for a damages claim. This is specifically a point where the UK Supreme Court and the EFTA Court have taken opposing views in their recent judgments.

The UK Supreme Court's approach

Indeed, in its NDA Judgment (as per Lord Mance, with Lord Neuberger, Lady Hale, Lord Sumption and Lord Carnwath agreeing), the UK Supreme Court followed what I think is the correct reading of Spijker and established that

… para 87 [of Spijker] proceeds by making clear that the liability of an awarding authority is to be assessed by reference to the Francovich conditions. Subject to these conditions being met, paras 88 to 90 go on to make clear that the criteria for damages are to be determined and estimated by national law, with the further caveat that the general principles of equivalence and effectiveness must also be met (para 91). Finally, para 92 summarises what has gone before, repeating the need to satisfy the Francovich conditions (NDA, per Lord Mance, at [23]).

More importantly, the UK Supreme Court considered that

… there is … very clear authority of the Court of Justice confirming that the liability of a contracting authority under the Remedies Directive for the breach of the [public procurement rules] is assimilated to that of the state or of a public body for which the state is responsible. It is in particular only required to exist where the minimum Francovich conditions are met, although it is open to States in their domestic law to introduce wider liability free of those conditions (NDA, per Lord Mance, at [25], emphasis added).

Therefore, the UK Supreme Court takes the clear view that the existence of grounds for an EU damages action based on the Remedies Directive requires the existence of a ‘sufficiently serious breach’ of EU public procurement law. At the same time, it takes no issue with the possibility for more generous domestic grounds for actions for damages (although it eventually decided that this was not the case in relation to the Public Contract Regulations 2006; see NDA, per Lord Mance at [37], with which I also agree).

The EFTA Court's approach

Conversely, in its Fosen-Linjen Judgment, and despite the fact that similar arguments on the interpretation of Spijker were made before it (in particular by the Norwegian Government), the EFTA Court considered that

Article 2(1)(c) of the Remedies Directive … precludes national legislation which makes the right to damages for an infringement of public procurement law by a contracting authority conditional on that infringement being culpable … The same must apply where there exists a general exclusion or a limitation of the remedy of damages to only specific cases. This would be the case, for example, if only breaches of a certain gravity would be considered sufficient to trigger the contracting authority’s liability, whereas minor breaches would allow the contracting authority to incur no liability …

… A requirement that only a breach of a certain gravity may give rise to damages could also run contrary to the objective of creating equal conditions for the remedies available in the context of public procurement. Depending on the circumstances, a breach of the same provision of EEA public procurement could lead to liability in one EEA State while not giving rise to damages in another EEA State. In such circumstances, economic operators would encounter substantial difficulties in assessing the potential liability of contracting authorities in different EEA States’ (Fosen-Linjen, paras 77 and 78, emphases added).

This led it to reach the view that

A simple breach of public procurement law is in itself sufficient to trigger the liability of the contracting authority to compensate the person harmed for the damage incurred, pursuant to Article 2(1)(c) of the Remedies Directive, provided that the other conditions for the award of damages are met including, in particular, the existence of a causal link (Fosen-Linjen, para 82, emphasis added).

I already discussed (here) the reasons why I think the EFTA Court’s Judgment does not accord with the ECJ’s case law (notably in Spijker) and why I hope the ECJ will explicitly correct this situation. In the remainder of this post, I briefly discuss the themes of minimum and maximum harmonisation of procurement remedies that emerge from a comparison of the approaches adopted by the UK Supreme Court and by the EFTA Court.

(2) Minimum harmonization through the Remedies Directive

The UK Supreme Court’s approach is implicitly based on a conceptualisation of the Remedies Directive as a minimum harmonization instrument, which sets the basic elements of the (effective and equivalent) remedies that Member States must regulate for, in accordance with the peculiarities of their own domestic systems. I think that this characterisation of the Remedies Directive is uncontroversial (see eg the recent report by the European Commission on its implementation at Member State level, at 4). Following the logic of minimum harmonization, the UK Supreme Court clearly has no problem with the existence of two potential tiers of remedies: a lower or more basic EU tier (subject eg to a requirement of ‘sufficiently serious breach’), and a higher or more protective domestic tier (subject eg to ‘any infringement’), which may or may not exist depending on the policy orientation of each EU/EEA State.

This approach has both the advantage of being in accordance with the current state of the law as interpreted by the ECJ (as above), and of not imposing—as a matter of legal compliance, rather than policy preference—an absolute harmonisation of public procurement remedies (at least as the threshold of liability for damages is concerned).

However, this approach is not without some practical difficulties, as there is a thick mist of uncertainty concerning what is a sufficiently serious breach of procurement rules (but also of what rules in the EU directives are ‘intended to confer rights’ on the tenderers—ie the first Francovich condition, which has been so far largely untested), and the existing ECJ case law on the interpretation of substantive EU procurement rules would require significant reconceptualisation in order to provide clarity in this respect. The existence of the preliminary reference mechanism of Art 267 TFEU can alleviate this legal uncertainty (in the long term, and maybe starting soon with the pending decision in Rudigier, C-518/17), but not without creating a significant risk of collapse of the ECJ (or, at least, an even more significant growth in procurement-related preliminary references). From that perspective, the possibility to engage in maximum harmonization (as rather implicitly advocated by the EFTA Court) deserves some consideration.

(3) Maximum harmonization through a revised remedies directive?

In my view wrongly, the EFTA Court holds the implicit normative position that the Remedies Directive is an instrument of maximum harmonisation when it emphasises its ‘objective of creating equal conditions for the remedies available in the context of public procurement’ (see Fosen-Linjen, para 78 above, emphasis added). The EFTA Court derives this objective in an earlier passage, where it stresses that a 'fundamental objective of the Remedies Directive is to create the framework conditions under which tenderers can seek remedies in the context of public procurement procedures, in a way that is as uniform as possible for all undertakings active on the internal market. Thereby, as is also apparent from the third and fourth recitals to the Remedies Directive, equal conditions shall be secured (sic)' (Fosen-Linjen, para 66, emphasis added).

I think this is a clear judicial excess and I do not think the Remedies Directive can be considered an instrument of maximum harmonization (ie a tool that sets a ceiling, or even a common core of protections that must be uniformly provided in all EEA States) in the way the EFTA Court does. In my view, this is particularly clear from recital (6) of the Remedies Directive, according to which: ‘it is necessary to ensure that adequate procedures exist in all the Member States to permit the setting aside of decisions taken unlawfully and compensation of persons harmed by an infringement’ (emphasis added; note that adequate procedures are not necessarily homogeneous or identical procedures)--which the EFTA Court includes in its Judgment (para 3), but then largely ignores.

However, the EFTA Court does have a point when it stresses that the divergence of rules on (damages) remedies can distort the procurement field and, in particular, discourage cross-border participation—which could be alleviated by a reform of the Remedies Directive to create such maximum harmonization. Such revision and an explicit view on the elements of a uniform system of maximum harmonisation could bring a much needed clarification of the function and position of different types of remedies under its architecture—notably, it would clarify whether damages are a perfect substitute for other remedies (as the EFTA Court seems to believe) or an ancillary remedy [as I posit, maybe not in the clearest terms, in A Sanchez-Graells, '"If It Ain't Broke, Don't Fix It"? EU Requirements of Administrative Oversight and Judicial Protection for Public Contracts' in S Torricelli & F Folliot Lalliot (eds), Contrôles et contentieux des contrats publics (Bruylant, 2018)]. Maximum harmonisation could also provide an opportunity to consider the creation of safe harbours (at least of damages liability) for purely procedural errors, or in the context of certain general guidelines.

Nonetheless, despite potential advantages derived from a revision of the system to consider maximum harmonization, given the vast differences in the rules on damages claims across EU jurisdictions, it would be certainly difficult, if not outright impossible, to reach an agreement on the adequate level of protection and the relevant procedural mechanisms [for comparative discussion, see for example, the contributions to S Treumer & F Lichère (eds), Enforcement of the EU Public Procurement Rules (DJØF, 2011), and to D Fairgrieve & F Lichère (eds), Public Procurement Law. Damages as an Effective Remedy (Hart, 2011); see also H Schebesta, Damages in EU Public Procurement Law (Springer, 2016)].

Given these practical difficulties, I would not think the European Commission would be willing to engage in the exercise of designing such maximum harmonization, even if it decided to revise the Remedies Directive in the future (which, unfortunately, seems very unlikely at least for now). What then should not be acceptable is for such maximum harmonisation to be achieved or imposed through an excessively broad interpretation of the Remedies Directive as, in my view, the EFTA Court's Fosen-Linjen judgment does.

(4) Damages-based enforcement of procurement rules & EU tort law

As a last thought, I think it is worth stressing that, in addition to the practical difficulties derived from the current minimum harmonization of procurement remedies, and the not smaller difficulties in attempting a maximum harmonization, there are also structural tensions in the use of damages actions for the enforcement of EU public procurement rules. As recent research has clearly shown (see P Giliker (ed), Research Handbook on EU Tort Law (Elgar, 2017)), the use of damages actions (either based on Francovich liability, or sector-specific rules) for the enforcement of substantive EU law creates distortions in the domestic legal systems of the Member States. From that perspective, both the minimum and maximum harmonization approaches are problematic.

From the minimum harmonization perspective, because the existence of two tiers of protection can also result in two tiers of regulation and/or case law concerning the interpretation and application of the rules, which is bound to create legal uncertainty (eg if issues around the effectiveness of the remedy in the EU-tier create pressures on the interpretation of the domestic-tier remedies as a result of reverse pressures resulting from the principle of equivalence—ie the domestic remedy can hardly be both broader in scope and less effective in its consequences).

From the maximum harmonization perspective, because the creation of a one-size-fits-all remedy (such as that derived from the lower threshold for damages liability in the EFTA Court’s Judgment) can have rather drastic impacts for some Member States (in particular, those without a ‘higher-tier’ domestic protection), not only in the area of procurement law, but also in other areas of (economic) law which regulation and case law can be distorted as a result of the EU rules.

Thus, it seems adequate (and it may not be too late…) to reconsider a drastic change in the enforcement strategy to reduce the current over-reliance on tenderer-led administrative and/or judicial reviews, and start to move away from damages-fueled private enforcement of EU public procurement law and towards a more robust architecture of public enforcement with a restriction of damages compensation solely in exceptional cases—certainly where that compensation goes beyond direct participation costs.

Discussing the possibilities of doing so and the challenges it would imply far exceeds the possibilities of this post, but given that reaching a ‘happy median’ in the regulation of (private) damages actions in the context of procurement remedies in the EU would not be a minor feat, it may be time to (re)open that discussion.

Examining Brexit Through the GPA’s Lens: What Next for UK Public Procurement Reform?

Dr Pedro Telles and I have just published 'Examining Brexit Through the GPA’s Lens: What Next for UK Public Procurement Reform?' (2017) 47(1) Public Contract Law Journal 1-33 and, thanks to the permission of the American Bar Association, made it available through SSRN https://ssrn.com/abstract=3076543. This is the abstract:

The United Kingdom has formally started the process of leaving the European Union (so called Brexit). This has immersed the UK Government and EU Institutions in a two-year period of negotiations to disentangle the UK from EU law by the end of March 2019, and to devise a new legal framework for UK-EU trade afterwards. The UK will thereafter be adjusting its trading arrangements with the rest of the world. In this context, public procurement regulation is broadly seen as an area where a UK ‘unshackled by EU law’ would be able to turn to a lighter-touch and more commercially-oriented regulatory regime. There are indications that the UK would simultaneously attempt to create a particularly close relationship with the US, although recent changes in US international trade policy may pose some questions on that trade strategy. Overall, then, Brexit has created a scenario where UK public procurement law and policy may be significantly altered.

The extent to which this is a real possibility crucially depends on the framework for the future trading relationship between the UK and the EU. Whereas ”EU-derived law” will not restrict the UK’s freedom to regulate public procurement, the conclusion of a closely-knit EU-UK trade agreement covering procurement could thus well result in the country’s continued full compliance with EU rules. Nonetheless, this is not necessarily a guaranteed scenario and, barring specific requirements in future free trade agreements between the UK and the EU or third countries, including the US, the World Trade Organisation Government Procurement Agreement (GPA) seems to be the only regulatory constraint with which future UK public procurement reform needs to conform. However, the position of the UK under the GPA is far from clear. We posit that the UK will face a GPA accession process and GPA members may see Brexit as an opportunity to obtain new concessions from the UK and the EU, which could be both in terms of scope of coverage or regulatory conformity. Further, given the current trend of creating GPA plus procurement chapters in free trade agreements, such as the US-Korea FTA, the GPA regulatory baseline will gain even more importance as a benchmark for any future reform of public procurement regulation in the UK, even beyond the strict scope of coverage of the GPA. Given the diversity of GPA-compliant procurement systems (such as the EU’s and the US’), though, the extent to which the GPA imposes significant restrictions on UK public procurement reform is unclear. However, we argue that bearing in mind the current detailed regulation in the UK might itself limit deregulation due to the need to comply with the international law principle of good faith as included in the 1969 Vienna Convention on the Law of Treaties and, to a certain extent, the United Nations Convention Anti-Corruption. 

The aim of this paper is to try to disentangle the multi-layered complexities of Brexit and to explore the issues that Brexit has created in the area of international public procurement regulation, both from the perspective of ‘internal’ EU law-related issues and with regard to broader ‘external’ issues of international trade regulation, as well as to assess the GPA baseline regulatory requirements, and to reflect on the impact these may have on post-Brexit public procurement reform in the UK.

Interesting AG Opinion on limits of duty to investigate intra-group collusion in procurement (C-531/16)

In his Opinion of 22 November 2017 in Specializuotas transportas, C-531/16, EU:C:2017:883, Advocate General Campos Sánchez-Bordona has considered the limits of a contracting authority's duty to investigate potential intra-group collusion or manipulation of tender procedures by entities belonging to the same corporate group--in particular in a setting where the tenderers are under no specific obligation to disclose their links to the contracting authority, but the contracting authority is aware of those links and can identify signs that point towards potential collusion. In my view, his approach is functional and enabling, and pushes for a competition-orientated exercise of the contracting authority's discretion.

AG Campos concluded that, on the one hand, '[i]n the absence of an express legislative provision or a specific requirement in the specifications governing the conditions for the award of a service contract, related tenderers which submit separate tenders in the same procedure are not under an ineluctable duty to disclose their links to the contracting authority'. And, on the other hand, that '[t]he contracting authority will be obliged to request from those tenderers the information it considers necessary if, in the light of the evidence available in the procedure, it harbours doubts concerning the risk that the simultaneous participation of those tenderers will undermine transparency and distort competition between operators tendering to provide the service' (para 87).

In my view, and for the reasons discussed below, AG Campos' approach creates the right set of incentives both for national legislators and for contracting authorities. Even if his Opinion is concerned with the regime under Directive 2004/18/EC, in my view, the balance of duties deriving from EU law and those that can be created under the national law of the Member States will extend to the system created by Directive 2014/24/EU--as, ultimately, the second part of AG Campos' conclusion is compatible with the principle of competition in Article 18(1) thereof, and the first part will be largely unaffected by any self-certification requirements concerning the discretionary exclusion ground in Art 57(4)(d) under the ESPD.

The case and the questions in the preliminary reference

In the case at hand, both Specialus autotransportas UAB (‘tenderer A’) and Specializuotas transportas UAB (‘tenderer B’) had submitted tenders for a contract for the provision of municipal waste collection and transportation services. Both tenderers were subsidiaries of Ecoservice UAB (‘Ecoservice’) (see paras 15 and 16). However, they did not disclose this information explicitly to the contracting authority. Instead, tenderer B 'voluntarily submitted a declaration of honour to the effect that it was taking part in the call for tenders on an autonomous basis and independently of any other economic operators which might be connected to it, and it requested the [contracting authority] to treat all other persons as competitors. It further stated that it undertook, should it be so required, to provide a list of economic operators connected to it' (para 17).

The contracting authority eventually rejected tenderer A’s tender on the ground that it did not comply with one of the conditions set out in the tender specifications; and tenderer A did not contest that decision. The contract was ultimately awarded to tenderer B. The review court rejected a complaint by a disappointed competitor, arguing that the tenders submitted by A and B had not been properly evaluated and that the principles of transparency and equality before the law had been infringed. An appeal of such decision brought the preliminary reference to the Court of Justice (see paras 18-21).

Thus, in Specializuotas transportas, the referring court asked a long list of very detailed questions concerning the duties for a contracting authority to carry out an in-depth assessment of potential intra-group collusion for the manipulation of a public tender.

Interestingly, during the procedure before the Court of Justice, the contracting authority clarified that it was aware of the links between the tenderers because this was public knowledge, so that at no time was it misled when it took its decisions; and that 'quite apart from the relationship between the tenderers, which does not of itself imply an absence of competition, there [were] a number of objective factors in the instant case which enabled it to conclude that those tenderers were in competition with one another' (paras 26-27).

AG Campos' analysis

AG Campos grouped the questions under reference into two main issues: (1) whether related tenderers which submit separate tenders are under a duty, in all cases, to disclose that relationship to the contracting authority and, if so, what the consequences of failure to do so are; and (2) how must the contracting authority — and any court which reviews its actions — proceed where it becomes aware of the existence of important links between certain tenderers (para 42).

The answer to the reformulated issue (1) is straightforward, and AG Campos puts it simply that 'A requirement (the alleged duty to declare links with other companies) which is not set out in the contract documents, is not provided for in national law and is not laid down in Directive 2004/18 does not pass the transparency test referred to by the Court. ..., in the absence of an express legislative provision (of EU law or of national law), related tenderers are not under a duty to disclose the relationship between them to the contracting authority' (para 48, emphasis in the original). In my view, this is the correct approach. Any practical shortcomings derived from the absence of such explicit rules should by now be overcome with the adoption of the European Single Procurement Document (see part III.C of Annex 2 of the ESPD Implementing Regulation) and, if not, the position adopted in the Opinion creates a clear incentive for all Member States to reconsider their approach to tenders by related undertakings and the corresponding information requirements for exclusion/rejection screening purposes.

Moreover, AG Campos also provides convincing reasons for the rejection of an implicit duty to disclose the links between tenderers (paras 49-52), as well as for rejecting the analysis of both tenders as variants (constructively) submitted by the same holding company (Ecoservice) (paras 53-62). In this part of the analysis, AG Campos refers to my views on the automatic exclusion of tenders submitted by entities belonging to the same corporate group (see fn 20, with reference to Sánchez Graells, A., Public Procurement and the EU Competition Rules, Hart, Oxford, 2nd ed., 2015, p. 341). I am greatly honoured by this reference.

The answer to the reformulated issue (2) is potentially less straightforward and the reasoning of AG Campos merits close attention. His starting point is that the relevant analysis concerns 'whether ... the contracting authority is under a duty to ask related tenderers to provide evidence that their situation does not run counter to the principle of competition ... [and] whether inactivity on the part of the contracting authority would be sufficient for a declaration that its conduct in the procedure is unlawful' (para 67). Furthermore, he considers that 'the aim is not so much to protect the (general) competition between independent operators in the internal market as to protect the (more specific) competition which must operate in procedures for the award of public contracts. From that perspective, what really matters is the separateness of and genuine difference between the respective tenders (which will enable the contracting authority to choose the tender most favourable to public interests), whether the tenderers are independent or related economic operators' (para 71, reference omitted and emphasis added). In my view, this points towards an analysis that is more demanding than a simple general competition test because, as the Opinion also rightly points out, the general prohibition of anticompetitive conduct in Article 101(1) TFEU does not apply to intra-group relationships (para 69).

Concerning the specific duty to investigate potential intra-group collusion in the procurement setting, AG Campos constructs the following reasoning:

... the judgment in Etruras and Others states that ‘the principle of effectiveness requires that an infringement of EU competition law may be proven not only by direct evidence, but also through indicia, provided that they are objective and consistent.’ The judgment in VM Remonts and Others states that, in the absence of EU rules on the matter, ‘the rules relating to the assessment of evidence and the requisite standard of proof … are covered … by the procedural autonomy of the Member States’.

Applying that case-law to the facts at issue in the main proceedings, where the contracting authority is aware that related tenderers are participating in the procedure, the ‘active role’ expected of it, as the guarantor of genuine competition between tenderers, should normally lead it to make certain that the tenders submitted by those tenderers are separate. 

In short, that requirement is just one of the measures aimed at "[examining] all the relevant circumstances … in order to prevent and detect conflicts of interests and remedy them, including, where appropriate, requesting the parties to provide certain information and evidence."

However, the contracting authority may, in cases such as the present one, dispense with a communication to the related tenderers, asking them, ... "to clarify whether and how their personal situation is compatible with free and fair competition between tenderers". Clearly, "where appropriate, requesting the parties to provide certain information and evidence" may be important if the information and evidence available to the contracting authority is not sufficient for it to form a view regarding the risk that the tenders are not separate and distort competition.

Therefore, what matters is not that the contracting authority contacts the related tenderers, asking them for information about their relationship and seeking their view regarding the protection of the principle of competition between tenderers. The decisive factor is, rather, that the contracting authority is in a position to conclude that the simultaneous participation of those related operators does not jeopardise competition. The contracting authority may, of course, reach that conclusion by requesting that information or that view from the tenderers but it may also do so by referring to the information already available in the procedure and therefore without the need to approach the tenderers (paras 76-80, references omitted and emphasis added).

Ultimately, when assessing the extent to which the contracting authority discharged its duty to ensure effective competition for the contract and equality of treatment in the assessment of the tender, AG Campos stresses that '[e]verything will depend on the sufficiency or insufficiency of the available evidence and, therefore, on the objective soundness of the contracting authority’s decision to allow related tenderers to participate in the tendering procedure, on which it ultimately falls to the national court to rule' (para 86).

Final thoughts

As mentioned above, I think that the approach taken by AG Campos in the Specializuotas transportas Opinion is functional and enabling, and pushes for a competition-orientated exercise of the contracting authority's discretion. In situations where the contracting authority is aware of the existence of links between (seemingly) competing tenderers, it is appropriate to expect a high level of diligence--that is, to establish that 'the ‘active role’ expected of it, as the guarantor of genuine competition between tenderers, should normally lead it to make certain that the tenders submitted by those tenderers are separate' (para 77).

In my view, this is completely in line with the principle of competition of Article 18(1) Dir 2014/24/EU and seeks to avoid that contracting authorities tolerate an artificial narrowing of competition by inaction or omission. Conversely, the Opinion also seems to indicate that contracting authorities have a self-standing role as 'guarantors of genuine competition between tenderers', which is a good foundation on which to build a broader due diligence duty to identify the existence of indications of distortions of competition by colluding tenderers--whether linked through corporate group relationships or not. On the whole, then, the Opinion of AG Campos in Specializuotas transportas must be welcome and it can be hoped that the Court of Justice will not only follow his approach, but consolidate the general duty for contracting authorities to actively act as the 'guarantors of genuine competition between tenderers'

GC decision delimiting obligation to assess abnormally low tenders, where contracting authority changes tenders (T-281/16)

In its Judgment of 10 October 2017 in Solelec and Others v Parliament, T-281/16, EU:T:2017:711 (only available in French), the General Court of the Court of Justice of the European Union (GC) decided one more case concerning the analysis of potentially abnormally low tenders under the 2012 Financial Regulation. Solelec brings in a twist to the previous case law, which derives from the fact that the winning tender was unilaterally 'arithmetically adjusted' by the contracting authority during the award process in a manner that increased its value by approximately 10%. The GC, perhaps surprisingly, took no issue.

This is an area of litigation that has triggered a significant number of recent decisions (see here, here and here), and these are consolidating a two-step approach to the analysis of abnormally low tenders: (i) an initial motu proprio duty for the contracting authority to screen tenders for signs of apparent abnormality without a corresponding duty to explicitly provide reasons when it does not identify those signs (and, alternatively, a duty to start the information-seeking inter partes procedure with the affected tenderer), and (ii) upon allegations by the tenderers, a duty to investigate claims of apparent abnormality, and an interrelated duty to provide sufficient reasons for its findings (one way or the other).

Solelec concerned the second type of duties, as the GC was faced with a case where a disappointed tenderer (Solelec, as part of a consortium, together with Mannelli, Wagner & Socom) challenged the award of a contractual lot to a competing consortium (Muller & Putman), on the basis that (i) the latter's tender was abnormally low and (ii) that Muller & Putman did not meet the applicable qualitative selection criteria. This second line of argument makes the case also partially comparable to Marina del Mediterráneo (see here), concerning the justiciability of allegations of improper assessment of selection criteria concerning competing tenderers. In that regard, in my view, Solelec is another case supporting the need to regulate more clearly pre-litigation procedural phases where undertakings want to challenge qualitative selection decisions concerning themselves or competing tenderers.

In Solelec, the European Parliament rejected Solelec's arguments on the lack of qualification of the Muller & Putman consortium the first time they were submitted on the basis that tenderers are not allowed to contact the contracting authority after the submission of the tenderers and until an award decision is made (see paras 5-6). This is a highly formalistic approach, and one that pushes all such claims to the litigation stage. This is undesirable and, in general, the regulation of a pre-litigation possibility of airing all concerns about qualification would be desirable [see A Sanchez-Graells, '"If It Ain't Broke, Don't Fix It"? EU Requirements of Administrative Oversight and Judicial Protection for Public Contracts', in S Torricelli & F Folliot Lalliot (eds), Administrative oversight and judicial protection for public contracts (Bruylant, 2018, forthcoming)].

On substance, firstly and concerning Solelec's claims that Muller & Putman did not meet the required qualitative selection criteria, the GC dismissed the argument that the late deposit of financial statements under domestic law (Luxembourg) can be a cause for a determination of lack of financial or professional standing, in particular if that is not indicated in the tender documentation as an exclusion ground (paras 28-32), it also dismissed a claim that a potential breach of domestic corporate law could lead to exclusion, where that breach would be in the future and susceptible of being remedied by the tenderer concerned (paras 33-45--in the case, the need to extend the period of establishment of a corporate entity), and engaged in a very detailed assessment of claims of inexistence of required references supporting past experiences claims, in a setting where the information that had been disclosed to Solelec had been redacted on the basis of the protection of commercial and business secrets of Muller & Putman (paras 46-106). Part of the latter discussion is particularly interesting in relation with the possibility of remedying incomplete tender documents (à-la-Manova, see paras 60-78).

Secondly, and concerning Solelec's claim that Muller & Putman's tender was abnormally low, the GC discusses the reasons why the fact that the latter offer was 30% lower than Solelec's and almost 13.5% lower than the estimated budget did not necessarily lead to a finding of abnormality (paras 107-164)--much in the same line as in TV1 v Commission, T-700/14, EU:T:2017:35 (see here). Maybe the most interesting point of this part of the Judgment is the one concerned with an upwards 'arithmetical adjustment' of the winning tender carried out by the contracting authority, which increased the offered price of €41.4 million to an award of €45.6 million (paras 150-164). According to the contracting authority, such adjustment resulted 'on the one hand, from the correction of calculation errors and, on the other hand, from the correction resulting from the modification of the quantity of certain activities in the tender form of the successful tenderer, in the course of the tender procedure' (para 154. own translation from French).

Concerning the possibility for the contracting authority to introduce an upwards modification of the volumes of activities included in the original tender form, the GC indicated that the change was acceptable because the need for the adjustment in the volume of activities derived from the fact that, during the period for the submission of tenders, the contracting authority issued a revised scope of works that was presented as a revision of estimated prices, but also included changes in quantities of works.

In the words of the GC

It is certainly true that the successful tenderer [Muller & Putman] drew up its tender on the basis of the first version of the price schedule and that the said schedule was replaced, before the date of submission of the tenders, by a second version which was made available to all bidders through a computer platform. The applicants [Solelec] for their part, drew up their offer on the second version of the price schedule.

It follows that the error to be corrected in the present case results from the fact that the successful tenderer failed to take into account, in its tender, the changes in the quantities of certain services set out in the second version of the price schedule (paras 156-157, emphasis added, own translation from French).

This is certainly a difficult situation, and one where, in the absence of specific rules in the tender documentation establishing the way the contracting authority could proceed to amend the tenders, a unilateral corrective intervention by the contracting authority would not necessarily be beyond reproach. However, in the case at hand, the contracting authority had reserved the right to adjust the content of the tenders received in a limited number of circumstances, including a mention that 'the quantities or other elements of the tender schedule [ie the form according to which all tenders had to be submitted] that are modified by the tenderer will be put back to the state of the tender schedule provided to the tenderers in the tender dossier' (para 158, own translation from French). Or, in other words, the contracting authority indicated that the quantities had to be fixed for all tenderers, and that it would make any required adjustments to the tenders received to that effect.

This led to the GC's assessment that 'there is no reason to conclude that the contracting authority was not entitled to correct the tenderer's tender based on the first version of the schedule in the light of the second version of the schedule ... in order to to allow the award to be made on as good a basis as possible, and in order to improve the comparability of tenders and not to jeopardize the equal treatment of tenderers. The Parliament therefore proceeded lawfully by making this correction in accordance with the power at its disposal', which the GC identifies in the tender documentation (para 160, own translation from French).

In my view, the extent to which this approach in the tender documentation is acceptable and fully compatible with the general principles of procurement law can be controversial (what are the limits on the changes that a contracting authority can unilaterally reserve the right to introduce, and is compliance with an implicit transparency requirement sufficient to legitimise such an approach?). Arguably. it would have been preferable for the contracting authority to foresee in the tender documents the possibility to have contacted the tenderer and given it the opportunity to correct the obvious error (which is in any case allowed by the case law), rather than reserving a right to directly proceed to the correction. Moreover, some more detailed discussion of whether the error was obvious (and why would changes in quantities be possible at all, as the tenderers could have been requested to solely submit unit prices), and whether it corresponded with the grounds for unilateral adjustment of the tenders included in the tender documentation would have been useful (in particular by reference to the Slovensko case law).

AG suggests CJEU should declare fines for clarification or supplementation of procurement documents as contrary to EU law only if disproportionate (C-523/16)

In his Opinion of 15 November 2017 in case MA.T.I. SUD, C-523/16, EU:C:2017:868, Advocate General Campos Sánchez-Bordona has considered whether, in a situation where a tenderer for a public contract has submitted incomplete information, national rules subjecting the possibility of supplementing that documentation to the payment of a fine are compatible with EU public procurement law.

The dispute concerned a 2014 reform of the Italian law transposing 'Article 51 of Directive 2004/18/EC in a manner which enabled tenderers for public contracts to remedy any irregularities in their tenders, but at the same time imposed on them a financial penalty proportional to the value of the contract' (para 1)--of between 0.1% and 1% of the value of the contract, with a maximum ceiling of €50,000 (para 5, by reference to Art 38(2a) of the Italian Legislative Decree No 163 of 2006). Interestingly, the rule also foresaw that '[i]n the case of non-substantial irregularities, that is, any non-essential absence or incompleteness of declarations, the contracting authority shall not require the remedying thereof or impose any penalty' (idem).

AG Campos has submitted that Art 51 Dir 2004/18 did not prohibit the imposition of such fines, 'provided that [the national legislation] ensures compliance with the principles of transparency and equal treatment, that the remedying of those irregularities does not make possible the submission of what, in reality, would be a new tender and that the burden is proportionate to the objectives justifying it' (para 80), but that, under the circumstances of the case, a fine of between 0.1% and 1% with a maximum of €50,000 was not allowable (para 80). The AG Opinion and the future Judgment of the Court of Justice will be relevant for the interpretation of Articles 56 and 59 of Directive 2014/24/EU, but I am not sure that the reasoning can be simply carried forward to a regulatory setting that indicates more clearly the conditions for the request of clarifications. In this post, I pick on a few elements of the analysis of AG Campos Sánchez-Bordona in his MA.T.I. SUD Opinion, and reflect on the applicability of the reasoning to the post-2014 setting.

Some preliminary normative thoughts

As a preliminary point, though, I think it worth stressing that the functioning of a system allowing for ‘remedying procedural shortcomings in return for payment’ is probably better understood as a system allowing 'avoiding exclusion for payment', in the sense that an undertaking that has submitted incomplete or unclear documentation is given a chance to avoid exclusion from the procurement procedure under the double condition that (a) it is able to submit a clarification or supplementary documentation that does not materially alter its tender, and (b) it is able (and willing) to pay the financial sanction. While (a) is relevant to the goals of the procurement 'triage' process because the contracting authority has a structural interest in attracting as many (in open procedures) or the best (in restricted and different variations of negotiated procedures) qualified tenderers, (b) is irrelevant unless and except in the case in which the inability to pay the fine signals financial difficulties or bankruptcy--which should in any case be captured by discretionary exclusion grounds based on that specific circumstance. Therefore, (b) comes to create a functional distortion of the procurement procedure and, in particular, of the aims of the qualitative selection phase. 

While sanctions in this setting may be seen as an incentive for undertakings to submit full and accurate documentation, this can also be the type of provision that creates a disincentive to participate, and one that seeks to displace part of the costs of the administrative procedure from the contracting authority unto the tenderers (for, statistically, there will be errors and this type of cost should thus be seen as part of the ordinary costs of running procurement processes). While the financial impact of the 'fine-based remedial system' will then largely be borne by the tenderers, the benefits will also fall on the contracting authority (at least in those cases where the 'paying, sloppy undertaking' ends up being awarded the contract for having submitted the most advantageous tender). This creates a strange trade-off between private costs and private and public benefits, which can be further complicated where the imposition of the fine has a discretionary element to it (eg the possibility to waive the fine for non-essential defects, where the determination of the threshold of 'essentiality' is far from clear-cut and objective).

At first sight, then, this seems like the type of rule that can create perverse incentives--in particular in terms of SME access to procurement procedures, or their ability to continue in the race when they commit mistakes--which comes to raise the threshold of 'professionalism' needed to participate in procurement processes without risking significant financial consequences. On the whole, then, from a normative perspective, I think that this is the kind of rule that seeks to reduce the administrative cost of procurement at the expense of reduced (potential) competition for public contracts, in particular from SMEs. The same way I argue against charging potentially interested tenderers for access to the tender documentation, I would also take the normative position that imposing fines for the remediation of documentation shortcomings is undesirable, and would propose their eradication de lege ferenda (by analogy, see A Sanchez-Graells, Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 280-281).

This should be kept in mind when reading the remainder of this post, as this line of normative argumentation was used by the parties. In particular, in the clear formulation of the European Commission, which stressed that 'the contrast between paying a fine for a minor irregularity and the uncertainty of being awarded a contract may cause tenderers, especially small and medium-sized undertakings, not to participate in tenders or, where applicable, to withdraw their participation after the tenders have been submitted' (para 38, although the Commission goes on to note that the payment would be allowable despite its dissuasive effects, 'provided that it pursues a legitimate objective of general interest. Such objectives may include both the aim of making undertakings behave responsibly (encouraging them to act seriously and promptly when supplying the documentation for their tenders) and that of financially compensating the contracting authority for the work involved in the more complicated and extended procedure of remedying procedural shortcomings', para 39, which is not completely aligned with my normative position).

‘Remedying procedural shortcomings in return for payment’ under the pre-2014 EU public procurement rules

In the pre-Slovensko (C-599/10, EU:C:2012:191), pre-Manova (C-336/12, EU:C:2013:647) setting, where some doubts could be harboured as to the possibility for contracting authorities to seek clarifications of the tender documentation, and its limits, the only guidance the then current EU rules provided was to be found in the sparse Article 51 Dir 2004/18/EC, which foresaw that 'The contracting authority may invite economic operators to supplement or clarify the certificates and documents submitted pursuant to Articles 45 to 50'--that is, clarifications or supplements to the certificates and documents concerning (i) the personal situation of the candidate or tenderer (art 45); (ii) its suitability to pursue the professional activity (art 46); (iii) its economic and financial standing (art 47); (iv) its technical and/or professional ability (art 48); (v) its quality assurance standards (art 49); and (vi) its environmental management standards (art 50).

However, Slovensko and Manova came to clarify the possibility for clarifications to be sought (which in my view can result in a duty to seek clarifications under certain conditions, see here), and this seemed to prompt a legislative reaction in Italy. Given the need to allow for clarifications and modifications of the tender documentation in certain cases, Italian procurement law was modified from a system of strict disqualification for formal shortcomings, to as system allowing for 'remedying procedural shortcomings for payment' [see M Comba, 'Qualification, Selection and Exclusion of Economic Operators (Tenderers and Candidates) in Italy', in M Burgi, M Trybus & S Treumer (eds), Qualification, Selection and Exclusion in EU Procurement (DJØF Publishing, 2016) 85, 97-100]. However, this modification of the rules and the increased procedural flexibility were subjected to the payment of an administrative fine by the undertakings that had presented incomplete or unclear documentation (see above).

AG Campos assesses the compatibility of this approach to financially-conditional clarification or supplementation of documents under the rules in Directive 2004/18/EC (as Directive 2014/24/EU was not applicable ratione temporis, see paras 50-52 of his Opinion). In his view, there is 'nothing in [the case-law of the Court on Directive 2004/18] which might preclude the Member States from providing for contracting authorities to charge a certain amount (in this case, as a penalty) to tenderers who have placed themselves in that situation' (para 56, reference omitted). Further, he considers that there is no objection in principle and that any EU-law derived restriction on this possibility would be a matter for a proportionality assessment. In his words,

... national legislation may ... authorise the remedying of formal shortcomings in the tenders, while imposing on the tenderers a certain economic burden in order to encourage them to submit their tenders correctly and to pass on to them the additional cost (if any) arising from the procedure for remedying shortcomings. However, national legislation of that kind, which, owing to the magnitude of that burden, constitutes a not easily surmountable obstacle to the participation of undertakings (in particular, small and medium-sized ones) in public procurement procedures, would run counter to Directive 2014/18 and to the principles underlying it; moreover, this would also undermine the competition to be desired in respect of those procedures (para 58, references omitted and emphasis added).

This leads him to stress that he does 'not consider ... that objections of principle can be raised to a mechanism which makes the correction of shortcomings in the submission of a tender subject to a payment by the person responsible for those shortcomings and required to remedy them' (para 59, emphasis in the original).

AG Campos then proceeds to assess whether such non-negligible restriction to participation is created by the Italian rule at stake. He also addresses the issue whether the Italian provision may be in breach with the Court of Justice's case law on the limits to the allowable modifications and clarifications to tender documentation (paras 60-65). However, this concerns a literal interpretation of the Italian rule (which foresees the possibility of remedying '[a]ny absence, incompleteness or any other substantial irregularity in the information'). However, even if part of the rule should be quashed for exceeding the relevant case law, the possibility would have remained to require payment for the remediation of a 'Manova-like' situation that concerned the absence of (pre-dating) information. Thus, the analysis of the rule remains interesting even in the case of partial incompatibility.

A tricky proportionality assessment

In AG Campos' view, the relevant point is thus to establish whether the financial burden derived from the 'remedy for payment' rule is not an 'easily surmountable obstacle' to participation in procurement procedures, in particular by SMEs. In the second part of his Opinion, he deals with this point and considers two sets of issues. First, he carries out a strict proportionality assessment. Second, he goes back to points of principle despite his previous position that no objections of principle could be raised against the mechanism, which is slightly puzzling.

On the strict proportionality front, the Opinion submits that

The two criticisms of that instrument ... are, on the one hand, that the amount of the penalty is determined a priori, in the contract notice itself, without attempting to assess the magnitude of the irregularities committed or the infringing tenderer’s economic circumstances, and, on the other hand, that the resulting amounts (up to a maximum of EUR 50 000) do not comply with the principle of proportionality. Moreover, the exorbitant amount of the penalty is such as to deter participation in the tendering process, especially by small and medium-sized undertakings, thereby restricting competition.

... the objectives which might justify the imposition of the penalties are not consistent with the minimum and maximum amounts of those penalties...

Of course, the argument of higher administrative costs does not justify such substantial amounts: it should be borne in mind that even the minimum of 0.1 per cent (and a fortiori 1 per cent), in contracts subject to [Union] directives, is in itself high, given the lower thresholds for the application of those directives. That argument is also not consistent with a single amount which is established a priori and consists in a percentage of the amount of the contract, since it would be logical, following that line of thought, to tailor to each individual case to the resulting higher costs.

The disproportionate nature of the penalties is evident in the present two cases, which merely arise from the practical application of the legal provision: an executive’s forgetting to sign and the failure to provide a sworn statement regarding a criminal record result in fines of EUR 35 000 and EUR 50 000 respectively. I find it difficult to accept that the higher cost to the contracting authorities, merely for detecting those two anomalies and for inviting the tenderers to remedy them, corresponds to those amounts, which seem rather to be designed to increase their revenue (paras 71-74, references omitted and emphasis in the original).

This part of the reasoning seems unobjectionable and comes to challenge the possibility of imposing a fine for the remedying of documentation, rather than imposing a duty to cover any additional administrative costs ensuing from the remedial action--which would have been preferable, even if still normatively undesirable (see above). Importantly, this part of the reasoning would have sufficed to quash the Italian provision at stake. However, the Opinion proceeds to assert that

Nor does the aim of ensuring the seriousness of tenders justify such large fines. In the first place, because such fines are imposed (as stated in the tender specifications) regardless of the number of irregularities, that is, regardless of the type of information or document which is missing or must be supplemented and of its greater or lesser significance. The provision treats the offences in a uniform manner and allows their level of complexity to be disregarded.

In the second place, that aim [of ensuring the seriousness of tenders] must be weighed against that of promoting the widest possible participation of tenderers, resulting in greater competition and, in general, the best service to public interests. An excessive penalty will probably deter undertakings with smaller financial resources from participating in calls for tenders for high-value contracts, given the percentage limits stated above. They might also be deterred from participating in future calls for tenders which include the same penalty provision.

Moreover, such a burden will be even more of a deterrent to ‘tenderers established in other Member States, inasmuch as their level of knowledge of national law and the interpretation thereof and of the practice of the national authorities cannot be compared to that of national tenderers’.

In short, a provision the purpose of which was, precisely, to help to remedy formal errors made by tenderers (by amending the previous national rule) and, thereby, to increase their chances of successfully participating in public procurement procedures ultimately deters such participation by imposing financial burdens which are disproportionate to its objective (paras 75-78, references omitted and emphasis added).

In this second part, AG Campos seems to adopt a half-way approach to the objection in principle to the establishment of dissuasive barriers to participation, but only through disproportionate or excessive penalties. I find this problematic because it is very difficult establish at which level the dissuasive effect will kick-in, regardless of what can be considered excessive or disproportionate for the purposes of finding an infringement of EU internal market law. Thus, as mentioned above, I think that there are good reasons to oppose the creation of these mechanisms out of principle (the principle of maximising competition for public contracts, to be precise) and, from that perspective, I find the Opinion in MA.T.I. SUD unnecessarily shy or insufficiently ambitious. This does not affect the outcome of the specific case, but perpetuates the problem in view of the 2016 reform of the controversial Italian law, as discussed below.

‘Remedying procedural shortcomings in return for payment’ under the post-2014 EU public procurement rules

Interestingly, the case comprises a dynamic element that remains unresolved. It is worth noting that the Italian rule at stake in MA.T.I. SUD has been amended, and a 2016 reform relaxed 'the conditions for requiring the fine (imposing it only if rectification is required) and reduced its maximum ceiling (from EUR 50 000 to EUR 5 000)' (para 8). Additionally, any substantive assessment of the revised rule will now have to take place within the setting of the rules in Directive 2014/24/EU, where it can be argued that contracting authorities are under a duty to seek clarifications [for discussion, see A Sanchez-Graells, Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 321-323]. In my view, in this setting, the analysis should not rely on a matter of proportionality, but on a more sophisticated understanding of the functions and balance of interests involved in the qualitative selection phase of each procurement procedure, which very much opposes the levying of financial penalties for clarifications sought by the contracting authority, regardless of their amount.

My view seems to run contrary to that of AG Campos and the European Commission, which both seem to have hinted at the fact that the new maximum amount of €5,000 for necessary rectifications saves the mechanism. This is seen with favour by both the European Commission in its submissions ('a maximum ceiling of EUR 5 000, such as that adopted by the new Public Contracts Code, is more reasonable', para 41) and, in less clear terms, by the AG ('Perhaps that reform, by significantly reducing the absolute maximum ceiling to EUR 5 000, was a response to the national legislature’s belief that that ceiling had been excessive, as the referring court implies', para 72).

If this represented the position the European Commission would defend in a future case involving the revised Italian rule, and/or the position taken in an Advocate General Opinion, I would strongly disagree because I do not consider helpful the view that €5,000 per rectification is 'more reasonable' or 'less excessive' than €50,000 per error (unless waived due to its non-essential character). Going back to the principles behind the creation of this type of mechanisms, important questions remain as to whether the goals it seeks to achieve are either justified in the public interest, or not already sought by other aspects of the procurement rules.

As submitted by the Italian Government and the Commission, the double legitimate goal of the measure would be 'first, to make the tenderer responsible for acting diligently when producing the documentation which will accompany his tender and, second, to compensate the contracting authority for the additional work involved in administering a procurement procedure which allows for the possibility of remedying those irregularities' (para 70).

On the second point, I am not sure that there is a clear public interest in seeking to recover part or all of the administrative costs involved in rectifying qualitative selection decisions in the view of supplemented or clarified information, in particular because this recovery of costs comes at the expense of an immeasurable potential reduction of competition (and, if one is to adopt AG Campos' reasoning, particularly acute in the case of undertakings from other jurisdictions, see para 77--although I am not sure this part of the argument is persuasive). On the first point, the argument that the financial penalty will ensure that undertakings participating in tender procedures will act diligently seems moot. The main incentive for undertakings to act diligently in the preparation of their tenders is the economic incentive derived from being awarded the contract. Thus, creating a negative incentive that works in the same direction that the main economic incentive (ie to prompt undertakings to submit their best possible tender) makes no economic sense because it creates a double-whammy on less diligent tenderers, whereas it adds no incentive for diligent tenderers.

By isolating the qualitative selection phase and thinking that tenderers have an interest in acting in less than diligent terms (within their abilities) seems to me to miss the point. While the frustration at the administrative burden of carrying out several (or at least two) iterations of inspection of documents where there have been mistakes is understandable, that should not lead to the creation of financial penalty mechanism that is bound to both be ineffective in what it tries to achieve and to create a likely high shadow cost in terms of lost potential competition for public contracts. In that regard, I would have preferred for the Italian mechanism to be quashed as a matter of principle on this occasion. But, even if this does not happen and the Court of Justice follows the intermediate approach of AG Campos' Opinion, I would still hope that a fresh consideration of the revised Italian rule under the setting of Directive 2014/24/EU delivered that result.

Postscript [16 Nov 2017, 9am]

After publishing this post, it was brought to my attention that I had missed the additional information in fn 5 of AG Campos' Opinion, where he explains that the Italian fees for remediation of documentation shortcomings has been abolished. Indeed, the fn says:

Although it can have no bearing on the consideration of the questions referred ... a further, more radical amendment of the Code ... occurred in 2017. In fact, Legislative Decree No 56/2017 of 19 April issued a new draft of Article 89(3) which definitively removed the requirement to pay for the remedying of shortcomings upon its entry into force (20 May 2017). Since then, economic operators have been able to rectify the absence of any formal element from their proposals (except those relating to the economic and technical aspects of the tender) without incurring any kind of penalty or other similar charge.

Thus, the issue will remain unresolved, unless similar charges or financial penalties exist in other jurisdictions.

Mixed views on General Court decision concerning claim of 'artificial narrowing of competition' through too strict procurement selection requirements (T-668/15)

In its Judgment of 10 November 2017 in Jema Energy v Entreprise, T-668/15, EU:T:2017:796 (only available in Spanish and French), the General Court of the Court of Justice of the European Union (GC) engaged with a claim that, by setting exceedingly demanding qualitative selection criteria, the contracting authority had artificially narrowed down competition. I find this case very interesting because I expect this type of argument to be increasingly used in procurement challenges as a result of the consolidation of the principle of competition in Article 18(1) of Directive 2014/24/EU [for my interpretation, see A Sanchez-Graells, Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) ch 5]. Even if Jema Energy v Entreprise was decided on the basis of the Implementing Rules of the Financial Regulation applicable to procurement by Fusion for Energy, given that the GC explicitly considered Art 18(1) Dir 2014/24/EU, I think that the Judgment offers valuable pointers as to how the case law may develop in this area.

The case at hand concerned a tender for the design, manufacture, supply and installation of electrical equipment where the contracting authority established qualitative selection criteria concerned with previous experience that required tenderers to demonstrate previous delivery of specific types of equipment in the 5 years prior to the tender. A tenderer requested repeated clarifications on the requirements and prompted the contracting authority to change the requirements. The contracting authority replied that it did not appreciate the presence of objective circumstances requiring such changed. Eventually, the tenderer was rejected for not meeting the requirements and the decision was challenged. One of the grounds for the challenge was based on a breach of the principle of proportionality and on the 'artificial narrowing of competition'. I will concentrate on this ground of appeal (paras 67-109 of the Judgment).

It is interesting that the third ground of appeal treated separately claims on the basis of the principle of proportionality (supported by reference to the Commission's Guidance for practitioners on the avoidance of the most common errors in projects funded by the European Structural and Investment Funds) and on the artificial narrowing of competition (which was build by reference to Art 18 Dir 2014/24/EU). After making reference to the broad discretion of contracting authorities in the design of the tender procedure, including the choice of qualitative selection criteria and their form of assessment, and the subjection of the exercise of that discretion to compliance with general principles of EU law (paras 73-74), the GC assessed each claim separately.

The proportionality analysis is very formal and mostly relies on the lack of supporting evidence for some of the technical claims against the proportionality of the qualitative selection criteria. It is also disappointing that the GC decided not to engage with the arguments based on the functional criteria included in the Commission's guidance for ESI-funded procurement on the basis that this specific project did not concern those funds, which misses the opportunity of both identifying whether the guide includes best practice recommendations and, if so, to rely on them for the development of more detailed case law on the application of the principle of proportionality to discretionary decisions of the contracting authority. Granted, such engagement may not have been necessary to decide the case at hand, but this flat-out rejection of the substantive argument comes to diminish the value of soft law efforts oriented to the creation of best practice standards--which is the only type of guidance the Commission seems willing to adopt these days.

Going back to the case... the GC's analysis of the claim of artificial narrowing down of competition is very interesting because, even if the GC equally rejected to engage in a direct consideration of Art 18(1) Dir 2014/24/EU on the basis that it was not applicable ratione temporis (86-88), and given that this prompted the claimant to request for the argument to be assessed on the basis of Directive 2004/18/EC, the GC was willing to establish that

It should be noted that Directive 2004/18 did not contain a provision similar to Article 18, paragraph 1, second paragraph, of Directive 2014/24 [prohibiting a contracting authority from designing the tender with the intention of artificially narrowing competition by unduly favoring or disadvantaging certain undertakings]. Indeed, Article 2 of Directive 2004/18 referred, as does Article 18 of Directive 2014/24, to the principles of awarding contracts, namely the principles of equal treatment, non-discrimination and transparency, without explicitly referring to the prohibition of artificially restricting competition. However, Article 2 of Directive 2004/18 must be interpreted in the light of the recitals in the preamble thereto, and in particular in recital 2, which provides for effective competition in public contracts, as well as in light of the case-law according to which effective competition and the opening to undistorted competition are essential objectives of Directive 2004/18 and in particular of its Article 2, for which attainment Union law applies in particular the principle of equal treatment between tenderers or candidates and the obligation of transparency that results from it (see, in this regard, the judgment of 17 March 2011, Strong Segurança, C-95/10, EU:C:2011:161, paragraph 37, see also, in in this sense, the judgments of March 29, 2012, SAG ELV Slovensko and others, C-599/10, EU:C:2012:191, paragraph 25 and the case law cited therein, and of October 10, 2013, Manova, C- 336/12, EU:C:2013:647, paragraph 28 (T-668/15, para 91, emphasis added, own translation from Spanish).

This starting position allowed the GC to carry on with the assessment of whether (even if proportionate) very demanding qualitative selection criteria could be in breach of the EU procurement rules due to the ensuing artificial narrowing of competition. In particular, the analysis concentrated on the requirements derived from general principles of EU law and, in that regard, the GC further considered that

... the principle of equal treatment between tenderers, which aims to encourage the development of healthy and effective competition between undertakings participating in a public tender, requires that all bidders have the same opportunities in formulating the terms of their offers and implies that they are subject to the same conditions for all competitors.

In addition, the courts of the Union have stated that one of the objectives of the Union rules on public contracts is to open them up to the widest possible competition and that it is in the interest of Union law to ensure the broadest participation possible of bidders in a tendering procedure. It should be added, in this respect, that such an opening to the widest possible competition is contemplated not only in relation to the Union interest in the free movement of goods and services, but also in the self-interest of the contracting authority involved, which will thus have greater choice in terms of the most advantageous offer and the best adapted to the needs of the public entity concerned (judgment of 10 November 2015, GSA and SGI / Parliament, T-321/15, unpublished, EU:T:2015:834, paragraph 58, see also, in this regard, the judgments of December 23, 2009, CoNISMA, C-305/08, EU:C:2009:807, paragraph 37 and case law cited, and of June 18, 2015, Martin Meat, C-586/13, EU:C:2015:405).

It follows that an obligation for the contracting authority not to artificially restrict competition can be deduced from the general principles of law to which the [contracting authority] is subject, and especially from the principle of equal treatment (T-668/15, paras 101-103, emphasis added, own translation from Spanish).

I find this point of departure extremely interesting and I think it comes to confirm my long-held view that the 2004 procurement rules already included an embedded principle of competition, which the rest of the general principles seek to give effectiveness to [see A Sanchez-Graells, Public Procurement and the EU Competition Rules, 1st edn [Oxford, Hart, 2011] ch 5]. I also think that it provides the right framework for the assessment of the competition implications of the requirement of demanding qualitative selection criteria.

However, in the operationalisation of the test to check whether such obligation not to artificially narrow down competition had been respected, I find some fault in the approach followed by the GC in Jema Energy v Entreprise because it is limited to the specific requirements of the principles of proportionality, transparency and non-discrimination, without any sign of competition-orientedness. In that regard, I find it disappointing that the GC decided that, in the case at hand, the selection criteria were not contrary to the obligation not to artificially narrow competition because: (i) the demanding criteria were objectively justified and did not favour or disadvantage any undertaking or impair the ability of the contracting authority to choose the most advantageous offer (para 105); (ii) they had been subjected to proper transparency requirements (para 106); (iii) the time period of allowed references on previous experience had been extended from the minimum 3 years to 5 years prior to the tender (para 107); and (iv) the fact that 3 out of 5 tenderers were able to meet the selection criteria is a sign that competition was not restricted (para 108).

I think that the tests applied by the GC do not add any meaningful competition check. First, because proportionate is different than competition-neutral. Second, because transparency is irrelevant (whereas its lack may be relevant). Third, because extending time periods is also irrelevant if the material content of the requirement is limiting competition. And fourth, because finding that competition was not restricted because a majority of tenderers that expressed interest managed to qualify falls in the trap of tender-specific reasoning and ignores the possibility that many undertakings were dissuaded from participating in view of the (potentially) exceedingly demanding qualitative selection requirements.

Thus, my view of the GC Jema Energy v Entreprise Judgment is mixed. On the one hand, I think it is good news that the existence of the principle of competition and the ensuing prohibition of artificially narrowing competition constitute an uncontroversial grounds for the review of procurement decisions--even where Art 18(1) Dir 2014/24/EU does not apply, as a consequence of the competition-orientedness of the applicable general principles. However, it is also clear to me that more work is necessary for this test to be developed in a way that adds to the standard analysis under those general principles, so that the obligation is not rendered moot. This is something I am currently working on, and which I will build on the basis of the preliminary ideas I presented at Oxford recently. I will keep readers of the blog posted.

Important EFTA case on procurement damages: Was the court of one mind, and will the CJEU follow? (E-16/16)

In its Judgment of 31 October 2017 in Fosen-Linjen AS v AtB AS, the EFTA Court issued an important Opinion on the interpretation of the procurement Remedies Directive (Dir 89/665/EEC, as amended by Dir 2007/66/EC) and, in particular, on the conditions for the recognition of a right to damages compensation where the contracting authority uses an illegal award criterion and subsequently decides to cancel the tender for that reason. That is, cases where it is clear (and acknowledged by the contracting authority itself) that the procurement procedure was not fully compliant with substantive EU/EEA public procurement rules--which comes to constrain the legal analysis to the question whether the irregularity is such as to allow disappointed tenderers to claim damages compensation.

The Fosen-Linjen case raised a number of issues in the six questions sent to the EFTA Court, such as the threshold for liability, evidentiary requirements, causation, exoneration causes and due diligence requirements. All of them are important but, in my view, the main relevance of the case concerns the threshold of liability, on which the EFTA Court found that 

A simple breach of public procurement law is in itself sufficient to trigger the liability of the contracting authority to compensate the person harmed for the damage incurred, pursuant to Article 2(1)(c) of Directive 89/665/EEC, provided that the other conditions for the award of damages are met, including, in particular, the condition of a causal link (E-16/16, para 82).

The EFTA Court reached this position in answer to a series of questions and sub-questions concerning whether liability under the Remedies Directive was conditional upon the contracting authority having deviated markedly from a justifiable course of action, upon it having incurred a material error that justified a finding of culpability under a general assessment, or upon it having incurred in an inexcusable'material, gross and obvious error' (question 1), or whether liability can be triggered under a test of 'sufficiently qualified breach' where the contracting authority was left with no discretion as to how to interpret or apply the infringed substantive rule (question 2). 

In the case at hand, the EFTA Court decided to group these questions and address them together. In my view, this has been determinative of the outcome of the case. Had the Court addressed the questions sequentially, and inverting the order, it would have been possible to establish that a breach of a substantive provision for which interpretation and application the contracting authority has no discretion constitutes a 'sufficiently serious breach' of EU/EEA procurement law triggering liability (if all other requirements are met) (question 2), which would have rendered the other issues (question 1) moot and unnecessary in this case. By choosing not to do so, the EFTA Court grabbed an opportunity to influence the development of EU/EEA law in the area of procurement remedies in a way that I am not sure will be productive in the long run, particularly because the rather extreme position taken by the EFTA Court--ie that any simple breach of EU/EEA procurement law suffices to generate liability for damages--was not really necessary under the circumstances and does not easily sit with previous developments in the case law of the Court of Justice of the European Union (CJEU).

Ultimately, this finding is controversial because of (1) the way the EFTA Court couches the deviation of liability standards under the Remedies Directive and under the general doctrine of State liability for breach of EU/EEA law, as well as (2) due to the fact that the EFTA Court engages in contradictory normative assessments in the reasoning that leads to this conclusion--which makes the interpretation and operationalisation of its main finding rather tricky. In my view, these two points of contention make it unclear that the CJEU--which is not bound by the EFTA Court's interpretation--will adopt the same approach. I will explore these two issues in turn.

Is public procurement special?

One of the normative and doctrinal issues in the background of the discussion surrounding the threshold of liability under the Remedies Directive concerns its relationship with the general doctrine of State liability for breach of EU/EEA law. The position taken by the EFTA Court on this point is not very clear--despite explicit submissions to that effect by the parties, the Norwegian government and the EFTA Surveillance Authority--but it seems to indicate that the Court considers that procurement law is somehow special.

While it is commonly accepted that the State liability doctrine is premised on the existence of a sufficiently serious breach of EU/EEA law (as seminally established in Francovich and Others, C‑6/90 and C‑9/90, EU:C:1991:428, para 35, and in Brasserie du Pêcheur and Factortame, C‑46/93 and C‑48/93, EU:C:1996:79, paras 31 and 51, and consistently reiterated by the CJEU, most recently in Ullens de Schooten, C-268/15, EU:C:2016:874, para 41), the EFTA Court is not willing to retain this threshold of liability in the area of procurement. As the EFTA Court indicated

... it has already been established that a national rule making the award of damages conditional on proof of fault or fraud would make actions for damages more difficult and costly, thereby impairing the full effectiveness of the public procurement rules ... The same must apply where there exists a general exclusion or a limitation of the remedy of damages to only specific cases. This would be the case, for example, if only breaches of a certain gravity would be considered sufficient to trigger the contracting authority’s liability, whereas minor breaches would allow the contracting authority to incur no liability (E-16/16, para 77, emphasis added).

In other words, the EFTA Court is not willing to tolerate a situation where what could be termed de minimis breaches of EU/EEA public procurement law remain unchallenged and, in that regard, the Court seems to have been influenced by the European Commission's position that 'any infringement of public procurement law should be followed up and should not be left unattended because the breach is not “sufficiently serious”' (E-16/16, para 59). The EFTA Court thus seems to consider that the establishment of an almost absolute right to claim damages is necessary to ensure the desirable effectiveness of EU/EEA procurement law.

The Court also considers that '[a] requirement that only a breach of a certain gravity may give rise to damages could also run contrary to the objective of creating equal conditions for the remedies available in the context of public procurement. Depending on the circumstances, a breach of the same provision on EEA public procurement could lead to liability in one EEA State while not giving rise to damages in another EEA State' (E-16/16, para 78), which is by no means obvious, in particular if the preliminary reference mechanism works appropriately. 

In my opinion, this general line of reasoning conflates two separate issues. First, whether any infringement of EU/EEA substantive law should trigger a ground for the review of the procurement decision concerned and, if justified, to set it aside. Second, whether any infringement of EU/EEA substantive law should provide a right to claim damages. By conflating both issues, the EFTA Court implicitly assumes that claims for damages are the only effective remedy. The Court does not take into account the existence of public oversight mechanisms able to 'pick up' on those de minimis infringements of EU/EEA public procurement law, and seems not to think it possible for disappointed tenderers to exercise rights of review in the absence of the financial incentives resulting from damages claims. This comes both to establish a hierarchy of remedies that is absent in the Remedies Directive [see A Sanchez-Graells, '"If It Ain't Broke, Don't Fix It"? EU Requirements of Administrative Oversight and Judicial Protection for Public Contracts' in S Torricelli & F Folliot Lalliot (eds), Contrôles et contentieux des contrats publics (Bruylant, 2018) forthc.], and to create the same risk of deformation of EU tort law that we have witnessed in other areas of EU economic law [see O Odudu & A Sanchez-Graells, 'The interface of EU and national tort law: Competition law', in P Giliker (ed), Research Handbook on EU Tort Law (Elgar, 2017); as well as the rest of contributions to that volume].

From a normative perspective, I find this approach problematic due to the perverse incentives it creates--and which I think the EFTA Court was somehow aware of (see below). Moreover, I am not persuaded that this would necessarily be the position of the CJEU, which has in the past held that Art.2(1)(c) of Directive 89/665 'gives concrete expression to the principle of State liability for loss and damage caused to individuals as a result of breaches of EU law for which the State can be held responsible' (Combinatie Spijker Infrabouw-De Jonge Konstruktie and Others, C-568/08, EU:C:2010:751, para 87, emphasis added). From that perspective, and even if the CJEU is likely to continue developing its line of case law that prevents the creation of additional requirements for the existence of liability in damages (as is clear it did by rejecting the imposition of a requirement of fault in Strabag and Others, C-314/09, EU:C:2010:567), I see no reason why it would accept that the requirement for a 'sufficiently serious breach' does not apply in this sub-field of State liability.

In my view, this is particularly important because the position taken by the EFTA Court was both unnecessary for the resolution of the case, and not explicitly premised on a deviation of the State liability doctrine, which leaves the CJEU an easy way out if it decides to take a different approach in the future. In my view, this is likely, because from a normative point of view, the position taken by the EFTA Court is not easily tenable.

What are the implications for contracting authorities and tenderers?

One of the important normative aspects on which the EFTA Court's Fosen-Linjen Judgment rests concerns the incentives that different liability thresholds and requirements create. In that regard, the Court seems to adopt two contradictory normative standpoints in dealing with the twin question of the threshold for liability and the causality requirement--which are indivisibly interlinked in its overall finding that 'A simple breach of public procurement law is in itself sufficient to trigger the liability ... provided that the other conditions for the award of damages are met, including, in particular, the condition of a causal link' (E-16/16, para 82, emphasis added). The contradiction is as follows.

On the one hand, the EFTA Court considers that a simple infringement of EU/EEA public procurement rules must suffice to trigger liability because

... damages seek to achieve a three-fold objective: to compensate for any losses suffered; to restore confidence in the effectiveness of the applicable legal framework; and to deter contracting authorities from acting in such a manner, which will improve future compliance with the applicable rules. Liability through damages may also provide a strong incentive for diligence in the preparation of the tender procedure, which will, ultimately, prevent the waste of resources and compel the contracting authority to evaluate the particular market’s features. Were liability to be excluded, this may lead to a lack of restraint of the contracting authority (E-16/16, para 76, emphasis added).

Thus, in this part of the Judgment, the EFTA Court considers a high likelihood of liability a proper incentive for adequate diligence and decision-making on the part of the contracting authority.

Conversely, on the other hand, when assessing the causality requirements for the recognition of a right to damages compensation (in the context of the fourth question referred by the Norwegian court), the EFTA Court stresses that

... there must be a balance between the different interests at stake. While liability of the contracting authority for any errors committed promotes, in principle, the overall compliance with the applicable legal framework, exaggerated liability of the contracting authority could lead to excessive avoidance costs, reduce the flexibility of the applicable framework and may even lead to the unjust enrichment of an unsuccessful tenderer. Furthermore, excessive liability may provide an incentive for a contracting authority to complete award procedures, that were evidently unlawful, or impinge upon the freedom to contract (E-16/16, para 101, emphasis added). 

This clearly indicates that the existence of liability needs to be constrained or modulated. The EFTA Court seems to want to do so by establishing a complicated approach to causality requirements that would distinguish between those applicable to claims for negative and positive damages (ie bid costs and loss of profits). Even in the context of the first question, the EFTA Court had already shown some inconsistency when establishing that 'a claim for damages can only succeed if certain other conditions are fulfilled, such as the condition that there must be a sufficient causal link between the infringement committed and the damage incurred' (E-16/16, para 81, emphasis added)--which, however, is not equally reflected in the wording of its general finding, which only makes reference to 'the condition of a causal link' (para 82). 

In my view, the approach (implicitly) followed by the EFTA Court is not better than the alternative approach of having closely stuck to a requirement for a sufficient breach of EU/EEA public procurement rules. Even if a combination of low liability threshold (simple breach) and high causality requirements ('sufficient causality') could lead to the same practical results that a requirement for 'sufficiently serious breach', the EFTA approach creates legal uncertainty and more scope for divergence across EU/EEA jurisdictions, not the least because causation is within the remit of domestic law. more importantly, it can create a wave of litigation based on any (minimal, formal, irrelevant) errors in the conduct of procurement procedures in an attempt to test the boundaries of that test.

In my view, on the whole, it would have been preferable to stick to the general framework of the State action doctrine as specified in the Remedies Directive, which is compatible with a finding of a requirement for there to be a 'sufficiently serious breach' of EU/EEA procurement law and, at the same time, with a finding that breaching a provision for which interpretation and application the contracting authority has no discretion (eg the obligation to be in a position to verify the content of tenders against its requirements and award criteria, as in Fosen-Linjen) suffices to trigger liability (the same way that the mere lack of transposition of a Directive triggers State liability under the general test). Therefore, I very much hope that this issue is brought to the CJEU soon, and I would strongly advocate for the CJEU to explicitly reject the EFTA Court's approach.

UNDERSTANDING THE CATALAN CONFLICT FROM A SPANISH CONSTITUTIONAL PERSPECTIVE [VIDEO NOW AVAILABLE]

I have now uploaded the full recording of my talk of 30 October 2017 "Understanding the Catalan Conflict from a Spanish Constitutional Perspective" on youtube. I hope it is of interest.

This is the recording of the talk I gave at the University of Bristol Law School on 30 October 2017 about the Spanish Constitutional framework within which the Catalan Independence challenge developed in the months of September and October 2017.

Discretion in public procurement—notes of a very energising workshop

I have the great privilege and pleasure of participating in a research project on ‘Discretion in public procurement’ funded by the Swedish Competition Authority and led by Profs Groussot, Hettne and Bogojević of the Universities of Lund and Oxford. In the context of the project, a workshop was held at Lady Margaret Hall (Oxford) on 3 November. The discussions brought together leading general EU law, environmental law and public procurement law academics, and this created a very open-minded atmosphere conducive to very productive discussions.

The results of the research project will be published in due course by Hart, as part of the series Studies of the Oxford Institute of European and Comparative Law (IECL). For now, I am happy to share my notes of the seminar. Needless to say, all valuable insights should be attributed to relevant colleagues, and any errors or misunderstandings are my own responsibility. I hope these notes serve to promote further debate.

Public Procurement and Internal Market

Prof Phil Syrpis used his previous discussion of the two constitutional visions on the interaction between primary and secondary EU law (see P Syrpis, ‘The relationship between primary and secondary law in the EU’ (2015) 52(2) Common Market Law Review 461) to assess the extent to which such primary-secondary interaction shapes the spaces for the exercise in the field of public procurement (see P Syrpis, ‘RegioPost—A Constitutional Perspective’, in A Sanchez-Graells (ed), Smart Public Procurement and Labour Standards. Pushing the Discussion after RegioPost (Hart, 2018) ch 2).

In particular, he discussed RegioPost (C-115/14, EU:C:2015:760), and how the interaction of Art 56 TFEU, the Posted Workers Directive and the rules in Directive 2004/18/EC shaped the space for the exercise of discretion concerning the imposition of minimum wage requirements in the execution of public contracts—emphasising that this is an area of non-exhaustive EU harmonisation, thus triggering EU primary law analysis. Phil criticised the conflation of primary law (Art 56 TFEU) and secondary law (Posted Workers Directive), and the ‘horizontal interaction’ between directives in which the RegioPost case resulted (where the interpretation of the procurement rules hinged on the interpretation of the Posted Workers Directive), as muddling the constitutional position on the value of the sources.

The discussion raised issues concerning the blurry lines around exhaustive/non-exhaustive harmonisation areas, and whether there is displacement or rather procedural juxtaposition of primary and secondary law. Whether a hierarchical approach already contains the seeds of heteronormative interpretation of EU primary law was also considered—in particular in view of the open textured and permeable nature of EU Treaty provisions, and the tendency of the CJEU to consider secondary law as a source of inspiration for the interpretation of primary law, sub silentio. The discussion also raised issues of the potential impact of Art 4(2) TEU (respect for national identities) on the scope for discretion at national level.

Prof Stephen Weatherill used the image of public procurement law as ‘internal market law made better’ and discussed the way in which EU internal market law has generally been developed to constrain the exercise of discretion of (public and private) national actors, and compared the situation in the field of procurement with general internal market law—thus reaching the conclusion that procurement law is more developed and perfected (in constraining national discretion more tightly), and in particular in the area of remedies, which creates a significantly different enforcement scenario and possibly more effectiveness of procurement law compared to general internal market rules (which is jeopardised by the procedural obstinacy of the Member States). He also reflected on the contradiction between the existence of that dense legal framework regulating public procurement in the internal market, and the enduring fragmentation of that market along uncompetitive national lines.

The discussion concentrated on issues surrounding the difficulties in bringing together the analysis in the area of free movement of goods and services, in particular services of general economic interest, the wiggle room for the CJEU to shy away or not from addressing specific cases by using jurisdictional criteria (cfr Comune di Ancona (C-388/12, EU:C:2013:734) and Tecnoedi Costruzioni (C-318/15, EU:C:2016:747)), as well as issues concerning the extent to which the 2014 Public Procurement Package, by creating more discretion or flexibility, may have eroded the component of ‘internal market law made better’ and potentially make public procurement move back to the median (effectiveness) of EU internal market law.

Prof Jörgen Hettne discussed public procurement and technical standards, and whether the specific rules constituted mechanisms to limit discretion or rather a democratic threat. He discussed the multi-faceted nature of technical standards as potential technical barriers, or rather trade facilitators or trade promoters—and focussed on the latter under the new approach to EU standards (CE mark) and the presumption of compliance embedded in the rules on technical specifications in the 2014 Public Procurement Package. He also concentrated on the quasi-binding nature that technical standards are acquiring (eg Nordiska Dental (C-288/08, EU:C:2009:718), James Elliot Construction (C-613/14, EU:C:2016:821)—and see also Medipac - Kazantzidis (C-6/05, EU:C:2007:337), and Commission v Greece (C-489/06, EU:C:2009:165)).

He wondered whether the obligation to respect the CE mark in the context of public procurement is problematic due to its requirement of ‘blind trust’ in the harmonisation system, and whether this is a democratic threat—in particular due to the way in which broad participation is (not) working in the context of standard-setting. He also discussed the constraints in an alternative approach based on the flexibility around the use of functional requirements embedded in Art 44(6) of Directive 2014/24/EU.

Public Procurement Discretion: Limits and Opportunities

Prof Chris Bovis reflected on the drivers and boundaries of discretion in the award of public contracts. He discussed the evolution of the regulatory space left to discretion throughout the five generations of EU procurement directives, and raised issues concerning the scale or structural dimension of discretion, in particular due to the different nature of the issues left to the discretion of the Member States (system-level issues) or the contracting authorities (procurement/procedure-level issues). His reflections also prompted discussion on the dynamics and interaction between exposure to competition, accelerating market dynamics (eg regarding innovation) and exercise of (administrative) discretion.

Dr Dieter Klaus explored the lessons that can be learnt from an analysis of the constraints on discretion in the public procurement setting, as a case study of broader issues concerning the regulation of discretion under EU law. He started with conceptual remarks on ‘discretion’ and the general approach to discretion (deplorable exception or rather a valuable instrument?) and the tension between different pulls and levers in EU law (flexibility, subsidiarity, harmonisation, compliance and potential over-regulation risks). He also stressed the risks and difficulties in EU level concept-building around (eponymous) notions that carry specific connotations in the context of national legal systems, which triggers risks of possible misunderstandings—as well as the interaction between spheres of discretion and intensity of judicial review of (discretion-based) executive decisions.

He used examples that compared case law on gambling (eg Politanò (C-225/15, EU:C:2016:645), Unibet International (C-49/16, EU:C:2017:491) or Vereniging Hoekschewaards Landschap (C-281/16, EU:C:2017:774)) and case law on public procurement (TNS Dimarso (C-6/15, EU:C:2016:555), LitSpecMet (C-567/15, EU:C:2017:736) or Borta (C-298/15, EU:C:2017:266)), with a particular emphasis on the intensity of judicial scrutiny for the justifications backing up discretionary decisions by the Member States. In concluding his reflections, he wondered whether there is something that makes procurement law special within the framework of EU internal market rules—which he thought probably not, in particular if one considers the fact that discretion works in different ways in different areas of EU internal market law, and that EU public procurement law displays the whole range of scenarios where discretion is subjected to different constraints.

The discussion raised the issues of whether the discretion under analysis (in the case law) is only that exercised by the contracting authority in executive decisions, or whether macro/systemic issues are subjected to the same issues and constraints. It also raised issues on the interaction between incompleteness of the regulatory system and (unforeseen) sources of discretion. The discussion also raised the point of whether Art 18 Dir 2014/24 is the natural ‘home’ of discretion within the system (as a horizontal issue), or whether the Directives somehow operate on the basis of a more undercover position for discretion.

In my presentation, I discussed the extent to which the general principles in Article 18(1) of Directive 2014/24/EU set out the relevant constraints on the exercise of executive discretion in the context of procurement and, in particular, the role that the prohibition for contracting authorities to artificially narrow down competition can be used to create effective substantive and/or procedural tests to control the exercise of such discretion.

Following up on my previous proposals (mainly, in Public Procurement and the EU Competition Rules, 2nd edn (Hart, 2015) ch 5) I suggested that Article 18(1)II Dir 2014/24/EU provides the basis for a competition-orientated or competition driven adaptation of a general proportionality test. I suggested that the existing case law of the CJEU, in particular concerning anti-circumvention rules, can form the basis for a substantive test oriented towards the consideration of the counterfactual decision adopted by a diligent contracting authority. I acknowledged that such a test may be difficult to craft in a way that does not create risks of ex post facto reassessment of decisions that would have originally not been seen as restrictive of competition.

I also suggested that a procedural test may be preferable, in the sense of creating a presumption of conformity with the requirements of the Directive where the contracting authority can provide an adequate paper trail (ex Art 84(2) Dir 2014/24) demonstrating having given due consideration to competition impacts of the decisions taken along the procurement design and implementation phase. My preliminary idea is that the procedural test would create a rebuttable presumption of conformity and that, in case of indicia to the contrary, the substantive test would then be applied.

The ensuing discussion concerned challenges on my claim about the competition-orientatedness of the regime in Directive 2014/24/EU and the 2014 Public Procurement Package more generally, discussion of the different concepts of competition (either as a mechanism or as a benchmark demanding economic efficiency in absolute terms) and the links that could be drawn before the substantive test I propose and the more general test of abuse of EU internal market law.

Environmental and Social Clauses

Dr Marta Andrecka discussed limits of contracting authority discretion in the pursuit of sustainability, and drew from previous analysis on her recently edited monographic issue of the European Procurement & Public Private Partnership Law Review (2017) 12:3. Her reflections concerned the balance between the flexibility created to support sustainability goals in procurement through the ‘toolbox approach’ in the 2014 Public Procurement Package and ensuing Commission guidance, on the one hand, and the necessary checks and balances, on the other—in particular by reference to the interpretation of Art 18(2) of Directive 2014/24/EU and difficulties to fit different understandings of ‘public interest’ at EU and national level in this context. She gave significant weight to the addition of sustainability as a strategic goal of procurement under the new rules, very much in line with the European Commission’s approach in the October 2017 Communication on ‘Making public procurement work in and for Europe’. She also mapped out emerging obligations to include sustainability considerations in the context of other (horizontal) EU policies with an impact on procurement—such as the current proposal for a European Accessibility Act.

The ensuing discussion concerned the boundaries of the concepts of public interest and public policy within the context of EU internal market law, and the extent to which that is directly applicable and/or transferable to the interpretation and enforcement of the 2014 Public Procurement Package. It also concerned the link between the increasing sophistication and complications derived from sustainability-orientated procurement and emerginginitiatives on professionalization and capacity building as part of the broader procurement strategy.

Dr Sanja Bogojević mapped environmental contestation points in EU procurement law and policy, as a way of bringing attention to problems and opportunities for the pursuit of environmental policies in the context of public procurement. She recreated the discourse on green procurement through the case law of the CJEU after Concordia Bus Finland (C-513/99, EU:C:2002:495) and EVN and Wienstrom (C-448/01, EU:C:2003:651), and compared it to the discourse in broader internal market case law, to finally arrive to the current expressions of green public procurement aims and goals in policy documents, such as the 7th Environmental Action Plan or the Europe 2020 Strategy. Concentrating on Directive 2014/24/EU, her discussion considered the way green procurement is presented in relation to technical standards, labels and life-cycle costing rules.

Once the mapping was complete, she identified 5 points of contestation: (1) role of sustainable development and the risk it creates of squeezing environmental protection act; (2) reviewability of environmental models used in life-cycle costing (eg as exemplified in the litigation leading to R (ClientEarth) [2016] EWHC 2740); (3) what is the nature of the obligation in Art 11 TFEU (‘environmental protection requirements must be integrated into the definition and implementation of the Union policies and activities’ – is this solely a procedural minimum?); (4) discretionary climate change policy and ways in which policy can be used to create obligations (eg along the lines of the Dutch Urgenda case); and (5) the role of EU public procurement law in non-EU countries looking to access the EU (eg Serbia) or on the way out (UK). Ultimately, she made a compelling case for more interdisciplinary work and efforts of legal imagination to try to find workable legal solutions to global challenges.

Dr Jeremias Prassl discussed means, ends and conflicts in attempting to carry out social procurement. He introduced the clash between labour rights and internal market rules and restrictions (ie a clash of the economic vs the social)—which underlies calls for broad exemptions from internal market law from scholars such as Prof Alan Bogg ('Viking and Laval: The International Labour Law Perspective', in M R Freedland & J Prassl (eds), Viking, Laval and Beyond (Hart, 2016) ch 3)—and considered whether public procurement is more sensitive or atuned to labour law considerations than general internal market. He also reflected on whether the relevant clash was not one between economic and social rights, but rather between social rights of different collectives. He then developed each of the different narratives to see how they have shaped law and policy in the context of EU social and procurement law—in particular around the Posted Workers Directive.

His discussion provided insights on how the application of the internal market logic and its broader normativity comes to water down labour law’s protective effects (building on the analysis of L Rodgers, ‘The Operation of Labour Law as the Exception: The Case of Public Procurement’, in A Sanchez-Graells (ed), Smart Public Procurement and Labour Standards. Pushing the Discussion after RegioPost (Hart, 2018) ch 8). He assessed these issues of normativity and exception from Viking (C-438/05, EU:C:2007:772) and Laval (C-341/05, EU:C:2007:809) to the more recent cases of Bundesdruckerei (C-549/13, EU:C:2014:2235) and RegioPost. He also relied on Prof Weatherill’s approach ('Viking and Laval: The EU Internal Market Perspective', in M R Freedland & J Prassl (eds), Viking, Laval and Beyond (Hart, 2016) ch 2; see also S Weatherill, The Internal Market as a Legal Concept (OUP, 2017)) to criticising the insensitivity of internal market case law to legitimate and democratically expressed national priorities—which Jeremias considers is currently softening, as the CJEU approach in RegioPost indicates.

He also critically reflected on whether the seeming growing scope for labour policies in the context of procurement is likely to generate the maximum practical effects that would be desirable. In closing his paper, he wondered whether the heterogeneity of workers and the conflicts between different groups of workers (insiders vs outsiders) would provide a better narrative and analytical perspective to reassess this topic. In doing that, he drew on Prof Catherine Barnard’s contrast between the equal treatment logic of the procurement rules and the differentiation logic of the traditional rules on posting of workers, which is now being tamed in the revision of the Posted Workers Directive (see C Barnard, ‘Fair’s Fair: Public Procurement, Posting and Pay’, in A Sanchez-Graells (ed), Smart Public Procurement and Labour Standards. Pushing the Discussion after RegioPost (Hart, 2018) ch 10).

The ensuing discussion concentrated on how attempts to integrate social and environmental considerations in a public procurement regime that already tried to address other goals—mainly, economic and internal market-orientated—triggers issues around the extent to which social and environmental considerations should be a more intrinsic element of internal market law generally, as a sort of ‘softer market’, rather than an issue to be addressed sectorially.

Prof Xavier Groussot and Ms Angelica Ericsson wrapped up the discussions with a reflection on the tension between discretion and proportionality in the use of social clauses in procurement. They discussed (i) the elements of discretion, (ii) the application of procedural proportionality to control discretion—and in particular from the perspective of transparency—and (iii) whether recent case law seemingly deviating from the principle of proportionality creates a problem, mainly in light of the application of covert proportionality through consistency in RegioPost (contra P Bogdanowicz, ‘Article 56 TFEU and the Principle of Proportionality: Why, When and How Should They be Applied After RegioPost?,’ in A Sanchez-Graells (ed), Smart Public Procurement and Labour Standards. Pushing the Discussion after RegioPost (Hart, 2018) ch 3). In the first part of the discussion, they explored the connections between the application of discretion under EU law and under ECHR law, and how that comparison can be best assessed using a variation of the framework set out by Tridimas (‘Proportionality in Community Law. Searching for the Appropriate Standard of Scrutiny’, in E Ellis (ed), The Principle of Proportionality in the Laws of Europe (Hart, 1999) 65 ff), and the additional issue of harmonisation raised by Thym (‘The Constitutional Dimension of Public Policy Justification’, in P Koutrakos, N Nic Shuibhne, & P Syrpis, Exceptions from EU Free Movement Law: Derogation, Justification and Proportionality (Hart, 2016) ch 9): (1) the interest, (2) the proceeding, and (3) the level of harmonization (cfr Opinion of AG Cruz-Villalon in dos Santos Palhota and Others (C-515/08, EU:C:2010:589)).

In the second part, they discussed discretion and procedural proportionality, and reflected about ‘what would a high level of discretion mean for a proportionality assessment’ both in theory and in practice. They stressed that the level of discretion and the intensity of proportionality review should theoretically be inversely proportionate (much along the lines presented by Dr Kraus earlier in the day, but with inverted causality), and that this is demonstrated in practice in the area of public procurement (such as in Politanò), where the CJEU shows more deference to administrative discretion (ie a lighter-touch proportionality analysis) where a higher level of discretion exists ex ante. Specifically in the context of procedural proportionality (eg Beentjes v State of the Netherlands (C-31/87, EU:C:1988:422)), and in the context of transparency obligations, they suggested that procurement is a good testing ground for the correlation between higher discretion and more limited proportionality scrutiny by the CJEU (eg in RegioPost, where regulatory transparency may have saved the social clause). They concluded that (i) high level policy discretion for Member States must not translate into unfettered discretionary/arbitrary decision-making by contracting authorities, (ii) procedural scrutiny is spreading beyond public procurement (R Caranta, ‘Public Procurement Law: Limitations, Opportunities and Paradoxes’ in U Neergaard, C Jacqueson & GS Ølykke (eds), XXVI FIDE Congress in Copenhagen, vol 3 (DJØF, 2014), where he claims principles of procurement becoming general principles of EU administrative law more generally), (iii) EU law principles (eg transparency) may be fuelled by different justifications than (eponymous) national ones.

Finally, in the third part, and drawing from French administrative law, they explored the possibilities of developing a taxonomy of CJEU case law that would distinguish between a procedural approach (controle minimum), substantive approach (controle normal) and a balancing approach (controle maximum).

The discussion concentrated mostly on the boundaries of the procedural proportionality approach and the categories that could most usefully be used to create a taxonomy of approaches by the CJEU. This was linked to the discussion to the standard of review of decisions in other areas of EU law—eg competition law, where the connection between EU and ECHR standards has been questioned (eg Menarini, as discussed in extenso in A Sanchez-Graells, ‘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 (Hart, 2014) 255-70).

Alternative Procurement Models

Dr Ohad Graber-Soudry presented the procurement rules of European Research Infrastructure Consortia (ERICs) under the specific regulatory framework of Council Regulation 723/2009/EC, which creates significant space for each ERIC to adopt its own procurement rules. His presentation concentrated on the uncertainties derived from the treatment of ERICs as international organisations and the impact these have on ERICs’ discretion to develop their own procurement rules, as well as the treatment of discretion within those (self-developed) rules.

The ensuing discussion mainly concerned the limits and effects of Art 7(3) of Regulation 723/2009, whereby ‘[a]n ERIC is an international organisation within the meaning of Article 15(c) of Directive 2004/18/EC’, which now corresponds to Article 9(1)(b) of Directive 2014/24/EU.

Closing the workshop, Prof Ulf Bernitz discussed the peculiarities of the Swedish system, and stressed the particular use and weight of transparency obligations in that jurisdiction.