The Norwegian Supreme Court Gives its Final Word in the Fosen-Linjen Saga [guest post by Dag Sørlie Lund]

The Fosen-Linjen Saga has finally come to a close with the Norwegian Supreme Court’s Judgment. Dag Sørlie Lund* kindly provides a sharp summary of the case while we await for any official translations. His fuller critical assessment of the Judgment will be included in the EPPPL special issue we are working on.

The Norwegian Supreme Court Gives its
Final Word in the Fosen-Linjen Saga

The so-called Fosen-Linjen Saga has finally come to its long-awaited end by the judgment of the Norwegian Supreme Court of 27 September 2019, more than 6 years after the company AtB tendered for the procurement of ferry services between Brekstad and Valset in the County of Trøndelag.

The contract was initially awarded to the company Norled. The competitor, Fosen-Linjen, which was ranked as the runner-up, claimed Norled had been awarded the contract unlawfully, and managed to stop the signing of the contract through interim measures. In the interim measures procedure two errors were identified by the courts:

  1. AtB had not required the necessary documentation for the award criteria “environment”; and

  2. AtB had not verified the viability in Norled’s offer regarding fuel consumption (which was part of the criteria “environment”).

As a result of this, AtB decided to cancel the tender procedure, and restart the whole process.

Fosen-Linjen did not submit a new tender, but instead filed a law suit against AtB claiming damages for the positive interest, or, in the alternative, the negative contract interest. The negative contract interests essentially amounts to the costs of tendering (damnum emergens), while the positive contract interest essentially amounts to the loss of profit (lucrum cessans).

The Supreme Court’s judgment clarifies several key questions about public procurement law related to the threshold for damages, and for the requirement of causality between the breach and the damages. Furthermore, the ruling contains interesting assessments of legitimate grounds to cancel a tender procedure, and the significance of the fact that a tenderer submits an offer despite being aware of errors in the procurement documents for the possibility to receive damages. The judgment is unanimous for all but the question of causality for damages for the negative contract interest, where one justice had a concurring opinion with a slightly different approach. For the purposes of this summary, I will not go further into the differences in the concurring opinion.

The Principle of State liability for breaches of EEA Law

The Supreme Court starts out by grounding the liability for damages in the general principle of State liability for breaches of EEA law. According to this principle an EEA State may be held liable for breaches of its obligations where the following three conditions are met:

  1. The breached provision of EEA law must be intended to confer rights on individuals and economic operators;

  2. The breach must be considered as sufficiently serious; and

  3. There must be a direct causal link between the breach of the obligation in question and the damage suffered by the aggrieved party.

The first condition was clearly met, and the case before the Supreme Court thus mainly concerned the question of the threshold for receiving damages and what it takes to establish a direct causal link for damages for negative costs. A particularly disputed question in the Fosen-Linjen Saga, has been whether the threshold for damages for the negative and the positive contract interests is different. Under Norwegian law, it has traditionally been easier to receive compensation for the negative costs than for the positive costs.

The Positive Contract Interest

The Supreme Court rejected Fosen-Linjen’s claim for damages for the positive interest since there were sufficient grounds to cancel the tender procedure. In fact, there were two grounds for cancelling the procedure.

First, the Supreme Court considered that the identification of the two errors in the interim measures proceedings raised serious doubts about the lawfulness of the procedure. These doubts were considered as sufficient grounds to cancel the tender procedure.

Second, it was also considered that the fact that AtB did not require the necessary documentation for the award criteria “environment”, also constituted sufficient grounds to cancel.

Consequently, the Supreme Court concluded that since the cancellation was lawful, Fosen-Linjen could not receive damages for the positive contract interest. This part of the judgment is somewhat confusing, since it appears to consider the question of causality rather than the question of whether the breach was sufficiently serious: since the tender procedure was lawfully cancelled, no one could ever be awarded the contract, and thus no one would ever have a claim for the loss of profit.

This is particularly confusing since the Appeals Selection Committee of the Supreme Court had explicitly rejected the question of causality for the positive contract interest from being heard by the Supreme Court. This is all the more puzzling since the Supreme Court appears to have been aware of this distinction, noting that the cancellation did not exclude the possibility for damages for the negative contract interest, which shows that the question of liability was not conceptually excluded by the fact of the cancellation.

The Negative Contract Interest

As mentioned, the traditional approach in Norwegian torts law is that the threshold is lower when it comes to damages for the negative costs.

Based on its reading of case law from the CJEU and the EFTA Court, the Supreme Court held, however, that the test for receiving damages, regardless of the categorization of the damages as negative or positive costs, is whether the breach in question may be considered “sufficiently serious”. The Supreme Court outright rejected the suggestion that the threshold might be lower under Norwegian tort law.

In the assessment of whether a breach is sufficiently serious, the Supreme Court noted that it may not be required to demonstrate fault or fraud, although both subjective and objective factors included in the traditional assessment of liability under national tort law, may be relevant to take into account.

Same same, but different

Despite this description of the test for receiving damages, the Supreme Court emphasized that the norm could not be characterized as more or less strict than would otherwise follow from Norwegian tort law, but that the assessment may be somewhat different.

The Supreme Court identified the norm as a sliding scale where the crucial point appears to be the level of discretion enjoyed by the contracting authority – from wide to none at all.

The rule that was breached in the tender procedure – namely the obligation to require necessary documentation for an award criterion – was found to be clear and precise. Accordingly, the Supreme Court found that AtB was liable for the negative costs. In that regard, it was pointed out that AtB twice received questions that raised doubts as to the lawfulness of the award criteria, which combined with the consequences caused by the breach, led to the conclusion that the threshold of “sufficiently serious” was passed.

It’s worth noting that despite the fact that the Supreme Court rejected that a contracting authority might escape liability by claiming not to possess the necessary powers, knowledge, means or resources, it still considered the complexity of the public procurement rules indicated a certain restraint or caution in establishing liability.

Direct Causal Link

Concerning the question of a direct causal link between the breach and the damage, the Supreme Court asked whether the tenderer would have submitted an offer if they had known about the error committed.

Even though the fact that AtB had not required the necessary documentation for the award criteria “environment” was clearly visible for Fosen-Linjen, the Supreme Court considered that this criterion was met since AtB had considered the procurement documents to be lawful despite the fact that the error had been pointed out twice during the tendering procedure. This part of the judgment is also confusing, as it is not entirely clear why the subjective view of the contract authority is relevant when assessing the question of causality.

Unanswered questions

The Supreme Court thus disentangled many key questions about liability for breaches of procurement rules, but some issues remain unanswered. For example, the Supreme Court did not rule on the question of whether liability is conceptually possible where the tendering process should have been cancelled, but this doesn’t happen. Furthermore, as mentioned above, the question regarding direct causal link for damages for the positive interest was not accepted to be heard by the Supreme Court, so the particularities of that assessment was not further clarified. Considering the attention these questions have received through the Fosen-Linjen Saga, it is probably only a matter of time before these will materialize themselves in future cases, with new sagas in national courts and in Luxembourg.


Dag Sørlie Lund

Dag Sørlie Lund is part of our European and Competition law team. He has previously worked at the Department of Legal Affairs in the Ministry of Foreign Affairs, the EFTA Court, the EFTA Surveillance Authority (ESA), and as an attorney. He has experience in advising clients in EU/EEA and competition law, including state aid and public procurement law.

Dag has handled a number of cases concerning the EFTA Surveillance Authority, and has pleaded several cases before the Court of Justice for the European Union and the EFTA Court. Dag has lived in Spain, Belgium and Luxembourg, and speaks Spanish and English fluently.

Interesting Norwegian case on public procurement of health and social services and alleged discrimination of private enterprises against EU/EEA law (ESA 154/17/COL)


On 20 September 2017, the EFTA Surveillance Authority (ESA) decided to close the investigation of a complaint against Norway for the alleged unlawful discrimination of private enterprises and breach of the EEA rules on public procurement in the award of contracts for health and social services (that is, childcare services, management of nursing homes, hospitals, medical and other types of rehab, psychotherapy, professional addiction treatment, etc), on the basis that Norwegian national rules appeared to allow public entities to award those contracts exclusively to non-profit organisations (“ideelle organisasjoner”, according to the terminology used in Norwegian legislation).

The case thus concerned a set of issues closely linked to those decided by the Court of Justice of the European Union in Spezzino (C-113/13, EU:C:2014:2440/ CASTA (C-50/14, EU:C:2016:56) [for discussion, see the special issue of (2016) 11(1) EPPPL]. ESA dismissed the complaint both on procurement and on general EEA law grounds (ie Articles 32 and 39 of the EEA agreement, providing for an exemption for activities 'connected, even occasionally, with the exercise of official authority'; cfr Art 51 TFEU).

Regarding the procurement aspects of the complaint, ESA considered that the Norwegian rules fulfilled 'the legal requirements laid down in case-law exceptionally allowing national contracting authorities to directly award public contracts having as their subject matter services in the social and health sector to non-profit organisations' (ESA, 154/17/COL, para 5). Regarding general internal market law, ESA concluded that the Norwegian rules on direct award 'applied to activities connected directly and specifically with the exercise of official authority, in particular those necessary to operate child welfare institutions and requiring the adoption of coercive measures, as specified in Norwegian legislation. Ancillary activities such as works and/or the provision of catering, laundry, transport and similar services remain subject to the EEA rules on public procurement' (idem). 

In this post, I reflect on both lines of argumentation concerning the exemption of the award of contracts for the provision of healthcare and social services from procurement and EEA law. Before engaging with the details , it is worth noting that the case was initiated in 2015 and thus concerned Norwegian law transposing the 2004 EU/EEA public procurement rules (Dir 2004/18/EC, in particular for the 'old' Part II-B services). However, in my view, the decision by ESA raises some issues that will remain relevant for the procurement of healthcare and social services under the light-touch regime of Directive 2014/24/EU (esp Art 77)--on which I offer some concluding thoughts.

The Norwegian reservation and exclusion of contracts

In the case at hand, ESA had to assess the compatibility with general EEA law and with EU/EEA procurement law of Norwegian legislation allowing for the reservation of contracts for the provision of health and social services to non-profit organisations, to the exclusion of private (profit-seeking) enterprises. In particular, the analysis concerned the compatibility or not with EEA law of 'Section 2-1 (3) and Section 1-3(2) lit. k of the Norwegian Regulation No. 402 of 7 April 2006 on public procurement (Forskrift No. 402 om offentlige anskaffelser). While the first legal basis contains a general authorisation to privilege non-profit organisations in award procedures, the second legal basis relies on a presumed exercise of official authority required to provide the services in question' (ESA, 154/17/COL, para 1).

In particular, the relevant provisions established that Norwegian contracting authorities did not have to comply with the relevant procurement rules for the award of 'contracts regarding the execution of health and social services' to 'an ideal organisation' (ie “ideelle organisasjoner”) (Section 2-1 (3)); and that those rules did not apply to 'contracts involving the exercise of official authority which can be exempted in line with the EEA Agreement Article 39, cf. Article 32' (Section 1-3(2) lit. k) (see ESA, 154/17/COL, para 3.2). The first rule was based on the limited obligations derived from Dir 2004/18/EC for services covered by category 25 of its Annex II-B (where there was no presumption of cross-border interest in their provision), whereas the second one is clearly linked to the carve-out in the scope of the EEA Agreement for the exercise of official authority. Given that the rules had different legal bases, ESA decided to assess them separately ESA, 154/17/COL, para 4).

Reservation of contracts to non-profit organisations

In order to assess the compatibility with EU/EEA procurement law of the possibility to directly award contracts to 'ideal organisations', ESA relies on the case law of the Court of Justice in Spezzino and CASTA (above), which it interprets as establishing the following principles:

  • EU/EEA law does not categorically prohibit the privileged treatment of non-profit organisations in award procedures (ESA, 154/17/COL, para 4.1.2).
  • The legal requirements derived from the case law for a privileged treatment of non-profit organisations in award procedures are as follows (ESA, 154/17/COL, para 4.1.2):
    • the service must be exclusively or, at least predominantly, a non-priority service covered by Annex II-B of Dir 2004/18/EC;
    • the service in question must have some cross-border relevance in order to trigger the application of the general principles of EU public procurement law, which is of limited relevance in the context of EEA law, where EEA States 'could, in principle, adopt a less strict set of rules than those foreseen in Directive 2004/18, allowing a preferential treatment of voluntary organisations, provided that there is no discrimination based on nationality';
    • there has to be an objective justification consisting in an interest to protect human health and life, and 'it is for the EEA States ... to decide on the degree of protection which they wish to afford to public health and on the way in which that degree of protection is to be achieved'; 
    • the award must contribute to the social purpose and the pursuit of the objectives of the good of the community and budgetary efficiency, which is subject to a case by case analysis; and
    • the organisations beneficiaries of privileged treatment are not allowed to pursue objectives other than the good of the community and budgetary efficiency, and are not allowed to make any profit as a result of their services apart from reimbursement of the variable, fixed and on-going expenditure to provide them, or to procure any profit for their members.
    • Finally, resort to this exception from the general rules on public procurement finds its limits in the prohibition of abuse of rights.

In my view, the interpretation of the Spezzino/CASTA case law by ESA is largely adequate, but it seems to omit an explicit assessment of the importance given in those cases to the Italian constitutional framework, which created a special protection for third sector voluntary organisations at a constitutional level (Spezzino, EU:C:2014:2440, para 9; CASTA, EU:C:2016:56, para 9, for further discussion, see here and here). It would have been interesting for ESA to express a view on whether such constitutional requirements form part of the case law or not (implicitly, it seems the view is that they do not) and how they applied to the Norwegian context (in particular, in view of the absence of a specified constitutional position of such 'ideal organisations', see below).

In applying the legal requirements derived from the Spezzino/CASTA line of case law, ESA followed a light-touch approach and considered that all of them were met (ESA, 154/17/COL, para 4.1.4). In particular, ESA stressed that the Norwegian Government considered that

Section 2-1(3) of the Norwegian Regulation aims to ensure that non-profit organisations can continue to provide health and social services ... [and that] non-profit organisations are an important alternative to common service providers. A combination of public, commercial and non-profit providers of health and social services shall ensure a diversified offer, designed to fulfil the different needs of the population. The Authority infers from this explanation that the legislative objective pursued by the national provision in question is to safeguard public health and social welfare, both being legitimate grounds, which justify a derogation from the principles of transparency and non-discrimination in EEA public procurement law, as established in the Court of Justice’s case-law.

While the national provision in question seems to be based on policy considerations, namely to create conditions for involving non-profit organisations in the provision of health and social services, the Authority does not see any inconsistency with the general objective of protecting public health and social welfare in Norway. As the Court of Justice has repeatedly emphasized, EEA law does not detract from the power of the EEA States to organise their public health and social security systems. Consequently, the said national policy consisting in favouring non-profit organisations with the aim of increasing their degree of involvement in the national health and social system must be regarded as one of the many considerations the EEA States may take into account when exercising their discretion as regards the manner how the wish to organise their public health and social security systems (ESA, 154/17/COL, para 4.1.4, pages 9-10, footnote omitted, emphasis added). 

In my view, this passage of the Decision is not too clear and the analysis comes to conflate two issues: first, the absence of constraints on decisions of organisation of public health and social security systems and, second, the applicability of EU/EEA procurement rules to specific modes of organisation derived from those decisions and, in particular, to modes of organisation involving the buy-in of services from the market (even if the market is limited to that of non-profit organisations). From this perspective, the boundaries of the constitutional limits to the self-organisation (which under EU law are controlled by Art 14, Protocol No (26) and Art 345 TFEU) seem to be slightly blurred, and thus the benefit that could have been derived from more explicit reasoning considering the classing of the activity and the existence or not of constitutional-level protection in Norway.

Similarly, the application of the requirement of contribution to budgetary efficiency is limited to general considerations leading to the conclusion that there was no 'indication that tender procedures carried out under this legal regime might not be driven by budgetary efficiency concerns' (ESA, 154/17/COL, para 4.1.4, page 10), and the analysis of the boundaries of the concept of 'ideal organisation' is equally loose where ESA relies on the following:

... the concept of “ideelle organisasjon” ... is generally understood by the Norwegian Government and contracting authorities as synonymous for “non-profit organisation in pursuance of a social aim”. Due to the absence of any legal definition in national legislation and/or any national registry of recognised entities, the classification as non-profit must be carried out ad hoc by every contracting authority for every award procedure. In order to ensure a consistent administrative practice, the classification is based on guidelines developed by the Norwegian Government, which specify the criteria that must be met. According to these guidelines, “either the business pursued shall not have any profit objective or the profit gained must be used exclusively to operate humanist and social services in the interest of the general public or that of particular groups”. In addition, “the entire organisation, without any economic incentive, must work to alleviate social needs of the community or specific vulnerable groups”. Both the entity’s organisational structure and any tax privileges are taken into account as relevant factors in the overall assessment. According to the information provided, contracting authorities have nonetheless established a practice with regard to which providers are considered to be non-profit. As a result, unless their status changes, no documentation will be required from them in order to prove their status a non-profit organisation (ESA, 154/17/COL, para 4.1.4, pages 9-10, footnotes omitted, emphasis added).

On the whole, in my view, the analysis is rather lenient. This follows the same normative direction as the Spezzino and CASTA Judgments of the Court of Justice, but it may become too lenient under the revised regime of Directive 2014/24/EU (see below). Interestingly, ESA saved this possibility by explicitly indicating that 'given the limited scope of the Authority’s assessment, this preliminary conclusion does not extend to the question of a possible compatibility of currently applicable Norwegian law with Article 77 of Directive 2014/24' (ESA, 154/17/COL, para 4.1.5).

Direct award of contracts involving the exercise of official authority

Concerning the second Norwegian rule under examination--ie the possibility to directly award contracts involving the exercise of official authority--ESA explained that Section 1-3(2) lit. k of the Norwegian Regulation 'constitutes a legal basis allowing contracting authorities to derogate from the general national rules on procurement, where the provision of public services in the health and social sector requires the exercise of official authority. In accordance with the national policy referred to above, in support of an increased involvement of voluntary organisations, this legal provision is applied as a legal basis for excluding economic operators other than non-profit organisations from tender procedures if contracting authorities wish so' (ESA, 154/17/COL, para 4.2.1). Therefore, the crucial aspect that required analysis concerned the test applicable to determine whether the provision of certain types of health and social services require the exercise of official authority. In that regard, ESA established the relevant test as follows

The Court of Justice has interpreted these provisions on several occasions, shedding light on the requirements their application is subject to. It has ruled that, as derogations from the fundamental rules of freedom of establishment and freedom to provide services, they must be interpreted in a manner which limits their scope to what is strictly necessary in order to safeguard the interests which they allow the EEA States to protect. Furthermore, the Court of Justice has ruled that derogations provided for under those articles must be restricted to activities which, in themselves, are directly and specifically connected with the exercise of official authority. Such a connection requires a sufficiently qualified exercise of prerogatives outside the general law, privileges of official power or powers of coercion. This applies, in particular, to activities entailing the exercise of powers of constraint. Accordingly, the exceptions in question do not extend to activities that are merely auxiliary or preparatory to the exercise of official authority, or to certain activities whose exercise, although involving contacts, even regular and organic, with the administrative or judicial authorities, or indeed cooperation, even compulsory, in their functioning, leaves their discretionary and decision-making powers intact, or to certain activities which do not involve the exercise of decision-making powers, powers of constraint or powers of coercion (ESA, 154/17/COL, para 4.2.2, pages 12-13, footnotes omitted, emphasis added).

The test seems unobjectionable and, in my view, it reflects adequately the case law of the Court of Justice. However, in the assessment of the application of the test to the analysis of the case at hand, it is necessary to bear in mind that ESA was analysing tenders for the operation of child welfare institutions (ESA, 154/17/COL, para 4.2.3), which will make the criterion of 'exercise of powers of constraint' particularly important, not least because 'these services have as their objective the wellbeing of minors, who, due to the special protection they require, are placed under the care and the surveillance of the State. The conditions for their – voluntary or compulsory – internment in the institutions in question are regulated in detail in national legislation. The same applies to the conditions for the adoption of a number of measures, aimed at ensuring the fulfilment of the tasks, such as body searches, search of rooms and personal belongings, confiscation and destruction of dangerous objects and drugs, control of mail as well as the recovery of minors who have escaped from the institutions' (ibid). 

In that regard, ESA reached the conclusion that, given the impact of the decisions adopted by the staff of the operators of child welfare institutions on the fundamental rights of the children interned there, 

 it is evident ... that child welfare institutions in Norway exercise coercive powers within the meaning of Articles 32 EEA and 39 EEA, as interpreted in the case-law of the Court of Justice, when adopting the said measures on minors in the accomplishment of the tasks assigned. This occurs in an official function, as it is expressly authorised by the national legislator on the basis of a specific legal base in domestic law and does not require further involvement and/or authorisation of State bodies typically entrusted with the exercise of official authority, in particular the use of force. Furthermore, the use of coercive measures occurs in fulfilment of tasks concerning essential interests of society. The consequence of this conclusion is that activities requiring the use of these coercive measures are not covered by the fundamental rules of the right of establishment and the freedom to provide services. As a result, the EEA rules on public procurement do not apply to this specific area of social and health services. From this point of view, these rules do not preclude a national provision such as Section 1-3(2) lit. k of the Norwegian Regulation, which allows the exclusion of economic operators other than non-profit organisations from tender procedures if contracting authorities wish so (ESA, 154/17/COL, para 4.2.3, page 11, emphasis added).

However, ESA is also clear in stressing the fact that, in the context of contracts for the operation of these institutions, the exercise of official authority will only concern some activities, but not others. In that regard, the decision is clear in stressing that

The obligation to subject exceptions to the fundamental freedoms to a narrow interpretation, thus limiting them to activities connected directly and specifically with the exercise of official authority in order to ensure the functioning of the internal market, makes it nonetheless necessary to distinguish them from other activities possibly falling within the definition of “works” and/or “services” within the meaning of Article 1 of Directive 2004/18. Activities such as the construction of infrastructure needed for the operation of child welfare institutions and/or the provision of catering, laundry and transport services do not appear ... to be connected directly and specifically with the exercise of official authority, and could be equally performed by economic operators specialised in the respective area. Performance of these tasks would merely require supervision by the institution’s management bodies, but not necessarily the adoption of measures falling under the State’s prerogatives. Consequently, in order not to deprive the rules on the right of establishment and the freedom to provide services, Directive 2004/18 intends to implement, of all practical effectiveness, it is upon the contracting authority to carry out a case-by-case assessment of the applicability of Section 1-3(2) lit. k of the Norwegian Regulation to every public contract to be tendered out, taking into account the purpose of Articles 32 EEA and 39 EEA, as interpreted in the case-law referred to above. The contracting authority must thereby assess whether other merely ancillary activities, not strictly requiring the exercise of official authority in order to safeguard legitimate State interests, would be eligible for being subject to a separate tender procedure foreseeing the participation of both non-profit organisations and other economic operators alike. In its assessment, the contracting authority must take due account of the objective underlying the EEA rules on public procurement, consisting in ensuring the development of effective competition in the field of public contracts, while the principles of transparency, non-discrimination and equal treatment are upheld (ESA, 154/17/COL, para 4.2.5, page 17, footnotes omitted, emphasis added).

In my view, the general criterion is adequate and the need to limit the exception based on the exercise of official authority is correctly stated. Nonetheless, the ESA decision could have indicated some criteria as to how to carry out such assessment of severability of activities and, in particular, of the proportionality requirements applicable to such assessment. In my view, it will be difficult for a contracting authority to identify the extent to which it should insist on the tender of separate contracts for works or services for ancillary activities when it is choosing to award a contract for the operation of facilities providing health or social services. Functionally, the selection of the operator comes to avoid the need for the contracting authority to directly manage those facilities, which seems rather incompatible with the on-going obligation that the authority would retain if it were to impose procurement obligations on the operator of those facilities in relation to non-core or ancillary activities. Equally, it is not clear the extent to which this approach is compatible with the rules on the mandatory tendering of subsidised contracts (in particular where the 'construction of infrastructure needed for the operation of' those facilities is concerned), ex Art 8 Dir 2004/18/EC and, now, Art 13 Dir 2014/24/EU--which ESA could have considered explicitly in its decision.

In any case, it seems that this could soon be subjected to a re-examination, given that ESA reserved 'itself the right to investigate possible breaches derived from an application of that legal basis to contracts covering activities not linked to the exercise of official authority, such as those referred above, including, but not limited to, contracts expected to be awarded in tender procedures concerning the construction and operation of nursing homes' (which seems to form part of an on-going dispute; ESA, 154/17/COL, para 4.2.6, page 17).

critical considerations, in particular concerning Art 77 Dir 2014/24/EU

In my view, the decision of ESA in this case indicates that--even from a normative position of minimum intervention and creation of maximum policy space for EEA (and EU) Member States, such as that derived from the Spezzino/CASTA case law and from the recognition that the provision of health and social services (and any 'services to the person') can have an impact on the fundamental rights of the beneficiaries of those services, which should be conceptualised as the exercise of official authority (in particular to subject their control to the guarantees of the ECHR and the Charter of Fundamental Rights)--there are important unresolved issues where Member States decide to outsource the operation of facilities for the provision of those services.

Firstly, the creation of preferential treatment is now to be governed by the specific light-touch regime of Art 77 Dir 2014/24/EU, which creates specific requirements for the operators that can benefit from the reservation of public contracts for the provision of social and special services. Each Member State will need to adopt policies that are both in compliance with their constitutional structure and tradition and their broader social policies, and with the specific requirements in the Directive. From that perspective, it seems no longer acceptable for Member States not to have clear rules on which entities fall within the remit of Art 77 Dir 2014/24/EU and any such assessments of compatibility will require effective monitoring by the relevant authorities (ie either each contracting authority, or some central authority or body in each Member State). In addition, and implicitly, there has to be a mechanism to ensure the mutual recognition of entities covered by Art 77 Dir 2014/24/EU in other EU/EEA jurisdictions. In the specific case, ESA did not need to assess this issue due to the inapplicability of Dir 201424/EU, but it is worth stressing that, as part of its assessment, it highlighted the fact that 'economic operators from other EEA States are welcome to submit tenders in the area of health and social services provided that they are registered as non-profit organisations in their respective States of origin' (ESA, 154/17/COL, para 4.1.4, page 9). However, this possibility will have to remain effective, and that would not necessarily be the case if contracting authorities were allowed to act in certain ways (eg with insufficient transparency, or relying on pre-approved (or informal) lists of potential non-profit providers--in particular if those included in the lists or informal arrangements were never audited to ensure continued compliance with the applicable requirements).

Secondly, and probably with more practical complications, it seems difficult to establish bright-line criteria to determine the boundaries of the material scope of the exemption from competitive tendering (either due to a reservation of contract under Art 77 Dir 2014/24/EU or, in the context of EEA law, due to the exercise of official authority--which may now become a testable argument under EU law to seek exemptions beyond Art 77 Dir 2014/24/EU). In particular where the contract is not solely for the provision of the 'core' health or social services (which will rarely be), but rather for the operation of facilities where those services are provided--which might be the most common way of commissioning those services. In that regard, it seems that there can be an incentive for contracting authorities to opt for the outsourcing of the management of health or social services facilities where the contracting authority can enter into a single contract and thus detach itself from the day to day operation thereof. In that context, if contracting authorities need to engage in a detailed analysis of the services that can or cannot be exempted (and those that, consequently, need to be tendered separately and with full subjection to the procurement rules), possibly with a view of running several procurement processes and, eventually micro-managing the contracting of ancillary services (with the ensuing integration and coordination risks, for the split of contracts would create residual risks for the contracting authority), the incentive for the outsourcing can largely be lost.

On the whole, then, it seems that additional clear guidance is needed on the scope of Art 77 of Dir 2014/24/EU and, more generally, on the extent to which the light-touch regime foreseen in Arts 74-77 thereof is subject to limitations in cases of outsourcing of entire facilities. In that regard, it would seem desirable for the European Commission to adopt a more proactive approach to the publication of interpretive guidance of the 2014 Public Procurement Package beyond the meagre fact sheets currently available.

[Input sought] Access to procurement remedies and reciprocity in EU/EEA Member States

I have been thinking for a while about a comparative procurement law question on which I would appreciate your help and input (please comment below or send me an email to if you have information about your jurisdiction that you can share, for which I would be most grateful). The question concerns the extent to which contracting authorities in the EU/EEA Member States apply an access filter for bids coming from non-EU/non-GPA covered states -- that is, whether contracting authorities check that the tenderer/tender are covered by trade-liberalising instruments or not at the initial stages of a procurement process -- and the extent to which that filter or its absence may then carry on to the access of non-EU/non-GPA tenderers to domestic remedies in those jurisdictions -- that is, whether remedies are limited to EU/GPA tenderers or are more broadly available.

My interest in this topic comes from the fact that, one of the issues that keep arising in the context of the Brexit debate (particularly in view of Prof Arrowsmith's proposals, which I criticised here, and Pedro Telles also criticised here) concerns the future access for UK tenderers/candidates to domestic remedies in the EU27/EEA jurisdictions in case of no deal with the EU and the UK resorting to GPA rules. This links to the broader question of which tenderers/candidates have access to procurement processes and to domestic remedies in the EU27/EEA jurisdictions, as mentioned above.

In my view, Member States can either control coverage by EU/GPA rules at the start of the process or not, and this may result from either an obligation to check or discretion to check. Later, in relation to the point on remedies, there are probably only four relevant (legal) options:

(a) all tenderers/candidates have access to all domestic remedies regardless of their nationality (ie totally open remedies system).

(b) all tenderers/candidates have access to some domestic remedies regardless of their nationality, but only EU/EEA tenderers/candidates have access to 'premium' remedies mandated by EU law (ie those with standstill, etc) (ie open EU+ remedies system).

(c) only tenderers/candidates covered by GPA/WTO, EU/EEA or bilateral FTAs have access to all domestic remedies (ie trade-led remedies system).

(d) only tenderers/candidates covered by GPA/WTO, EU/EEA or bilateral FTAs have access to some domestic remedies, but only EU tenderers/candidates have access to 'premium' remedies mandated by EU law (ie those with standstill, etc) (ie trade-led EU+ remedies system).

I am interested in writing a short paper on this issue and would really appreciate your input on: (i) whether there is some other legally-compliant model I may have overlooked and, (ii) more importantly, what is the model in your jurisdiction (specially if you are based in an EU27/EEA country). So far, the information I have been able to gather is as follows [apologies to those of you who have helped me with this if I have misinterpreted it -- corrections welcome; when reading this, please bear in mind that the content evolves as I discuss these issues with national experts and explore the ideas further, particularly in terms of the contours between models (a) and (c)]:

  1. Austria (thanks to Michael Fruhmann): Federal Procurement Law states, that procurement procedures shall be carried out in compliance with the fundamental principles of EU Law, the principles of free and fair competition and the equal treatment of all applicants and tenderers. However, different treatment of applicants and tenderers on grounds of their nationality or of the origin of goods which is permissible under international law remains unaffected by this obligation. The (legal) consequence is, that if no union or international obligations (re latter: this depends on the existence and scope of FTAs, RTAs also) exist to open PP procedures to foreign bidders, contracting authorities are free to admit participation or to deny the participation of such bidders. However, if such bidders are allowed to participate they have the same standing as national/EU bidders (also as regards remedies). In practice this comes down to the question, whether the contracting authority wants such bidders to participate. This is a case by case decision depending i.a. on the subject matter of the contract, the interest to intensify/safeguard competition in a given procedure. This decision (no admittance) can of course be reviewed (and has been reviewed) but the courts confirmed that without any EU/international obligation it's fully within the competence of the contracting authority to decide either way. Generally, this points towards the model being generally (c), but with the possibility of going beyond that and getting closer to (a) depending on the contracting authority's discretion.
  2. Belgium (thanks to Baudoin Heuninckx): a contracting authority may reject the request to participate or tender by undertakings from countries outside of EU/WTO or without an FTA, so there is a potential "filter" at the very beginning of the procedure. In terms of remedies, every candidate or tenderer has access to all remedies regardless of nationality. Potentially, this leads to the remedies model being (c).
  3. Czech Republic (thanks to Jaroslav Mencik): contracting authorities may not restrict participation in public tenders of suppliers from the EU, the EEA, Switzerland, or other states with which the Czech Republic or the EU has concluded international agreements which guarantee that suppliers from such a state will have access to the public contract being awarded. It follows that contracting authorities are required neither to check the nationality of tenderers nor exclude non-EU/non-GPA tenderers (but may choose to do so). Remedies follow model (a), all tenderers participate on equal terms.
  4. Denmark (thanks to Carina Risvig Hamer): it is not foreseen in legislation, but contracting authorities can decide not to allow participation from non-EU/non-GPA tenderers. All candidates and tenderers have full access to remedies. Potentially, this leads to the remedies model being (c). 
  5. Estonia (thanks to Mari Ann Simovart): remedies are available to any "interested party" without any restriction based on the country of origin. In short, model (a) applies. However, a contracting authority can restrict access to a particular procurement procedure for tenderers of EU/EEA/WTO only - in which case, tenderers outside EU/EEA/WTO can be regarded as having no "interest" towards the particular procurement and thus no standing to claim review.
  6. Finland (thanks to Kirsi-Maria Halonen): contracting authorities would not always check whether a tenderer is covered by the agreements, but could do so at the beginning of the tendering procedure. If accepted to participate/tender, the candidate/tenderer would likely have access to all domestic remedies. This leads to the remedies being closer to model (c), but it is possible that de facto, contracting authorities may be granting equal treatment beyond GPA/EU/FTA coverage in sui generis basis (model (a)). It is in the contracting authorities' discretion whether to even look into the matter/exclude. If tenderers are not excluded, they'll have equal rights for remedies. However, it is worth bearing in mind that this is untested in the courts.
  7. Germany (thanks to Gabriella Gyori): not taking into account decentralized matters (due to the differences among the "Bundesländern"), according to the federal public procurement legislation related to above threshold procedures, tenderers from outside of Germany are allowed to participate, treated equally and have equal rights. Remedies follow model (a). 
  8. Greece (thanks to Marios Skiadas): in order to be eligible to participate in a public tender, economic operators must be based in an EU, EEA, GPA or other countries which have signed bilateral or multilateral agreements with the EU in matters related to public procurement procedures. Contracting authorities have a first chance of checking this requirement when they assess the ESPD or equivalent documentation. Additionally, during the final stage of the awarding phase, the winning bidder is required to submit all legal documents regarding company establishment, operation and representation. Therefore, the contracting authority will in practice have a “second chance” to check conformance. Access to remedies applies to all parties with an interest in being awarded a public contract. By combining this to the eligibility criteria stated above,Greece follows model (c).
  9. Hungary (thanks to Gabriella Gyori): economic operators shall be excluded from participating in the procedure as a tenderer, candidate, subcontractor or an organization participating in the certification of suitability, if have their fiscal domicile in a country outside the EU, the EEA or the OECD or in a non WTO/GPA country or outside the overseas countries specified in the TFEU or in a country which has not signed any agreement with Hungary on avoiding double taxation or which has not signed a bilateral agreement with the EU concerning public procurement. Claims can be submitted by a contracting authority, a tenderer(s) or any other interested person whose right or legitimate interest is being harmed or risks being harmed by an activity or default which is in conflict with the procurement legislation. This brings the remedies system close to model (c).
  10. Ireland (thanks to James Farrell): based on long-standing practices, there are not requirements of EU/EEA/GPA membership as a qualifying requirement for tenderers, or references to different treatment of tenderers emanating from non-EU/EEA/GPA countries in any policy or guidance documents issued by the relevant Irish authorities. The general approach, driven by Ireland's open trading policy, is to take value wherever it can be found. There have been no court challenges in Ireland where an unsuccessful tenderer sought to argue that a winning tender should be disqualified because of the country of origin/registration/domicile of the tendering entity. Regarding remedies, apart from reliefs arising under the Remedies Directive there are also domestic reliefs such as Judicial Review, Injunctions etc that would be available to tendering entities regardless of nationality. Therefore, Ireland follows model (a).
  11. Italy (thanks to Roberto Caranta): only tenderers/candidates from MS/parties to GPA/WTO, EU/EEA or bilateral FTAs are eligible to bid. Eligible suppliers then have access to all domestic remedies; so the systems follows model (c).
  12. Lithuania (thanks to Deividas Soloveičik): there is no obligation for contracting authorities to check non-EU/ non-GPA suppliers. Remedies follow model (a), all suppliers participate on equal terms.
  13. Netherlands (thanks to Tim Beukema): Dutch law states that a contracting authority shall not grant any advantage in regard to the tender and the contract that is not granted to parties from countries within the EU. In regard to rejection of participants, contracting authorities may reject the request to participate by undertakings from countries outside of the GPA, EU or FTA. Entities operating in the water, energy, transport and postal services sectors (special sectors) have the possibility to reject a participation or tender if the goods that a party provides consists of more than 50% from countries on which the EU has no obligation to, i.e. countries outside the GPA, EU or FTA. A special sector company has the obligation to decline an offer of such party in the case of an equal bid from a undertaking within the GPA, EU or FTA that has less than 50% of the goods from within these countries. Claims can be submitted by parties who are interested in the tender in the case that his rights are being harmed or could be harmed because of the fact that the tender procedure breaches the procurement rules, which is a remedies system in accordance with model (c).
  14. Norway (thanks to Eirik Rise): follows model (c); only tenderers/candidates covered by GPA/WTO, EU/EEA or bilateral FTAs have access to domestic remedies, and only to the extent that it is covered in the relevant FTA.
  15. Poland (thanks to Paweł Nowicki and Piotr Bogdanowicz):  There is a newly introduced obligation to comply with WTO GPA and other international agreements to which the EU is a party, and there is no explicit obligation to exclude non-EU/non-GPA tenderers. Remedies follow model (a).
  16. Portugal (thanks to Pedro Telles): [not clear yet whether there is an initial filter]. Remedies follow model (a).
  17. Romania (thanks to Dacian Dragos): [not clear yet whether there is an initial filter]. Remedies follow model (a).
  18. Slovenia (thanks to Njives Prelog): suppliers from all over are allowed to participate, treated equally and have equal rights. Remedies follow model (a). 
  19. Spain: at the initial stage, contracting authorities have an obligation to check coverage by EU/GPA rules or to require confirmation of reciprocal access for Spanish tenderers in the country of origin of non-EU/non-GPA tenderers (which are also required to have a branch office in Spain). Remedies follow closely model (a) because remedies are open to all those admitted to tender procedures [ie go beyond (c), but are still somehow trade-led due to reciprocity requirement].
  20. Sweden (thanks to Andrea Sundstrand): there is no check at the start of the procedure and suppliers from all over are welcome to participate on equal terms. Remedies follow model (a) and all suppliers have access to exactly the same remedies regardless of whether they are from countries that Sweden has trade agreements with.
  21. United Kingdom (thanks to Aris Christidis and Pedro Telles for discussions): The UK system replicates the EU Directive in terms of extending equal treatment (which can be seen to include access) to economic operators covered by EU law, the WTO GPA, or other international agreements by which the EU is bound (see reg. 25 PCR2015). The remedies system is limited to those economic operators to which contracting authorities are legally taken to owe a duty to comply with public procurement rules. Effectively, this is limited to economic operators from the EEA, GPA signatories (provided the procurement is covered) and countries with bilateral agreements in force (see regs. 89 and 90 PCR2015).

This initial scoping exercise seems to indicate clustering around models (a) and (c). It would be amazing if we could collectively cover most of the EU27/EEA and complete the exercise, not only in order to gain a better understanding of this issue, but also because this will be relevant for Brexit negotiations around procurement in the immediate future. Your contribution will, of course, be duly acknowledged and gratefully received.