OPINION OF ADVOCATE GENERAL

delivered on 24 June 2004(1)

(Failure to fulfil obligations – Articles 8 and 11(1) of Council Directive 92/50/EC relating to the coordination of procedures for the award of public service contracts – Contract for the transport of waste concluded by the City of Munich without observing European rules on publication)

I – Introduction

II – Legal framework

7. Article 11(1) provides that in awarding public service contracts, contracting authorities shall apply the procedures defined in Article 1(d), (e) and (f), adapted for the purposes of this Directive.

8. Pursuant to Article 11(3)(d), contracting authorities may award public service contracts by negotiated procedure without prior publication of a contract notice in so far as is strictly necessary when, for reasons of extreme urgency brought about by events unforeseeable by the contracting authorities in question, the time‑limit for the open, restricted or negotiated procedures referred to in Articles 17 to 20 cannot be kept. The circumstances invoked to justify extreme urgency must not in any event be attributable to the contracting authorities.

III – Facts and pre-litigation procedure

10. The two bidders had agreed in advance that if the City of Munich’s bid was successful, the transport of the waste would be subcontracted to Rethmann, as the City of Munich did not possess the necessary transport capacity. Conversely, were Rethmann’s bid to succeed, the City of Munich, which did have sufficient processing capacity, would have the residual waste processed at its Munich North waste-burning power-station.

11. The entire contract was awarded to the City of Munich on 27 February 1998. As agreed, the City of Munich duly subcontracted the transport of the waste to Rethmann; it did not observe the procedure laid down in Directive 92/50.

13. The Commission initially gave the German Government an opportunity to submit observations, and subsequently – on 25 July 2001 – dispatched a reasoned opinion. The German Government responded by letter on 30 October 2001. The Commission did not consider that response satisfactory, and accordingly brought the present action before the Court.

14. The Commission asks the Court to declare that, by reason of the fact that the contract for waste transport concluded by the City of Munich was awarded without the procedures laid down in Articles 8 and 11(1) of Directive 92/50 having been observed, the Federal Republic of Germany has failed to fulfil its obligations under that Directive; and to order the Federal Republic of Germany to pay the costs of the proceedings.

15. The Commission considers the City of Munich to be a contracting authority within the meaning of Article 1(b) of Directive 92/50, and the transport of waste to be a service within the meaning of Category 16 of Annex 1A to the Directive. It follows that the contract for the supply of that service should have been awarded according to the rule laid down in Titles III to VI inclusive.

16. The German Government disagrees: there is no question of any infringement, since the City of Munich – in the present case – cannot be deemed to be a contracting authority.

17. It concedes that, as a general rule, the City of Munich would rank as a contracting authority within the meaning of the Directive, and that the conclusion of a transport contract with a value above the limit meets the definition of a public service contract within the meaning of Article 1(a), in conjunction with Category 16 of Annex 1A to Directive 92/50. However, in view of the purpose and scope of the Directive, those provisions cannot be applied to the present case.

18. The German Government adduces the following principal arguments. First, it contends that, in the circumstances of the case, the City of Munich is not a prospective purchaser of waste-transport services. Furthermore, the award of the contract to supply the services did not occur in the context of the performance by the City of Munich of the public-service tasks incumbent on it, but concerned a separate economic activity – the operation of the combined power-station and waste-processing-plant. That economic activity is as such subject to competition.

19. Furthermore, the City of Munich would never have been in a position to offer its services to the Donau-Wald region had it not secured the transport services supplied by Rethmann. If it had been necessary for the transport services contract to go out to tender, Rethmann’s transport services would have been subject to a public award procedure twice. The German Government maintains that to require ‘tenders within tenders’ is utterly pointless.

21. Finally, it was practically impossible to hold, prior to an award procedure in which the City of Munich was itself a bidder, a further award procedure for that part of the contract which would have to be subcontracted. First, the contract was at that time a hypothetical one. Secondly, the period between the date of the invitation to tender and the date of the submission of the bid was too short to conduct a full award procedure. For the same reason it was not possible to subcontract the transport of the waste on the basis of an award procedure conducted following the award of the main contract. There was a further practical obstacle: any tenderer must show that they are suitable, and appropriately qualified, and must therefore indicate the identity of any possible subcontractor when making their bid.

22. In view of the fact that the services at issue form part of the operation of the Munich North thermal power station, the German Government concludes that in the circumstances of the present case the City of Munich cannot be regarded as a contracting authority within the meaning of Article 1(b) of Directive 92/50.

23. Moreover, if the City of Munich were deemed to be a contracting authority, it would be possible to rely on the exception contained in Article 11(3)(d) of Directive 92/50. The requirement of urgency was met – with so little time between the invitation to tender and the deadline for submitting a bid, the contract in question had to be awarded swiftly – and that urgency was both unforeseen, and inherent in the circumstance of the City of Munich being itself a bidder in another procedure.

IV – Assessment

25. The German Government favours a functional approach to the concept of ‘contracting authority’; it sees intimations of such an approach both in the purpose and scope of the Directive, and in the Court’s case-law.(4) It concludes that the public tendering rules do not apply to a party which is a prospective supplier. Moreover, waste-disposal in the Donau-Wald region does not constitute part of the statutory duties of the City of Munich; the contract to provide those services was obtained under normal conditions of competition.

27. Moreover, the City of Munich may be considered to be a prospective purchaser, inasmuch as it lacks the requisite transport capacity and consequently needs services provided by a third party.

28. It should be borne in mind that if a contracting authority, while trading as a supplier, none the less subcontracts certain services to a third party, the selection of that subcontractor may well be based on non-economic considerations. It is also quite possible that, at some stage in the process, public funds will be used.

29. As to the case-law relied on by the German Government,(6)

this goes to the question of whether or not a given body is a public body. There are three conditions; all must be met. The body must have been established for the specific purpose of meeting needs in the general interest, not of an industrial or commercial character; it must have legal personality; and it must be closely dependent on the State, regional or local authorities or other bodies governed by public law. Unlike a regional or local authority, a ‘body governed by public law’ is thus not by definition a contracting authority. However, where a public body meets the cumulative criteria, then it too is by definition a contracting authority within the meaning of the Directive, and the procedural rules set out in that Directive must be fully observed, whether or not the contract awarded concerns tasks in the general interest, and whether or not these are carried out under normal market conditions

30.I think Mannesmann Anlagenbau Austria may be helpful on that point – the Court explained there that Article 1(a) of the Directive makes no distinction between public works contracts awarded by a contracting authority for the purposes of fulfilling its task of meeting needs in the general interest, and those which are unrelated to that task – the reason for this being to avoid the risk of preference being given to national tenderers or applicants whenever a contract is awarded by the contracting authorities.

31.In the present case, therefore, it is immaterial that the activity in question may be unrelated to the body’s task in the general interest, or may not involve any public funds. Where, under the terms of the Directive, a body ranks as a contracting authority, the Directive requires it to conduct award procedures. Accordingly that rule applies even where the contracting authority itself is trading as a supplier on the market, and subcontracting certain parts of a contract to a third party. It is, after all, entirely possible that non-economic considerations might be involved in the selection of a subcontractor, just as it is possible that public funds might be used in the course of the operation.

32.Incidentally, I agree with the Commission’s view that it was open to the City of Munich to set up a legally independent body if it wished to offer services to third parties under normal market conditions. If such an organisation aims to make a profit, bears the losses related to the exercise of its activities itself, and performs no public tasks, it is not a public body, and hence not a contracting authority within the meaning of the Directive; its activities will therefore not be subject to the provisions of the directives coordinating public procurement procedures. A body which aims to make a profit and bears the losses associated with the exercise of its activity will not normally become involved in an award procedure on conditions which are not economically justified.

33.Germany has argued that European procurement law does not require ‘tenders within tenders’. It cites Article 1(a)(ii) of Directive 92/50, which excludes certain tasks from the scope of the Directive, and refers in that connection to Article 7 of Directive 93/38, a directive dealing with a number of specific sectors; that provision, which excludes contracts awarded for purposes of resale or hire to third parties from the scope of the directive, is, it suggests, applicable to Directive 92/50 by virtue of the reference to it there, the reason for the exclusion being that the purchase of the goods occurs in principle in a context of free competition, and the ensuing commercial discipline prevents a contracting authority in the sector from favouring particular tenderers on non-economic grounds. It claims that is also the position in the present case.

34.I disagree. The purpose of Article 1(a)(ii) of Directive 92/50 is to exclude from the scope of that Directive any contracts relating to the specific areas covered by Directive 90/531 (since replaced by Directive 93/38), because they are covered by what is now Directive 93/38. The provision in question, as the Commission has observed, establishes a dividing-line between Directive 92/50 and Directive 93/38. Directives 93/36 and 93/37 both contain a similar dividing-line. It is only in areas where the sectoral directive applies that Article 7 of that directive has any part to play. However, it not Directive 93/38 which applies to the present case, but Directive 92/50. Article 7 of the former is therefore not applicable, nor may it be applied by analogy.

35.Similarly, there is no merit in the German Government’s contention that it would not be possible to conduct an award procedure for services which had to be subcontracted within the context of an award procedure in which the City of Munich was itself a bidder, either prior to that procedure or after it. First, that is no reason to disregard European public procurement legislation. Moreover, it is apparent from documents in the case-file that neither in the notice nor the conditions of tender is there a requirement that the tenderer identify any subcontractor beforehand. The conditions expressly state that subcontracting was allowed. In such a case, any subcontracting had to occur under normal conditions of competition and the party awarded the contract was obliged, on request, to inform the principal subsequently of the identity of the subcontractor.

36.Finally, the German Government considers that if, in the circumstances of the present case, the City of Munich were deemed to be a contracting authority, it could rely on the exception contained in Article 11(3)(d) of Directive 92/50. It would not have been possible to conduct an award procedure for the subcontracted transport services prior to the award procedure for the main contract.

37.The first thing that must be said about that argument is that Article 11(3), which permits derogation from the rules designed to guarantee the proper exercise of the rights granted by the Treaty in the field of public service contracts, must be construed strictly; moreover, a party seeking to rely on that provision must prove that the exceptional circumstances invoked to justify the derogation do indeed obtain.

38.Article 11(3)(d) of Directive 92/50 allows prior publication of a contract notice to be waived in certain specified circumstances, namely in so far as is strictly necessary when, for reasons of extreme urgency brought about by events unforeseeable by the contracting authorities in question, the time-limit cannot be kept. For a claim based on that provision to succeed, therefore, there must be irrefutable proof of extreme urgency – and the urgency must be unforeseen.

39.However, it follows from the above that an award procedure for the (sub)contract could have been conducted following the main award. The German Government cannot therefore properly argue that in the circumstances it was not possible to conduct an award procedure for the relevant transport services; nor may it plead unforeseeability within the meaning of Article 11(3)(d). One hardly needs to add that it is illogical for a contracting authority which is itself bidding for a contract, aware from the start that a substantial part of the execution of that contract would have to be subcontracted should the bid succeed, to fail to take all necessary steps to ensure that it will be able to meet its own obligations under the Directive. Accordingly I consider that the argument predicated on the time-consuming nature of the (sub)contract award procedure is untenable.

40.It follows from the foregoing that I agree with the Commission that the German Government has failed to fulfil its obligations under Directive 92/50. Furthermore, the infringement is a continuing one, since the contract in question was concluded for a term of 25 years.

41.On that latter point, the German Government has claimed that it is, in any case, under no duty to terminate the contract prematurely. First, to do so would be both impossible (no mention being made of such a contingency in the contract itself), and contrary to the maxim pacta sunt servanda. Secondly, Article 2(6) of Directive 89/665 empowers Member States to maintain in force the consequences of contracts awarded in contravention of the public procurement directives.

42.That provision does indeed permit Member States to provide that, after the conclusion of a contract following its award, the powers of the body responsible for the review procedures shall be limited to awarding damages to any person harmed by an infringement, thus protecting the legitimate expectation of the parties to the contract. However, as I stated in my Opinion in Joined Cases C-20/01 and C-28/01 (the issue there was admissibility), that provision in no way renders Treaty infringement proceedings impossible or meaningless. In fact the reverse is true: a finding that an infringement has occurred may well be to the advantage of any parties adversely affected.

43.I should like to make one further – emphatic – point: there are limits to the extent to which Member States may shelter behind the principle of legitimate expectation and the maxim pacta sunt servanda in order to avoid the consequences attendant on repeated breaches of the procurement directives. Ultimately each Member State must take responsibility for ensuring compliance with those directives within its jurisdiction.

44.However, as the Commission has refrained from raising such issues in the present proceedings, they need not be addressed here.

45.V – Conclusion

On the basis of the foregoing I suggest that the Court:

(1)Declares that the Federal Republic of Germany has failed to fulfil its obligations under Article 8 in conjunction with Article 11(1) of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts;

(2)Orders the Federal Republic of Germany to pay the costs.

Original language: Dutch.

OJ 1992 L 209, p.1.

Council Directive 93/38/EEC of 14 June 1993 coordinating the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors (OJ 1993 L 199, p. 84).

The German Government cites inter alia the first four recitals in the preamble to Directive 92/50; Case 31/87 Beentjes [1988] ECR 4635, paragraph 11; and Case C-360/96 BFI Holding [1998] ECR I-6821, paragraph 62.

See, for example, Cases C-107/98 Teckal [1999] ECR I-8121, and C-399/98 Ordine degli Architetti and Others [2001] ECR I-5409.

Inter alia Case C-360/96 BFI Holding, cited at footnote 4, and Joined Cases C-223/99 and C‑260/99 Agorà and Excelsior [2001] ECR I-3605.

Case C-44/96 [1998] ECR I-73, paragraph 32. Mannesmann concerns Directive 93/37, the public works directive. For the same interpretation in the context of public service contracts (Directive 92/50) and public supply contracts (Directive 93/36), see respectively BFI Holding, cited at footnote 4, and Case C-373/00 Adolf Truley [2003] ECR I-1931.

Case C-18/01 Korhonen and Others [2003] ECR I-5321, paragraph 51.

Council Directive 93/36/EEC of 14 June 1993 coordinating procedures for the award of public supply contracts (OJ 1993 L 199, p. 1).

Council Directive 93/37/EEC of 14 June 1993 concerning the coordination of procedures for the award of public works contracts (OJ 1993 L 199, p. 54).

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11Joined Cases C-20/01 and C-28/01 Commission v Germany [2003] ECR I-3609.

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12Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts (OJ 1989 L 395, p. 33).