On 13 October, the European Court of Justice ("ECJ") reached a
decision in the Parking Brixen V. Gemeinde case (Case C-458/03). In
essence, the ECJ confirmed that even where a public authority is not
obliged to follow the public procurement rules in the award of a
contract, it is still bound to comply with the general principles of
the EC Treaty such as freedom of establishment, freedom to provide
services, equal treatment, non-discrimination and transparency. In
effect, the ECJ suggested that there should be at least some form of
market testing even when the public procurement rules do not apply.

In 2002 the Municipality of Brixen ("MB") awarded a nine year
contract to a 100% subsidiary, Stadtwerke Brixen, for the management of
a car park. SB's remuneration comes primarily through collection of the
parking charges.

The ECJ confirmed that the contract took the form of a public
service concession and therefore, the relevant public procurement
directive did not apply.

The ECJ went on to say, however, that as a public authority, MB was
obliged to observe the rules in the EC Treaty on freedom of
establishment, freedom to provide services, equal treatment,
non-discrimination and transparency. The ECJ therefore concluded that
the complete failure to put the award of the public service concession
out to tender was incompatible with EC law.

The implication of the ECJ's judgement was that the contract award should have been subject to a market tendering exercise.

Importantly, the ECJ did not regard the contract award as an
in-house transaction (to which the EC procurement rules and principles
would not apply). The ECJ established that SB has a high degree of
independence from MB:

  • MB cannot exercise the same degree of control over SB as it exercises over its own departments;
  • SB's capital is open to other shareholders;
  • SB's objects cover a range of fields and expand to the whole of Italy and abroad; and
  • In practice, there was no management control of SB by MB.

Accordingly, public bodies will need to take care that, in awarding
a public services concession which is not an in-house award, they do
not assume that non-application of the EC procurement rules means that
the contract award does not have to be subject to some degree of market
testing.

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