The European Court of Justice (ECJ) has ruled that a public authority must comply with the EU law principles of equal treatment, transparency, and non-discrimination when the agreement has a clear cross-border character. This applies, for example, if the contract is below the specific threshold values for service contracts and is therefore not covered by the general rules for tendering.
Read attorney Hans Sønderby Christensen’s article published on Thursday, June 21, 2018, on Jyllands-Posten’s website here or download it as a PDF here.
In a new ruling, the ECJ has stated that a public authority must observe the EU law principles of equal treatment, transparency, and non-discrimination when the agreement has a clear cross-border character, even if the contract is not covered by the general rules for tendering. This applies, for example, if the contract does not exceed the specific threshold values for service contracts in EU law.
In the ruling, the ECJ emphasized that the authorities have an obligation to ensure compliance with the fundamental EU law principles in connection with the tendering of service contracts within the healthcare sector, which have a clear cross-border character, even if the general rules for tendering do not apply. The authorities must therefore ensure that uniform conditions are treated equally, unless there are objective reasons for treating the conditions differently. In addition, the authorities must ensure publicity in connection with the conclusion of the contract in accordance with the principle of transparency and ensure that foreign companies are not placed at a disadvantage in the competition for the contract compared to national companies. These general principles must be observed when concluding service contracts that are below the specific threshold values for certain service contracts, including certain healthcare, social, and education services.
The case arose from 2 independent national cases from Italy between Oftalma Hospital Srl (hereinafter Oftalma) and Commissione Istituti Ospitalieri Valdesi (hereinafter CIOV) and the Piedmont Region (hereinafter Piedmont). In 1999, Oftalma entered into an agreement with CIOV, which is a committee for Valdese hospitals in Italy, for the provision of a number of healthcare services to a hospital in Turin. In one case, CIOV and the responsible authority, Piedmont, were ordered by the Tribunale di Torino (Court of Turin) to pay a fee to Oftalma for a number of healthcare services. Both CIOV and Piedmont protested against the payment claim, among other things, on the grounds that the agreement had not been validly concluded as there had been no tendering. The Tribunale di Torino rejected the protests. In the second case, Oftalma had brought an action against CIOV regarding payment of a settlement amount for services provided under the contract. However, the Tribunale di Torino dismissed the action.
CIOV and Piedmont both appealed the cases to the Corte d’appello di Torino (Court of Appeal in Turin), which declared the agreement between Oftalma and CIOV invalid, as the contract had not been tendered, which, the Corte d’appello di Torino believed, was in violation of EU law.
Oftalma appealed the case to the Corte Suprema di Cassazione (Supreme Court of Cassation in Italy), which, due to doubts about the interpretation of EU law, chose to postpone the case and submit it to the ECJ.
According to EU law, public service contracts must, as a general rule, be tendered prior to the conclusion of the agreement. However, according to the legislation in force at the time, there were certain contracts which, according to EU law, did not have to be tendered, including contracts for healthcare services. According to the procurement rules, the public authority was only obliged to set the technical specifications with reference to the national standards in the general documents or the individual agreement and to inform the EU about the conclusion of the agreement.
However, the Corte Suprema di Cassazione was of the conviction that agreements on the provision of healthcare services should also be subject to general EU principles in connection with the conclusion of the agreement, as the authority had to ensure genuine competition when concluding the contract.
The ECJ initially noted that more lenient requirements had been set in connection with the conclusion of service contracts within special areas, including the healthcare system. Regarding the background for this, the ECJ noted that the EU legislator presumed that these special agreements did not immediately, due to their special nature, have a sufficient cross-border interest to justify the implementation of a tendering procedure.
According to the ECJ’s practice, the fundamental EU law principles of equal treatment, non-discrimination, and transparency must nevertheless be observed when the agreement on the provision of healthcare services has a clear cross-border character, so that other companies can safeguard their interests. However, the ECJ emphasized that this did not contain an obligation to tender the contract, but that the issuing authority should ensure an appropriate degree of publicity, so that other companies had the opportunity to compete and check that the process was impartial.
In this connection, the ECJ stated that it was up to the national court to assess whether there was a clear cross-border interest in this case. However, the ECJ emphasized that the assessment of whether there was a cross-border character should, as a starting point, be made at the time of the conclusion of the agreement. The ECJ highlighted a number of factors that the national court could include in the assessment of whether the agreement had a cross-border character, including the value of the agreement, the place of performance of the work, and the special technical characteristics of the contract and healthcare services. In addition, consideration could be given to whether complaints about the agreement had been received from businesses from other EU countries, and whether a business in another EU country already provided similar healthcare services. However, the ECJ stated that there should be a real interest from a foreign company before it could be established that the contract had a cross-border character.
The ECJ noted in conclusion that if the national court assessed that there was a clear cross-border interest, and where the lack of transparency could have led to discrimination, the national court had to investigate whether this discrimination could be justified on the basis of objective circumstances.
The EU law regulation of when and how public service contracts must be tendered has changed since the conclusion of the contract to which this case related. According to the new rules for tendering, which have been applied since April 17, 2014, all public service contracts must, as a general rule, be tendered, but a more lenient procedure has been laid down for the implementation of the tendering for a more precisely specified number of contracts, including the provision of healthcare services. However, the more lenient tendering procedure only applies if the value of the contract exceeds the relatively high threshold value. If the value of the contract does not exceed the threshold value, the national courts must follow the same procedure as specified in this judgment, which means that the member state must still comply with the fundamental EU law principles if it is assessed that the contract has a clear cross-border character. The judgment is therefore still relevant.