CJEU decision on EIB-funded procurement sheds some light on interpretation of Arts 9 & 17 Dir 2014/24/EU (C-408/16)

In its Judgment of 6 December 2017 in Compania Naţională de Administrare a Infrastructurii Rutiere, C-408/16, EU:C:2017:940, the Court of Justice (ECJ) has decided a case concerning procurement potentially covered by the rules of an international financing institution (in particular, the European Investment Bank - EIB). In the case, which is somehow complicated by transitory arrangements linked to Romania's accession to the EU, the ECJ has advanced some relevant considerations on the interpretation of the now repealed Art 15(c) of Directive 2004/18/EC, which foresaw an exclusion for contracts tendered 'pursuant to the particular procedure of an international organisation'. In my view, those considerations will be relevant for the interpretation of the revised rules in Articles 9(2) and 17(2) of Directive 2014/24/EU, which now extend the exclusion to contracts tendered 'in accordance with procurement rules provided by an international organisation or international financing institution, where the [contracts] concerned are fully financed by that organisation or institution'.

The CNADNR case

In 2003, the EIB and Romania entered into a finance agreement for the construction of the Arad-Timişoara-Lugoj motorway, which was to be managed by Compania Naţională de Autostrăzi şi Drumuri Naţionale of România SA (‘CNADNR’, now renamed as Compania Naţională de Administrare a Infrastructurii Rutiere). As part of a linked 2004 loan contract, it was established that ‘the CNADNR shall comply with the EIB’s procedures for the procurement of goods, the guarantee of services and the undertaking of works necessary for the project’, namely ‘through international calls for tender open to candidates from all countries’.

At that time, this commitment derived from Chapter 3 of the 2004 EIB Guide to Procurement (since replaced by a 2011 version), which controlled procurement linked to its operations outside the EU. However, the implementation of the project would eventually span beyond the date of Romania's accession to the EU on 1 January 2007, which triggered some issues of transitional procurement arrangements that require some consideration.

The Romanian Adhesion Protocol established that public procurement procedures linked to pre-accession financial commitments but initiated after accession shall be carried out in accordance with the relevant Union provisions (Art 27(2)), and that all EU secondary legislation shall be given effectiveness in Romania from the date of accession, save if a different date was agreed for specific instruments (which did not include the then effective Dir 2004/18/EC; Art 53(1)). In short, this meant that all new procurement procedures starting on or after 1 January 2017 were subjected to the rules of Dir 2004/18/EC.

The same result would derive from the EIB Guide, according to which the rules in its Chapter 3 would apply 'until the deadline when [borrowing countries] were committed to applying the EU Directives on procurement as agreed during their negotiations with the Commission to the extent that they have transposed these Directives into their national legislation at that moment' and, from that moment, Chapter 2 on operations within the EU would apply to them--thus requiring, by and large, compliance with specific procedures as regulated by the EU Directives.

Romania generally subjected all of its post-accession procurement to its domestic transposition of Directive 2004/18/EC by means of the Government Emergency Order No 34/2006 (OUG No 34/2006). However, Government Emergency Order No 72/2007 (OUG No 72/2007) created a specific exception for the motorway project, according to which '[b]y way of derogation from the provisions of [OUG No 34/2006] … for the purposes of the procedure for the award of public works contracts … relating to the Arad-Timișoara-Lugoj motorway …, the [CNADNR] shall apply the provisions of the [EIB Guide], Chapter 3' (C-408/16, para 17). Somehow, the need for this exception seemed to derive from the fact that a contract had been awarded in 2006 for the consulting services necessary for the preparation of the procurement file for the public works contracts (see para 20), which probably established requirements concerned with tendering under Chapter 3 of the EIB Guide, rather than under the rules of Directive 2004/18/EC.

The exception created for the tendering of the contracts funded by the EIB was eventually caught by an audit linked to the granting of retroactive EU funding for the project. The exception from compliance with the tender rules in Dir 2004/18/EC was considered an irregularity, which triggered a financial correction of 10% of the value of the contract. The audit also noted that non-compliance with the rules of Dir 2004/18/EC was not solely formal, but that 'three pre-selection criteria laid down by [the EIB-compliant tender documents] were more restrictive than those provided for by Directive 2004/18, namely, firstly, a criterion relating to the candidate’s personal situation and in particular, the background of non-performance of contracts, which is contrary to Articles 44 and 45 of Directive 2004/18, and secondly, a criterion relating to the applicant’s financial situation which is contrary to Article 47 of Directive 2004/18 and, thirdly, a criterion relating to the applicant’s experience which does not comply with Article 48 of that directive' (ibid, para 25). 

Ultimately, in view of the impossibility of reconciling the requirements of EIB Chapter 3 with those of Dir 2004/18/EC, a legal dispute arose as to whether this discrepancy could be saved by the exclusion from coverage of Dir 2004/18/EC of contracts 'governed by different procedural rules and awarded ... pursuant to the particular procedure of an international organisation' (Art 15(c))--in that case, the EIB's.

As could be expected, the ECJ has found that the specific exception created by OUG No 72/2007 contravened EU law. In clear terms, it has reiterated that accession to the EU requires compliance with EU procurement rules, to the effect that this 'precludes a Member State’s legislation that provides, for the purposes of a public procurement procedure initiated after the date of its accession to the European Union, in order to complete a project started on the basis of a finance agreement concluded with the EIB prior to that accession, the application of the specific criteria laid down by the provisions of the EIB Guide which do not comply with the provisions of that directive' (para 52).

The ECJ's decision, even if it carries significant financial implications, does not raise any legal concerns--in particular in view of the fact that the transition to full compliance with the EU Directive derived both from the Adhesion Protocol (para 48) and the transitory rules in the EIB Guide (para 50; particularly in view of the fact that Romania transposed the relevant EU Directive ahead of its accession, by means of OUG No 34/2006). However, the way the ECJ has approached the analysis can shed some light on the likely interpretation of the revised rules in Dir 2014/24/EU.

The ECJ's reasoning concerning procurement rules of international organisations under Dir 2004/18/EC and relevance for Dir 2014/24/EU

In its assessment of whether Art 15(c) Dir 2004/18/EC would have subjected the tender at issue to the EIB procurement rules to the exclusion of those in the domestic transposition of the same directive, the ECJ established that

Article 15(c) of Directive 2004/18 states that that directive does not apply to public contracts governed by particular procedural rules of an international organisation ... that article, read in conjunction with recital 22 of Directive 2004/18, lists three cases of public contracts to which that directive does not apply to the extent that those public contracts are governed by different procedural rules. Moreover, it is clear that that article forms part of Section 3, entitled ‘Excluded contracts’, of Chapter II, entitled ‘Scope’, of Title II, itself entitled ‘Rules on public contracts’ of Directive 2004/18. It thus follows both from the wording of Article 15(c) of Directive 2004/18 and from the context in which it appears, that that article constitutes an exception to the material scope of that directive. Such an exception must necessarily be interpreted strictly ... In order to assess whether a public procurement procedure ... may fall within the exception provided for in Article 15(c) of Directive 2004/18, it is necessary to determine whether such a procedure can be considered to be governed by particular procedural rules of an international organisation (C-408/16, paras 43-46, references omitted and emphases added).

In my view, there are two main potential implications of this passage. The first one concerns the scope of the concept of 'international organisation' under Art 15(c) Dir 2004/18/EC, and how it will impact an interpretation of the equivalent concept in Arts 9 and 17 of Dir 2014/24/EU. Even if the ECJ made it clear that the construction of the exception in Art 15(c) Dir 2004/18/EC had to be narrow, the Court did not pay much attention to the legal nature of the EIB and did not consider whether it could be classified as an 'international organisation' stricto sensu. This could be surprising, as the EIB has a status under EU law that could be difficult to subsume within certain (narrow) interpretations of the concept of 'international organisation'.

Indeed, under Arts 308 and 309 TFEU and Protocol (No 5) on the statute of the European Investment Bank, the EIB has a sui generis status that derives from EU primary law [see both the Judgment in Commission v EIB, C-15/00, EU:C:2003:396, and the Opinon of AG Jacobs in that case (EU:C:2002:557), as well as the European Parliament's 2003 working paper on the EIB's Institutional Status]. From this perspective, assigning it the nature of 'international organisation' may have required some additional scrutiny under the strict interpretive approach outlined by the ECJ. The absence of such additional scrutiny could seem to point towards a certain leniency or flexibility in the scoping of the concept of 'international organisation'. However, this may be misleading if we take into account that, in the CNADNR case, the non-compliant rules of Chapter 3 of the EIB guide would not have governed the contract anyway--which may have conditioned the ECJ's approach throughout the case. 

In the future, and in the specific case of the EIB and other multilateral lending institutions, this may not be too relevant in the context of Arts 9 and 17 of Directive 2014/24/EU because they make explicit reference to procurement subject to the rules of an 'international organisation or international financing institution' (emphasis added). However, given the possibility of disputes as to whether specific entities or institutions can be considered 'international organisations' stricto sensu, and in the absence of an obligation to communicate a list of those organisations to the Commission (cfr Art 9(1) in fine Dir 2014/24/EU for exceptions based on legal instruments creating international law obligations), understanding whether the ECJ approach is restrictive or not will be important. In that regard, in my view and despite the fact that the analysis in the CNADNR could have been clearer, the exception in Arts 9(2) and 17(2) Dir 2014/24/EU will have to be constructed on the basis of a strict interpretation of the concept of 'international organisation'.

The second potential implication of the passage cited above--and in particular of the ECJ's consideration that '[i]n order to assess whether a public procurement procedure ... may fall within the exception ..., it is necessary to determine whether such a procedure can be considered to be governed by particular procedural rules of an international organisation' (C-408/16, para 46)--is that not EU law, but rather the rules of the international organisation providing putative coverage will determine the applicability of the exception. Or, in other words, it seems that the national review bodies and courts, and ultimately the ECJ, will have to engage in assessments of whether the procurement rules of the given international organisation or international financing institution cover or not a specific tender, which will potentially require them to engage in the interpretation of those 'foreign' rules. This triggers complicated issues linked to the ability of the ECJ (and other administrative and judicial bodies) to engage in the interpretation of those rules, which is something I discuss in some detail in a recent paper [see A Sanchez-Graells, 'Territorial Extension and Case Law of the Court of Justice: Good Administration and Access to Justice in Procurement as a Case Study' (2017) SSRN working paper]. This will trigger some additional interpretive difficulties surrounding the scope of the exclusion in Arts 9 and 17 Dir 2014/24/EU and, once more, my view is that the ECJ will tend to take a narrow approach.