When the CJEU opens the umbrella, lawyers and economists get ready for a warm shower of damages claims (C-557/12)

In its Judgment in Kone, C-557/12, EU:C:2014:917, the Court of Justice of the European Union (CJEU) has followed the highly controversial proposal of AG Kokott (see my criticism here) and has bought into the theory of 'umbrella damages', hence determining that "Article 101 TFEU must be interpreted as meaning that it precludes the interpretation and application of domestic legislation enacted by a Member State which categorically excludes, for legal reasons, any civil liability of undertakings belonging to a cartel for loss resulting from the fact that an undertaking not party to the cartel, having regard to the practices of the cartel, set its prices higher than would otherwise have been expected under competitive conditions."

In my opinion, this Judgment must be strongly criticised and shows a very dangerous path of judicial activism that the CJEU is for some reason willing to engage with in the area of private law, but that it avoids in the area of public law and fundamental rights (see my remarks on the CJEU's total lack of will to effectively become EU's constitutional court here). Only on this asymmety of approach towards the development of EU rights in the public law / private law area (or, more bluntly, in the fundamental rights/economic rights divide) should give us all some food for thought about the role of the CJEU.
 
Further than the general criticism already spelled out against AG Kokott's Opinion, I think that the Judgment gives rise to even more specific arguments against the findings of the CJEU on the basis of the 'umbrella damages' theory of harm. I am lucky to have colleagues such as Dr Sebastian Peyer with whom to discuss these issues and, on this occassion, we clearly  coincide in our negative reading of the case. In this post, we put together our thoughts. Mine are slightly more general, so they will come first. Sebastian will then follow on with more specific and ellaborate points on the basis of his expertise in private enforcement of EU competition law.

My own criticism

From a general perspective of EU law and its effectiveness, the Kone Judgment really makes no sense and potentially impinges on the Member States' competences to regulate non-contractual liability and tort remedies [this point is common to previous criticisms against the EU's competence to regulate in the area of damages actions, as Francisco Marcos and myself stressed in “Towards a European Tort Law? Damages Actions for Breach of the EC Antitrust Rules: Harmonising Tort Law through the Back Door?” (2008) 16(3) European Review Private Law 469-488].

 

 

Quite simply, in my view, Kone has carried the application of the principle of supremacy and effectiveness of EU law too far and the contrast between the findings in Kone and its original application to the competition law damages field in Courage and Crehan [C-453/99 EU:C:2001:465, paras. 23 and ff] is simply abysmal. Courage 'just' made the point clear that damages actions should not be impossible and that they were governed by the general principles of equivalence and effectiveness of remedies (para. 29). This general mantra has been repeated over and over but, in its repetition, the effectiveness part has been gaining relevance and, at least in Kone, the CJEU has completely disregarded the principle of equivalence (despite mentioning it in para. 25).

 

Given the split of competences between the EU and the Member States in many areas of the law and, in particular, in many areas that govern the remedies available for breaches of EU (and domestic) rules, the principle of equivalence needs to be understood as a functional tool to provide effectiveness to EU rights without altering the Member States' competences. In that regard, it seems uncontroversial that, as even an undergraduate student of law can clearly express in an effective way: "The principle of equivalence ensures that EU rights receive the same protection as domestic ones" [David Murray, "EU law rights and national remedies: an uneasy partnership?" (2010) Diffusion 6(1)]. There is no reason to suggest that, in the absence of EU regulatory competences or specific EU remedies, EU rights should receive more intense protection than domestic ones.

 

However, the CJEU disregards this plain understanding of the general requirements of EU law and its supremacy and goes on to state that:

32 [...] it is, in principle, for the domestic legal system of each Member State to lay down the detailed rules governing the application of the concept of the ‘causal link’. However,  [...] national legislation must ensure that European Union competition law is fully effective (see, to that effect, VEBIC EU:C:2010:739, paragraph 63). Those rules must therefore specifically take into account the objective pursued by Article 101 TFEU, which aims to guarantee effective and undistorted competition in the internal market, and, accordingly, prices set on the basis of free competition. In those circumstances [...] national legislation must recognise the right of any individual to claim compensation for loss sustained.
33 The full effectiveness of Article 101 TFEU would be put at risk if the right of any individual to claim compensation for harm suffered were subjected by national law, categorically and regardless of the particular circumstances of the case, to the existence of a direct causal link while excluding that right because the individual concerned had no contractual links with a member of the cartel, but with an undertaking not party thereto, whose pricing policy, however, is a result of the cartel that contributed to the distortion of price formation mechanisms governing competitive markets.

In my view, this is truly far away from a pondered and acceptable balancing of the competing demands of the principles of equivalence and effectiveness and amounts to a suppression of the equivalence element that is essential to the test for compliance by Member States with their duty to ensure the effet utile of EU law under Article 4(3) TFEU and the existing case law.

Moreover, it prevents Member States from adopting clear and streamlined rules that avoid the need to engage in very complicated and costly case by case assessments of every claim, regardless of any indication of remoteness or weakness of basic causality links. Hence, the Kone Judgment should clearly be rejected and its implications limited (ie undone) by the CJEU itself at the closest opportunity.

What Sebastian has to say
The Court's judgement does not only show some dangerous judicial activism, as my colleague and host Dr Albert Sanchez Graells has pointed out, it also raises more questions than it answers.

What do we talk about when we talk about umbrella pricing? In a standard cartel case the damages claimant, typically a direct customer of the cartel, has to show that the defendant overcharged him. For umbrella pricing the situation is different. The claimant has not purchased from the cartelist but from another firm in the affected market. Consequently, the claimant should demonstrate that the market price was inflated due to the cartel and that he suffered harm due to the higher market price. In European jurisdictions this is basically a question of causation and a question of the proof that is required by the courts whereas US courts deal with these issues under ‘antitrust injury’. In Kone, the Court has stated that national courts cannot categorically reject a causal link between the cartel and inflated market prices charged by non-cartelists (para. 34):

“Consequently, the victim of umbrella pricing may obtain compensation for the loss caused by the members of a cartel […] where it is established that the cartel at issue was, in the circumstances of the case and, in particular, the specific aspects of the relevant market, liable to have the effect of umbrella pricing being applied by third parties acting independently, and that those circumstances and specific aspects could not be ignored by the members of that cartel.”

The Court addresses the two issues related to umbrella pricing (Was there an effect on the market? Did the market effect cause damage to the claimant?) in one sentence and merges them into one “be liable” test. It is left to the Member States to establish the rules and standards for proving these effects. The Court also seems to introduce some element of knowledge on part of the cartelist ("could not be ignored"). This may turn out to be impossible to prove.

 

Sadly, the ruling fits into the line of recent cases that appear to be claimant-friendly but may not contribute much to the effectiveness of enforcement. On the face of it, cases such as Pfleiderer [C-360/09, EU:C:2011:389] or Donau Chemie [C-536/11, EU:C:2013:366] have opened the gates to private damages claims, allegedly improving the effectiveness of competition law enforcement through access to documents. But I think this does not hold true. In those rulings the court replaced categorical rules with a case by case approach. So far, this has not really helped claimants but forced courts to justify why they have decided to, for example, deny access to leniency material (Pfleiderer). With regards to umbrella pricing, the CJEU has followed this approach replacing a 'fixed rule' with a case by case approach. We shall see if the claimants can get anything out of this apart from more complicated litigation.

 

Overall, the CJEU’s decision is extremely short for a ruling that could turn out to be expensive for both claimants and defendants. The cost associated with proving and calculating umbrella pricing could be prohibitive and adds to the generally high litigation costs of follow-on damages actions. I would expect most umbrella claimants to fail at the quantification stage, even if they have actually managed to master the causation hurdles.

The implications of this judgement for national causation rules are also worrying. Member States are supposedly able to govern causation and remoteness of damages under the procedural autonomy principle the Court stressed in the Kone ruling but also in Courage, Manfredi, Pfleiderer and Donau Chemie. However, in AG Kokott (see her opinion in Kone) and the Court disregard earlier statements that it is for the domestic legal system to regulate a causal relationship. So, what does this mean for the domestic legal systems?

 

Regarding the UK, I could imagine that the autonomous decision of a third party not to undercut the cartel is an intervening event breaking the chain of causation. It could also become a struggle to show that damages were foreseeable because they depend on the buyer's decision to contract with a non-cartelist and on the non-cartelist’s decision to charge an inflated price in the shadow of the cartel. However, the TheWagon Mound (No1) holds that only the kind of damage has to be foreseeable, not the extent of it. The CJEU’s decision in Kone has certainly created many more questions. Now, the ball is in the national courts.

Directive 2014/23 on concessions and the 'Frankenstein effect'

The more one analyses the content of Directive 2014/23 on concessions (the Concessions  Directive), the more one realises that it is full of unnecessary complexities and that it is (unfortunately) a horrible example of the 'Frankenstein effect' that the EU legislative procedure sometimes generates.

 

I am in particular puzzled by Arts 1(2), 6 and 7 of the Concessions Directive, which aim to determine its (personal) scope of application. The difficult exercise attempted in the Concessions Directive is to combine or merge the scope of application of both the Public Sector Directive (2014/24) and the Utilities Directive (2014/25) and, at first sight, looking at Article 1(2), it seems like it achieves that goal (as Richard Craven concludes in his piece on the Concessions Directive about to be published in the Public Procurement Law Review).

 

A cursory look at that provision indeed confirms that both 'contracting authorities' subjected to the Public Sector Directive and the 'contracting entities' covered by the Utilities Directive are within the scope of the Concessions Directive, as its Article 1(2) determines that: "This Directive applies to the award of works or services concessions, to economic operators by: (a) Contracting authorities; or (b) Contracting entities, provided that the works or services are intended for the pursuit of one of the activities referred to in Annex II".

 

However, that is not the end of the story, as Articles 6 and 7 define contracting authorities and contracting entities respectively and create an unnecessary split of the category of contracting authorities that I find unnecessary. The following is a draft comment on Article 6 of the Concessions Directive on which I am working and, as it will probably be evident, this keeps me quite confused...

 

On Article 6

6. Contracting authorities

01. With the exception of the excluded contracting authorities mentioned at the end of paragraph 1, this provision is identical to the Public Sector Directive Article 2(1) subparagraphs 1 and 4 and Article 2(2). For a commentary, see those provisions.

 

6.1. Excluded contracting authorities, which become contracting entities

01. One of the elements of the definition of the personal scope of application of the Concessions Directive with which it is difficult to come to terms is the treatment of certain contracting authorities (as per their classic definition in the Public Sector Directive) as contracting entities. More specifically, the exclusion is triggered when entities that would otherwise be contracting authorities engage in activities listed in Annex II (ie utilities activities except those related to water, see Article 12 and commentary to Article 1) and award a concession for the pursuit of one of those activities. The exclusion refers to the treatment of those ‘contracting authorities’ (by nature) as ‘contracting entities’ (by reason of their activity) under Article 7, which comes to mean that the carrying out of one of the activities in Annex II by means of a concession will only be subjected to the regime applicable to contracting entities, whereas the carrying out of any other concession-related activity (unless excluded from the Directive or subjected to a special regime) will be subjected to the rules applicable to contracting authorities. In case the contracting authority/contracting entity carries out both types of activities and awards a concession that covers both types of activities, the rules to determine the applicable legal regime will be those in Article 22 and, generally, will imply that the concession is subject to the rules applicable to the activity for which it is principally intended [Article 22(2)]. However, if it is objectively impossible to determine for which activity the contract is principally intended, the obscure provision in Article 22(3)(a) of the Concessions Directive will be applicable, which indicates that “the concession shall be awarded in accordance with the provisions of this Directive applicable to concessions awarded by contracting authorities, if one of the activities for which the contract is intended is subject to the provisions of this Directive applicable to concessions awarded by contracting authorities and the other is subject to the provisions of this Directive applicable to concessions awarded by contracting entities”. Hence, in case of significant difficulty (rectius, objective impossibility) in determining the applicable legal regime, the one corresponding to contracting authorities will be preferred.

02. However, the exclusion in Article 6 and inclusion in Article 7 are superfluous in connection with most of the specific obligations and duties regulated in the Concessions Directive, which establishes a regime that is fundamentally homogeneous to concessions awarded by contracting authorities and those awarded by contracting entities. At least in the case of contracting authorities ‘by nature’, the justification for the creation of the dual legal regime on the basis of the activity they pursue is difficult to understand and is likely to have a very limited effect in practice that can hardly justify the complexity it brings about (think exclusively of the convoluted drafting that the Concessions Directive has adopted in order to accommodate such minimal nuances). Indeed, comparing both regimes, it is only possible to identify a very limited number of discrepancies in legal regime (which are almost exclusively concerned with the potential exclusions of coverage from the directive) and primarily include the following rules:

·        Recital 66: only mentions contracting authorities when it indicates the possibility of including social requirements that directly characterise the product or service affected by a concession in the technical specifications. However, the omission of contracting entities seems to be an error, as there is no reason to prevent contracting entities from doing so, as long as they comply with the requirements imposed in the case law of the ECJ.

·         Article 10(1): covering an exclusion for concessions awarded to a contracting authority on the basis of an exclusive right, although the exclusion is extended to a contracting entity as referred to in point (a) of Article 7(1), which effectively nullifies the different in treatment for these purposes.

·         Article 11: covering a specific exclusion in the field of electronic communications whereby the Concessions Directive shall not apply to concessions for the principal purpose of permitting the contracting authorities to provide or exploit public communications networks, or to provide to the public one or more electronic communications services. However, the restriction of this exclusion to contracting authorities may have very limited effects in view of the alternative exclusion available for contracting entities when their activities are subject to competition (Article 16 below), given that most electronic communications exploited commercially are actually exposed to competition as a requirement of sectorial regulation.

·         Articles 13 and 14, and Article 17, which set out different rules for (quasi) in-house exclusions depending on whether they relate to contracting authorities or contracting entities. However, the functional requirements are rather similar, so there is no significant difference in the rules allowing for the award of concessions without compliance with competitive tendering requirements (effective control, 80% of turnover generated in the in-house sphere, etc; see commentary below).

·         Article 15, which creates an additional duty of information on contracting entities in favour of the Commission in case certain exclusions under Articles 13 and 14 apply.

·         Article 16: which restricts the exclusion available for activities directly exposed to competition to contracting entities—and that, in any case, would be very difficult to apply to contracting authorities because they do not tend to participate directly in the provision of services subjected to effective competition.

·         Article 23: on concessions including activities subjected to diverse legal regimes and that set out a preference for the regime applicable to contracting authorities over the one applicable to contracting entities as a residual rule.

·         Article 38(4) in fine: which sets higher evidentiary standards for contracting entities that are not (improper) contracting authorities wishing to exclude from participation any economic operators affected by the grounds of mandatory exclusion foreseen in Article 38(4) of the Concessions Directive (see that provision for commentary). This also applies to other aspects of Article 38, where the degree of compliance with rules on mandatory or discretionary compliance can be modulated differently by Member States depending on whether the concession is awarded by a contracting authority (or an improper contracting entity) or by a (proper) contracting entity. However, given the discretion left to Member States in this area, it is hard to foresee whether this will generate any meaningful differences in practice.

03. Moreover, the inclusion of contracting authorities as contracting entities by virtue of the activities in which they engage creates significant difficulty in the treatment of contracting entities in the Concessions Directive, as some provisions are addressed to all contracting entities and others are only addressed to ‘proper’ contracting entities (ie those that are not contracting authorities ‘by nature’) which forces the drafting to resort to convoluted expressions such as “contracting authorities and contracting entities as referred to in point (a) of Article 7(1)” or “contracting entities other than those referred to in point (a) of Article 7(1)”. Indeed, in most cases where there is any meaningful difference, contracting entities as referred to in point (a) of Article 7(1) receive the same legal treatment as contracting authorities under Article 6 (which seems like the logical thing to do). All in all, then, given the (very) minor differences in legal regime (which are almost non-existent other than in terms of coverage of the directive), a much more simplified regime for contracting authorities would definitely have been preferable.

* * * * *   More than ever, I wish that the 'Sanity clause' scene of the Marx Bros' A Night at the Opera was just a figment of a crazy imagination...

The elusiveness of academic integrity and its value: some musings against any relaxation of standards

One of the most complicated and elusive elements in the day to day of a professional academic have to do with some form of academic integrity and, particularly, with the keeping of academic standards. This is a fundamental part of our role in two main dimensions: peer review and student assessment.

In the peer review area, this relates to editorial functions (such as the blind review of manuscripts before publication in academic journals, or the publication of book reviews) as well as to the active participation in research debates (such as conferences, seminars or, these days, twitter and blog platforms).

In student assessment, the array of activities is even broader, from marking (and second marking) of undergraduate work, to external examining in other institutions, to supervision of postgraduate students and, maybe with the highest significance, the examination of PhD theses. The indivisible connection between assessment and academic standards can hardly be overstated (see The Quality Assurance Agency for Higher Education's position here).

 

In my view and (still limited) experience, all these processes feed into each other and the only sensible strategy for a professional academic concerned with academic integrity and the keeping of academic standards (which are the only value that universities should really protect above any other) is to try to remain actively involved in both dimensions (ie peer review and assessment) and to resist the permanent pressures to lower standards here and there. It may sound slightly self-important, but I think that professional academic need to perceive ourselfs as a gatekeepers and resist calls to open the doors too often or too easily.

 

 

It is also very important for us, as a community, to be able to communicate to society that this is the core, most fundamental function that we develop and the most significant value we add in return for the (always too limited, always too insecure) funding of our activities. Hence, when there are debates about the purpose and function of higher education institutions and their (core) employees, we should always make sure to stress that we uphold academic integrity and enforce academic standards. It may sound too vague, but this is the most important function we can possibly perform. And it is also the most distinctive.

 

Otherwise, if we fail to keep academic integrity, the ensuing dillution of academic standards will end up resulting in a scenario where academic qualifications are completely irrelevant because they no longer tell anyone how much of an expert somebody is, or how qualified to develop activities in a field that requires scientific knowledge. It will also be impossible to distinguish one university from another on the basis of any valuable merits-based metric and, in the end, academic excellency will fade away.

 

Of course, keeping academic integrity is difficult to do and usually comes (sooner or later) at a personal cost. Nobody likes to tell someone else that their work/research is not up to the applicable standard and we all tend to get upset when we hear it. Nobody likes rejection or failure. However, professional academics need to be able to swallow that bitter pill every now and then, and make sure that standards are kept despite colleagues, peers or students getting upset or frustrated. Hopefully, their (academic) maturity will make those feelings go away and the objectiveness of the academic assessment will be recognised sooner or later.

 

In this time of the year, with so many assessments going on and so many pressures coming from rakings based on student satisfaction as yesterday's Guardian 2015 University Guide tables, it is worth reminding ourselves of the value and long-term relevance of what we do. We cannot always please everyone if that means that academic integrity is jeopardised. And, most importantly, we must not do it. If we sacrifice academic standards in the altar of satisfaction, the importance and long-term viability of higher education institutions will be doomed. Clearly, a bitter pill to swallow.

 

http://youtu.be/7S94ohyErSw

Why are NHS Commissioners 'undertakings' and, consequently, subject to competition law?

Some months ago, I held an interesting email exchange with some readers of my paper New Rules For Health Care Procurement in the UK. A Critical Assessment from the Perspective of EU Economic Law. They basically challenged my understanding of the National Health Service (Procurement, Patient Choice and Competition) (No. 2) Regulations 2013 on the basis that NHS Commissioners could not be considered undertakings and, hence, their decisions should remain outside the scope of application of competition rules.

 

However, I thought and still think that NHS Commissioners are 'undertakings' for the purposes of (EU) competition law enforcement. These are the main reasons why I think so (apologies to non-competition law readers for the amount of 'slang' in this post, which reproduces parts of the email exchange.

 

* * * * *

 

Regarding the treatment of NHS commissioners as undertakings, I think that the FENIN/Selex exemption is inapplicable and probably I should have made this clear in my paper (I simply assumed that this would not be controversial). As you probably know better that myself, the reason for that is basically that (most) GPs are engaged in economic activity as self-employed providers of services to the NHS (http://www.nhscareers.nhs.uk/explore-by-career/doctors/pay-for-doctors/) under the so-called General Medical Services Contract (http://www.nhsemployers.org/PayAndContracts/GeneralMedicalServicesContract/Pages/Contract.aspx). Indeed, they hold contracts for the provision of those services and, consequently, everything that they procure or commission needs to be assessed in light of such ‘downstream’ or parallel economic activity (which, in my view, immediately deactivates the FENIN/Selex exemption). Moreover, GPs located in a given area are in competition between themselves in order to attract patients and retain them, and that has an impact on their level of remuneration by the NHS. All this indicates that they do engage in economic activity ‘downstream’ or in parallel to the services and goods that they commission and purchase in their public procurement (‘upstream’?) activities. That is enough to justify the direct applicability of competition law (EU and domestic) to their activities.

In my view, this conclusion is robust even if those services are generally not directly paid for by the end users in most of the cases, since that should not affect either: 1) their inclusion within the scope of application of EU internal market law (C-372/04 Watts, dealing particularly with the NHS, although with hospital care provision), or 2) the fact that GPs are undertakings, as the requirement of provision of services in the market for remuneration does not require direct payments; under the classic formulation of the concept of an undertaking, it encompasses every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed. So, I guess that the largest point of disagreement between us is that you may consider that GPs (individually or collectively as part of a Clinical Commissioning Group, CCG) are not engaged in economic activity. However, as self-employed providers of services, I think that that assessment would not be in line with the generally functional approach to the concept of undertaking and that it is not covered by the FENIN/Selex case law. I do not think that GPs would be covered by the ‘social’ exclusion for systems based on solidarity either, given that the system in the UK promotes choice and competition and, by itself, that goes against the requirements of mandatory participation that the CJEU has included in its sickness funds-relate case law.

Finally, I also think that there would be a possibility of circumventing any possible exclusion of the (direct) applicability of the rules to the GPs and CCGs as undertakings (or groupings/associations of undertakings) via a State action doctrine approach (basically, on the basis of Cipolla) given that the UK as a State has delegated economic decisions on a type of organs (CCGs) that are in a structural (mild?) conflict of interest when they adopt commissioning (economic) decisions and, consequently, liability (of the UK) could be found on the basis of Art 4(3) + 101 TFEU. That would clearly justify the consideration and application of EU competition rules by Monitor as the ultimate watchdog in charge of ensuring compliance with (EU and UK) competition rules—as it is indeed co-competent with the new CMA in the healthcare sector. Again, you may consider this a weak legal basis, but I would disagree with that.

An Opportunity for a 21st Century Spanish Republic? The King has abdicated, long live the Republic!

Today's news that King Juan Carlos I is stepping down and abdicating the Spanish Crown in compliance with Art 57.5 of the Spanish Constitution is bound to prompt significant speculation about the future of Spain as a State.

With all (regional) nationalist tensions on the rise and a massive loss of support of the royal family in recent years, it should come as no surprise that many Spaniards would like to have a referendum on the basic structure of the State. I am certainly one of them.

 

In my view, only a Republic can seriously ensure that we are all equal under the law (in the Spanish case, this would suppress the aberration in Art 56.3 of the Constitution, whereby "The person of the King is inviolable and shall not be held accountable"). In the 21st Century, this simply makes no sense and undermines the basic principle of equality (recognised in Art 14 of the Spanish Constitution). As put in a rather extreme and poetic manner by Diderot, “Men will never be free until the last king is strangled with the entrails of the last priest.” This remains true, particularly in Spain. But there is a pacific way out now.

 

Moreover, a referedum on the structure of the State would most certainly allow for a deep discussion of the internal organization of the Spanish State and strengthen the importance of its belonging to the European Union (two points not addressed in the current Constitution: the first one, due to the delicate balances that were necessary to overcome the dictatorship and, the second one, due to a lack of maturity of the political system when Spain joined the EU). Most internal unbalances could be settled and the structure of the State could be adapted to the needs of the 21st Century, with much more local devolution, a streamlined and simplified federal government, and a clarification of the regional inclusion in the European puzzle.

 

Some will say that Spain is not ready for such type of debate and that it would only bring a risk of fracture of the State. If they manage to persuade the citizenship that continuying in the status quo and welcoming Felipe VI is the adequate way forward, then Spain will have a King it will deserve... but this will mean that Spanish society keeps rooted in a value base that does not really encompass modernity and is definitely not in sink with the advanced country it aims to be.  However, I hope this will not be the case and that there will be debate, a referedum, and a significant reform of the State. The King has abdicated, long live the Republic!

A new European Dynamics challenge rejected: let's focus on admissibility of claims (T-553/11)

In its Judgment of 23 May 2014 in case T-553/11 European Dynamics Luxembourg v ECB, the General Court (GC) has ruled on yet another challenge filed by European Dynamics (ED) against procurement decisions of the EU Institutions and, in this case, the European Central Bank (for previous episodes in the appeals saga, see here).

In this case, the legal framework applicable to the procurement is basically contained in Decision ECB/2007/5 of the ECB of 3 July 2007 laying down the rules on procurement. However, the issues discussed are fundamentally common to those under the EU procurement Directives, which makes the case generally relevant.

 

Generally, the challenges brought by ED concern the duty to state reasons and potential abuses of power by the contracting authorities and, with some small differences based on the specific content of the procurement decision appealed, they tend to be subjected to exactly the same legal tests (which tend to result in the dismissal of their appeals). In my view, this case is not materially different from the previous ones as those issues are concerned.

 

However, there is an element in this saga of cases that is often overlooked because it is purely procedural, which relates to the admissibility of the challenges themselves (as, oftentimes, ED is rather 'non-selective' or not sufficiently precise in the identification of the procurement decision subjected to appeal). In that regard, the Judgment in T-553/11 is interesting (?) in that it assesses two points: a) the admissibility of (independent) challenges against confirmatory decisions in internal appeal procedures, and b) the admissibility of claims requesting the annulment of all decisions related to the 'core' procurement decision subject to challenge.

 

(Independent) appeals against internal review confirmatory decisions In the first part of the Judgment, the GC engages in a rather lengthy discussion on the admissibility of a challenge against both the initial decision not to invite ED (as leading undertaking in a grouping) to submit an offer in a negotiated procedure and the subsequent decision of the procurement review body (PRB) to dismiss the internal appeal and confirm the initial decision. The GC clearly indicates that those are two separate decisions and that both are open to challenge. However, it immediately stresses that:

there is no need to specifically examine the legality of the decision of [the PRB], but [...] it is appropriate to conduct a review of the legality of the rejection of the consortium’s application taking into account all the reasons relied on during the procedure, bearing in mind that in public procurement, the obligation to state reasons pertaining to a decision may be fulfilled in several stages (see, to that effect and by analogy, Case T‑50/05 Evropaïki Dynamiki v Commission [2010] ECR II‑1071, paragraph 133 and the case-law cited, and judgment of 22 May 2012 in Case T‑6/10 Sviluppo Globale v Commission, not published in the ECR, paragraph 29), and must be assessed in the light of information available to the applicant at the time of bringing the action (Case T‑183/00 Strabag Benelux v Council [2003] ECR II‑135, paragraph 58, and Case T‑4/01 Renco v Council [2003] ECR II‑171, paragraph 96) (T-553/11 at para 49, emphasis added).

Both parts of the reasoning on admissibility seem functionally contradictory, given that the individualisation or distinction between the decisions should make them amenable to different grounds for a challenge. However, the 'holistic' approach adopted by the GC comes to institute de facto a full review of the (content) of all decisions involved in a procurement process prior to the application for judicial review. 

 

Hence, the valuable message derived from this lengthy discussion is, in my view, that regardless of the number of formal decisions adopted in a procurement procedure and the possibility to challenge them separately, the reviewing court must take the content of all of them (ie the full procurement file, at least as regards that candidate or tenderer) into account when a challenge is actioned against a decision adopted at any stage of the process. However, this may not be particularly new and should not have been controversial, as it seems to derive rather plainly from the power to conduct full reviews of the findings in fact and in law in which a procurement decision is based.

 

Appeals against 'all decisions related' to the main challenged decisionIn my opinion, this discussion is very formalistic and, to a certain extent, unnecessary. It revolves around whether the claimant submits a valid challenge if it requests the annulment of 'all decisions related' to the main procurement decision object of the appeal. The argument against the admissibility of such (secondary) claim is that it is inespecific and, consequently, does not meet the requirements of precision that are common to most judicial review systems. In the reasoning of the GC

54 Heads of claim [...] that seek the annulment of acts related to challenged acts which are not identified must be declared inadmissible as a result of the lack of precision of their subject-matter (see, to that effect, order in Case T‑166/98 Cantina sociale di Dolianova and Others v Commission [2004] ECR II‑3991, paragraph 79).

55 That finding is not undermined by the fact that it has been held, first, that the identification of the contested act could be implicitly inferred from the indications contained in the application and from the argument therein as a whole and, secondly, that an action formally brought against an act that is part of a series of acts forming a whole could be regarded as directed also, so far as necessary, against the others (order in Case T‑320/09 Planet v Commission [2011] ECR II‑1673, paragraph 23). Indeed, such a deduction is impossible specifically when the arguments contained in the application manifestly lack clarity and precision (order in Case T‑64/96 Jorio v Council [1997] ECR II‑127, paragraph 35), as is the case in the present case (T-553/11 at paras 54-55, emphasis added).

Hence, in the case at hand, the GC dismisses the claim for annulment of  'all related decisions of the ECB'. However, materially, this may not have any effect on the final outcome of the process if the appeal is upheld. In this regard, it must be taken into consideration that, (possibly) differently from other areas of (contract) law, the remedies against the illegal conclusion of a public contract may or may not involve the annulment of the contract depending on the grounds on which the illegality is founded, and irrespective of the specific claims brought forward by the applicant.

 

In the specific case of the review of EU institutional procurement, this discussion may have some purpose, as Article 263 TFEU  does not expressly regulate the remedies available. However, more generally, outside the scope of the review of the procurement decisions of the EU Institutions, the Remedies Directive allows Member States to restrict the ineffectiveness (ie voidability?) of public contracts to certain very grave cases (see art 2d) so, other than in those cases (where ineffectiveness must be declared, even if it was not expressly required by the appellant, as a matter of direct effect and supremacy of the Remedies Directive itself), the ineffectiveness of those decisions may be barred by domestic rules, regardless of the content of the action exercised by the appellant.

 

In my view, given the possibility for Member States to balance public and private interests in their domestic rules concerned with the effectiveness of illegally awarded public contracts, in public procurement litigation, the annulment of 'all related decisions' or their preservation (with a consequent indemnification of damages and, if applicable, the imposition of fines) is a matter of determination of the adequate remedy by the review court and, consequently, the discussion on the admissibility of this head of claim remains fundamentally superfluous.

Parody and the protection of fundamental rights under EU law: No laughing matter? (C-201/13)

In his Opinion of 22 May 2014 in case C-201/13 Deckmyn and Vrijheidsfonds (once again, not available in English), AG Cruz Villalon has assessed the concept of 'parody' under Art 5(3)(k) of Directive 2001/29/CE on the harmonisation of certain aspects of copyright and related rights in the information society (Copyright Directive). 

The Opinion is interesting because it concerns the degree to which fundamental rights' protection needs to be taken into consideration (as a matter of EU law) when making the relevant determination of the extension of the 'parodic' exception to copyright in a civil procedure. 

This is one of the myriad of cases in which the Court of Justice of the EU (CJEU) will soon be concerned with the EU Charter of Fundamental Rights and, consequently, the proposals on the integration/coordination of these issues that the AG puts forward may be interesting beyond the scope of application of the Copyright Directive.

In the case at hand, a political party used a parody of a comic to criticise the then mayor of Ghent (Belgium). In the parodied copy, the name of the original author (Vandersteen) was included, with a reference that indicated that the current version was a "free adaptation" of the original work made by a second author (Fre) -- both designs are reproduced below, as they appear on AG Cruz Villalon's Opinion (original on the right).

 

The controversy basically derived from the fact that the parody had a discriminatory or racist content and, consequently, the heirs of the original author and the companies that currently hold the rights to the exploitation of his works tried to prevent such a use of Vandersteen's comic. The claim was technically framed as a challenge to the proper use of the materials as a parody, given that it was not the original work that was being parodied, but Ghent's mayor of the time. According to the claimants, that use would not be covered by the exception under Art 5(3)(k) of Directive 2001/29/CE.

AG Cruz Villalon, anticipating potential criticisms to his Opinion on the interpretation of the concept of parody, establishes important limitations to the scope of his arguments, where he makes clear that they do not include any elements regarding the moral rights of the author, the "three-step" test that Art 5(5) of the Copyright Directive establishes as a balancing requirement between the exceptions therein regulated and the protected rights, or the caveat that Belgian law introduced to the fact that parody is only acceptable provided it is conducted "in observance of good manners".

After confirming that, in his view, the concept of 'parody' (for the purposes of the Copyright Directive) is an autonomous concept of EU Law (paras 32-39), the AG goes on to consider that "Parody is [...] structurally, 'imitation' and, functionally, 'burlesque'" (or mocking, para 48, own translation from Spanish), and provides a significant amount of details as to his interpretation of both these structural (paras 49-58) and functional (paras 59-70) requirements. In my view, the most interesting part of his Opinion concerns paras 71-88, where he engages in a discussion on the incidence of the protection of fundamental rights on the (acceptable) content of the parody. The difficult question to be answered is, basically, "To what extent can the interpretation of the scope of the exception for parody given by the civil judge be determined by the protection of fundamental rights?" (para 76, own translation from Spanish).

The AG approaches the issue both as a matter of principle and introducing an exception. As a matter of principle, the AG submits that "always under the assumption that parody effectively meets the requirements already mentioned, an interpretation of the notion of parody by the civil court should, as a matter of principle, favor the exercise of freedom of expression through this unique medium" (para 81, own translation from Spanish). However, given that freedom of expression is never unlimited, 

Considering the "presence" to be recognized to fundamental rights in the legal system as a whole, I understand that, in principle and from the narrow perspective of the concept of parody, a certain image cannot be excluded from this notion for the simple fact that the message is not shared by the author of the original work, or by the rejection that it may deserve from much of the public. Still, those deformations of the original work that, in the form or substance, convey a message radically contrary to the deepest convictions of society, and in which the European public space is ultimately built, and ultimately exists, should not be accepted as a parody, and the authors of the parodied work are entitled to enforce that restriction as well (para 85, own translation from Spanish, emphasis added).

Nonetheless, the final test proposed by the AG is rather mild and, in my view, is unnecessarily inconclusive, as he proposes the CJEU to find that "When interpreting the term 'parody', the civil court must be guided by the fundamental rights proclaimed in the Charter of Fundamental Rights of the European Union and proceed to the necessary balancing between those rights when the circumstances of the case at hand require".

I consider that the (self)restraint that AG Cruz Villalon shows in the final part of his Opinion in Deckmyn and Vrijheidsfonds is a clear indicator of the pusillanimous approach that we can expect the CJEU to adopt in cases like this one. Given that the concept of parody is a concept of EU law (for the purposed of the Copyright Directive, anyway) and that the CJEU holds the ultimate competence for the interpretation of the EU Charter [as coordinated with the European Convention on Human Rights and the case law of the European Court of Human Rights per art 52(3) EUCFR] the AG could have been more aggressive.

In my view, the AG should have clearly proposed that the CJEU interpreted that the concept of parody does not include 'those deformations of the original work that, in the form or substance, convey a message radically contrary to the deepest convictions of society' and, in particular, those that are racist, xenophobic or, in any other way, attempt against cultural, religious and linguistic diversity as protected in Article 22 of the EU Charter. Such a finding would still require the domestic courts of the Member States to determine whether, on the basis of the facts and circumstances of a given case, the intended parody is or not covered by the EU concept. However, the message would be much stronger and the CJEU would be effectively acting as a constitutional court for Europe, at least as the protection of the rights recognised in the EU Charter is concerned.

On the contrary, by deferring all judgment and providing no clear indication as to the way the balance is likely to tilt, the AG (and the CJEU if they follow the 'soft, self-restrained' approach in Deckmyn and Vrijheidsfonds) would once more be refusing to exercise their function as a constitutional court and, in my view, would indicate that all the fuss and complicated negotiations of the (prior involvement mechanism in order to authorise) accession of the EU to the European Convention of Human Rights would have been unnecessary and superficial, given their lack of commitment to a substantive and effective enforcement of the necessary protections of fundamental rights in the EU (for a critical assessment of the process and mechanisms involved in the accession, see the various contributions to Tzevelekos et al, The EU Accession to the ECHR).

From this perspective, I will be eagerly awaiting the CJEU's final ruling in Deckmyn and Vrijheidsfonds, although I must say that I do not hold high expectations and I would bet that they will follow the approach suggested by the AG (maybe including one or two 'strong' obiter dicta but) refusing to provide a clear indication of the way the balance of fundamental rights should tilt. 

Let's hope the wait is over soon.

The "new" principle of competition in Directive 2014/24: a new set of presumptions?

The adoption of Directive 2014/24 of 26 February 2014 has resulted in the consolidation of the principle of competition in Article 18. According to the wording of this provision: "The design of the procurement shall not be made with the intention of […] artificially narrowing competition. Competition shall be considered to be artificially narrowed where the design of the procurement is made with the intention of unduly favouring or disadvantaging certain economic operators".

 

In my opinion, despite the positive aspects of the express recognition of the principle of competition in the new EU Directive, the inclusion of a subjective element and the reference to the prevention of corruption or the avoidance of conflicts of interest by establishing an irrebuttable presumption of competitive distorsion, raise many questions that are difficult to answer that may give rise to more litigation. In this post, I venture some further thoughts on this "new" principle of competition in Directive 2014/24 (for an initial reaction, see here; please bear in mind that this is a translation of a contribution to http://www.obcp.es/ soon to be published in Spanish, which justifies (?) the references to Spanish domestic law).

 

Explicit recognition of the principle of competition

 

Importantly, and unlike in Spanish national legislation on public procurement (art 1 of RDL 3/2011, of 14 November, approving the consolidated text of the Law on Public Sector Contracts: "This law aims to regulate public sector procurement in order to [...] ensure [...] an efficient use of funds [...] by [...] safeguarding free competition"); so far, the principle of competition in public procurement was only reflected somewhat partially and in a fractionated manner at EU law level, by means of both Directive2004/18 (and earlier versions of the procurement Directives that it consolidated) and the interpretative case law of the Court of Justice of the EU (CJEU) in cases such as Fracasso and Leitschutz (C-27/98, para 31 . "to meet the objective of developing effective competition in the area of public contracts"), Lombardini and Mantovani (C-285/99, para 76: "all the requirements imposed by Community law must unquestionably be complied with in the context of the various aspects of the national procedures for awarding public works contracts, which must moreover be applied in such a manner as to ensure compliance with the principles of free competition") and SECAP (Opinion of AG in C-147/06, para 29 "those directives pursue a limited direct aim, namely the coordination of procedures governed by the sectoral directives with a view to encouraging the development of effective competition in the field of public contracts", as endorsed by the CJEU in the Judgment in C-147/96, para 29: "assess tenders which are submitted to them under conditions of effective competition").

 

Additionally, the contours of the principle of competition were somewhat fuzzy and required a considerable interpretive effort to delineate the obligations derived therefrom (for further details, see A Sanchez Graells, "Competition and the Public Buyer Towards a More Competition - Oriented Procurement: The Principle of Competition Embedded in EC PublicProcurement Directives"). From this perspective, the explicit recognition of the principle of competition in the new EU directive is to be welcomed. However, the explicit formulation adopts the policy is problematic for at least two reasons.

 

Inclusion of a very problematic subjective element: can we "objectify" it?

As we have seen, Article 18 of Directive 2014/24 provides a formulation of the principle of competition in which the subjective or intentional element of any restriction of competition is emphasized: "The design of the procurement shall not be made with the intention of […] artificially narrowing competition" (emphasis added). This intentional element is common to different language versions of the Directive ("intención" in Spanish, "intention" in French, "intento" in Italian, "intuito" in Portuguese or "Absicht" in German), so it cannot be justified as a deficiency in translation or an error in the wording of the provision. However, the recitals of the directive do not provide any clarification and, ultimately, this provision opens the door to complex problems of identification and attribution of intentional elements in the field of public procurement—or, more generally, in administrative (economic) law.

In my opinion, this task is very complex, as it requires establishing the parameters by which a decision that often involves various individuals (and potentially several administrative bodies) is considered affected by an underpinning anticompetitive intent. In fact, I think that this task is virtually impossible, given that the traditional mechanisms of allocation of subjective factors in (administrative) disciplinary or criminal law are not applicable and very clearly require an "objectifying" reinterpretation of the intentional element in the provision.

The reasons for the "objectification" of the wording of Article 18 of Directive 2014/24 are multiple and derived mainly from the need for coordination of this new rule with some of its "functional neighbours". Firstly, such coordination should take into account the objective character of the restrictions of competition derived from the rules of the Treaty on the Functioning of the EU (TFEU) and its interpretation by the CJEU. Indeed, the prohibitions in Articles 101 and 102 TFEU (and their national counterparts, such as in Articles 1 and 2 of the Spanish Law 15/ 2007 of 3 July, on the defence of competition) apply in abstraction from any volitional element of the offending parties. A competitive restriction in the market automatically results in a violation of those prohibitive norms, irrespective of the intention with which market players have conducted the practice restrictive of competition.

 

Secondly, and in a more subtle but functionally relevant relationship, the objectification of the competition principle standard must be coordinated with the criminal law rules applicable to the criminal liability of legal entities—which establish (at least in Spain) a clearly objective and independent regime, disconnected from any subjective element of the specific individuals who have committed crimes or offences whose responsibility extends to legal persons (see Article 31bis.3 of the Spanish Criminal Code, as introduced by LO 5/2010, of June 22, amending the Organic Law 10/1995 of 23 November, on the Criminal Code).

Therefore, the objectification of Article 18 of Directive 2014/24 seems the most appropriate functional solution—but, acknowledgedly, it can be seen as lying somewhat far away from a literal interpretation of the provision. Broadly speaking, in my opinion, this objectification of the principle should be carried out by establishing a rebuttable presumption of restrictive intent in cases where, in fact, the tendering procedure has been designed in a manner that is restrictive of competition.

The disproval of this rebuttable presumption would require the contracting authority or entity to justify the existence of objective, legitimate and proportionate reasons for the adoption of the criteria restrictive of competition (ie, to provide a plausible justification for the imposition of restrictive conditions of competition in tendering the contract, so as to exclude the plain and simple explanation that it was intended to restrict competition therewith). In other words, if it could be justified that a "reasonable and disinterested contracting entity" (meaning free from any intent to restrict competition) would have taken the same decision on the design of the tender in a form restrictive of competition, the presumption of restrictive intent would not be applicable and, ultimately, the tender would be compliant with Article 18 of Directive 2014/24. Obviously, this test requires further development (and I will devote some time to developing a more refined proposal in the coming months).

 

Linking distortions of competition and favouritism or corruption: a bidirectional and biunivocal relationship?

 

The second problematic aspect in the wording of Article 18 of Directive 2014/24 is, in my opinion, the establishment of a iuris et de iure presumption of competitive distortion in: "Competition shall be considered to be artificially narrowed where the design of the procurement is made with the intention of unduly (sic) favouring or disadvantaging certain economic operators".

 

This assumption raises a potential problem of (logical) "capture" of the interpreters of this rule, as they may be tempted to consider that in the absence of (undue!) favouritism or corruption, no restrictions on competition are contrary to the precept—that is, they can be inclined to decide not to apply the "residual" part of the prohibition and limit it exclusively to cases covered by the presumption. Additionally, while it is true that most cases of favouritism or corruption will result in a restriction of competition, this is not always necessarily the case. For example, in cases where the beneficiary of favouritism could be awarded the contract under competitive conditions, or in cases in which corrupt practices are added to previous restrictions of competition created by the bidders active in the market; it could be argued that there is no (independent) restriction competition and, therefore, that the presumption is unnecessary or unjustified.

In any case, the instances of favouritism included in the irrebuttable presumption would (also) be covered by the new rules relating to conflicts of interest envisaged in Article 24 of Directive 2014/24: "Member States shall ensure that contracting authorities take appropriate measures to effectively prevent, identify and remedy conflicts of interest arising in the conduct of procurement procedures so as to avoid any distortion of competition and to ensure equal treatment of all economic operators", and can even fit into one of the headings of mandatory exclusion of Article 57(1)(b) for corruption, as supplemented by the obligation to terminate the contract under Article 73(b).

Therefore, the establishment of the presumption of anticompetitive intent in cases of favouritism or discrimination is, in my opinion, unnecessary and may be counterproductive. Ultimately, I think that it will be necessary for the bodies responsible for the implementation of these provisions to clearly distinguish instances of corruption from those of (simple) restriction of competition and, in the latter scenario, apply the first part of the principle of competition in an "objectified" manner, as advocated above.

Conclusion

The consolidation of the principle of competition in Article 18 of Directive 2014/24 should be welcomed, but its wording requires two major adjustments designed to ensure functionality. On the one hand, it is necessary to objectify the interpretation and application of the provision and, in my opinion, this should be done by establishing a rebuttable presumption of competition restrictive intent. Moreover, the irrebuttable presumption of restriction of competition in cases of favouritism or corruption should be interpreted as not being exhaustive and should not prevent the widespread application of the (not necessarily residual) general test of competitive restraint in the absence of (clear) discrimination.

In any case, it should come as no surprise if the new Article 18 of Directive 2014/24 gives rise to a significant level of litigation.

When time limits result in a prohibition, the Commission cannot present its decisions as 'temporary authorisations' (T-198/12)

In its Judgment of 14 May 2014 in case T-198/12 Germany v Commission (Toy safety), the General Court of the European Union (GC) has established an interesting standard for the analysis of the criteria concerned with the imposition of time limits in the Commission's enforcement of Article 114 TFEU. In short, under Art 114(6) TFEU, despite the adoption of a harmonisation measure which has as its object the establishment and functioning of the internal market, and as long as it concerns health, safety, environmental protection and consumer protection, the Commission can authorise Member States to maintain (conflicting) national provisions on grounds of the major needs mentioned in Article 36 TFEU.

In the case at hand, Germany had requested authorisation to keep domestic rules that deviated from the new standards concerned with the presence of certain (toxic) metals in toys set by Directive 2009/48 on the safety of toys. Germany considered that the standards imposed by the new version of the toy safety directive where not supported by adequate scientific evidence and requested the Commission to authorise it to maintain the existing domestic standards, which had been developed on the basis of the previous version of the toy safety Directive 88/378/EEC.

 

The European Commission partly authorised the German measure and, for some substances, imposed a time restriction whereby the domestic standards could only be enforced until the approval of new EU standards or 21 July 2013, whatever came first. Germany challenged this aspect of the partial approval on two grounds: 1) that the Commission incurred in a contradiction when it imposed the time limitation on the authorisation, given that it had found that it was legitimate, justified and did not significantly restrict intra-EU trade in toys (and, hence, should be authorised without restrictions); and 2) that the specific time-limit imposed actually amounted to a prohibition, given that the date chosen by the Commission was fundamentally coincidental (or, as the Commission indicated during the procedure, diverged symbolically by one day) with the final date foreseen in Directive 2009/48 for the repeal of the pre-existing domestic standards.

 

The GC has upheld this point of Germany's appeal and, more importantly, has established the principle that the Commission cannot issue de facto prohibitions of domestic measures under the appearance of temporary authorisations, as that fundamentally infringes its duty to state reasons and motivate its decisions. It is interesting to stress that

Given that, on the one hand, the bioavailability limits set by Directive 88/378 should continue to apply until 20 July 2013 and, on the other hand, the maintenance of national provisions on lead is authorized only until 21 July 2013 (specifying that the difference between these two dates is merely symbolic), it should be noted, as the Federal Republic of Germany rightly points out, that the contested decision is equivalent, in terms of concrete results, to a negative decision--which, furthermore, the Commission has expressly acknowledged during the proceedings, as the institution has indicated in its decision that the [German] measure met the requirements of Article 114 TFEU, paragraphs 4 and 6 [...] It is clear, therefore, that the contested decision contains an internal contradiction that may hinder the correct understanding of the reasons on which it is based (T-198/12 at paras 64 and 65, own translation from Spanish).

This is an interesting case, given that the GC has focussed on the material or substantial elements of the Commission's Decision and its effects on the autonomy of the Member State to actually deviate from the harmonising measure after seeking approval uner Art 114 TFEU. Hopefully this will result in more clarity in the enforcement Decisions of the Commission in the future and will contribute to a more speedy revision of security standards when Member States challenge the scientific evidence used at EU level. 

Are future (lease) contracts covered by the EU public procurement directives? (C-213/13)

In his Opinion of 15 May 2014 in case C-213/13 Impresa Pizzarotti (not available in English, so the following discussion is based on my reading of the Spanish version), Advocate General Nils Wahl has addressed the tricky issue whether future lease contracts, or contracts for the lease of buildings that are yet to be constructed, are covered by the EU public procurement Directives (in particular, by Directive 2004/18, but the interpretation will remain relevant under the new Directive 2014/24, which scope has not changed as far as works contracts are concerned).

 

The factual background of the case is rather complicated as the Commune di Bari and the Italian Ministry of Justice kept changing the conditions of the financial arrangements concerned with the building and rental of Bari's new city of justice; but, as AG Wahl indicates in his Opinion, the legal issue to be addressed is whether transactions relating to future buildings may fall within the exception to the application of the rules on public contracts--as foreseen in Article 16(a) of Directive 2004/18 [or art 10(a) Dir 2014/24], which indicates that the Directive "shall not apply to public service contracts for: (a) the acquisition or rental, by whatever financial means, of land, existing buildings or other immovable property or concerning rights thereon".

 

In his view, the exception in Art 16(a) Directive 2004/18 [and now art 10(a) Dir 2014/24] can under no circumstances be interpreted in a way that covers works which execution has not yet started (para 54). On the ultimate basis of the principles of the protection of the internal market's fundamental freedoms and the promotion of effective competition (para 56), AG Wahl clearly argues that

With respect to the exclusion relating to the acquisition or lease of real estate, understood in the broad sense, I believe that it can only refer to existing assets. Indeed, a tender under the application of the rules on public procurement will have little purpose when referred to the lease or sale of an existing and well determined bulding, which is inappropriate for a confrontation with others because of its unique character. Furthermore, it appears from some preparatory works that the exclusion of contracts for lease or purchase of real estate was initially motivated by the local and non cross-border nature of these contracts. However, given that the activities in question involve the future construction of real estate and, therefore, the execution of works, the tendering process and transparency required by these rules are not inappropriate at all and therefore should be applied. Further, in my view, the reference that the provisions in question make ​​to "other (immovable) property" should be understood in the sense that it relates to assets other than land and buildings, and not to goods whose construction has yet to be conducted. [...] In the event that a public administration chooses, within the framework of the installation of certain services, for a formula for the purchase or lease of a work to be constructed, this operation shall be subject to the procurement procedures established by the relevant regulation (Opinion in C-213/13 at paras 60 and 61, own translation from Spanish, references ommitted and emphasis added).

 

This reasoning must be shared, given the need to interpret the exclusions to the Directives in a restrictive manner (as the AG stresses in his Opinion, at para 58). Incidentally, it is also interesting to stress that in AG Wahl's Opinion, the fact that the aggregated consideration for the lease of the future building does not cover the costs of its construction is insufficient to alter any conclusion as to the existence of a works contracts that should have been tendered under the relevant EU rules (para 80).

 

In my view, this is an important case, as the adoption of the interpretation suggested by AG Wahl would come to limit the possibilities to exclude certain types of contracts that fall within the broad category of public-private cooperation from the remit of the procurement directives, and seems to put some pressure on the (increased) use of either design contests or full-fledged procurement procedures (probably, from now on, the competitive procedure with negotiation under art 29 dir 2014/24) when contracting authorities seek to have dedicated buildings constructed. Let's hope that the CJEU follows this Opinion.

Has Directive 2014/24 come too late for horizontal in-house provision? (C-15/13)

In its recent Judgment in case C-15/13 of 8 May 2014 Datenlotsen Informationssysteme, the CJEU has addressed a so-called 'horizontal' in-house provision of goods and rejected the proposal of AG Mengozzi to exclude it from the application of Directive 2004/18 (see comment here).

 

Indeed, the CJEU has ruled that

Article 1(2)(a) of Directive 2004/18 (...) must be interpreted as meaning that a contract for the supply of products concluded between (i) a university which is a contracting authority and whose purchases of products and services are controlled by a German Federal State, and (ii) an undertaking under private law, owned by the Federation and by Federal States, including the abovementioned Federal State, constitutes a public contract for the purposes of that provision, and must therefore be subject to the public procurement rules laid down in that directive.

This surely is the most accurate interpretation of the current 'in-house' exception provision under Directive 2004/18 but arrives slightly too late in view of the fact that article 12(2) of Directive 2014/24 creates that exception. In my view, cases like this one indicate the problems of inter-temporal consistency of EU public procurement rules (and other EU Economic Law provisions more generally) and suggest that there may be scope for a revision of the current rules on the need to conclude cases such as this when new rules are in operation.

 

Germany may have transposed Directive 2014/24 by now and, in that case, the re-tendering of the contract would probably be completely unnecessary--leaving the challenger with a 'mere' right to financial compensation that may not amount to much more than the direct costs of participating in the tender. In such case, the interpretation provided by the CJEU would have come at a large cost and provide limited benefits.

 

In my view, this should be food for thought and the possibility to dismiss requests for a preliminary ruling when the EU rule to be interpreted becomes de facto obsolete should be considered in the future.

Osei-Afoakwa's Paper on Transparency and Procurement

In a recent paper on transparency and public procurement, Dr Osei-Afoakwa presents a very passionate defence of maximising transparency in procurement for the purposes of combating corruption ["How Relevant is the Principle of Transparency in Public Procurement?" (2014) Developing Country Studies 4(6): 140-146]. 

Given my personal view that transparency in procurement (in the EU) is excessive and potentially self-defeating (see here and here), I read it with some skepticism. 

However, I have been glad to discover a section where the advocation of transparency is subjected to some counter-arguments. In my view, the most interesting ones are summarised as follows:

With reference to transparency as it affects public procurement, the increased knowledge associated with transparency may prove counterproductive. According to Jenny (2005) unmitigated transparency may breed anticompetitive practices, facilitate tacit collusion among the tenderers and thereby foment corruption. Under certain circumstances, the bureaucracy associated with the need to provide more information may indeed assist bribe givers to identify potentially corrupt officials (Bac, 2001). Bac (2001) argues that, this may facilitate corruption by enabling easy identification of people with whom “connection” may be established for the purpose of corrupt practices. In addition, knowledge acquired by potentially corruptible officials through transparency measures will enable them to learn the “ways and means” of perfecting and promoting the art of corruption.

Moreover, transparency for the sake of it is not a final-one-stop cure for the corruption in procurement syndrome. It must be supported by other corruption-reducing imperatives including assurance of effective competition and efficiency in managing public resources (Beth, 2005). Nowadays, as indicated by policy developments and experience in advanced countries spearheaded by the United States, the OECD and WTO, and reflected in “internationally shared norms”, effective competition is being maintained through the international trade liberalisation crusade (Anderson and Kovacic, 2009).In addition, sometimes unmitigated transparency may be at variance with other requirements of good governance. It is therefore important to establish an appropriate balance between transparency and other tenets of good governance by ensuring that information is released with due regard to established rules (Wittig, 2005). Thus absolute, unmitigated transparency may not be always desirable. The degree of transparency and openness should be adapted accordingly to suit the nature, status and value of recipient of information, the stage of the procurement cycle, the sensitivity of information, the size of the contract and the nature of the item to be procured. Therefore it becomes necessary to time the release of information to suit the nature, status and value of recipients (emphasis added).

Overall, the paper is interesting food for thought for anyone interested in the difficult balance between transparency and effective competition in public procurement. 

The new Directive on Concessions is basically unnecessary, but creates red tape, duplication & legal uncertainty (Dir 2014/23)

I have been working on the preparation of a commentary to the first part of the new Directive 2014/23 on the award of concession contracts [OJ L 94, 28/03/2014, p. 1–64] and have realised that, unfortunately, it has indeed become a basically unnecessary piece of EU legislation that creates significant red tape and muddles an already complicated area of EU Economic Law.

Unfortunately, as I anticipated [What Need and Logic for a New Directive on Concessions, Particularly Regarding the Issue of Their Economic Balance? (2012) European Procurement & Public Private Partnership Law Review 2/2012: pp. 94-104], most of the general provisions of Directive 2014/23 are a copy (or a 'Frankenstein copy') of provisions already available in other procurement Directives and, mainly, in Directive 2014/24 on public sector procurement. Such a duplication makes me think that the EU legislator would indeed have been better off by just including a limited set of specific provisions dealing with concession contracts within Directive 2014/24. By not doing so, it has created unnecessary duplication and complication.

As clear evidence of the basic unnecessity of Directive 2014/23, suffice it to stress that only 10 of its first 29 articles include specific rules for concession contracts (and, only 5 articles of those 10 are exclusively relevant for concession contracts, while the other 5 are slight modifications of general rules). All other articles are simply a repetition of provisions of other Directives. The table below clarifies this assessment. Hopefully Member States will take this significant duplication into account and will adopt a sensible (unified) approach in the transposition of Directives 2014/23, 2014/24 and 2014/25 to their domestic legal systems before April 2016, avoiding unnecessary repetitions.

 

 

ECLI and the new method of citing case law of the CJEU

The Court of Justice of the European Union is in the process of changing the way its Judgments are reported (now only electronically and in monthly sets) and cited. A transition period has started and the movement towards full use of the ECLI (European Case-Law Identifier) referencing system should be completed within the first semester of 2014.

This change is fundamentally oriented towards enhancing the usability of the case law as an enriched information source, facilitating the introduction and use of metadata in citations and the searchability of European case law. All these changes should be welcome and, if possible, pushed forward so that Member States also adopt ECLI citation quickly.

GC hints at a reduction of the burden of motivation of administrative decisions under EU law (T-319/11)

In its Judgment of 8 April 2014 in case T-319/11 ABN Amro Group v Commission, the General Court has indicated that the context in which an administrative decision is adopted may reduce the burden of motivation imposed on an institution when it deals with undertakings as interested parties, particularly when the alleged failure to provide sufficient motivation concerns a relatively secondary matter.

 

In the context of the judicial review of a State aid Decision adopted by the European Commission in the recapitalisation of ABN Amro by the Dutch State, the challengers of the Decision argued that the Commission had breached its duty of good administration and, more especifically, its obligation to provide reasons for the rejection of certain commitments linked to the restructuring of the bank.

 

Taking a pragmatical approach to the issue of whether the succint explanations provided by the Commission allowed the interested bank to assess its legal position, and whether the general motivation of the Decision was sufficient to discharge the requirements of the duty of good administration, the GC ruled that

138 [...] referring, by analogy, to the case-law according to which the reasons given for a measure adversely affecting a person are sufficient if that measure was adopted in a context which was known to that person and which enables him to understand the scope of the measure concerning him (see Case C‑417/11 P Council v Bamba [2012] ECR, paragraph 54 and case-law cited), it cannot be accepted in this case that the reasons stated in the contested decision do not meet the requisite legal standard because the decision does not discuss the alternative measures proposed by ABN Amro during the investigation procedure and rejected by the Commission (T-319/11 at para 138, emphasis added).

In my view, this Judgment can have interesting and positive implications if it is properly carried through to other areas of EU administrative law where, to date, the CJEU has adopted a much more demanding approach. In particular, I think that this incipient string of case law can be very helpful in the area of public procurement, where the current state of the law imposes what I deem as excessive debriefing obligations on the basis of the duty to provide reasons--which, in turn, result in a very dangerous and detrimental transparency in public procurement settings [for discussion, see "The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives", University of Leicester School of Law Research Paper No. 13-11]. I therefore hope that such pragmatical approach will be further developed and properly adjusted to other areas of EU Economic law, such as public procurement.

CJEU further pushes for a universal application of the 'market economy private investor test' (C-224/12)

In its Judgment of 3 April 2014 in case C-224/12 Commission v Netherlands and ING Groep, the Court of Justice of the European Union (CJEU) has followed its antiformalistic approach to the application of the 'market economy private investor test' (see comment to its precedent in C-124/10 EDF here) and has basically consolidated its role as a universal test in the application of Article 107(1) TFEU [for discussion, see A Sanchez Graells, “Bringing the ‘Market Economy Agent’ Principle to Full Power” (2012) 33 European Competition Law Review 35-39].

In its ING Groep Judgment, the CJEU determined that the Commission could not evade its obligation to assess the economic rationality of an amendment to the repayment terms of the aid granted by the Dutch State to ING in the light of the private investor test solely on the ground that the capital injection subject to repayment itself already constituted State aid--since only after such an assessment would the Commission be in a position to conclude whether an additional advantage within the meaning of Article 107(1) TFEU had been granted.

 

In my view, this general approach insisting on the application of the 'market economy private investor test' regardless of the prior existence of State aid in itself must be praised, and the very rotund terms in which the CJEU has stressed its importance deserve some emphasis.

 

Indeed, the CJEU has built up on the arguments already indicated in C-124/10 EDF and, following the advice of AG Sharpston, has made it clear that:

30 [...] in view of the objectives pursued by Article [107(1) TFEU] and the private investor test, an economic advantage must, even where it has been granted through fiscal means, be assessed in the light of the private investor test if, on conclusion of an overall assessment, it appears that, notwithstanding the fact that the means used were instruments of State power, the Member State concerned has conferred that advantage in its capacity as shareholder of the undertaking belonging to it.

31 It follows that the applicability of the private investor test to a public intervention depends, not on the way in which the advantage was conferred, but on the classification of the intervention as a decision adopted by a shareholder of the undertaking in question.

32 Furthermore, that test is one of the factors which the Commission is required to take into account for the purposes of establishing the existence of aid and is therefore not an exception that applies only if a Member State so requests, where the constituent elements of State aid incompatible with the common market referred to in Article [107(1) TFEU] have been found to be present (see Commission v EDF, paragraph 103).

33 Consequently, where it appears that the private investor test may be applicable, the Commission is under a duty to ask the Member State concerned to provide it with all relevant information enabling it to determine whether the conditions governing the applicability and the application of that test are met (see Commission v EDF, paragraph 104).

34 The application of that case-law cannot be compromised merely because, in this case, what is at issue is the applicability of the private investor test to an amendment to the conditions for the redemption of securities acquired in return for State aid.

35 Indeed, as the Advocate General has stated [...] any holder of securities, in whatever amount and of whatever nature, may wish or agree to renegotiate the conditions of their redemption. It is, consequently, meaningful to compare the behaviour of the State in that regard with that of a hypothetical private investor in a comparable position (C-224/12 at paras 30-35, emphasis added).

In my view, this Judgment must be welcome as a good addition and (further) clarification to C-124/10 EDF in terms of the universal applicability of the  'market economy private investor test' and, as I already indicated, it would be interesting to see this criterion extended to other areas of EU Economic Law and, particularly, public procurement, where the control the (disguised) granting of State aid is crying for further developments of the 'market economy private [buyer] test' [as I stressed in "Public Procurement and State Aid: Reopening the Debate?"(2012) 21(6) Public Procurement Law Review 205-212].

Recent CJEU and GC views on the "economic advantage" element in State aid cases (C-559/12 and T-150/12)

In two recent cases, the Court of Justice of the EU (CJEU) and the General Court (GC) have reassessed the element of "economic advantage" required in the prohibition of State aid in Art 107(1) TFEU in connection with State guarantees in France and Greece. The element of advantage has ranked rather high in the list of issues recently submitted to public consultation by the European Commission as part of the forthcoming new Notice on the concept of State aid. Hence, it seems interesting to have a look at these cases.


Firstly, in its Judgment of 3 April 2014 in case C-559/12 France v Commission (La Poste), the CJEU assessed the Commission's previous findings regarding the existence of an unlimited guarantee granted by the French State to its postal operator (La Poste) as part of its status as an establishment of an industrial and commercial character (établissement public à caractère industriel et commercial, ‘EPIC’)--which entails a number of legal consequences, including the inapplicability of insolvency and bankruptcy procedures under ordinary law--and which ultimately constituted State aid within the meaning of Article 107(1) TFEU. The Commission's assessment had been endorsed by the GC (see comment here). The CJEU concurs with the substantive assessment of both the Commission and the GC in an interesting reasoning (and after having addressed a number of issues concerning the burden of proof that, in the end, remain largely marginal in view of the consolidation of a presumption of advantage in the case of unlimited State guarantees):

94 [...] it must be borne in mind that the concept of aid embraces [...] measures which, in various forms, mitigate the charges which are normally included in the budget of an undertaking and which, therefore, without being subsidies in the strict sense of the word, are similar in character and have the same effect [...] Also, State measures which, whatever their form, are likely directly or indirectly to favour certain undertakings or are to be regarded as an economic advantage which the recipient undertaking would not have obtained under normal market conditions, are regarded as aid [...].
95 Since State measures take diverse forms and must be analysed in terms of their effects, it cannot be ruled out that advantages given in the form of a State guarantee can entail an additional burden on the State [...].
96 As the Court has already held, a borrower who has subscribed to a loan guaranteed by the public authorities of a Member State normally obtains an advantage inasmuch as the financial cost that it bears is less than that which it would have borne if it had had to obtain that same financing and that same guarantee at market prices [...].
97 From that point of view, moreover, the Commission Notice on the application of Articles [107 and 108 TFEU] to State aid in the form of guarantees specifically provides[...] that an unlimited State guarantee in favour of an undertaking whose legal form rules out bankruptcy or other insolvency procedures grants an immediate advantage to that undertaking and constitutes State aid, in that it is granted without the recipient thereof paying the appropriate fee for taking the risk supported by the State and also allows better financial terms for a loan to be obtained than those normally available on the financial markets.
98 It is apparent, [...] a simple presumption exists that the grant of an implied and unlimited State guarantee in favour of an undertaking which is not subject to the ordinary compulsory administration and winding-up procedures results in an improvement in its financial position through a reduction of charges which would normally encumber its budget.
99 Consequently, in the context of the procedure relating to existing schemes of aid, to prove the advantage obtained by such a guarantee to the recipient undertaking, it is sufficient for the Commission to establish the mere existence of that guarantee, without having to show the actual effects produced by it from the time that it is granted (C-559/12 at paras 94 to 99, emphasis added). 

Secondly, in its Judgment of 9 April 2014 in case T-150/12 Greece v Commission (aid to cereal production), the GC has also assessed a Greek guarantee scheme to cereal producers and has upheld the Commission's view whereby the conditions attached to such guarantee--i.e. initially, the acceptance of crops as collateral (although the existence of the guarantee rights and the conditions for their execution were not automatic) and later the potential charge of a 2% premium (again, which charge was not automatic)--did not dissipate the existence of an economic advantage for the beneficiaries of the guarantee scheme. The reasoning of the GC (in French) in paras 82 to 97 is interesting to grasp the unconditionality required of any measures intended to eliminate the (presumed) advantage that State guarantee schemes provide.

In my view, both Judgments are in line with the content of the Commission's Draft Notice on the concept of State aid (and, in particular, paras 111 to 117) and it seems now clear that unlimited State guarantees or State guarantees without actual (automatic) conditions (such as collateral and premia to be paid by the beneficiaries) will be ruled as being against Art 107(1) TFEU as a result of the iuris et de iure presumption of their conferral of an advantage.

AG proposes to reduce safe harbour for directly awarded public contracts subjected to prior transparency (C-19/13)

In his Opinion of 10 April 2014 in case C-19/13 Fastweb, Advocate General Bot has proposed an interpretation of Art 2d(4) of Directive 89/665 (as amended by dir 2007/66) that would seriously erode the safe harbour (apparently) created by that provision for contracts that have been directly awarded by the contracting authority (without competition), provided that the following cummulative conditions are met: 

 

— the contracting authority considers that the award of a contract without prior publication of a contract notice in the Official Journal of the European Union is permissible in accordance with Directive 2004/18/EC,

 — the contracting authority has published in the Official Journal of the European Union a notice (...) expressing its intention to conclude the contract, and,

 — the contract has not been concluded before the expiry of a period of at least 10 calendar days with effect from the day following the date of the publication of this notice (emphasis added).

 

The key element of his Opinion is, in my view, his interpretation of the extent to which the discretion of the contracting authority in 'considering' that it can avail itself from the possibility to award a contract without prior publication of a contract notice is subject to judicial review. A literal reading of the provision seems to indicate that the standard of review is very low (if not inexistent) and that, provided the transparency requirement and standstill period are respected, the directly awarded contract cannot be declared ineffective--leaving the challenging tenderer with the only option of seeking compensation for damages.

 

However, AG Bot argues that this would create a paradox and opposes such a literal interpretation of the provision, subjecting that exercise of discretion to effective (full) judicial review. As AG Bot argues,

74. Indeed, it should be noted that Directive 89/665 is specifically designed to increase the guarantees of transparency and non-discrimination in the context of procedures for the award of public contracts so that the injured economic operator receives complete legal protection. Moreover, it should also be remembered that the European Union legislature opted to strengthen in Directive 2007/ 66 the effectiveness of review procedures to combat the illegal direct award of public contracts and to protect potential tenderers against the arbitrariness of the contracting authority.

 

75 . Secondly, [if the judgment made by the contracting authority was not open to judicial review], in these circumstances, the contracting authority [would be allowed] to directly award a contract in contravention of the requirements laid down in Directive 2004/18, by serving minimum formalities and exposing itself to a minimum punishment, giving rise to potential abuses of the rights thereby recognized (AG Bot in C-19/13, at paras 74-75, own translation from Spanish and references omitted).

 

Further, AG Bot considers that

One must not lose sight of the dact that the maintenance of the effects of the contract provided for in Article 2d paragraph 4 of Directive 89/665 is based on the good faith of the contracting authority and seeks to preserve legal certainty for the contracting parties. The European Union legislature expressly recognized this in the twenty-sixth recital of Directive 2007/66, by insisting on the need to "avoid legal uncertainty which may result from ineffectiveness" of the contract. In addition, the Court has expressly admitted this in the judgment in Commission / Germany [EU:C:2007:432, para 33] (AG Bot in C-19/13, at para 82, own translation from Spanish and emphasis added).

In view of these (and other) considerations, AG Bot proposes that the CJEU interprets that

Article 2d , paragraph 4 of Council Directive 89/665 (...) read in the light of the principle of equal treatment and the right to effective judicial protection, must be interpreted as not precluding that a Member State grants the body responsible for appeal proceedings the freedom to appreciate the extent to which a contract awarded without prior publication of a notice in the Official Journal of the European Union must be declared ineffective when it finds that, despite the publication in the Official Journal of the European Union of a notice stating its intention to conclude the contract and the observance of a minimum standstill period of ten days, the contracting authority has violated in a deliberate and intentional way the advertising standards and the requirements of opening up to competition laid down in Directive 2004/18 (own translation from Spanish, emphasis added).

Basically, AG Bot argues against an automatic exclusion of the possibility to declare contracts ineffective under Art 2d(4) of Directive 89/665 and advocates for an extension of the scope of judicial review in order to assess whether contracting authorities acted in good faith. In my view, this potential development in the interpretation of EU procurement rules is troubling because it points towards a tendency to include subjective assessments in procurement review procedures (see Art 18 Directive 2014/24) and departs from the standards of judicial review: manifest error in law or in fact, and abuse of power/procedure.

 

The same result [ie inapplicability of the safe harbour of art 2d(4) of dir 89/665] could be achieved by simply stating that the first condition (that is, that the contracting authority considers that the award of a contract without prior publication is permissible in accordance with Directive 2004/18) is subject to that 'consideration' not being manifestly incorrect in law or in fact, or that the contracting authority has not abused its powers in the award of the contract.

I would prefer the CJEU to rule in that regard without embarking on analyses related to the good faith or otherwise of the contracting authority. Let's hope that the final judgment in the Fastweb case does not open the door to a myriad of complications in order to determine such type of subjective elements.

US GAO publishes report on urgency contracting (GAO-14-304)

The US Government Accountability Office has published an interesting report on the use of urgency contracting by the  Departments of Defense (DOD) and State and the U.S. Agency for International Development (USAID) in the period 2010-2012. The report is interesting in that it shows the relevance of having accurate data in order to carry out oversight efforts such as this one (in their research, they had access to rather poor and incorrect data) and, more importantly, because it clearly points out certain implementation problems that are similar to the ones that can be expected under the EU rules--and, looking at the future, under art 32(2)(c) of Directive 2014/24. It is interesting to read it ahead of its (re)transposition.

CJEU stresses 'consumer interest' test under Art 34 TFEU and finds Spain guilty of "gold-plating" in transport services' regulation (C-428/12)

In its Judgment of 3 April 2014 in case C-428/12 Commission v Spain (new transport trucks) (only available in French and Spanish) the Court of Justice of the European Union (CJEU) has found Spain in breach of Art 34 and Art 36 TFEU due to the imposition of a disproportionate requirement in the system of authorisation of road transport services by companies not primarily engaged in road transport. In my view, the case is interesting because it deals once again with claims of justification based on road safety, in what seems to have become a topic in EU free movement of goods law [see C-110/05 Commission v Italy (mopeds) and, very recently, C-639/11 Commission v Poland (right steering wheel cars), discussed here and here].

 

In the case at hand, Spain had adopted regulations for the authorisation of companies providing ancillary road transport services that required that the age of the first heavy (ie above 3,500 kg) vehicle in the fleet of a (newly authorised) company did not exceed five months from its first registration. The Commission considered that this requirement infringed Art 34 TFEU and was not justified under Art 36 TFEU. One can wonder why the case was brought under this legal basis instead of the seemingly more appropriate of Art 49 TFEU (given that the system was concerned with a 'first' or new authorisation and, consequently, seemed to affect newly established transport companies particularly) or of Art 56 TFEU (on the provision of services, as the effect of the restriction surely would limit the offer of road transport services), although the (greater?) difficulty in justifying the existence of a cross-border impact and the exclusion of transport from the 2006 Services Directive may have played a role in the 'strategic' choice of legal basis by the Commission.

 

Taking the (uneasy?) approach of the restriction of the free movement of goods under Art 34 TFEU, the Commission considered that i) the Spanish rule constituted a measure having equivalent effect to a quantitative restriction on imports, ii) that such provision had the effect of restricting imports of heavy goods vehicles more than five months old from other Member States, and iii) that it violated the principle of mutual recognition and impeded access to the Spanish market, which had the effect of severely restricting the use of the vehicles concerned. The Commission also considered that neither road safety or environmental protection justifications could exempt the controverted rule. The CJEU rather keenly accepts the approach taken by the Commission and makes some interesting findings, not least consolidating the 'market access' test approach to the enforcement of Art 34 TFEU:

29 [...] it is clear from the case law that a measure, even if it does not have the purpose or effect of treating less favorably products from other Member States, is included in the concept of a measure equivalent to a quantitative restriction within the meaning of Article 34 TFEU if it hinders access to the market of a Member State of goods originating in other Member States (see, to that effect, Commission / Italy, C-110/05, EU: C: 2009:66, paragraph 37).

30 In this regard, the Court observes that the prohibition of use as the first vehicle in the fleet of vehicle with a maximum authorized mass exceeding 3.5 tonnes and more than five months old from the date of its first registration may have a considerable influence on the behavior of firms wishing to use a vehicle of this nature for complementary private transport, behavior which in turn can affect access of that product to the market of the Member State in question (C-428/12 at paras 29-30, own translation from Spanish).

The CJEU also consolidates the 'consumer interest' test in order to assess restrictions to market access:

31 [...] businesses, knowing that the use authorized [...] of a vehicle with a maximum authorized mass exceeding 3.5 tonnes and more than five months old from the date of first registration is restricted, will only have a limited interest in buying a truck like this for their complementary private transportation activities (see, to that effect, Commission / Italy EU: C: 2009:66, paragraph 57, and Mickelsson and Roos, EU: C: 2009:336, paragraph 27) (C-428/12 at para 31, emphasis added, own translation from Spanish).

The CJEU dismisses the claims for justification made by Spain, indicating that road safety could be protected by less intrusive measures (such as technical inspections, already in place) and also interestingly dismisses arguments based on the solvency of companies:

40 As regards [...] the other explanations given by the Kingdom of Spain [... such as] the proof of greater solvency of the company or even fostering better exploitation of vehicles for private complementary transport do not constitute reasons of public interest within the meaning of Article 36 TFEU or mandatory requirements within the meaning of the Court of Justice's case law (C-428/12 at para 40, own translation from Spanish).

In my opinion, the case is interesting because it consolidates the 'new' approach to the enforcement of Art 34 TFEU under a 'market access' test applied thorugh a 'consumer interest' (sub)test. It is also interesting because it continues to perpetuate the 'supremacy' of free movement of goods rules as the main analytical framework for the protection of the fundamental freedoms impinging the internal market.