The public cooperation-saga continues in Irgita [guest post by Dr Willem A Janssen & Erik Olsson, LLM] — How to Crack a Nut

• 1. A brief introduction to the Irgita case
• 2. Harmonization of self -organization
• 3. Topics of cooperation, free movement of the competition
  • 3.1. Competition cooperation
  • 3.2. Cooperation of free movement
• 4. Final remarks

• 1. A brief introduction to the Irgita case
• 2. Harmonization of self -organization
• 3. Topics of cooperation, free movement of the competition

• 3.1. Competition cooperation
• 3.2. Cooperation of free movement

Last month, the Court of Justice in the Irgita case has a confusing and potentially revolutionary. Give DR in this blog post. Willem A Janssen and Erik Olsson, LLM us a sketch of deep implications that could have the case, and the interpretative complications that it already generates. Your ideas provide a lot of food and are probably expanded in an upcoming (even) more detailed academic article.

Janssen Olsson refers to another confusing and complicated recent recent. Keep an eye on the blog for a comment from this case soon.

Many contracting authorities in the European Union (EU) sigh with relief when Article 12 of Directive 2014/24/EU 2014 was passed. After years of the continued uncertainties that were not solved by the legal dispute of the EU Court of Justice (CJEU). Some may have even hoped that it would also put an end to the legal discussions about internal and public public cooperation in acquaintance with public procurement. However, new uncertainties come with new laws. It did not take too long for the CJEU to show that the community of public procurement law will continue to discuss these exceptions in the future – because if a door closes. In fact, the CJEU has the basics of the "public house" for the EU labeling regulations with its judgment of 3. October 2019 in the Lithuanian case Irigita (C-285/18, EU: C: 2019: 829) shaken again.

After we have given a brief overview of the case of Irgita (Section 1), we examine some of the CJEU conclusions and provide a first mapping exercise to end their potential effects on future discussions in this article. In particular, we discuss the third preliminary question of the legality of the national rules that restrict the scope of the institutionalized exemption of Article 12 of you 2014/200/EU by adapted or additional criteria (section 2). However, we assume that most future discussions with the court's answer will respond to the fourth preliminary question, whereby the argumentation of the CJEU was two new requirements 12 (1) to (c) of Directive 2014/24 not compatible with the EU law 'as such', Because such a provision cannot relieve the Member States or the contracting authorities of the obligation to be taken into account, among other things,, the principles of equal treatment, non -discrimination, mutual recognition, proportionality and transparency '. This position is anything but clear and may increase extensive consequences for the general functioning of Article 12 (Section 3). Therefore, we discuss at least two interpretative questions, namely the legal relevance of the effects on the competition through a collaboration (Section 3.1), and if the fulfillment of the criteria of Article 12 is a general exception to the EU law (Section 3.2). We also offer some final comments.

1. A brief introduction to the Irgita case

The legal context and the circumstances of the Irgita -if necessary, can be summarized as follows. The Lithuanian legislature carried out Article 12 of you 2014/200/EU through Article 10 of the Law on Public Procurement (as on 1. July 2017 correct). This was not an implementation of copies pies. The legislator has clearly restricted the application of Article 12 in the law on public procurement and in the Competition Act by additional criteria (IRGita, par. 8-10). For example, the scope of Article 12 Dir 2014/200/EU was limited by Article 10 paragraph 2 that required this:

“An internal transaction can only be completed in an extraordinary case."

Article 4 Competition Act also contains an additional criterion:

In the fulfillment of the assigned tasks to regulate economic activities in the Republic of Lithuania, companies in public administration must ensure the freedom of fair competition.

The Lithuanian legislature also banned the participation of private capital in institutionalized cooperation (IRGITA, PAR. 9). This is an example of a changed implementation of Article 12 paragraph 1 (1) (C), which allows some categories of private participation the contracts that have no decisive influence on the controlled legal person ").

The Irgita case takes place within this legal framework. In short, in this case there are two relevant awards for public contracts. First, the municipality of Kaunus has a contract for the maintenance and management of forgives plantations, forests and forest parks according to a public procurement procedure to Irgita (a private operator) in February 2014. Second, the municipality decided to award a contract for similar services for another organization in March 2016, the publicly controlled Kauno Švare. This latter contractual relationship fulfilled the control, activities and private participation points of institutionalized exemption (i.E. 100% stocks, more than 90% of the activities for the community etc.))). Irgita questioned the validity of the second award in view of the Lithuanian competition, while he recognized that the criteria of the institutionalized liberation were actually met.

After a legal struggle through the national courts, the Lithuanian Supreme Court provided questions [as at this time of dr. Dividas Soloveičik discussed in this blog]. As mentioned above, we consider the third and fourth preliminary questions to be particularly relevant. 

2. Harmonization of self -organization

The third preliminary question (part a) took into account the discretion. This is also relevant for other Member States such as Finland, Italy and Poland, which have also restricted the scope of this provision in their own way.

We argue that this question has checked the harmonization method of Article 12. Mile stone cases such as Rätti (C-148/78, EU: C: 1979: 110) and Gallaher (C-11/92, EU: C: 1993: 262) have clarified that the 1) goal, 2) structure and 3) The wording of a legal provision is relevant to determine whether it concerns the total or minimum harmonization. The latter would leave the national legislator discretion to introduce additional and adapted criteria while the former would not.

Among other things, we argue that this would be relevant, for example, to consider. This is also the approach of the Hogan General Attorney, in his opinion from 7. May 2019 in Irgita (C-285/18, EU: C: 2019: 369) [For such a complete analysis based on the Lithuanian and Finnish context, see also W a Janssen, “Swimming against the flood: The harmonization of self-organization of Article 12 Directive 2014/24/EU “(2019) 14 (3) European procurement of public private partnership law review 145-155).

Contrary to the general attorney, however, the court does not mention the relevance of the type of harmonization in Article 12 you 2014/200/EU, but emphasizes the following (IRGita, par. 45-46):

The freedom of the Member States in relation to externalize the provision of services that you offer or want to organize according to other public contracts within the meaning of this guideline.

Just as Directive 2014/24 does not require that the Member States can fall back on a public procurement procedure, it cannot force you to use an internal transaction."

Despite the clarity granted about the relevant discretion of legislation, it is unclear why this argument would provide a conclusive and final argument for national legislation for legislation for additional or adapted criteria. While an analysis of harmonization would deliver it, the arguments of the CJEU only seem to be the first step in a more extensive analysis. It supports the long-term idea that the EU legislator is not due to the discretion of the Member States to organize itself as they consider correctly [according to their chosen socio-economic model, as discussed in a Sanchez graells 'against' against 'against' Against 'the' detailed the grain? Member State of interests and EU procurement law ”, in M Varju (ed.), Between compliance and scotism: interests of the Member States and the European Union (Springer 2019) 171-189; See Chapter 3, W a Janssen, EU Public Procurement Law Selbstericanization: A connection of voltage reconciliation (eleven publishers 2018) for the development of a right to self -organization in Article 4 (2) TEU]. The following argument would be to examine the discretion of national legislation for legislation. 

The second paragraph above may try to make this explicitly, but could also be a reaction to the general attorney's conclusion. While the general lawyer, who surprisingly argued in favor of a minimum harmonization, surprisingly, he said that Article 12 could not affect any overall harmonization, as this would mean par. 46). The Court of Justice seems to expressly take over the opposite position. However, the result of the approach or an argument based on harmonization is more practical.

Finally, the CJEU rightly emphasizes two aspects. First, the court comes. 48). Second, it comes to the conclusion that the principle of transparency must be interpreted in such a way that the conditions for which the Member States must maintain the conclusion of internal transactions in their application sufficiently accessible, precise and predictable in order to avoid a risk of popular (See preliminary question 3b in Irgita, par. 57).

3. Topics of cooperation, free movement of the competition

The Lithuanian Supreme Court aimed at a fairly long fourth preliminary question.E. Control, activities and private participation) would keep the entire transaction in the IRGITA case compatible with the entire property of the EU law. In its question, the Supreme Court referred to a large number of legal obligations, including Article 2 of Directive 2004/18/EC and 2014/200/EU, Article 18, 49, 56, 106 Tfeu and the case law of the CJEU on institutionalized cooperation (anav , Teckal, Sea, and Isis Servizi and others). The general core of the CJEU diktum was not surprising (Irgita, par. 64):

“The answer to the fourth question is therefore that the conclusion of an internal transaction, which fulfills the conditions specified in Article 12 (a) in Article 12 (a) of Directive 2014/24, is not compatible with EU law as such."

This conclusion appears correctly, since the institutionalized exemption transferred to Article 12 only frees the application of Directive 2014/200/EU, in which it is included. However, the court's argument raises various difficult interpretive questions. We tried to categorize them in connection with (1) competition and (2) free movement. In addition, we would like to illuminate possible interpretations.

3.1. Competition cooperation

After the CJEU the relevance of the criteria for control, activities and private participation in their response to the fourth question (Irgita, par. 59) A apparently new term appears on stage in paragraph 62:

“It must also be observed that concert 31 of these guideline states should ensure that the company belongs to the public sector that every cooperation of this type that is excluded from the scope of this guideline leads to a distortion of the competition in relation On private business operators."

The question can be raised what the meaning of this recording is. Two potential interpretations seem to be relevant. Another limited, the other opened rather openly. A third interpretation reveals a kind of balance between the two, but is also connected to the rules of free movement and is therefore discussed in section 3.2 below.

1. Interpretation: an existing obligation

Paragraph 62 could be a general reference to the existing private participation criterion of the institutionalized exemption. A similar consideration was recorded in the light of the non-institutioned exemption when the CJEU introduced this criterion in the milestone case of Commission/Germany (C-480/06, EU: C: 2009: 357, par. 47):

The main goal of the community rules for public procurements, ie the free movement of services and the opening of the specified competition in all Member States

And the court continued by stating in the same paragraph:

That no private company is laid in a position of advantage over competitors.

In the city of Halle (C-26/03, EU: C: 2005: 5), the CJEU referred to such an examination in relation to institutionalized exemption (par. 59):

Second This would offer such a procedure with a capital presence in this competition a private company."

This was also interpreted expansive in Centro Hospitalar de Setúbal and the like (C-574/12, EU: C: 2014: 2004; as discussed in this blog) as discussed in this blog). Article 12 Sub 1 (c) Dir 2014/200/EU is a codification of this ban on private participation and could therefore only be a reference to the ratio of this article. If such an interpretation is correct, paragraph 59 only emphasize a current obligation and thus provide nothing new under the sun. This is confirmed again in paragraph 61, which would mean that the private participation criterion is actually relevant, since the court refers to these principles before its reference to the competition:

'As follows from paragraph 48 of the present judgment, the fact that an internal transaction within the meaning of Article 12 (1) of Directive 2014/24 does not fall within the scope of this directive cannot relieve the Member States or the contracting authorities of the obligation, Among other things, the principles of equal treatment, non -discrimination, mutual recognition, proportionality and transparency."

This interpretation would also fit the last part of Recital 31 you 2014/24/EU, which the court in paragraph 62 did not accept its decision by Irgita and determine that:

“It should be ensured that freed public public cooperation does not lead to a distortion of the competition in relation to private business operators As far as a private service provider puts it in a advantages of the advantage over its competitors." (Added emphasis)

If the above were correct, paragraph 62 would contain a simple repetition of an existing obligation. In the. While these cases refer to a business operator who can benefit from a exempted contract, the IRGITA case affects a scenario in which the exempted contract could influence the competition in other ways. This is supported by the facts of the Irgita case, which do not refer to a scenario. As a result, it arises as to why the court would have primarily accepted this paragraph and does not explain why the court consider competitive concerns in a scenario between public cooperation and a private operator (public private) in addition to competitiveness Would scenario between business operators (private private). 

2. Interpretation: A new general criterion for institutionalized exemption

Alternatively, paragraph 62 could create much more significant consequences if it introduces a new criterion for institutionalized exemption. It could require that cooperating authorities take into account the effects of their cooperation on the market. This introduction of a "distortion of the competition" could analyze the cooperation authorities whether their presence on the market if you should use the discretion granted in Article 12 to operate market activities up to 20% of sales, to distort the competition. However, this test is already treated by the state rules (Arts 106 to 108 Tfeu) that aim to prevent such distortions-and a simple application of the competitive rules (Arts 101 and 102 TFEU) to the internal company would also be the same purpose fulfill. In addition, this could mean that the use of exceptions such as Article 12 reduces the potential volume available on the market and thus also distort the competition.

This interpretation could actually make the use of institutionalized exemption completely impossible, since such a distortion would always exist. Apparently it also undermines that the Member States are free to organize their public tasks at the national level through cooperation, how they think it is fit, which is found in Article 345 Tfeu, Art 14 Tfeu, Article 4 (2) (2) (2) 2) Teu and CJEU cases such as Remondis (C-51/15, EU: C: 2016: 985) and instead of hall (see reference in the top in Sanchez-Graells 2019; Janssen 2018). If at all, it definitely leads to the discussion about the existence of a competitive principle and its effects of the EU law on public procurement (a. Sanchez graells, public procurement and the EU competition rules (2. Edition., Bloomsbury-Hart 2015).

3.2. Cooperation of free movement

In addition to the competition problems, the most relevant problem is the relationship between Article 12 Dir 2014/200/EU and among other things the rules of freedom of movement. In his response to the preliminary question 4, CJEU takes into account in paragraph 63:

In this case, it is in particular the task of the transferring court to assess whether Irgita, when the party was awarded, did not have against its contractual obligations, the party with which this contract was awarded with which this contract was awarded result in this public contract and against the principle of transparency; Whether it had to be determined that the contracting authority did not define its requirements sufficiently clearly, in particular by providing a minimum volume of services for the party to which this contract was placed, or further whether this transaction is a significant change in the general structure of the contract with IRGita completed."

Before this paragraph, the CJEU states that Article 12 contains an exception to Directive 2014/24 and that the contracting authorities must take into account the principles of equal treatment, non -discrimination, mutual recognition, proportionality and transparency '(Irgita, par. 61). This paragraph also brings interpretative difficulties for which – at least two interpretations could be relevant.

1. Interpretation: A stressful double test of the public-public Cooperation

The least favorable interpretation would have a significant legal influence, since it would carry out a stressful double test for the public acquaintance with public cooperation. This would mean that the first contract that was awarded to Irgita and the second contract that has been awarded to the in -house company is still obliged to meet the requirements of the freedom of freedom. 63). An effect of this interpretation would be that a liberated internal contract would have to continue to comply with the transparency principle.

This interpretation would violate the idea that the EU guidelines for public procurement, which is the legal basis on the internal market. It is therefore often assumed that a liberation of these guidelines automatically covers the rules for freedom of movement. In addition, the CJEU already in the parking brixes (C-458/03, EU: C: 2005: 605), a case about service concessions, clarified, par. 62), Which means that this exemption is relevant within and outside of Directive 2014/24/EU. Have to say that this interpretation would add the added value of the exception to.

A softer – but unlikely – interpretation of a double test could be that the principle of transparency would require the contract authorities. This would fill a currently existing gap, which represents the lack of knowledge of excluded contracts and thus enables these parties to question their legality. It is unknown to say.

2. Interpretation: A double test only applies if a procurement has been carried out

A second – and apparently cheapest – interpretation, in which two scenarios are relevant to the principles of free movement, would be as follows.

The first scenario in which the freedom of free movements apply the national legislation that have decided to limit the scope of institutionalized exemption at the national level. This was discussed in section 2 regarding the preliminary question 3a and B.  Member States can therefore clearly restrict this exemption through national legislation and, if they opt for the implementation of such restrictions, the principles of equal treatment, non -discrimination, mutual recognition, proportionality and transparency. This seems to be a classic application of the principles that are based on the rules of free movement for national legislation.

The second scenario refers to the relationship between the two contract prices in the Irgita case, which would integrate the freedom of movement and the competition issues discussed in this article. However, it would initially require that the CIEU incorrectly introduced the concept of "internal transaction" (Irgita, par. 58) As a separate concept according to EU law. The court seems to grant this concept the individual weight, since it repeatedly describes itself as an independent concept that contains both contract prices (1. According to Irgita and 2. To the internal entity). The court then implicitly asks whether the fulfillment of the criteria of Article 12 would be freed from both awards from the scope of the EU law. Apart from the wording under the new roof of the "internal transaction", this is not a new conclusion if you agree that both contracts require a separate examination of EU law. Against this background, it is not surprising that the court determines. Therefore, this individual analysis per contract is expanded by the court to the relationship between the two contracts.

Accordingly, the principle of transparency requires that it becomes clear to a reasonably informed bidder what can be expected when you receive a contract.  If the second contract with the internal company undermines this transparency request, this would represent a kind of "according to the fact" against this requirement in relation to the first contract. Such a violation would be expected against a business operator in the first procedure and thus to undermine the effectiveness of Directive 2014/24/EU, which can be expected reasonably. As a result, it could be argued that the National Court should interpret and apply the National Contract Act for the first contract that was awarded to IRGITA.

In a national legal system, in which appropriate expectations of the contracting parties are important, tools to interpret a contract could determine that the principle of transparency would request a contracting authority. In fact, Swedish courts have found on some occasions that there is probably an obligation that a contracting authority is clearer and more precise in a contract that was awarded according to a public procurement procedure than the case would be the case in a "normal". Contract (see Hovrätten För Nedre Norrland, case No. T-678-14 and Hovrätten Över Skåne Och Blekinge, case No. 2798-16).

This interpretation of Irgitas problem of freedom of movement fits the argument of the CJEU if it focuses on the fact that it focuses on its contractual obligations ”(IRGITI, par. 63). As a result, this interpretation means that the free movement rules would only apply to a scenario that resembles the case of Irgita, in which two overlapping contract price was awarded. In such situations, the double test would basically be limited to the question of whether the contracting authority was transparent enough when it concluded the first contract for her intention to submit a second contract for similar services during the term of the first contract. In other words, this obligation would not prevent the contracting authority from using the institutionalized exemption in the future (see comparatively and possibly even contradictory the court of the court and the decision of the CJEU in relation to the Dutch tenders (C-687/17, EU: C: 2019: 932), in which e-proof was seen as a service of general interest, and thus the EU law left space for the national organization of procurement functions.)))

After all, it is also possible to extend the same scenario for the competition problems discussed in Section 3.1. Despite the general termology of the CJEU in his argument, it could be. At this point, however, no conclusive answers can be given.

4. Final remarks

The above discussion has shown that the cooperation saga continues in the procurement context. It is clear that the case of Irgita offers an interesting rampart for discussions about public public cooperation, harmonization, competition and freedom of movement. We have aimed to make some first thoughts about this case. Most of the time we need to read between the lines and close interpretive gaps to understand the argumentation of the CJEU.

When monitoring this case and its potential important consequences, we are still not sure whether the court deliberately aims to change the field of cooperation, or whether the different interpretations were simply created due to the Lithuanian case -specific circumstances. Time – and maybe future CJEU cases – will say, but at the moment we are not yet asked: there is still room for contractual cooperation between the authorities within the EU right?

Dr. Willem Janssen

Dr. Willem A. Janssen is an assistant professor for European and Dutch public procurement laws at the PPRC and Renforce of the Law School of Utrecht University. In 2018 he published his monograph on the self -organization "EU Public Procurement Law Selbste: A connection between tensions and reconciliations" and has published in various international and national magazines on the law on public procurement law. He organizes the first Dutch procurement podcast'bestek – de aanbestedingSpodcast ', The monthly columnist in Gemeente and is actively involved in improving the law and the practices of the public procurement procedure.

Erik Olsson, LLM

Erik Olsson is a lawyer and partner at Advokatfirman Kahn Pedersen in Sweden. He specializes in public procurement law. He regularly gives lectures on public procurement and is also a columnist in the Swedish European case examination. Erik Olsson is one of the authors of the Swedish leading book on procedural procurement law, the judicial review of procurement – and other means under the ludwoman and air (SW: Överprövning AV excitement – OCH Andra Rätsmedel enligt lou och air).