In its Judgment in Bundesdruckerei, C-549/13, EU:C:2014:2235, the CJEU continued the development of its case law on the interaction between public procurement and labour law. In this area that was revolutionised by the Viking and Laval cases (although Viking was not about procurement), and then expanded in Rüffert and Luxembourg (idem), every decision of the CJEU is highly sensitive and likely to be received with as much praise as criticism [see, eg, Zimmer, 'Labour Market Politics through Jurisprudence' (2011) 7(1) German Policy Studies 211-234, or Bücker and Warneck, 'Viking-Laval-Rüffert: Consequences and policy perspectives' (2010) 11 European trade union institute report].
The Bundesdruckerei Judgment will surely be no exception, given that the CJEU has ruled that if a tenderer intends to carry out a public contract by having recourse exclusively to workers employed by a subcontractor established in a Member State other than that to which the contracting authority belongs, article 56 TFEU precludes the application of legislation of the contracting authority's Member State that requires the subcontractor to pay a minimum wage to its workers.
It specifically determines the incompatibility with EU law of the Law of the Land of North Rhine-Westphalia on compliance with collective agreements, social norms and fair competition in the award of public contracts of 10 January 2012 and, particularly, its paragraph 4(3), which foresaw that:
Public service contracts which are not covered by [rules on posted workers, or on the public transportation of passengers by road and rail] may be awarded only to undertakings which, at the time of the submission of the tender, have agreed in writing, by means of a declaration made to the contracting authority, to pay their staff …, for the performance of the service, a minimum hourly wage of at least EUR 8.62. The undertakings shall, in their declarations, state the nature of the commitment adopted by their undertaking in the context of the collective agreement and the minimum hourly wage which will be paid to the staff engaged for the performance of the services. The amount of the minimum hourly wage may be adapted in accordance with Paragraph 21, by means of a regulation adopted by the Ministry of Labour.
Hence, Bundesdruckerei is different from previous cases because it does not involve posted workers, but exclusively the recourse to a fully-owned subsidiary in a different Member State by the main contractor. Hence, the relevant situation is that in which ‘the subcontractor is established in another EU Member State and the employees of the subcontractor carry out the services covered by the contract exclusively in the subcontractor’s home country’ (para 26).
Issues of abuse of internal market rules aside [for a very interesting discussion, see Sayde, Abuse of EU Law and Regulation of the Internal Market (Oxford, Hart Publishing, 2014)], the legal question was relatively straightforward: does 'Article 56 TFEU preclude the application of legislation of the Member State to which that contracting authority belongs which requires that subcontractor to pay those workers a minimum wage fixed by that legislation'? (para 29).
The CJEU had no doubt about the incompatibility of the minimum wage requirement, even if it could be considered a 'contract compliance clause' under article 26 of Directive 2004/18, which foresaw that
Contracting authorities may lay down special conditions relating to the performance of a contract, provided that these are compatible with Community law and are indicated in the contract notice or in the specifications. The conditions governing the performance of a contract may, in particular, concern social and environmental considerations (emphasis added).
The CJEU hence focussed on the compatibility with EU law of the minimum wage requirement. In very clear terms, the CJEU has ruled that
By imposing, in such a situation, a fixed minimum wage corresponding to that required in order to ensure reasonable remuneration for employees in the Member State of the contracting authority in the light of the cost of living in that Member State, but which bears no relation to the cost of living in the Member State in which the services relating to the public contract at issue are performed and for that reason prevents subcontractors established in that Member State from deriving a competitive advantage from the differences between the respective rates of pay, that national legislation goes beyond what is necessary to ensure that the objective of employee protection is attained (C-549/13, at para 34, emphasis added).
This is bound to be a truly relevant case, as it can effectively deactivate all attempts by Member States to impose minimum wages being paid in public procurement settings, even under the revised rules for 'contract compliance clauses' in art 70 of Directive 2014/24. This provision has now substituted art 26 of dir 2004/18 and indicates that
Contracting authorities may lay down special conditions relating to the performance of a contract, provided that they are linked to the subject-matter of the contract within the meaning of Article 67(3) [ie linked to the specific process of production or a specific process in another stage of the life-cycle] and indicated in the call for competition or in the procurement documents. Those conditions may include economic, innovation-related, environmental, social or employment-related considerations (emphasis added).
There are two important changes to note in the Drafting of art 70 dir 2014/24 when compared to art 26 of dir 2004/18.
The first one is that art 70 dir 2014/24 attempts to swap the general criterion of compatibility with EU law with a requirement for the conditions to be linked to the subject-matter of the contract. Generally, this is simply laughable, as the general obligation to comply with EU law does not need to be written in a Directive, but derives generally from the supremacy of EU law and, in particular, of TFEU provisions (as art 56). However, in a more possibilistic reading, the requirement of link to object of the contract may be reinterpreted as establishing a tight proportionality test, in which case the change of drafting will not have any meaninguful legal consequences (either).
The second change is the explicit inclusion of employment-related considerations, as a specification of social issues. This change is also bound to be significantly ineffective, as the CJEU did not contend that employment-related considerations could be the object of contract compliance clauses.
Generally, I think that the case law of the CJEU is consistent and very clear in imposing restrictions to any deactivation of (labour) competitive advantages. And I think that it will be very difficult to avoid that approach under art 70 dir 2014/24, unless contracting authorities smarten up in the way they impose minimum wage conditions [for a general discussion on the likelihood of this, see Jaehrling, ‘The state as a “socially responsible customer”? Public procurement between market-making and market-embedding’ (2014) European Journal of Industrial Relations (forthc)]. More generally, this could put pressure on the development of a European minimum wage (see discussion here), but the analysis of the (undesirable) effects of such policy exceed our time and space.
However, as public procurement is concerned, the Judgment of the CJEU in Bundesdruckerei should be welcome, as it stresses that the main goal of public procurement rules are to ensure economic efficiency by a deepening of the internal market and a protection of undistorted competition (even by means of regulation). Some may like it (I do), and some may hate it (as Arrowsmith and, particularly, Kunzlik seem to do), but this is what it is.