Is allocating airport space to groundhandling operators, even if only temporarily, subject to eu utilities procurement rules? (AG Opinion in C-701/15)

In his Opinion of 3 May 2017 in the case of Malpensa Logistica Europa,
C-701/15, EU:C:2017:332, Advocate General Campos Sánchez-Bordona has considered the extent to which an airport management company is under a duty to carry out a tendering procedure when temporarily allocating certain airport facilities to groundhandling services companies, under the rules of Directive 2004/17/EC on utilities procurement and Directive 96/67/EC on access to groundhandling market at EU airports.

In the case at hand, the body managing the Milan Malpensa airport (SEA) carried out a competitive procedure for the allocation of certain areas within the airport to groundhandling operators. Both Beta-Trans and Malpensa Logistica submitted bids in that selection procedure for the performance of handling activities at the airport. Beta-Trans was successful. However, it was unable to occupy the area assigned to it because the space was not yet ready and had to be fitted out. SEA therefore gave Beta-Trans the temporary use of a hangar so that it could commence its groundhandling activities immediately. The allocation of the hangar was merely temporary until the ‘final area’ was ready for use (scheduled for July 2017) (AGO in C-701/15, paras 22-23). The decision to temporarily allocate the hangar to Beta-Trans was challenged by Malpensa Logistica on the basis that this should also have been subjected to a (separate) public selection procedure.

In general terms, I think it is clear that a procedure for the allocation of airport space to groundhandling operators authorised to provide services in that airport should not be covered by the utilities procurement directive (either the 2004 version, or the current 2014 version, or the 2014 concessions directive) because the body managing the airport is not procuring services from those companies when it takes the space allocation decision. This could have led to a rather straightforward subjection of SEA's decision to the specific procedures for access to groundhandling only, which did not require such competitive tendering. However, the referring court had indicated that, under relevant case law of the Italian Consiglio di Stato, domestic public procurement legislation transposing Directive 2004/17/EC governed the concession of areas within airports for the provision of groundhandling services. Since the award of those concessions came within the material scope of the legislation on special sectors, a public selection procedure had to be conducted (AGO in C-701/15, para 25).

This is relevant because the Italian procurement rules (rectius, their interpretive case law) may impose requirements that go beyond those derived from Directive 96/67/EC on access to groundhandling markets and its Italian transposition. Therefore, the main legal issue concerns a clash between the Italian instruments transposing EU rules, rather than between the EU rules themselves. However, both layers of legislation need to be coordinated in order to ensure regulatory consistency--and the Opinion of AG Campos seems to show that there may be underlying coordination issues concerning the definition of public contracts that remain unaddressed. Additionally, the case is interesting in the flexibility that AG Campos tries to create for temporary 'substitutory' measures under the groundhandling market access rules, which may however not be exportable to decisions actually covered by the procurement rules. Each of these issues is discussed in turn below.

Difficulties concerning the concept of public contract?

On the domestic peculiarities of the case, AG Campos indicates that the "fact that both sets of national provisions ‘are derived from EU law’ ... does not prevent the Italian legislature from requiring that public selection procedures apply in the case of allocations of areas within airports ... [even if they] are not covered by Directive 2004/17. Whilst that directive certainly requires that contracts falling within its scope be awarded in accordance with its provisions, there is nothing to prevent a Member State from deciding, on its own initiative, to extend those rules to other contractual arrangements" (AGO in C-701/15, para 45).  While the principle behind this statement seems correct in so far as Directive 96/67/EC is a liberalisation instrument rather than a maximum harmonisation directive, it seems to me that the instrument and the reasons used by Italian law to impose additional requirements deserve additional scrutiny.

There can be a problem if the sole reason why the Consiglio di Stato mandates compliance with domestic rules transposing Directive 2004/17/EC in decisions involving the allocation of rights to use areas within airports for the provision of groundhandling services (which are not concessions, in the technical meaning of EU procurement rules) is that it considers these decisions "within the material scope of the legislation on special sectors [procurement]" (AGO in C-701/15, para 25). This would be a misinterpretation of the relevant EU rules because, as rightly concluded by AG Campos, given that this is an arrangement akin to the rental of the relevant space by the contracting entity (which receives the relevant fees rather than paying any pecuniary compensation), the allocation of the right to use "airport facilities to a supplier so that the latter can provide groundhandling services to third parties cannot be classified as a public service contract for the purpose of Article 1(2)(a) and (d) of Directive 2004/17, with the result that the relationship referred to in the main proceedings falls outside the scope of that directive" (AGO in C-701/15, para 53). In my view, such misinterpretation should not be saved on the basis of the Member States' abstract ability of creating requirements beyond those in Directive 2004/17/EC.

If the Consiglio di Stato case law solely (or primarily) relies on an improper interpretation of the domestic rules in relation with EU rules (which cannot be ascertained on the basis of the information in the Opinion), Italian law would not be respecting the material scope of EU public procurement rules because it would be distorting (ie expanding) the definition of public contract--both under Art 1(2)(a) Dir 2004/17/EC, and under the equivalent provisions of the 2014 EU public procurement rules, including the definition of services concessions in Art 5(1)(b) Dir 2014/23/EU. This could be important because, in the absence of separate/explicit domestic rules explicitly subjecting these decisions to competitive tendering, it is questionable that the case law of the Consiglio di Stato can be seen in compliance with the supremacy of EU law (in terms of respecting the interpretation of the concept of public contract and public procurement by the CJEU, which continues to gain prominence in recent cases such as Falk Pharma or Remondis) and the duty of consistent interpretation--as well as raising issues about the possibility of expanding the scope of legislation through case law under Italian constitutional rules, which I am in no position to assess.

Also, while the deviation from the concept of public contract may be seen not to create problems in this specific instance because the (possibly wrong) interpretation embedded in the case law of the Consiglio di Stato results in overcompliance, this can be an issue in terms of ensuring a level playing field across the EU in utilities sectors. Therefore, in my opinion, this is an issue that could merit close assessment in relation with the Italian transposition of the 2014 EU Public Procurement Package.

The scope for temporary 'substitutory' measures

The second aspect of the Malpensa Logistica Europa Opinion that I find relevant concerns AG Campos' approach to the requirements applicable to the temporary allocation of the use of the hangar as a substitutory measure. In that regard, he submits to the Court that the analysis should proceed as follows:

... SEA awarded Beta-Trans the definitive airport facilities as the result of a competitive selection procedure in which Malpensa Logistica also participated. ... the assignment of the temporary hangar ... came about because the area which had been definitively awarded was not ready.
These factors (the temporary nature of the hangar and the existence of an earlier competitive procedure) may be relevant in determining whether SEA complied with Article 16(2) of Directive 96/67. Since this provision allows the managing body a broad discretion, subject to the [obligation to to observe, when allocating areas or facilities within airports, ‘relevant, objective, transparent and non-discriminatory rules and criteria’], responsibility for assessing it lies with the national courts.
It should also be borne in mind that the objectives of Directive 96/67 include encouraging the presence of new suppliers of groundhandling services and that one of the criteria for assigning available space within airports is to promote ‘effective and fair’ competition between all operators, ‘including new entrants in the field’. Effective competition precisely requires the removal of barriers preventing the entry of new operators. From that perspective, the principles of objectivity, transparency and non-discrimination may justify decisions on the allocation of areas which take account of the situation of suppliers of groundhandling services already in place and their possible dominance in the provision of those services at a given airport (AGO in C-701/15, paras 73-75, footnotes omitted).

I find this reasoning interesting because it suggests that the adoption of substitutory measures aimed at facilitating competition on a temporary or anticipatory basis is allowable where the deciding entity is under an obligation to adopt decisions in compliance with 'relevant, objective, transparent and non-discriminatory rules and criteria'. This could be important because, at least functionally, it would imply that having carried out a competitive procedure for a specific object (ie the space allocated on a permanent or definitive basis) provides legal cover for a temporary modification of the object of the authorisation or licence to use that object (ie the temporary assignment of alternative space). This makes commercial sense and avoids situations where the effects expected from the initial competitive procedure can be delayed or frustrated.

However, when compared with the rules on contract modification under the EU procurement rules, one can wonder if the same flexible and commercially-oriented approach could pass legal muster. Given that delays are common in public contracts (most likely, that was also the case for the lack of availability of the definitive premises at Malpensa), it would be interesting to see how the analysis would play out if it was a public contractor to offer an alternative, temporary solution to a contracting authority or entity. In that case, my guess is that this would be assessed as a contract modification of difficult assessment under value-based thresholds, and probably subjected to an analysis of whether the modification is substantial (cfr Art 72(4) Dir 2014/24/EU, Art 80(4) Dir 2014/25/EU and Art 43(4) DIr 2014/23/EU), which could easily lead to a finding that the temporary substitutory measure was not allowed--unless the ECJ would be willing to deviate from recent decisions, such as Finn Frogne.

Of course, this falls short from showing a stark internal contradiction between different sets of rules within the broader system of EU economic law, but I think that it does indicate that the internal market logic--and even the pro-competitive logic--that underlies the system can create opposing normative criteria, unless they are reconciled with some checks and balances based on commercial considerations. Not that this is bound to carry legal weight, but it may help construct a different parameter of evaluation closer to the concept of market economy agent, which could provide some additional consistency in the area of EU economic law.