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A B C D E F G H I J K L M N O P R S T V W Y

Public Procurement Law – A new exemption to the Regulations?

Public Procurement Law – A new exemption to the Regulations?
Thursday 19th January 2017

Does the recent ruling in the case of Remondis GmbH & amp Co KG Region Nord v Region Hannover and others (Case C-51/15) open a third way for contracting authorities to organise the delivery of public services without being subject to the EU public procurement rules?

The case concerned the transfer by the Region of Hannover of waste treatment tasks which were its responsibility, to another public body, which was a special purpose association (SPA) that had been created by local authorities for the purposes of waste management. The referring court asked whether such a transfer constituted a public contract, and if it was, whether it could fall outside the scope of EU public procurement law either by the ‘in-house’ (Teckal) exception or the ‘cooperation’ (Hamburg Waste) exception.

German law allows for public authorities to create SPAs to carry out duties conferred on the relevant authority. When formed, the public authority transfers the rights and powers to perform the duty to the SPA. Such transfer can include an obligation on the public authorities to pay contributions to the SPA where other sources of revenue are not sufficient to cover its financial needs. However, the SPA at the subject of this case was generating substantial revenue, both from the tasks formerly carried out by the conferring public authorities and also, from tasks performed for other third parties. This prompted Remondis to make the initial application for review.

The referring court referred four aspects, which it considered characterised the arrangement:

  1. The tasks carried out by the SPA were ‘services’ within the meaning of Directive 2004/18;
  2. The transfer was effected for consideration;
  3. The SPA carried out other activities beyond those within the remit of the original public authorities; and
  4. The transfer did not fall within the ‘in-house’ (Teckal) or ‘cooperation’ (Hamburg Waste) exemptions.

The ECJ noted that case law had previously determined that agreements which transfer powers between public authorities and do not provide for remuneration for contractual performance, are deemed to be an internal reorganisation and therefore are not public contracts. 

The ECJ found that the arrangement did give rise to a genuine transfer of powers and to the Region of Hannover relinquishing its own responsibilities in relation to the relevant services. Whilst waste services were a ‘service’ within the scope of Directive 2004/18, the arrangement as a whole, concerned the genuine transfer of power to perform a public service task and was not confined just to the performance of a service. The fact that activities beyond the task and duties of the original authorities were being performed was not relevant. Whilst the authorities could be required to contribute financially to the SPA if it could not generate sufficient revenue to meet its financial needs, this was considered to more akin to a subsidiary or a form of guarantee and could not be construed as remuneration for services. The ECJ concluded that the SPA had financial and full autonomy in the performance of the tasks. It therefore found that the conditions for the existence of a public contract were not met. 

This case provides for a very different kind of solution to that which has previously been explored by public authorities using the ‘in-house’ and ‘cooperation’ exemptions. If you would like to explore the options that may be available to you, or to discuss public procurement law in general, please do not hesitate to contact Victoria Trigwell  on 0151 600 3429 or email victoria.trigwell@brabners.com.


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