Interesting AG Opinion on limits of duty to investigate intra-group collusion in procurement (C-531/16)


In his Opinion of 22 November 2017 in Specializuotas transportas, C-531/16, EU:C:2017:883, Advocate General Campos Sánchez-Bordona has considered the limits of a contracting authority's duty to investigate potential intra-group collusion or manipulation of tender procedures by entities belonging to the same corporate group--in particular in a setting where the tenderers are under no specific obligation to disclose their links to the contracting authority, but the contracting authority is aware of those links and can identify signs that point towards potential collusion. In my view, his approach is functional and enabling, and pushes for a competition-orientated exercise of the contracting authority's discretion.

AG Campos concluded that, on the one hand, '[i]n the absence of an express legislative provision or a specific requirement in the specifications governing the conditions for the award of a service contract, related tenderers which submit separate tenders in the same procedure are not under an ineluctable duty to disclose their links to the contracting authority'. And, on the other hand, that '[t]he contracting authority will be obliged to request from those tenderers the information it considers necessary if, in the light of the evidence available in the procedure, it harbours doubts concerning the risk that the simultaneous participation of those tenderers will undermine transparency and distort competition between operators tendering to provide the service' (para 87).

In my view, and for the reasons discussed below, AG Campos' approach creates the right set of incentives both for national legislators and for contracting authorities. Even if his Opinion is concerned with the regime under Directive 2004/18/EC, in my view, the balance of duties deriving from EU law and those that can be created under the national law of the Member States will extend to the system created by Directive 2014/24/EU--as, ultimately, the second part of AG Campos' conclusion is compatible with the principle of competition in Article 18(1) thereof, and the first part will be largely unaffected by any self-certification requirements concerning the discretionary exclusion ground in Art 57(4)(d) under the ESPD.

The case and the questions in the preliminary reference

In the case at hand, both Specialus autotransportas UAB (‘tenderer A’) and Specializuotas transportas UAB (‘tenderer B’) had submitted tenders for a contract for the provision of municipal waste collection and transportation services. Both tenderers were subsidiaries of Ecoservice UAB (‘Ecoservice’) (see paras 15 and 16). However, they did not disclose this information explicitly to the contracting authority. Instead, tenderer B 'voluntarily submitted a declaration of honour to the effect that it was taking part in the call for tenders on an autonomous basis and independently of any other economic operators which might be connected to it, and it requested the [contracting authority] to treat all other persons as competitors. It further stated that it undertook, should it be so required, to provide a list of economic operators connected to it' (para 17).

The contracting authority eventually rejected tenderer A’s tender on the ground that it did not comply with one of the conditions set out in the tender specifications; and tenderer A did not contest that decision. The contract was ultimately awarded to tenderer B. The review court rejected a complaint by a disappointed competitor, arguing that the tenders submitted by A and B had not been properly evaluated and that the principles of transparency and equality before the law had been infringed. An appeal of such decision brought the preliminary reference to the Court of Justice (see paras 18-21).

Thus, in Specializuotas transportas, the referring court asked a long list of very detailed questions concerning the duties for a contracting authority to carry out an in-depth assessment of potential intra-group collusion for the manipulation of a public tender.

Interestingly, during the procedure before the Court of Justice, the contracting authority clarified that it was aware of the links between the tenderers because this was public knowledge, so that at no time was it misled when it took its decisions; and that 'quite apart from the relationship between the tenderers, which does not of itself imply an absence of competition, there [were] a number of objective factors in the instant case which enabled it to conclude that those tenderers were in competition with one another' (paras 26-27).

AG Campos' analysis

AG Campos grouped the questions under reference into two main issues: (1) whether related tenderers which submit separate tenders are under a duty, in all cases, to disclose that relationship to the contracting authority and, if so, what the consequences of failure to do so are; and (2) how must the contracting authority — and any court which reviews its actions — proceed where it becomes aware of the existence of important links between certain tenderers (para 42).

The answer to the reformulated issue (1) is straightforward, and AG Campos puts it simply that 'A requirement (the alleged duty to declare links with other companies) which is not set out in the contract documents, is not provided for in national law and is not laid down in Directive 2004/18 does not pass the transparency test referred to by the Court. ..., in the absence of an express legislative provision (of EU law or of national law), related tenderers are not under a duty to disclose the relationship between them to the contracting authority' (para 48, emphasis in the original). In my view, this is the correct approach. Any practical shortcomings derived from the absence of such explicit rules should by now be overcome with the adoption of the European Single Procurement Document (see part III.C of Annex 2 of the ESPD Implementing Regulation) and, if not, the position adopted in the Opinion creates a clear incentive for all Member States to reconsider their approach to tenders by related undertakings and the corresponding information requirements for exclusion/rejection screening purposes.

Moreover, AG Campos also provides convincing reasons for the rejection of an implicit duty to disclose the links between tenderers (paras 49-52), as well as for rejecting the analysis of both tenders as variants (constructively) submitted by the same holding company (Ecoservice) (paras 53-62). In this part of the analysis, AG Campos refers to my views on the automatic exclusion of tenders submitted by entities belonging to the same corporate group (see fn 20, with reference to Sánchez Graells, A., Public Procurement and the EU Competition Rules, Hart, Oxford, 2nd ed., 2015, p. 341). I am greatly honoured by this reference.

The answer to the reformulated issue (2) is potentially less straightforward and the reasoning of AG Campos merits close attention. His starting point is that the relevant analysis concerns 'whether ... the contracting authority is under a duty to ask related tenderers to provide evidence that their situation does not run counter to the principle of competition ... [and] whether inactivity on the part of the contracting authority would be sufficient for a declaration that its conduct in the procedure is unlawful' (para 67). Furthermore, he considers that 'the aim is not so much to protect the (general) competition between independent operators in the internal market as to protect the (more specific) competition which must operate in procedures for the award of public contracts. From that perspective, what really matters is the separateness of and genuine difference between the respective tenders (which will enable the contracting authority to choose the tender most favourable to public interests), whether the tenderers are independent or related economic operators' (para 71, reference omitted and emphasis added). In my view, this points towards an analysis that is more demanding than a simple general competition test because, as the Opinion also rightly points out, the general prohibition of anticompetitive conduct in Article 101(1) TFEU does not apply to intra-group relationships (para 69).

Concerning the specific duty to investigate potential intra-group collusion in the procurement setting, AG Campos constructs the following reasoning:

... the judgment in Etruras and Others states that ‘the principle of effectiveness requires that an infringement of EU competition law may be proven not only by direct evidence, but also through indicia, provided that they are objective and consistent.’ The judgment in VM Remonts and Others states that, in the absence of EU rules on the matter, ‘the rules relating to the assessment of evidence and the requisite standard of proof … are covered … by the procedural autonomy of the Member States’.

Applying that case-law to the facts at issue in the main proceedings, where the contracting authority is aware that related tenderers are participating in the procedure, the ‘active role’ expected of it, as the guarantor of genuine competition between tenderers, should normally lead it to make certain that the tenders submitted by those tenderers are separate

In short, that requirement is just one of the measures aimed at "[examining] all the relevant circumstances … in order to prevent and detect conflicts of interests and remedy them, including, where appropriate, requesting the parties to provide certain information and evidence."

However, the contracting authority may, in cases such as the present one, dispense with a communication to the related tenderers, asking them, ... "to clarify whether and how their personal situation is compatible with free and fair competition between tenderers". Clearly, "where appropriate, requesting the parties to provide certain information and evidence" may be important if the information and evidence available to the contracting authority is not sufficient for it to form a view regarding the risk that the tenders are not separate and distort competition.

Therefore, what matters is not that the contracting authority contacts the related tenderers, asking them for information about their relationship and seeking their view regarding the protection of the principle of competition between tenderers. The decisive factor is, rather, that the contracting authority is in a position to conclude that the simultaneous participation of those related operators does not jeopardise competition. The contracting authority may, of course, reach that conclusion by requesting that information or that view from the tenderers but it may also do so by referring to the information already available in the procedure and therefore without the need to approach the tenderers (paras 76-80, references omitted and emphasis added).

Ultimately, when assessing the extent to which the contracting authority discharged its duty to ensure effective competition for the contract and equality of treatment in the assessment of the tender, AG Campos stresses that '[e]verything will depend on the sufficiency or insufficiency of the available evidence and, therefore, on the objective soundness of the contracting authority’s decision to allow related tenderers to participate in the tendering procedure, on which it ultimately falls to the national court to rule' (para 86).

Final thoughts

As mentioned above, I think that the approach taken by AG Campos in the Specializuotas transportas Opinion is functional and enabling, and pushes for a competition-orientated exercise of the contracting authority's discretion. In situations where the contracting authority is aware of the existence of links between (seemingly) competing tenderers, it is appropriate to expect a high level of diligence--that is, to establish that 'the ‘active role’ expected of it, as the guarantor of genuine competition between tenderers, should normally lead it to make certain that the tenders submitted by those tenderers are separate' (para 77).

In my view, this is completely in line with the principle of competition of Article 18(1) Dir 2014/24/EU and seeks to avoid that contracting authorities tolerate an artificial narrowing of competition by inaction or omission. Conversely, the Opinion also seems to indicate that contracting authorities have a self-standing role as 'guarantors of genuine competition between tenderers', which is a good foundation on which to build a broader due diligence duty to identify the existence of indications of distortions of competition by colluding tenderers--whether linked through corporate group relationships or not. On the whole, then, the Opinion of AG Campos in Specializuotas transportas must be welcome and it can be hoped that the Court of Justice will not only follow his approach, but consolidate the general duty for contracting authorities to actively act as the 'guarantors of genuine competition between tenderers'

Brexit, the limits of law and legal scholarship

Brexit has created a very troubling and destabilising environment for legal researchers in the UK and beyond. This is particularly true for those directly concerned with EU and international law, as well as constitutional and public law, but it is quickly expanding to all other areas of legal scholarship, such as human rights law or jurisprudence. Brexit has created shock waves that will continue to hit legal academia at least for the coming 5 to 10 years, and not only in terms of its focus as a discipline.

This not only jeopardises the development of previous research plans and the completion of on-going research projects, but also exposes the limits of law and legal scholarship in a way that I considered unimaginable before 23 June 2016. But then, most of what Brexit has brought had never crossed my mind or seemed outlandish. The following are just a few thoughts of what really worries me at the moment, not only as an EU lawyer, but more generally as a legal scholar. Of course, I am also an EU citizen living in the UK, which adds one layer of implications for me personally. However, I hope I can disentangle both dimensions.

Hard Brexit as a coup against the rule of law

We have been waiting all summer for the dust of the referendum to settle and to see what the UK Government and the UK Parliament made of the result and how they formulated their strategy going forward. What is starting to emerge, particularly from the Government's approach and its toying with the idea of a hard Brexit, is worryingly taking the shape of a coup against the rule of law. It is also starting to encapsulate xenophobic and racist elements of the Brexit campaign that are now presented as reasonable policy choices within mainstream movements, rather than being denounced as extreme and contrary to the very basic values of British society--unless they are now made to represent what they seemed to stand against until very recently.

There is an absolute disregard for the acquired rights of millions of people and the rhetoric that no basic protection is guaranteed and all individual and collective rights are on the table and prone to be used as bargaining chips simply goes against basic principles of legal certainty, prohibition of retroactive effects of rules that significantly impinge on individual rights, good faith and sincere cooperation duties under EU and international law. And the troubling part is that the mechanisms that would ordinarily protect those rights and these principles--mainly, cases brought before the Court of Justice of the European Union and the European Court of Human Rights--would not only be too slow off the Brexit mark, but also unlikely to provide effective protection against the actions of what is emerging as a bully State (or at least a bully Government) willing to disregard any legal consequences of its ill-thought policies.

Some of this is not strictly speaking a Brexit byproduct, but a result of the added or twin process of departure from European human rights instruments and standards. It is also compounded by the complexities of UK (unwritten) constitutional law and the absence of a domestic constitutional court strictly speaking, which starts to paint a scenario where the UK Government seems to believe that it can shape the future system of protection (or less) of human rights in the UK without any constraint or respect for the status quo. For a country that promoted human rights internationally in the past, this is such a return to the cave that it is hard to believe that this is actually happening. And the UK highest courts seem to be the only ones (potentially) able to bring a torch to the cave and force the Government out of it. Whether they will do it, or at least pass the issue on to Parliament, is everybody's guess.

"The first thing we do, let's kill all the lawyers" ~ William Shakespeare's Henry VI. 

As lawyers and legal scholars, we are now under the double attack and accusation of being both experts and agitators of the public space. What I would have thought were two of the most precious treasures legal academia and legal practice can protect (knowledge and independence of action) seem to have turned against us. We had to endure the Lord Chancellor and Secretary of State for Justice spit in our faces that “people in this country have had enough of experts”. The Prime Minister now also wants to protect the British Army (and Government, ultimately) from "activist left wing human rights lawyers"--but, not necessarily because of their ideology, but because they "harangue and harass" Britain's armed forces.

It is obvious that having a dissenting voice (particularly if it is informed and shouts evidence-based arguments), or contributing to the proper functioning of the system of checks and balances that a State based on the rule of law depends upon, now make you a public enemy. This really worries me because legal academia (and legal practice, but maybe to a lesser extent) will now be pushed towards a dangerous path to potentially becoming a place of fear and suppression of ideas and arguments that run contrary to what is now accepted as the official discourse or the policy of the day. We need to react against this and do it quickly, firmly and with all our intellectual might. If we fail to do this, there should be no need to kill all the lawyers, because we will (or should have) committed intellectual suicide already.

Brexit as Moby Dick

The final aspect that really worries me is that we will now probably be obsessed with Brexit. And to some extent we will have to if we are to discharge our moral and social duty of resisting the coup against the rule of law and against legal academia and practice as their stewards--against legal scholars and jurists as a collective that must contribute to keeping the Government in check under the rule of law. But this is very likely to also become our white whale, a permanent chase in a run with a moving finish line, something that is so much bigger than us and our capacities that eventually exhausts us and makes us drown (or feel we are drowning).

This obsession will also impoverish our legal scholarship beyond Brexit and drain our energy and absorb our time in ways that will make us stop pushing the boundaries of knowledge we were exploring before 23 June 2016. This is, in itself, one of the Brexit tragedies. By creating this black hole of legal problems and this immense pressure on the structures for the creation and dissemination of legal knowledge, Brexit has already put a heavy burden on law and legal scholarship. Like the value of the currency, which has been on free fall and already moved back the equivalent of almost the entire span of my lifetime, this will take very many years to recover, and I worry that it may never reach the level it had before the Great Repeal Bill was announced.

A final thought

I wish I got all of this wrong. If I have, then ignore it. Treat it as the dark thoughts of someone too personally affected by Brexit. But if I haven't, then please see this as a call for action. Join the conversation, so we can collectively think about ways of getting out of this.