Draft Commission interpretative communication on concessions under Community law on public contracts
C 94/4 EN Official Journal of the European Communities 7. 4. 1999 Draft Commission interpretative communication on concessions under Community law on public contracts (1999/C 94/04) out sets interpretative communication the draft This Commission’s first thoughts on the subject after discussing the problems named within the two advisory committees on public contracts and taking note of contributions from the sectors concerned. It intends to consult as widely as possible. The Commission will take account, when drafting the final version of the communication, of any contribution which may be addressed to it. Any such contribution should be forwarded to it within two months of the publication of this draft in the Official Journal of the European Communities. It can also be sent by e-mail to the following address: concessions@dg15. cec. be INTRODUCTION 1. Participation by the private sector in the financing of public investment has varied widely over time and from one country to another. Some Member States have not hesitated to entrust their major infrastructure projects to private investors (e. g. the railways in the 19th century, the urban transport networks at the 20th century and, large parts of the road network, redevelopment of city centres etc. ). in some countries, the beginning of Involvement of the private sector has declined since the first quarter of the 20th century as governments began to prefer to be directly involved in the provision and management of infrastructure and public services. Nowadays, however, it is experiencing a considerable upswing for technical and financial reasons. large-scale infrastructure projects railways, motorways 2. This can be explained partly by the need for private such as financing for airports. The underground in some cases, have particular private sector can also, know-how or experience that is not available in the public sector (water, waste or urban transport management, for instance). In its Communication on public-private part- nerships in trans-European Transport Network projects (1), the Commission said that it wanted to promote this type of partnership, particularly for certain priority projects. and State to another. Some countries have legislation on relationships of this kind, sometimes dating back centuries. The most common arrangement is the concession contract. 4. Public-private partnerships - particularly the concession system, which is in full spate - are of great interest for the Single Market as the economic significance of projects is often far greater than that of the biggest traditional public contracts. 5. The usefulness of additional legislation setting out the terms for opening up concessions to Community competition became apparent at the end of the 1980s with the intro- duction of specific arrangements for works concessions. The Justice has also clarified various aspects of Court of Community law with implications for concessions and other similar forms of public-private partnership. 6. In its Communication on public procurement (2), the Commission said that it also intended to examine other forms of public-private partnership to determine the to which the rules on public contracts might extent framework for provide an appropriate ensuring legal compliance with the rules of the Treaty while allowing these forms of cooperation to develop. In view of the Court’s case law in this field and the experience gained in examining cases in the sector of which it has taken cognisance, the Commission proposes in this interpretative communication to give its opinion on the legal arrangements applicable to concessions and other similar forms of public-private partnership given the current state of Community law. However, this text does not seek to interpret the more specific systems of the Directives adopted in different sectors. The Commission regards recourse to private investment for the public infrastructure projects as a positive factor, which must be promoted while ensuring that it complies with Community law. 3. The forms taken by these partnerships between the public and private sectors vary widely from one period or Member (1) COM(97) 453 final of 10 September 1997. In particular the Commission will ascertain the extent to which Council Directives 93/37/EEC of 14 June 1993 coor- dinating procedures for the award of public works contracts, 92/50/EEC of 18 June 1992 coordinating procedures for the award of public services contracts and 93/38/EEC of 14 June 1993 coordinating the procurement procedures of entities operating in the water, energy, transport and tele- communications sector, apply to concessions and other analogous forms of public/private partnership. (2) Public procurement in the European Union, Communication adopted on 11 March 1998, COM(98) 143. Cf. in particular point 2. 1. 2. 4. 7. 4. 1999 EN Official Journal of the European Communities C 94/5 It is set out authorities, is obviously a basic framework which will be This to enable the various parties developed. contractors, (public economic operators, etc. ) the existing rules of the game and to contribute, by applying the them correctly, European Single Market. towards improving the operation of to get a better picture of authorities, awarding áa contract of the same type as a public works contract except for the fact that the consideration for the works to be carried out consists either solely in the right to exploit the construction or in this right together with paymentí I. DEFINITION AND GENERAL PROBLEM OF CONCESSIONS AND SIMILAR FORMS OF PUBLIC/PRIVATE PARTNERSHIP Public authorities in Member States are increasingly calling on the private sector to provide public services on their behalf using various procedures and on a variety of scales. In some cases cooperation of this kind is governed by the directives on public contracts, but it can also take forms, which are not covered. For example, only works concessions are covered by Directive 93/37/EEC, while other similar forms of public/ private partnership do not explicitly fall within the scope of the directives on public contracts. All these forms of coop- eration nevertheless have common features, and should therefore be dealt with in this communication. The fact that service concessions and other similar forms of public/private partnership are not expressly covered by the directives on public contracts does not mean that they are exempt from the rules and principles of the Treaty, since in so far as concessions and other forms of public/private part- nership are acts of State (3) involving economic activities, they are subject to Articles 52 to 66 of the Treaty and the principles set out in the Treaty or deriving from the Court’s case law, particularly the principles of non-discrimination, equality of treatment, recognition and propor- tionality. transparency, mutual a According to this definition, the main distinctive the concession is feature of the consideration for the works consists in the right to exploit and the exploitation risks are borne for a significant part by the concessionaire. that fact Exploitationí means that the contractor carrying out instead of being paid directly by the the work, awarding authority initiating the procedure, earns revenue from the fees charged to users of the construction when it is completed. In addition to the a therefore, he construction risk in the risks significant part management and use of the facilities. If recovery of expenditure were awarding guaranteed authority without the risk involved in the management of the construction, there would be no element of risk should be regarded as a works and the contract contract rather than a concession contract (4). also assumes involved the the by of The directive also states that there may be payment in addition to the right to exploit the construction. We shall deal with this aspect in greater detail in point (b) for distin- below, since it guishing a concession from a public works contract in practice. is an important element Concessions and other similar forms of public/private part- nership are not defined in the Treaty. We therefore need to outline their distinctive features in order to delimit the field of application of this interpretative communication. (b) Delimitation of the concepts of ápublic works contractí and áworks concessioní 1. 1. Definition of áworks concessionsí (a) Directive 93/37 definition Article 1(d) of Directive 93/37/EEC defines a ápublic works concessioní as (3) In the largest sense, i. e. the acts adopted by all public bodies belonging to the organisation of the State (local authorities, regions, departments, autonomous communities, municipalities) as well as any other entity which, even if it has its own legal existence, is linked to the State in such a tight manner that it is to be considered as being part of the State’s organisation. The notion of acts of State comprehends also the acts that are attributable to the State, for which the public authorities are responsible, even though not adopted by them, given that they can intervene to prevent to receive their amendment. their adoption or is acts that that contracts at present are the concept of public As the legislation developed, works extended to situations not contracts was covered by the previous directives (5). The text as it ápublic works stipulates stands contractsí interest for concluded in writing between a contractor and a contracting authority (. ) which have as their object either the execution, or both the execution and design, of works related to one of the activities referred to in Annex II or a work (. ), or the execution by whatever means of a work corresponding to the requirements specified by the contracting authority (Article 1(a)). pecuniary (4) The best-known example of a public works concession is a contract whereby a State grants a company the right to build and exploit a motorway and authorises it to earn revenue by charging tolls. (5) See, in particular, the eighth recital of Directive 89/440/EEC ( Whereas it is to define more precisely what is meant by public works contracts in order to take account, in particular, of new forms of such contractsí). C 94/6 EN Official Journal of the European Communities 7. 4. 1999 In view of this extension of the Community concept of public works contracts, there is a risk of confusion between public works concessions and public works contracts complex legal arrangements (6). forming the subject of Even if awarding authorities use complex contractual formulas, these are still public works contracts within the meaning of Community law in so far as the cost is borne entirely by the awarding authority and there are no exploitation risks for the contractor (7). The fact that the directive allows for a payment in addition to the right of exploitation does not change this analysis. The definition of a concession always includes the possibility that a payment may be made provided that it doesn’t eliminate a significant part of the risk borne by the concessionaire, since Directive 93/37/EEC states that the right to exploit the construction may be accompanied by a payment. in certain cases, the It can be seen in practice that, grantor shares some of the economic risk borne by the concessionaire. The State therefore bears part of the costs of exploiting the concession in order to keep prices down for the user. A variety of procedures are possible (guaranteed flat rate, fixed sum but paid on the basis of the number of users etc. ). This sharing of risks and costs does not necessarily change the nature of the contract. If the payment covers only part of the cost of the construction, the concessionaire will still have to bear a significant part of the exploitation risks. Similarly, if the concessionaire must, for reasons of public interest, apply ásocial pricesí (8) and receives compensation from the State in a lump sum or instalments, this sharing by to meet for (6) For example, the Commission has already taken cognisance of cases in which a consortium composed of contractors and banks the needs of undertook to carry out a project the awarding authority, reimbursement by the in exchange awarding authority of the loan taken out by the contractors with the banks, together with a profit for the private partners. The Commission interpreted this as a public works contract since the consortium did not undertake any exploitation, and therefore bore no attendant risk. The Commission came to the same conclusion in another case where, although the private partner carrying out the work was ostensibly exploiting the construction, the public authority had in fact guaranteed that he would receive compensation. The terms of this guarantee were such that the public authority in effect bore the exploitation risks. (7) In its Judgment of 10 November 1998 of the Arnhem case, (Case C-360/96), the Court implicitly concluded that it could not be a the remuneration paid public concession on the grounds that comprises only a price and not the right to operate the service, without interpreting the term public service concession (Grounds, paragraph 25). relieve the the State of operating costs does not concessionaire of a significant part of the exploitation risks. The the awarding authority assumes responsibility for the exploitation risks. In that case it is a public works contract. situation is different if 1. 2. Service concessions and coverage of this communi- cation does define 92/50/EEC it relates to. Thus, not the distinctive áservice Directive concessionsí (9). However, features of works concessions as defined by the Community legislator in Directive 93/37/EEC are shared by service concessions, since a concession has the same features regardless of what for example, as with works concessions, the exploitation criterion is vital for deter- mining service concession (10). By virtue of this criterion, the contractor bears the risk involved in operating the service in question, obtaining a significant part of his revenue from the user, particularly by charging fees in one form of another. otherwise existence the or of a The Commission’s discussions in the Advisory Committees on public contracts and with the main economic operators concerned have also revealed that there are other forms of public/private partnership in the Member States that are very similar to concessions, in the field of both works and services. the State is it has been observed that For example, sometimes involved in the financing and exploitation of a construction or services at the same time as the private ácontracts (9) The absence of a reference to the concept of service concession in Directive 92/50/EEC calls for some comment. Although, when preparing this directive, the Commission had proposed including a special arrangement for this type of concession equivalent to the existing arrangement for works concessions, the Council did not accept this proposal. The question remains, however, as to whether or not the granting of service concessions comes entirely under the arrangements introduced by Directive 92/50/EEC, since this applies to all for pecuniary interest concluded in writing between a service provider and a contracting authorityí, to the exception of certain types of contract specified in the directive which do not include concession contracts. followed by certain this definition, A literal authors, could lead to inclusion of concession contracts, since these are for pecuniary interest and concluded in writing. This approach would mean that the granting of a service concession would have to comply with the entire detailed provisions of to a more Directive 92/50/EEC, and would hence be subject complex procedure than works concessions. However, in the absence of Court case law on this point, the Commission does not follow this interpretation. interpretation of (8) For example, if the toll for a motorway is fixed by the State at a (10) See also the Judgment of the Court in Case C-360/96, Arnhem, level which does not cover exploitation costs. (Grounds, paragraph 25). 7. 4. 1999 EN Official Journal of the European Communities C 94/7 sector, setting up by means of a regulatory act - not necessarily a contract - a public-private equity joint venture. The fact that these forms of concession cannot be defined as works concessions or public contracts within the meaning of Directive 93/37/EEC or that they are not covered by Directive 92/50/EEC does not prevent the rules of Articles 52 and 59 of the Treaty from applying, since any act of State laying down the terms governing economic activities, be it contractual or unilateral, must be viewed in the light of the Treaty and in particular Article 52 to 66. Concessions and similar forms of public/ private partnership are governed by acts of this kind and as such are covered by the abovementioned rules and principles of the Treaty. This interpretative communication therefore concerns acts of State whereby a public authority entrusts to a third party - by means of a contractual act or a unilateral act with the prior consent of the third party - the total or partial management of services for which that authority would normally be responsible and for which the third party takes on the main exploitation risk. Such services are covered by this communication only if they constitute economic activities within the meaning of Articles 52 to 66 of the Treaty. These acts of States will henceforth be referred to as áconcessions and similar forms of public/ private partnershipí. interpretative communication does not therefore This concern acts whereby a public authority entrusts to a third party the management of services connected with the exercise of official authority (11) or authorises the exercise of an economic activity even if these acts would be regarded as concessions in certain Member States (12). Nor does it concern relationships which are internal in the public administration (13). Instead, relationships between public authorities and public enterprises entrusted with the operation of services of general economic interest are covered by the present communication (14). II. REGIME APPLICABLE TO CONCESSIONS AND SIMILAR FORMS OF PUBLIC/PRIVATE PARTNERSHIP As mentioned above, only works concessions for an amount equal to or greater than the threshold specified in Directive 93/37/EEC (ECU 5 000 000) are subject to a specific regime. Other forms of public/private partnership for works or services or telecommunications sectors are not subject to the directives on public contracts. in the water, energy, transport or This does not, however, mean that these phenomena are not covered by any Community rules. Like any act of State laying down the terms governing economic activities, concessions and similar forms of public/ private partnership are subject to Articles 52 to 66 of the Treaty and the principles enshrined in the Treaty or emerging from the Courts’ case law - notably the principles of non-discrimination, equality of transparency, mutual recognition and proportionality (15). treatment, In the transport sector the relevant rules on freedom to provide services are set, by the means of Article 61, by Articles 74 to 84 of the Treaty (16). This is without prejudice to the fact that as the Court has consistently held, the general principles of Community law are applicable to the sector (17). The Treaty does not restrict the freedom of a Member State to have recourse to concessions and analogous forms of public/ private partnership, provided the methods of granting these are if a compatible with Community law. Thus, Member State seeks to impose conditions of an environmental kind when choosing the concessionaire it can include, among the selection criteria, requirements of environmental qualifi- cation on a non-discriminatory basis, provided that they are compatible with the rules and the principles of the Treaty. instance, for (11) For example, ásovereigní services (notably, in certain Member States, the profession of notary). (12) For example, taxi concessions or authorisations to use the public relating to highway (newspapers kiosks, cafØ terraces), acts pharmacies, gas stations. (13) In his opinion regarding the case Arnhem (abovementioned), Advocate General La Pergola outlined that these are forms of inter- organic delegation that are not outside the administrative sphere of contracting authorities. (14) In the broadcasting sector the protocol on the system of public broadcasting in the Member States annexed to the Treaty of Amsterdam, amending the Treaty of European Union (still to be ratified) has to be taken into consideration. (15) Obviously, acts and behaviour of the concessionaire to the extent that these are attributable to the State within the meaning of the case law of the Court of Justice are governed by the above rules and principles. (16) Transport services by rail, road and inland waterway are covered by Regulation (EEC) No 1191/69 as amended by Regulation (EEC) No 1893/91, which set out the mechanisms and procedures that public authorities can employ in ensuring that their objectives for public transport are met. (17) Judgments of 4 April 1974, Affair C-167/73, Commission v. France, of 30 April 1986, Joint Affairs 209/84 and 213/84, MinistŁre Public v. ASJES et al, of 17 May 1994, Affairs C-18/93, Corsica Ferries, of 1 October 1998, Affair C-38/97, Autotrasporti Librandi snc v. Cuttica. C 94/8 EN Official Journal of the European Communities 7. 4. 1999 As the Court has stated in connection with the directives on public contracts, even if the Member States remain free to lay down the substantive and procedural rules, they must respect all the relevant provisions of Community law and particularly the prohibitions deriving from the principles enshrined in the Treaty concerning right of establishment and freedom to provide services (18). The Court stated in particular that the public procurement directives were intended to áfacilitate the attainment within the Community of freedom of establishment and freedom to provide servicesí and áto ensure the effec- tiveness of the rights conferred by the Treaty in the field of public works and supply contractsí (19). States thought sometimes that have Certain Member concessions were not governed by the rules of the Treaty in that they involved delegation of a service to the public, which would be possible only on the basis of mutual trust (intuitu personae). According to the consistent case law of the Court, the only reasons which would enable State acts which violate Articles 52 and 59 of the Treaty (and therefore concessions and similar forms of public/private partnership which violate Articles 52 and 59 of the Treaty) to circumvent prohibition under these Articles are those referred to in Articles 55 and 66. The very restrictive conditions specified by the Court for the application of these Articles are described below (20). In what follows, the Commission will refer to the rules of the Treaty and the principles deriving from Court case law that are applicable to concessions and similar forms of public/private partnership covered by this communication; it will explain what, at thinking, are the applicable criteria. the current state of 2. 1. The rules and principles of Community law applicable to concessions and similar forms of public/private partnership The Treaty makes no specific mention of public contracts, concessions or other similar forms of public-private part- nership. A number of its provisions are, however, relevant, i. e. the rules instituting and guaranteeing the proper operation of the Single Market, namely: (18) Judgment of 9 July 1987 Joint Affairs 27/86, 28/86 and 29/86, Bellini. (19) Judgments of 10 March 1987, Affair 199/85, Commission v. Italy and of 17 November 1993, Affair 71/92, Commission v. Spain. (20) Judgment of 26 April 1994, Affair C-272/91, Lottomatica. In this Judgment, the Court of Justice ruled that in view of the facts, the tasks of the concessionaire were limited to activities of a technical nature and as such were subject to the provisions of the Treaty. - the rules prohibiting any discrimination on grounds of nationality (Article 6(1)), - the rules on freedom of establishment (Articles 52 and following) and on freedom to provide services (Article 59 and following) and the exceptions to these rules provided for in Articles 55 and 56 (21), - Article 90 of the Treaty might help to determine if the grant of these rights is legitimate. The rules and principles arrived at by the Court are clarified below. 1. Equality of treatment the general The Court has consistently held that principle of equality of treatment, which includes specifically a prohibition of discrimination based on nationality, is a fundamental principle of Community law. This principle requires that similar situations are not to be treated differently unless this is justified by objective reasons (22). In a judgment on the application of the rules and principles of the Treaty to public contracts the Court asserted that the principle of equality of treatment, of which Articles 52 and 59 are a particular expression prohibits not only the obvious discrimination based on nationality but also all covert forms of discrimination which, by applying other criteria of differentiation, lead in fact to the same result (23). all that treatment implies rules tenderers know the in The principle of equality of in particular they apply to everybody in the advance and that same way. The case law of the Court, in particular the Judgment Rauliní (24) and the Judgment Parliament/ Councilí (25) lays down that the principle of equality of treatment requires not only that conditions of access to an economic activity be non-discriminatory, but also that public authorities take all the measures required to ensure the exercise of this activity. (21) The Commission points out that restrictive but non-discriminatory they are not measures are contrary to Articles 52 and 59 if motivated by overriding reasons of public interest worth protecting. This is the case when the measures are neither appro- priate nor necessary for achieving the objective in question. (22) Judgment of 8 October 1980, Affair 810/79, berschär. (23) Judgment of 5 December 1989, Case C-3/88, Data Processing, recital 8. (24) Judgment of the Court of 26 February 1992, Case C-357/89. (25) Judgment of the Court of 7 July 1992, Case C-295/90. 7. 4. 1999 EN Official Journal of the European Communities C 94/9 In the Judgments Storebælt and Bus Wallons the Court had the occasion to set out the scope of the principle of equality of treatment in the area of public contracts, by asserting on the one hand that this principle requires that all offers conform to the tender specifi- cations to guarantee an objective comparison between offers (26) and, on the other hand, this principle is violated, and transparency of the procedure impaired, when an awarding entity takes account of changes to the initial offers of one tenderer who thereby obtains an advantage over his competitors. Moreover, the Court notes áthat the procedure to compare offers (must) observe at all stages both the principle of equality of treatment of tenderers and that of transparency, so that all tenderers have the same chances in formulating the terms of their offersí (27). a principle of therefore developed in these two The Court has judgments treatment equality of between tenderers quite apart from possible discrimi- nation on the basis of nationality or other criteria to distinguish between them. their being opened or cations or amended after allowing variants when this possibility was not provided for in the specifications or contract notice. In addition the nature of the initial project must not be changed during negotiation in regard to the criteria and requirements laid down at the beginning of the procedure. solutions Furthermore, in certain cases, awarding authorities are unable to specify their requirements in sufficiently precise technical terms, so they seek alternative offers to a problem likely to provide various expressed in general terms. In such cases, however, in order to ensure fair and effective competition, the spec- ifications must always state in a non-discriminatory and objective manner what is asked of the candidates and above all the way in which they must draw up their bids. In this way, each tenderer knows in advance that he has the possibility of proposing various technical solutions. More generally, the specifications must not infringe the abovementioned contain elements that rules and principles of the Treaty. similar awarding authority negotiates with The application of this principle to concessions and other forms of public/private partnerships (which from all the evidence is only possible when several the candidates) implies that the grantor is free to choose the award procedures and lay down the requirements which candidates must meet throughout the various the phases of procedure must be conducted objectively and trans- parently and comply with the procedural rules and basic requirements originally set (28). Where these rules have not yet been fixed, the application of the principle of equality of treatment requires in any event that the candidates be chosen objectively. tendering procedure. However, a of The following must therefore be considered contrary to the Treaty and to the the abovementioned rules of provisions principle treatment; of in reserving public which the State or the public sector has a majority or complete participation (29); practices allowing for the acceptance of bids not complying with the specifi- contracts only to companies equality (26) Judgment of 22 June 1993, Case C-243/89, Storebælt, recital 37. (27) Judgment of 25 April 1996, Commission v. Belgium, Case 87/94, Bus Wallons. (28) Thus, for example, even if the specifications provide for the possi- improvements to the bility for candidates to make technical solutions proposed by the awarding authority (and this will often be such improvements may not relate to the basic requirements of a project and must be delimited. infrastructure projects), complex case the for (29) Case C-3/88, Data Processing, abovementioned, recital 30. requirements of The also be determined in collaboration with companies in the sector provided that this does restrict competition. the grantor may 2. Transparency The Commission notes that in virtually all the Member States the administrative rules or practices adopted with regard to concessions and similar forms of public/ private partnership provide that bodies wishing to entrust the management of an economic activity to a in order to ensure a minimum of third party must, transparency, make their intention public according to appropriate rules. It is up to the awarding authorities to choose these methods. This is done, for example, by publishing a tender notice or a pre-information notice in the daily press or specialist journals, or by posting appropriate notices. These notices generally contain the information necessary to enable potential to decide tenderers whether interested in participating (e. g. selection and award criteria, etc. ). This includes the subject of the concession or partnership and the nature and scope of the services expected from the concessionaire or partner. they are The Commission considers that, under these circum- stances, the requirement of transparency is met. C 94/10 EN Official Journal of the European Communities 7. 4. 1999 The Commission would call moreover that the Court has in its case law concerning subsequent stages of the procedure affirmed that the principle of transparency is the equality of the corollary of the principle of treatment whose useful effect it seeks to ensure in undistorted competitive conditions (30). 3. Proportionality The principle of proportionality is recognised by the established case law of the Court áas being part of the general principles of Community lawí (31); it also binds national authorities in the application of Community law (32), even when these have a large area of discretion (33). The principle of proportionality requires that any measures chosen should be both necessary and appro- In priate in the light of choosing the measures to be taken, a Member State those which cause the least possible must adopt disruption to the pursuit of an economic activity (35). the objectives sought (34). this partnerships Applied to concessions and other similar forms of public/private principle, which allows contracting authorities to define, especially in terms of performance and technical specifications, the objective to be reached, requires, however, that any measure chosen is both necessary and appropriate in relation to the objective laid down. Thus, for example, a Member State may not impose, when selecting candidates, technical, professional or financial conditions which are excessive and dispropor- tionate to the subject of the concession or similar form of public/private partnership. 4. Mutual recognition The principle of mutual recognition has been laid down by the Court and gradually defined in greater detail in a large number of judgments on the free circulation of goods, persons to this principle, a Member State must accept the products and services supplied by economic operators in other and services. According (30) As the Court has stated, a non-distorted system of competition can be guaranteed only if the various economic players have equal chances. (31) Judgment of 11 July 1989, Case 265/87, Schräder, ECR p. 2237, recital 21. (32) Judgment of 27 October 1993, Case 127/92, recital 27. (33) Judgment of 19 June 1980, Joint cases 41/79, 121/79 and 796/79, Testa et al. , recital 21. (34) Judgment of the Court of First Instance of 19 June 1997, Case T-260/94, Air Inter SA, recital 14. (35) See, for example, Judgment of 17 May 1984, Case 15/83, Denkavit Nederland. Community countries if the products and services meet in like manner the legitimate objectives of the recipient Member State (36). The application of this principle to concessions and similar forms of public-private partnership implies, in particular, that the Member State in which the service is provided must accept the technical specifications, checks, qualifications certificates required in another Member State if they are recognised as equivalent to those required by the Member State in which the service is provided. diplomas, and for example, Thus, the Member State in which the service is provided must accept the equivalent qualifi- cations already acquired by the service provider in another Member State which attest to his professional, technical and financial capacities (37). 5. Exceptions provided for by the Treaty Restrictions on the freedom of establishment and the freedom to provide services are allowed only if they are justified by one of the reasons stated in Articles 55 and 56 of the Treaty. With particular reference to Article 55 (which allows restrictions on the freedom of establishment and the freedom to provide services in the case of activities connected, even occasionally, with the exercise of on the Court official numerous occasions (38) that ásince it derogates from the fundamental freedom of establishment, the Treaty must be interpreted in a Article 55 of is strictly manner which limits its scope to what authority), stressed rule of has basis discrimination on the (36) This principle derives from case law relating to freedom of estab- lishment and freedom to provide services (in particular in the Vlassopoulou Judgment (7 May 1991, Case C-340/89) and Dennemeyer Judgment (25 July 1991, Case C-76/90). In the first Judgment, the Court of Justice found that áeven if applied without any of nationality, national requirements concerning qualifications may have the effect of hindering nationals of the other Member States in exercising their right of establishment guaranteed to them by Article 52 of the EEC Treaty. That could be the case if the national rules in question took no account of the knowledge and qualifications already acquired by the person concerned in another Member State. í In the Dennemeyer Judgment the Court stated in particular that áa Member State may not make the provision of services in its territory subject to compliance with all the conditions required for establishment and thereby deprive of all practical effectiveness the provisions of the Treaty whose object is, precisely, to guarantee the freedom to provide services. í Lastly, in the Webb case (of 17 December 1981, Case 279/80), the Court added that the freedom to provide services requires that á(. ) the Member State in which the service is provided (. ) takes into account the evidence and guarantees already produced by the provider of the services for the pursuit of his activities in the Member State in which he is estab- lishedí. (37) Apart from applying the technical harmonisation directives, recognition of voluntary certification agreements on mutual systems can constitute proof that the qualifications of enterprises are equivalent; these agreements can be based on accreditation, which shows the competence or the conformity assessment body. (38) See, in particular, the Judgment of 15 March 1988, Case 147/86, Commission v. Hellenic Republic. 7. 4. 1999 EN Official Journal of the European Communities C 94/11 necessary in order to safeguard the interests which it allows the Member States to protectí. Such exceptions must be restricted to those activities referred to in Articles 52 and 59, which in themselves involve a direct and specific connection with the exercise of official authority (39). Consequently, the exception included in Article 55 must apply only to cases in which the concessionaire or partner directly and specifically exercises official authority. Thus, this exception does not automatically apply to activities carried out by virtue of an obligation or exclusivity established by law or qualified by the national authorities as being in the public interest (40). It is true that any activity delegated by the public auth- orities normally has a connotation of public interest, but this still does not mean that such activity neces- sarily involves exercising official authority. an example, As Justice dismissed the Court of application of the exception under Article 55 on the basis of findings such as: - the activities transferred remained subject to super- vision by the official authorities, which had at their the disposal protection of the interests entrusted to them (41), appropriate means ensuring for - the activities transferred were of a technical nature and therefore not connected with the exercise of official authority (42). restricting the exercise of that any The principle of proportionality requires measures the freedoms provided for in Articles 52 and 59 should be both necessary and appropriate in the light of the objectives in the pursued (43). This implies, the measures for achieving the objective choice of the Member State must give preference to pursued, those which least these the freedoms (44). in particular, exercise of restrict that (39) Judgment of 21 June 1974, Case 2/74, Reyners. (40) Conclusions of Mr Advocate-General Mischo in Case C-3/88, Data Processing, referred to above. (41) Judgment of 15 March 1988, Case 147/86, referred to above. (42) Cases C-3/88 and 272/91, Data Processing and Lottomatica, referred to above. (43) Case T-260/94, Air Inter SA, referred to above. For example, the Court rejected the application of the exception relating to public policy when it was supported by insufficient reasons and the objective could be achieved by other means which did not restrict freedom of establishment or freedom to provide services (cf. Recital 15 of the Judgment C-3/88, Data Processing, referred to above). (44) Judgment of 28 March 1996, Case C-272/94, Guiot/Climatec. Furthermore, with regard to the freedom to provide services, the host Member State must check that the interest to be safeguarded is not safeguarded by the rules to which the applicant is subject in the Member State where he normally pursues his activities. 6. Protection of the rights of individuals In consistent case law on the fundamental freedoms guaranteed by the Treaty, the Court has stated that decisions to refuse or reject must state the reasons and must be open to judicial appeal by the affected parties (45). These requirements are generally applicable since, as the Court has stated, they derive from the constitu- tional traditions common to the Member States and enshrined in the European Convention on Human Rights (46). They are therefore also applicable to individuals who consider that they have been harmed by the award of a concession or by the choice of a partner within the meaning of this communication. 2. 2. The provisions of Directive 93/37/EEC on works concessions The Commission considers it worthwhile to point out that the rules and principles, which it has explained regarding forms of public/ concessions for services and similar to private partnership, are applicable mutatis mutandis concessions for works. The fact that Directive 93/37/EEC lays down only adver- tising rules for works concessions does not mean that these rules are the only ones applicable to them, and for the following reason: since works concessions are State acts the purpose of which is the provision of economic activities, they also fall within the field of application of Articles 52 to 66 of the Treaty and the abovementioned principles. It goes without saying that, for concessions whose value is below the threshold laid down by Directive 93/37/EEC, the same rules and principles of the Treaty are applicable. (a) The upstream phase: choice of concessionaire 1. Rules on advertising and transparency in the Official Awarding authorities must publish a concession the European notice of Communities according to the model laid down in the contract up for Directive 93/37/EEC to put competition at the European level (47). Journal (45) Judgment of 7 May 1991, Case C-340/89, Vlassopoulou, recital 22. (46) Judgment of 15 October 1987, Case 22/86, Heylens, recital 14. (47) In order to meet the directive’s aim of ensuring development of effective competition. In the award of public works contracts, the criteria and conditions which govern each contract must be given sufficient publicity contractsí (Judgment of 20 September 1988, Case 31/87, Beentjes, recital 21). authorities awarding the by C 94/12 EN Official Journal of the European Communities 7. 4. 1999 the Commission A problem encountered by involves the award of concessions between public entities. Some Member States seem to consider that the provisions of Directive 93/37/EEC applicable to works concessions do not apply to contracts concluded between a public authority and a legal person governed by public law. hensive list of such firms must be enclosed with the application for the concession and must be updated following any subsequent changes in the relationship between firms. Since this list is comprehensive, the concessionaire may not cite the non-applicability of for awarding a the advertising rules as grounds works contract to a firm which does not figure on the abovementioned list. a 93/37/EEC requires Nevertheless, Directive for for all contracts preliminary advertisement public works concessions, irrespective of whether the potential concessionaire is private or public. Furthermore, Article 3(3) of Directive 93/37/EEC expressly states that the concessionaire can be one of the authorities Directive, which implies that this type of relation is subject to publication in accordance with Article 3(1) of the same Directive. covered by awarding the 2. The choice of the type of the procedure The grantor of works concessions is free to adopt one of the three procedures mentioned in the Directive, whilst complying with the abovemen- tioned rules and principles laid down in the Treaty. (b) The downstream phase: contracts awarded by the contract holder (48) Directive 93/37/EEC lays down certain rules on contracts awarded by public works concessionaires for works for a value of ECU 5 000 000 or more. They vary, however, depending on the type of conces- sionaire. If the concessionaire is an awarding authority within the meaning of the Directive, the contracts for such works must be awarded in full compliance with all the Directive’s provisions on public works contracts. If the concessionaire is not an awarding authority, the Directive stipulates that he must comply only with certain advertising rules. These rules are not applicable when the concessionaire awards works contracts to affiliated undertakings within the meaning of the Directive. The Directive also stipulates that a compre- (48) It should be recalled that under Article 3(2) of the Directive the contracting authority may require the concessionaire to award to third parties contracts representing a minimum percentage of the total value of the work. The contracting authority may also request the candidates for concession contracts to specify in their tenders this minimal percentage. Consequently the concessionaire is always obliged to make known his intention to award a works contract to a third party whether or not he is an awarding authority. The Commission considers that a Member State is in breach either of the provisions of Directive 93/37/EEC on works carried out by third parties if, to award works contracts to third-party firms, without any invi- tation to tender, it uses as an intermediary a firm with which it is linked. (c) The rules applicable to review In the case of public works concessions, the provisions of Directive 89/665/EEC concerning review are applicable (49). draws The Commission also the requirements of Article 2(7) of Directive 89/665/EEC, which stipulates áthe Member States shall ensure that decisions review taken by bodies procedures can be effectively enforced. í responsible for attention to This implies that the Member States must not take any material or procedural measures, which might render ineffective this Directive. the mechanisms introduced by (49) In this context, it should be noted that Mr Advocate-General Elmer, in Case C-433/93, Commission v. Germany, found that according to the case law of the Court (Judgments of 20 September 1988, in Case 31/87, Beentjes, and 22 June 1989, in Case 103/88, Constanzo) the Directives on public contracts confer on individuals rights which they may exercise, in certain conditions, directly before the national courts, vis-à-vis the State and awarding auth- orities. The Advocate-General also maintained that Directive 89/665/EEC, adopted after this Judgment, did not seek to restrict the rights which case law individuals vis-à-vis public authorities. On the contrary, the Directive sought to reinforce áthe existing arrangements. particularly at a stage when infringements can be correctedí (second recital of Directive 89/665/EEC). and Community levels at both national 7. 4. 1999 EN Official Journal of the European Communities C 94/13 In addition to the obligations already mentioned above, these public contracts are subject to the obli- gation to state reasons provided for by Article 8 of Directive 93/37/EEC, which makes it compulsory for the awarding authority to state the reasons for its decision within fifteen days, and to the review procedures provided for by Directive 89/665/EEC. 2. 4. Concessions in the special sectors Directive 93/38/EEC on contracts awarded by entities operating in the water, energy, transport and telecom- munications sectors does not have any specific rules either on works concessions or on service concessions. Lastly, in the case of service concessionaires who are awarding authorities within the meaning of the Directives, the provisions of the Directives apply to the procedures to award concession contracts. 2. 3. The delimitation between works concessions and service concessions Since Directive 93/37/EEC provides for a special system of procedures for granting public work concessions, is worth determining exactly what this type of concession is, especially if it is a mixed contract, which also includes a the case in service element. This concessionaire often practice a public works since provides a service to the user on the basis of the structure he has built. is virtually always it For the Commission, the decisive criterion is whether the contract involves building a structure on behalf of the grantor. the awarding authority, If the contract involves building a structure or carrying out works and the control of the resulting assets is to the remain in the hands of Commission considers that the system provided for by Directive 93/37/EEC must apply as long as the threshold for applying this Directive is reached (ECU 5 000 000), even if service aspects are involved. The fact that the works are performed or the structures are built by third parties does not change the nature of the contract. The same applies the concessionaire cannot build the structure or perform the works himself: the subject of the contract remains the same. if In contrast, a concession contract, which does not involve construction work or only involves operating an existing structure, is regarded as a service concession since, in both cases, no actual construction work takes place. Furthermore, alongside a public works concession, service contracts or other service concessions may be concluded for complementary activities, which are, however, inde- pendent of the concession, and particularly of a structure. Thus, services to repair a service motorway may be the subject of a different concession from that construction or management. the exploitation of involving its the four The Commission would, however, recall that the award by authority not operating the State or other public specifically in one of sectors governed by concession involving an Directive 93/38/EEC of economic activity in one of falls within the rules and principles of the Treaty described above, if it is a service concession, and such rules and principles of the Treaty as well as the Directive 93/37/EEC, if it is a works concession (50). these four sectors, a The system of the Treaty which applies to the grant of a concession by an entity operating in one of the sectors covered by Directive 93/38/EEC does not differ in any material respect from the system applicable to the grant of a concession where the grantor is a public entity and falls within the rules and principles described above. the Member States have a discretionary power (50) On the basis of Articles 74 to 84 of the Treaty the Community has legislated to ensure the free provision of services in certain transport sectors, but not all especially not in a significant part of the land transport sectors. For these the responsible authorities of to select to whom they accord special rights to supply land operators, transport services and/or whom they reimburse for providing public transport services in this sector. However, Regulation (EEC) No 1191/69 (as amended by Regulation (EEC) No 1893/91) and Regulation (EEC) No 1107/70 lay down rules on compensation (which are in fact State aids) for providing public land transport services. Certain tasks are only remunerated if they are covered by a public service contract between an operator and a public authority. This applies both to the provision of services in a works concession contract and to combined supplies and services contracts. Although authorities do not have to apply the detailed rules of Directives bestow service concessions the general principles set out under point 2. 1 of equality of treatment, transparency, proportionality, mutual recog- nition and protection of individual rights apply when a public authority chooses a potential operator. Since the adoption of Regulation (EEC) No 1191/69 there is now a considerably greater understanding of the conditions required for an adequate transport service and the best ways of ensuring it. For these reasons the Commission considers that the Regulation must be brought up to date among other things to set out more precisely proportionality of exclusive rights and to extend the use of public service contracts. 92/50/EEC and 93/38/EEC to