Shepherd and Wedderburn LLP
  February 28, 2007 - Scotland

Two Cheers for Advocate General Sharpston
  by Dawn Hendry

Advocate General Sharpston has recently expressed her opinion in the Commission v Republic of Finland case that ensuring a sufficient degree of transparency for the award of sub-threshold procurements should be determined by national law, rather than Community law. If these views were to be followed by the ECJ, it would provide renewed impetus to create national rules on low value awards and represent a meaningful evolution of the ECJ's past case law. This article examines the advocate general's opinion in the context of the current case law.

In March 1998 ("Stage I"), a Finnish contracting authority published a contract notice under the restricted procedure for public works. This was subdivided into lots, one of which related to the installation of catering equipment. Although there was disagreement about whether any tenders had been received pursuant to this lot in the notice, the parties agreed that no tender was accepted for the catering equipment.

In early 2000 ("Stage II"), the contracting authority wrote to four undertakings, inviting tenders for the supply and installation of catering equipment. The tenders were rejected due to high costs. However, the addressees were subsequently invited ("Stage III") to submit new offers to the tenant of a restaurant in which the catering equipment was to be installed (as it had been agreed that the tenant would purchase the catering equipment on behalf of the contracting authority). The contract was subsequently awarded to one of these tenderers. The value of that contract was below the relevant public procurement thresholds.

A complaint was then made to the European Commission and, following investigation, the Commission took the view that the contracting authority had not ensured a sufficient degree of advertising and Finland was therefore in breach of its obligations under article 28 of the EC treaty. The Commission raised proceedings in the European Court in 2003 and Advocate General Sharpston delivered her opinion on 18 January 2007.

Key issues and arguments
The key issue of the case was whether the contract had been sufficiently advertised and whether the award was sufficiently transparent, even where the value of the contract fell below the relevant threshold set out in the public procurement legislation.

The Commission takes the view that low value contracts still require a degree of advertisement to comply with the obligation of transparency which is derived from obligations under the EC treaty (including article 28 (free movement of goods) and the principle of non-discrimination). In the Finland case, the Commission believed that, despite the publication of Stage I, the contract had not been sufficiently advertised because Stages II and III had not been advertised.

Finland argued two points:
First, that the entire process had to be looked at as a whole. The award procedure commenced with the publication of the contract notice in 1998, which provided sufficient publicity.

Second, that in respect of a low value contract, the transparency obligation does not necessarily require a particular form of publication or the issue of a formal invitation to tender and that the application of the transparency obligations depends on the circumstances and is primarily governed by national law.

The advocate general's opinion
The advocate general found that, in this particular case, the action was inadmissible and in any event unfounded as the Commission had failed to set out how the alleged breach of the transparency obligation infringed article 28 of the EC treaty. Thus far, the decision is purely procedural and, as such, unremarkable.

However, the first cheer goes to the advocate general for providing further clarification on publicity requirements generally. She held the transparency obligation was not infringed where a contracting authority used the negotiated procedure without advertising in circumstances where a restricted procedure for substantially the same contract terms had already failed to produce any appropriate tenders. Coming to a different conclusion in a case where, on the face of it, there was little or no interest in the contract would have placed an even higher financial and bureaucratic burden on authorities than is already the case under the procurement directives.

The second cheer goes to the advocate general for pushing the formulation of advertising requirements and the enforcement of any breaches back to the member states, and, in particular, the aggrieved parties through national courts:

First, she held that, even if the advertising had not been sufficient, the award of low value contracts is a matter for national law.Based on principles of subsidiarity, the European Commission would be better bringing infringement proceedings against member states which failed to provide sufficient transparency through national legislation, rather than bringing individual contract cases relating to low value contracts.

Second, she decided that imposing an obligation to publicise without having the detail in any legislative texts would create significant legal uncertainty. The advocate general pointed to the fact that the Commission could only suggest in vague terms what form of publicity would have been required to satisfy the transparency obligation in the present case. Referring to the Interpretative Communication issued by the Commission earlier in 2006, the Advocate General noted that the Commission had not explained how the breach in the present case related to the requirements which it had proposed in that communication.

The missing third cheer
It would be regrettable if the ECJ were to follow the advocate general on the issue of admissibility and dispose of the case without providing a coherent direction on the advertising rules and the enforcement system for below-threshold contracts as the advocate general has provided. For this reason, the third cheer is reserved for the ECJ, pending its final ruling.

In previous cases on contracts falling outside the scope of the procurement directives (see, for instance, the Telaustria case) the ECJ has held that the fact that a contract falls beyond the scope of the procurement directives does not mean that this absolves the member state from general principles of Community law, such as non-discrimination. The advocate general's ruling provides a meaningful and necessary development of the application of these principles with regard to low value contracts.

It would place the onus on member states to develop a process and set of principles that would give both contracting authorities and suppliers clarity over the degree of advertising required for below-threshold contracts and allowed aggrieved parties a clearer and ultimately more effective remedy in national courts. More importantly, it would also force the Commission to refocus its efforts from litigating a haphazard bouquet of individual small cases to addressing more fundamental shortcomings of individual systems.

Let us hope that the ECJ will follow the advocate general on her substantive conclusions.

(This article was first published in CLi Volume 6, in Brief 2 28 February 2007)

Case C-195/04 - Commission v Republic of Finland, Opinion of AG Sharpston, 18 January 2007

Interpretative Communication on the Community law applicable to contract awards not or not fully subject to the provisions of the Public Procurement Directives (OJ 2006 C 179)

Telaustria, Case C-324/98 [2000] ECR I-10745

Dawn Hendry is solicitor with Shepherd and Wedderburn LLP (Glasgow). The author is grateful for comments from John Schmidt and Richard Cockburn from Shepherd and Wedderburn's Edinburgh and Aberdeen offices. The views expressed are purely personal.