Saturday, 10 January 2009

EU Procurement Directive: Fuel extraction and terminal facilites

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.

Here we look at contracts excluded from the Procurement Directive because they fall within the scope of Article 7 of the Utilities Directive: Exploration for, or extraction of, oil, gas, coal or other solid fuels, as well as ports and airports.


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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:

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(Although not relevant for today’s blog post, the second paragraph is obsolete since 1 January 2009.)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

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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Additional contracts excluded (and included)

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 the primary source concerning 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 6 of the Utilities Directive. Article 7 of the Utilities Directive applies to activities relating to the exploitation of a geographical area – land or water – for certain purposes (subject to further precisions):







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

This Directive shall apply to activities relating to the exploitation of a geographical area for the purpose of:

(a) exploring for or extracting oil, gas, coal or other solid fuels, or

(b) the provision of airports and maritime or inland ports or other terminal facilities to carriers by air, sea or inland waterway.


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Fuel exploration or extraction


Recital 38 Utilities Directive


The exploitation of a geographical area for the purpose of exploring for or extracting oil, gas, coal or other solid fuels is given the following explanation in Recital 38 of the Utilities Directive:


(38) To forestall the proliferation of specific arrangements applicable to certain sectors only, the current special arrangements created by Article 3 of Directive 93/38/EEC and Article 12 of 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 governing entities exploiting a geographical area for the purpose of exploring for or extracting oil, gas, coal or other solid fuels should be replaced by the general procedure allowing for exemption of sectors directly exposed to competition. It has to be ensured, however, that this will be without prejudice to Commission Decision 93/676/EEC of 10 December 1993 establishing that the exploitation of geographical areas for the purpose of exploring for or extracting oil or gas does not constitute in the Netherlands an activity defined by Article 2(2)(b)(i) of Council Directive 90/531/EEC and that entities carrying on such an activity are not to be considered in the Netherlands as operating under special or exclusive rights within the meaning of Article 2(3)(b) of the Directive, Commission Decision 97/367/EC of 30 May 1997 establishing that the exploitation of geographical areas for the purpose of exploring for or extracting oil or gas does not constitute in the United Kingdom an activity defined by Article 2(2)(b)(i) of Council Directive 93/38/EEC and that entities carrying on such an activity are not to be considered in the United Kingdom as operating under special or exclusive rights within the meaning of Article 2(3)(b) of the Directive, Commission Decision 2002/205/EC of 4 March 2002 following a request by Austria applying for the special regime provided for in Article 3 of Directive 93/38/EEC and Commission Decision 2004/73/EC on a request from Germany to apply the special procedure laid down in Article 3 of Directive 93/38/EEC.


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Article 20 Utilities Directive

Article 20 of the Utilities Directive limits the scope of the Directive concerning contracts awarded by contracting authorities for purposes outside Articles 3 to 7 or with regard to activities in third countries:

Article 20
Contracts awarded for purposes other than the pursuit of an activity covered or for the pursuit of such an activity in a third country

1. This Directive shall not apply to contracts which the contracting entities award for purposes other than the pursuit of their activities as described in Articles 3 to 7 or for the pursuit of such activities in a third country, in conditions not involving the physical use of a network or geographical area within the Community.

2. The contracting entities shall notify the Commission at its request of any 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 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 this information.


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Countries with exceptions

The exceptions for Austria, Germany, the Netherlands and the United Kingdom explained in Recital 38 are given legal form in Article 27 of the Utilities Directive:

Article 27
Contracts subject to special arrangements

Without prejudice to Article 30 the Kingdom of the Netherlands, the United Kingdom, the Republic of Austria and the Federal Republic of Germany shall ensure, by way of the conditions of authorisation or other appropriate measures, that any entity operating in the sectors mentioned in Decisions 93/676/EEC, 97/367/EEC, 2002/205/EC and 2004/73/EC:

(a) observes the principles of non-discrimination and competitive procurement in respect of the award of supplies, works and service contracts, in particular as regards the information which the entity makes available to economic operators concerning its procurement intentions;

(b) communicates to the Commission, under the conditions defined in Commission Decision 93/327/EEC defining the conditions under which contracting entities exploiting geographical areas for the purpose of exploring for or extracting oil, gas, coal or other solid fuels must communicate to the Commission information relating to the contracts they award.


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Article 30 Utilities Directive

The reference to Article 30 above refers to contracts excluded from the scope of the Utilities Directive because they are directly exposed to competition. Paragraph 1 sets out the main rule (and the rest of the Article lays down the procedure):

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.


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Contracting authorities

The indicative lists of contracting authorities for different kinds of contracts offer some guidance on contracts subject to the Utilities Directive:

Annex VII Contracting entities in the sectors of exploration for and extraction of oil or gas

Annex VIII Contracting entities in the sectors of exploration for and extraction of coal and other solid fuels



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Airports, ports or terminal facilities



Recital 25 Utilities Directive

Recital 25 of the Utilities Directive refers to circumstances when the construction of port or airport facilities does not constitute an exclusive right within the meaning of the Directive:

(25) There has to be an appropriate definition of the concept of special or exclusive rights. The consequence of the definition is that the fact that, for the purpose of constructing networks or port or airport facilities, an entity may take advantage of a procedure for the expropriation or use of property or may place network equipment on, under or over the public highway will not in itself constitute exclusive or special rights within the meaning of this Directive. Nor does the fact that an entity supplies drinking water, electricity, gas or heat to a network which is itself operated by an entity enjoying special or exclusive rights granted by a competent authority of the Member State concerned in itself constitute an exclusive or special right within the meaning of this Directive. Nor may rights granted by a Member State in any form, including by way of acts of concession, to a limited number of undertakings on the basis of objective, proportionate and non-discriminatory criteria that allow any interested party fulfilling those criteria to enjoy those rights be considered special or exclusive rights.


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Contracting authorities

The indicative lists of contracting authorities for different kinds of contracts offer some guidance on contracts subject to the Utilities Directive:


Annex IX Contracting entities in the field of maritime or inland port or other terminal facilities

Annex X Contracting entities in the field of airport installations


(The new Annexes IX and X are found in 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.)


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Purpose

Activities relating to the exploitation of a geographical area for the purposes mentioned in Article 7 of the Utilities Directive is a broad definition. When a contract relates to an activity mentioned in Article 7(a) or (b) it must be presumed to fall within the scope of the Directive if the purpose does not clearly set it outside the ‘normal’ scope of activities of an explorer or extractor of fuels, or of a provider of an airport, port or terminal.



Ralf Grahn