Introduction
Almost 14 years after the inaugural case law of the European Court of Justice in the Telaustria1 case dealing with the issue of concessions in the light of European Union law, EU institutions and the Member States have finally reached an agreement to endorse the first European body of law concerning the award of concession contracts: Directive 2014/23/EU, of 26 February (“Directive”).
To a certain extent, the new Directive consolidates the vast case law of EU courts on this matter, which, in itself, has the merit of strengthening legal security. However, there are also a number of innovative and relevant solutions that will certainly impact on the way that Member States structure their supply of goods and services.
Why was there a need for the Directive?
Until the Directive was approved, concession contracts were not entirely subject to harmonized legal discipline in the European area. The classic directives on public procurement, which address the award of public contracts, expressly exempt from their scope – since their first generation in the beginning of the 1970s – the so-called ‘service concessions’. They only cover the ‘works concessions’.
Despite this exclusion, it was common ground on the case law of the Court of Justice and the decision practice of the European Commission, at least since the Telaustria judgment, that, notwithstanding the fact that service concessions were not caught by EU directives on public contracts, the awarding entities concluding them were nonetheless bound to comply with the fundamental rules and principles of the Treaties, in particular those concerning non-discrimination on the ground of nationality, equality of treatment, transparency, mutual recognition, proportionality and securement of competition within the internal market.
In practical terms this means that, even before the Directive, awarding entities had the obligation to ensure, for the benefit of any potential tenderer, a degree of advertising adequate to enable the services at stake to be opened up to competition and the impartiality of the proceedings to be reviewed.
Having said this, the fact remains that there was always a considerable divergence on the way that each Member State interprets such rules and principles and implements them in the framework of concession procedures, which led to the fact that a significant part of the case law in this field was built at the expense of preliminary rulings to the ECJ by national courts, in the first moment, and subsequently of infringement proceedings brought by the Commission against Member States. From this standpoint, the Directive brings the advantage of stabilising a set of procedural and substantive rules applicable to concessions, thus contributing to ensure uniform application of EU law.
Scope of the Directive
As a result of the principle of neutrality of the EU vis-à-vis the system of property ownership of Member States,2 the Directive acknowledges and reaffirms the right of States to decide the means of administration they deem to be most appropriate for performing works and providing services. In particular, nothing in the Directive limits the choice between public or private management models. However, if Member States decide to award to third parties (be they public or private) the supply of goods or services, EU law comes into play.
The Directive covers the majority of works and service concessions, although there are important derogations to the general provisions (v.g., in respect to the energy, transport and postal sectors) and even exclusions (v.g., in respect to the water, air transport, defence and security, certain audiovisual and radio media services, gambling and betting and financial securities sectors or in respect to activities that are directly exposed to competition).
Another important exclusion has to do with in house procurement. Following on from the extensive case law of the Court of Justice launched by the Teckal3 rendering, the Directive recognises that public contracting authorities and entities are not required to follow the Directive if
(i) they exercise over the concessionaire a control which is similar to that which they exercise over their own departments,
(ii) the concessionaire carries out more than 80% of its activities in the performance of tasks entrusted to it by the controlling contracting authority or contracting entity and
(iii) there is no direct private capital participation in the concessionaire with the exception of non-controlling and non-blocking forms of private capital required by national legal provisions, in conformity with the Treaties, which do not confer a decisive influence over the concessionaire.
This last condition applicable to in house procurement represents a considerable evolution when compared to the current status of the European case law and decision practice in this field, which – sometimes unreasonably – tend to consider that the holding of a participation, even as a minority, of a private undertaking in the capital of a concessionaire excludes in itself the possibility of public contracting authorities and entities exercising over such concessionaire a control similar to the one they exercise over their own internal departments.4
In the Directive, it is now clear that such type of private holding in concessionaires does not preclude the direct award of public tasks to these entities «as such participations do not adversely affect competition between private economic operators».5 At the same time, the fact that the Directive only imposes a ban on the «direct» participation of private capital may give Member States an additional room to shape their in house arrangements.
Outside the scope of the contemplated derogations and exceptions, the Directive essentially lays down a coordination of national procedures for the award of concessions that, in view of their value (equal to or above EUR 5.186 million), are likely to raise greater cross-border interest. As a rule, the award of these concessions should be preceded by publication of a notice in the Official Journal of the European Union in accordance with standard forms to be approved by the Commission.
There is now also a level playing field as regards essential terms of the award proceedings, such as a minimum time limit for the receipt of applications (in principle 30 days from the date on which the concession notice was sent), award criteria (that must be proportionate, non-discriminatory, fair, linked to the subject-matter of the contract, previously disclosed and listed by their order of importance) and the duration of concessions (for concessions lasting more than 5 years, the maximum duration of the concession shall not exceed the time that a concessionaire should reasonably be expected to take to recoup the investments made and the costs incurred, together with a return on capital under normal operating conditions).
Other relevant aspect of the Directive is the fact that it helps clarifying the situations under which modifications of a concession during its performance require a new concession award procedure. This is the case in particular where the amended parameters would have dah an influence on the outcome of the procedure, had they been part of the initial procedure (v.g., scope of the concession or mutual rights and obligations of the parties). There are, however, a few provisions dealing with review clauses for changes of circumstances contained in the initial concession documents and that provide for de minimis thresholds, below which a new award procedure is not required.
Entry into force and transposition
The Directive entered into force on 17 April 2014 and shall be transposed by Member States into their national laws by 18 April 2016.
Final remarks
It took the Member States a few years to accept the relevance of drafting harmonised legal rules within the European area applicable to concessions.
The negotiation of a legal regime with such wide implications represents, in view of its complexity, duration and diversity, a particularly demanding challenge from a legislative point of view. This is to say that, any legal attempt made in this field, has to strike a sensitive balance between, on the one hand, basic guarantees in favour of equal treatment and competition among operators and, on the other, flexibility for Member States to define and organise the procedure leading the choice of a concessionaire.
In the confrontation between these two interests, which were always present throughout the legislative work that resulted in the approval of the Directive, the final product seems to be a globally balanced text that enhances legal security for both public and private entities.
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1 Judgment of 7.12.2000, case C-324/98.
2 Article 345 TFEU.
3 Judgment of 18.11.1999, case C-107/98.
4 This line of reasoning was first adopted on case C-26/03 Stadt Halle and RPL Lochau, of 11.1.2005, and was later affirmed in a number of subsequent cases. Alon the same lines, see also the Commission interpretative communication on the application of Community law on public procurement and concessions to institutionalised public-private partnerships, of 12.4.2008.
5 Recital (46), § 2.
