Some thoughts on the principle of competition's direct and indirect effects in public procurement from 18 April 2016

It was a pleasure to speak at Upphandlings Dagarna 2016 in Stockholm on the principle of competition enacted in Article 18(1) of Directive 2014/24 and Article 36(1) of Directive 2014/25 [for background reading, see here]. The recording of the livestreaming is available here (starts at 1:30, main remarks after 8:00).

One of the issues that featured prominently in the discussions with my panellists is the legal value of the principle under EU law, and how to make it effective in case Member States do not transpose it (or are late in the transposition, which will certainly be a common situation for a while). 

In my view, and in simplified terms, there are two main routes that EU law provides for the enforcement of the principle regardless of the transposition decisions the Member States adopt. Firstly, the principle can be given direct effect. And, secondly (and probably with greater practical relevance), the principle must be given indirect effect. I develop these ideas for the enforcement of the principle of competition, particularly through indirect effect or interpretation conforme, in Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 215-227, available here.

Direct effect can be given to the presumption in Art 18(1) Dir 2014/24 / Art 36(1) Dir 2014/25 that 'Competition shall be considered to be artificially narrowed where the design of the procurement is made with the intention of unduly favouring or disadvantaging certain economic operators'. In my view, this provision sets out a clear, precise and unconditional individual right for candidates and tenderers not to be unduly disadvantaged, which therefore meets the requirements for direct effect as per Van Duyn (C-41/74, EU:C:1974:133). It will be particularly relevant to coordinate any legal claims with the clear push for effectiveness of the EU public procurement rules in the Remedies Directive.

Indirect effect must be given to the broad principle of competition in Art 18(1) Dir 2014/24 / Art 36(1) Dir 2014/25 that 'The design of the procurement shall not be made with the intention ... of artificially narrowing competition.' This is not only a clear general principle of EU law (which could also engage Mangold, C-144/04, EU:C:2005:709), but a fundamental pillar of the procurement system and, in particular, of the system created by the 2014 new public procurement Directives. The Commission could not have stressed this more clearly in the recent strategy for the Upgrade of the Single Market, where it highlighted that 'In 2014, the EU adopted a major overhaul of the EU procurement framework .... This was aimed at making public procurement more efficient and strategic, fulfilling the principles of transparency and competition to the benefit of both public purchasers and economic operators, in particular SMEs' (emphasis added). Overall, the obvious and pervasive pro-competitive orientation of the 2014 Directives and the explicit consolidation of the principle of competition triggers an obligation to interpret any domestic procurement rules in light of the principle of competition under as per Von Colson (C-14/83, EU:C:1984:153).

In short, even if Member States did not transpose (in time, or at all) the principle of competition in Art 18(1) Dir 2014/24 / Art 36(1) Dir 2014/25, EU law requires national administrative bodies, review bodies and courts to give it full effectiveness, both under  the direct and indirect effect doctrines. This obligation kicks in on 18 April 2016 at the latest (although arguments for an already existing obligation to do so have been on the table since, at least, 2011). This is likely to spur an initial wave of litigation likely to result in references to the CJEU for clarification of the content, meaning and extent of the principle of competition. I for one will keep a close look at these developments.

CJEU: vertical effect of Directives goes both ways (C-425/12)


The Judgment of the CJEU of 12 December 2013 in case C-425/12 Portgás may appear to be of interest only for public procurement aficionados (and, even then, only for hardcore ones), as it deals with the potential applicability of the old 1993 utilities procurement Directive (no longer current) to a company entrusted with a gas distribution concession in Portugal. Hardly a topic bound to spur heated debates. Hence, it seems a case doomed to receive very little attention amongst EU lawyers...
 
However, it contains one of the very few potential (r)evolutions in the theory of Directives' direct effect since Mangold and Kücükdeveci by holding that their vertical direct effect goes both ways (i.e. both up and down). In my view, Portgás should become the new Foster and claim a main spot in general EU law (text)books.
 
I think that the Portgás Judgment indeed develops the existing law on Directives' vertical effect. Implicitly, that theory was always concerned with upwards vertical effect, in the sense of allowing particulars to claim EU law protection against the infringing Member State. The theory has clearly been conceptualised on the basis of an (implicit) bottom up claim.
 
However, it is not at all clear whether a downwards application of the theory is at all possible. In general terms, however, the canon (as an extension of the no-horizontal direct effect declared in Marshall) would dictate that such a vertical direct effect cannot go down because the infringing Member State cannot rely on the (non-transposed or deffectively transposed) Directive to affect the legal position of particulars (just as one particular cannot do it against another one).
 
The Foster line of extension of the "standard" upwards vertical direct effect of Directives started to tackle what we may now call 'mezzanine' situations, where a particular did not want to claim protection against the State itself, but against one of its 'emanations' (as a way to circumvent the harshness of the no-horizontal direct effect dogma). In that case, the CJEU was clear to stress that the upwards dimension of Directives' direct effect reaches such a mezzanine situation and declared, as is well known, that particulars can rely on EU law protection under certain circumstances.
 
In Portgás the situation is the opposite. The CJEU was asked to determine whether in a comparable 'mezzanine' situation, the State could claim downwards direct effect of a non-transposed Directive against one of its Foster-emanations. The first bet may be that the principle of legitimate expectations may prevent such an extension of the doctrine. However, such a position has now been rejected by the CJEU.
 
In the passages that deserve more attention in the Portgás Judgment, the CJEU analyses the possibility for the Portuguese government to claim financial recovery of amounts paid to Portgás to finance the acquisition of equipment (gas meters) due to the fact that the undertaking did not tender the contract in accordance with the requirements of the 1993 utilities procurement Directive. However, at the time of the purchase of the equipment, Portugal had not implemented the Directive. Consequently, Portgás raised the defence that Portugal cannot require compliance with a set of rules it had not itself transposed. The CJEU, however, takes a different approach based on the effet utile of EU law and argues that:
33 [...] although the Court has held that unconditional and sufficiently precise provisions of a directive may be relied on by individuals against a body which has been given responsibility, under the control of the State, for a public-interest service and which has, for that purpose, special powers (see, to that effect, Foster and Others, paragraphs 18 and 20, and Dominguez, paragraphs 38 and 39 and the case-law cited), the case in the main proceedings has arisen in a context different from the context of that case-law.
34 In the context of the present case, it should be recalled that, according to the case-law of the Court, the obligation on a Member State to take all the measures necessary to achieve the result prescribed by a directive is a binding obligation imposed by the third paragraph of Article 288 TFEU and by the directive itself. That duty to take all appropriate measures, whether general or particular, is binding on all the authorities of the Member States (see Case C‑129/96 Inter-Environnement Wallonie [1997] ECR I‑7411, paragraph 40 and the case-law cited) as well as on bodies which, under the control of those authorities, have been given responsibility for a public-interest service and which have, for that purpose, special powers. It follows that the authorities of the Member States must be in a position to ensure that such bodies comply with the provisions of Directive 93/38.
35 It would be contradictory to rule that State authorities and bodies satisfying the conditions set out in paragraph 24 of the present judgment [Foster conditions] are required to apply Directive 93/38, while denying those authorities the possibility to ensure compliance, if necessary before national courts, with the provisions of that directive by a body satisfying those conditions when that body must itself also comply with Directive 93/38.
36 Furthermore, the Member States would be able to take advantage of their own failure to comply with European Union law in failing correctly to transpose a directive into national law if compliance with the provisions of Directive 93/38 by such bodies could not be ensured on the initiative of a State authority.
37 Lastly, that approach would make it possible for a private competitor to rely on the provisions of Directive 93/38 against a contracting entity which satisfies the criteria set out in paragraph 24 of the present judgment [Foster conditions], whereas State authorities could not rely on the obligations flowing from that directive against such an entity. Consequently, whether or not such a contracting entity would be required to comply with the provisions of Directive 93/38 would depend on the nature of the persons or bodies relying on Directive 93/38. In those circumstances, Directive 93/38 would no longer be applied in a uniform manner in the domestic legal system of the Member State concerned.
38 It follows that a private undertaking, which has been given responsibility, pursuant to a measure adopted by the State, for providing, under the control of the State, a public-interest service and which has, for that purpose, special powers going beyond those which result from the normal rules applicable in relations between individuals, is obliged to comply with the provisions of Directive 93/38 and the authorities of a Member State may therefore rely on those provisions against it (C-425/12 at paras 33-38, emphasis added).
I think that it is plain to see that Portgás is somehow the mirror image of Foster. Its practical implications may seem small in that the number of Foster-emanations that Member States hold is probably relatively small. However, in the area of public procurement and, more generally, of EU economic law, it is not hard to imagine a relatively important number of potential 'Portgás' entities that can see their rights and (financial) interests compromised as a result of the 'sandwich' situation that this latest CJEU Judgment creates. And this may be a situation that triggers litigation on the basis of the protection of legitimate expectations, rights to property or other fundamental rights by those companies (which stresses the relevance of rethinking the current trends of granting of 'corporate human rights'--see some discussion here).
 
What may be more controversial is to claim, as I would, that this is the last frontier before the full recognition of Directives' direct effect. All in all, as the law currently stands, there is a very limited field where Directives are not directly effective (after their period of transposition) and that, by itself, may justify a simplification (repeal?) of the no-horizontal direct effect dogma. It remains to be seen if the CJEU will ever be willing to cross that bridge.

Is Costa v Enel forgotten? CJEU trips over supremacy and direct effect in case concerning Art 41(2)(c) CFREU (C-313/12)

In its Judgment of 7 Movember in case C-313/12 Romeo, the Court of Justice of the EU issued an important ruling concerned with the extension of the obligation to state reasons derived from Article 41(2)(c) of the Charter of Fundamental Rights of the EU in purely domestic situations.
 
In the case at hand, the CJEU was especifically presented with a query regarding the compatibility with Article 41(2)(c) CFREU (and, more generally, with the case law on the duty to state reasons) of an Italian rule whereby faulty administrative decisions would not be quashed if the authorities supplemented their statement of reasons in subsequent court proceedings.
 
In my view, the reasons offered by the CJEU to decline jurisdiction to respond to the questions referred by the Italian court show a poor understanding of (or a lack of willingness to give effect to) the changed nature of the Charter after the entry into force of the Treaty of Lisbon. As very clearly stated, 'the EU Charter of Fundamental Rights is now legally binding, having the same status as primary EU law' [for discussion, see S Douglas-Scott, 'The European Union and Human Rights after the Treaty of Lisbon' (2011) Human Rights Law Review 11(4): 645-682].
 
In that regard, keeping in mind that Article 6(1) of the Treaty on European Union now very clearly indicates that 'The Union recognises the rights, freedoms and principles set out in the Charter of Fundamental Rights of the European Union of  [...] which shall have the same legal value as the Treaties' (emphasis added), it is very hard to understand how the CJEU can have unblinkingly held that:
it cannot be concluded that [...] Article 41(2)(c) of the Charter or indeed other rules of European Union law concerning the obligation to state reasons for acts have been made directly and unconditionally applicable (sic), as such, by [the relevant Italian rules], so that internal situations and situations relating to European Union law are treated in the same way. Therefore it must be held that, in the present case, there is no clear European Union interest in a uniform interpretation of provisions or concepts taken from European Union law, irrespective of the circumstances in which those provisions or concepts are to apply (C-313/12 at para 37, emphasis added).

I cannot get my head around the fact that, as no one would doubt, the CJEU has kept for time immemorial the position that the Treaties (now including the Charter of Fundamental Rights  for these purposes) are supreme and directly effective without any need for internal measures that receive them or recognise that they are directly and unconditionally applicable in all EU Member States--and, yet, it shows a stark resistance to apply these principles to the Charter (see also C-482/10 Cicala).
 
As very clearly summarised in Costa v Enel,
A Member State's obligation under the [Treaty], which is neither subject to any conditions nor, as regards its execution or effect, to the adoption of any measure either by the States or by the Commission, is legally complete and consequently capable of producing direct effects on the relations between Member States and individuals. Such an obligation becomes an integral part of the legal system of the Member States, and thus forms part of their own law, and directly concerns their nationals in whose favour it has created individual rights which national courts must protect (6/64, summary, point 7).
This, together with Art 6(1) TEU surely determines the supremacy and direct effect of the Charter--as also supported by an a contrario interpretation of Protocol No 30 on the Application of the Charter of Fundamental Rights of the European Union to Poland and the United Kingdom (what would be the purpose of the Protocol if not precisely to exclude such supremacy and direct effect regarding the UK and Poland?). Then, if the CJEU has not forgotten Costa v Enel, the only relevant question is: how are Judgments like Cicala and Romeo possible? Why is the CJEU (suddenly) so averse to (continuying to) act as constitutional court at EU level?