EU procurement: Contracts excluded from both Directives

Public procurement is an important area of internal market law, but some contracts are excluded from the Directives on procurement. We continue our presentation of the relevant provisions to public officials and interested businesses.

The general European Community (European Union) Procurement Directive 2004/18/EC, also known as the Classic Directive, does not apply to public contracts in the special sectors covered by the Utilities Directive 2004/17/EC.

But when a contract in the special sectors is excluded from the Utilities Directive on certain grounds, it would fall within the default Procurement Directive if not specifically excluded from reverting.

We look at these cases of double exclusion.

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Article 12 Procurement Directive

Article 12 of the Procurement Directive 2004/18/EC excludes the sectors to which the so called Utilities Directive 2004/17/EC applies as ‘lex specialis’: water, energy, transport and postal services.

In this blawg post we follow the thread of non-application ‘to public contracts excluded from the scope of that Directive under Article 5(2) and Articles 19, 26 and 30 thereof’:


S e c t i o n 3
Excluded contracts

Article 12
Contracts in the water, energy, transport and postal services sectors

This Directive shall not apply to public contracts which, under Directive 2004/17/EC, are awarded by contracting authorities exercising one or more of the activities referred to in Articles 3 to 7 of that Directive and are awarded for the pursuit of those activities, or to public contracts excluded from the scope of that Directive under Article 5(2) and Articles 19, 26 and 30 thereof.

[However, this Directive shall continue to apply to public contracts awarded by contracting authorities carrying out one or more of the activities referred to in Article 6 of Directive 2004/17/EC and awarded for those activities, insofar as the Member State concerned takes advantage of the option referred to in the second subparagraph of Article 71 thereof to defer its application.]


(Although not relevant for today’s blog post, the second paragraph is obsolete since 1 January 2009.)


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Exclusion of utilities explained

First, a few words on the general scheme of things. Recital 20 of the Procurement Directive refers to Directive 2004/17/EC, the so called Utilities Directive, and explains the exclusion of specific sectors from the Procurement Directive:

(20) Public contracts which are awarded by the contracting authorities operating in the water, energy, transport and postal services sectors and which fall within the scope of those activities are covered by Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors. However, contracts awarded by the contracting authorities in the context of their service activities for maritime, coastal or river transport must fall within the scope of this Directive.


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Double exclusion

The headline ‘water, energy, transport and postal services sectors’ gives us a rough indication of the activities, which fall under the Utilities Directive 2004/17/EC, but the scope of the Utilities Directive needs to be defined in order to determine when this Directive takes precedence.

The Utilities Directive is applied to public contracts awarded by contracting authorities exercising one or more of the activities referred to in Articles 3 to 7 of that Directive and awarded for the pursuit of those activities.

In earlier blog posts we have looked at Articles 3 to 7 of the Utilities Directive, which applies to the following activities:

Article 3 Gas, heat and electricity

Article 4 Water

Article 5 Transport services

Article 6 Postal services

Article 7 Exploration for, or extraction of, oil, gas, coal or other solid fuels, as well as ports and airports


The special exclusions from the scope of the Utilities Directive under Article 5(2) and Articles 19, 26 and 30 thereof do not lead to the application of the fall-back Procurement Directive.

Next, we look at the instances excluded from both Directives.



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Bus transport services excluded


Article 5(2) Utilities Directive

2. This Directive shall not apply to entities providing bus transport services to the public which were excluded from the scope of Directive 93/38/EEC pursuant to Article 2(4) thereof.


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Old Utilities Directive: Excluded bus transport services

Article 2(4) of the old Utilities Directive 93/38/EEC excluded the following bus transport services where effective competition existed. This exclusion still applies:

4. The provision of bus transport services to the public shall not be considered to be a relevant activity within the meaning of paragraph 2(c) where other entities are free to provide those services, either in general or in a particular geographical area, under the same condition as the contracting entities.


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Bus transport exclusion explained

Recital 19 of the current Utilities Directive explains the scope of excluded bus transport services:


(27) Certain entities providing bus transport services to the public were already excluded from the scope of Directive 93/38/EEC. Such entities should also be excluded from the scope of this Directive. In order to forestall the existence of a multitude of specific arrangements applying to certain sectors only, the general procedure that permits the effects of opening up to competition to be taken into account should also apply to all entities providing bus transport services that are not excluded from the scope of Directive 93/38/EEC pursuant to Article 2(4) thereof.


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Resale or lease to third parties

Article 19 of the Utilities Directive excludes contracts awarded for purposes of resale or lease to third parties:



SUBSECTION 2
Exclusions applicable to all contracting entities and to all types of contract


Article 19 Utilities Directive
Contracts awarded for purposes of resale or lease to third parties

1. This Directive shall not apply to contracts awarded for purposes of resale or lease to third parties, provided that the contracting entity enjoys no special or exclusive right to sell or lease the subject of such contracts, and other entities are free to sell or lease it under the same conditions as the contracting entity.

2. The contracting entities shall notify the Commission at its request of all the categories of products or activities which they regard as excluded under paragraph 1. The Commission may periodically publish in the Official Journal of the European Union, for information purposes, lists of the categories of products and activities which it considers to be covered by this exclusion. In so doing, the Commission shall respect any sensitive commercial aspects that the contracting entities may point out when forwarding information.


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Water and energy contracts

Pursuant to Article 26 of the Utilities Directive, certain contracting entities are excluded with regard to contracts for the purchase of water and for the supply of energy or of fuels for the production of energy:


SUBSECTION 4
Exclusions applicable to certain contracting entities only

Article 26 Utilities Directive
Contracts awarded by certain contracting entities for the purchase of water and for the supply of energy or of fuels for the production of energy

This Directive shall not apply:

(a) to contracts for the purchase of water if awarded by contracting entities engaged in one or both of the activities referred to in Article 4(1).

(b) to contracts for the supply of energy or of fuels for the production of energy, if awarded by contracting entities engaged in an activity referred to in Article 3(1), Article 3(3) or Article 7(a).


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Competitive markets

Article 30(1) of the Utilities Directive establishes the principle to exclude contracts from the application of the Directive, if the activity is directly exposed to competition on markets to which access is not restricted.

The rest of Article 30 deals with the criteria and the procedures:




Article 30 Utilities Directive
Procedure for establishing whether a given activity is directly exposed to competition

1. Contracts intended to enable an activity mentioned in Articles 3 to 7 to be carried out shall not be subject to this Directive if, in the Member State in which it is performed, the activity is directly exposed to competition on markets to which access is not restricted.

2. For the purposes of paragraph 1, the question of whether an activity is directly exposed to competition shall be decided on the basis of criteria that are in conformity with the Treaty provisions on competition, such as the characteristics of the goods or services concerned, the existence of alternative goods or services, the prices and the actual or potential presence of more than one supplier of the goods or services in question.

3. For the purposes of paragraph 1, access to a market shall be deemed not to be restricted if the Member State has implemented and applied the provisions of Community legislation mentioned in Annex XI.

If free access to a given market cannot be presumed on the basis of the first subparagraph, it must be demonstrated that access to the market in question is free de facto and de jure.

4. When a Member State considers that, in compliance with paragraphs 2 and 3, paragraph 1 is applicable to a given activity, it shall notify the Commission and inform it of all relevant facts, and in particular of any law, regulation, administrative provision or agreement concerning compliance with the conditions set out in paragraph 1, where appropriate together with the position adopted by an independent national authority that is competent in relation to the activity concerned.

Contracts intended to enable the activity concerned to be carried out shall no longer be subject to this Directive if the Commission:

— has adopted a Decision establishing the applicability of paragraph 1 in accordance with paragraph 6 and within the period it provides for, or

— has not adopted a Decision concerning such applicability within that period.

However, where free access to a given market is presumed on the basis of the first subparagraph of paragraph 3, and where an independent national authority that is competent in the activity concerned has established the applicability of paragraph 1, contracts intended to enable the activity concerned to be carried out shall no longer be subject to this Directive if the Commission has not established the inapplicability of paragraph 1 by a Decision adopted in conformity with paragraph 6 and within the period it provides for.

5. When the legislation of the Member State concerned provides for it, the contracting entities may ask the Commission to establish the applicability of paragraph 1 to a given activity by a Decision in conformity with paragraph 6. In such a case, the Commission shall immediately inform the Member State concerned.

That Member State shall, taking account of paragraphs 2 and 3, inform the Commission of all relevant facts, and in particular of any law, regulation, administrative provision or agreement concerning compliance with the conditions set out in paragraph 1, where appropriate together with the position adopted by an independent national authority that is competent in the activity concerned.

The Commission may also begin the procedure for adoption of a Decision establishing the applicability of paragraph 1 to a given activity on its own initiative. In such a case, the Commission shall immediately inform the Member State concerned.

If, at the end of the period laid down in paragraph 6, the Commission has not adopted a Decision concerning the applicability of paragraph 1 to a given activity, paragraph 1 shall be deemed to be applicable.

6. For the adoption of a Decision under this Article, in accordance with the procedure under Article 68(2), the Commission shall be allowed a period of three months commencing on the first working day following the date on which it receives the notification or the request. However, this period may be extended once by a maximum of three months in duly justified cases, in particular if the information contained in the notification or the request or in the documents annexed thereto is incomplete or inexact or if the facts as reported undergo any substantive changes. This extension shall be limited to one month where an independent national authority that is competent in the activity concerned has established the applicability of paragraph 1 in the cases provided for under the third subparagraph of paragraph 4.

When an activity in a given Member State is already the subject of a procedure under this Article, further requests concerning the same activity in the same Member State before the expiry of the period opened in respect of the first request shall not be considered as new procedures and shall be treated in the context of the first request.

The Commission shall adopt detailed rules for applying paragraphs 4, 5 and 6 in accordance with the procedure under Article 68(2).

These rules shall include at least:

(a) the publication in the Official Journal, for information, of the date on which the three-month period referred to in the first subparagraph begins, and, in case this period is prolonged, the date of prolongation and the period by which it is prolonged;

(b) publication of the possible applicability of paragraph 1 in accordance with the second or third subparagraph of paragraph 4 or in accordance with the fourth subparagraph of paragraph 5; and

(c) the arrangements for forwarding positions adopted by an independent authority that is competent in the activity concerned, regarding questions relevant to paragraphs 1 and 2.




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Exposure to competition explained

Direct exposure to competition is explained by Recitals 40 and 41 of the Utilities Directive:

(40) This Directive should apply neither to contracts intended to permit the performance of an activity referred to in Articles 3 to 7 nor to design contests organised for the pursuit of such an activity if, in the Member State in which this activity is carried out, it is directly exposed to competition on markets to which access is not limited. It is therefore appropriate to introduce a procedure, applicable to all sectors covered by this Directive, that will enable the effects of current or future opening up to competition to be taken into account. Such a procedure should provide legal certainty for the entities concerned, as well as an appropriate decision-making process, ensuring, within short time limits, uniform application of Community law in this area.

(41) Direct exposure to competition should be assessed on the basis of objective criteria, taking account of the specific characteristics of the sector concerned. The implementation and application of appropriate Community legislation opening a given sector, or a part of it, will be considered to provide sufficient grounds for assuming there is free access to the market in question. Such appropriate legislation should be identified in an annex which can be updated by the Commission. When updating, the Commission takes in particular into account the possible adoption of measures entailing a genuine opening up to competition of sectors other than those for which a legislation is already mentioned in Annex XI, such as that of railway transports. Where free access to a given market does not result from the implementation of appropriate Community legislation, it should be demonstrated that, de jure and de facto, such access is free. For this purpose, application by a Member State of a Directive, such as Directive 94/22/EC opening up a given sector to competition, to another sector, such as the coal sector, is a circumstance to be taken into account for the purposes of Article 30.


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Annex XI Community legislation



Access to a market shall be deemed not to be restricted if the Member State has implemented and applied the provisions of Community legislation mentioned in Annex XI.

Commission Decision 2008/963/EC of 9 December 2008 amending the Annexes to Directives 2004/17/EC and 2004/18/EC of the European Parliament and of the Council on public procurement procedures, as regards their lists of contracting entities and contracting authorities, published OJEU 24.12.2008 L 349/1, amended Annexes I to X of the Utilities Directive.

Annex XI was left untouched, so we should be safe in accessing this Annex from the latest consolidated version (15 September 2008) of the Utilities Directive. Here is the list of relevant internal market legislation (but look for possible amendments to the Directives mentioned):


ANNEX XI
LIST OF COMMUNITY LEGISLATION REFERRED TO IN ARTICLE 30(3)

A. TRANSPORT OR DISTRIBUTION OF GAS OR HEAT

Directive 98/30/EC of the European Parliament and of the Council of 22 June 1998 concerning common rules for the internal market in natural gas (1)

B. PRODUCTION, TRANSMISSION OR DISTRIBUTION OF ELECTRICITY

Directive 96/92/EC of the European Parliament and of the Council of 19 December 1996 concerning common rules for the internal market in electricity (2)

C. PRODUCTION, TRANSPORT OR DISTRIBUTION OF DRINKING WATER

—

D. CONTRACTING ENTITIES IN THE FIELD OF RAIL SERVICES

—

E. CONTRACTING ENTITIES IN THE FIELD OF URBAN RAILWAY, TRAMWAY, TROLLEYBUS OR MOTOR BUS SERVICES

—

F. CONTRACTING ENTITIES IN THE FIELD OF POSTAL SERVICES

Directive 97/67/EC of the European Parliament and of the Council of 15 December 1997 on common rules for the development of the internal market of Community postal services and the improvement of quality of service (3)

G. EXPLORATION FOR AND EXTRACTION OF OIL OR GAS

Directive 94/22/EC of the European Parliament and of the Council of 30 May 1994 on the conditions for granting and using authorisations for the prospection, exploration and production of hydrocarbons (4)

H. EXPLORATION FOR AND EXTRACTION OF COAL OR OTHER SOLID FUELS

—

I. CONTRACTING ENTITIES IN THE FIELD OF SEAPORT OR INLAND PORT OR OTHER TERMINAL EQUIPMENT

—

J. CONTRACTING ENTITIES IN THE FIELD OF AIRPORT INSTALLATIONS

—



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(1) OJ L 204, 21.7.1998, p. 1.

(2) OJ L 27, 30.1.1997, p. 20.

(3) OJ L 15, 21.1.1998, p. 14. Directive last amended by Directive 2002/39/EC (OJ L 176, 5.7.2002, p. 21).

(4) OJ L 164, 30.6.1994, p. 3.


(Check if the Directives have been amended.)






Ralf Grahn