ECJ holds that a single award procedure is sufficient for IPPPs

The Acoset judgment of  the ECJ dated 15 October 2009 (C-196/08) was related to a dispute about an institutionalised public-private partnership (IPPP).  A local authority wanted to grant a concession to a newly-created semi-public company, whose minority shareholder would be a private company selected by an open tender procedure. The minority shareholder would be responsible for the operations of the semi-public company.
 
The question put to the Court was in essence rather simple: if a local authority wants to grant a concession to a semi-public company, does it have to organise two tender procedures: one for selecting the minority private shareholder in the semi-public company and another to award the concession to the semi-public company? Or, alternatively, is one tender procedure sufficient? The Court chose the latter option, and rightly so.
 
The case came before the ECJ as a request for a preliminary ruling by the Regional Administrative Court of Sicily (Tribunale amministrativo regionale della Sicilia).
 
Italian law allows local authorities to award service contracts directly to companies whose share capital is owned by both public and private bodies, if  the private partner has been selected by means of a public open tender procedure compliant with domestic and Community law.
 
In 2005, a local inter-municipal body in the province of Ragusa organised a tender procedure to select an undertaking, which would be entrusted, as private minority shareholder, with the operation of the integrated public water supply and the prior execution of certain works. A contract notice was also published in the Official Journal.
 
Acoset participated in the bidding, together with two other companies. Eventually, only Acoset remained, as one other candidate was excluded and the other did not reply when asked if it was still interested by the local inter-municipal body.
 
In early 2007, the local inter-municipal body began to doubt that its tender  procedure (and hence, Italian law) complied with European procurement law, and so it cancelled the tender procedure. Acoset then initiated proceedings before the Sicilian Regional Administrative Court, seeking a court order to award it the contract and to grant it compensation .
 
The referring judgment from the Italian court was issued on 13 March 2008 (case N° 3271/2007). It makes reference to interesting arguments from both parties. The local inter-municipal body justified its doubts as to its procedure’s compliance with European law on the basis that it did not meet the conditions for “in-house” tendering. It referred to the Stadt Halle judgment (case C-26/03, 11 January 2005), in which the ECJ had held that: “Where a contracting authority intends to conclude a contract for pecuniary interest relating to services within the material scope of Directive 92/50, as amended by Directive 97/52, with a company legally distinct from it, in whose capital it has a holding, together with one or more private undertakings, the public award procedures laid down by that directive must always be applied.” If the ECJ says “always”, it becomes difficult to argue against this. Hence, the Sicilian Regional Administrative Court referred the case to the ECJ.
 
The Advocate General Ruiz-Jarabo Colomer (in his opinion of 2 June 2009) and the ECJ (in its judgment) agreed that no second tender procedure was necessary, provided the first tender procedure had fulfilled certain conditions.
 
Indeed, the Court held that Articles 43 EC, 49 EC and 86 EC do not preclude the direct award of a public service contract which entails the prior execution of certain works to a semi‑public company formed specifically for the purpose of providing that service and possessing a single corporate purpose, if (i) the private participant in the company was selected by means of a public and open procedure after verification of the financial, technical, operational and management requirements specific to the service to be performed and of the characteristics of the tender with regard to the service to be delivered, and if (ii) the tendering procedure in question is consistent with the principles of free competition, transparency and equal treatment laid down by the EC Treaty with regard to concessions. A third condition does not clearly appear from the dictum of the judgment, but is indicated in its reasons: the semi-public company must retain the same corporate purpose throughout the duration of the concession.
 
The Court’s reasoning to arrive at this conclusion was mostly pragmatic. Procedural formalities have to be reduced (par. 58); the selection of the concessionaire is the indirect result of the selection of the private minority shareholder (par. 60) and a double procedure would be likely to deter private entities and public authorities from forming IPPPs (par. 61).
 
Even if the outcome of the case may seem intuitively correct, the legal argument is not self-evident, as there is no explicit basis for such a rule. Advocate General Ruiz-Jarabo Colomer came to the same conclusion as the Court, but at the same time his opinion contained the most eloquent of criticisms: “No conviene erigir al pragmatismo, aspiración lógica de todo ordenamiento, en fundamento exclusivo de un razonamiento jurídico.” (“It is not appropriate to make pragmatism, the logical aspiration of any legal system, the exclusive basis of a legal argument” (opinion, par. 84)).
 
Reading the Acoset judgment, it is easy to doubt that the ECJ’s arguments meet that test. There is a temptation to conclude that, even if pragmatism should not be the only legal argument, it is clearly a very good one. Again, the Court has shown by this judgment that public procurement law is becoming more and more reliant on case law.