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.

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.

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

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

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

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

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

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