Judge Christopher Vajda is a judge at the Court of Justice of the European Union. He would like to thank Veena Srirangam for her assistance in preparing this article. This article is based on a presentation at The George Washington University Law School on November 1, 2017. All opinions expressed herein are personal to the author.
Public procurement is a subject of huge practical and legal importance. The annual value of public procurement contracts in the European Union (EU) is estimated at €2 trillion, representing fourteen percent of the EU’s gross domestic product.1 From the legal perspective, there is detailed legislation both on substantive and procedural issues. There are now two relatively new directives in this area as well — Directives 2014/23 and 2014/24, which codify the Court of Justice for the European Union’s (CJEU) case law in some respects and develop the law in others.2 This is also an area with voluminous CJEU case law and even more in the national courts of the EU Member States — which never reaches the CJEU. Between 2012 and 2016, the CJEU determined a total of eighty-two cases on public procurement — with nineteen new cases coming before the CJEU in 2016 alone.3
This Article provides an overview of the development of EU public procurement law and considers some of the issues surrounding the application of EU law’s general principles as well as remedies available in public procurement litigation. This Article also briefly discusses the World Trade Organization (WTO) regime on public procurement.
Before looking at the detail of EU public procurement law, this Article will briefly describe the principal features of the EU legal order. For present purposes, EU law is found in four sources: treaties — currently the Treaty of the European Union (TEU)4 and the Treaty of the Functioning of the European Union (TFEU),5 the Charter of Fundamental Rights,6 legislation, and general principles.
The TFEU provides that the European Parliament and the Council constitute the Union legislator.7 Article 289 TFEU stipulates that the Parliament and the Council may adopt “a regulation, directive or decision on a proposal from the Commission.”8 Regulations are measures of general application that are binding in their “entirety and directly applicable in all Member States.”9 By contrast, directives are binding upon each Member State as to the result to be achieved but leave it to the Member States’ authorities as to the form and methods by which the directive will be incorporated into national law.10 A directive must be transposed into national law by the deadline set during the directive’s adoption. Where a Member State has failed to do so, the Commission may initiate infringement proceedings (under article 258 TFEU)11 before the CJEU, and the Member State may face a fine (under article 260(3) TFEU).12 Where a directive has not been transposed, or has been transposed incorrectly, it can still have direct effect against the Member State — including state bodies, where the provisions of the directive are unconditional and sufficiently clear and precise, and the provisions of the directive confer rights upon individuals.13 In parallel to law derived from the treaties, the CJEU has developed general principles such as non-discrimination,14 proportionality,15 legitimate expectations,16 and legal certainty.17
With respect to judicial enforcement of EU law, national courts have the competence to rule on EU law matters; indeed, EU law requires the Member States’ national courts to recognize and enforce EU law.18 When a national court requires guidance on EU law interpretation, it may request the CJEU to give a preliminary ruling under the procedure set out in article 267 TFEU. The preliminary reference is not a form of appeal but an exercise in judicial cooperation between national courts and the CJEU to ensure the uniform application of EU law across all the Member States.19 A final court — i.e., a national court against whose decisions there is no judicial remedy under national law — is obliged to refer to the CJEU questions of EU law where necessary to enable it to give judgment; whereas, lower national courts only have the discretion to do so.20 In CILFIT, the CJEU held that the final court of a Member State is not under an obligation to make a reference if (1) previous decisions of the CJEU have already dealt with the point of law in question or (2) “the correct application of [EU] law is so obvious” that there is “no scope for any reasonable doubt” as to the manner in which the question raised is to be resolved.21 In Fotofrost, the CJEU stated the national courts had no power to declare a Union act invalid, as that “would be liable to place in jeopardy the very unity” of the Union legal order.22 Where the validity of an EU measure is in question, the issue must be referred to the CJEU, which has the exclusive power to declare that measure invalid.23 This preliminary reference procedure acts as the route by which many of the public procurement cases come before the CJEU.24
II. Overview of Development of EU Public Procurement Law
This section provides an account of the development of public procurement law over time generally and then considers in more detail the evolution in public procurement law’s objectives, as well as the regulation of award criteria over the past fifty years.
A. From Early Case Law to the 2014 Directives
The EU rules on public procurement derive from three sources: treaties, a series of directives, and general principles. The TFEU — as primary law — is not as detailed or exhaustive as the directives, which specify legislation in respect to public procurement. The TFEU makes provision for the free movement of goods and services (articles 28 and 56 TFEU) as well as the freedom of establishment (in article 49 TFEU). The rules in the treaty and the general principles — especially transparency and equal treatment — underlie the public procurement directives and continue to apply to cases that fall outside their scope.
The case of Dundalk Water Supply provides a good example of how the treaty rules apply in the context of public procurement.25 The dispute arose out of an invitation to tender published by the Dundalk Urban District Council in 1986 for the construction of a water main, which would transport water from a nearby source into Dundalk’s drinking water supply.26 The invitation to tender set out technical specifications for the asbestos cement pressure pipes to be used — in accordance with the Irish Standard Mark Licensing Scheme.27 At that time, public works contracts awarded for the distribution, transmission, or transportation services for water were outside the scope of the public procurement directives.28 The CJEU, nonetheless, found that the contract specification for the pipes breached the prohibition on quantitative restrictions set out in what is now article 28 of the TFEU.29 The CJEU reasoned that contract specifications requiring compliance with Irish technical standards may cause economic operators who produce or utilize pipes of an equivalent standard to refrain from tendering.30 In essence, the obligation on the Irish government was negative, as it was not permitted to require compliance with national technical standards and thereby restrict competition to tender for public works contracts.31
Indeed, until the 2000 landmark judgment in Telaustria, the case law applying treaty principles largely highlighted negative obligations on the contracting authority — such as the prohibition of discrimination.32 Telaustria concerned a public tender procedure relating to a service concession for the production and publication of telephone directories in Austria.33 At that time, service concessions were excluded from the scope of public procurement directives.34 The CJEU, nonetheless, found that contracting authorities concluding such contracts had to respect the fundamental principles of the treaties “in general, and the principle of non-discrimination on the ground of nationality, in particular.”35 It stated that this principle implied an obligation of transparency on the part of the contracting authority.36
That obligation required the authority to ensure, “for the benefit of any potential tenderer, a degree of advertising sufficient to enable the services market to be opened up to competition and the impartiality of procurement procedures to be reviewed.”37 The positive obligation of advertisement — deriving from a transparency requirement — was identified in respect of contracts falling outside the scope of the procurement directives.38 This treaty obligation for such contracts mirrored the detailed advertising requirements set out in those directives, albeit in a manner far less defined.39
The directives, by contrast, contain a series of positive obligations relating to all aspects of the tender procedure, including technical specifications, advertising requirements, and award criteria. Since the 1960s, there have been a number of directives regulating public procurement, and legislation has become increasingly detailed and complex over time. Directive 71/305 — one of the first directives to coordinate national procedures for the award of public works contracts — was eleven pages long with thirty-four articles.40 Compare that to the more recent Directive 2014/24 on public procurement, which is 178 pages long with 138 recitals, ninety-four articles, and fifteen Annexes.41
The level of detail in these directives raises two issues. First, there is the issue of whether the directives have succeeded in clarifying the public procurement rules. Second, the more granular the directives’ requirements are, the less the scope for discretion on the part of the contracting authority.
Set against that is the need — on the part of the Union legislator — to provide sufficient detail to ensure the consistent and predictable application of EU laws across the Member States. The effectiveness of EU public procurement law depends, to some extent, on detailed rules. Such considerations have invariably resulted in more detailed and longer pieces of legislation over time.
B. The Development of Objectives
The objectives of public procurement legislation evolved over time. In the very first directives from the 1960s, public procurement regulation was seen as an economic exercise aimed at opening up government contracts to competition from across the Member States to bring about a more efficient allocation of resources.42 By removing preferential treatment and protection from the market, the contracting authority could procure services at a lower cost—translating to an economic benefit for the taxpayer.43 Further, a lower cost of procurement also yields the same service at a lower cost for consumers. Accordingly, one finds that Directive 71/305 states its objective as “the simultaneous attainment of freedom of establishment and freedom to provide services in respect of public works contracts.”44
By contrast, the aims of the 2014 Directives were much wider, and the emphasis shifted from competitive public procurement to sustainable public procurement.45 This is a major shift in the focus of public procurement law with wide-ranging consequences, leading some commentators to note that the “sustainability paradigm is almost taking over the realm of public procurement.”46 Broadly speaking, in addition to the objectives of pursuing freedom of establishment, freedom to provide services, and the free movement of goods, there are now a number of restrictions on the means of achieving those objectives — including social and environmental considerations.47
The CJEU’s jurisprudence led the way toward the use of such considerations in a series of cases starting with the Bentjees case in 1988.48 In that case, the CJEU held that the awarding authority’s specification — that tenderers should be able to prove that they are able to employ long-term unemployed persons — was compatible with Directive 71/305 if it did not have direct or indirect discriminatory effects on tenderers from other Member States.49 With respect to environmental considerations, the CJEU held in 2002, in Concordia (Helsinki) Bus Finland, that the municipality of Helsinki was entitled to take environmental considerations into account in deciding which tenderer would be awarded the contract for bus transport services as long as it applied its criteria in a non-discriminatory way.50
There is now express recognition in the Recitals of Directive 2014/24 that the regulation of public procurement is vital to the Union’s strategy for “smart, sustainable and inclusive growth” while ensuring the most efficient use of public funds.51 The Recitals also spell out that the new rules aim to “enable procurers to make better use of public procurement in support of common societal goals.”52 This is reflected in the directive’s provision setting out the “principles of procurement,” which provides that “Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law established by Union law.”53
Thus, it becomes clear that the objectives of EU public procurement law have widened over the past forty years. They have gone from being a primarily economic exercise to embracing many social, environmental, and industrial objectives of the Union.54
III. The Bodies Subject to Public Procurement Rules
The aim of public procurement rules, in general terms, is to capture and regulate the purchasing behavior of entities with a close association or connection to the state. The 1971 Directive referred to these entities as “authorities awarding contracts,” which generally were defined as associations governed by public law, formed by regional or local authorities.55 In the 2004 Directive, the term “contracting authority” — which includes the core public authorities (e.g., the state, regional, and local authorities), as well as “bodies governed by public law” — encapsulates the same concept.56 The latter term refers to a body (1) “established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character”; (2) “having legal personality”; and (3) “financed, for the most part, by the [s]tate, regional or local authorities, or other bodies governed by public law [or is] subject to management supervision by those bodies.”57 These are cumulative requirements.58 This section briefly addresses some of the case law on the financing requirements and then outlines a recent case that grappled with the “general interest” condition.
In the 2000 case of University of Cambridge, the CJEU was asked about the types of payments that should be included in determining whether the entity in question was “financed, for the most part” by a contracting authority.59 The CJEU reiterated that the test was one of dependency — determining whether there was a relationship of subordination or dependency on the contracting authority as a result of the payments.60 Not all payments made by a contracting authority have the effect of creating or reinforcing a specific relationship of subordination or dependency. Only payments going to finance or support the activities of the body concerned, without any specific consideration, could be described as “public financing.”61 The CJEU also clarified that the reference to “for the most part” in the directive was to be interpreted as being “more than half” the financing of the body in question.62
The financing requirement came to the fore again in 2004 in the German case of Bayerischer Rundfunk.63 The dispute concerned a central agency that collected broadcasting fees on behalf of public broadcasters.64 It had invited tenders for cleaning services of its premises, but not in accordance with the EU public procurement rules.65 The CJEU was asked whether such an entity, which was indirectly financed by the state, could be treated as a contracting authority.66 As a preliminary point, the CJEU noted how the German system of financing public broadcasting bodies excludes the public authority from exercising political influence over public broadcasters. However, this alone did not suffice to exclude state influence for the purposes of the public procurement rules.67 The CJEU reiterated that the concept of a “body governed by public law” must be interpreted in functional terms and, in light of the aims of Directive 92/50, held that indirect financing is sufficient to meet the financing requirements for a body to be governed by public law.68 As an effect, it did not matter whether the financing passed through the state budget or whether the state simply granted to the bodies the right to collect the fees. If there is indirect financing, it is not necessary, in addition, for the state to interfere in the award of the contract in issue.69
The CJEU examined the criterion that an entity be established to meet needs in the “general interest” — the first condition for a body to be governed by public law — in the recent case of LitSpecMet, decided in October 2017.70 The litigation arose out of a tendering procedure adopted by VLRD, a commercial company established as a subsidiary of the state-owned railway company LG following a restructuring.71 The CJEU was asked whether VLRD could be considered a contracting authority.72 The CJEU first noted that VLRD had been established to enable LG to carry out passenger and freight transportation and played a crucial role in the LG meeting the needs of general interest.73 It was irrelevant that VLRD carried on other non-general interest activities.74 Secondly, if VLRD operated in normal market conditions with the aim of making a profit — and bore the losses associated with the exercise of the activity, it was likely that the needs it sought to meet were of an industrial or commercial nature, thus taking it outside the ambit of “general interest” and outside the scope of the public procurement rules.75
IV. The Regulation of Award Criteria
Under the 1971 Directive and the 2004 Directive, the contracting authority could apply one of two criteria to award the contract — “the lowest price” or “the most economically advantageous tender.”76 If the contracting authority intends to use the former, then it must award the contract to the tenderer that submits the cheapest offer.77 By contrast, using the criterion of “most economically advantageous” offer provides the contracting authority with a wider scope of discretion.78 It can take into consideration a series of factors — including price, delivery or completion date, running costs, cost-effectiveness, profitability, technical merit, product or work quality, and so on — as long as the invitation to tender mentions the factors in hierarchical order.79 However, the CJEU has recognized a number of limitations on how the contracting authority could weigh these factors.
In ATI EAC, the CJEU held that the contracting authority is able to attach specific weight to each factor as long as weight is defined in advance.80 In that case, the Italian contracting authority ACTV set out four award criteria — along with a points system by which the criteria would be weighted — in the invitation to tender on the basis of how the most economically advantageous tender would be determined.81 After the expiration of the tender submission period — but before the envelopes containing the bids were opened — the jury divided one of the criteria into further subheadings and allocated a particular number of points to each sub-category.82 The tenderers who had their bids rejected challenged the decision in the national courts.83 The Italian Council of State asked, on a reference to the CJEU, about the scope of discretion available to the contracting authority under Directive 92/50.84 The CJEU held that EU law would have been infringed upon if the contracting authority’s decision applied such weighting in a way that (1) altered the award criteria set out in the tender; (2) contained elements that could have affected the tenderers’ preparation of the bid; or (3) was taken on the basis of matters likely to give rise to discrimination against one of the tenderers.85 In other words, there was scope for discretion for the contracting authority in weighing each factor, but it had to take a number of steps to ensure that such discretion would not create a discriminatory impact on any of the tenderers.86
In that vein, it is also worth mentioning the important case of Lianakis — decided in 2008 under Directive 92/50.87 The Municipal Council of Alexdroupolis issued a call for tenders, and the contract notice specified the award criteria in order of priority.88 Once the bids were in, the contracting authority “defined the weighting factors and sub-criteria in respect of the [published] award criteria.”89 The tenderers with rejected bids challenged the authority’s decision on the basis that the project could have been awarded only on the basis of the ex post stipulation of weighting factors and sub-criteria.90 The CJEU held that the subsequent stipulation of weighting and sub-criteria was not compatible with the principle of equal treatment of economic operators.91 Further, the CJEU held that a contracting authority was not allowed to use the tenderer’s experience and qualifications as “award criteria” because those criteria related, rather, to the ability of the tenderer to perform the contract and could only be taken into account at the earlier selection stage.92 Award criteria, by contrast, are aimed at identifying which tender is economically the most advantageous and should not, therefore, include those criteria that are “essentially linked to the evaluation of the tenderers’ ability to perform the contract in question.”93 The CJEU reiterated that selection and award are two independent and separate processes that ought not be conflated.94
Under Directive 2014/24, the award criterion is stipulated as “[t]he most economically advantageous tender,” which is to “be identified on the basis of price or cost, using a cost-effectiveness approach.”95 The directive also introduces the new concept of “life-cycle costing,” which is one type of cost-effectiveness approach set out in the directive as a basis upon which the contracting authority may determine the most economically advantageous offer.96 This approach engages directly with the costs that the relevant service, product, or work incurs over its life-cycle, including costs borne by the contracting authority such as the cost of acquisition, use, and maintenance, as well as the “costs imputed to environmental externalities linked to the product, service or works during its life cycle — provided their monetary value can be determined and verified.”97 The directive also spells out clearly that the award criteria shall not result in “unrestricted freedom of choice on the contracting authority.”98
Unrestricted freedom of choice was never envisaged as being available to the contracting authority even in earlier public procurement directives, but it is fair to say that the margin of the discretion available to the contracting authority has been increasingly circumscribed by the CJEU and the Union legislator in the furtherance of the principles of equal treatment and non-discrimination — with the broader aim of promoting the effectiveness of EU law.
Turning finally to the important question: when are amendments made to the provisions of a procurement contract considered a new award of the contract and therefore subject to a new award procedure? In Pressetext, the CJEU held — applying the principles of non-discrimination and equal treatment — that amendments to the provision of a public contract constitute a new award of contract, within the meaning of Directive 92/50, when they are “materially different in character from the original contract and, therefore, … demonstrate the intention of the parties to renegotiate the essential terms of the contract.”99 The CJEU noted such a material difference in character would be present where (1) conditions are introduced that would have allowed for admission of tenderers other than those initially admitted or would have allowed for the acceptance of a tender other than the one initially accepted; (2) the changes extend the scope of the contract considerably to encompass services not initially covered; or (3) when there is a change in the economic balance in favor of the contractor in a manner not provided for in the initial contract.100
V. General Principles of EU Law
The principles of non-discrimination and equal treatment have played, and continue to play, an important role in opening markets across the EU. It is remarkable that despite ever more detailed legislation in this area, the general principles remain so important. Other general principles that are of relevance to public procurement include proportionality and legal certainty.
The case of Fabricom provides a useful illustration of the interaction between the principles of equal treatment and proportionality.101 Fabricom challenged a Belgian national measure that automatically excluded any person who has been instructed to carry out research, experiments, studies, or development in connection with a public contract from participation in a tender.102 The CJEU held — applying the principle of equal treatment and proportionality — that the measure went further than necessary to ensure the equal treatment of tenderers.103 While a person who had carried out research, experiments, etc., could be in an advantageous position in some cases, there was no national procedure for that person to demonstrate that his or her participation in the tender procedure would not entail risk of distorting competition between tenderers.104
A similar issue arose in the context of the use of experts in the more recent case of eVigilo.105 The applicant, eVigilo Ltd., alleged, inter alia, that the experts used by the Lithuanian contracting authority to evaluate the tenders were biased because they had professional relations with the specialists referred to in the tender by the successful tenderers.106 The Lithuanian court made a preliminary reference to the CJEU asking, in part, whether the unsuccessful tenderer had to establish in concrete terms if the experts acted in a biased manner.107 Further, the court asked CJEU whether a national reviewing body could — if it turned out that the applicant’s claim was well-founded — have regard for the fact that the results of the evaluation of the tenders would have been essentially the same if there had not been any biased assessors among the experts who evaluated the tenders.108
The CJEU held, on the first point, that it followed from the principle of equal treatment and the obligation of transparency “that the contracting authority … is required to determine whether any conflicts of interest exist and to take appropriate measures … to prevent and detect [such conflicts] and remedy them.”109 It would be contrary to the principle of effectiveness and the requirement of an effective remedy110 if the burden of proving the experts’ bias rested on the applicant because a tenderer generally is not in a position with access to the information and evidence allowing it to prove such bias.111 The contracting authority had an active role to play in securing the application of the principles of non-discrimination and equal treatment.112 With respect to the second point, the CJEU highlighted that the directives did not contain specific provisions as to bias on the part of experts.113 Therefore, it was for the national law of Member States to define — subject to obligations of transparency and non-discrimination under EU law — the concept of bias and its criteria.114 The CJEU held that the same was true for the rules relating to the legal effects of possible bias, and it followed that it is for national law to determine whether reviewing authorities “must take into account the fact that possible bias on the part of the experts had no effect on the decision to award the contract.”115
The CJEU grappled with the principle of equal treatment again in the case of MT Højgaard.116 The case concerned a Danish contracting authority, which had invited five candidates to submit tenders for the construction of a new railway line, following a process of pre-selection.117 One of the candidates was a consortium formed of two companies — one of which was subsequently declared insolvent.118 The other company in that consortium, Per Aarsleff, sought to continue participation in the tender process in its own name, after taking on a number of staff from the insolvent company.119 It then submitted a second bid with the contracting authority’s permission.120 The contracting authority decided to award the contract to Per Aarslef and informed the other tenderers of its decision.121 The unsuccessful tenderers alleged that the award decision breached the principles of equal treatment and transparency on the basis that Per Aarslef had not been pre-selected to participate in the tender.122 The CJEU was asked whether the principle of equal treatment precluded the course of action adopted by the Danish contracting authority.123 The CJEU held that the principle would not have been breached as long as it was first established that Per Aarslef itself met the requirements laid down by the contracting authority at the preselection stage and second, that its continued participation in the tender procedure did not place the other tenderers at a competitive disadvantage.124 Giving effect to the principle of equal treatment and non-discrimination thus necessarily means circumscribing the scope of the discretion available to the contracting authority.
The concern for legal certainty is also particularly acute in the context of public procurement because of the public nature of the contracts involved and the impact on public works or services if their provision is delayed due to long and drawn out legal challenges. This is now recognized expressly in Recital 2 of Directive 2014/24, which identifies the “need to clarify basic notions and concepts to ensure legal certainty.”125
What remedies are available to an aggrieved tenderer challenging a decision of the contracting authority? It is rather unusual for the EU to legislate on remedies as it does in the public procurement ‘remedies’ directives. The normal position is that remedies for breach of EU law are left up to national law — subject to compliance with general principles, in particular those of equivalence and effectiveness.126 This is still the case for matters that lie outside the current EU legislative code for remedies, which is set out in the Directive 89/665 as amended by Directive 2007/66, and covers specific situations of breach of the public procurement rules.127
There are two particular issues underlying remedies in public procurement law that are worth discussing. The first concerns the balance to be struck between sanctioning breaches of the directives (to ensure that directives are obeyed), while at the same time ensuring legal certainty for the successful tenderer who is awarded the contract and may be unaware of why the contracting authority breached the directive and who spent money pursuant to the award of the contract. The second concerns the most appropriate remedy in a given case and whether ex ante or ex post remedies are to be preferred.
A. Striking the Balance Between Sanctioning Breaches and Legal Certainty
The tension between legal certainty and sanctioning breaches of public procurement law is reflected in the Recitals to Directive 2007/66.128 Recital 14 recognizes that rendering a contract awarded in breach of public procurement rules ineffective is “the most effective way to restore competition and to create new business opportunities for those economic operators which have been deprived illegally of their opportunity to compete.”129 However, at the same time, Recital 24 indicates that, in exceptional circumstances, ineffectiveness could lead to disproportionate consequences,130 and Recital 26 makes explicit reference to the legal uncertainty that may result from ineffectiveness.131
In its original version, Directive 89/665 provided that national review procedures should allow the possibility to annul illegal decisions, order interlocutory measures, and award damages.132 However, the directive’s provisions were not considered entirely adequate in creating an effective system of review.133 The original version required Member States to ensure that a decision to award a public works contract in violation of EU law could be annulled only in the period before the conclusion of the contract and that thereafter, only damages could be awarded.134 What is more, Member States did not have to provide a minimum period between the award decision and the conclusion of the contract, which would have been necessary for an effective review procedure.135
It fell initially to the CJEU to fill the gaps in effective judicial protection. In a series of cases, starting with Alcatel Austria in 1999, the CJEU strengthened the remedies available to the unsuccessful tenderer.136 In that case, the CJEU declared that Member States were “required to ensure that the contracting authority’s decision prior to the conclusion of the contract is in all cases open to review” such that the decision may be “set aside if the relevant conditions are met.”137 Further, in Alcatel, the tenderers had only learned of the contract’s conclusion between the authority and the successful tenderer through the press, but the CJEU did not elaborate on this point — as it was not directly relevant to the question of whether an award decision should be open to review, regardless of the possibility to obtain damages.138 However, in Commission v. Austria, the CJEU then set out more specific requirements that the contracting authority must comply with in order to ensure “complete legal protection” for the unsuccessful tenderer.139 It held that in order for the Directive 89/665 to have practical effect, the contracting authorities had an obligation to keep tenderers informed of the award decision and to allow a reasonable period of time to elapse between the communication of the award decision to unsuccessful tenderers and the conclusion of the contract with the successful tenderer.140 This would allow the unsuccessful tenderer(s) to make “an application … for interim measures prior to the conclusion of the contract.”141
This case law prompted the EU legislator to modernize the rules relating to review procedures through the adoption of Directive 2007/66, amending Directive 89/665. It provided a minimum standstill period of ten days between notification of the award decision to the unsuccessful tenderers and contract signature.142
The amended directive further increased judicial protection for the unsuccessful tenderers by obliging Member States to ensure that public contracts are declared ineffective in three different situations where the requirements of the directive have been infringed.143 The first and second are of particular interest and relate respectively to a breach of the requirement for prior publication of a contract notice in the Official Journal of the EU and the infringement of standstill provisions if it “has affected the chances of the tenderer applying for a review to obtain the contract.”144 Where the requirement of prior publication in the Official Journal is breached, article 2d(4) of the directive recognizes an exception to the rule that the contract is to be considered ineffective and thereby seeks to strike a balance between sanctioning breaches and ensuring legal certainty. One of the cumulative conditions for the application of that exception is that the contracting authority considers there is no need for prior publication of a contract notice pursuant to Directive 2004/18.
In 2014, the CJEU examined the scope of these conditions in Fastweb (No 2).145 In this case, the applicant disputed the Italian Ministry of the Interior’s re-awarding of a telecoms services contract to Telecom Italia upon the expiry of its previous contract with the company — using the negotiated procedure without prior publication of a contract notice.146 Although the award decision was annulled, the Italian court decided it could not declare the subsequent contract ineffective because the conditions for the article 2d(4) exception were fulfilled.147
The CJEU was asked whether the provision precluded a declaration of ineffectiveness when it was established that the conditions laid down in Directive 2004/18 for awarding a contract without prior publication of a contract notice were not in fact met.148 The CJEU held that even though the exception must be interpreted strictly, its terms should not be interpreted in a manner that would deprive it of its intended effect.149 Rather than being governed by national law, the national measures that could be taken were determined only according to the rules of the directive.150 It would therefore be contrary to the wording and aims of article 2d(4), as well as to legal certainty, to declare a contract ineffective if the three conditions in that exception were fulfilled.151 However, the CJEU added the importance of the reviewing body carrying out an effective review of the satisfaction of those conditions.152 In order to do that, it needed to examine the reasons set out in the notice in the Official Journal for proceeding without prior publication.153
B. Types of Remedies
The second tension in this area relates to the type of remedy appropriate to rectify the breach. It is important to balance the availability of ex ante remedies — usually interim measures taken to stop the breach of public procurement law which may be available to a tenderer — with ex post remedies — typically damages.
Directive 89/665 requires Member States to ensure that ex ante remedies, or interim measures, are available to aggrieved tenderers such that the award procedure can be suspended before the contract’s conclusion.154 Such interim measures bring with them the advantage that an illegal award of a contract can be prevented. On the other hand, in many cases, there will be a detrimental impact on the public interest because the provision of a public service will be delayed due to a legal challenge to the decision. Therefore, there is a need to balance the competing interests at hand in deciding whether to award interim measures.
With ex post remedies, the emphasis of the remedy lies in redress for the complainant — generally in the form of damages. The advantage of this type of remedy is that, in many cases, it benefits the public interest because the public contract is procured and the associated benefits realized. Directive 89/665 does not lay down a detailed normative framework for actions for damages, and the availability of damages therefore is largely determined by national law and practice. In most Member States, the burden of proof lies on the aggrieved tenderer.155 The unsuccessful tenderer will typically seek recovery for the loss of profits it suffered as a result of the contract being awarded unlawfully to another party. This may involve considering whether the unsuccessful tenderer is entitled to rely on a loss of a chance. For example, in English law, the unsuccessful tenderer will be able to recover damages if it can prove that it had a chance of being awarded the contract, and the breach of the public procurement rules by the contracting authority resulted in the claimant losing that chance.156 There must be a significant chance that the tenderer would have won the contract for the breach to be actionable.157 This “loss of chance” or “loss of opportunity” measure has been considered in cases where an unsuccessful tenderer is seeking damages against the EU.158 Discussing this measure of damages, Advocate General Saugmandsgaard Øe highlighted in his Opinion, in the recent case of European Dynamics Luxembourg, that there must be a causal link between the damages for loss of opportunity claimed by the applicant and the breach of the public procurement rules by the contracting authority.159 The Court itself has so far refrained from stating whether loss of a chance is a basis for a damages claim in a public procurement action.
From the unsuccessful tenderer’s perspective, the action for damages will not necessarily remedy the consequences of the breach of the rules on public procurement — highlighting the significance of ex ante remedies that have been strengthened by CJEU case law and Directive 2007/66.160
VII. WTO Rules on Public Procurement
The final topic addressed in this Article pertains to an important development in public procurement law on the international plane: WTO rules on public procurement. This area is now governed by the revised Government Procurement Agreement (GPA), which came into effect on April 6, 2014.161 “The GPA is a plurilateral agreement … meaning that not all WTO members are part[y] to” it; forty-seven WTO members have signed up to the GPA, including the twenty-eight EU Member States.162 The GPA is composed of two main parts — the text of the Agreement and the Annexes, which contain the parties’ market access schedule of commitments.163 The latter, also known as the coverage schedules, form an integral part of the Agreement, as they set out for each party the extent to which the GPA will apply in respect to (1) the procuring entities, (2) the types of goods and services, and (3) the threshold values above which the activities are subjected to the WTO rules on public procurement.164 There is also an element of bilateralism in the GPA, as a party can decide the extent to which the GPA shall apply to goods and services of another party.165 The United States, for example, stipulates that the GPA will not apply with respect to Canada for procurement by certain entities.166 Canada similarly provides that the GPA only covers the procurement of certain services “with respect to a particular party only to the extent that such party has provided reciprocal access to that service.”167 The GPA, then, envisages a more flexible regime that provides the parties to the agreement with more autonomy and discretion in deciding how it will apply to them. However, this has also attracted criticism for the regime not being as effective as it could be and for its complexity.
The text of the GPA stipulates procedures — albeit in less strict terms than the EU regime — “which must be followed when awarding contracts within its scope … [which] aim to ensure transparency and openness … in the award of public contracts to facilitate cross-border trade between signatories.”168 Commentators have noted the influence of the EU on the GPA regime, treating it as “an indication of the maturity and validity of the regulatory process of the European public markets integration.”169 The GPA’s underlying principle, as with the EU regime, is that of non-discrimination — requiring GPA parties to show “no less favourable treatment” to providers and products of other signatory states as compared to national providers and products.170 For instance, article X(1) of the GPA, echoing the CJEU in Dundalk, provides that technical specifications indicated by a contracting authority in a tender notice should not create unnecessary obstacles to international trade.171 In addition, the GPA follows the EU directives in its provision for domestic review procedures — including inter alia, the requirements for a standstill period of ten days, review by an impartial administrative or judicial body of the award decision, and the availability of interim measures to the unsuccessful tenderer.172 The case law of the CJEU in government contracts then has had an impact not only within the EU but also on an international level through the GPA.
This brief survey of the development of EU public procurement law has illustrated the varieties of issues that the CJEU grapples with in this increasingly complex and important area of law. It is equally true that the EU legislator has not remained idle, and particularly with the new directives in 2014, has codified some of the CJEU’s caselaw while in some areas going further than the CJEU had ventured. The freedom to provide services and the freedom of establishment are vital to the effective functioning of the EU single market, and the law on public procurement has played a significant role in realizing these freedoms in the context of opening up public contracts. The law on EU public procurement is a good illustration of the Union legislator and the CJEU developing an area of law in which we can see detailed legislative rules overlaid with the general principles developed by the CJEU.
- Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: Making Public Procurement Work in and for Europe, at 2, COM (2017) 572 final (Oct. 3, 2017); Public Procurement Strategy, EUR. COMMISSION, https://ec.europa.eu/growth/single-market/public-procurement/strategy_en [https:// perma.cc/RC6T-7LCD] (last visited Jan. 17, 2018).
- Council Directive 2014/23, 2014 O.J. (L 94) 1–64 (EU); Council Directive 2014/24, 2014 O.J. (L 94) 65 (EC) [hereinafter Directive 2014/24] (repeating Directive 2004/18).
- Court of Justice of the European Union, Annual Report 2016: Judicial Activity 89, 96 (2016).
- Consolidated Version of the Treaty on European Union, June 7, 2016, 2016 O.J. (C 202) 13.
- Treaty of the Functioning of the European Union, June 7, 2016, 2016 O.J. (C 202) 47 [hereinafter TFEU].
- Charter of Fundamental Rights of the European Union, June 7, 2016, 2016 O.J. (C 202) 389.
- TFEU, supra note 5, at 51, 53.
- TFEU Article 289, first paragraph.
- TFEU, Article 288, second paragraph.
- TFEU, Article 288, third paragraph.
- Id. at 160, 173.
- Id. at 161–62.
- See Case C-91/92, Paolo Faccini Dori v. Recreb Srl, 1994 E.C.R. I-3325, I-3354-55.
- See, e.g., Case C-106/83, Sermide SpA v. Cassa Conguaglio Zucchero, 1984 E.C.R. 4209, 4231.
- See, e.g., Ministry of Agric., Fisheries and Food, ex parte Nat’l Farmers’ Union, 1998 E.C.R. at I-2258; Case C-375/96, Zaninotto v. Ispettorato Centrale Repressione Fordi, 1998 E.C.R. I-6680, I-6710.
- See, e.g., Zaninotto, 1998 E.C.R. at I-6706; Case C-177/90, Ku¨hn v. Landwirtschaftskammer Weser-Ems, 1992 E.C.R. I-58, I-63.
- See, e.g., Case C-143/93, Gebroeders van Es Douane Agenten BV v. Inspecteur der Invoerrechten en Accijnzen, 1996 E.C.R. I-459, I-471; Case C-177/96, Belgium v. Banque Indosuez, 1997 E.C.R. I-5673, I-5681; Case C-233/96, Denmark v. Comm’n, 1998 E.C.R. I-5781, I-5793.
- See Case 26/62, NV Algemene Transport-en Expeditie Onderneming van Gend & Loos v. Netherlands Inland Revenue Administration, 1963 E.C.R. 1, 2, 13. The EU judicial order is different as compared to, for example, a system of state and federal courts as in the United States where, in general terms, the former has jurisdiction over state laws and the latter over federal laws. There is no such separation of jurisdiction in the EU, and national courts are competent to apply and enforce EU law. See id. at 2, 12.
- See Case C-370/12, Thomas Pringle v. Government of Ireland and Others, ECLI:EU: C:2012:756, ¶ 83 (Nov. 27, 2012).
- TEFU, supra note 5, at 164.
- See Case 283/81, CILFIT v. Ministry of Health, 1982 E.C.R. 3417, 3430–31.
- Case C-314/85, Foto-Frost v Hauptzollamt Lübeck-Ost, 1987 E.C.R. 4199, 4200.
- See id. at 4205.
- See SUE ARROWSMITH ET AL., EU PUBLIC PROCUREMENT LAW: AN INTRODUCTION 20 (2010).
- See Case 45/87, Comm’n v. Ireland, 1988 E.C.R. 4929, 4961.
- Id. at 4933.
- Id. at 4934.
- Council Directive 71/305, art. 3, 1971 O.J. SPEC. ED. 682, 683–84 (EEC) [hereinafter Directive 71/305]. Such contracts are now within the scope of public procurement law. See Council Directive 2014/25, art. 4(1)(b), 2014 O.J. (L 94) 243, 279 (EC) (repealing Directive 2004/17/EC).
- See Case 45/87, Comm’n v. Ireland, 1988 E.C.R. 4929, 4937.
- Id. at 4961.
- Id. at 4962–63.
- See Case C-324/98, Telaustria Verlags GmbH v. Telekom Austria AG, 2000 E.C.R. I-10,770, I-10,794.
- Id. at I-10,773.
- Id. at I-10,781.
- Id. at I-10,794.
- See id. at I-10,781, I-10,794.
- See Council Directive 93/38, art. 21, 1993 O.J. (L 199) 84, 96–97 (EEC).
- Directive 71/305, supra note 28, at 682.
- Directive 2014/24, supra note 2, at 65.
- See CHRISTOPHER BOVIS, THE LAW OF EU PUBLIC PROCUREMENT 2–3 (2d ed. 2015).
- See id. at 1.
- Directive 71/305, supra note 28, at 682.
- See generally BOVIS, supra note 42, at 8.
- Dacian C. Dragos & Bogdana Neamtu, Sustainable Public Procurement in the EU: Experiences and Prospects, in MODERNISING PUBLIC PROCUREMENT: THE NEW DIRECTIVE 301, 301 (Lichere et al. eds., 2014).
- See BOVIS, supra note 42, at viii.
- Case 31/87, Gebroeders Beentjes BV v. Netherlands, 1988 E.C.R. 4635, 4659.
- Id. at 4664.
- Case C-513/99, Concordia Bus Finland Oy Ab v. Helsingin kaupunki, 2002 E.C.R. I-7251, I-7277–78.
- Directive 2014/24, supra note 2, at 65.
- Id. at 105–06.
- Cf. BOVIS, supra note 42, at 8.
- Id. at 683.
- Council Directive 2004/18, art. 1(9), 2004 O.J. (L134) 114, 127 (EU) [hereinafter Directive 2004/18]; Council Directive 93/37, art. 1(b), 1993 O.J. (L199) 55 (EC).
- Directive 2004/18, supra note 56, at 127.
- Case C-18/01, Korhonen v. Varkauden Taitotalo, 2003 E.C.R. I-5345, I-5357.
- Case C-380/98, The Queen v. H.M. Treasury ex parte Univ. of Cambridge, 2000 E.C.R. I-8035, I-8043.
- Id. at I-8046.
- See id. at I-8045. The referring court identified four types of payments that were made to the university by one or more of the contracting authorities: (a) awards or grants paid for the support of research work; (b) consideration paid for the supply of services comprising research work; (c) consideration paid for the supply of other services, such as consultancy or the organization of conferences; and (d) student grants paid by local education authorities to universities in respect of tuition for named students. Id. at I-8073. The CJEU held that only payments under (a) and (d) could constitute public financing, whereas those under (b) and (c) could not, since they constituted contractual consideration for services provided by the university. See id.
- Id. at I-8055.
- Case C-337/06, Bayerischer Rundfunk v. GEWA, 2007 E.C.R. I-11,173, I-11,193.
- See id. at I-11,181–82.
- See id. at I-11,182.
- See id. at I-11,195.
- See id. at I-11,203–04.
- See id. at I-11,184.
- See id. at I-11,189.
- Case C-567/15, ‘LitSpecMet’ v. ‘Vilniaus lokomotyvu˛ remonto depas’, EU:C:2017:736, ¶ 7 (Oct. 5, 2017).
- See id. ¶¶ 9–10.
- See id. ¶¶ 22–23.
- Id. ¶ 27.
- See id. ¶ 40.
- See id. ¶ 13.
- Directive 71/305, supra note 28, at 690; Directive 2004/18, supra note 56, at 127.
- Directive 71/305, supra note 28, at 689; Directive 2004/18, supra note 56, at 127.
- See Directive 71/305, supra note 28, at 689; Directive 2004/18, supra note 56, at 127.
- Case 31/87, Gebroeders Beentjes v. Netherlands, 1988 E.C.R. 4652, 4664.
- See Case C-331/04, ATI EAC Srl e Viaggi di Maio Snc v. ACTV Venezia SpA, 2005 E.C.R. I-10,109, I-10,136.
- See id. at I-10,112.
- See id.
- See id. at I-10,112–13.
- See id. at I-10,113–14.
- See id. at I-10,136–37.
- See id.
- See Case C-532/06, Emm. G. Lianakis AE v. Alexandroupolis, 2008 E.C.R. I-251, I-269.
- See id. at I-260.
- See id. at I-261.
- See id. at I-262.
- See id. at I-269.
- See id. at I-266.
- Id. at I-265.
- See id. at I-264-65.
- Directive 2014/24, supra note 2, at 134.
- Id. at 83.
- Case C-454/06, Pressetext Nachrichtenagentur GmbH v. Republik Österreich (Bund), 2008 E.C.R. I-4401, I-4402.
- See id. at I-4462.
- See Joined Cases C-21 & C-34/03, Fabricom SA v. Belgium, 2005 E.C.R. I-1559, I-1568-69, I-1571-72, I-1593, I-1595.
- See id. at I-1568.
- See id. at I-1593.
- See id. at I-1560–61, I-1598.
- See Case C-538/13, eVigilo Ltd v Priesˇgaisrine˙s apsaugos ir gelbe˙jimo departamentas prie Vidaus reikalu˛ ministerijos, EU:C:2015:166 (Mar. 12, 2015).
- See id. ¶¶ 23–24 (eVigilo Ltd claimed that the successful tenderers’ specialists were colleagues of three of the six experts used by the contracting authority).
- See id. ¶ 31.
- See id. ¶ 46.
- See id. ¶ 43.
- See Council Directive 89/665, art. 1(1), 1989 O.J. (L 395) 3 (EEC) [hereinafter Directive 89/665].
- See Case C-538/13, eVigilo Ltd, EU:C:2015:166, ¶ 43.
- See id. ¶ 4(46).
- See id. ¶¶ 37–38.
- See id. ¶ 46.
- Case C-396/14, MT Højgaard A/S and Züblin A/S v. Banedanmark, EU:C:2015:774 (Nov. 24, 2015).
- Id. ¶¶ 13–15.
- Id. ¶ 81.
- Id. ¶¶ 20–21.
- Id. ¶ 48.
- Id. ¶ 22.
- Id. ¶ 2.
- Id. ¶ 1.
- Id. ¶ 83.
- Council Directive 2014/24, 2014 O.J. (L 94) 65 (EC) (repealing Directive 2004/18/EC).
- See Case 33/76, Rewe-Zentralfinanz eG & Rewe-Zentral AG v. Landwirtschaftskammer für das Saarland, 1976 E.C.R. 1989, 1997.
- Directive 89/665, supra note 110, at 3; Council Directive 2007/66, 2007 O.J. (L 335) 31–46 (EC) [hereinafter Directive 2007/66].
- Directive 2007/66, supra note 127, at 31–32.
- Id. at 33.
- Id. at 34.
- Directive 89/665, supra note 110, art. 2 ¶ 1(b).
- See Council Directive 2007/66, 2007 O.J. (L 335) 31 (EC).
- Directive 89/665, supra note 110, at 34.
- See id.
- Case C-81/98, Alcatel Austria AG v. Bundesministerium für Wissenschaft und Verkehr, 1999 E.C.R. I-7671, I-7691.
- Id. at I-7672.
- Id. at I-7673.
- Case C-212/02, Comm’n v. Austria, EU:C:2004:386, ¶ 20–21 (June 24, 2004).
- See id. ¶ 23.
- See id.
- Directive 89/665, supra note 110, art. 2(a) ¶ 2; Council Directive 92/13, art. 1(a), 1992 O.J. (L 76) 7 (EEC).
- Directive 89/665, supra note 110, art. 2(d) ¶ 1.
- Directive 89/665, supra note 110, art. 2(d) ¶ 1(a), (b).
- Case C-19/13, Ministero dell’Interno v. Fastweb SpA, EU:C:2014:2194, ¶ 39 (Sept. 11, 2014).
- Id. ¶¶ 1–2, 20–21.
- Id. ¶¶ 39–41.
- Id. ¶¶ 27–28.
- Id. ¶ 40.
- Id. ¶¶ 41–42.
- Id. ¶ 45.
- Id. ¶ 46.
- In Fastweb, the contracting authority had decided to proceed via a negotiated procedure without prior publication of a contract notice. Id. ¶¶ 47–48.
- Council Directive 89/665, art. 2.
- BOVIS, supra note 42, at 527.
- Matra Commc’ns SAS v Home Office  1 WLR. 1646 at 1653–54, 1656 (Eng.); see also Exel Europe Ltd. v Univ. Hosps. Coventry & Warwickshire NHS Tr.  EWHC (TCC) 3332  (Eng.) (“It is now fairly well established that a claimant who successfully challenges a procurement exercise will be entitled to damages, usually calculable on a lost opportunity or chance basis.”).
- See Lettings Int’l Ltd. v Newham  EWCA (Civ) 1522  (Eng.).
- Case T-299/11, European Dynamics Luxembourg SA v. Office for Harmonisation in the Internal Mkt., EU:T:2015:757, ¶¶ 146, 156 (Oct. 7, 2015), where the General Court awarded “compensation for the loss of an opportunity” to the unsuccessful tenderer.
- For its part, the CJEU found that there was no causal link between the error in examining the bid and the damage in question, and the Court did not specifically rule on the question of whether such a head of damage exists under EU law. Case C-677/15 P, European Union Intellectual Prop. Office (EUIPO) v. European Dynamics Lux. SA, EU:C:2017:363, ¶ 87–89 (May 11, 2017).
- See EUROPEAN PUBLIC PROCUREMENT LAW: PART II–REMEDIES 6–7 (Constant De Koninck & Peter Flamey eds., 2009).
- Agreement on Government Procurement, WORLD TRADE ORG., https://www.wto.org/english/tratop_e/gproc_e/gp_gpa_e.htm [https://perma.cc/ZFD6-ZNQ4] (last visited Jan. 13, 2018).
- Id.; see also Parties, Observers and Accessions, WORLD TRADE ORG., https://www.wto.org/english/tratop_e/gproc_e/memobs_e.htm [https://perma.cc/28LP-G8LS] (last visited Jan. 13, 2018).
- Revised Agreement on Government Procurement, Mar. 30, 2012, art. II, §§ 2, 4. https://www.wto.org/english/docs_e/legal_e/rev-gpr-94_01_e.pdf [https://perma.cc/VNX7-QZNA] [hereinafter Revised GPA].
- See id. art. II, § 4.
- See id. art. II, §§ 2, 4.
- See id. at Appendix I, United States Annex 7.
- See id. at Appendix I, Canada Annex 7.
- BOVIS, supra note 42, at 59.
- Revised GPA, supra note 163, art. IV, § 1.
- Id. art. X, § 1.
- Id. art. XVIII, § 3.