No obligation to revise prices payable under public contracts. OK, but for the wrong reasons? (C-152/17)


In its recent Judgment of 19 April 2018 in Consorzio Italian Management e Catania Multiservizi,
C-152/17, EU:C:2018:264, the Court of Justice of the European Union (CJEU) clarified that EU public procurement law (in this case, the 2004 Utilities Directive) does not create an obligation to review prices after the award of a public services contract. This seems largely uncontroversial, not least due to the lack of concern of the pre-2014 EU procurement rules with contract execution. However, the reasons given by the CJEU to exclude mandatory price revision and, beyond that, the mistrust it places on price review clauses, are dubious. The way in which the CJEU refers back to Finn Frogne (see here) should also set off some alarm bells.

The case at hand (N.B. Defective English version of the Judgment)

In this case, Rete Ferroviaria Italiana (RFI) had awarded a services contract to Consorzio Italian Management and Catania multiservizi (CIMCM) for the cleaning, maintenance and ancillary services at stations, installations, offices and workshops at various sites throughout the region of Cagliari. The contract included a clause limiting price review. Despite that, and as a result of increasing staff costs, CIMCM requested RFI to review the prices payable under the contract (ie the claim seemed to be a statutory claim contra the explicit terms of the public contract). RFI rejected the request for the price revision, which triggered the underlying dispute. Establishing the legal architecture underlying the claim requires some legal funambulism.

The award of the contract had been subject to the rules of the 2004 Utilities Directive, as well as domestic law transposing it. At the relevant time, the Italian procurement code (Legislative Decree No 163/2006) established that in 'the absence of any express provisions' in the procurement rules, the Italian Civil Code (Codice Civile, CC) would provide default rules for contractual arrangements between contracting authorities or entities and their contractors. It is important to clarify that the Italian procurement code had a two-tier approach whereby it established a full regime applicable to general procurement (tier 1) and then specified a sub-set of rules applicable to utilities procurement (tier 2, Art 206 Legislative Decree No 163/2006). Tier 2 set a numerus clausus of provisions applicable to contracts linked to the activities referred to in Articles 3 to 7 of the 2004 Utilities Directive.

Concerning the review of contractual prices, Art 115 of the Italian procurement code established that '[a]ll contracts for the supply of goods or services on an ongoing basis must include a clause providing for periodic review of the price'. This provision was however inapplicable to public contracts in the utilities sectors [N.B. despite the English version of the Judgment (para 11), where it is indicated that 'Article 115 of that Legislative Decree was one of the provisions which, under Article 206 thereof, were applicable to public contracts', this is contradicted by eg the French ('L’article 115 de ce décret législatif ne figurait pas ...') and Italian ('L’articolo 115 di tale decreto legislativo non era indicato ...') versions of the Judgment, as well as the logic of the decision]. It is thus worth taking into account that, where Art 115 was not applicable, the default rule in the Italian Civil Code would provide for price revision linked to circumstances of 'hardship' (ie cost increases above 10% of the overall price agreed; Article 1664 CC).

The dispute between CIMCM and RFI is fundamentally concerned with a domestic issue of contractual and statutory interpretation. However, given that the scope of application of the domestic rules is pegged to the scope of application of the 2004 Utilities Directive, it acquired EU relevance.

At first instance, the challenge was dismissed by the regional administrative tribunal on the basis that 'the supply of cleaning services at stations, installations, offices and workshops was ancillary to the performance of activities covered by special sectors, in that those services related to elements forming an essential part of the rail transport network' (C-152/17, para 16, emphasis added). This justified the subjection of the contract to the tier 2 procurement regime, and thus excluded the mandatory price review clause of Art 115 of the Italian procurement code. Beyond that, the regional administrative court reached the additional finding that 'price review was not mandatory under Article 1664 of the Civil Code, as the parties to a contract may derogate from that provision by inserting in the contract a contract term limiting price review, which was the case in the main proceedings' (ibid). 

Given the implicit reference to Art 5 of the 2004 Utilities Directive in terms of scoping the applicability of the relevant rules, which was challenged in the appeal of the first instance decision, the dispute required clarification from the CJEU. Moreover, the claimants raised a challenge of validity against the 2004 Utilities Directive by arguing that, should it allow for the award of contracts excluding price revision, it would infringe Articles 3(1) TEU, Articles 26, 56 to 58 and 101 TFEU, and Article 16 of the Charter, ‘in the light of the unfairness, disproportionality and distortion of contractual balance and, therefore, of the rules governing an efficient market’ (C-152/17, para 19). The reasoning of the CJEU on these two matters (scope of application and validity of the 2004 Utilities Directive) is interesting.

Functional scope of application

The issue here seems simply to require an understanding of the functional approach followed b y the CJEU in determining the scope of application of the 2004 Utilities Directive. In that regard, the CJEU stressed that

... as regards the interpretation of Directive 2004/17 and of the underlying general principles, the referring court considers that the contract at issue in the main proceedings falls within the scope of that directive, since it was awarded by a contracting authority within the meaning of that directive, namely RFI, and that it is functionally linked to rail transport operations falling within the scope of that directive.

In that regard, it follows from the Court’s case-law that Directive 2004/17 in fact applies not only to contracts awarded in the sphere of one of the activities expressly listed in Articles 3 to 7 thereof, but also to contracts which, even though they are different in nature and could as such normally fall within the scope of Directive 2004/18/EC ..., are used in the exercise of activities defined in Directive 2004/17. Consequently, where a contract awarded by a contracting entity is connected with an activity which that entity carries out in the sectors listed in Articles 3 to 7 of that directive, that contract is subject to the procedures laid down in that directive (C-152/17, paras 25-26, references omitted and emphasis added).

This creates the functional criterion that ancillary activities are covered by the Utilities procurement regime because, as a matter of determining the scope of the activities listed in Arts 3 to 7 of Dir 2004/17, EU procurement law also comprises ancillary activities.

No 'EU law' obligation to revise prices

Beyond that, the CJEU also stressed that 

... it is not apparent from any provision of that directive that it must be interpreted as precluding rules of national law, such as Article 115, in conjunction with Article 206, of Legislative Decree No 163/2006, which do not provide for periodic review of prices after contracts are awarded in the sectors covered by the directive, since the latter does not impose any specific obligation on Member States to lay down provisions requiring the contracting entity to grant its contractual partner an upwards review of the price after the contract has been awarded (C-152/17, para 29, emphases added)

In my view, this is correct, and there is no question that the 2004 Utilities Directive did not create an 'EU law' obligation to include contract review clauses. However, the reasons given by the CJEU on the basis of the general principles of procurement should raise some eyebrows. Indeed, the CJEU found that

... the general principles underlying Directive 2004/17, in particular the principle of equal treatment and the consequent obligation of transparency enshrined in Article 10 of that directive do not preclude such rules either. On the contrary, it cannot be ruled out that a price review after the contract has been awarded may run counter to that principle and that obligation (see, by analogy, judgment of 7 September 2016, Finn Frogne, C‑549/14, EU:C:2016:634, paragraph 40). Indeed, as the Commission points out in its written observations, the contract price is an element of great importance in the assessment of tenders by a contracting entity, as well as in its decision to award the contract to an operator. This is also clear from the reference to the price in both of the criteria for the award of contracts mentioned in Article 55(1) of Directive 2004/17. In those circumstances, rules of national law which do not provide for periodic price review after the award of contracts in the sectors covered by that directive are, in fact, likely to encourage compliance with those principles.

It follows from those considerations that Directive 2004/17 and the general principles that underlie it are to be interpreted as not precluding national rules, such as those at issue in the main proceedings, which do not provide for periodic price review after a contract has been awarded in the sectors covered by that directive (C-152/17, paras 30-31, emphases added).

Wrong reasons?

The reasoning of the CJEU is certainly hard to share, in particular in view of the precise reasoning of Finn Frogne--unless read in an extreme manner. It is also hard to reconcile with Art 72(1)(a) of Directive 2014/24 and Art 89(1)(a) of Directive 2014/25.

The reasoning of the CJEU is hard to reconcile with the fact that the relevant Italian rules (Art 115) established that price revision clauses had to be included in the relevant contract (but did not prescribe their content) and had to establish that the price 'revision shall be carried out on the basis of an investigation by the managers responsible for the acquisition of goods and services on the basis of the data' regulated in other parts of the Italian procurement code (C-152/17, para 11). How this is incompatible with Finn Frogne is beyond me, as the Court stated there that the position that 'following the award of a public contract, a material amendment cannot be made to that contract without a new tendering procedure ... would be different only if the contract documents provided for the possibility of adjusting certain conditions, even material ones, after the contract had been awarded and fixed the detailed rules for the application of that possibility' (C-549/14, para 40, emphasis added). Two thoughts come to mind here. First, that a review clause compliant with Art 115 of the Italian procurement code would meet precisely the requirements of Finn Frogne. Second, that the issue whether the exclusion or limitation of price review under the specific contract was allowable rested solely on the point of determination of the scope of application of the 2004 Utilities Directive, so why did the CJEU feel the need to include this obiter dictum?

Looking forward, it is difficult to understand what the CJEU has in mind concerning equal treatment, transparency and price revision clauses. While in Finn Frogne --and, incidentally, in Art 72(1)(a) of Directive 2014/24 and Art 89(1)(a) of Directive 2014/25-- the position is that contractual price revision clauses are perfectly compliant with EU procurement rules and the principles of transparency and equal treatment; in Consorzio Italian Management the CJEU seems to be of the opposite view and stress that 'rules of national law which do not provide for periodic price review after the award of contracts ... are, in fact, likely to encourage compliance with those principles' (C-152/17, para 30). Of course, taken in isolation, both approaches make sense, but I would struggle to reconcile them if there was a claim that a contractual price revision clause was discriminatory because it either had different impact on different potential contractors, or because its interpretation could favour some suppliers over others. What is more objective, to have a contractual price review clause or not to have it? In addition, what is the problem with having legislative requirements for those clauses, as was the case in Art 115 of the Italian procurement code?

What about Art 16 of the Charter?

Another point worth mentioning is the CJEU's approach to the analysis of the compatibility of the inexistence of a right to price revision with Art 16 of the Charter, enshrining the freedom to conduct a business. Here, it would seem possible to expect from the CJEU an analysis of whether the inexistence of such a right as a matter of EU law is in compliance with the Charter. However, the CJEU refused to answer that question on the grounds that it was hypothetical (see paras 37-40). However, the CJEU did engage on the analysis of compatibility within the context of the first question, and almost as a matter of jurisdictional rather than substantive analysis. In that regard, the CJEU stressed that

... as regards the interpretation of Article 16 of the Charter, it must be recalled that, under Article 51(1) of the Charter, its provisions are addressed to the Member States only when they are implementing EU law. Under Article 51(2) of the Charter, the Charter does not establish any new power or task for the Union, or modify powers and tasks as defined in the Treaties. Accordingly, the Court is called upon to interpret EU law, in the light of the Charter, within the limits of the powers conferred on it ...

In that regard, it should be borne in mind that the concept of ‘implementing Union law’ within the meaning of Article 51 of the Charter presupposes a degree of connection between the measure of EU law and the national measure at issue. In particular, the Court has ruled that fundamental European Union rights could not be applied in relation to national legislation because the provisions of EU law in the area concerned did not impose any specific obligation on Member States with regard to the situation at issue in the main proceedings ...

In the present case, since it is apparent from paragraphs 29 and 30 above that neither Directive 2004/17 nor its underlying general principles impose on Member States a specific obligation to lay down provisions requiring the contracting entity to grant its contractual partner an upwards price review after the award of a contract, the provisions of Legislative Decree No 163/2006 at issue in the main proceedings, in so far as they do not provide for periodic price review within the sectors covered by that directive, do not have any connection with that directive and cannot, therefore, be regarded as implementing EU law (C-152/17, paras 33-35, references omitted and emphases added).

First, it is worth stressing that it is hard to imagine a legal strategy that will make the CJEU engage with the compatibility of secondary EU legislation with the Charter, in particular in relation to the absence of guarantees, as compared to its review concerning positive obligations for the addressees of the domestic implementing measures. Normatively, this is undesirable for the limited engagement the CJEU shows with substantive Charter-based analysis. And even from a positive perspective, this approach is criticisable. I find the CJEU's logic puzzling.

In a situation (maybe different from the case at hand, where the absence of the price revision guarantee ultimately results from a rule on the delimitation of applicable EU law regimes, rather than the direct implementation of a specific, single regime) where the claim was that the domestic rules implementing EU law failed to create a Charter-compliant (or rather Charter-mandated) guarantee not imposed by the implemented Directive, the CJEU would probably also take this route and argue that the absence of creation of an obligation at domestic level which is not required by EU rules is not connected with the EU rules in a manner that triggers the analysis of compatibility with the Charter. Would this make sense? I would not think so, but I guess we will have to wait for the relevant case to see whether the CJEU sticks to this analysis.

ECJ extends the Manova principles to the submission of samples & clarifies the scope of Remedies Directive in a Utilities Procurement setting (C-131/16)

In its Judgment of 11 May 2017 in Archus and Gama, C-131/16, EU:C:2017:358, the European Court of Justice (ECJ) issued two sets of clarifications concerning the rules applicable to utilities procurement, which are however of general relevance, due to the identity of the relevant provisions under the general and the utilities procurement rules.

First, the ECJ explicitly extended the Manova and Slovensko line of case law to utilities procurement and in relation to the submission of samples, thus trying to clarify the boundaries of the possibility for contracting entities to request  and/or accept clarifications or additional documentation (and samples) from tenderers while still complying with the principles of equal treatment, non-discrimination and the obligation of transparency. This first part of the Archus and Gama Judgment will thus be relevant to the interpretation and application of Art 76(4) of Directive 2014/25/EU (which is identical to Art 56(3) of Directive 2014/24/EU). 

Second, the ECJ also provided clarification of the rules on standing to challenge procurement decisions under Art 1(3) of the Utilities Remedies Directive (which is identical to Art 1(3) of the general procurement Remedies Directive), and clarified that having or having had an interest in the award of the contract extends to situations where the remedy sought by the challenger cannot result in the award of such contract, but is likely to concern the initiation of a new award procedure for the award of a (different) contract with the same subject matter.

Extension of Manova to the submission of samples

In the case at hand, tenderers were required to submit samples of micro-filmed material together with their tenders. The "quality of the microfilm sample was to be assessed according to the ‘satisfies/does not satisfy’ rule, it being stipulated that if the sample was not satisfactory the offer was to be rejected" (para 14). After submission of their tender and during the evaluation phase, joint tenderers Archus and Gama sent the contracting authority a request for a correction of their tender, arguing that "there had been an inadvertent mistake [... and] seeking to substitute a new microfilm sample for that annexed to their tender, which did not conform to the tender specifications" (para 17). The contracting authority accepted the substitution of the microfilm but requested further clarification from the tenderers because it considered that "they had not provided information on the method for microfilming the sample and the [relevant] technical parameters" (para 18). The contracting authority eventually rejected the tender as non-compliant.

In a rather convoluted drafting influenced by the question referred by the domestic court, the ECJ established that the legal issue arising from these circumstances required it to determine "whether the principle of equal treatment ... must be interpreted as precluding ... a contracting authority from inviting tenderers to provide the required declarations or documents which were not supplied by them within the prescribed period for the submission of tenders or to correct those declarations or documents in case of errors, without that contracting authority also being required to point out to those tenderers that they are prohibited from altering the content of the tenders submitted" (para 24). However, there are two factual elements that seems missing here: first, the fact that the initiative for the correction initiated from the tenderers; and, second, the fact that the correction concerned a sample rather than a declaration or document, and therefore it was not information-based. Disappointingly, none of these important details feature with much prominence in the ECJ's analysis (despite para 35 referring to the fact that "it was [the] tenderers who sent the contracting authority a request for their tender to be corrected"). 

Indeed, in this part of the Judgment (paras 29-33), the ECJ provides a summary of the Manova and Slovensko line of case law and, in simplified terms, reiterates that "the principle of equal treatment does not preclude the correction or amplification of details of a tender, where it is clear that they require clarification or where it is a question of the correction of obvious clerical errors, subject, however, to the fulfilment of certain requirements" (para 29, emphasis added), such as:

  • a request for clarification of a tender cannot be made until after the contracting authority has looked at all the tenders and must, as a general rule, be sent in an equivalent manner to all undertakings which are in the same situation and must relate to all sections of the tender which require clarification (para 30)
  • that request may not lead to the submission by a tenderer of what would appear in reality to be a new tender (para 31)
  • as a general rule, when exercising its discretion as regards the right to ask a tenderer to clarify its tender, the contracting authority must treat tenderers equally and fairly, in such a way that a request for clarification does not appear unduly to have favoured or disadvantaged the tenderer or tenderers to which the request was addressed, once the procedure for selection of tenders has been completed and in the light of its outcome (para 32)

The ECJ also reiterated that "a request for clarification cannot, however, make up for the lack of a document or information whose production was required by the contract documents, the contracting authority being required to comply strictly with the criteria which it has itself laid down" (para 33, emphasis added). 

When trying to apply these general principles to the situation at hand, the ECJ established that "a request sent by the contracting authority to a tenderer to supply the declarations and documents required cannot, in principle, have any other aim than the clarification of the tender or the correction of an obvious error vitiating the tender. It cannot, therefore, permit a tenderer generally to supply declarations and documents which were required to be sent in accordance with the tender specification and which were not sent within the time limit for tenders to be submitted. Nor can it ... result in the presentation by a tenderer of documents containing corrections where in reality they constitute a new tender" (para 36); ultimately leaving it to the "referring court to determine whether ... the substitution made by Archus and Gama remained within the limits of the correction of an obvious error vitiating its tender" (para 38, emphasis added).

I find this reasoning of limited assistance in assessing the legal issue at hand. It would seem to me that the fact that the tenderers unilaterally sought to modify their tender in relation with a sample of the output of the services they were offering should have been given more weight (as this did not result from the observation of an obvious shortcoming or mistake by the contracting authority), and the difficulties in establishing objectively what is obviously wrong with a sample probably should have been enough relevance to provide a more conclusive answer against the acceptability of the substitution of samples.

From that perspective, confronted with a defective sample, the contracting authority could simply observe a deviation from the tender requirements, but it could hardly establish whether the defect resulted from an obvious mistake (ie whether the tenderer mistakenly submitted the wrong sample, as they claimed), or establish a way of clarifying the reasons for the defectiveness of the sample without allowing for the submission of a sample equivalent to the submission of a different tender. Differently from documents and declarations, or from the inclusion of insufficient details or mistakes in an offer, a sample is meant to evidence the product to be supplied or to result from the provision of the services. It is difficult to imagine circumstances under which a contracting authority could meet the strictures of the Manova-Slovensko case law while prompting the tenderer to submit an alternative sample. Moreover, under the rules applicable to the tender, it seems clear that a defective sample should trigger rejection of the tender, without any further analysis, which the ECJ does not seem to give much relevance to either.

Overall, I think that there is enough to justify the rejection of the possibility to substitute samples (in particular at the initiative of the tenderers) within the confines of the Manova-Slovensko test. However, I find this part of the Archus and Gama Judgment slightly confusing due to its open ended wording and, more importantly, to the practical difficulties in applying a test originally meant to correct missing or obviously erroneous information in documents to issues concerning the manifestation of technical aspects in a sample.

On this occasion, I tend to think that the ECJ has possibly pushed too far in trying to create procedural flexibility. While the absence of a sample could have allowed for the contracting authority to request the submission of one (because the problem with the tender would have been obvious), an attempt by the tenderers to substitute a previously submitted sample raises a whole host of other issues. In cases such as this, it may be preferable to have a clear cut rule against the possibility to substitute the sample. Moreover, given that the tender documents had explicitly indicated that rejection of the sample would also imply the rejection of the offer, it is difficult to understand why the ECJ has deviated from its previous approach to imposing compliance with the specific rules created in the tender documentation by the contracting authority itself (not that I find it always or generally convincing (see eg here), but a deviation from that approach seems to create inconsistency). Thus, I do not think this part of the Archus and Gama Judgment deserves a positive assessment.

Clarification of the scope of active standing under the remedies directive

In relation to a rather distinct aspect of the same case, the ECJ was also asked to clarify "whether Article 1(3) of [the Utilities Remedies Directive] must be interpreted as meaning that the concept of ‘a particular contract’ ... refers to a specific public procurement procedure or the actual subject matter of the contract which is to be awarded following a public procurement procedure, in a situation where only two tenders have been submitted and where the tenderer whose tender has been rejected may be regarded as having an interest in seeking the rejection of the tender of the other tenderer and, as a result, the initiation of a new public procurement procedure" (para 47).

Maybe in simpler words, the question concerned whether the EU rules grant legal standing to challenge a procurement decision to disappointed tenderers that are found to be properly excluded and, rather than seeking a remedy concerning the award of the contract as part of the procedure where the dispute arose (which would not be possible), may rather be interested in the cancellation of that procedure and the start of a fresh tender. In the end, the clarification concerned the tenability under EU law of a position that interpreted that "an economic operator who has submitted a tender in a public procurement procedure does not, where his tender is rejected, have an interest in bringing proceedings against the decision awarding the public contract" (para 48).

The answer provided by the ECJ is narrowly tailored to the specific circumstances of the case, as it established that "in a situation ... in which ... two tenders have been submitted and the contracting authority has adopted two simultaneous decisions rejecting the offer of one tenderer and awarding the contract to the other, the unsuccessful tenderer who brings an action against those two decisions must be able to request the exclusion of the tender of the successful tenderer, so that the concept of ‘a particular contract’ within the meaning of Article 1(3) of [the Utilities Remedies Directive] may, where appropriate, apply to the possible initiation of a new public procurement procedure" (para 59).

This interpretation seems generally uncontroversial and follows the same path of extension of the justiciability of exclusion and qualitative selection grounds as the recent Marina del Mediterráneo Judgment (see here). However, it also seems very limited to circumstances that may be difficult to meet in practice in a large number of procedures, such as the fact that only two tenderers participated in the procedure, or that the decisions to reject one tender and award the contract to the other were adopted simultaneously. In that regard, the ECJ could have been slightly bolder and simply clarified that retaining the possibility of being awarded a contract under the same (administrative) procedure is not a pre-requisite for the recognition of active standing to challenge procurement procedures under the EU rules. I would have preferred this broader approach, which could have saved future preliminary references on the basis of cases with minor variations of the underlying factual scenario.

Additional Austrian postal services to be exempted from compliance with EU (utilities) procurement rules (T-463/14) -- a warning of procedural rebalancing under dir 2014/25?

In its Judgment of 27 April 2016 in Österreichische Post v Commission, T-463/14, EU:T:2016:243 (not available in English), the General Court (GC) of the Court of Justice of the European Union ruled on judicial review of the Commission Implementing Decision exempting certain services in the postal sector in Austria from the application of Directive 2004/17 on utilities procurement, in particular as carried out by Österreichische Post AG (the Austrian national universal service provider, under public ownership of 52.8% of its capital).

The GC quashed the Commission's Decision regarding the denial of exemption for cross-border postal services for addressed (‘outbound’) business to business and business to consumer letters ('B2X letters'), as well as for addressed (‘outbound’) letters between private customers and between private customers and business customers ('C2X letters')--ie, in relation with the activities covered in paras [43]-[50].

The Commission's Decision was based on Art 30 Dir 2004/17, which allowed for utilities procurement linked to activities directly exposed to competition to be exempted from compliance with the otherwise applicable EU public procurement rules. The same regime is now foreseen in Art 34 of Directive 2014/25 on utilities procurement. Thus, the GC's Judgment in Österreichische Post v Commission is interesting in order to gain a better understanding of the procedure (and evidentiary requirements) for the exemption of activities directly exposed to competition from compliance with the revised EU utilities public procurement rules.

the contested decision

In its Implementing Decision, the Commission had considered that

(46) Competition for cross-border letter post is very different for private persons and for companies. Private persons generally have no real choice but to send international mail with their national universal service provider. The volumes sent by private persons are generally too low to offer incentives for new entrants into the market.

(47) It is noted that the competitive situation depends also on the size/population of each city due to the fact that cross-border service providers do not maintain a nationwide access network but generally collect the mail directly at the customer's premises. 

(48) Previous Commission practice... made a distinction between the cross-border postal services for addressed B2X letters market and the cross-border postal services for addressed C2X letters market. 

(49) There is no evidence that the situation is different in Austria,  therefore, for the purposes of this Decision and without prejudice to competition law, two separate product markets will be considered, namely the cross-border postal services for outbound B2X addressed letters and the cross-border postal services for outbound C2X addressed letters. 

(50) Austrian Post could not provide detailed information ... on its relevant shares in each market, nor the market shares of its main competitors. In the absence of information on the degree of competition in each of those markets, it is not possible to conclude that the conditions for granting an exemption under Article 30(1) of Directive 2004/17/EC to cross-border postal services for outbound B2X addressed letters and to cross-border postal services for outbound C2X addressed letters in Austria are met. Consequently, Article 30(1) of Directive 2004/17/EC does not apply to contracts intended to enable the pursuit of those activities in Austria (Implementing Decision 2014/184/EU, paras 46-50, references omitted).

In reviewing this argumentation, which seems to fundamentally rely on the ultimate ratio that Österreichische Post had not discharged the burden of proof imposed by Art 30 Dir 2004/17 (now Art 34 Dir 2014/25), the GC raises some important issues about the level of detail with which the Commission needs to assess estimated figures provided by applicants for exemption from compliance with EU public procurement rules:

(161) ... the applicant states that, following its own argument, the Commission should have exempted at least the B2X international market from the application of Directive 2004/17. It adds that, given that, according to paragraph 46 of the contested decision, its services were not substitutable in the C2X international market, its market share in the B2X international market should be significantly below [confidential]%, which it also corresponded with the Commission's assessment contained in paragraph 47 of the contested decision that the applicant's competitors were mainly in urban areas.

(162) This argument must be accepted. Indeed, on the one hand, the Commission did not dispute that the market share of the applicant in the market for postal services for addressed ['outbound'] B2X and C2X letters at international level was below [confidential]%, as stated in ... the application of the applicant. Moreover, as stated by the applicant, recital 46 of the contested decision shows that the services in question were not substitutable in the C2X international market, since, according to the Commission, private persons generally have no real choice but to send international mail with their national universal service provider. It follows that the market share of the applicant in the market for postal services for addressed B2X letters at international level should be well below [confidential]%, which the Commission did not take into account when considering that those postal services were not directly exposed to competition. In view of these considerations, it must be concluded that the Commission incurred in a manifest error of assessment in not exempting postal address for addressed B2X letters at international level from the application of Directive 2004/17.

(163) Accordingly, the fourth plea must be upheld in so far as it relates to the postal services for addressed B2X letters at international level and dismissed as regards postal services for addressed C2X letters at international level (T-463/14, paras 161-163, own translation from Spanish).

Cracking the specifics of the reasoning is complicated due to the confidential nature of the initial application for exemption under Art 30 Dir 2004/17, as well as the confidentiality of the market share data used by the GC. However, it seems clear that the Commission is subjected to a very demanding standard of data assessment and that it is obliged to use any information provided by the applicants in order to make educated guesses where market intelligence is insufficient to support a direct analysis. Looking to the future, this stringent approach highlights one of the differences between the 'old' regime of Art 30 Dir 2004/17 and the 'new' rules of art 34 Dir 2014/25, which may well make the Commission's life easier.

what Dir 2014/25 has changed

Under the procedural provisions of Art 30(6) Dir 2004/17, 'For the adoption of a Decision [exempting activities directly exposed to competition from compliance with Dir 2004/17] the Commission shall be allowed a period of three months commencing on the first working day following the date on which it receives the notification or the request. However, this period may be extended once by a maximum of three months in duly justified cases, in particular if the information contained in the notification or the request or in the documents annexed thereto is incomplete or inexact or if the facts as reported undergo any substantive changes'.

Conversely, Dir 2014/25 now has a new Art 35 on the procedure applicable for exemption decisions for activities exposed to competition under Art 34. And this is complemented by the additional rules in Annex IV, according to which second paragraph, 'The Commission may require the Member State or the contracting entity concerned or the independent national authority referred to under paragraph 1 or any other competent national authority to provide all necessary information or to supplement or clarify information given within an appropriate time limit. In the event of late or incomplete answers, the periods set out in the first subparagraph of paragraph 1 shall be suspended for the period between the expiry of the time limit set in the request for information, and the receipt of the complete and correct information'.

The change of the extension of the maximum period for a decision to exempt activities exposed to competition for a suspension of the period to adopt such decision is important because, both under the old [Art 30(4)(II) Dir 2004/17] and the new rules [Art 35(3)(II)(b) Dir 2014/25], in the absence of a decision within the specified time period (3 months in the old rules, and 90 working days under the new ones), the Directive ceases to apply to contracts intended to enable the activity exposed to competition. Consequently, a combination of a ticking time limit and the impossibility to reject claims based on what the Commission may have considered unreliable or insufficient evidence, would have resulted in significant pressure on the Commission under the old rules. Thus, it seems clear that, under the new rules and with the ability to 'stop the clock', the Commission will be able to relocate the burden of proof squarely onto the applicant's shoulders, which may well minimise or neutralise the tough approach indicated by the GC in its Österreichische Post v Commission Judgment.

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.