New paper on EU public procurement and national interest


I have recently finished a new paper on the regulatory space for Member States' national interest under EU public procurement law, which will be published in an edited collection putting together the main academic outputs of an international project led by Dr Varju (Institute for Legal Studies, Hungarian Academy of Sciences).

Its abstract is as follows:

EU public procurement law has been increasingly criticised for the restrictions it places on Member States’ regulatory autonomy and for the imposition of neoliberal conceptions of State intervention in the economy that do not necessarily match the general preferences of Member States with a social market economy orientation. Following that view, it could be thought that there is a limited (and possibly narrowing) space for Member State interests in EU public procurement law—or, in other words, that pursuing national interests goes against the grain of the internal market foundations of the 2014 Public Procurement Package.

The purpose of this chapter is to dispel this conception by making three points. First, that despite its competition-orientedness, the 2014 Public Procurement Package does not impose a ‘one-size-fits-all’ straitjacket on domestic economic systems, but is rather compatible with diversity of economic models at national level. A series of complex trade-offs resulting from the last revision of the EU public procurement rules, where Member State interests played a multifaceted role, have consolidated a competition-based model with significant flexibility for non-market and non-competed mechanisms, as repeatedly tested before and confirmed by the Court of Justice. Second, that EU public procurement law, however, does appropriately prevent Member States from pursuing protectionist policies, even if they consider them to be in their national interest—quod non, because the proper working of the internal market is both in the collective interest of the EU and of the individual Member States. Third, that EU public procurement law, in particular in its current incarnation in the 2014 Public Procurement Package, emphasises the ability of Member States to pursue secondary policies (such as the promotion of innovation or sustainability) in a diverse manner, in accordance with their domestic interests and local particularism. On the whole, thus, EU public procurement law allows Member States significant space to pursue their national interests, always provided that they are also compatible with their own interest in the proper functioning of the internal market.

The full paper is freely downloadable on SSRN: A Sanchez-Graells, 'Against the Grain? -- Member State Interests and EU Procurement Law' (August 18, 2017). To be published in M Varju (ed), Between Compliance and Particularism: Member State Interests and European Union Law (Springer, forthcoming). Available at SSRN: As always, comments most welcome: 

Cross-border joint public procurement: some reflections on the puzzling Art 39(2) Dir 2014/24

I gave a seminar on "The emergence of trans-EU public law: public procurement as a case study" yesterday at UEA Law School. My presentation (below) was largely based on this earlier paper of mine, where I discuss the new rules on centralised, joint and cross-border procurement in Directive 2014/24/EU (Arts 37-39). It also aimed to go beyond the technical aspects of the paper in exploring how these new mechanisms of cross-border cooperation between public buyers can help us identify the emergence of trans-EU public law, either of a substantive or 'conflict of laws' type.

The discussion eventually turned on Art 39(1)II Dir 2014/24, which states: "Contracting authorities shall not use the means provided in this Article [ie mechanisms of cross-border collaborative procurement] for the purpose of avoiding the application of mandatory public law provisions in conformity with Union law to which they are subject in their Member State."

This can be seen as an anti-circumvention clause aimed at ensuring that contracting authorities do not seek to disapply mandatory domestic rules by 'escaping' their jurisdiction through international collaboration--and, consequently, as a rule aimed at preserving the competential split between Member States and the EU in an area that arguably exceeds the procurement remit and goes to the core of the principle of national procedural and organisational autonomy.

However, participants in the seminar raised the point that it can also be seen as a 'Trojan horse' indicating further legal integration (and further regulation of these mechanisms in a future 6th iteration or generation of EU public procurement Directives) through the test of 'EU compatibility' of domestic mandatory public law provisions. I find this a very interesting thought, which is worth exploring in more depth. For now, I can only offer a few initial reflections.

From that perspective of 'EU law tests creeping into mandatory domestic public law requirements', and taking the example of free movement of goods, the question would be whether Art 39(1)II Dir 2014/24 does no more than recreate the mechanism of Art 36 TFEU--ie bring to the area of public procurement a 'public policy' (+ proportionality) test that mandatory public law requirements need to meet in order to justify the restriction on free movement that derives from preventing contracting authorities from resorting to enabling provisions for collaborative cross-border procurement. Or, on the contrary, whether it creates a separate test of 'EU law compatibility' that can actually go beyond what could be defended by Member States from a free movement of goods perspective by forcing an interpretation based on the effet utile of the rules in Dir 2014/24 itself--which would, almost by definition, result in more limited scope for absolute restrictions on the possibility to engage in collaborative cross-border joint procurement.

Either way, and having in mind recent cases on 'public policy' justifications for restrictions on free movement of goods, such as the DocMorris 2 case, it seems plausible that Art 39(1)II Dir 2014/24 may effectively be used in the future to demolish traditional public law requirements applicable to public procurement (such as subjection to domestic public contract law, language requirements, etc) on the basis that they disproportionately (or absolutely) restrict the possibility to engage in collaborative cross-border procurement.

For the purposes of the emergence of trans-EU public law, this would be a clear lever for the transformation of Member States' domestic public law requirements applicable to procurement activities, not least because internal market-type analysis would start being applied to public purchasing arrangements and their regulation in a different and possibly more stringent fashion.

So this is an area where I plan to keep an eye in the future and where I would appreciate input concerning any cases that may be developing at domestic level in the Member States. Either now or in the future.

What does Brexit mean for public procurement? Short remarks on Arrowsmith's White Paper

Prof Arrowsmith has published a White paper on the implications of Brexit for the law on public and utilities procurement, where she briefly considers the alternative models for the future regulation of public procurement in the UK after an exit from the EU. A fuller academic version of the paper is bound to appear in a Brexit special issue of the Public Procurement Law Review. In her White Paper, Arrowsmith provides the skeletal implications that different UK-EU relationships would have in terms of public procurement regulation, most of which point towards a clear need for (broad) continuity of the existing EU-based model.

Along the same lines already drawn by previous commentators (see here), her White Paper stresses the limited scope (and incentive) for a change of regulatory model if the UK is to have full access to the EU single market (under either the 'Norwegian'/EEA model, or the slightly more flexible 'Swiss' approach). She indicates that there is a (theoretical) possibility for the UK to reach a bespoke agreement with the EU that softens the requirements under the current EU Directives, but she also stresses that the stronger indication is that the EU would rather push for a consolidation of existing rules, both because that is the obvious 'off-the-shelf' solution, and due to the different negotiation dynamics between previously unrelated parties (the EU and Switzerland, for these purposes) and between the UK and the EU, which render arguments based on the need to 'learn' about the EU procedures or to reform internal rules to ensure approximation and consistency moot.

She then also assesses two scenarios that, in my view, are only interesting from a theoretical perspective. First, the strict application of the WTO GPA, which leads her to suggest that this option would allow the UK to develop a more flexible procurement regime but, realistically, only in the long run because access to the WTO GPA (of which the UK is not a Member in its own right, but only as part of the EU) would be significantly facilitated by keeping the existing EU-based regulations in place. She also mentions that this option would require the UK to agree on coverage with the EU and all other GPA members, and that 'there ... seems to be no reason why the other GPA parties would want to reopen the existing detailed coverage arrangements with the UK, or vice versa'. She is right to stress that business as usual would be the best way of ensuring quick accession to the GPA by the UK, but the question then arises of what is the advantage of such loose relationship with the EU compared to full access to the single market?--and the simple answer is that, in procurement terms, there is none in the short run and that any long run advantage seriously depends on the way the GPA itself evolves, which is not something we can include in our analysis with any meaningful level of predictability.

Second, and maybe in the only controversial or provocative point of her White Paper, Arrowsmith entertains the idea "that Brexit [c]ould see the UK throw off the shackles of EU procurement law, leaving it free to design its own system", in what she labels "the freedom option", which would derive in case the UK was not able to commit to any trade agreements covering public procurement. Arrowsmith rightly considers this situation unlikely and, as far as I can assess her qualitative comments on its implications, probably undesirable. I think that Arrowsmith's assessment of this situation is however partial because it fails to stress the losses in terms of trade that would derive from such "freedom solution", that I would rather label "the self-destructive, isolationist option".

Beyond the possibility of creating a superior public procurement system, which is by no means guaranteed (as Arrowsmith stresses herself), this solution of "absolute regulatory freedom" would not be viable unless the UK had no intention of keeping a meaningful level of international trade in public procurement markets. This scenario would come together with the possibility for any third country to discriminate against UK producers and exporters in their own procurement, as well as reduced incentives for international suppliers to participate in tenders where their ability to enforce individual rights was more reduced than in other jurisdictions. In general, it does not seem far fetched to consider that there would be less overall competition for contracts tendered by the UK government and, in the end, this would harm the UK taxpayer via higher prices and/or reduced quality of supplies, services and works needed to run public services.

I guess that my broader point is that, in this area of economic regulation, as in any other, arguments based on the possibility to develop a (theoretically) better system from a legal / technical perspective need to be considered together with their economic implications. And, from this perspective, any option that implied limited access to the EU single market and, even more, to the international markets, would impose a very heavy burden on UK's public expenditure. That is why it is important not to isolate technical legal analysis from its broader context in this important debate.

Moreover, and this is not a perspective generally included in Brexit assessments, multilateral investment banks also have a stake in the domestic regulation of public procurement. In case the UK wanted to have any chance of securing international funds for large infrastructure projects (which it may well want to preserve, in order to retain some possibilities of, for instance, EBRD investment in the country), it would still need to have a domestic regulation that complied with standards very close to those of the current EU-based regulatory mechanisms. Otherwise, it could not be out of the question that internationally-funded projects would need to be tendered under special rules in the future, thus not leaving the "freedom option" completely unconstrained.

Similarly, these issues of reduced international competition (with its negative economic effects) and difficulties in continuing to attract procurement-related international investment would arise in case Arrowsmith's proposal for a transition period between Brexit (ie, 2 years after the trigger of Art 50 TEU, which now seems likely to happen in early 2017) and the moment trade agreements were reached, in which she considers that a "sensible and likely interim solution would be to retain the award procedures of the regulations in place, but without provision for enforcement by non-domestic suppliers, pending eventual confirmation, modification/replacement, or total repeal of the regulations, depending on the outcome of trade negotiations and other decisions on how procurement will be regulated after Brexit". In my view, this is a bad idea and the UK would be better off by completely keeping the status quo ante Brexit (including remedies for international tenderers and investors) if it wants to preserve its (diplomatic) options of a swift conclusion of procurement-related trade agreements, as well as preventing disruption in investment and infrastructure projects.

Once again, from a broader perspective and like in most other areas of Brexit-related renegotiation, strategies that not only do not consolidate or grandfather rights, but also seek to (temporarily) restrict rights and guarantees, seem not to be conducive to productive future relationships and there is no reason to believe that such moves would not severely damage the UK's chances of reaching satisfactory agreements for the future. Thus, in my view, Arrowsmith's proposal for a transition period of reduced enforcement rights for non-UK bidders should not be followed.

AG Opinion favours minimum pay in public contracts: why the CJEU should not follow (C-115/14)

In his Opinion in RegioPost, C-115/14, EU:C:2015:566 (not yet available in English), Advocate General Mengozzi has submitted that the relevant EU public procurement rules (still Directive 2004/18; Art 26 on conditions for performance of contracts), did not oppose the imposition of requirements to pay minimum hourly rates to workers executing specific public contracts if those requirements stem from domestic (regional) legislation that would be engaged as a result of the posted workers Directive

The AG makes significant efforts to distinguish the RegioPost case from previous Judgments of the CJEU in Rüffert (C-346/06, EU:C:2008:189) and Bundesdruckerei (C-549/13, EU:C:2014:2235, see my comments here), and his Opinion creates leeway for the inclusion of minimum wage requirements in the execution of certain types of services contracts (something discussed by Dr Richard Craven in a work-in-progress paper presented at the UACES conference earlier this week). Moreover, the analysis in the AG's Opinion is relevant for the interpretation and enforcement of the new EU public procurement rules (Directive 2014/24; Art 70 on Conditions for performance of contracts). Thus, his RegioPost Opinion deserves some analysis.

In the case at hand, according to Rhineland-Palatinate's regional legislation (ie at Länder-level, as opposed to Federal-level which did not at the relevant time regulate minimum wage), public contracts could not be awarded to tenderers that did not commit to pay a gross minimum hourly wage of €8,70 to the workers involved in the execution of the contract. Remarkably, such commitment had to be made in their own name and on behalf of any existing or potential subcontractors. 

RegioPost was interested in a contract for the provision of postal services, but considered the minimum-wage requirement contrary to EU law and submitted its offer without the necessary declaration committing to pay such minimum hourly wage. Its offer was excluded from the process and each of the lots in which the contract was divided was awarded to a competing tenderer. RegioPost appealed the exclusion/award decision.

The arguments put forward by RegioPost, which the Commission shared, stressed that the incompatibility of the minimum hourly wage requirement with EU law derived both from the fact that this was a special requirement for public contracts not applicable to the execution of private contracts (Rüffert), and that the imposition of such a requirement needed to be assessed in accordance with the posted workers Directive because the provision of postal services would (at least for interested tenderers not based in Germany) require hiring or posting workers (differently from the situation in Bundesdruckerei, where the disappointed tenderer intended to execute the services contract remotely). There is a third, very technical issue, but the CJEU would not need to engage in its assessment if it followed the approach suggested here, so I will not discuss it in any detail.

A 'subjective' legal assessment?
In his Opinion, AG Mengozzi rejects both arguments. Starting with the analytical framework, he rejects that the analysis needs to include the provisions in the posted workers Directive. In his view, in Bundesdruckerei, the CJEU limited the analysis to compatibility with Art 56 TFEU because the circumstances of the case would not have engaged the posted workers Directive. In that regard, AG Mengozzi stresses that RegioPost (being an undertaking based in Germany and that had not indicated its intention to subcontract the execution beyond German territory) would not have executed the contract in a way that engaged the posted workers Directive. Thus, the AG concludes that the posted workers Directive is not relevant and, consequently, the analysis needs to be limited to compatibility with Art 56 TFEU as in Bundesdruckerei (paras 45-60).

In my view, this is a very problematic analytical option. If RegioPost had been an undertaking not based in Germany or that intended to subcontract the execution of the contract to a non-German based company in all or in part, the analysis would have been different. Therefore, the legal analysis depends in this case from the fact that the situation that gives rise to RegioPost's challenge is strictly internal. However, in its analysis of the admissibility of the request for a preliminary ruling, the AG had gone to painstakingly long efforts to set aside this argument in order to justify the competence of the CJEU to rule on this issue (paras 27-44). 

Remarkably, the AG had stressed how 'it cannot be excluded in any way that, following its publication in the Official Journal of the European Union, this tender has been of interest for a number of companies established in Member States other than Germany, but these companies have not finally participated in the award procedure for reasons that could be related to the requirements [concerning the minimum hourly wage at stake]' (para 37, own translation from Spanish). In my view, this should suffice for the CJEU to adopt a view that does not depend on the specific tenderer that challenges the requirement, but on the objective compatibility of the requirement with EU law, particularly in protection of the interests of those potentially excluded cross-border tenderers.

A competence-based legal assessment?
In similar terms, AG Mengozzi rejects the argument that the imposition of the minimum hourly wage only to the execution of public contracts, but not to private contracts, determines its incompatibility with EU law a-la-Rüffert. The AG considers that the inclusion of Art 26 in Directive 2004/18 (and now Art 70 in Dir 2014/24) has overruled Rüffert by allowing for the imposition of special conditions for the execution of public contracts. In his view, this suffices to overcome the Rüffert line of case law and moves the analysis to a pure competence-based issue. In the AG's view, given that German Lander have competence to legislate on minimum wages solely for public contracts (but not general minimum wages), upholding the difference between special conditions for public contracts and those generally applicable to private contracts (as well) would result in the nullification of the Lander's legislative competence (paras 61-89).

This is a very complex and counter-intuitive approach to the issue. Particularly because the AG stresses that 'it is true that Member States with a federal structure, such as the Federal Republic of Germany, cannot claim the internal division of powers between the authorities of regional or local authorities and federal authorities in order to avoid compliance with the obligations imposed on them by EU law. In order to ensure compliance with these obligations, these different authorities are obliged to coordinate the exercise of their respective powers' para 83, own translation from Spanish and reference omitted). And, however, his Opinion goes on to protect the effectiveness of the internal split of competences in a way that, in my opinion, simply goes against those findings.

Moreover, the AG traces a parallelism between social and environmental considerations in public procurement and indicates that the possibility of including environmental considerations that apply solely to public contracts (and not to private contracts) further justifies such a deviation from the Rüffert approach to issues of implicit discrimination. However, the AG is mixing different issues because, as recently argued in a persuasive manner, the inclusion of environmental considerations is assessed in an inverted manner by means of the requirement for those considerations to be linked to the subject-matter of the contact [see the analysis by Dr Rike Krämer in a work-in-progress paper also presented at UACES earlier this week]. Thus, the analytical framework is different, not least because the EU has a significant volume of environment-related competences, whereas its ability to regulate in social matters is extremely limited, if not practically non-existent.

What should the CJEU do?
In my opinion, the CJEU should reject AG Mengozzi's RegioPost Opinion on both aspects. Starting with the second argument, the CJEU should reject the competence-based analysis because it would allow Member States to restrict the effectiveness of EU internal market rules on the basis of their internal split of competences, which has not been accepted by the CJEU in the past. By stressing the important point in Bundesdruckerei that 
imposing ... a fixed minimum wage corresponding to that required in order to ensure reasonable remuneration for employees in the Member State [or region] of the contracting authority in the light of the cost of living in that Member State [or region], but which bears no relation to the cost of living in the Member State in which the services relating to the public contract at issue are performed and for that reason prevents subcontractors established in that Member State from deriving a competitive advantage from the differences between the respective rates of pay ... national legislation goes beyond what is necessary to ensure that the objective of employee protection is attained (C-549/13, at para 34, emphasis added).
This would simply imply using the principle of undistorted competition as a moderating factor aimed at controlling potential excessed resulting from the pursuit of secondary considerations in public procurement and, in particular, using undistorted competition as a limit to the pursuit of social policies that can break-up the internal market and prevent cross-border participation in public tenders [as discussed in full detail in A Sanchez-Graells, 'Truly Competitive Public Procurement as a Europe 2020 Lever: What Role for the Principle of Competition in Moderating Horizontal Policies?' (2016) 22(2) European Public Law forthcoming].

Moreover, on the first aspect, the CJEU should expand its analysis under Bundesdruckerei and include the assessment of the situation where the execution of the contract would necessarily require a non-German based contractor to either post workers or subcontract to a German-based undertaking. In those cases, compliance with the posted workers Directive would be the applicable standard in terms of social protection. Therefore, that would be the analysis to be carried out in order to assess whether the imposition of the minimum hourly wage solely to workers involved in the execution of public works is acceptable. The answer would most likely be that it is not (Rüffert), regardless of the wording of Art 26 of Dir 2004/18 and Art 70 of Dir 2014/24, because both of them require that any such special conditions for the execution of public contracts comply with general EU law.

In short, the CJEU should not follow AG Mengozzi's Opinion on any of these two issues. It should stress the current limits on the inclusion of social considerations in public procurement and define clear boundaries. Granted, this is an area where Member States may want to achieve more leeway (see eg the UK's latest approach to internships, as discussed by Dr Pedro Telles here), but this would require further harmonisation of social legislation on an EU-basis to avoid a new fractioning of the internal market. In the absence of such harmonisation, public procurement remains the wrong regulatory tool to address those issues.

My approach to public procurement and competition: A rebuttal to Prof Arrowsmith (2012) and Prof Kunzlik (2013)

I am at the latest stages of updating my monograph Public Procurement and the EU Competition Rules (Oxford, Hart), which 2nd edn will be published by Hart again in 2015. Preparing the revision of the book, and seeing that the 1st edn raised some criticism by very notable procurement scholars, I thought that it would be good to write an introduction that provides some context. The following is from this introduction and basically amounts to a rebuttal of the arguments developed by Professor Sue Arrowsmith and Professor Peter Kunzlik to my 1st edn, both of them published in the Cambridge Yearbook of European legal studies. Hopefully, this rebuttal will contribute to a transparent academic debate about public procurement--and it will persuade readers to look for the new edition as soon as it is available Needless to say, further comments from Arrowsmith or Kunzlik would be enriching.
* * *
From an academic perspective, it has been remarkable to see how the first edition of this book has sparked a rather intense, estimulating and fruitful debate between Professor Sue Arrowsmith, Professor Peter Kunzlik and myself about the ultimate goal of the EU public procurement rules. More specifically, we seem to hold very different views about the meaning of ‘competition’ and the ensuing economic efficiency, as well as their place in the EU procurement Directives. I think that the readers of this second edition will benefit from a short summary of this academic debate, since it fundamentally underpins the work in this book.
(1) Professor Sue Arrowsmith’s contention that the pro-competitive framework on which this book is based constitutes a stretched and distorted reading of the competition elements included in the EU public procurement Directives and their interpreting case law.

Professor Sue Arrowsmith criticises my competition-oriented approach in a section of her article ‘The Purpose of the EU Procurement Directives: Ends, Means and the Implications for National Regulatory Space for Commercial and Horizontal Procurement Policies’ [(2011-2012) 14 Cambridge Yearbook of European legal studies 1–47].
She argues for her own interpretation of the goal of the EU rules and tries to limit their scope in search for some ‘regulatory space’ for Member States. This is part of a larger endeavour of hers, likely to carry on in the written proceedings of her coming conference on “Rethinking ‘economic’ derogations and justifications under the EU’s free movement rules” within the Current Legal Problems 2014-15 series.  
In her 2012 paper, Professor Arrowsmith considered that my book espouses ‘a broad notion of competition as a tool for replicating the private sector market’ in the public procurement setting. She considers that such point of departure should be rejected, as it is a misunderstanding of the concept of competition embedded in the pre-2014 public procurement Directives, which she considers limited to ‘removing discrimination and barriers to entry into the competitive market, and implementation of the competitive procedures for transparency reasons’. She adopted a rather positivistic approach and stressed that ‘[i]t seems significant that while non-discrimination, transparency and equal treatment were written into the directives as general principles, [its] ‘competition’ provisions are confined to specific areas’. She eventually concluded that ‘a broad interpretation of the directives as being concerned with replicating market competition is incorrect. While apparently supported by some statements in the jurisprudence these are based on misunderstanding and such a broad interpretation, it is submitted, represents unwarranted judicial reorientation of the directives’ rules’ (all quotes from pages 25–34). My reaction to the line of criticism voiced by Professor Arrowsmith is as follows.

Firstly, I am not sure that my approach can be conceptualised as an attempt to make the directives ‘replicate market competition’. I would submit that it is rather an attempt to properly integrate them within an environment of market competition. Or, put differently, this is an attempt to avoid public procurement rules from distorting or restricting the competition that already takes place in the market, or from preventing the competition that would emerge but for the constraints imposed by the procurement rules. 

Secondly, as to the point that this approach is flawed and based on misunderstandings, taking exclusively into account the pre-2014 materials, I would suggest that Professor Arrowsmith’s views do not lie on the strongest economic foundations. Professor Arrowsmith basically comes to the view that EU public procurement rules are concerned with preventing barriers to trade within the internal market (by means of transparency and non-discrimination), but that this has nothing to do with economic efficiency derived from undistorted competition because the ultimate objective of the rules (beyond internal market integration per se) belongs to the domestic regulatory space of the Member States. However, economic efficiency must, by necessity, derive from the completion of the internal market if that results in stronger competitive pressures for economic operators.
Furthermore, as the Court of Justice of the EU has very recently stressed in an interpretation of the 2004 public procurement Directives, the ultimate objective of the internal market rules and the EU public procurement Directives is to allow all the economic operators involved to achieve economic efficiency derived from competition strategies unaffected by restrictive procurement decisions—in particular, even if that is attained by deriving a competitive advantage from the differences between the respective rates of pay applicable in different Member States (Judgment in Bundesdruckerei, C-549/13, EU:C:2014:2235, 34). It seems very clear that EU public procurement rules, just as everywhere else, are concerned with economic efficiency. Hence, limited doubt can seriously be cast on the fundamental proposition that the development of the internal market, including public procurement rules, and its supporting system of competition rules aim at generating economic efficiency by relying on (economic) market mechanisms.

Thirdly, and from a more legalistic perspective, the development of the EU public procurement rules in the revised 2014 Directives also disprove the point that the general principle of competition does not exist and that competition considerations are limited or confined to specific areas. As discussed at length in Chapter 5 of this second edition, article 18(1) of Directive 2014/24 now clearly consolidates the principle of competition amongst the general principles of the system. It is true that the wording of this provision could have been clearer and that there are significant interpretative questions that need being addressed, but it should be acknowledged that by clearly stating that ‘The design of the procurement shall not be made with the intention … of artificially narrowing competition [and 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’, Directive 2014/24 stresses the relevance of competition considerations across the board and provides an interpretative tool that is likely to further develop the pro-competitive orientation of the system of EU public procurement rules in the coming years. In my view, this is a truly welcome development, and not only because it clearly supports the ideas and approach developed in the first edition of this book and now further refined in this second edition. As has always been my conviction, a competition-oriented public procurement system is necessary for the public sector to properly carry out their missions with the minimum distortion of private sector activities and, ultimately, with the minimum loss of social welfare. 

In the 2005 second edition of her magnificent treatise The Law of Public and Utilities Procurement, 2nd edn (London, Sweet and Maxwell, 2005) 432, Professor Arrowsmith had indicated that ‘competition might be developed as a general principle with the same status as transparency and equal treatment. The very broad conception of competition endorsed by the Advocate General [Stix-Hackl in case C-247/02 Sintesi] was criticised … it was suggested that the directives are merely concerned with removing restrictions on participation in competitions held in public markets. However, a general principle of competition could properly be developed to support this latter objective of removing restrictions on participation’. Consequently, even if back in 2005 she already stressed the same points she later emphasised in the 2012 paper regarding transparency and non-discrimination, she seemed to be open to a development such as the ‘creation’ of a principle of competition like the one now included in article 18(1) of Directive 2014/24.
However, when she now reads that article in 2014, she considers that it ‘appears to be simply a manifestation of the more general equal treatment principle, as designing any aspect of the procurement for this reason [ie, ‘unduly favouring or disadvantaging certain economic operators’] rather than based on the needs and preferences in the project would clearly infringe that principle’ (The Law of Public and Utilities Procurement. Regulation in the EU and the UK, Vol. 1, 3rd edn (London, Sweet & Maxwell, 2014) 631). Professor Arrowsmith has overlooked the first part of the clause of article 18(1) of Directive 2014/24, where contrary to what she concluded regarding the 2004 rules, it is at least clear that competition is ‘elevated’ to the same altar of the general principles of the EU public procurement system as equality, non-discrimination, transparency and proportionality.

Overall, there is very little left to support Professor Arrowsmith’s view that the pro-competitive approach advocated for in this book is based on misunderstanding. On the contrary, I would claim that the arguments presented in the first edition paved the way for a stronger recognition of the existence of the principle of competition embedded in the EU public procurement Directives, which has now culminated in its explicit consolidation in article 18(1) of Directive 2014/24. That being said, this second edition will provide the reader with arguments why this is a development that still requires further fine-tuning and optimisation. And this is an endeavour to which I plan to continue dedicating my academic efforts.
(2) Professor Peter Kunzlik’s argument that this book ‘as well as being a scholarly analysis within the neoliberal normative frame, is a manifesto for the neoliberalisation of public procurement regulation in the EU’ and is ‘the most systematic statement’ of the argument that ‘the dominating aim of the EU procurement directives is to advance competition in the sense of a competition doctrine intended only to achieve efficiency’.

The further debate with Professor Peter Kunzlik was equally refreshing. Indeed, he thought that Arrowsmith had fallen short from exhausting the criticism of the first edition of this book and further expanded it in his article ‘Neoliberalism and the European Public Procurement Regime’ [(2012-2013) 15 Cambridge yearbook of European legal studies 283, 312–56]. Interestingly, Kunzlik took a completely different approach and focussed his criticism on the ideology that he imputes to the book (and myself, by extension). I must say that I am not completely dissatisfied by the label of ‘neoliberal manifesto’ and that, as Kunzlik recognises, this is something I disclose rather openly in the book when I warn the reader that 'this is a ‘free-market type’ study of competition in the public procurement environment'. However, when it comes to the details of his criticism, I think that Kunzlik fails to provide a convincing argument for the following reasons.

Kunzlik starts off with a very lengthy discussion of Neoliberalism to set the tone for his criticism, and then goes on to acknowledge Arrowsmith’s position. Taking issue with both her and my positions, Kunzlik indicates that he aims to ‘offer a third approach to the relevance of competition and value for money in EU public procurement regulation’. He considers that ‘the concept of ‘competition’ to which the public procurement directives relate is not the ‘efficiency’ concept suggested by [Sanchez] Graells, but rather a ‘structure of competition’ concept that is concerned to protect the structure of the market and equality of competitive opportunity of traders in the interests of customers, competitors and ultimate consumers. It is a concept that in the public procurement context simply requires that the law must ensure equality of opportunity for potential tenderers and a structure of competition for public contracts that allows sufficient opportunities for EU-wide competition, thereby ensuring the integrity of the internal market—the very same objectives that are asserted by Arrowsmith’ (quotes from pages 327 and 335). Kunzlik was trying to square a circle between Arrowsmith’s and my position. However, beyond the dismissive way in which he uses the terms efficiency and neoliberalism, there are no such differences in the implications of his and my arguments. Indeed, I do not see any third view in his proposal.

I find it even harder to understand how his argument deviates from the ones presented in this book when he stresses that ‘the public procurement directives do have a competition objective. However, … the objective in question is not to achieve ‘efficiency’ in the sense contended by [Sanchez] Graells, but to ensure a structure of competition for public contracts to be opened up to EU-wide competition on the basis of equality of competitive opportunity’ (340). Tertium non datur. I struggle to understand how equality of competitive opportunity on an EU-wide level does not amount to (facilitating) economic efficiency. Consequently, I hope the reader will agree with me in that there is no ‘third view’ and that, once it is accepted (as he does) that the public procurement directives do have a competition objective, the argument is over—regardless of the ideological content one tries to give to it.

Overall, then, I think that the academic debate (as I understand it) strongly supports the approach taken in this book, where these and other criticisms are addressed in further detail. There is nothing left for me to say. It is now for you, dear reader, to decide.

CJEU continues reducing the scope of minimum wage laws when public contracts are subcontracted (C‑549/13)

In its Judgment in Bundesdruckerei, C-549/13, EU:C:2014:2235, the CJEU continued the development of its case law on the interaction between public procurement and labour law. In this area that was revolutionised by the Viking and Laval cases (although Viking was not about procurement), and then expanded in Rüffert and Luxembourg (idem), every decision of the CJEU is highly sensitive and likely to be received with as much praise as criticism [see, eg, Zimmer, 'Labour Market Politics through Jurisprudence' (2011) 7(1) German Policy Studies 211-234, or Bücker and Warneck, 'Viking-Laval-Rüffert: Consequences and policy perspectives' (2010) 11 European trade union institute report].
The Bundesdruckerei Judgment will surely be no exception, given that the CJEU has ruled that if a tenderer intends to carry out a public contract by having recourse exclusively to workers employed by a subcontractor established in a Member State other than that to which the contracting authority belongs, article 56 TFEU precludes the application of legislation of the contracting authority's Member State that requires the subcontractor to pay a minimum wage to its workers.
It specifically determines the incompatibility with EU law of the Law of the Land of North Rhine-Westphalia on compliance with collective agreements, social norms and fair competition in the award of public contracts of 10 January 2012 and, particularly, its paragraph 4(3), which foresaw that:
Public service contracts which are not covered by [rules on posted workers, or on the public transportation of passengers by road and rail] may be awarded only to undertakings which, at the time of the submission of the tender, have agreed in writing, by means of a declaration made to the contracting authority, to pay their staff …, for the performance of the service, a minimum hourly wage of at least EUR 8.62. The undertakings shall, in their declarations, state the nature of the commitment adopted by their undertaking in the context of the collective agreement and the minimum hourly wage which will be paid to the staff engaged for the performance of the services. The amount of the minimum hourly wage may be adapted in accordance with Paragraph 21, by means of a regulation adopted by the Ministry of Labour.
Hence, Bundesdruckerei is different from previous cases because it does not involve posted workers, but exclusively the recourse to a fully-owned subsidiary in a different Member State by the main contractor. Hence, the relevant situation is that in which ‘the subcontractor is established in another EU Member State and the employees of the subcontractor carry out the services covered by the contract exclusively in the subcontractor’s home country’ (para 26).
Issues of abuse of internal market rules aside [for a very interesting discussion, see Sayde, Abuse of EU Law and Regulation of the Internal Market (Oxford, Hart Publishing, 2014)], the legal question was relatively straightforward: does 'Article 56 TFEU preclude the application of legislation of the Member State to which that contracting authority belongs which requires that subcontractor to pay those workers a minimum wage fixed by that legislation'? (para 29).
The CJEU had no doubt about the incompatibility of the minimum wage requirement, even if it could be considered a 'contract compliance clause' under article 26 of  Directive 2004/18, which foresaw that
Contracting authorities may lay down special conditions relating to the performance of a contract, provided that these are compatible with Community law and are indicated in the contract notice or in the specifications. The conditions governing the performance of a contract may, in particular, concern social and environmental considerations (emphasis added).
The CJEU hence focussed on the compatibility with EU law of the minimum wage requirement. In very clear terms, the CJEU has ruled that
By imposing, in such a situation, a fixed minimum wage corresponding to that required in order to ensure reasonable remuneration for employees in the Member State of the contracting authority in the light of the cost of living in that Member State, but which bears no relation to the cost of living in the Member State in which the services relating to the public contract at issue are performed and for that reason prevents subcontractors established in that Member State from deriving a competitive advantage from the differences between the respective rates of pay, that national legislation goes beyond what is necessary to ensure that the objective of employee protection is attained (C-549/13, at para 34, emphasis added).
This is bound to be a truly relevant case, as it can effectively deactivate all attempts by Member States to impose minimum wages being paid in public procurement settings, even under the revised rules for 'contract compliance clauses' in art 70 of Directive 2014/24. This provision has now substituted art 26 of dir 2004/18 and indicates that
Contracting authorities may lay down special conditions relating to the performance of a contract, provided that they are linked to the subject-matter of the contract within the meaning of Article 67(3) [ie linked to the specific process of production or a specific process in another stage of the life-cycle] and indicated in the call for competition or in the procurement documents. Those conditions may include economic, innovation-related, environmental, social or employment-related considerations (emphasis added).
There are two important changes to note in the Drafting of art 70 dir 2014/24 when compared to art 26 of dir 2004/18.
The first one is that art 70 dir 2014/24 attempts to swap the general criterion of compatibility with EU law with a requirement for the conditions to be linked to the subject-matter of the contract. Generally, this is simply laughable, as the general obligation to comply with EU law does not need to be written in a Directive, but derives generally from the supremacy of EU law and, in particular, of TFEU provisions (as art 56). However, in a more possibilistic reading, the requirement of link to object of the contract may be reinterpreted as establishing a tight proportionality test, in which case the change of drafting will not have any meaninguful legal consequences (either).
The second change is the explicit inclusion of employment-related considerations, as a specification of social issues. This change is also bound to be significantly ineffective, as the CJEU did not contend that employment-related considerations could be the object of contract compliance clauses.
Generally, I think that the case law of the CJEU is consistent and very clear in imposing restrictions to any deactivation of (labour) competitive advantages. And I think that it will be very difficult to avoid that approach under art 70 dir 2014/24, unless contracting authorities smarten up in the way they impose minimum wage conditions [for a general discussion on the likelihood of this, see Jaehrling, ‘The state as a “socially responsible customer”? Public procurement between market-making and market-embedding’ (2014) European Journal of Industrial Relations (forthc)]. More generally, this could put pressure on the development of a European minimum wage (see discussion here), but the analysis of the (undesirable) effects of such policy exceed our time and space.
However, as public procurement is concerned, the Judgment of the CJEU in Bundesdruckerei should be welcome, as it stresses that the main goal of public procurement rules are to ensure economic efficiency by a deepening of the internal market and a protection of undistorted competition (even by means of regulation). Some may like it (I do), and some may hate it (as Arrowsmith and, particularly, Kunzlik seem to do), but this is what it is.

CJEU 'consolidates' market access test in the enforcement of Art 34 TFEU (C-639/11 & C-61/12)

In its Judgments of 20 March 2014 in cases C-639/11 Commission v Poland and C-61/12 Commission v Lithuania, the Court of Justice of the European Union (CJEU) has found that both countries infringed their obligations under Art 34 TFEU by making registration in their territory of passenger vehicles having their steering equipment on the right-hand side, whether they are new or previously registered in other Member States, dependent on the repositioning of the steering wheel to the left-hand side. In my view, this case is interesting for at least two reasons.
Firstly, the CJEU has 'consolidated' the so-called 'market access test' in the enforcement of Art 34 TFEU by recasting the traditional 'Dassonville' formula and focussing the assessment on hindrances to market access. Indeed, in the 'new' (re)formulation of the test, the CJEU considers that
In view of the Court’s settled case-law, the contested legislation constitutes a measure having equivalent effect to quantitative restrictions on imports within the meaning of Article 34 TFEU, in so far as its effect is to hinder access to the Polish [sic, Lithuanian (oh, the joys of copy and paste!)] market for vehicles with steering equipment on the right, which are lawfully constructed and registered in Member States other than the Republic of Lithuania (see, concerning the origins of that case-law, Case 8/74 Dassonville [1974] ECR 837, paragraph 5; Case 120/78 Rewe Zentral, ‘Cassis de Dijon’ [1979] ECR 649, paragraph 14; and, more recently, Case C‑110/05 Commission v Italy [2009] ECR I‑519, paragraph 58) (C-61/12 at para 57 emphasis added and, equally, C-639/11 at para 52, correction needed in the English version of the C-61/12 Judgment but not in other linguistic versions].
This may be seen as a relatively welcome development, as it continues in the line of clarification already initiated in C-110/05 Commission v Italy (mopeds) and consolidates a more encompassing test that allows for the harmonious assessment of potential restrictions to free movement of goods under a single, unified (and probably more functional) test.
Secondly, the case is important in that the CJEU deviates significantly from C-110/95 in applying a much more stringent test of (strict) proportionality to the measures adopted by Poland and Lithuania (basically, requiring a repositioning of the steering wheel prior to registration of the motor vehicles) than it did to the measures adopted by Italy (an outright ban of a specific type of trailers to be towed by motorbikes and other vehicles) on the grounds of road safety [see C-61/12 paras 63-69 and C-639/11 paras 58-65].
In my view, the application of such a stringent proportionality test (with which the CJEU seems to revitalise the pro-integrationist agenda in the enforcement of Art 34 TFEU) will create frictions with Member States for two main reasons.
Firstly, the 'consolidation' of the new (re)formulation around hindrance of market access indicates an effective substitution of the underlying rationale in internal market rules (art 34 TFEU particularly) from a producers’ freedom (push market) to a consumers’ right (pull market). This will be problematic unless free movement rules further converge with (effective) consumer protection and safety and similar concerns receive a common treatment throughout the EU (ultimately, the goal of the CJEU, particularly when it uses the argument that in 22 of the 28 Member States registration would not have required changing the wheel location).
And, secondly, because the new (re)formulation of the case law creates a dangerous test leading to a (very, too broad) Dassonville-like formula limited only by (subjective) proportionality analysis carried out by the CJEU, which can result in an encroachment of domestic regulatory powers if the CJEU adopts a tough stance, as it has done against Poland and Lithuania (and differently from its previous, more timid approach in the case against Italy).
In the future, it will be interesting to see if the CJEU does not find itself under the same amount of criticism as when it first adopted the Dassonville fomula and, consequently, whether the next round of evolution of the law on free movement of goods does not initiate a new restriction of the rules under a new version of Cassis de Dijon. All in all, the development of the law in this area of the internal market seems to evolve in cycles.

Protection of IPR and limits of contractual relationships: AG Opinion in Case C-103/11 P

Last 15 Movember 2012, Advocate General Cruz Villalon delivered his Opinion in case in Case C-103/11 P Commission v Systran SA and Systran Luxembourg SA, where he endorsed the position of the European Commission whereby intellectual property related disputes that arise in the broader context of a contractual relationship between rights-holder and infringer are a matter of contractual liability--and, consequently, remain outside the jurisdiction of the EU Courts.

The dispute derived from the disclosure of proprietary Systran know how and other IPR protected data by the European Commission to a third party in the context of the maintenance and linguistic enhancement of a machine translation system initially developed by Systran. Systran brought the case to the General Court and, in 2010 (T-19/07), it held that the dispute could not be considered to be contractual in nature and that it did not therefore lack jurisdiction to adjudicate upon it. It imposed a lump sum payment of €12mn to compensate Systran for the loss of value of its IPR. The Commission appealed.

According to AG Cruz Villalon,  the dispute in question must primarily be examined by the competent national courts, in accordance with the agreements in question and the laws applicable to them.  According to the AG, the General Court made an error in law in its examination of the relationships which were established, in a very marked contractual context, between the Commission and the various companies in the Systran group which have developed or contributed  to the development of the various versions of the Systran software. Therefore, the General Court wrongly declared itself as having jurisdiction to hear and determine the action for compensation for the damage allegedly caused to Systran by the Commission’s conduct. 

The final decision by the CJEU in this case will be of major relevance, since it will deal with the complicated issue (which does not seem to receive homogeneous treatment across the EU) of the vis attractiva of contracts when the parties engage in subsequent tortious behavior. Therefore, the final Judgment in case C-103/11 may have large consequences for the Contract Law of Member States, which leaves me with the question whether the adjudication of this case may not in itself run against the allocation of competences in private law matters that seem to have a weak connection with the internal market (mainly, concerning art 114 TFEU). Definitely, a case to follow with interest and area where some well-meditated research seems required.

An interesting assessment of the enforcement of EU procurement rules: Pelkmans & Correia De Brito (2012) Enforcement in the EU Single Market

In their forthcoming book Enforcement in the EU Single Market ( Jacques Pelkmans and Anabela Correia De Brito provide an interesting overview of the laws and regulations of the single market of the European Union, the current EU enforcement landscape and its functioning, with a particular focus on compliance with public procurement rules. This is a very topical and relevant field of inquiry and their book sheds some interesting insights into the actual level of compliance with EU public procurement rules and the potential gains to be obtained if the current modernization process is correctly driven towards simplifying and promoting compliance.

As the authors rightly indicate,
Among all types of EU single market legislation, the problems with public procurement are undoubtedly the harder ones. The potential market is huge: there is still an enormous potential of cross-border competition for contracts and the economic welfare gains can be very substantial. The European Commission’s proposals of December 2011 should be of some help. There should be more harmonization, including in the national review and remedies systems.
In their book, Pelkmans and Correia De Brito offer a short but useful typology of enforcement barriers that stress some of the main areas of difficulty, such as administrative barriers [which include include "the incorrect application of EU directives, conformity assessment barriers and enforcement issues in (intra-EU) public procurement, especially non-publication (when above the value thresholds in EU law)] or the maybe more implicit restrictions derived from gold plating and an improper application of the rules controlling technical requirements in public procurement procedures.

Further than that qualitative analysis of the enforcement landscape, some of the data provided by Pelkmans and Correia De Brito is also worth highlighting. They provide a statistic of the cases handled by the Commission concerning the enforcement of public procurement rules (p. 89, please note that the most recent year is to the left, which makes the reading of the table slightly counter intuitive): 

As the authors derive from those numbers:
[...] the number of public procurement infringement files handled by the European Commission each year has progressively decreased in the period 2007-10 (155 in 2010, 258 in 2009, 333 in 2008 and 344 in 2007). Most of the files opened by the Commission were closed during the pre-administrative/administrative phase of the infringement procedure (76, 127, 163 and 142, respectively). However, in comparative terms, the number of cases referred to the Court of Justice of the European Union increased slightly in 2010 (7.5% of the cases in 2010 had been reported to the CJEU, compared with 2.3% of the cases in 2009, 2.4% in 2008 and 3.5% in 2007).
Even if the number of infringement procedures opened by the Commission in the reported period had decreased in relation to previous years, the case load of public procurement infringement complaints still remains high and indicates that compliance levels should be improved in a number of member states.
In my opinion, the analysis of the data also offers other  interesting hints, since it shows that there seems to be a significant amount of backlog piling up in the Commission's docket (ie the number of cases closed is less than 50% of those open for any year in the 2007-10 period) and that only a small fraction of those cases are referred to the CJEU (which means that political negotiation remains the paramount enforcement tool in the public procurement field).

I also find it interesting to compare the relatively low number of public procurement cases based on Article 258 TFEU and the increasing number of Judgments of the CJEU and the GC in the field of public procurement. A quick search for the words "public procurement" with the case-law search engine of the curia webpage retrieves over 730 documents, most of which were produced after the adoption of the current 2004 Directives. Such a contrast in numbers indicates that public procurement enforcement is running trough two very different roads when one compares its enforcement based on the "law in the books" (Commission enforcement) and the "law in action" (references for preliminary rulings and challenges to procurement decisions of the European Institutions). This seems, then, a worthy area were to focus future research efforts.

In their conclusions, Pelkmans and Correia De Brito find that the source of the massive litigation in public procurement is basically the heterogeneity of the rules. They submit that:
There are still numerous ‘barriers’, real and perceived, in the internal public procurement market. Member states have (too) much regulatory discretion because the procurement directives are ‘coordination’ directives, with insufficient harmonization. The ‘regulatory heterogeneity’ in the area is far too costly for the businesses interested in cross-border or even EU-wide operation. More harmonization and/or disciplines of national ‘special or extra’ rules and requirements should urgently be pursued. Also, the national review and remedies systems are vastly different in terms of rules, procedures, ease-of-access and effectiveness. Such complications go squarely against the justified desire of business to have prior confidence in cross-border tenders. Quick access to national reviews of public procurement is an asset, but its utility is dramatically diminished by the overly fragmented arrangements that confuse business and undermine a level playing field. Harmonization here is tough given the incorporation in national legal systems, but EU-wide performance criteria might be introduced to enhance confidence for cross-border entrepreneurs (pp. 130-131).
This may be a call for a shift from having public procurement Directives to the adoption of proper public procurement Regulations (although many scholars, such as Arrowsmith or Treumer, have already indicated that the EU public procurement directives just fall shy from being disguised regulations due to their high degree of prescriptiveness). 

Be it as it may, the findings of the authors may be worth taking into consideration in the last steps of the modernization process of EU public procurement rules, which still seems to be scheduled for completion before Summer of 2013. Having enforcement considerations in the back of the policymakers' heads when finalizing the drafting of the new rules seems definitely desirable.