Interesting AG Opinion on treatment of on-going criminal cases & self-cleaning under 2004 rules (C-178/16)

In his Opinion of 21 June 2017 in Impresa di Costruzioni Ing. E. Mantovani and Guerrato, C-178/16, EU:C:2017:487 (not available in English), Advocate General Campos Sanchez-Bordona analysed an Italian case concerning the interaction between mandatory and discretionary exclusion grounds related to an undertakings' director's criminal record, as well as the self-cleaning measures adopted by the undertaking as it aimed to carry on participating in tenders for public contracts. The case requires the interpretation of the 2004 EU public procurement rules, but its rationale will be relevant in the future interpretation of Art 57 of Directive 2014/24.

In the case at hand, a former director (Mr B) of a tenderer (Mantovani) was under criminal investigation for having run a scheme of fraudulent invoices, and it was publicly known (vox populi) that he had entered into a plea bargain deal. When Mantovani submitted a tender for the construction of a new prison in Bolzano (the irony is inescapable...), and as part of the documentation aimed at demonstrating its good personal and professional standing, it submitted a self-certification indicating that Mr B had ceased his position as president of the board of directors 4 months prior to the start of the tender procedure and that, to the best of Mantovani's knowledge, no conviction by final judgment or plea bargain deal had been had been adopted.

Relying on the public information of which it was aware, the contracting authority requested a copy of Mr B's criminal record. It revealed that a sentence based on the plea bargain deal had become final after the submission of the self-certification by Mantovani (the sentence being adopted only the day after the submission of the first self-certification by Mantovani). The contracting authority decided to exclude Mantovani, which challenged this decision on the basis that: (a) the conviction had been published and become final after the submission of the self-certification, and (b) that it had taken remedial action to severe all ties with Mr B (including cessation of his directorship, restructuring of the board of directors, repurchase of Mr B's shares in Mantovani, and suing Mr B for director's liability).

Interestingly, the contracting authority asked for consultation to the Italian Anti-Corruption Agency (ANAC), which advised that, even if it could be found that Mantovani did not submit a false self-declaration (which onus probandi fell on the contracting authority), and in particular due to the (technical) fact that the conviction was not final at the time of the self-declaration, the contracting authority has a duty to assess the effectiveness of the self-cleaning measures and it is conceivable that Mantovani's integrity is compromised due to the fact that it had not taken positive steps to make the conviction know to the contracting authority once it became official and final. In ANAC's view, and according to Italian case law, failure to actively keep the contracting authority informed of developments in a criminal investigation (where there is an eventual conviction) reveals the absence of disengagement with the former director, and is thus a violation of the duty of loyal cooperation that can justify its exclusion from the procurement procedure.

The contracting authority decided to keep Mantovani's exclusion, and this was challenged. The assessment of the case is complicated by the peculiarities of the Italian rules (which triggered significant debate between the interveners before the ECJ, and which AG Campos rightly  considers the Court incompetent to rule on, see paras 37-38), as well as by the fact that the new rules on self-cleaning are not applicable ratione temporis, which creates some vacuum in the framework for the assessment of the contracting authority's exercise of discretion in this case. However, AG Campos' assessment of the case offers some interesting interpretive pointers. In my view, these are the relevant points of the Opinion:

  • The key issue concerns the contracting authority's decision to exclude Mantovani not directly on the basis of the criminal conviction of Mr B, but rather on Mantovani's own failure to keep the contracting authority informed once that conviction was official. This thus requires an assessment of compatibility with the ground of exclusion based on the existence of evidence that the economic operator is guilty of grave professional misconduct, which renders its integrity questionable [Art 45(2)(d) Dir 2004/18 and now Art 57(4)(c) Dir 2014/24] (paras 42-46).
  • Member States have significant discretion to regulate the conditions applicable to discretionary exclusion grounds, and this is only limited by the impact that such grounds and their exercise can have on freedom of establishment and freedom to provide services. Such impact needs to be subjected to a balancing exercise vis-a-vis the public interest in the probity of the procurement process, under a proportionality assessment (paras 51-53).
  • Under that analytical framework, nothing prevents an extension to the economic operator of (some of) the consequences of the criminal behaviour of one of its former directors, and it is adequate to make the burden of proving effective disengagement and adoption of effective remedial measures (ie, self-cleaning) on the undertaking (paras 54-65).
  • It is adequate, and certainly not incompatible with EU law, to treat the economic operators' silence (or the omission of an implicit duty to keep the contracting authority informed based on a more general duty of loyal cooperation) as evidence of professional misconduct capable of justifying a decision to exclude it from the tender procedure. Where no documentary evidence exists that could allow for a pre-defined check of compliance with (or absence of) exclusion grounds -- notably, those concerning professional misconduct or failure to supply required/adequate/truthful information -- the contracting authority enjoys a broad degree of discretion to assess the circumstances and evidence potentially leading to an exclusion decision (paras 72-83).
  • Importantly, given that the exclusion of the economic operator is not automatic, but rather based on an ad casum assessment, and that such discretionary assessment is subjected to judicial review, this does not place the economic operator in a situation where it cannot defend its interests (para 84).

I think that AG Campos shows two interesting guiding principles that the ECJ should support in its Judgment in Impresa di Costruzioni Ing. E. Mantovani and Guerrato, as well as more generally in the future. First, that contracting authorities need to be given space to exercise discretion aimed at ensuring the probity of the procurement process. And, second and equally important, that the exercise of that discretion needs to be subjected to appropriate checks and balances, including an opportunity to challenge exclusion decisions under appropriate procedural guarantees.

In my view, this functional approach also stresses the need to create effective inter partes procedures for the economic operator and the contracting authority to exchange information prior to the exclusion decision being effective, as well as ensuring swift review of those decisions at a stage where they can still be undone (as the logic in Marina del Mediterraneo requires, see here). Thus, this supports, once more, the need to revise and reform the remedies directive, largely along the lines I drew in A Sanchez-Graells, "'If It Ain't Broke, Don't Fix It'? EU Requirements of Administrative Oversight and Judicial Protection for Public Contracts", in S Torricelli & F Folliot Lalliot (eds), Administrative Oversight and Judicial Protection for Public Contracts (Larcier, 2017, forthc)].