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A sizzling potato? CJEU faces questions on guidelines relevant to cross-border procurement litigation (C-480/22) — Tips on how to Crack a Nut

The Court docket of Justice has obtained a very attention-grabbing preliminary reference from the Austrian Supreme Administrative Court docket (Verwaltungsgerichtshof) regarding worldwide battle of legal guidelines points regarding cross-border public procurement involving contracting entities from totally different Member States (Case C-480/22, EVN Enterprise Service and Others, hereafter the ‘EVN II’ case). The preliminary reference covers problems with judicial competence and relevant procedural legislation to cross-border challenges of procurement choices.

Apparently, the case issues a unfavorable battle of jurisdiction, the place neither the Bulgarian nor the (first occasion) Austrian courts contemplate themselves competent. The case thus appears to be a little bit of a sizzling potato—though the referring (increased) Austrian courtroom appears focused on nipping the problem within the bud, presumably to keep away from a state of affairs of deprivation of procurement treatments that might in the end violate EU procurement guidelines and common necessities of entry to justice underneath the Constitution of Elementary Rights (although this isn’t specific within the preliminary reference).

The foundation of the issue is that the battle of legal guidelines dimension of the executive overview of procurement choices involving contracting authorities from totally different Member States is just not explicitly addressed within the 2014 Procurement Directives. Though the case issues the interpretation of Article 57 of Directive 2014/25/EU, it’s of direct relevance to the interpretation of Article 39 of Directive 2014/24/EU, because the wording of provisions is close to similar (aside from references to contracting entities fairly than contracting authorities in Artwork 57 Dir 2014/25/UE, and the suppression of particular public sector guidelines on awards underneath framework contracts that aren’t related to this case).

I’ve been within the regulatory gaps left by Artwork 39 Dir 2014/24/EU for some time. On this put up, I handle the primary two questions posed to the CJEU, because the proposed solutions would make it pointless to reply the third query. My evaluation is predicated on my earlier writings on the subject: A Sanchez-Graells, ‘The Emergence of Trans-EU Collaborative Procurement: A “Dwelling Lab” for European Public Legislation’ (2020) 29(1) PPLR 16-41 (hereafter Sanchez-Graells, ‘Dwelling Lab’)); and idem, ‘Article 39 – Procurement involving contracting authorities from totally different Member States’ in R Caranta and A Sanchez-Graells (eds), European Public Procurement. Commentary on Directive 2014/24/EU (Edward Elgar 2021) 436-447 (hereafter Sanchez-Graells, ‘Artwork 39’).

The ‘EVN II’ case

Primarily based on the information of the preliminary reference, the authorized dispute originates in a ‘public home’ atmosphere inside the Austrian EVN group. The Land of Decrease Austria owns 51% of EVN AG, which in flip not directly wholly owns each (i) EVN Enterprise Service GmbH (‘EBS GmbH’), an Austrian central buying physique (CPB), and (ii) Elektrorazpredelenie YUG EAD (‘EY EAD’), a Bulgarian utilities firm. EBS GmbH had the duty of procuring providers on behalf of and for the account of EY EAD by way of a framework settlement on the efficiency {of electrical} set up works and associated development and dismantling works divided into 36 tons, the place of efficiency being situated in Bulgaria.

Notably, within the invitation to tender, the Landesverwaltungsgericht Niederösterreich (Regional Administrative Court docket, Decrease Austria) was named because the competent physique for enchantment proceedings/overview procedures. Austrian legislation is said because the legislation relevant to the ‘procurement process and all claims arising therefrom’, and Bulgarian legislation because the legislation relevant to ‘the efficiency of the contract’.

Two Bulgarian corporations unsuccessfully submitted tenders for a number of tons and subsequently sought to problem the related award choices. Nonetheless, these claims had been dismissed by the Austrian Regional Administrative Court docket on grounds of lack of competence. The Court docket argued {that a} determination on whether or not a Bulgarian endeavor might conclude a contract with a contracting entity situated in Bulgaria, which is to be carried out in Bulgaria and executed in accordance with Bulgarian legislation, would intrude massively with Bulgaria’s sovereignty, thereby giving rise to rigidity with the territoriality precept underneath worldwide legislation. Furthermore, the Court docket argued that it isn’t obvious from the Austrian Federal Legislation on public procurement which procedural legislation is to be utilized to the overview process.

The case thus raises each a problem of the competence for judicial overview and the relevant procedural legislation. The battle of jurisdiction is unfavorable as a result of the Bulgarian Supreme Administrative Court docket confirmed the dearth of competence of the Bulgarian procurement supervisory authority.

An avoidable hole within the 2014 Directives

The problem of cross-border use of CPB providers is regulated by Artwork 57(3) Dir 2014/25/EU, which in similar phrases to Artwork 39(3) Dir 2014/24/EU, establishes that ‘The availability of centralised buying actions by a central buying physique situated in one other Member State shall be carried out in accordance with the nationwide provisions of the Member State the place the central buying physique is situated.’

The primary rivalry within the case is whether or not Article 57(3) of Directive 2014/25 have to be interpreted as masking not solely the procurement process itself, but additionally the principles governing the overview process. The argument put ahead by the Bulgarian challengers is that if the CPB is required to use Austrian legislation from a substantive perspective, the enchantment proceedings earlier than the Austrian overview our bodies should even be carried out in accordance with Austrian procedural legislation.

As talked about above, battle of legal guidelines points aren’t regulated within the 2014 Procurement Directives, regardless of specific guidelines having been included by the European Fee within the 2011 proposal for a brand new utilities procurement directive (COM(2011) 895 remaining, Artwork 52) and the 2011 proposal for a brand new public sector procurement directive (COM(2011) 896 remaining, Artwork 38). With similar wording, the proposed rule was that

A number of contracting [authorities/entities] might buy works, provides and/or providers from or by way of a central buying physique situated in one other Member State. In that case, the procurement process shall be carried out in accordance with the nationwide provisions of the Member State the place the central buying physique is situated [Art 52(2)/Art 38(2) of the respective proposals].

Selections on the award of public contracts in cross-border public procurement shall be topic to the strange overview mechanisms accessible underneath the nationwide legislation relevant [Art 52(8)/Art 38(8) of the respective proposals].

The 2011 proposals would thus have resolved the battle of legal guidelines in favour of the jurisdiction the place the CPB is predicated. Reference to subjection ‘to the strange overview mechanisms accessible underneath the nationwide legislation relevant’ would even have encompassed the problem of relevant procedural legislation. The 2011 proposals additionally included specific guidelines on the mutual recognition and collaboration within the cross-border execution of procurement overview choices (for dialogue, see Sanchez-Graells, ‘Dwelling Lab’, 25-26).

Nonetheless, the 2014 Directives omit such guidelines. Whereas there are indications within the recitals that the ‘new guidelines on cross-border joint procurementought to decide the circumstances for cross-border utilisation of central buying our bodies and designate the relevant public procurement laws, together with the relevant laws on treatments’ (rec (82) Dir 2014/25/EU and, identically, rec (73) Dir 2014/24/EU), this isn’t mirrored within the provisions of the Directives. Whereas the place within the recitals could possibly be seen as interpretive information to the impact that the system of battle of legal guidelines guidelines implicit within the Directives is unitary and the situation of the CPB is determinative of the jurisdiction and relevant legislation for the overview of its procurement choices, this isn’t essentially a definitive argument because the CJEU has made clear that recitals could also be inadequate to create guidelines [see C-215/88, Casa Fleischhandel v BALM, EU:C:1989:331, para 31; Sanchez-Graells, ‘Art 39’, para 39.26. For discussion, see S Treumer and E Werlauff, ‘The leverage principle: Secondary Community law as a lever for the development of primary Community law’ (2003) 28(1) European Law Review 124-133].

Questions earlier than the CJEU — and proposed solutions

Given the dearth of specific answer within the 2014 Procurement Directives, the CJEU now faces two related questions within the EVN II case. The primary query issues the scope of the principles on the supply of cross-border CPB providers, which is barely sophisticated by the ‘public home’ background of the case. The second query issues whether or not the principles subjecting such procurement to the legislation of the CPB lengthen to each the laws relevant to overview procedures and the competence of the overview physique.

Query 1 – contracting authorities/entities from totally different Member States

Within the EVN II case, the CJEU is first requested to determine whether or not Artwork 57(3) Dir 2014/25/EU (and, implicitly Artwork 39(3) Dir 2014/24/EU) needs to be interpreted as which means that the supply of centralised buying actions by a CPB situated in one other Member State exists the place the contracting entity – no matter the query as to the attribution of the management exercised over that contracting entity – is situated in a Member State apart from that of the CPB. The problem of attribution of management arises from the truth that, within the case at hand, the ‘shopper’ Bulgarian contracting entity is financially managed by an Austrian regional authority—which, by the way, additionally controls the CPB offering the centralised buying providers. This raises the query whether or not the shopper entity is ‘really’ overseas, or whether or not it must be reclassified as Austrian on the idea of the monetary management.

Whereas I see the logic of the query when it comes to the formal applicability of the Directive, from a practical perspective, the query doesn’t make a lot sense and a solution apart from sure would create important issues.

The query doesn’t make a lot sense as a result of the purpose of the rule in Artwork 57(3) doesn’t gravitate on the primary a part of the article: ‘The availability of centralised buying actions by a central buying physique situated in one other Member State shall be carried out in accordance with the nationwide provisions of the Member State the place the central buying physique is situated.’ Relatively, the relevance of the rule is within the extension of the legislation of the CPB to ‘(a) the award of a contract underneath a dynamic buying system; [and] (b) the conduct of a reopening of competitors underneath a framework settlement’ by the ‘shopper’ (overseas) contracting authority or entity. The aim of Artwork 57(3) Dir 2014/25/EU is thus the avoidance of probably conflicting guidelines within the creation of cross-border CPB procurement automobiles and within the call-offs from inside these automobiles (Sanchez-Graells, ‘Artwork 39’, paras 39.13-39.15).

Functionally, then, the logic of the whole thing of Artwork 57(3) (and Artwork 39(3)) rests on the avoidance of a danger of conflicting procurement guidelines relevant to the cross-border use of CPB providers, presumably for the good thing about taking part financial operators, in addition to seeking broader consistency of the substantive authorized framework. Both such a danger exists, as a result of the ‘shopper’ contracting entity or authority would in any other case be subjected to a special procurement laws than that relevant to the CPB, or it doesn’t. That’s for my part the essential practical facet.

If this method is appropriate, the problem of (potential) Austrian management over the Bulgarian contracting entity is irrelevant, because the essential challenge is whether or not it’s usually subjected to Bulgarian utilities procurement legislation or not when conducting lined procurement. There isn’t a data within the preliminary reference, however I’d assume it’s. Primarily due to the formal standards figuring out subjection to the home implementation of the EU Directives, which tends to be (implicitly) primarily based on the place of location of the related entity or authority.

Extra basically, if this method is appropriate, the impingement on Bulgarian sovereignty feared by the Austrian first occasion courtroom is a results of EU procurement legislation. There isn’t a query that the 2014 Directives generate the authorized impact that contracting authorities of a given Member State (A) are certain to adjust to the procurement laws of a special Member State (B) after they resort to the providers of that State (B) CPB after which implement their very own call-off procedures, probably resulting in the award of a contract to an endeavor in their very own Member State (A). This probably places the laws of State B within the place of figuring out whether or not an endeavor of State A might conclude a contract with a contracting entity situated in State A, which is to be carried out in State A and executed in accordance with the legislation of State A. It’s thus not simply tenable underneath EU legislation that this represents a large interference with State A’s sovereignty—except one is prepared to problem the EU’s authorized competence for the adoption of the 2014 Directives (see Sanchez-Graells, ‘Dwelling Lab’, 31-33).

An additional practical consideration is that the cross-border provision of CPB providers doesn’t have to be restricted to a two-country setting. If the CPB of nation B is eg making a framework settlement that can be utilized by contracting authorities and entities from nations A, C, D, and E, the applicability of Artwork 57(3) Dir 2014/25/EU (and Artwork 39(3) Dir 2014/24/EU) couldn’t range for entities from these totally different nations, or from inside a rustic, relying on a case-by-case evaluation of the situation of the entities controlling the ‘shopper’ authorities and entities. In different phrases, Artwork 57(3) Dir 2014/25/EU (and Artwork 39(3) Dir 2014/24/EU) can’t fairly be of variable utility inside a single procurement.

Taking the information of the EVN II case, think about that along with EY EAD, different Bulgarian utilities had been additionally in a position to attract from the (similar a number of the) framework settlement put in place by EBS GmbH. How may it’s that Artwork 57(3) managed the procurement for the ‘clearly’ Bulgarian utilities, whereas it will not be relevant for the Bulgarian utility managed by an Austrian authority?

For my part, all of this offers convincing argumentation for the CJEU to reply the primary query by clarifying that, from a practical perspective, the necessity to create a unitary authorized regime relevant to procurement tenders led by CPBs the place there’s a danger of conflicting substantive procurement guidelines requires decoding Artwork 57(3) Dir 2014/25/EU (and Artwork 39(3) Dir 2014/24/EU) as relevant the place the situation of ‘shopper’ contracting authorities or entities is in a number of Member States apart from that the place the CPB is itself situated.

Query 2 – presumption of jurisdiction and relevant legislation

The second query put to the CJEU builds on the applicability of Artwork 57(3) Dir 2014/25/EU and asks whether or not its ‘conflict-of-law rule … in accordance with which the “provision of centralised buying actions” by a [CPB] situated in one other Member State is to be carried out in accordance with the nationwide provisions of the Member State the place the [CPB] is situated, additionally cowl[s] each the laws relevant to overview procedures and the competence of the overview physique’. Aside from on the idea of the interpretive information included within the recitals of Dir 2014/25/EU (and Dir 2014/24/EU) as above, I believe there are good causes to reply this query within the affirmative.

The primary line of arguments is systematic and considers the remedy of battle of legal guidelines conditions inside Artwork 57 Dir 2014/25/EU (and 39 Dir 2014/24/EU; see Sanchez-Graells, ‘Dwelling Lab’, 21-24). In that regard, whereas there’s a onerous battle of legal guidelines rule in Artwork 57(3) (and 39(3)) that selects the legislation of the CPB to the whole thing of the procurement process, together with ‘overseas’ call-offs, the state of affairs could be very totally different within the the rest of the supply. Certainly, on the subject of occasional cross-border joint procurement, within the absence of a binding worldwide settlement, the selection of the relevant substantive procurement laws is left to the settlement of the taking part contracting authorities or entities (Artwork 57(4) Dir 2014/25/EU, and Artwork 39(4) Dir 2014/24/EU). Equally, the place the cross-border procurement is carried out by way of a joint entity, together with European Groupings of territorial cooperation, the taking part contracting authorities have a alternative between the legislation of the Member State the place the joint entity has its registered workplace, or that of the Member State the place the joint entity is finishing up its actions (Artwork 57(5) Dir 2014/25/EU, and Artwork 39(5) Dir 2014/24/EU). This means that the selection of legislation rule relevant to the cross-border provision of CPB providers leaves a lot much less area (certainly, no area) to the applying of a substantive procurement legislation apart from that of the CPB. An extension of this argument helps answering the query within the affirmative and increasing the selection of legislation rule to each the laws relevant to overview procedures and the competence of the overview physique.

A second line of argument issues the effectiveness of the accessible procurement treatments. Such effectiveness would, on the one hand, be elevated by a decreased judicial burden of contemplating overseas procurement legislation the place the situation of the CPB determines jurisdiction and procedural relevant legislation, which can be anticipated to be coordinated with substantive procurement legislation. Then again, answering the query within the affirmative would require financial operators to problem choices regarding potential contracts with a home contracting authority or entity in a overseas courtroom. Nonetheless, provided that the substantive guidelines are these of the overseas jurisdiction and that they had been anticipated to tender (or tendered) in that jurisdiction, the impact could also be comparatively restricted the place the CPB choices are being challenged—as in comparison with a problem of the call-off determination carried out by their home contracting authority or entity, however topic to overseas procurement legislation. For my part, the final set of circumstances could be very unlikely, because the applicability of the ‘overseas’ legislation of the CPB generates a really sturdy incentive for the CPBs to additionally perform the call-off section on behalf of the shopper authority or entity (Sanchez-Graells, ‘Artwork 39’, 39.14).

Total, for my part, the CJEU ought to reply the second query by clarifying that the reference to the nationwide provisions of the Member State the place the CPB is situated in Artwork Artwork 57(3) Dir 2014/25/EU (and 39(3) Dir 2014/24/EU, additionally covers each the laws relevant to overview procedures and the competence of the overview physique.

Some additional ideas

Past the particular points earlier than the CJEU, the EVN II case raises broader issues across the versatile contractualised method (to not say the absence of an method) to battle of legal guidelines points within the 2014 Procurement Directives—which depart important leeway to taking part contracting authorities and entities to craft the relevant authorized regime.

Whereas the state of affairs could be comparatively simple to kind out with an expansive interpretation of Artwork 57(3) Dir 2014/25/EU and Artwork 39(3) Dir 2014/24/EU within the comparatively easy case of the cross-border provision of CPB providers (as above), these points can be far more advanced in different sorts of procurement involving contracting authorities from (a number of) totally different Member States. The method adopted by the primary occasion Austrian courtroom in EVN II appears to me reflective of extra generalised judicial approaches and attitudes in direction of unregulated battle of legal guidelines conditions the place they are often reluctant to easily abide by no matter is revealed within the related procurement notices—as was the case in EVN II, the place the invitation to tender was specific about allocation of jurisdiction and choice of relevant procedural legislation and, that however, the primary occasion courtroom discovered points on each grounds.

This will probably be a significant blow to the ‘contractualised’ method underpinning the 2014 Procurement Directives, particularly the place conditions come up that require home courts of a Member State to make choices imposing legal responsibility on contracting authorities of one other Member State, and the next have to implement that call. The problem of the battle of legal guidelines dimension of the executive overview of procurement choices involving contracting authorities from totally different Member States will thus not be totally addressed by the Judgement of the CJEU in EVN II, though the CJEU may trace at potential options, relying on how a lot it determined to depend on the 2011 proposals as a steppingstone in direction of an expansive interpretation of the present provisions—which is in no way assured, because the suppression of specific guidelines may as simply be interpreted as a presumption or as a rejection of these guidelines by the CJEU.

It appears clearer than ever that the procurement treatments Directives have to be reformed to create a workable and clear system of battle of legal guidelines dimension of the executive overview of procurement choices involving contracting authorities from totally different Member States, in addition to specific guidelines on cross-border enforcement of these choices (Sanchez-Graells, ‘Dwelling Lab’, 39-40).

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