Not worth the paper it is written on? ~ AG on the expectations created by legal advice in #competition (C-681/11) #EULaw

In her Opinion in case C-681/11 Schenker and Others, Advocate General Kokott has addressed a very relevant question regarding the possibility to avoid competition sanctions on the basis of the (legitimate) expectations created by professional legal advice. In her Opinion, she expressly addresses the question 'Is an error with regard to the lawfulness of conduct unobjectionable in the case where the undertaking acts in accordance with advice given by a legal adviser experienced in matters of competition law and the erroneous nature of the advice was neither obvious nor capable of being identified through the scrutiny which the undertaking could be expected to exercise?'. In my view, as clearly emphasised by the AG, this is of major relevance in the 'self-assessment' paradigm created by Regulation 1/2003.

According to the AG, the framework for the analysis must be the following:
Apparently, the members of the [cartel] wrongly considered that they had stayed ‘on the safe side’, as far as European Union law was concerned, by restricting the geographical scope of their cartel to Austria alone. In the light of the case-law of the European Union courts and the administrative practice of the European Commission, there is no doubt that that legal opinion was objectively incorrect. However, it is unclear whether the infringement of the prohibition of cartels under EU law can also be attributed subjectively to the undertakings concerned. In other words, it must be examined whether the undertakings participating in the [cartel] culpably infringed the prohibition of cartels under EU law (Opinion in C-681/11, at para 36, emphasis in the original, footnotes omitted).
In that regard, and after clearly indicating that the principle of nulla poena sine culpa applies in the field of EU Competition law as an implicit requirement of Articles 6(2) of the European Convention on Human Rights and 48(1) of the European Charter of Fundamental Rights [for general discussion on human rights in this area, see A Sanchez Graells, 'The EU’s Accession to the ECHR and Due Process Rights in EU Competition Law Matters: Nothing New Under the Sun?', in Kosta, Skoutaris & Tzevelekos (eds), The Accession of the EU to the ECHR (Hart Publishing, 2014), available at http://ssrn.com/abstract=2156904], AG Kokott goes on to explain that:
44. According to the principle of nulla poena sine culpa, an undertaking may be held responsible for a cartel offence which it has committed on a purely objective basis only where that offence can also be attributed to it subjectively. If, on the other hand, the undertaking commits an error of law precluding liability, an infringement cannot be found against it nor can it form the basis for the imposition of penalties such as fines.
45. It should be stressed that not every error of law is capable of precluding completely the liability of the undertaking participating in the cartel and thus the existence of a punishable infringement. Only where the error committed by the undertaking regarding the lawfulness of its market behaviour was unavoidable – sometimes also called an excusable error or an unobjectionable error – has the undertaking acted without fault and it cannot be held liable for the cartel offence in question.
46. Such an unavoidable error of law would appear to occur only very rarely. It can be taken to exist only where the undertaking concerned took all possible and reasonable steps to avoid its alleged infringement of EU antitrust law.
47. If the undertaking concerned could have avoided its error regarding the lawfulness of its market behaviour – as is often the case – by taking adequate precautions, it cannot escape any penalty for the cartel offence committed by it. Rather it will be liable at least for a negligent infringement, which, depending on the seriousness of the questions of competition law involved, may (but not must) lead to a reduced fine.
48. It is necessary to assess whether the error of law committed by an undertaking participating in a cartel was avoidable or unavoidable (objectionable or non-objectionable) on the basis of uniform criteria laid down in EU law, so that uniform conditions in respect of EU substantive competition law apply to all undertakings operating in the internal market (‘level playing field’) (Opinion in C-681/11, at paras 44 to 48, bold emphasis in the original,  underlined added, footnotes omitted).
After briefly referring to the old Miller case law on the suitability of the (legitimate) expectations created by legal advise as a competition defence, the AG enters an interesting revision of this issue in the new paradigm created by Regulation 1/2003 and she considers that
57. [...] obtaining expert legal advice has a completely different importance in the system under Regulation No 1/2003 than was the case in the system under Regulation No 17. Consulting a legal adviser is now often the only way for undertakings to obtain detailed information about the legal situation under antitrust law.
58. It is not acceptable, on the one hand, to encourage undertakings to obtain expert legal advice but, on the other, to attach absolutely no importance to that advice in assessing their fault in respect of an infringement of EU antitrust law. If an undertaking relies, in good faith, on – ultimately incorrect – advice provided by its legal adviser, this must have a bearing in cartel proceedings for the imposition of fines.
59. In particular, the purely civil liability of a lawyer for incorrect legal advice given by him does not, contrary to the view taken by the European Commission, constitute adequate compensation in itself. Civil recourse by a client against his lawyer is generally subject to considerable uncertainty and, moreover, cannot dispel the condemnation (‘stigma’) associated with the imposition of cartel – i.e. quasi-criminal – penalties against the undertaking.
60. Of course, obtaining legal advice cannot exempt an undertaking from all individual responsibility for its market behaviour and for any infringements of European competition law. The opinion of a lawyer can never give carte blanche. Otherwise, this would open the way to the production of opinions tailored to the interests of the undertaking and the power to give official negative clearance abolished by Regulation No 1/2003 would be transferred de facto to private legal advisers, who do not have any legitimacy in that regard.
61. In accordance with the fundamental objective of the effective enforcement of European competition rules, any expectations on the part of an undertaking created by legal advice may be recognised as the basis for an error of law precluding liability only where, in obtaining that legal advice, certain minimum requirements were complied with, which I will describe briefly below.
Minimum requirements in obtaining legal advice
62. The basic condition for taking into consideration the legal advice obtained by an undertaking is that the undertaking relied in good faith on that advice. Protection of legitimate expectations and good faith are closely related. If the facts justify the assumption that the undertaking relied on a legal opinion against its better judgment or that the report was tailored to the interests of the undertaking, the legal advice given is irrelevant from the very outset in assessing fault for an infringement of the rules of European competition law.
63. Furthermore, the following minimum requirements apply to obtaining legal advice, in respect of which the undertaking concerned itself bears the risk and responsibility for compliance.
64. First of all, the advice must always be obtained from an independent external lawyer. [...]
65. Second, the advice must be given by a specialist lawyer, which means that the lawyer must be specialised in competition law, including European antitrust law, and must also regularly work for clients in this field of law.
66. Third, the legal advice must have been provided on the basis of a full and accurate description of the facts by the undertaking concerned. If an undertaking has given only incomplete or even false information to the lawyer consulted by it regarding circumstances which originate from the area of responsibility of the undertaking, the opinion of that lawyer cannot have an exculpating effect in cartel proceedings in relation to any error of law.
67. Fourth, the opinion of the consulted lawyer must deal comprehensively with the European Commission’s administrative and decision-making practice and with the case-law of the European Union courts and give detailed comments on all legally relevant aspects of the case at issue. An element which is not expressly the subject-matter of the legal advice but may possibly be inferred implicitly from it cannot form the basis for recognition of an error of law precluding liability.
68. Fifth, the legal advice given may not be manifestly incorrect. No undertaking may rely blindly on legal advice. Rather, any undertaking which consults a lawyer must at least review the plausibility of the information provided by him.
69. Of course, the diligence expected of an undertaking in this regard depends on its size and its experience in competition matters. The larger the undertaking and the more experience it has with competition law, the more it is required to review the substance of the legal advice obtained, especially if it has its own legal department with relevant expertise.
70. In any event, every undertaking must be aware that certain anti-competitive practices are, by their nature, prohibited, and in particular that no one is permitted to participate in ‘hardcore restrictions’, for example in price agreements or in agreements or measures to share or partition markets. Furthermore, large, experienced undertakings can be expected to have taken note of the relevant statements made by the European Commission in its notices and guidelines in the field of competition law.
71. Sixth, the undertaking concerned acts at its own risk if the legal opinion obtained by it shows that the legal situation is unclear. In that case, the undertaking is at least negligent in accepting that by its market behaviour it infringes the rules of European competition law.
72. Admittedly, in the light of the minimum requirements I have just proposed, the value of legal opinions given by lawyers is slightly diminished for the undertakings concerned. However, this is inherent in the system created by Regulation No 1/2003 and is also no different in conventional criminal law; in the final analysis, any undertaking is itself responsible for its market behaviour and bears the risk for infringements of the law it commits. Absolute legal certainty cannot be secured by obtaining legal advice from a lawyer. However, if all the abovementioned minimum requirements are satisfied, an error of law precluding liability can be taken to exist where the undertaking concerned has relied in good faith on an opinion from its legal adviser.
73. It should be added that a lawyer who, by delivering opinions tailored to the interests of an undertaking, becomes an accomplice in the undertaking’s anti‑competitive practices will have to contend with not only consequences under the rules of civil law and of professional conduct, but may possibly also himself be subject to penalties imposed in cartel proceedings (Opinion in C-681/11, at paras 57 to 73, underlined added, footnotes omitted).
In my view, the very high minimum requirements suggested by AG Kokott may seem desirable from a theoretical perspective but, in practice, may generate the result that (very expensive, specialised) legal advice in EU Competition law matters is not worth the paper it is written on--and, consequently, undertakings may not even bother seeking (and paying for) it. 

Moreover, the level of pressure under which competition specialists would operate may make it impossible for them to effectively cover (ie insure) their potential liability at reasonable costs--thereby having a negative effect on the availability and affordability of good quality legal advice in this field. 

On the other hand, building a strong in-house competition team may even be self-defeating, as it comes to raise the threshold of diligence applicable to the undertaking. Therefore, companies may even consider whether they are better off simply omitting competition legal advice.

Given the complexity of the assessments required in certain cases, as well as the standard practice of introducing caveats and limitations in legal opinions (not only in this field of legal practice), coupled with the (not-so) residual duty of the requesting undertakings to double-check the accuracy of the legal advise obtained; successfully relying in a defence based on the legitimate expectations created by the advice of the legal expert seems very hard to achieve.

In that regard, I think that the CJEU should depart from the Opinion of AG Kokott in one of two possible ways: a) either the CJEU avoids endorsing her analysis and confirms the full applicability of Miller in the post- Regulation 1/2003 paradigm (which would generate simplicity and avoid litigation), or b) it adopts a more flexible approach and sets a less demanding standard for this defence (and,consequently, creates some room for an effective  'serious legal advice' defence). 

In my view, route b) would be preferable because resort to 'sound legal advice' can be coupled with the requirements connected with the implementation of effective competition compliance programs for the purposes of giving undertakings a chance of ever succeeding in proving lack of intention or unobjectionable conduct. In that regard, there seems to be some need for further consistent developments of the rules applicable in the 'self-assessment' paradigm created by Regulation 1/2003.

US GAO report on the use of small business and other preferences in the acquisition of goods

The US GAO has published an interesting report on the Army's and Defense Logistics Agency's Approach for Awarding Contracts for the Army Combat Shirt. 

The report details how the relevant agencies have moved from preferential emergency contracting towards more competitive preferential contracting for the supply of the increasing number of necessary army combat shirts. 

I think that the report is particularly interesting for non-US procurement lawyers, as it describes very clearly the decision-making procedures that need to be complied with in order to resort to preferential award of government contracts, with or without competition.

With a little help from my friends: AG Jääskinen supports flexible interpretation of rules on reliance on third party capabilities in #publicprocurement

In his Opinion of 28 February 2013 in case C‑94/12 Raggruppamento Temporaneo Imprese (‘RTI’), Advocate General Jääskinen has clearly indicated that the rules of arts 47(2) and 48(3) of Directive 2004/18 preclude national legislation which prohibits, except in special circumstances, reliance on the capacities of more than one auxiliary undertaking in order to fulfill the selection criteria concerning the economic and financial standing and/or technical and/or professional ability of an economic operator tendering for a contract as main contractor.

The approach followed by the AG must be welcome and, in my opinion, his teleological interpretation in view of the 'ultimate' objectives of the Directives deserves particular praise:
31. This argument is further supported by analysis of the objectives of Articles 47(2) and 48(3) of Directive 2004/18. According to the Court, one of the primary objectives of the public procurement rules of the European Union is to attain the widest possible opening‑up to competition, and that it is the concern of European Union law to ensure the widest possible participation by tenderers in a call for tenders.
32. The objective of widest possible opening‑up to competition is regarded not only from the interest in the free movement of goods and services, but also in regard to the interest of contracting authorities, who will thus have greater choice as to the most advantageous tender. Exclusion of tenderers based on the number of other entities participating in the execution of the contract such as allowing only one auxiliary undertaking per qualitative criteria category does not allow for a case by case evaluation, thus actually reducing the choices of the contracting authority and affecting effective competition.
33. Another objective of the public procurement rules is to open up the public procurement market for all economic operators, regardless of their size. The inclusion of small and medium‑sized enterprises (SMEs) is especially to be encouraged as SMEs are considered to form the backbone of European Union economy. The chances of SMEs to participate in tendering procedures and to be awarded public works contracts are hindered, among other factors, by the size of the contracts. Because of this, the possibility for bidders to participate in groups relying on the capacities of auxiliary undertakings is particularly important in facilitating the access to markets of SMEs. (AG in C-94/12 at paras 31 to 33, emphasis added).
These considerations rely on a conception of public procurement as a 'competition-enhancing' tool, which I personally very much favor [A Sanchez Graells, Public Procurement and the EU Competition Rules, Oxford: Hart Publishing, 2011]. However, relevant commentators such as Professor Arrowsmith continue to oppose this approach [S Arrowsmith, "The Purpose of the EU Procurement Directives: Ends, Means and the Implications for National Regulatory Space for Commercial and Horizontal Procurement Policies", in C. Barnard, M. Gehring and I. Solanke (eds.), Cambridge Yearbook of European Legal Studies (Hart Publishing, Oxford, 2011-2012), Vol. 14, pp.1-48]. Therefore, the doctrinal debate that the RTI Opinion in brings to the spotlight deserves some attention.

I think that it will be interesting to see if the CJEU expressly adopts the reasoning of AG Jääskinen in the final Judgment in the RTI case. If so, I think that the path towards the express and full recognition of the principle of competition in public procurement will continue to be paved and that there will be opportunities for further developments in the right direction.

http://youtu.be/gQLtCoh5EaI

#Decency in #publicprocurement could take us out of the #crisis: or how #corruption is making us bleed out

Stories about corruption in public procurement are so common that they have become part of the daily news (and, sadly, a part that tends to receive less and less attention due to routine and tiredness from repetition). However, when one looks at the aggregate data, an immediate need for reaction becomes evident.

As the EU Commissioner for Home Affairs has just emphasised "The Commission's best estimate is that 120 billion euros are lost each year to corruption in the 27 Member States of the EU. That is the equivalent of the whole EU-budget. In public procurement, studies suggest that up to 20- 25% of the public contracts’ value may be lost to corruption." 

Given that  public procurement represents around 20% of the GDP in the European Union, a loss of 20% of its value due to corrupt practices of all sorts means that corruption in public procurement costs around 4% of the EU GDP. 

If we add the fact that, sometimes, corruption is coupled with collusion (or bid rigging), which can generate an increase in prices of approximately 20% (with instances of around 40%), the numbers may be easily brought up to losses due to illegal and indecent behavior representing 40% to 50% of its value--i.e. around 8-10% of GDP.

The power of these facts seems unbeatable and we should all have it now clear in our minds that only decency can save us from the economic crisis.

However we want to run the numbers or reduce them to be conservative in our claims, even a reduction of 50% of the perceived level of corruption would not only avoid most of the cuts being imposed on the budgets for the provision of public services, but it would also allow for a relaxation of tax pressure on individuals and companies, and to provide effective economic incentives to entrepreneurship and innovation. 

Even in clearer terms: addressing the issue of corruption and collusion in procurement would single-handedly bring the EU from recession/depression into economic growth. In this regard, the initiative of the European Commission to move from rhetoric to results in the fight against corruption (in public procurement) in the EU must be echoed, voiced and supported.

This is something we intend to do at workshops B5 and B6 of the Global Revolution VI Conference next June in Nottingham. Suggestions and active participation is encouraged and definitely more than welcome!

One more #publicprocurement Judgment in the Evropaïki Dynamiki Saga (T-9/10)

The General Court's Judgment of 21 February 2013 in case T-9/10 Evropaïki Dynamiki v Commission (Microsoft SharePoint) is a new addition to this seemingly never-ending saga of cases where the Greek IT company challenges procurement award decision on the two-fold basis of failure to state reasons and presence of manifest errors of assessment.

This Judgment basically reiterates the position of the EU Courts on the duty to state reasons but, interestingly, includes an obiter paragraph that is not always expressly mentioned in the growing case law in this area of EU public procurement. 

In my opinion, paragraph 26 of this latest Evropaïki Dynamiki Judgment deserves emphasis, as the GC indicates that
It should also be borne in mind that the requirements to be satisfied by the statement of reasons depend on the circumstances of each case, in particular the content of the measure in question, the nature of the reasons given and the interest which the addressees of the measure, or other parties to whom it is of direct and individual concern, may have in obtaining explanations (see Case C‑367/95 P Commission v Sytraval and Brink’s France [1998] ECR I‑1719, paragraph 63 and case-law cited, and Case T‑465/04 Evropaïki Dynamiki v Commission, paragraph 49) (emphasis added).
This offers the basis for a far more restricted disclosure of information to unsuccessful candidates and disappointed bidders than usually provided by contracting authorities, and could (should) be used as the basis to rationalise this area of the law--where contracting authorities are indeed under significant pressure to provide excessive information during debriefing and bid protest procedures. 

In fact, in the case at hand,  
the Commission considers that it provided a statement of reasons exceeding that laid down in Article 100(2) of [the Financial Regulation] by informing the applicant of the reasons why its tender had been rejected as well as providing the scores obtained by the tenderers at the award stage, even though the applicant had not passed the selection phase (T-9/10 at para. 24, emphasis added). 
Situations such as this should be avoided, given the negative impacts that excessive transparency can generate in terms of potential collusion and access to confidential information and business secrets of competitors. Therefore, once again, it seems desirable to clarify and rationalise this area of EU public procurement law in the current process of revision of the EU Directives on public procurement.

The Future of European Legal Education -- Comment on Maduro's views

Prof. Miguel Poiares Maduro has published an interesting piece on The Future of European Legal Education, where he identifies some challenges derived from a tension between law as legal practice and law as science and highlights how those challenges can become an opportunity to reform legal education. 

In my view, his critical analysis is mostly accurate and supports his (relatively implicit) claim for a study of law in context, following the 'classic' proposals of Weiler (with whom Maduro has been working closely in related academic projects) and Snyder, who 23 years ago stressed that 
So far European Community law has been conceived mainly as 'black-letter law' [...] it is time to draw upon perspectives from other social sciences and to move in new directions. We must place European Community law in its social, economic and political context. Only in this way can we achieve the deeper and broader understanding—both practical and theoretical—of European Community law [F Snyder, New Directions in European Community Law (Law in Context) 30 (2nd edtn. 1990)].
Some of this certainly not-so-new worries go beyond Europe and are echoed by the work of the American Bar Association's Task Force on the Future of Legal Education, which is also concerned with the challenges that legal education faces as a result of the rapid and substantial changes in the legal profession, legal services, the national and global economy, and markets affecting legal education.

The issue is, therefore, of high currency and of global relevance, and deserves some good thought. In that regard, I think that it is remarkable that one of Maduro's main claims is that
These changes [derived from increased global economic and social integration] are bound to challenge not only the content of the law but also how it needs to be taught. This context of legal pluralism and legal miscegenation requires different hermeneutics and the interaction between legal cultures, which is triggered by the Europeanisation of the law, will confront each national legal culture with many of its unarticulated assumptions. Change in what you study is often the fastest way to break path-dependencies on how you study (p. 456).
While I agree that these global aspects need to be understood and mastered in order to become a well-rounded lawyer (be it in practice, be it in the academy, or anywhere in between), I remain skeptical that such a 'global' or 'delocalised' approach can be adopted from minute one in anyone's legal education.

Not to sound parochial, but I think that law is and will always be a jurisdiction-specific phenomenon (in our case, EU+Member State-specific) and I doubt that you can understand the very complex issues of the global legal reality if you have not first been (solely and thoroughly) trained in the law of one specific jurisdiction. 

This does not mean that legal studies throughout the EU need not be more 'Europeanised' (as, indeed, restricting EU law to a self-standing module is no longer a sensible option), but I think that it raises the issue that before you can engage in highly sophisticated comparative and contextualised legal analysis, you need to have a deep knowledge of a (self-contained) domestic system. As the saying goes, you must learn to walk before you can run.

Therefore, I would agree with Maduro's diagnosis and recommendations for the development of better postgraduate legal education programs, but I think that extending them to initial or basic legal studies may overshoot the mark. Maduro himself hints at this by the end of his contribution (p. 461), which maybe would have required some clearer disclosure in his general criticism to the development of legal theory.

Why is #competition law so special? Or how #leniency will kill private #damages actions (AG C-536/11)

In his Opinion of 7 February 2013 in case C-536/11 Donau Chemie and Others, Advocate General Jääskinen has developed a line of reasoning that goes well beyond the issue at hand (whether access to judicial documents should be granted to a potential claimant for damages derived from anticompetitive behaviour) and encapsulates the growing risk that an excessive level of protection of leniency applicants will kill (all) potentially significant developments in damages litigation. 

Indeed, as clearly emphasised by AG Jääskinen,
36. In my opinion it is inarguable that such proceedings [ie damages actions based on infringement of EU competition law] are comparable to either ordinary civil or criminal procedures, given that neither is concerned with the protection of leniency programmes or other specific features of public law proceedings in the context of enforcing competition policy (emphasis added).
For such strong claims, the AG's reasoning remains rather sparse and implicit, and seems to oversee the fact that in certain criminal procedures a similar scheme of plea-bargain can exist in some Member States and that, in any case, the current trend in competition law enforcement seems to search for a more balanced approach between public and private enforcement, or even for a boost of private enforcement (as is the case in the UK).

Moreover, if his argument was carried to the extreme, there would be no difficulty for Member States to create a 'damages-proof' system that completely excluded damages actions when they risked the effectiveness of the public enforcement of competition law (and, notably, of leniency programmes). 

But surely this cannot be in line with the (declared) policy of the European Commission--or with the functional and pro-effective stance taken by the CJEU in Courage and in Manfredi--despite the very clear Opinion of AG Jääskinen, who expressly states that 'the Courage and Crehan/Manfredi right of private parties to seek damages from economic operators that have breached EU competition law should not, in my opinion, be developed to a point that would imperil the efficacy of public law enforcement mechanisms, whether they be European or national' (para 62). In my opinion, this is a seriously troubling position, as it clearly sets a glass ceiling on the development of private enforcement of competition law in the EU and, ultimately, may be the final thrust against its true development.

I think that the criticism against the bluntness of the AG's Opinion is not dispelled by his effort to square the circle by making compatible the 'damages proofness' of leniency applications with a right of effective access to justice for antitrust litigants. In my opinion, there are two frontally contradicting arguments in the AG's Opinion.

On the one hand, and on the basis of the general requirements of the principle of effectiveness (effet utile) of EU law, the AG claims that

51. […] subjecting access to public law competition judicial files to the consent of the infringer of the competition rules amounts to a significant deterrent of the exercise to a right to claim civil damages for breach of EU competition law. The Court has ruled that if an individual has been deterred from bringing legal proceedings in good time by the wrong-doer, the latter will not be entitled to rely on national procedural rules concerning time limits for bringing proceedings. I can see no reason for confining the application of this principle to limitation periods, and would advocate its extension to onerous rules of evidence that have an analogous deterrent effect. I would further query the compliance of remedies that deter enforcement of EU law rights with Article 19(1) TEU (footnotes omitted, emphasis added).
On the other hand, however, the AG carves out a truly significant exception for leniency applications:
55. Article 47 [of the Charter of Fundamental Rights] is also relevant to the case to hand because it guarantees the fairness of hearings, which serves to protect the interests of the undertakings that have participated in the cartel. In my opinion, access by third parties to voluntary self-incriminating statements made by a leniency applicant should not in principle be granted. The privilege against self-incrimination is long established in EU law, and it is directly opposable to national competition authorities that are implementing EU rules.
56. It is true that leniency programmes do not guarantee protection against claims for damages and that the privilege against self-incrimination does not apply in private law contexts. Despite this, both public policy reasons and fairness towards the party having given incriminating declarations within the context of a leniency programme weigh heavily against giving access to the court files of public law competition proceedings where the party benefiting from them has acted as a witness for the prosecuting competition authority (footnotes omitted, emphasis added). 
In my view, both positions are logically irreconcilable in that leniency applicants would have (by definition) prevented by their own unilateral will, access by third parties to the parts of the file that could be used to claim damages against them (something the AG rightly criticises at para. 51 of his Opinion).
Moreover, I find unjustified the final statement whereby AG tries to balance them exclusively on the basis of the peculiarities of leniency programmes:
64. [...] from the point of view of proportionality, in my opinion a legislative rule would be more appropriate that provided absolute protection for the participants in a leniency programme, but which required the interests of other participants to a restrictive practice to be balanced against the interests of the alleged victims. [...] Furthermore, in my view and except for undertakings benefiting from leniency (sic!), participation in and of itself in an unlawful restriction on competition does not constitute a business secret that merits protection by EU law (emphasis added).
* * *
But, beyond the specifics of the reasoning, I think that the Opinion in Donau Chemie is troublesome because it indicates a very strong resistance against effective private actions and, in my view, excessive deference towards leniency applicants--and, what is more important, low priority to granting effective economic compensation to the victims of cartels. 

Maybe this is just an indication that a 'public enforcement only' model is better suited to EU competition law and its institutional architecture. But then, if such is the case, maybe it is better to accelerate the process and not wait for leniency protection to (slowly) kill private actions. Let's just bury them and avoid unnecessary litigation. Or, if we want them in the EU competition toolbox, let's abandon the 'pro-public' approach expressed in the AG Opinion. Otherwise, competition law evolution will continue running in circles... to everyone's loss.

Las tasas judiciales como límite a la efectividad del Derecho UE: Una razón (más) para su supresión

El debate en torno a la imposición de nuevas tasas judiciales parece estar perdiendo algo de fuerza, pese a las recientes decisiones del Tribunal Constitucional sobre las tasas judiciales catalanas y la decisión de la Audiencia Nacional de no suspender su efectividad. 

Dada la desproporcionada limitación al derecho a la tutela judicial efectiva previsto en el artículo 24 de nuestra Constitución, creo que este importante asunto merece mucha más atención.

Para contribuir a (re)avivar el debate, creo que hay que añadir la perspectiva del Derecho comunitario, que da argumentos adicionales para la supresión de las tasas, al menos allí donde limitan la efectividad de la normativa de la UE y, en especial, en cuanto limita los derechos de los ciudadanos comunitarios, cuya última base es el artículo 20 TFUE. Habida cuenta de que estamos celebrando el 50º Aniversario de la Sentencia Van Gend en Loos, que dio inicio a la importante doctrina de la supremacía y efecto directo del Derecho de la UE, creo que estos argumentos deben tenerse en especial consideración.

Pongamos un ejemplo concreto. Creo que es ilustrativo el caso de las indemnizaciones por retrasos y cancelaciones de vuelos conforme al Reglamento (CE) n° 261/2004 del Parlamento Europeo y del Consejo, de 11 de febrero de 2004, por el que se establecen normas comunes sobre compensación y asistencia a los pasajeros aéreos en caso de denegación de embarque y de cancelación o gran retraso de los vuelos. Conforme al Reglamento 261/2004, los pasajeros que sufran retrasos significativos o cancelaciones tienen derecho a reclamar una compensación de entre 250 y 600 Euros por trayecto (art 7 Rgto 261/2004). 

Hay que tener en cuenta que el TJUE ha interpretado de manera claramente expansiva el ámbito de protección de los pasajeros afectados por cancelaciones y retrasos (basta ver la muy reciente STJUE de 31 de enero de 2013 contra Ryanair en el caso del cierre del espacio aéreo de gran parte de la UE en 2010 por la actividad del volcán islandés Eyjafjallajökull), de modo que el grado de protección de los ciudadanos comunitarios que utilizan el transporte aéreo (o de extranjeros que viajan por la UE) sea suficiente y efectivo.

Sin embargo, esta importante normativa y jurisprudencia comunitaria pueden quedar sin efecto para los ciudadanos españoles o para quienes opten por reclamar en España frente a aerolíneas españolas por la necesidad de pagar tasas judiciales para ejercitar su reclamación. Y esto no será infrecuente en el futuro inmediato, por ejemplo, debido a la inminente huelga de los trabajadores de Iberia de estos meses de febrero y marzo--que seguramente generarán numerosas situaciones de retraso o cancelación de vuelos.

Efectivamente, en España, una vez agotada la vía amistosa de reclamación directa frente a la aerolínea, que tiende claramente a negar la responsabilidad de compensar (al menos en mi experiencia personal), sólo queda la posibilidad de interponer una demanda de proceso verbal para tratar de obtener la compensación por parte de la aerolínea. Y resulta que, para la interposición de una reclamación de 250 Euros, la tasa aplicable es de 150 Euros (es decir, del 60% del valor de la reclamación, o un poco menos si la autoliquidación se presenta electrónicamente). Para el caso de la mayor reclamación, de 600 Euros, la tasa aplicable es de 180 Euros (el 30% del valor de la reclamación). La barrera al acceso a una tutela judicial efectiva no podría ser más palmario.

No deberá sorprender a nadie que, a salvo de casos excepcionales en que se acumulen reclamaciones de mucho mayor cantidad o se ejerciten acciones colectivas (con todas las dificultades que acarrean), lo racional para los viajeros que hayan sufrido retrasos o cancelaciones es olvidarse de la reclamación y simplemente elegir otra aerolínea en el futuro. La restricción a la efectividad del Derecho comunitario en la materia no podría ser, tampoco, más clara.

En definitiva, creo que este ejemplo (que puede multiplicarse casi hasta el infinito en relación con todas las normas de tutela de consumidores y usuarios, entre otras) debería bastar para entender que no sólo hay argumentos muy contundentes de Derecho constitucional interno, sino también de Derecho comunitario, para la supresión de las tasas judiciales (o, cuanto menos, para una revisión en profundidad que garantice que no generan un efecto disuasorio para la tutela efectiva de los derechos de los ciudadanos).

CJEU prevents competitors from taking the law into their hands (C-68/12)

In its Judgment of 7 February 2013 in case Slovenská sporiteľňa, the Court of Justice of the EU (CJEU) has clarified that the fact that an agreement between competitors is concluded in order to prevent a situation of allegedly illegal competition by a third party is irrelevant for its analysis under Article 101 TFEU.

In the very clear terms of the Slovenská sporiteľňa Judgment,

18 Article 101 TFEU is intended to protect not only the interests of competitors or consumers but also the structure of the market and thus competition as such (Joined Cases C‑501/06 P, C‑513/06 P, C‑515/06 P and C‑519/06 P GlaxoSmithKline Services and Others v Commission and Others [2009] ECR I‑9291, paragraph 63).
19 In that regard, it is apparent from the order for reference that the agreement entered into by the banks concerned specifically had as its object the restriction of competition and that none of the banks had challenged the legality of Akcenta’s business before they were investigated in the case giving rise to the main proceedings. The alleged illegality of Akcenta’s situation is therefore irrelevant for the purpose of determining whether the conditions for an infringement of the competition rules are met.
20 Moreover, it is for public authorities and not private undertakings or associations of undertakings to ensure compliance with statutory requirements. The Czech Government’s description of Akcenta’s situation is evidence enough of the fact that the application of statutory provisions may call for complex assessments which are not within the area of responsibility of those private undertakings or associations of undertakings.
21 It follows from those considerations that the answer to the first and second questions is that Article 101 TFEU must be interpreted as meaning that the fact that an undertaking that is adversely affected by an agreement whose object is the restriction of competition was allegedly operating illegally on the relevant market at the time when the agreement was concluded is of no relevance to the question whether the agreement constitutes an infringement of that provision (C-68/12 at paras. 18 to 21, emphasis added).
In my view, the general principle reinforced by the CJEU is sensible and prevents undertakings from taking the law into their own hands--and, even further, from trying to disguise anticompetitive agreements behind an appearance of law-reinforcing behaviour. It clearly establishes a positive obligation for undertakings (either unilaterally or through a sectoral association?) to report instances of potential illegal competition to the competent authorities. Also, although not mentioned by the CJEU, undertakings may be able to file judicial claims (including requests for interim measures) on the basis of unfair competition rules under the relevant domestic legislation [which offers yet one more instance of potential (dis)coordination between unfair competition and antitrust rules in the EU; see Ulrich's reflective piece Anti-Unfair Competition Law and Anti-Trust Law - A Continental Conundrum?].

Moreover, in the view of the CJEU, the existence of such avenues for legal reaction / opposition exclude the possibility to apply the exemption of Article 101(3) TFEU:
35 Even if [the first] condition were met [regarding the protection of conditions for healthy competition and, in the broader sense, thus seeked to promote economic progress], the agreement at issue in the main proceedings does not appear to meet the other three conditions – more particularly, the third condition, whereby an agreement must not impose on the undertakings concerned restrictions which are not indispensable to the attainment of the objectives referred to in the first condition laid down in Article 101(3) TFEU. Even if, as stated by the parties to that agreement, the purpose was to force Akcenta to comply with Slovak law, it was for those parties [...] to lodge a complaint with the competent authorities in that respect and not to take it upon themselves to eliminate the competing undertaking from the market. (C-68/12 at para. 35, emphasis added).
Again, the general position of the CJEU seems highly appropriate. However, a feeling remains that the CJEU's Slovenská sporiteľňa Judgment may be too blunt and that the assessment of fulfillment of the conditions could be refined by leaving a door open for a justification in view of Article 101(3) TFEU in some (extreme) cases where lack of reaction on the part of the established industry could result in irreversible changes to market structure, or where other (superior) conflicting interests may be affected. Indeed, a reading of paragraph 35 of the Judgment seems to disqualify the standard position that it is possible to exempt any agreements prohibited under Article 101(1) TFEU if the four conditions of Article 101(3) TFUE are fully met (as indicated by the CJEU only in para. 31).


In any case, as a matter of principle, it must be welcome that the CJEU has excluded the "an eye for an eye" principle and strongly pushed for undertakings to resort to the established regulatory and judicial avenues in order to try to prevent instances of illegal competition in their markets. At the same time, it seems to generate some (positive) pressure on sectoral regulators and the courts to integrate competition law analysis (or competition implications) when deciding on the existence of potential illegal competition or intrusion in a given market.


US GAO report on interagency contracting: A mirror for centralised purchasing strategies in the EU?

The US Government Accountability Office (GAO) has just published an interesting report and recommendations for executive action regarding interagency contracting.

In the US, interagency contracting refers to a strategy whereby 'one agency either places an order directly against another agency's contract or uses the contracting services of another agency to obtain supplies or services'. The EU rough equivalent is the use of centralised purchasing strategies and, in particular, the carrying out of cooperative procurement--most often through dedicated central purchasing bodies. 

In view of the importance given to these 'smart procurement' strategies in the revision of the current EU rules (see October 2012 compromise text for a 'state of play' on centralised procurement strategies), learning from the lessons offered by the experience in the US looks like a promising opportunity.

In my view, the relevance of the GAO interagency contracting report relies on its realism and practical approach. Indeed, GAO 'designated the management of interagency contracting as a high risk area in 2005, in part because of the need for stronger internal controls and clear definitions of agency roles and responsibilities'. 

Following a first assessment in 2010 and the implementation of important policy reforms aimed at strengthening the governance and oversight of interagency contracting, GAO now issues a series of additional recommendations that, basically, boil down to giving effect to the 2011 Policy developed by the Office of Federal Procurement Policy (OFPP) and to strengthening the collection and analysis of data on interagency contracting. Some of the most interesting extracts are, in my opinion, the following:
OFPP issued guidance in September 2011 that requires agencies to develop business cases for creating new governmentwide acquisition contracts and multi-agency contracts. The business cases must address three key elements: (1) the scope of the contract vehicle and potential duplication with existing contracts; (2) the value of the new contract vehicle, including expected benefits and costs of establishing a new contract; and (3) the administration and expected interagency use of the contract vehicle.
The guidance also requires senior agency officials to approve the business cases and post them on an OMB website to provide interested federal stakeholders an opportunity to review and provide feedback. Feedback is addressed through various channels, including posting written comments through the website and sending letters or memos to stakeholders. According to OFPP, it also conducts follow-up with sponsoring agencies when significant questions are raised during the interagency vetting process, including questions related to potential value or duplication.
OFPP and GSA have taken a number of steps to address the need for better data on interagency contract vehicles. We previously have reported that a lack of reliable information on interagency contracts hampers agencies’ ability to do market research as well as efforts to manage and leverage them effectively. To promote better and easier access to data on existing interagency contracts, OFPP has worked to improve the Interagency Contract Directory, a searchable online database of indefinite delivery vehicles for interagency use created in 2003. [...] Short-term improvements include enhancing the search function and simplifying the presentation of search results, which should aid market research. Potential long-term enhancements include the ability to access vendor past performance information and upload contract documents, such as statements of work, to the system. OFPP officials also noted that this information will be helpful in providing data on the use of interagency contract vehicles, as the database provides information on the amount of obligations against the contracts, and eventually may provide other information such as a notification when contracts not designated for interagency use are being used in that manner.
In my view, the practical recommendations and the policy objectives set out by the OFPP and now strongly endorsed / recommended by GAO make sense and should be carried to the regulation of centralised procurement bodies/strategies in the forthcoming EU rules, with a particular focus on data collection and analysis (which has been significantly reduced with the proposed suppression of article 84 of the 2011 Commission's proposal and, particularly, of its paragraph 3(1) that mandated special public oversight of central purchasing bodies). 

I think that the more general transatlantic message to carry home in the revision of the current of the EU rules is that, as procurement strategies become more complicated, more planning and more oversight / analysis are required. Maybe not an easy lesson to square with the aim of procurement simplification, but definitely an operative need if we want to avoid creating (or nurturing) a 'regulatory beast' we may be unable to tame.

Latest GC on contract modification in #publicprocurement: Practical difficulties and the need for new rules in the 2013 Directive

In its Judgment of 31 January 2013 in case T-235/11 Spain v Commission (AVE), the General Court has set a very rigid position against the permissibility of contract modifications under EU public procurement rules. 

In a nutshell, and further developing the previous case law in Succhi di Frutta and Pressetext Nachrichtenagentur, the GC has declared that (non-insignificant) contract modifications amount to direct award of (complementary) public contracts and that, consequently, failure to do so in accordance with the rules of the Directives implies a breach of EU law by the contracting authority or entity.

Indeed, the GC has declared that:

69 [...] nor can the argument of the Kingdom of Spain that despite the alteration of certain of the characterizing elements of the services contracted, by keeping the contract initially concluded, the modification of the original contract cannot be considered substantial. As is clear from the case law, in order to ensure transparency of procedures and equal treatment of tenderers, amendments to the provisions of a public contract during its validity constitute a new award of the contract when they have characteristics substantially different from those of the original contract and therefore highlight the willingness of the parties to renegotiate the essential aspects of the contract (see, to that effect, the judgment of the Court of 5 October 2000, Commission / France, C-337/98, ECR p. I-8377, paragraphs 44 and 46, see, by analogy, Pressetext Nachrichtenagentur, paragraph 60 above, paragraph 34).
70 The modification of a contract in force may be considered material when it introduces conditions that, had they been included in the initial award procedure, would have allowed the participation of tenderers other than those initially admitted, or would have allowed the selection of a tender other than the initially selected. Also, a modification of an initial contract can be considered substantial when the contract extends largely to works not originally foreseen. An amendment can also be considered substantial when it changes the economic balance of the contract in favor of the contractor in a way that was not foreseen in the terms of the original contract (see, by analogy, Case Pressetext Nachrichtenagentur [C‑454/06, Rec. p. I‑4401] paragraphs 35 to 37).
71 In the present case, the technical specifications that were modified cannot be considered ancillary, but of a greater importance, as they relate, in particular, to the implementation of important works (such as the execution false tunnels, a viaduct, deepening of foundations, strengthening of technical armor blocks, extension of drainage works, etc..). Therefore, the Kingdom of Spain cannot claim that the work to be executed remains the one initially designed, ie, the high-speed train line, not that the object of the initial contract remained essentially unaltered. (T-231/11 at paras. 69-71, own translation from Spanish; emphasis added).
This position generates practical difficulties, particularly in technically complicated projects, where the use of non-modifiable fixed-price contracts could deter bidders from participating or could generate an increase of total procurement costs due to the need of contractors to create a 'financial cushion' in their offers to cover any unexpected needs for amendments in the scope of works.

This seems now recognized in the current version of the Compromise Text for the reform of current EU public procurement Directives, which includes a (more flexible) rule on contract modification that reduces the risk of (illegal) direct award of public contracts where modifications are justified and necessary.
Article 72 Modification of contracts during their term
1. A substantial modification of the provisions of a public contract or a framework agreement during its term shall be considered as a new award for the purposes of this Directive and shall require a new procurement procedure in accordance with this Directive. In the cases referred to in paragraphs 3, 4 or 5, modifications shall not be considered as substantial.
2. A modification of a contract or a framework agreement during its term shall be considered substantial within the meaning of paragraph 1, where it renders the contract or the framework agreement materially different in character from the one initially concluded. In any case, without prejudice to paragraphs 3, 4 or 5, a modification shall be considered substantial where one of the following conditions is met:
(a) the modification introduces conditions which, had they been part of the initial procurement procedure, would have allowed for the admission of other candidates than those initially selected or for the acceptance of an offer other than that originally accepted or would have attracted additional participants in the procurement procedure;
(b) the modification changes the economic balance of the contract or the framework agreement in favour of the contractor in a manner which was not provided for in the initial contract or framework agreement;
(c) the modification extends the scope of the contract or framework agreement considerably to encompass supplies, services or works not initially covered.
3. Modifications shall not be considered substantial within the meaning of paragraph 1 where they have been provided for in the initial procurement documents in clear, precise and unequivocal review clauses or options. Such clauses shall state the scope and nature of possible modifications or options as well as the conditions under which they may be used. They shall not provide for modifications or options that would alter the overall nature of the contract or the framework agreement.
4. Where the value of a modification can be expressed in monetary terms, the modification shall not be considered to be substantial within the meaning of paragraph 1, where its value does not exceed the thresholds set out in Article 4 and where it is below 10% of the initial contract value, provided that the modification does not alter the overall nature of the contract or framework agreement. Where several successive modifications are made, the value shall be assessed on the basis of the net cumulative value of the successive modifications.
5. A modification shall not be considered to be substantial within the meaning of paragraph 1, where the following cumulative conditions are fulfilled:
(a) the need for modification has been brought about by circumstances which a diligent contracting authority could not foresee;
(b) the modification does not alter the overall nature of the contract;
(c) any increase in price is not higher than 50% of the value of the original contract or framework agreement.
Contracting authorities shall publish in the Official Journal of the European Union a notice on such modifications. Such notices shall contain the information set out in Annex VI part G and be published in accordance with Article 49. 
6. Without prejudice to paragraph 3, the substitution of a new contractor for the one to which the contracting authority had initially awarded the contract shall be considered a substantial modification within the meaning of paragraph 1. However, the first subparagraph shall not apply in the event of universal or partial succession into the position of the initial contractor, following corporate restructuring, including takeover, merger, […] acquisition or insolvency, of another economic operator that fulfils the criteria for qualitative selection initially established provided that this does not entail other substantial modifications to the contract and is not aimed at circumventing the application of this Directive.
As can be seen, the current proposal incorporates the (formalistic) criteria used by the GC in Spain v Commission (AVE), but also creates some flexibility both in terms of setting a value threshold that excludes the need to run a new procurement procedure to increase contract value of up to 10% (as long as the addition remains below EU thresholds, which does not seem to be a necessary or practical requirement), and recognizing that there are sets of circumstances where contract modifications are simply needed and, consequently, legitimate.

In my view, the adoption of new Article 72 in the 2013 EU public procurement Directive is much needed from a practical perspective, although the final wording could still be improved to enhance the effectiveness of its paragraph 4.


#publicprocurement in price regulated markets: you cannot have your cake and eat it too, Mme. Spanish Minister of Health

The Spanish press has just reported that the Ministry of Health, Social Services and Equality has mandated some pharmaceutical companies to lower the prices of certain common use drugs. This would not be in the news but for the important detail that the Ministry has adopted this decision in retaliation for the low bids submitted by those pharmaceutical companies in a centralized procurement process run by the Andalusian Health Department in 2012 (which re-run is currently taking place). 

The Spanish Health Minister was upset to see that, as a result of the centralized purchase of drugs, the Andalusian regional authorities were receiving better offers than the Ministry and other (regional) Health Authorities had managed to secure from the same pharmaceutical companies. Moreover, the prices offered in the Andalusian tender were significantly lower than those charged in the 'private' market to users whose medication is not covered by Social Security.

Instead of learning the proper lessons and exploring the potential benefits of more efficient procurement techniques (which remain to be seen in the long run, particularly in terms of sustainability of low prices, rate of innovation, protection of effective competition, etc--of which I am personally highly skeptical), the Ministry adopted a rather childish and short-sighted strategy whereby it has sought to punish the drug manufacturers by damaging their revenue stream.

In today's reported decision, the Ministry is forcing the unruly pharma companies to lower their prices for the affected drugs to levels even lower than those offered in Andalusia.  The Ministry can impose such a price reduction as part of its general regulatory powers. In my opinion, this is an enormous mistake. The use of price regulation powers as a poison pill against pharma companies that bid aggressively in public tenders is simply nonsensical.

The only message that pharma companies should take home is the following: never, ever again, compete on prices. Surely, in the immediate future, the safest position for pharmaceutical companies will be to always bid the maximum authorized price, in order to avoid a downward revision every time they offer a discount in a public procurement procedure. And, in order to protect their revenue stream, to then lobby the Ministry to protect (or raise) the level of authorized prices. 

Could one think of a worse outcome in terms of effective market competition and efficiency of public procurement? I can't. But I am sure that the Spanish Ministry of Health may surprise me in the future...

Impossible dialogue on EU #publicprocurement reform? Council and Parliament follow parallel roads

I may be about to show how naive I am, but I have just astonishingly discovered that the EU Institutions in charge of discussing the European Commission's 2011 Proposal for a new general Directive on public procurement are working in parallel and do not seem to be talking to each other at all.

While the Council has been negotiating intensely and trying to find a compromise and common position for over a year (the most recently publicly available compromise text is dated 2 October 2012), the European Parliament's Committee on the Internal Market and Consumer Protection has been looking at the 2011 Proposal independently and has published a Report that includes several hundred amendments to the original proposal (dated 11 January 2013). So far so good. Everybody seems to be doing its homework.

What is astonishing and a proof of the weak governance mechanisms in the EU Institutions is that the European Parliament's IMCO Committee has not incorporated the changes negotiated between Member States at the Council (which were disclosed, at least, on 24 July 2012 and again in the latest October 2012 compromise text). 

At this point, when the Council and the EU Parliament's representatives meet to discuss the amendments each institution wants to make on the Commission's 2011 Proposal, they will simply be speaking different languages. In some cases, the EU Parliament has proposals that concern articles the Council wants completely eliminated. Reversely, the Council has managed to reach a compromise on articles the Parliament wants to suppress. And all other types of inconsistent proposals can be found in both rather lengthy documents. It is plain to see that a first effort will need to be made to focus the terms of the discussion and work on a single basis text (which seems likely to be the one prepared by the Council, in my opinion). Therefore, waste of time and energies is sadly guaranteed.

In this situation, it is hard to anticipate that the new Directive can be adopted in early 2013 (which would already be a delay on the initial goal of having it published in the OJ by the end of 2012) and that it can be fully effective any time before 2016. Moreover, it is hard to see how such a scattered and uncoordinated legislative process can lead to a consistent and coherent final text--which imperfections can only be magnified at transposition stage, particularly if Member States use any ambiguities to include their preferred policy options.

All in all, I guess I am just puzzled by the fact that two institutions that have to cooperate in the adoption of new legislation can work in such a parallel and disconnected manner. Again, this just probably shows how naive I am. Or maybe it is an indicator that the system does not really work... 


Again on the protection of confidentiality in procurement evaluation: A step forward? (T-339/10 and T-532/10)

In its Judgment of 29 January 2013 in Joined Cases T‑339/10 and T‑532/10 Cosepuri Soc. Coop. pA v European Food Safety Authority (EFSA), the General Court has ruled again on the topical issue of the protection of confidentiality and business secrets in tender evaluation--and, in principle, has shown a more balanced approach than in previous Judgments concerned with transparency at debriefing stage. 

However, in my opinion, the case law in this area still falls short from guaranteeing a proper balance between transparency and protection of business secrets and continues to promote excessive disclosure.

In the case at hand, Cosepuri challenged the EFSA's evaluation procedure on the basis of the confidential treatment of financial assessment. The GC has taken no issue with the degree of confidentiality imposed by EFSA, but on a series of grounds that still seem (partially) inadequate:

32 First, the applicant calls into question the fact that Part II.8.2 of the tender specifications provided that the tender evaluation procedure was to be confidential. It should be noted in that regard that the applicant has the right to challenge, as an incidental plea, the lawfulness of the specifications in the present action (see, to that effect, Case T‑495/04 Belfass v Council [2008] ECR II‑781, paragraph 44). […]
33 Article 89(1) of the Financial Regulation provides that all public contracts financed in whole or in part by the budget are to comply, inter alia, with the principle of transparency. In the present case, it must be noted that Part II.8.2 of the specifications, which provides that the procedure for the evaluation of the tenders is to be conducted in secret, satisfies the requirement of preserving the confidentiality of the tenders and the need to avoid, in principle, contact between the contracting authority and the tenderers (see, on this point, Article 99 of the Financial Regulation and Article 148 of the Implementing Rules). The principle of transparency, referred to in Article 89(1) of the Financial Regulation, which is invoked by the applicant, must be reconciled with those requirements. Accordingly, there is no basis on which it can be concluded that Part II.8 of the specifications is vitiated by unlawfulness.
34 Second, the applicant challenges the fact that it was not able to ascertain the price proposed by the successful tenderer. In particular, the applicant states that EFSA ensured that it would not be possible for any subsequent verification to be carried out by redacting from the evaluation report the price offered by the successful tenderer. In that regard, without there being any need to rule in the present case on whether the price proposed by the successful tenderer formed part of the information which the contracting authority should have communicated to the unsuccessful tenderers (sic), it is clear from the evidence submitted that the applicant was in a position to ascertain the price in question. It is apparent from Section 2.4 of the evaluation committee report that the applicant and the successful tenderer offered the same price in respect of points 2 to 7 of the financial bid, both obtaining the maximum score of 15 points. The price offered by the successful tenderer in respect of points 2 to 7 of the financial bid is therefore abundantly clear from the evaluation committee report. Moreover, with regard to point 1 of the financial bid, the evaluation committee report indicated the price offered by the applicant and the mark obtained. Although it does not expressly refer to the price offered by the successful tenderer, that report specifies the mark obtained by it. Taking account of those factors, it was possible to calculate, without any difficulty, the price proposed by the successful tenderer in respect of point 1 of the financial bid, as submitted by EFSA in connection with the second plea. Furthermore, the Court has been able to verify, by way of the measure of inquiry adopted at the hearing (see paragraph 16 above), that the price mentioned by EFSA in its written pleadings was in fact the price proposed by the successful tenderer. In view of all the foregoing considerations, the Court considers that, even if EFSA had erred by failing to indicate expressly to the applicant the price proposed by the successful tenderer, such an error would have had no effect on the lawfulness of EFSA’s decision to reject the applicant’s tender and award the contract at issue to another tenderer whose bid was considered to be better, since the applicant was in a position to ascertain that price. The applicant’s arguments in that regard must therefore be rejected.
35 Third, with regard to the principle of sound administration relied on by the applicant, according to case‑law, guarantees afforded by the European Union legal order in administrative proceedings include, in particular, the principle of sound administration, which entails the duty on the part of the competent institution to examine carefully and impartially all the relevant aspects of the individual case (see the judgment of 15 September 2011 in Case T‑407/07 CMB and Christof v Commission, not published in the ECR, paragraph 182 and the case‑law cited). In the present case, the arguments put forward by the applicant in the first plea, which essentially consist in criticising the fact that it was not granted access to the financial bid of the successful tenderer, do not demonstrate that EFSA failed to examine carefully and impartially all the relevant aspects of the case. In the absence of more detailed evidence, the applicant’s arguments in that regard must be rejected. (T-339/10 and 532/10 at paras. 32 to 35, emphasis added).

In my view, paragraphs 33 and 35 of the Cosepuri Judgment must be welcome, as they set a more balanced framework for the assessment of the obligation to disclose confidential information and business secrets under the principles of transparency and good administration.

On the contrary, paragraph 34 deserves a clear rejection, given that the GC keeps a very formalistic approach to the protection of confidential information and takes no issue with the fact that such sensitive information as price can be disclosed indirectly, and considers that that does not infringe either the rights of the 'disclosed' undertaking to protection of its business secrets, nor the procedural rights of the disappointed bidder that is granted indirect access to that information.

I think that the GC should have taken a stronger position and clearly confirmed that both direct and indirect disclosure of price elements and financial evaluations can be restricted or excluded on grounds of protection of confidentiality. Otherwise, the incentives continue to push contracting authorities for an excessive degree of transparency in public procurement settings--which creates significant risks of collusion [Sánchez Graells, "Public Procurement and Competition: Some Challenges Arising from Recent Developments in EU Public Procurement Law" in Bovis (ed) Research Handbook on European Public Procurement  (forthcoming), http://ssrn.com/abstract=2206502]. 

A bunch of perfectly useless deposit-guarantee schemes will do ( EFTA Court E-16/11 #icesave )

In its recent Judgment of 28 January 2013 in Case E-16/11 EFTA Surveillance Authority and Commission v Iceland (Icesave Judgment), the EFTA Court has given an interpretation to Directive 94/19/EC on deposit-guarantee schemes (even as amended by Directive 2009/14/EC) that significantly reduces the potential effectiveness of EU/EEA/EFTA banking and security deposit-guarantee schemes. This is worrying.

According to the EFTA Court,
135 [...] pursuant to Article 3 of the Directive, EEA States have to introduce and officially recognise a deposit-guarantee scheme. Moreover, they have to fulfil certain supervisory tasks in order to ensure the proper functioning of the deposit-guarantee scheme. However, it is not envisaged in that provision that EEA States have to ensure the payment of aggregate deposits in all circumstances.
139 It appears that under the new version of the provision EEA States are obliged to ensure a certain level of coverage. Whether this obligation is limited to a banking crisis of a certain size would require further assessment. However, that question can be left open here since […] Directive 2009/14 is not applicable in the present case.
140 At any rate, the rewording of Article 7 of the Directive shows that the European legislature considered substantial change necessary to extend the responsibility of the EEA States beyond the establishment of an effective framework.
141 This supports the view that the obligation on the EEA States under the version of the provision applicable in the case at hand is limited to ensuring that national rules which require a coverage level of at least EUR 20 000 are maintained or adopted.
144 […] it must be held that Article 7 of the Directive does not lay down an obligation on the State and its authorities to ensure compensation if a deposit-guarantee scheme is unable to cope with its obligations in the event of a systemic crisis.
148 […] an obligation on the State and its national authorities to ensure compensation if a deposit-guarantee scheme is unable to cope with its obligations under exceptional circumstances such as in a systemic crisis cannot be derived from that provision [Article 10 of the Directive].
172 […] recital 24 in the preamble to the Directive states that liability of a State and its competent authorities in respect of depositors is precluded “if they have ensured that one or more schemes guaranteeing deposits or credit institutions themselves and ensuring the compensation or protection of depositors under the conditions prescribed in this Directive have been introduced and officially recognized.”
176 […] the reservation set out in recital 24 in the preamble to the Directive aims expressly to preclude an excessive shifting to the State of the costs arising from a major banking failure.
178 In view of the above, the Court holds that the Directive does not envisage that the defendant itself must ensure payments to depositors in the Icesave branches in the Netherlands and the United Kingdom, in accordance with Articles 7 and 10 of the Directive, in a systemic crisis of the magnitude experienced in Iceland. (E-16/11 at paras 135 to 178, emphasis added).
In my view, this jeopardises the effectiveness of deposit-guarantee schemes (DGS) by allowing Member States and their supervision entities to shield behind formalities linked to the design of such DGS and to reject any liability potentially derived from their errors of assessment or insufficient solvency requirements in case of a systemic crisis. The issue of State liability is discussed in such formalistic terms that the Icesave Judgment seems completely disconnected from the general supervisory trends required in an area where risk assessment and risk-avoidance / risk-mitigation policies impose a much more sophisticated exercise to all other players (namely, the banks and the DGSs themselves). 

The simplicity of the analysis, which omits any appraisal of the proportionality of the regulatory measures carried out by the State (both in terms of their suitability and their sufficiency), sets a bad precedent in an area where the incentive to set per-se rules in discharge of State liabilities seem already excessive.

Moreover, regardless of the attempt to restrict these findings to the 'pre-2009' version of the Directive, the extremely broad wording of paragraphs 144, 172 and 176 of the Icesave Judgment indicate otherwise. Particularly in view of the fact that at paragraph 139 the EFTA Court hints at the inapplicability of the 'post-2009' version to 'a banking crisis of a certain size[, which] would require further assessment'--and, indeed, this seems to be the most plausible (future) interpretation, unless a significant reversal of the Icesave Judgment is intended.

In this day and age, it looks implausible to have (significant) non-systemic banking crises (which, at any rate, would not be a significant problem if the existing mechanisms are properly in place and States keep any type of financial muscle). And, after the Icesave Judgment, I think that the most optimistic assessment is that, in cases of (ever more likely) systemic crises, the current 'guarantees' are perfectly useless and leave savers and investors unprotected and on their own. And this does not seem to be the best way to trigger investor confidence and to support the reconstruction of the banking industry.


Coupled with the recent reduction of capital requirements derived from the delayed start of Basel III, this 'new configuration' of DGS' as absolute safeguards of Member States' liability  (limited, seemingly, to setting them up even if improperly or insufficiently), seems a worrying sign that the banking industry and, what is worse, its supervision is back to business as usual. I think I will start looking for a way to burn my limited savings before somebody else does it for me.

Public Procurement and Competition: Some Challenges Arising from Recent Developments in EU Public Procurement Law


I have just published on SSRN a new paper on "Public Procurement and Competition: Some Challenges Arising from Recent Developments in EU Public Procurement Law": http://ssrn.com/abstract=2206502.


The paper updates some of my previous commentary to the competition law implications of the ongoing reforms of EU public procurement rules, particularly in view of the 2 October 2012 revised Compromise Text published by the EU Council: http://register.consilium.europa.eu/pdf/en/12/st14/st14418.en12.pdf 

This is the abstract:
The relationship between public procurement and competition has recently been receiving an increasing amount of attention, both in academic and policy-making circles. It is becoming common ground that public procurement holds a complex and bidirectional relationship with market competition and that, consequently, a tighter link between public procurement and competition law enforcement needs to be established.
This paper explores the recent OECD push for more competition in public procurement and its role as an influential factor in the ongoing reform of EU public procurement rules. Afterwards, it critically assesses three of the main challenges to keeping public procurement precompetitive: (i) the difficult balance in terms of procurement transparency created by the clash between competition and corruption concerns; (ii) the magnification of the undesired (potential) anticompetitive effects of public procurement that centralised procurement may generate, as well as its increasing use as an improper tool of market regulation; and (iii) the possible competitive distortions and the potential advantages resulting from the generalization of eProcurement. The conclusions extract some common patterns derived from the previous analysis and suggest some policy recommendations mainly oriented at boosting oversight and professionalization of procurement.
The paper is due to appear in C Bovis (ed) Research Handbook on European Public Procurement (Elgar Publishing, 2013).

Who is an interested undertaking in procurement and State aid cases? (T-182/10)

The recent Judgment of the General Court of 15 January 2013 in case T-182/10 Aiscat v Commission (not available in English) raises a relevant question for the EU system of oversight of public procurement procedures that may have State aid implications--in the case at hand, due to the direct award of a works concession contract, as well as in view of the terms of the remuneration paid to the works concessionaire. 

In particular, the Aiscat Judgment establishes who is to be considered an "interested undertaking" and, consequently, who can act as complainant before the Commission and, eventually, challenge its Decisions in a State aid procedure based on Regulation 659/1999. In my view, a detailed analysis of the position of the GC in Aiscat shows certain inconsistencies between the (broad) concept of "disappointed bidder" under the EU public procurement regime and the concept of "affected undertaking" under State aid rules--which can diminish the effectiveness of a coordinated enforcement of both sets of rules.

In Aiscat, the Italian association of road concessionaires challenged the direct award of a works concession in the Padua region. The complaint submitted to the European Commission had a dual set of legal grounds. On the one hand, a "pure" public procurement claim that challenged the legality of the direct award of the contract under the in-house provision doctrine (which the Commission dismissed by considering that the awardee was in fact a "Teckal" entity controlled by the Italian contracting authorities). And, on the other hand, a State aid claim whereby the (illegal) direct award of the works concession contract and its terms of remuneration were considered an undue economic advantage in breach of Article 107 TFEU (which was also dismissed by the European Commission on the basis of the previously declared legality of the award and the absence of "direct" public funding).

Aiscat challenged the State aid decision of the Commission before the GC, which the Commission opposed on the basis of lack of active standing on the part of the association. In my view, the analysis conducted by the GC regarding the standing of the association to challenge the direct award of the contract is particularly relevant:
61 [...] with respect to the area of ​​State aid, persons other than the recipients who question the merits of the decision appraising the aid are considered individually concerned by that decision if their market position is substantially affected by the aid analysed in the decision in question (see, to that effect, Cofaz/ Commission [169/84, ECR p. 391] paragraphs 22 to 25, and Commission / Aktionsgemeinschaft Recht und Eigentum, [C-78/03, ECR I-10737] paragraphs 37 and 70).
62 This issue should be examined separately with respect to each of the two measures challenged by the applicant before the General Court, namely the award of the concession contract of the Passante without competitive bidding and increasing toll on the Tangenziale [which was the undue advantage identified by the appellant].
- The award without competitive bidding for the concession on the Passante
63 In the absence of any indication of the parties on the relevant market, it must be identified as that of motorway concessions in Italy, a market in which the 23 members of the applicant association that operate toll roads represent the demand, while the the State, represented by ANAS, which awards grants, represents the offer. According to statistics presented by the applicant, in November 2009, the toll road network in Italy extended over about 5,500 km.
64 As regards the determination of a substantial impairment of the market position, the Court of Justice has observed that the mere fact that an act such as the contested decision could influence the competitive relationships existing in market in question, and that the affected undertaking is in a competitive relationship of any kind with the beneficiary of that act does not suffice to conclude that it is of concern to that undertaking (see, to that effect, Case Justice of 10 December 1969, Eridania and others / Commission, 10/68 and 18/68, ECR p. 459, paragraph 7, the order of the Court of Justice of 21 February 2006, Deutsche Post and DHL Express / Commission, C-367/04 P, not published in the ECR, paragraph 40, and the judgment of the Court of 22 November 2007, Spain / Lenzing, C-525/04 P, ECR p. I-9947 , paragraph 32).
65 Therefore, an undertaking cannot rely solely on its status as a competitor of the beneficiary, but must also prove that it is in a factual situation that individualises it just as much as the beneficiary (judgment of the Court of May 23, 2000, Comité d'entreprise de la Société française de production and others / Commission, C-106/98 P, ECR p. I-3659, paragraph 41; Deutsche Post and DHL Express / Commission, cited in paragraph 64 above, paragraph 41, and judgment in Spain / Lenzing, cited in paragraph 64 above, paragraph 33).
66 However, the evidence that the position of a competitor in the market was significantly affected cannot be limited to the presence of certain elements indicating a worsening of its commercial or financial results, but may result from demonstrating the existence of a loss of revenue or less favorable business evolution than would have taken place had such aid not been granted (judgment in Spain / Lenzing, cited in paragraph 64 above, paragraph 35).
67 In the present case, in what respects the substantial affectation of the market position of the members of the applicant association due to the award of the concession on the Passante without competitive bidding, it should be noted that the applicant states in the claim the reasons why it considers that such direct award constitutes a breach of the principle of prohibition of State aid. As part of its observations on the objection of inadmissibility, the applicant claims an interest of its 23 members, as they were allegedly deprived from the opportunity to participate in a public tender for the award of the contract for the management and exploitation of the Passante.
68 However, in a market that consists of 5,500 km of toll roads, although the award without competitive bidding for the concession on a stretch of highway of about 32 km may have some impact on competition because other operators have not had the opportunity to increase the length of the networks that each exploits, it cannot be regarded that as such, this constitutes a substantial impairment of the competitive position of those other operators. Therefore, the applicant association has not demonstrated that the contested decision affected its members differently than all other operators wishing to exploit the concession on the Passante.
69 Consequently, the Court concludes that, with respect to the award of the concession on the Passante without competitive bidding, the contested decision did not affect the individual members of the applicant association. Consequently, they are not entitled to bring an action themselves to that effect and the applicant association also lacks standing to bring an action on behalf of those interests. (T-182/10, paras 61 to 69, own translation, emphasis added).

This is a very narrow analysis of the actual interest of potential bidders to participate in a tender and it follows a "de minimis-like approach" that does not match (easily) the requirements of Art 1(3) of Directive 2007/66/EC on public procurement remedies, which requires that "Member States shall ensure that the review procedures are available, under detailed rules which the Member States may establish, at least to any person having or having had an interest in obtaining a particular contract and who has been or risks being harmed by an alleged infringement". In my view [Sanchez Graells, Public Procurement and the EU Competition Rules (Oxford, Hart Publishing, 2011) 354], this means that
Directive 2007/66 requires Member States to adopt a broad approach to the setting of detailed rules regulating active standing to access bid protests and review procedures (as clearly indicated by the requirement of making these procedures available ‘at least’ to potentially affected parties—which seems to be oriented towards not excluding systems granting universal standing); and to do so attending both to the criterion of participation in the tender, and to the criterion of the effects generated or potentially generated by the alleged infringement.
To be sure, an alternative reading could suggest a more restrictive approach, requiring a potential challenger to meet simultaneously participation and harm requirements in order to have standing in bid protest and review procedures. However, from a logical perspective, configuring both requirements in a cumulative manner seems superfluous—since it would be very difficult to envisage a situation where a person having had an interest in obtaining a particular contract would not risk being harmed by an alleged infringement of public procurement rules. Moreover, it would seem an overly restrictive measure—particularly in cases where compliance with the first criterion is factually impossible, eg because a given contract was awarded without tender. Along the same lines, a systematic interpretation of Directive 2007/66 seems to exclude the possibility of restricting the standing for review to the candidates and tenderers that have participated in the tender, which are defined as ‘tenderers and candidates concerned’ [art 2a(2) dir 89/665 and art 2a(2) dir 92/13 (both as amended by dir 2007/66)]. The use of a much broader wording as regards the rule on standing [art 1(3) dir 89/665 and art 1(3) dir 92/13 (both as amended by dir 2007/66)] seems to clearly depart from its narrow construction. Moreover, it is submitted that such a restrictive approach would be undesirable from the perspective of guaranteeing the effectiveness of EU public procurement directives in general—and the embedded principle of competition in particular—and, therefore, would be contrary to the main goal of Directive 2007/66. Therefore, as anticipated, in our view, the best reading of the standing requirements imposed by Directive 2007/66 is that Member States have to adopt a broad approach to the setting of detailed rules regulating active standing to access bid protests and review procedures, and that they have to do so attending both to the criterion of participation in the tender, and to the criterion of the effects actually or potentially generated by the alleged infringement—so that bid protest and review procedures are open to any party that has taken part in the tender or that can otherwise prove that it has been harmed or risks being harmed as a result of the alleged infringement, regardless of its actual participation (or lack of it) in the specific tender that gave rise to it.
Therefore, by requiring a "singular" negative effect of the direct award on a complainant to allow it to raise a challenge on the basis of State aid rules generates frictions in the system. In some scenarios, it is not hard to see how an undertaking may be unable to challenge a direct award of a contract both under "pure" public procurement and State aid rules. And, certainly, this is not a situation that leads to effective enforcement of either of these important sets of EU economic law.
 
In my view, a revision of the Aiscat Judgment by the CJEU would be desirable in order to broaden the active standing of "disappointed bidders" (broadly conceived), and would also give the CJEU an opportunity to clarify its unclear decision in case C-496/99 Succhi di Frutta [2004] ECR I-3801 (where it seemed to adopt a similarly restrictive approach to active standing contrary to the posterior criteria of Directive 2007/66/EC).

CJEU puts a noose around its neck: Again on hypertrophy of Art 267 TFEU (C-416/10)

In its Judgment (Grand Chamber) of 15 January 2013 in case C-416/10 Križanand Others, the Court of Justice of the EU (CJEU) has reiterated its constant case law whereby internal constitutional rules cannot trump or diminish its role as the only authentic interpreter of EU Law (art 267 TFEU). 

The protection that CJEU has built around its ultimate jurisdiction concerning EU Law interpretation has been strengthened in several decisions adopted since 2010 and, in my view, the wording of the Križanand Judgment is definitive:
68 A rule of national law, pursuant to which legal rulings of a higher court bind another national court, cannot take away from the latter court the discretion to refer to the Court of Justice questions of interpretation of the points of European Union law concerned by such legal rulings. That court must be free, if it considers that a higher court’s legal ruling could lead it to deliver a judgment contrary to European Union law, to refer to the Court of Justice questions which concern it (Case C‑378/08 ERG and Others [2010] ECR I‑1919, paragraph 32; and [Case C-173/09 Elchinov [2010] ECR I‑8889], paragraph 27).
69 At this stage, it must be noted that the national court, having exercised the discretion conferred on it by Article 267 TFEU, is bound, for the purposes of the decision to be given in the main proceedings, by the interpretation of the provisions at issue given by the Court of Justice and must, if necessary, disregard the rulings of the higher court if it considers, in the light of that interpretation, that they are not consistent with European Union law (Elchinov, paragraph 30).
70 The principles set out in the previous paragraphs apply in the same way to the referring court with regard to the legal position expressed, in the present case in the main proceedings, by the constitutional court of the Member State concerned in so far as it follows from well-established case-law that rules of national law, even of a constitutional order, cannot be allowed to undermine the unity and effectiveness of European Union law (Case 11/70 Internationale Handelsgesellschaft [1970] ECR 1125, paragraph 3, and Case C-409/06 Winner Wetten [2010] ECR I-8015, paragraph 61). Moreover, the Court of Justice has already established that those principles apply to relations between a constitutional court and all other national courts (Joined Cases C-188/10 and C-189/10 Melki and Abdeli [2010] ECR I‑5667, paragraphs 41 to 45). [...]
72 Finally, as a supreme court, the Najvyšší súd Slovenskej republiky [Slovak Supreme Court] is even required to submit a request for a preliminary ruling to the Court of Justice when it finds that the substance of the dispute concerns a question to be resolved which comes within the scope of the first paragraph of Article 267 TFEU. The possibility of bringing, before the constitutional court of the Member State concerned, an action against the decisions of a national court, limited to an examination of a potential infringement of the rights and freedoms guaranteed by the national constitution or by an international agreement, cannot allow the view to be taken that that national court cannot be classified as a court against whose decisions there is no judicial remedy under national law within the meaning of the third paragraph of Article 267 TFEU. (C-416/10 paras 68 to 72, emphasis added).
In my view, paragraph 72 of the Križanand Judgment broadens the scope of the obligations of national Supreme Courts and imposes a counterintuitive (and somehow extensive) interpretation of the concept of domestic court "against whose decisions there is no judicial remedy under national law" (interpreting "remedy" as "full review", I would say). A straightforward reading of the Križanand Judgment seems to imply that all Supreme Courts and all Constitutional Courts of the Member States (where both of them exist) are bound to submit preliminary references under Article 267 TFEU, regardless of the system of checks and balances between both institutions established under the relevant national constitution.

This seems a logic consequence of the supremacy of EU Law and the central position of the CJEU in its interpretation. However, it may generate an even larger number of preliminary references to CJEU--which volume is already generating significant management difficulties. As I already indicated, the preliminary reference system is under significant pressure and risks hypertrophy. 

 In my view, this implies that we need to allow all domestic courts, including the highest courts of the Member States against whose decisions there is no judicial remedy under national law to "ask responsibly". Otherwise, we face a significant risk of hypertrophy of the preliminary ruling instrument. Therefore, in my opinion, the  boundless wording of the Križanand Judgment scenifies the CJEU putting a noose around its own neck.

A vueltas con las costas judiciales excesivas (Martinsa v Fadesa II)

Acabo de leer en Expansion.com que las costas del conocido proceso de Martinsa contra los antiguos administradores de Fadesa por sobrevaloración de activos podrían ascender a más de 85 millones de Euros tras la desestimación de la apelación.

Honestamente, no tengo mucho que añadir a lo que ya dije aquí sobre las costas excesivas en este tipo de pleitos. Únicamente que la transformación del sistema de determinación de costas es urgente (mucho más que otras de las reformas proyectadas por el Ministerio de Justicia, aunque igual de controvertida, por lo que debería ser del gusto del Ministro Gallardón).

Creo que es urgente reducir las oportunidades de pleitos dirigidos (al menos en parte) por los intereses financieros derivados de las actuales reglas sobre costas de abogados y procuradores. También en esto, por decirlo claro, creo que debemos abandonar la cultura del pelotazo. No deja de ser otra burbuja que, si no desinflamos, puede estallarnos en las manos. Y ya son tantas...