Discretion in EU Public Procurement Law 9781509919482, 9781509919512, 9781509919505

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DISCRETION IN EU PUBLIC PROCUREMENT LAW The EU public procurement regime has recently undergone an overhaul and now allows Member States and their contracting authorities to pursue strategic goals via public procurement, including environmental and social objectives. The extent to which such interests may be accommodated in the procurement process is ultimately determined by the broader legal context in which the EU public procurement regime exists, which raises pressing questions regarding the scope and limits of Member States’ discretion. This volume scrutinises these new legal acts – particularly Directive 2014/24/EU – focusing on discretion and engaging with questions central to the public procurement regime against the EU legal backdrop, including internal market law and environment law, as well as law beyond the EU. Volume 26: Studies of the Oxford Institute of European and Comparative Law

Studies of the Oxford Institute of European and Comparative Law Editor Professor Birke Häcker Board of Advisory Editors Professor Mark Freedland, FBA Professor Stephen Weatherill Professor Stefan Enchelmaier Recent titles in this Series Volume 17: Current Problems in the Protection of Human Rights: Perspectives from Germany and the UK Edited by Katja S Ziegler and Peter M Huber Volume 18: Legal Challenges in the Global Financial Crisis: Bail-outs, the Euro and Regulation Edited by Wolf-Georg Ringe and Peter M Huber Volume 19: The Unitary EU Patent System Edited by Justine Pila and Christopher Wadlow Volume 20: The EU Charter of Fundamental Rights as a Binding Instrument: Five Years Old and Growing Edited by Sybe de Vries, Ulf Bernitz and Stephen Weatherill Volume 21: The Images of the Consumer in EU Law: Legislation, Free Movement and Competition Law Edited by Dorota Leczykiewicz and Stephen Weatherill Volume 22: Passing Wealth on Death: Will-Substitutes in Comparative Perspective Edited by Alexandra Braun and Anne Röthel Volume 23: General Principles of Law: European and Comparative Perspectives Edited by Stefan Vogenauer and Stephen Weatherill Volume 24: The Future of Contract Law in Latin America: The Principles of Latin American Contract Law Edited by Rodrigo Momberg and Stefan Vogenauer Volume 25: The Code Napoléon Rewritten: French Contract Law after the 2016 Reforms Edited by John Cartwright and Simon Whittaker

Discretion in EU Public Procurement Law Edited by

Sanja Bogojević Xavier Groussot and

Jörgen Hettne

HART PUBLISHING Bloomsbury Publishing Plc Kemp House, Chawley Park, Cumnor Hill, Oxford, OX2 9PH, UK HART PUBLISHING, the Hart/Stag logo, BLOOMSBURY and the Diana logo are trademarks of Bloomsbury Publishing Plc First published in Great Britain 2019 Copyright © The editors and contributors severally 2019 The editors and contributors have asserted their right under the Copyright, Designs and Patents Act 1988 to be identified as Authors of this work. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system, without prior permission in writing from the publishers. While every care has been taken to ensure the accuracy of this work, no responsibility for loss or damage occasioned to any person acting or refraining from action as a result of any statement in it can be accepted by the authors, editors or publishers. All UK Government legislation and other public sector information used in the work is Crown Copyright ©. All House of Lords and House of Commons information used in the work is Parliamentary Copyright ©. This information is reused under the terms of the Open Government Licence v3.0 (http://www.nationalarchives.gov.uk/doc/ open-government-licence/version/3) except where otherwise stated. All Eur-lex material used in the work is © European Union, http://eur-lex.europa.eu/, 1998–2019. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication data Names: Bogojević, Sanja, 1982-, editor.  |  Groussot, Xavier, editor.  |  Hettne, Jörgen, editor. Title: Discretion in EU public procurement law / edited by Sanja Bogojević, Xavier Groussot, Jörgen Hettne. Description: Chicago : Hart Publishing, 2019.  |  Series: Studies of the Oxford Institute of European and comparative law  |  Includes bibliographical references and index. Identifiers: LCCN 2019001707 (print)  |  LCCN 2019001890 (ebook)  |  ISBN 9781509919499 (EPub)  |  ISBN 9781509919482 (hardback) Subjects: LCSH: Government purchasing—Law and legislation—European Union countries.  |  Public contracts—European Union countries.  |  BISAC: LAW / Public.  |  LAW / International. Classification: LCC KJE5632 (ebook)  |  LCC KJE5632 .D57 2019 (print)  |  DDC 346.2402/3—dc23 LC record available at https://lccn.loc.gov/2019001707 ISBN: HB: 978-1-50991-948-2 ePDF: 978-1-50991-950-5 ePub: 978-1-50991-949-9 Typeset by Compuscript Ltd, Shannon To find out more about our authors and books visit www.hartpublishing.co.uk. Here you will find extracts, author information, details of forthcoming events and the option to sign up for our newsletters.

PREFACE The idea behind this volume was born shortly after the new rules on EU public procurement regime were issued in 2014, opening up the possibility for Member States and their contracting authorities to pursue environmental and social objectives when procuring. As a group of EU law scholars focusing on environmental law, constitutional law and internal market law respectively, we found that EU public procurement law needed to be analysed against a broader EU law setting that would examine what degree of discretion Member States enjoy beyond procurement law. To that end, we organised a workshop at Lady ­Margaret Hall, Oxford in November 2017, at which the authors and other conference participants – a mix of EU law and procurement law specialists – discussed and debated the issues. This volume is a result of that workshop. We want to convey our profound gratitude to the Swedish Competition Authority, whose generous research grant enabled us to make this project a reality. We also thank Oxford’s Institute of European and Comparative Law (IECL) and Lady Margaret Hall for enabling this research collaboration between Lund and Oxford to take root and flourish. Jenny Dix at IECL and Åsa Mannesson Fransson at Lund Law Faculty deserve special thanks for their impeccable administrative support. Thanks are also due to Iva Svobodová for research assistance in the early phases of this project, and to Ulrika Carlsson for her superb editorial support. We similarly thank Hart Publishing for its support for this volume and for the helpfulness of its staff. As with any volume of this type, it would never have been possible without the commitment and hard work of the authors, and so our final and deepest thanks go to each of them for their contributions. Sanja Bogojević, Xavier Groussot and Jörgen Hettne Lund and Oxford October 2018

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CONTENTS Preface����������������������������������������������������������������������������������������������������������������������������v List of Contributors����������������������������������������������������������������������������������������������������� ix Table of Cases�������������������������������������������������������������������������������������������������������������� xi Table of Legislation���������������������������������������������������������������������������������������������������� xxi PART I INTRODUCTION 1. The ‘Age of Discretion’: Understanding the Scope and Limits of Discretion in EU Public Procurement Law�����������������������������������������������������������������������������3 Sanja Bogojević, Xavier Groussot and Jörgen Hettne PART II DISCRETION IN EU INTERNAL MARKET LAWS 2. EU Law on Public Procurement: Internal Market Law Made Better����������������21 Stephen Weatherill 3. The Drivers and Boundaries of Discretion in the Award of Public Contracts��������������������������������������������������������������������������������������������������������������51 Christopher H Bovis 4. Some Reflections on the ‘Artificial Narrowing of Competition’ as a Check on Executive Discretion in Public Procurement�������������������������������������������������79 Albert Sanchez-Graells 5. The Obligation of Transparency in EU Public Procurement Law����������������������99 Angelica Ericsson and Xavier Groussot PART III DISCRETION IN PURSUING STRATEGIC GOALS UNDER THE EU PUBLIC PROCUREMENT REGIME 6. Contracting Authorities and Strategic Goals of Public Procurement – A Relationship Defined by Discretion?������������������������������������117 Marta Andhov

viii  Contents 7. Public Procurement and European Standards: Fair Competition or Limits to Discretion?��������������������������������������������������������������������������������������139 Jörgen Hettne 8. Mapping Public Procurement and Environmental Law Intersections in Discretionary Space���������������������������������������������������������������������������������������161 Sanja Bogojević PART IV DISCRETION IN PUBLIC PROCUREMENT REGIMES BEYOND THE EU 9. Discretion, Divergence, Paradox: Public and Private Supply Chain Standards on Human Rights�����������������������������������������������������������������������������189 Claire Methven O’Brien and Olga Martin-Ortega 10. EU and US Discretion in Public Procurement Law: The Role of Eco-Labels and Life-Cycle Costing����������������������������������������������������������������211 Jason J Czarnezki 11. Regulating Procurement by European Research Infrastructure Consortia (ERICs) and the Exemption for International Organisations��������������������������249 Ohad Graber-Soudry PART V LOOKING AHEAD 12. Looking Ahead: A ‘New Age’ of Proportionality?���������������������������������������������267 Sanja Bogojević, Xavier Groussot and Jörgen Hettne Index��������������������������������������������������������������������������������������������������������������������������277

LIST OF CONTRIBUTORS Marta Andhov (née Andrecka), Assistant Professor at the Centre for Enterprise Liability, Faculty of Law, University of Copenhagen. Sanja Bogojević, Fellow and Associate Professor of Law at Lady Margaret Hall and University of Oxford. Christopher H Bovis, Professor of Business Law, Faculty of Business, Law and Politics, Hull University Business School, and Fellow of the Royal Society of Arts. Jason J Czarnezki, Gilbert and Sarah Kerlin Distinguished Professor of Environmental Law, and Associate Dean and Executive Director of Environmental Law Programs at the Elisabeth Haub School of Law at Pace University. Angelica Ericsson, legal secretary at the Court of Justice of the European Union and doctoral student at the Law Faculty, Lund University. Ohad Graber-Soudry, Director at X-officio and former Head of the Legal Division at the European Spallation Source ERIC in Lund. Xavier Groussot, Professor of EU Law, Law Faculty, Lund University. Jörgen Hettne, Associate Professor of EU Law, Department of Business Law at School of Economics and Management, Lund University. Olga Martin-Ortega, Professor of International Law, University of Greenwich Claire Methven O’Brien, Chief Adviser, Human Rights and Business, The Danish Institute for Human Rights, Copenhagen and Honorary Lecturer, School of Management, University of St. Andrews. Albert Sanchez-Graells, Reader in Economic Law, University of Bristol Law School and Member of the European Commission’s Stakeholder Expert Group on Public Procurement (2015–18). Stephen Weatherill, Jacques Delors Professor of European Law, Somerville College and Law Faculty, University of Oxford.

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TABLE OF CASES European Union Court of Justice Case C-373/00 Adolf Truley [2003] ECR-193������������������������������������������������������������52 Joined Cases C-115/81 and C-116/81 Adoui and Cornuaille, EU:C:1982:183���������������������������������������������������������������������������������������������������������27 Joined Cases C-223/99 and C-260/99 Agora Srl v Ente Autonomo Fiera Internazionale di Milano and Excelsior Snc di Pedrotti runa & C v Ente Autonomo Fiera Internazionale di Milano [2001] ECR 3605������� 52–53, 56 Case C-410/04 ANAV v Comune di Bari, EU:C:2006:237 �������������������������������������259 Case C-441/04 A-Punkt Schmuckhandels, EU:C:2006:141��������������������������������������29 Case C-131/16 Archus and Gama, EU:C:2017:358������������������������������������������ 111–12 Case C-295/05 Asociación Nacional de Empresas Forestales (Asemfo) v Transformación Agraria SA (Tragsa) and Administración del Estado [2007] ECR I-2999������������������������������������������������������������������������� 51, 57, 59 Case C-220/06 Asociación Profesional de Empresas de Reparto y Manipulado de Correspondencia v Administración General del Estado [2007] ECR I-12175����������������������������������������������������������������������������� 51, 64 Case C-410/04 Associazione Nazionale Autotrasporto Viaggiatori (ANAV) v Comune di Bari, AMTAB Servizio SpA [2006] ECR I-3303����� 60, 64 Case C-14/02 ATRAL SA, EU:C:2003:265�����������������������������������������������������������������27 Case C-31/87 Beentjes, EU:C:1988:422 [1988] ECR 4635�������������������51–52, 66–68, 101, 126, 133, 161, 168, 200 Case C-28/86 Bellini Case [1987] ECR 3347��������������������������������������������������������������66 Case C-59/00 Bent Mousten Vestergaard and Spøttrup Boligselskab [2001] ECR I-9505������������������������������������������������������������������������������������� 51, 63–64 Case C-98/14 Berlington Hungary and others, EU:C:2015:386�������������������������������26 Case C-360/96 BFI Holding [1998] ECR I-6821��������������������������������������������������������51 Case C-67/97 Bluhme, EU:C:1998:584���������������������������������������������������������������������166 Case C-415/93 Bosman, EU:C:1995:463��������������������������������������������������������������������28 Case C-382/87 Buet v Ministère Public, EU:C:1989:198�����������������������������������������147 Case C-549/13 Bundesdruckerei GmbH, EU:C:2014:2235������������������������86–88, 132 Case C-442/02 CaixaBank France [2004] ECR I-8961���������������������������������������������64 Case C-340/04 Carbotermo SpA, Consorzio Alisei v Comune di Busto Arsizio, AGESP SpA, [2006] ECR I-4137������������������������������������������������������� 59, 62

xii  Table of Cases Case C-194/94 CIA Security International SA v Signalson SA and Securitel Sprl, EU:C:1996:172������������������������������������������������������������������������������������������������32 Case C-265/12 Citroën Belux NV, EU:C:2013:498����������������������������������������������������29 Case C-324/07 Coditel Brabant SA v Commune d’Uccle, Région de Bruxelles-Capitale [2009] ECR I-8457����������������������������������������������������� 51, 57, 59 Case C-29/04 Commission v Austria [2005] ECR I-9705 ����������������������������������������59 Case C-187/16 Commission v Austria, EU:C:2018:194����������������������������������� 41, 270 Case C-2/90 Commission v Belgium, EU:C:1992:310���������������������������������������������166 Case C-87/94 Commission v Belgium (‘Walloon busses’), EU:C:1996:161����������101 Case C-496/99 P, Commission v CAS Succhi di Frutta SpA, EU:C:2004:236 ������259 Case C-302/86 Commission v Denmark (‘Danish Bottles’), EU:C:1988:421������������������������������������������������������������������������������������������������ 28, 166 Case C-243/89 Commission v Denmark (‘Bridge over the Storebælt’), EU:C:1993:257 ������������������������������������������������������������������������������������������� 79, 84–85 Case C-195/04 Commission v Finland, EU:C:2007:248��������������������������������������������36 Case C-246/91 Commission v France, EU:C:1993:174��������������������������������������������146 Case C-225/98 Commission v France (‘Nord-Pas-de-Calais’), EU:C:2000:494��������������������������������������������������������������������� 118, 133, 156, 161, 168 Case C-237/99 Commission v France (‘OPAC’), EU:C:2001:70 ����������������������� 52, 66 Case C-24/00 Commission v France, EU:C:2004:70��������������������������������������������������30 Case C-264/03 Commission v France, EU:C:2005:620 �������������������������������������������144 Case C-333/08 Commission v France, EU:C:2010:44������������������������������������������������30 Case C-28/84 Commission v Germany, EU:C:1985:386�����������������������������������������146 Case C-192/84 Commission v Greece, EU:C:1985:497����������������������������������������������24 Case C-126/03 Commission v Germany [2004] ECR I-11197���������������������������������52 Case C-480/06 Commission v Germany, EU:C:2009:357 ����������������������������������������89 Case C-489/06 Commission v Greece, EU:C:2009:165����������������������������������� 146, 148 Case C-45/87 Commission v Ireland, EU:C:1988:435 �����������������25, 29, 42, 140, 150 Case C-507/03 Commission v Ireland (‘An Post’), EU:C:2007:676 ��������������������������������������������������������������������������������������������� 145, 258 Case C-532/03 Commission v Ireland, EU:C:2007:801�������������������������������������������260 Case C-226-09 Commission v Ireland, EU:C:2010:697�������������������������������������������259 Case C-7/61 Commission v Italy, EU:C:1961:31��������������������������������������������������������28 Case C-3/88 Commission v Italy, EU:C:1989:606������������������������������������������������������24 Case C-360/89 Commission v Italy, EU:C:1992:235�������������������������������������������������24 Case C-112/97 Commission v Italy, EU:C:1999:168�����������������������������������������������150 Case C-385/02 Commission v Italy, EU:C:2004:522�����������������������������������������������256 Case C-412/04 Commission v Italy, EU:C:2008:102 ����������������������������������������������258 Case C-382/05 Commission v Italy [2007] ECR I-6657������������������������������������� 51, 63 Case C-437/07 Commission v Italy [2008] ECR I-0000������������������������������������� 51, 63 Case C-368/10 Commission v Netherlands (‘Dutch Coffee’; ‘Max Havellaar’), EU:C:2012:284������������������������������������������������������� 84–85, 87–88, 118, 126, 133, 157, 161, 175, 200

Table of Cases  xiii Case C-158/03 Commission v Spain, EU:C:2005:642�����������������������������������������������74 Case C-513/99 Concordia Bus Finland Oy Ab, formerly Stagecoach Finland Oy Ab v Helsingin Kaupunki and HKL-Bussiliikenne (‘Concordia Buses’), EU:C:2002:495 ������������������������������������84, 87, 118, 126, 133, 157, 161, 169, 174, 178 Case C-121/85 Conegate, EU:C:1986:114�������������������������������������������������������������������27 Case C-171/15 Connexxion Taxi Services, EU:C:2016:948������������������������������������273 Case C-231/03 Consorzio Aziende Metano (Coname) v Comune di Cingia de’ Botti, EU:C:2005:487 ����������������������������������������������������������� 36, 145, 259 Case C-234/03 Contse and Others, EU:C:2005:644 ������������������������������������������������145 Case C-61/80 Cooperative Stremsel- en Kleurselfabriek v Commission, EU:C:1981:75�����������������������������������������������������������������������������������������������������������27 Case C-371/98 ex parte Corporate Shipping, EU:C:2000:600��������������������������������179 Joined Cases C-72/10 and C-77/10 Costa and Cifone, EU:C:2012:80������������������103 Case C-6/64 Costa v ENEL, EU:C:1964:66�����������������������������������������������������������������33 Case C-453/99 Courage v Crehan, EU:C:2001:465���������������������������������������������������33 Case C-815/79 Cremonia and Vrankovich, EU:C:1980:273�����������������������������������150 Case C-324/99 DaimlerChrysler, EU:C:2001:682 ���������������������������������������������������146 Case C-8/74 Dassonville, EU:C:1974:82���������������������������������������������������������������������24 Case C-251/78 Denkavit Futtermittel, EU:C:1979:252�������������������������������������������146 Case C-322/01 Deutscher Apothekerverband, [2003] ECR I-14887������������������������73 Case C-343/95 Diego Cali et Figli, [1997] ECR 1-1547��������������������������������������������51 Case C-225/15 Domenico Politano, EU:C:2016:645��������������������������������������������������10 Case C-244/06 Dynamic Medien, EU:C:2008:85���������������������������������������������� 107–08 Case C-126/97 Eco Swiss China Time Ltd v Benetton International NV, EU:C:1999:269���������������������������������������������������������������������������������������������������������33 Case C-413/15 Elaine Farrell, EU:C:2016:745�����������������������������������������������������������38 Case C-219/15 Elisabeth Schmitt, EU:C:2017:128�������������������������������������������� 39, 148 Case C-168/05 Elisa María Mostaza Claro v Centro Móvil Milenium SL, EU:C:2006:675���������������������������������������������������������������������������������33 Case C-677/15 P, EUIPO v European Dynamics Luxembourg and Others, EU:C:2017:998���������������������������������������������������������������������������������������������������������94 Case C-277/02 EU-Wood-Trading, EU:C:2004:810������������������������������������������������179 Joined Cases C-204/12 to C-208/12 Essent Belgium NV v Vlaamse Reguleringsinstantie voor de Elektriciteits- en Gasmarkt, EU:C:2014:2192������29 Case C-448/01 EVN AG and Wienstrom GmbH v Republic of Austria (‘EVN-Wienstrom’), EU:C:2003:651 �����������������������������������������83, 103, 118, 126, 133, 157, 161, 181, 267 Case C-538/13 eVigilo, EU:C:2015:166����������������������������������������������������������� 100, 175 Joined Cases C-21/03 and C-34/03 Fabricom SA v État belge, EU:C:2005:127 ��������������������������������������������������������������������������������������������� 133, 275 Case C-91/92 Faccini Dori v Recreb, EU:C:1994:292������������������������������������������������38 Case C-213/89 Factortame, EU:C:1990:257���������������������������������������������������������������33

xiv  Table of Cases Joined Cases C-46/93 and C-48/93 Factortame (No. 3) and Brasserie de Pêcheur, EU:C:1996:79����������������������������������������������������������������������33 Case C-452/04 Fidium Finanz [2006] ECR I-9521���������������������������������������������������64 Case C-465/11 Forposta SA and ABC Direct Contact sp. z o.o. v Poczta Polska SA, EU:C:2012:801������������������������������������������������������������������������������������273 Case C-188/89 Foster and Others v British Gas, EU:C:1990:313 ��������������������������129 Case C-57/95 France v Commission, EU:C:1997:164������������������������������������������������37 Joined Cases 6/90 and 9/90 Francovich, EU:C:1991:428����������������������������� 33, 38, 44 Case C-479/93 Francovich, EU:C:1995:372���������������������������������������������������������������39 Case C-189/95 Franzén, EU:C:1997:504������������������������������������������������������������������107 Case C-315/01 (GAT) and Österreichische Autobahnen und Schnellstraßen AG (ÖSAG) [2003] ECR I-6351�����������������������������������������������������������������������������52 Case C-470/11 Garkalns, EU:C:2012:505�������������������������������������������������������������������26 Case C-55/94 Gebhard, EU:C:1995:411��������������������������������������������������������������������109 Case C-31/87 Gebroeders Beentjes BV v State of the Netherlands (‘Beentjes’), EU:C:1988:422 ��������������������������������������������������������101, 126, 133, 161 Case C-360/96 Gemeente Arnhem Gemeente Rheden v BFI Holding BV [1998] ECR 6821���������������������������������������������������������������������������������������� 51, 53 Case C-178/84 Germany v Commission (‘German Beer Case’), EU:C:1987:126������������������������������������������������������������������������������������������������ 105–06 Case C-315/01 Gesellschaft für Abfallentsorgungs-Technik GmbH (GAT) and Österreichische Autobahnen und Schnellstraßen AG (ÖSAG) [2003] ECR I-6351���������������������������������������������������������������������������������� 71 Case C-95/01 Greenham and Abel, EU:C:2004:71 ���������������������������������������������������30 Case C-249/01 Hackermüller [2003] ECR I-6319�����������������������������������������������������72 Case C-438/02 Hanner, EU:C:2005:332�������������������������������������������������������������������107 Case C-451/08 Helmut Müller v Bundesanstalt für Immobilienaufgaben [2010] ECR I-2673��������������������������������������������������������������������������������������������������62 Case C-92/00 HI [2002] ECR I-5553��������������������������������������������������������������������������74 Case C-75/63 Hoekstra, EU:C:1964:19�����������������������������������������������������������������������45 Case C-176/98 Holst Italia [1999] ECR I-8607����������������������������������������������������������52 Case C-178/16 Impresa di Costruzioni Ing E Mantovani SpA, EU:C:2017:1000�����������������������������������������������������������������������������������������������������273 Case C-336/14 Ince, EU:C:2016:72�������������������������������������������������������������������� 103–04 Case C-172/14 ING Pensii, EU:C:2015:484����������������������������������������������������������������27 Case C-613/14 James Elliott Construction, EU:C:2016:821��������������������������� 142, 157 Case C-220/05 Jean Auroux and Others v Commune de Roanne [2007] ECR I-385����������������������������������������������������������������������������������������������������51 Joined Cases C252/96 to C-258/96 Kampelmann, EU:C:1997:585 ����������������������129 Case C-244/02 Kauppatalo Hansel Oy [2003] ECR I-12139������������������������������������74 Joined Cases 201/85 and 202/85 Klensch and Others [1986] ECR 3477����������������74 Case C-158/96 Kohll, EU:C:1998:171�������������������������������������������������������������������������28 Case C-18/01 Korhonen and Others [2003] ECR I-5321����������������������������������� 52, 56 Case C-124/97 Läärä and Others, EU:C:1999:435������������������������������������������������8, 10

Table of Cases  xv Joined Cases C-226/04 and C-228/04 La Cascina, Zilch, EU:C:2006:94����������������41 Case C-341/05 Laval, EU:C:2007:809���������������������������������������������������������������� 107–10 Case C-42/07 Liga Portuguesa de Futebol Profissional and Bwin International, EU:C:2009:519���������������������������������������������������������������������������������������������������������10 Case C-287/98 Linster, EU:C:2000:468����������������������������������������������������������������������45 Case C-567/15 LitSpecMet UAB v Vilniaus lokomotyvu remonto depas UAB, EU:C:2017:736�������������������������������������������������������������������������������������� 251–52 Case C-144/17 Lloyd’s of London, EU:C:2018:78�������������������������������������� 79, 122, 161 Joined Cases C-285/99 and C-286/99 Lombardini and Mantovani, EU:C:2001:640 ��������������������������������������������������������������������������������������������� 134, 156 Case C-57/01 Makedoniko Metro and Mikhaniki [2003] ECR I-1091������������� 52, 74 Case C-44/96 Mannesmann Anlagenbau Austria [1998] ECR I-73����������� 51, 53, 66 Case C-336/12 Manova, EU:C:2013:647������������������������������������������������������������������111 Case C-166/14 MedEval - Qualitäts-, Leistungs- und StrukturEvaluierung im Gesundheitswesen GmbH, EU:C:2015:779������������������������� 46–47 Case C-6/05 Medipac-Kazantzidis AE v Venizelio-Pananio (PE.S.Y. KRITIS), EU:C:2007:337����������������������������������������������� 144, 146–47, 259 Case C-296/15 Medisanus, EU:C:2017:431�������������������������������� 42, 144–45, 270, 272 Case C 438/99 Melgar, EU:C:2001:509 ��������������������������������������������������������������������129 Case C-213/07 Michaniki AE, EU:C:2008:731������������������������������������41, 156, 269–70 Case C-142/05 Mickelsson & Roos, EU:C:2009:336������������������������������������������� 8, 166 Case C-19/13 Ministero Dell'interno v Fastweb Spa (‘Fastweb’), EU:C:2014:2194������������������������������������������������������������������������� 46, 90, 112–13, 274 Case C-327/12 Ministero dello Sviluppo economic v SOA, EU:C:2013:827������������26 Case C-343/13 Modelo Continente Hipermercados SA, EU:C:2015:146�����������������45 Case C-304/84 Muller, EU:C:1986:194�������������������������������������������������������������� 105–07 Case C-219/07 Nationale Raad van Dierenkwekers en Liefhebbers, EU:C:2008:353�������������������������������������������������������������������������������������������������� 28, 30 Case C-73/08 Nicolas Bressol, EU:C:2010:181�����������������������������������������������������������28 Case C-288/08 Nordiska Dental, EU:C:2009:718�������������������������������������142–43, 147 Case C-672/15 Noria Distribution SARL, EU:C:2017:310������������������30, 34, 107–09 Case C-36/02 Omega Spielhallen, EU:C:2004:614�����������������������������������������������������28 Case C-399/98 Ordine degli Architetti and Others, EU:C:2001:401 ���������������������156 Case C-61/14 Orizzonte Salute, EU:C:2015:655������������������������������������������������������275 Case C-261/95 Palmisani [1997] ECR I-4025������������������������������������������������������������70 Case C-458/03 Parking Brixen GmbH v Gemeinde Brixen and Stadtwerke Brixen AG (‘Parking Brixen’), EU:C:2005:605 ������������������������������259 Case C-79/01 Payroll and Others [2002] ECR I-8923�����������������������������������������������64 Joined Cases C-570/07 and C-571/07 Perez and Gomez, EU:C:2010:300��������������10 Case C-222/02 Peter Paul, Cornelia Sonnen-Lütte and Christel Mörkens v Bundesrepublik Deutschland, EU:C:2004:606������������������������������������������������������39 Joined Cases C-397/01 to C-403/01 Pfeiffer, EU:C:2004:584��������������������������� 33, 38 Case C-454/06 Pressetext Nachrichtenagentur [2008] ECR I-4401�������������������������69 Case C-78/98 Preston and Others [2000] ECR I-3201����������������������������������������������70

xvi  Table of Cases Case C-379/98 PreussenElektra AG v Schhleswag AG, EU:C:2001:160���������������������������������������������������������������������������������������� 28, 166, 181 Joined Cases C-458/14 and C-67/15 Promoimpresa srl v Consorzio dei comuni della Sponda Bresciana del Lago di Garda e del Lago di Idro, Regione Lombardia, and Mario Melis and Others v Comune di Loiri Porto San Paolo, Provincia di Olbia Tempio, EU:C:2016:558�����������������������������31 Case C-115/14 RegioPost, EU:C:2015:760���������������������������������� 86, 118, 132–33, 201 Case C-2/74 Reyners, EU:C:1974:68�������������������������������������������������������������������������200 Case C-120/78 Rewe-Zentrale AG v Bundesmonopolverwaltung für Branntwein, EU:C:1979:42�������������������������������������������������������������������������������������24 Case C-442/00 Rodríguez Caballero [2002] ECR I-11915����������������������������������������74 Joined Cases C-117/76 and C-16/77 Ruckdeschel and Others [1977] ECR 1753����� 74 Case C-346/06 Rüffert, EU:C:2008:189 ����������������������������������������������86–88, 132, 146 Case C-599/10 SAG ELV Slovensko and Others, EU:C:2012:191������������111, 134–35 Case C-327/00 Santex SpA, EU:C:2003:109������������������������������������������������������ 46, 275 Case C-515/08 Santos Palhota and Others, EU:C:2010:245�������������������������������������11 Case C-333/14 Scotch Whisky Association, EU:C:2015:845�������������������������������������28 Case C-573/07 Sea Srl v Comune di Ponte Nossa [2009] ECR I-8127��������������������60 Case C-336/14 Sebat Ince, EU:C:2016:72�������������������������������������������������������������������30 Joined Cases C-147/06 and C-148/06 SECAP SpA and Santorso Soc. coop. arl., EU:C:2008:277 ���������������������������������������������������� 26, 134, 145, 200, 260 Case C-376/08 Serrantoni and Consorzio stabile edili, EU:C:2009:808����������������145 Case C-19/00 SIAC v Mayo County Council, EU:C:2001:553 ���������������������������������41 Case C-314/01 Siemens and ARGE Telekom & Partner [2004] ECR I-2549����������52 Case C-219/15 Schmitt, EU:C:2017:128������������������������������������������������������������ 39, 148 Case C-36/98 Spain v Council, EU:C:2001:64����������������������������������������������������������179 Case C-203/08 Sporting Exchange, EU:C:2010:307���������������������������������������� 104, 110 Case C-26/03 Stadt Halle, RPL Recyclingpark Lochau GmbH v. Arbeitsgemeinschaft Thermische Restabfall- undEnergieverwertungsanlage TREA Leuna (‘Stadt Halle and RPL Lochau’), EU:C:2005:5 ������������������ 122, 161 Joined Cases C-439/14 and C-488/14 Star Storage and Others, EU:C:2016:688�������������������������������������������������������������������������������������������������������275 Case C-314/09 Strabag, EU:C:2010:567������������������������������������������������������ 46, 90, 275 Case C-95/10 Strong Segurança v Municipio de Sintra, EU:C:2011:161�������� 37, 260 Case C-367/12 Susanne Sokoll-Seebacher, EU:C:2014:68����������������������������������������26 Case C-107/98 Teckal Slr v Comune di Viano [1999] ECR I-8121�������51, 56, 58–62 Case C-318/15 Tecnoedi Costruzioni, EU:C:2016:747������������������������������������� 26, 145 Case C-5/77 Tedeschi, EU:C:1977:144����������������������������������������������������������������������146 Case C-324/98 Telaustria and Telefonadress, EU:C:2000:669 �����������30, 36–37, 102, 110, 144, 258, 262 Case C-298/16 Teodor Ispas, EU:C:2017:843�������������������������������������������������������������36 Case C-165/16 Toufik Lounes, EU:C:2017:862����������������������������������������������������������37 Case C-421/01 Traunfellner GmbH and Österreichische Autobahnen und Schnellstraßen Finanzierungs-AG (Asfinag) [2003] ECR I-11941�������������� 68–69

Table of Cases  xvii Case C-553/15 Undis Servizi, EU:C:2016:935����������������������������������79, 122, 161, 167 Case C-49/16 Unibet International, EU:C:2017:491�����������������������������������������������103 Case C-443/98 Unilever Italia SpA v Central Food SpA, EU:C:2000:496���������������32 Joined Cases C-25/14 and C-26/14 Union des Syndicats Immobilier (UNIS), EU:C:2015:821���������������������������������������������������������������������������31, 110–11 Case C-406/08 Uniplex, EU:C:2010:45�����������������������������������������������������������������������46 Joined Cases C-25/14 and C-26/14 Unis, EU:C:2015:821�������������������������31, 110–11 Case C-275/98 Unitron Scandinavia, EU:C:1999:567 ��������������������������������������������102 Case C-470/99 Universale-Bau AG, Bietergemeinschaft, EU:C:2002:746 ����������������������������������������������������������������������������������������������� 46, 156 Case C-380/98 University of Cambridge [2000] ECR I-8035����������������51, 56, 65–66 Case C-37/92 Vanacker and Lesage [1993] ECR I-4947�������������������������������������������73 Case C-227/82 Van Bennekom, EU:C:1983:354��������������������������������������������������������27 Case C-33/74 Van Binsbergen, EU:C:1974:131����������������������������������������������������������25 Case C-26/62 Van Gend en Loos, EU:C:1963:1���������������������������������������������������������33 Case C-368/95 Vereinigte Familiapress Zeitungsverlags- und vertriebs GmbH v Heinrich Bauer Verlag, EU:C:1997:325�������������������������������������������������28 Case C-59/00 Vestergaard [2001] ECR I-9505����������������������������������������26, 51, 63–64 Case C-14/83 Von Colson and Kamann v Land Nordrhein-Westfalen, EU:C:1984:153���������������������������������������������������������������������������������������������������������33 Case C-91/08 Wall AG, EU:C:2010:182����������������������������������������������������������������������31 Case C-261/81 Walter Rau, EU:C:1982:382���������������������������������������������������������������28 Case C-206/08 WAZV Gotha v Eurawasser Aufbereitungs [2009] ECR I-8377������� 51 Case C-60/02 X, EU:C:2004:10������������������������������������������������������������������������������������33 Case C-573/12 Ålands Vindkraft AB v Energimyndigheten, EU:C:2014:2037���������������������������������������������������������������������������������������� 12, 29, 181 General Court Joined Cases T-191/96 and T-106/97 Cas Succhi di Frutta v Commission, EU:T:1999:256 ������������������������������������������������������������������������������������������������������133 Case T-203/96 Embassy Limousine and Services v Parliament [1998] ECR II-04239���������������������������������������������������������������������������������������������133 Case T-331/06 Evropaïki Dynamiki – Proigmena Systimata Tilepikoinonion Pliroforikis kai Tilematikis AE v European Environment Agency (AEE), EU:T:2010:292 �������������������������������������������� 126, 133 Case T-258/06 Germany v Commission, EU:T:2010:214������������������������������������������37 Case T-384/10 Spain v Commission, EU:T:2013:277������������������������������������������������89 Case T-183/10 Sviluppo Globale v Commission, EU:T:2012:534�����������������������������94 European Court of Human Rights Ališić and Others v Bosnia and Herzegovina, Croatia, Serbia, Slovenia and the Former Yugoslav Republic of Macedonia [GC], Judgment of 16 July 2014��������196 Al-Skeini and others v UK, App No 55721/07 7, Judgment of 7 July 2011�����������193

xviii  Table of Cases Bankovic and Others v Belgium and Others, App. No. 52207/99, Judgment of 19 December 2001��������������������������������������������������������������������������193 Costello-Roberts v UK, Series A no 247-C, Judgement of 25 March 1993�����������196 Fadeyeva v the Russian Federation, App No 55273/00, Judgment of 30 November 2005 �����������������������������������������������������������������������������������������������194 llaşcu and others v Moldova and Russia [GC], App No 48787/99, Judgment of 8 July 2004���������������������������������������������������������������������������������������194 Ireland v UK, App No 5310/71, Judgment of 18 January 1978������������������������������194 Liseytseva and Maslov v Russia, Judgment of 9 January 2015�������������������������������196 Loizidou v Turkey, App No 15318/89, Judgment of 23 March 1995 ��������������������193 Moldovan and Others v Romania, App Nos 41138/98 and 64320/01, Judgment of 30 November 2005��������������������������������������������������������������������������194 Mykhaylenky and Others v Ukraine, Judgment of 6 June 2005������������������������������196 Öcalan v Turkey, App No 46221/99, Judgment of 12 March 2003������������������������193 Öcalan v Turkey, App No 46221/99, Judgment of 12 May 2005���������������������������193 Osman v UK, App. No.23452/94, Judgment of 28 October 1998��������������������������194 Storck v Germany, Judgment of 16 June 2005����������������������������������������������������������196 Van der Mussele v Belgium, Series A no 70, Judgment of 23 November 1983 �������196 X and Y v Netherlands, App No 8978/80, Judgment of 26 March 1985���������������194 Inter-American Court of Human Rights Velasquez Rodriquez Case, Judgment 29 July 1988, Inter-AmCtHR (Ser C), No 4 (1988)����������������������������������������������������������������������������������������������194 International Court of Justice Armed Activities on the Territory of the Congo (Congo v Uganda), Judgment of 19 December 2005��������������������������������������������������������������������������193 Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory: Advisory Opinion, 9 July 2004����������������������������������������193 United Nations Human Rights Committee Celiberti de Casariego v Uruguay, Communication No R 13/57, UN Doc. Supp No 40 (A/37/40) �������������������������������������������������������������������������193 Lopez Burgos v Uruguay (1981) 68 ILR 29, Communication No R12/52, UN Doc Supp No 40 (A/36/40)���������������������������������������������������������������������������193 Domestic courts United Kingdom ClientEarth (No 2) v Secretary of State for the Environment, Food and Rural Affairs [2016] EWHC 2740 (Admin).������������������������������������������������������184 Mott [2016] EWCA Civ 564���������������������������������������������������������������������������������������184

Table of Cases  xix United States Bibb v Navajo Freight Lines, 359 US 520, 530 (1959)����������������������������������������������217 City of Philadelphia v NJ, 437 US 617–28 (1978)��������������������������������������������� 215–16 C & A Carbone Inc v Town of Clarkstown, 511 US 383 (1994)����������������������� 215–16 Dean’s Milk Co v City of Madison, 340 US 349 (1951)������������������������������������� 215–16 Gibbons v Ogden, 22 US 1 (1824)������������������������������������������������������������������������������214 Granholm v Heald, 544 US 460 (2005)���������������������������������������������������������������������216 Hughes v Alexandria Scrap Corp 426 US 794 (1976)��������������������������������������� 217–18 Hunt v WA State Apple Adver Comm’n, 432 US 333 (1977)����������������������������������215 Huron Portland Cement Co v City of Detroit, 362 US 440 (1960)�������������������������216 Lewis v BT Investment Managers, 447 US 27, 44 (1978) ����������������������������������������216 Maine v Taylor, 477 US 131 (1986) ��������������������������������������������������������������������������224 Minnesota v Clover Leaf Creamery Co, 449 US 456 (1981) ������������������213, 216, 224 New State Ice Co v Liebmann, 285 US 262 (1932)���������������������������������������������������212 Pierce Cnty, WA v Guillen, 537 US 129 (2003)���������������������������������������������������������215 Pike v Bruce Church Inc, 397 US 137 (1970)���������������������������������������������215–16, 223 Reeves Inc v Stake, 447 US 429 (1980)����������������������������������������������������������������������218 S Cent Timber Dev Inc v Wunnicke, 467 US 82 (1984)�������������������������������������������218 Smith Setzer & Sons Inc v SC Procurement Review Panel, 20 F.3d 1311 (4th Cir 1994)��������������������������������������������������������������������������������������������������������223 United Haulers Ass’n, In v Oneida-Herkimer Solid Waste Mgmt Auth, 550 US 330 (2007)�������������������������������������������������������������������������������������������������215 US v Lopez, 514 US 549 (1995)����������������������������������������������������������������������������������215 White v Mass Council of Constr Emp’rs, 460 US 204 (1983)�����������������������������������218 Wickard v Filburn, 317 US 111 (1942)����������������������������������������������������������������������215

xx

TABLE OF LEGISLATION Council of Europe European Social Charter, 1961 (ETS No 035)���������������������������������������������������������198 Additional Protocol to the European Social Charter, 1988 (ETS No 128)����������198 Additional Protocol to the European Social Charter Providing for a System of Collective Complaints, 1995 (ETS No 158) ���������������������������������198 European Social Charter (revised), 1996 (ETS No 163)����������������������������������������198 European Union Treaties Charter of Fundamental Rights of the European Union [2012] OJ C326/391����������������������������������������������������������������������������������� 29, 93–94, 110, 112, 122, 179, 263 Treaty on European Union (TEU) [2016] OJ C202/13������������������������7–8, 122, 134, 162, 165–66, 257 Treaty on the Functioning of the European Union (TFEU) [2016] OJ C202/47�������������������������������������������������������������������������� 8, 10, 18, 23–25, 27–28, 31–33, 35, 37, 41, 47, 91, 94, 108, 111, 122–23, 140, 144–46, 156, 162, 165–66, 169, 173, 178–79, 200, 208, 232, 249–51, 258–64, 271 Regulations Regulation (EC) No 1882/2003 of the European Parliament and of the Council of 29 September 2003 (OJ 2003, L284)������������������������������������������������148 Regulation (EC) No 106/2008 of the European Parliament and of the Council on a Community energy-efficiency labelling programme for office equipment (OJ 2008, L39)���������������������������������������������������������� 128, 153 Regulation (EC) No 764/2008 of the European Parliament and of the Council of 9 July 2008 laying down procedures relating to the application of certain national technical rules to products lawfully marketed in another Member State and repealing Decision No 3052/95/EC (OJ 2008, L218/21)��������������������������������������������������������������� 32, 35

xxii  Table of Legislation Council Regulation (EC) No 723/2009 of 25 June 2009 on the Community legal framework for a European Research Infrastructure Consortium (OJ 2009, L206)������������������������������������������������������������������������ 18, 249 Regulation (EU, Euratom) No 966/2012 of the European Parliament and of the Council of 25 October 2012 on the financial rules applicable to the general budget of the Union (OJ 2012, L298)����������������������141 Directives Directive 80/778/EEC [1980] OJ L229���������������������������������������������������������������������165 Directive 89/665 (Council Directive of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts) (‘Remedies Directive’) [1989] OJ L395/33�������������������������������������������������������������������������43–44, 46, 54, 89, 112, 268, 274–75 Directive 92/13 [1992] OJ L76/14�������������������������������������������������������������������������������43 Directive 93/36/EEC of 14 June 1993 coordinating procedures for the award of public supply contracts [1993] OJ L199���������������������������������������������102 Directive 93/37 [1993] OJ L199 (‘Public Works Directive’)����������������������������� 66–68 Council Directive 93/42/EEC of 14 June 1993 concerning medical devices [1993] OJ L169��������������������������������������������������������������������������142, 147–48 Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services [1996] OJ L18/1�������������������������� 131–32 Directive 97/52/EC [1997] OJ L328����������������������������������������������������������������������������68 Directive 2001/77/EC of the European Parliament and of the Council of 27 September 2001 on the promotion of electricity produced from renewable energy sources in the internal electricity market [2001] OJ L283�����������������������������������������������������������������������������������������181 Directive 2001/78/EC [2001] OJ L285������������������������������������������������������������������������68 Directive 2003/35 [2003] OJ L156/17�������������������������������������������������������������������������39 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 service sectors) (‘Utilities Directive’) [2004] OJ L134������������������������������������ 56, 117, 200 Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the co-ordination of procedures for the award of public works contracts, public supply contracts and public service contracts) (‘Public Sector Directive’) [2004] OJ L134����� 56, 117, 121, 135, 145, 249, 257 Directive 2004/48 [2004] OJ L195/16�������������������������������������������������������������������������39

Table of Legislation  xxiii Directive 2006/123 of the European Parliament and of the Council of 12 December 2006 on services in the internal market [2006] OJ L 376 ��������������76 Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007 amending Council Directives 89/665/EEC and 92/13/EEC with regard to improving the effectiveness of review procedures concerning the award of public contracts [2007] OJ L335/31�������������������������������������������������������55, 70, 89, 120, 250–51, 268 Directive 2008/50/EU on ambient air quality and cleaner air for Europe [2008] OJ L152 ����������������������������������������������������������������������������������������185 Directive 2009/22 [2009] OJ L110/30�������������������������������������������������������������������������39 Directive 2009/28/EC on the promotion of the use of energy from renewable sources [2009] OJ L140 ���������������������������������������������������������������������181 Directive 2009/33/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of clean and energy-efficient road transport vehicles) (‘Clean Vehicles Directive’) [2009] OJ L120������������������������������������������������������������������������������128, 154, 173, 230 Directive 2009/81/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security, and amending Directives 2004/17/EC and 2004/18/EC [2009] OJ L216/76����������������������������������������������������������������������������������120–21, 250 Directive 2010/31/EU on the energy performance of buildings [2010] OJ L153/13�������������������������������������������������������������������������������������������������128 Directive 2014/23 of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts [2014] OJ L94/1����������������������������������������������������������� 4, 40, 51, 118, 127, 170, 250 Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement [2014] OJ L94/65��������3–4, 13–15, 18, 56, 81–82, 90–98, 118–36, 142, 144, 149, 152–53, 156, 161, 169–70, 172–76, 178, 181, 183, 212, 228–31, 235, 242, 249–51, 255, 267–68, 273 Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors [2014] OJ L94/243����������������������������������������������������������������������4, 56, 118, 170, 250 Directive 2014/52/EU [2014] OJ L124/1������������������������������������������������������������������165 Directive 2014/104 [2014] OJ L349/1�������������������������������������������������������������������������39 Directive 2015/1535 [2015] OJ L241/1�����������������������������������������������������������������������31

xxiv  Table of Legislation Decisions Decision No 1673/2006/EC of the European Parliament and of the Council [2006] OJ L316/9���������������������������������������������������������������������������������������������������141 Commission Communications Commission, ‘White Paper on Completing the Internal Market’, COM(85) 310 final����������������������������������������������������������������������������������������� 53, 164 Commission, Green Paper, ‘Action for faster technological integration in Europe’, COM(1990) 456 final������������������������������������������������������������������������141 Commission, ‘Green Paper on Public Procurement in the European Union: Exploring the way forward’, COM(96) 583����������������������������������������������������������53 Commission, ‘Communication on Public Procurement in the European Union’, COM(98) 143����������������������������������������������������������������������������������������������53 Commission, Communication to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions, ‘Towards a European Research Area’, COM(2000) 6 final�������������������������������252 Commission, ‘Interpretative communication on the Community law applicable to public procurement and the possibilities for integrating environmental considerations into public procurement’, COM(2001) 274 final������������������������������������������������������������������������������������������������������������������169 Commission, ‘Interpretative communication on the Community law applicable to public procurement and the possibilities for integrating social considerations into public procurement’, COM(2001) 566 final��������������������169 Commission, ‘Interpretative communication on the Community law applicable to contract awards not or not fully subject to the provisions of the Public Procurement Directives’ [2006] OJ C179/2������������������� 37, 75, 260 Commission, ‘Sustainable Consumption and Production and Sustainable Industrial Policy-Action Plan, COM(2008) 397 final������������������170 Commission, Communication to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions, ‘Towards a Single Market Act’, COM(2010) 608 final����������������� 53, 75 Commission, ‘Europe 2020 – a strategy for smart, sustainable and inclusive growth’, COM(2010) 2020 final���������������������������������������������������� 53, 120 Commission, ‘Green Paper on the modernization of EU public procurement policy: Towards a more efficient European Procurement arket’, COM(2011) 15/47����������������������������������������������������������������53 Commission, ‘A strategic vision for European standards: Moving forward to enhance and accelerate the sustainable growth of the European economy by 2020’, COM(2011) 311 final���������������������������������������������������� 154–55 Commission, ‘A renewed EU strategy 2011–14 for Corporate Social Responsibility’, COM(2011) 681 final (25 October 2011)���������������������� 189, 208

Table of Legislation  xxv Commission, ‘Proposal for a Directive on Public Procurement’, COM(2011) 896 final��������������������������������������������������������������������������������������������120 Commission, ‘Trade for All: Towards a more responsible trade and investment policy’, COM(2015) 497�������������������������������������������������������������������205 Commission, ‘Proposal for a Directive of the European Parliament and of the Council on the approximation of the laws, regulations and administrative provisions of the Member States as regards the accessibility requirements for products and services’, COM(2015) 615 final���������������������128 Commission, ‘Proposal for a Directive of the European Parliament and of the Council amending Directive 96/71/EC of The European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services’, COM(2016) 128 final��������������������������������������������������������������������������������������������132 Commission, ‘European Standards for the 21st Century’, COM(2016) 358 final������������������������������������������������������������������������������������������������������������������155 Commission, ‘Making Public Procurement work in and for Europe’, COM(2017) 572 final��������������������������������������������������������������������������������������������118 Commission, Communication to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the implementation of EU standardisation policy and the contribution of European standards to EU policies, COM(2018) 26 final����������������������������������������������������������������������������������������������������������� 155, 159 United Nations Committee on Economic, Social and Cultural Rights (CESCR) UN Committee on Economic Social and Cultural Rights, General Comment No. 24 (2017) on State obligations under the International Covenant on Economic, Social and Cultural Rights in the context of business activities, UN Doc E/C.12/GC/24, 10 August 2017)���������������������197 Human Rights Committee (CCPR) Human Rights Committee, General Comment No 3: The Nature of the General Legal Obligation Imposed on States Parties to the Covenant (2004), CCPR/C/21/Rev.1/Add. 1326����������������������������������������������������������������194 Human Rights Council (UNHRC) UNHRC, Protect, Respect and Remedy: a Framework for Business and Human Rights, UN Doc A/HRC/8/5, 7 April 2008�������������������������������������������189

xxvi  Table of Legislation UNHRC, Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy Framework, UN Doc A/HRC/17/31, 21 March 2011������������������������������ 189, 203 UNHRC, Human Rights and Transnational Corporations and Other Business Enterprises, UN Doc A/HRC/Res. 17/4, 16 June 2011����������������������189 International Labor Organization General Survey concerning the Labour Clauses (Public Contracts) Convention, 1949 (No 94) ����������������������������������������������������������������������������������199 ILO Declaration on Fundamental Principles and Rights at Work, Adopted by the International Labour Conference at its Eighty-sixth Session, Geneva, 18 June 1998 (Annex revised 15 June 2010)������������������������201 International Law Commission ILC, Draft Articles on Responsibility of States for Internationally Wrongful Acts, extract from the Report of the ILC on the work of its fifty-third session, November 2001, Supplement No 10 (A/56/10)����������������������������������193 Domestic Legislation France Loi no 2017-399 du 27 Mars 2017 relative au devoir de vigilance des sociétés mères et des entreprises donneuses d’ordre�����������������������������������������������������������190 Scotland Climate Change (Scotland) Act 2009�����������������������������������������������������������������������183 The Climate Change (Duties of Public Bodies: Reporting Requirements) (Scotland) Order 2015, SI 2015/347�������������������������������������������������������������������183 Public Contracts (Scotland) Regulations 2015, SI 2015/446 ��������������������������������130 United Kingdom UK Modern Slavery Act 2015������������������������������������������������������������������������������������190 United States Federal level US Constitution��������������������������������������������������������������������������������������80, 212–15, 217 Executive Order No 13,423, 72 Fed Reg 17 (26 January 2007)�����������������������������225

Table of Legislation  xxvii Executive Order No 13,514, 74 Fed Reg 194 (8 October 2009)����������������������������222 Executive Order No 13,693, 80 Fed Reg 57 (25 March 2015)�������������������������������225 Federal Acquisitions Regulations (12 November 2015)��������������������������222, 225–26 State level Pennsylvania Reciprocal Limitations Act, 62 PA Const Stat Ann § 107 (West 1986)������������������������������������������������������������������������������������������������������������219 New York State Omnibus Procurement Act (1994) (codified as amended at 1994 NY Laws 3553 and 2000 NY Laws 3032)����������������������������������������������219 California Transparency in Supply Chains Act 2010����������������������������������������������190

xxviii

part i Introduction

2

1 The ‘Age of Discretion’: Understanding the Scope and Limits of Discretion in EU Public Procurement Law SANJA BOGOJEVIĆ, XAVIER GROUSSOT AND JÖRGEN HETTNE

I. Introduction Discretion is, in the words of Dworkin, ‘the hole in a doughnut’,1 or, as DelmasMarty has expressed it somewhat more poetically, ‘le flou du droit’ (‘fuzzy law’).2 Both expressions capture the commonly perceived tension between legal rules (‘certainty’) and discretion (‘uncertainty’),3 but neither provides clearly marked guidance on how to move away from such binary frames.4 This is problematic not only because it can easily polarise legal discussion, but also because it presents law as an irrelevant component in debates on discretion.5 This volume takes a rather uncommon approach by positioning discretion at centre-stage, and making it the starting-point for the various contributions on European Union (EU) public procurement law. This approach was chosen for two reasons. First, understanding the scope and limits of EU public procurement law requires an understanding of the scope and limits of discretion in EU law. Such a requirement may seem overly demanding, especially in the EU context, where discretion operates at both the EU and the Member State levels, each within specific legal parameters.6 Indeed examining both is too ambitious for a single manuscript. This is why we have limited the present volume to the latter kind of discretion, and only as it relates to Directive 2014/24/EU (the Public

1 R Dworkin, Taking Rights Seriously (Bloomsbury 2013) 48. 2 See M Delmas-Marty, Le flou du droit (Presses Universitaires de France 1986). 3 M Shapiro, ‘The Institutionalization of the European Administrative Space’ in A Stone Sweet et al (eds), The Institutionalization of Europe (OUP 2001) 95. 4 E Fisher and S Shapiro, The Law of Public Administration: The Need to Reimagine Administrative Law (CUP forthcoming) ch 1. 5 Ibid. 6 P Craig, EU Administrative Law, 3rd edn (OUP 2018).

4  Sanja Bogojević, Xavier Groussot and Jörgen Hettne Procurement Directive), the key legal act underpinning the EU public procurement regime.7 Within this framework, Member States may exercise discretion in two types of situations: when the state and its contracting authorities implement the Public Procurement Directive (legislative discretion); and when they rely on EU law, including the above-mentioned Public Procurement Directive, to pursue social or environmental interests, and thereby derogate from the economic freedoms protected by the Treaty (administrative discretion).8 Each of the two scenarios is examined in this book. Second, the ways in which the Member States may exercise discretion are ultimately delineated by the EU courts’ adjudication on the topic. This jurisprudence, however, is significant not only in confirming the contours of what the Member States and their contracting authorities can and cannot do under the set legal regime. The case law is even more important for the way it exposes the legal reasoning behind each judgment. As this and the last chapter9 will show, assessments of proportionality play a central role. This suggests that discretion is less a matter of what a Member State may or may not do and more dependent on the legal tests the court develops and applies in relation to discretion. This shows the significance of law in debating discretion, and the need for mapping the many varieties of discretion in EU public procurement law. Debates on discretion, even if limited to EU public procurement and Directive 2014/24/EU, are difficult to exhaust in a single volume. Nor has that been our aim. Rather, we hope to initiate a discussion on the EU public procurement regime beyond the narrow disciplinary scope of EU public procurement law alone. In this chapter we take the initial steps in this direction by sketching an analytical frame for conceptualising discretion in the broader EU law context (section II), focusing, more generally, on legal reasoning on discretion by the EU courts, which centres on assessments of proportionality (section III). The aim here is to set the scene for the remaining chapters, which discuss discretion in EU public procurement law in light of internal market laws (in Part I of this book), and in relation to the possibilities and restraints as found in general EU law in pursuing strategic goals under the EU public procurement law regime (in Part II). In the last part of this volume (Part III), we look beyond the EU and explore the role of discretion in public procurement regimes elsewhere for comparative benefits.

7 [2014] OJ L94/65. This is not to overlook the two additional public procurement directives that set the basis of the EU public procurement regime – Directive 2014/25/EU on procurement by entities operating in the water, energy and transportation and postal sectors; and Directive 2014/23/EU on the award of concession contracts – which, however, are only examined peripherally in this volume. 8 It is important to keep these situations apart, although this is not always simple. Indeed, certain provisions embodied in the EU public procurement regime are instructions addressed to the Member States, those applicable to the contracting authorities only, or applicable to both without a consistent and clear distinction drawn between the two. As a result, the necessity, on part of the two entities, to consider environmental and social matters, as outlined in Art 18(2) of Directive 2014/24/EU, for instance, is a disputed matter. 9 See ch 12.

The ‘Age of Discretion’  5

II.  Conceptualising Discretion in EU Law It has long been argued that we live in the ‘age of rights’10 and the ‘age of subsidiarity’.11 We anchor these two claims in the idea that we live in the ‘age of discretion’.12 More precisely, our view is that discretion in EU law relates to the regulatory power allocation between the EU and its Member States, which, when reviewed judicially, rests heavily upon assessments of proportionality. What is more, discretion, as one of the most significant dynamics of administrative law,13 interacts with several key concepts of law, including the rule of law, separation of powers and methods of judicial interpretation. These links are unpacked in turn – albeit in brief – in the following sections.

A.  Discretion and the Rule of Law in EU Law The rule of law allows for a variety of definitions,14 but one basic view is that it seeks to limit arbitrariness through the mechanism of checks and balances.15 In the EU, the expansion of the rule of law, in the late 1980s and early 1990s, corresponds to an expansion of rights recognised by the Court of Justice of the European Union (CJEU) in litigation relating to the economic freedoms and general principles, which are in fact often thought of as the ‘rule of law principles’.16 This case law maps the scope of discretion through the application of a proportionality test. In a similar vein, the development of EU administrative law, and its authority, has been fostered by the application of procedural rights enshrined in two legal principles: effectiveness and equivalence.17 Indeed, the strong bond between discretion and proportionality in the adjudication of substantive and procedural rights is underlined in the scholarship.18 Kelemen, for instance, argues that the ECJ [European Court of Justice] has also encouraged the spread across Europe of a proportionality test for discretionary administrative decisions – demanding that 10 L Henkin, The Age of Rights (Colombia UP 1990). 11 R Spano, ‘Universality or Diversity of Human Rights? Strasbourg in the Age of Subsidiarity’ (2014) 14 Human Rights Law Review 487. 12 R Carenta, ‘On Discretion’ in S Prechal and B van Roermund (eds), The Coherence of EU Law (OUP 2008) 185. See also Shapiro (n 3). 13 Shapiro (n 3). 14 See eg J Raz, ‘The Rule of Law and its Virtue’ (1977) 93 LQR 195; TRS Allan, ‘Legislative Supremacy and the Rule of Law: Democracy and Constitutionalism’ (1985) 44 CLJ 111; Lord Bingham, ‘The Rule of Law’ (2007) 66 CLJ 67. 15 AV Dicey, An Introduction to the Study of the Law of the Constitution, 10th edn (Liberty Fund Inc 1959) ch 4. 16 D Kelemen, Eurolegalism: The Transformation of Law and Regulation in the European Union (OUP 2011) 47–52. 17 Ibid 53. 18 See eg A Barak, Proportionality (CUP 2014) 384–85; J Rivers, ‘Proportionality and Discretion in International and European Law’ in N Tsagourias (ed), Transnational Constitutionalism: International and European Perspective (CUP 2007) 107; Keleman (n 16).

6  Sanja Bogojević, Xavier Groussot and Jörgen Hettne national courts assess whether an administrative measure imposed a burden on the individual suitable, necessary, and proportional to the objective sought … By spreading the principle of proportionality across the EU, the ECJ has invited courts to engage in stricter judicial scrutiny of discretionary administrative decisions.19

Thus the strong connection between proportionality and discretion seems to hold also in practice. One may even contend that ‘the theory of discretion must be co-extensive with the doctrine of proportionality if the separation of powers is not to collapse’.20 The questions that then emerge are what the role of each branch of government is, and how much discretion each branch may enjoy without compromising the separation of powers.

B.  Discretion and the Separation of Powers In light of the doctrine of separation of powers, discretion can be defined as a space in the creation (‘legislative discretion’), application (‘executive discretion’) and adjudication (‘judicial discretion’) of legal norms.21 One of Barak’s fascinating conclusions following his scrutiny of each is that they are all ultimately designed to ensure individual liberty.22 Applying this thinking to the EU legal order is tricky, in part because the separation of powers in the EU institutional system is somewhat blurred, and in part due to the EU’s federalist nature, where the idea of separation of powers operates at both national and regional levels.23 Yet the doctrine of (federal) separation of powers in EU law has a decided impact on how the concept of discretion is understood in the EU legal order. In such an intricate legal system, dare we speak of federal discretion? One concern, in this regard, is what discretion national legislatures may enjoy in adopting laws that derogate from EU law (ie ‘legislative/federal’). Another question relates to the discretion of an administrative or contracting authority in a Member State, when implementing EU secondary law (‘executive/federal’). A  further inquiry concerns the discretion of a national court in interpreting national law in light of EU law (‘judicial/federal’). The answer to these questions may lie in the principle of ‘constitutional tolerance’, which Weiler sees as the normative hallmark of federalism.24 In fact, since the origins of the European Economic Community, this principle has been enshrined

19 Kelemen (n 16). 20 Rivers (n 18) 108. 21 See M Brand, ‘Discretion, Divergence and Unity’ in Prechal and van Roermund (eds) (n 12) 219. 22 Barak (n 18), 385–86. See more generally ibid 385–415, where the focus is mostly on legislative and judicial discretion. 23 On federalism and EU law, see R Schutze, From Dual to Cooperative Federalism: The Changing Structure of European Law (OUP 2009) 4. 24 See JHH Weiler, ‘Federalism without Constitutionalism: Europe’s Sonderweg’ in K Nicolaidis and R Howse, The Federal Vision (OUP 2001) 55, 65.

The ‘Age of Discretion’  7 in the clause about an ‘ever closer union of peoples’, reflecting both the unity (‘closer union’) and diversity (‘the peoples’) of the ongoing European project.25 The Treaty of Lisbon reinforced its importance by including the so-called ‘national identity clause’ in Article 4(2) of the Treaty on European Union (TEU).26 Under this provision, Member States may benefit from a certain margin of discretion when relying on their national constitutional identity. Against this background, federal discretion is indeed intimately connected with constitutional tolerance. Yet discretion is not only related to divergence and decentralisation;27 especially not in the EU context, where it is deeply engrained in the concept of unity. Ultimately, the acceptance or tolerance of diversity is a necessary condition for sustaining the narrative of unity in the EU legal order. All in all, this managed discretion conveys the ideas of ‘deference as respect’28 and the cultivation of humility, both of which are in fact necessary for facilitating pluralism and the existence of a uniform EU legal order.29 What this all means is that EU federal discretion is a complex notion that boasts both an external dimension (‘respect for the other’) and an internal dimension (‘the concept of unity’).30 Striking a balance between the two is a task that inevitably involves judicial interpretation, as outlined next.

C.  Discretion and Interpretation Discretion is in many ways a natural part of law due to law’s inherent ­indeterminacy.31 Indeed, it is argued that there is ‘an intimate link’ between issues concerning interpretation and those of discretion.32 In Dworkin’s view, a distinction may be drawn between a stronger and a weaker form of discretion, depending on the level of control enjoyed, often by judges, in reviewing and applying law.33

25 See A Moravcsik, ‘The European Constitutional Compromise and the Neofunctionalist Legacy’ (2005) 12 Journal of European Public Policy 349. 26 ‘The Union shall respect the equality of Member States before the Treaties as well as their national identities, inherent in their fundamental structures, political and constitutional, inclusive of regional and local self-government.’ 27 Brand (n 21) 223. 28 See D Dyzenhaus, ‘The Politics of Deference: Judicial Review and Democracy’ in M Taggart (ed), The Province of Administrative Law (Hart Publishing 1997) 279. 29 See P Caro de Sousa, ‘Normative and Institutional Dimensions of Rights Adjudication Around the World’ (17 April 2018), available at ssrn.com/abstract=3164407. 30 This view is inspired by Beaud, who sees the principle of federalism not as an individualist principle but as a holist principle, in the sense that its core element lies in the diverse systemic relations between the federation and its Member States and also between the Member States themselves: see O Beaud, Théorie de la fédération (Presses Universitaires de France 2007) 198. 31 H Lindahl, ‘Discretion and Public Policy: Timing the Unity and Divergence of Legal orders’ in Prechal and van Roermund (eds) (n 12) 291, 296–98. 32 T Koopmans, ‘Methods of Interpretation’ in O Wiklund (ed), Judicial Discretion in European Perspective (Kluwer Law International 2003) 75. 33 See R Dworkin, ‘The Model of Rules’ (1967) 35 University of Chicago Law Review 14.

8  Sanja Bogojević, Xavier Groussot and Jörgen Hettne The EU legislature has traditionally been afforded wide discretion in adopting secondary legislation, to which the bourgeoning debate on subsidiarity and ‘competence creep’ attests.34 When Member States, on the other hand, attempt to derogate from EU law, especially in internal market case law, this has generally been interpreted more strictly by the CJEU.35 Indeed, the relevant jurisprudence tends to repeat one of the EU Court’s favourite mantras: that derogation by a Member State from one of the economic freedoms must be ‘strictly interpreted’.36 Ultimately, CJEU interpretation of Treaty provisions links directly to the authority of EU law, especially as the Court is often seen justifying its judgments on the grounds of ensuring the effectiveness and uniformity of the EU legal order. Endorsing this view on behalf of the Member States would, however, imply that their own discretion is limited,37 especially in finding justifications for a potential breach of EU law. Yet discretion does not always restrain action but can also be used as an interpretative space. Thus, Member States may be afforded wide discretion in pursuing specific public policies. In significant cases, including Van Duyn,38 Läärä39 and Omega,40 the CJEU asserts that the concept of public policy may vary from one country to another and from one period to another,41 meaning that it provides the possibility for Member States to rely on so-called ‘cultural discretion’.42 ­Furthermore, it may even be said that delegating to the national courts the task of the proportionality test under the preliminary reference procedure constitutes another example of discretion by the CJEU.43 In Mickelsson & Roos and Sandström, for example, the CJEU confirmed that Article 267 of the Treaty on the Functioning of the European Union (TFEU) ‘is based on a clear separation of functions between the national courts and the Court of Justice’, and that ‘any assessment of the facts in the case is a matter for the national court’.44 This can be viewed

34 D Wyatt, ‘Community Competence to Regulate the Internal Market’ in M Dougan and S Currie (eds), Fifty Years of the European Treaties: Looking Back and Thinking Forward (Hart Publishing 2009); S  Weatherill, ‘The limits of legislative harmonisation ten years after Tobacco Advertising: how the Court’s case law has become a “drafting guide”’ (2011) 12 German Law Journal 827; P Craig, ‘The ECJ and Ultra Vires Action: a Conceptual Analysis’ (2011) 48 Common Market Law Review 395. 35 Note the changes in Art 4(2) TEU, and Case C-293/12 Digital Rights Ireland, EU:C:2014:238. 36 For an overview see, eg, C Kaupa, The Pluralist Character of the European Economic Constitution (Hart Publishing 2016) 203. 37 See L Azoulai, ‘The Europeanisation of Legal Concepts’ in U Neergaard and R Nielsen, European Legal Methods – in a Multi-Level EU Legal Order (DJØF, 2012) 165, 182. 38 Case C-41/74 Van Duyn v Home Office, ECLI:EU:C:1974:133. 39 Case C-124/97 Läärä, ECLI:EU:C:1999:435. 40 Case C-27/00 Omega, ECLI:EU:C:2002:161. 41 For an overview of the case law, see Lindahl (n 31). See also B van Roermund, ‘Laws at Cross-Purposes: Conceptual Confusion and Political Divergence’ in Prechal and van Roermund (eds) (n 12) 315. 42 See, on the concept of ‘evidentiary discretion’, Rivers (n 18). 43 Case C-142/05 Mickelsson & Roos, ECLI:EU:C:2009:336, para 39; Case C-433/05 Sandström ECLI:EU:C:2010:184, para 35. 44 Mickelsson & Roos (n 43) para 41; Sandström (n 43) para 35.

The ‘Age of Discretion’  9 as ‘evidentiary discretion’, since the CJEU assumes that a national court is better positioned to perform the test of proportionality, thanks to its special access to the facts of the case.45 In the end, the close connection between discretion and judicial interpretation reveals the virtue of discretion: its flexibility, which, however, is not isolated from law but dependent on legal reasoning for determining the appropriate standard of scrutiny.46 In fact, a theory of discretion is co-extensive with the doctrine of proportionality. The doctrine of proportionality, in turn, is an offspring of the rule of law and its original logic of limiting the arbitrary use of power.47 This is important for understanding their relationship properly before we analyse the ebb and flow of the CJEU case law on EU public procurement law, as well as the role of discretion in EU public procurement law regime.

III.  Judicial Discretion and Proportionality As the scope of discretion is closely intertwined with the exercise of judicial review,48 it is paramount for our present endeavour to understand the relationship between the two. If one could establish that Member States should be granted a high level of discretion with regard to the use of social or environmental clauses in public procurement – because such discretion would be justified by the social and environmental objectives and legitimate public interests underlying such clauses – what would such discretion mean for judicial review, and for the proportionality assessment of contracting authorities’ decision-making power in this regard? To address this question, which is the task especially of Part II of this volume, we must first examine the implications of a high level of Member State discretion for judicial review, and the proportionality assessment of national decision-making procedures more generally.

A.  The Nature of the ‘Inverse Relationship’ and its Impact on the Level of Discretion It can be concluded that the relationship between, on the one hand, the level of discretion granted to a Member State and, on the other hand, the intensity of the judicial review by a judge applying EU law, could reasonably be expected to be an inverse relationship, where regulatory power moves from the EU to the 45 Rivers (n 18). 46 T Tridimas, ‘Proportionality in European Community Law: In Search of the Appropriate Standard of Scrutiny’ in E Ellis, The Principle of Proportionality in the Laws of Europe (Hart Publishing 1999) 65. 47 T Tridimas, The General Principles of EU Law (OUP 2009). 48 A Fritzsche, ‘Discretion, Scope of Judicial Review and Institutional Balance in European Law’ (2010) 47 Common Market Law Review 361, 361.

10  Sanja Bogojević, Xavier Groussot and Jörgen Hettne Member State.49 Furthermore, a high level of Member State discretion should, a priori, mean that the proportionality assessment carried out by a judge is made with a lower level of scrutiny. After all, discretion is often associated with the idea of freedom to decide what action is appropriate and necessary in a certain context, which would appear antithetical to a high-intensity judicial review based on an assessment of proportionality. But what does discretion look like in practice? What conclusions can be drawn from the CJEU’s case law regarding the relationship between Member State discretion, the intensity of judicial review and assessments of proportionality? A recent judgment confirms the expected inverse relationship between the level of discretion and the level of intensity of the proportionality assessment. The case in question is Domenico Politano,50 which concerns the validity of a legal requirement in Italy that conditions responses to calls for tender for the grant of concessions in the field of betting and gambling on financial standing, in proof of which bank statements from at least two different banks must be submitted. Here, the Court found the measure to restrict the freedom of establishment within the meaning of Article 49 TFEU. However, upon explicitly recognising a wide margin of discretion on behalf of Member States within the context at hand,51 the Court kept a deferential stance in its assessment of the proportionality of the measure.52 It should be noted that this is only one of several cases in the area of gambling where the Court has proceeded in such a way,53 and there are judgments in the Court’s case law in other areas that display an inverse relationship between Member State discretion and the intensity of judicial review based on the proportionality assessment.54 Yet the question remains whether judicial review based on EU law may dictate other types of scrutiny regarding a Member State’s use of discretion. If the Court establishes that Member States should have a high level of discretion, and proceeds to apply a lower level of scrutiny when it comes to assessing the proportionality of a certain national measure, does EU law not require any further checks on the use of national discretion? Looking at the case law of the Court,

49 We are thankful to Dieter Kraus, who raised this point at the EU Public Procurement Law workshop held in November 2017 at Lady Margaret Hall. 50 Case C‑225/15 Domenico Politano, EU:C:2016:645. 51 According to ibid paras 39 and 40, ‘the Member States enjoy a wide discretion as regards choosing the level of consumer protection and the preservation of order in society which they deem the most appropriate [and are] therefore free to set the objectives of their policy on betting and gambling and, where appropriate, to define in detail the level of protection sought’. 52 In fact, with reference to the ‘particular nature of economic activities in the betting and gambling sector’ and without going into further detail about its reasoning, the Court squarely stated that the requirement at issue ‘does not appear to go further than is necessary in order to achieve the objective pursued’: see ibid, para 48. 53 See, eg Läärä (n 39); and Case C-42/07 Liga Portuguesa de Futebol Profissional and Bwin International, EU:C:2009:519. 54 Most notably, Omega (n 40); and Joined Cases C-570/07 and C-571/07 Perez and Gomez, EU:C:2010:300.

The ‘Age of Discretion’  11 we may discern something akin to a procedural proportionality assessment, with elements of judicial review that would arguably remain strict – even in the face of a high level of Member State discretion. The Court’s case law on public procurement becomes an excellent illustration of this, because even in sensitive areas like gambling, the Court has in principle remained strict in its requirements on transparency, as discussed in chapter 5. Here, it is useful to reflect first on the different elements of discretion, and how they may be seen to regulate the intensity of judicial review.

B.  The Elements of Discretion and their Impact on the Intensity of Judicial Review The intensity of judicial review is influenced by various elements (the so-called ‘elements of discretion’) that also affect the level of discretion.55 Rivers makes a tripartite distinction between ‘cultural discretion’, ‘policy-making discretion’ and ‘evidentiary discretion’.56 We see elements of all three types in EU law too, including EU public procurement law. More precisely, discretion in EU law is determined by the nature of the interest (‘cultural discretion’); the level of harmonisation (‘policy-making discretion’); and the type of proceedings at issue (‘evidentiary discretion’). Cultural discretion is best illustrated by the already mentioned CJEU jurisprudence on public policy, including Van Duyn and Omega.57 Those cases are important, since they show that the nature of the interest invoked by the Member State is essential for determining the level of discretion in a particular case. In a similar vein, Advocate General Cruz-Villalón has stated that ‘[a]s a result of the entry into force of the Lisbon Treaty, when working conditions constitute an overriding reason relating to the public interest justifying a derogation from the freedom to provide services, they must no longer be interpreted strictly’.58 This view thus reinforces the idea that cultural discretion determines the level of review. As for policy-making discretion, it is particularly important in a federal order of competences, and especially in the EU context where EU legislation must be implemented at the national level (‘situation of implementation of EU law’) and national legislation may restrict the effective application of EU law (‘situation of derogation from EU law’). The level of discretion is naturally higher for Member States that do not need to implement any particular EU secondary legislation. By contrast, in a situation of implementation, the Member State may enjoy only 55 Tridimas (n 46). See also D Thym, ‘The Constitutional Dimension of Public Policy Justifications’ in P Koutrakos et al (eds), Exceptions from EU Free Movement Law (Hart Publishing 2016). 56 Rivers (n 18). 57 Van Duyn v Home Office (n 38); Omega (n 40). 58 Case C-515/08 Santos Palhota, EU:C:2010:245, para 53. Note that the CJEU did not follow this view.

12  Sanja Bogojević, Xavier Groussot and Jörgen Hettne a narrow discretion, but the issue is a complex one that depends on the level of harmonisation of EU secondary legislation. Here, it is important to draw a distinction between exhaustive and non-exhaustive harmonisation. As the Court stated in Ålands Vindkraft, when a matter has been the subject of exhaustive harmonisation at the EU level, ‘any national measure relating thereto must be assessed in the light of the provisions of that harmonising measure and not in the light of primary law’.59 Exhaustive harmonisation is rather rare in EU law,60 and the supersession of secondary law over primary law is only procedural. That is, secondary law does not invalidate the very existence of primary law.61 In EU public procurement law there is no exhaustive harmonisation, and therefore EU secondary law is always applicable in synergy with EU primary law. Lastly, evidentiary discretion is relevant in EU public procurement law when it comes to assessing the proportionality of a national measure. Here, the CJEU can delegate the application of the proportionality test to the national court, and thereby create a certain level of discretion. Similarly to the two previously described types of discretion, evidentiary discretion fits a federal order of competence well, because the core issue is the degree of connection between the EU institutions (including the CJEU) and the Member States’ institutions and authorities (including national courts).

IV.  Points of Reflection The view set out in this chapter is that discretion can influence both the scope of protection of individual rights (‘rights discretion’) and the scope of a regulatory power between the Member States and the EU (‘federal discretion’). In this way, discretion in EU law is closely related to the meta concepts of rule of law and separation of powers. As already mentioned, it is co-extensive with the doctrine of proportionality, which may be regarded as an offspring of the substantive rule of law and the idea of limiting arbitrary powers, notably through judicial review. In reviewing discretion, the EU courts do not merely permit or restrict Member State powers. More importantly, they apply proportionality assessments where the intensity of review is guided by three main elements: the nature of the interest (‘cultural discretion’); the level of harmonisation (‘policy-making discretion’); and the type of proceeding (‘evidentiary discretion’). These findings are significant, because they highlight some of the complexities found in determining the scope and limits of discretion. In this way, they mark the significance of pursuing a study of the EU public procurement regime centred around discretion.

59 Case C-573/12 Ålands Vindkraft, EU:C:2014:2037, para 57. 60 Case C-37/92 Vanacker, EU:C:1993:836; Case T-325/01 Daimler Chrysler, EU:T:2005:322; and Case C-134/15 Lidl, EU:C:2016:498. 61 AG Cruz Villalón in Case C-216/11, Commission v France, EU:C:2013:162.

The ‘Age of Discretion’  13

V.  Discretion as Discussed in this Volume A central aim of this volume is to analyse the EU public procurement regime, particularly Directive 2014/24/EU, in its broader legal context. That is why Part II of this book positions the analysis against the backdrop of internal market laws, which provides a broader space in which debates about discretion can unfold. In Part III, the discussion homes in on the possibilities and limitations for Member States to pursue strategic goals, but again the analysis draws on EU law more broadly. Here, the focus is on environmental goals, as strategic goals on social objectives have been treated exhaustively and brilliantly elsewhere.62 In Part IV the volume looks outwards and examines public procurement regimes beyond the EU, and compares these with regard to discretion. A summary of each of these chapters is provided next.

A.  Discretion in EU Internal Market Laws (Part II) Stephen Weatherill’s contribution starts with the claim that EU law on public procurement makes internal market law better. He demonstrates how the Member States must comply with the conditions imposed by EU law in general. Decisions that obstruct inter-state trade must be reasoned, transparent and subject to review. The CJEU has integrated these requirements into the substantive rules of free movement. However, it is not only procedure but also remedies that are at stake. EU law has procedural and remedial teeth in case of misapplication. ­Weatherill argues that this model locks Member States into a tighter and more credibly enforced network of reciprocal commitments than is to be found in any other transnational trading bloc. However, he contends that the model is far from perfect or complete. The permitted space for Member States to justify traderestrictive practices is worryingly imprecise and unpredictable. Free movement according to the principle of conditional mutual recognition looks a lot better on paper than in practice. Overall, internal market law as a constraint on regulatory discretion practised at the national level has holes in it. Against this background, Weatherill maintains that public procurement law is significantly more elaborate than general internal market law – or, as his title suggests, that public procurement law is internal market law made better. A more critical view of public procurement law is presented by Christopher Bovis. He argues that discretion as a principle in the application of public procurement regulation represents the most influential factor in the evolution of public procurement acquis. He critically assesses the band-width of discretion in public procurement by identifying the grounds where it can be exercised by contracting authorities in their attempt to apply public procurement law as the conduit 62 A Sanchez-Graells (ed), Smart Public Procurement and Labour Standards: Pushing the Discussion after RegioPost (Hart Publishing 2018).

14  Sanja Bogojević, Xavier Groussot and Jörgen Hettne for delivery of public services. He argues that an important reason for conceptual and regulatory vagueness is the boundaries of discretion in the format of nonexhaustive harmonisation. This is a shortcoming of public procurement law that has existed from its inception until the most recent reforms of the 2014 procurement directives. Bovis contends that the non-exhaustive harmonisation of the public procurement rules has resulted in a legal lacuna and a recurrent danger of weakening discretion in the application of public procurement regulation, and consequently of limiting the effectiveness of the public procurement acquis. Albert Sanchez-Graells offers reflections on the constraint on contracting authorities not to artificially narrow down competition, as outlined in Article 18(1) of Directive 2014/24/EU, and he discusses this constraint as a possible check on executive discretion in public procurement. Sanchez-Graells argues that administrative practices based on executive discretion are much more likely to result in competitive distortions than are the public procurement rules themselves. Therefore, even if it might seem that there are very few restrictions derived from public procurement legislation in the books, there is much space to generate competition distortions by the conduct carried out in practice or in action, as a result of the discretion left to contracting authorities. Sanchez-Graells proposes a test for assessing competition-based constraints on the exercise of executive discretion that derive from the prohibition against artificially narrowing down competition. He does this in relation to the exercise of discretion for the inclusion of social, green and human-rights clauses in tender documentation, with particular regard to the mandate contained in Article 18(2) of Directive 2014/24/EU, whereby ‘Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law’. The author calls this test a presumption-based substantive test, as it aims to balance, on the one hand, the competition-based constraints derived from Article 18(1) and, on the other hand, the mandate to ensure the environmental, social and labour compliance that Article 18(2) imposes on Member States. He aligns this approach with an additional test of procedural traceability, which concerns the documentary obligations that contracting authorities need to discharge in the exercise of executive discretion. He proposes in this way the creation of a safe haven to modulate the operation of the substantive presumption, that is, a counter-presumption of conformity where the decision-making is transparent and traceable. Angelica Ericsson and Xavier Groussot elaborate on the obligation of transparency in EU public procurement law. They explain that the phenomenon of limiting discretion at the national level by EU law has been driven by the adjudicative application of the principles of equivalence and effectiveness. A similar process can also be detected in relation to the principle of proportionality, where the CJEU has invited national courts to undertake a stricter review of discretionary administrative decisions. Ericsson and Groussot claim that equivalence and effectiveness flow from the ideology of transparency and, at the same time, constitute fundamental principles of EU public procurement law together with the obligation of transparency. They argue that the CJEU’s public procurement and

The ‘Age of Discretion’  15 free movement case law on the obligation of transparency confirms its symbiosis with the principles of proportionality, equivalence and effectiveness.

B.  Discretion in Pursuing Strategic Goals under the EU Public Procurement Regime (Part III) In the third part of the book, the authors move closer to the area of public procurement and concentrate on discretion in the pursuit of strategic goals under the EU public procurement regime. Marta Andhov opens with a broad view of the discretion available for contracting authorities when engaged in sustainable procurement. She observes that the EU procurement regime changed significantly in the period from 2004 to 2014 in terms of the increased importance placed on the environment, innovation and social issues in public procurement processes. Previously, environmental and social considerations were cumulatively referred to as ‘secondary’ and ‘horizontal’ policies, and understood as aims that did not constitute the primary objective of public procurement. The well-known tension between internal market integration and horizontal policies was omnipresent, that is, the tension between the primary goal of EU public procurement, with its focus on opening national procurement markets to competition from bidders established abroad, and the secondary policies, which sought to consider environmental and social issues in the procurement process. Hence the uncertain place of secondary policies in public procurement. With the new regime, so-called ‘strategic public procurement’ has been encouraged. Strategic public procurement is an umbrella term for all public procurement that is used as a policy tool, and therefore includes considerations other than solely economic ones. Andhov points out that pro-strategic public procurement amendments that found their way into the final version of Directive 2014/24/EU are often facultative. The facultative character of the provisions entails that contracting authorities may consider strategic objectives, but are not obliged to do so. Against this background, Andhov analyses what legal status the pro-strategic provisions in the EU public procurement directives enjoy. She raises the question whether the Commission’s policy statements promoting innovation as well as environmental and social considerations have found their way into the legal text of the directives. Or has an opportunity to establish a sustainable public procurement market been missed? The author focuses in particular on the scope of discretion entrusted to contracting authorities in pursuing – or, rather, ignoring – the strategic objectives outlined in Directive 2014/24/EU. Jörgen Hettne devotes his chapter to the role European standards play in public procurement. Hettne discusses how the development of standards contributes to fair competition between contractors, but at the same time limits the discretion of contracting authorities. He describes the role and function of European standards in enhancing cross-border trade in the EU internal market, and how they have supplemented EU legislation in a unique manner through the ‘New Approach’, through which European standards have become a key instrument for a­ chieving

16  Sanja Bogojević, Xavier Groussot and Jörgen Hettne harmonisation of national technical requirements in order to remove trade barriers. Hettne demonstrates that the strong position of European standards has influenced the common framework for public procurement in the EU and has made it necessary to specifically regulate the obligations of contracting authorities to comply with various technical standards in EU public procurement law. He argues that there is an interaction between EU harmonisation and standardisation, on the one hand, and the discretion of contracting authorities in public procurement, on the other hand, and shows that the development of technical standards clearly limits the discretion of contracting authorities. He contends that this is perfectly in line with the objectives of the internal market, but raises a question about legitimacy, given that the standard-setting process is sometimes criticised for not being democratic, favouring as it does larger companies. Hettne also asks if this means that the use of standards unfairly limits the discretion of contracting authorities, and discusses different ways to achieve a balance between fair competition and reasonable discretion in public procurement. Sanja Bogojević focuses more directly on environmental issues when she maps discretionary space in EU public procurement law. She shows that the current EU procurement regime entrusts a range of discretionary powers to the Member States and the national procurement authorities to promote environmental policies whilst completing the objectives of the internal market. The construction and maintenance of the internal market and environmental protection must therefore be seen as two parties in a symbiotic relationship. In this regard, Bogojević observes that the question to what extent the EU procurement regime permits discretionary space for pursuing environmental objectives is usually understood as a choice between two options: either interfere or leave the national discretionary space be. This binary view of discretion, she suggests, has meant that much of the mutual benefit between trade and environmental protection, which is visible elsewhere in internal market law, has been absent from the EU public procurement regime. Against this background, Bogojević sets out to chart the possibilities for contracting authorities to pursue environmental considerations, which she undertakes by mapping intersections between environmental law and EU public procurement law, thereby showing the interconnectedness between these two areas of law. Through this analysis, Bogojević seeks to encourage legal intra-disciplinarity and to trigger the reader’s imagination in thinking about environmental problems and their legal responses.

C.  Discretion in Public Procurement Regimes Beyond the EU (Part IV) In the fourth part of this volume the authors focus on procurement law in a wider context and analyse what scope there is for discretion in areas outside the EU regime. This part commences with a chapter by Claire Methven O’Brien and Olga Martin-Ortega, comparing public and private supply chains as regards the

The ‘Age of Discretion’  17 protection of human rights. They explain that the UN Framework on Business and Human Rights, and the guiding principles which implement it, describes how businesses should discharge their duty of ‘human rights due diligence’ in areas including supply-chain management. Many large corporations have responded to such developments by establishing, besides human rights policies, detailed performance standards for their suppliers, which take legal form via incorporation into purchase contracts. They observe that, in stark contrast, the supply-chain responsibilities of public buyers for human rights have scarcely been addressed by new legislation, official guidance or contractual terms, notwithstanding increasing concerns about the human rights impacts of public purchasing. Methven O’Brien and Martin-Ortega contend that such a divergence between norms applicable in the public and private supply chain contexts appears paradoxical. Against this background, they explore the developments in the legal framework applicable to purchasing by public and private actors linked to human rights abuses as understood in international human rights law, and consider what implications these developments have for law, policy and practice. Thereafter, they extend their analysis and address, in particular, how the state duty to protect human rights and the doctrine of positive obligations play out in the procurement scenario with reference to the European Convention on Human Rights. They continue by demonstrating how public buyers’ discretion to promote the achievement of social objectives has conventionally been construed from the standpoint of EU public procurement law, namely as an exceptional derogation from the logic of competition. In a final section they analyse new supply-chain standards, demonstrating a growing discrepancy between the conduct expected of corporations versus public buyers as regards human rights due diligence. Jason J Czarnezki extends this wider view on procurement law to a comparison between US and European discretion in green public procurement, especially regarding the role of eco-labels and life-cycle costing. He starts with a discussion of the nature of public procurement discretion in the US, showing that an American State, when acting as a consumer in the market or a ‘market participant’, has significant discretion and can make restrictive choices in public procurement (eg, preferring eco-friendly or locally produced goods). In light of this, Czarnezki evaluates how emerging green public procurement techniques adopted in the EU can be used as a model for the US. He contends that green public procurement can serve as an effective environmental regulatory tool in a mode of alternative environmental governance, allowing public institutions to create both public and private markets for more environmentally friendly goods. This is a model for environmental progress that bridges the gap between traditional environmental law and private environmental governance. Lastly, the author addresses the emergence of life-cycle costing and eco-labels, which are important tools employed in green public procurement, and considers what role these tools might play in furthering environmental interests through public procurement programmes in the EU and US. Czarnezki focuses especially on the question whether green public procurement can be effectively used to promote environmental interests while creating

18  Sanja Bogojević, Xavier Groussot and Jörgen Hettne new innovative markets through the use of eco-labels and life-cycle costing. He argues that it is important for the two jurisdictions to learn from each other. He contends that the US legal system can be helpful to the EU in designing its green public procurement programme by suggesting opportunities for creativity and flexibility. Ultimately, the EU green public procurement programme, with its forthcoming life-cycle costing methodology and the common eco-label technical criteria, can be a model for implementation in the US as well as globally. Ohad Graber-Soudry ends this part with another type of external perspective. He analyses the extent to which European Research Infrastructure Consortia (ERICs) are obliged to respect EU public procurement law, and discusses the exemption for international organisations from the EU public procurement regime. He explains that research infrastructures are facilities, resources and services that are used by the research communities to conduct top-level research and foster innovation. An ERIC is a specific legal form for facilitating the establishment and operation of research infrastructures with European interest. It is based on Article 187 TFEU, which provides for the setting up of joint undertakings or any other structure necessary for research and technological development. According to Council Regulation (EC) No 723/2009, ERICs qualify as international organisations for the purposes of Directive 2004/18/EU (now 2014/24/EU) on public procurement, and they may adopt their own procurement procedures. However, these procedures must be based on the principles of transparency, non-discrimination and competition. Graber-Soudry discusses in detail the regulatory framework that underlines ERIC procurement activity and the limits of the discretion ERICs enjoy in formulating their own procurement rules. He evaluates relevant obligations derived from EU law, the EU public procurement regime and the EU legal framework for ERICs. Graber-Soudry contends that although ERICs are exempt from the scope of the EU directives on public procurement, they remain subject to the TFEU and the general EU principles applicable to procurement as interpreted by the CJEU. ERICs can therefore not develop a fully independent procurement regime the way other international organisations do. ERICs have less freedom to deviate from established EU policy and related obligations, and may also be subject to more scrutiny by national courts and the CJEU.

D.  Looking Ahead: Part V In the concluding chapter, the editors return to discussing proportionality assessments as a focal point in understanding the limits and scope of discretion under the EU public procurement regime. In many ways, this builds on this introductory chapter and maps the various levels of intensity of review we can expect when the CJEU interprets Member States’ implementation of Directive 2014/24/EU and derogation from the Treaties in order to pursue strategic goals. In looking ahead, we are sure to see much case law on these legal issues.

part ii Discretion in EU Internal Market Laws

20

2 EU Law on Public Procurement: Internal Market Law Made Better STEPHEN WEATHERILL

I. Introduction The law of the EU’s internal market disciplines the exercise of discretion practised by national actors insofar as it collides with the project of market integration to which the EU has always been committed. Those subject to EU law have no unconditional right to regulate. They must comply with the conditions imposed by EU law. Section II of this chapter demonstrates that this means that the control asserted over national regulatory autonomy, where it obstructs inter-state trade, is mediated through the patterns of justification that place limits or conditions defined by EU law on the right to regulate at national level. At a more detailed level, the requirement that decisions that obstruct inter-state trade be reasoned, transparent and subject to review has been bolted on to the substantive rules of free movement by the Court of Justice of the European Union (‘Court’). This is supplemented by a small amount of secondary legislation, which seeks to impose structure on national practice where it might conflict with the demands of market integration. It is not only procedure but also remedies that are at stake. Violations of EU law are not pursued exclusively by the Commission, but also by private parties able to enforce directly effective EU law rights before national courts, and, moreover, the pattern of national remedies is itself lent an EU shape by the Court’s insistence that where EU law forms the basis of a claim before a national court, national remedies shall be no less generous than apply to a domestic action and – more vigorous still  – that those national remedies shall be effective. In this way the discretion of regulatory bodies within the Member States is confined in its application to matters of substance, but there is more to it: EU law also provides procedural and remedial teeth in case of its misapplication. This model locks Member States into a tighter and more credibly enforced network of reciprocal commitments than is to be found in any other t­ ransnational

22  Stephen Weatherill trading bloc. Section III of this chapter warns that the model is far from perfect or complete. The space allowed to Member States to justify trade-restrictive practices is worryingly imprecise and unpredictable. The structure of conditional mutual recognition – whereby products and services that are good enough for the market of one Member State are good enough for the market of all Member States unless a justification is shown to support the application of stricter standards – has been elaborated by the Court, but it often needs the Court – or a national court – to rule on whether the conditions associated with justification are met, which tends to lend a practical advantage to the powerful regulator wishing to obstruct trade. Free movement according to the principle of conditional mutual recognition looks a lot better on paper than in practice. Procedure is murky too. The Court has ambitiously added certain procedural requirements, principally associated with transparency, to the free movement rules, but even so there is a wide discretionary space for national choices about matters of detail, and they will certainly vary among the Member States to the detriment of legal and  commercial certainty in the internal market. The law governing remedies follows a similar pattern. The Court has cannily applied a requirement of nondiscrimination and effectiveness to national practice, and it has added concrete requirements under a claim that certain consequences at national level dictated by EU law are inherent in the Treaty. But these EU law adjustments attach to existing national law, and in the matter of detail it is national law that is largely in charge. Again this means a degree of unpredictability and variation. The best way to understand this pattern is to appreciate that the right to regulate at national level is confined rather tightly when is compared to instruments of orthodox international law but that control is not comparable to the systematic structures found in an orthodox state system. This, of course, is where we expect to find EU law – positioned somewhere between international and national law, formally the former but resembling in important respects the latter. Overall, though, it means that internal market law, as a constraint on regulatory discretion practised at national level, has holes in it. Compared to this general pattern, public procurement law is paradise. Procurement is in some respects simply one sector where the broad pattern of EU internal market law may be seen in action, but in fact it is a particularly well-developed example. Section IV of this chapter explains that discretion in procurement practices is confined still more closely and at a much more intricate level of detail than is the norm under primary law. In the substance of the control imposed on national regulatory discretion, in the procedural dimensions of national administrative practice and in the matter of remedies, EU public procurement law is significantly more elaborate than general internal market law. This is largely as a result of the EU’s pattern of secondary legislation concerning substance, procedure and remedies in the field. So public procurement is, in short, an especially vivid and well-developed corner of EU internal market law. Public procurement law is internal market law made better.

Internal Market Law Made Better  23

II.  The Law of the Internal Market – Structuring the Exercise of Regulatory Discretion at National Level Participation in any scheme of inter-State trade integration involves some degree of acceptance that choices about how and why to regulate a national market are not merely a matter of local concern but shall instead be a matter of shared concern. The right to regulate is subject to some form of discipline, structured according to agreed legal rules, which reflects the common interest of all participants that markets shall be opened up to cross-border trade rather than left in the exclusive grip of the national regulator. The basic aim of such reciprocal commitments is improved economic performance achieved through the release of cross-border competitive energy; sometimes too the aim is to generate a heightened level of political co-commitment. Two principal questions of design are unavoidably prominent in shaping the rules that determine how far a state will surrender its unilateral right to regulate when it participates in such a scheme: first, what threshold must be crossed before a regulatory choice falls to be scrutinised; and, second, if the threshold is crossed, what scope is allowed for justification of such practices notwithstanding their obstructive effect on the project to promote integration. The lower the threshold, the more significant the surrender; the more sceptical the treatment of purported justification, the more significant the surrender. And, of course, vice versa.

A.  Defining the Threshold: When Does the Law of the Internal Market Apply? The first of the two identified key structural questions that must be answered in the construction of a system of trade integration built on legal rules that restrict local regulatory autonomy asks what the threshold is that must be crossed before a measure falls subject to review. In short, the question is what counts as a trade barrier. This is at heart a jurisdictional matter. A measure that is classified as a barrier to inter-state trade falls within the scope of the controlling regime, which in EU law means most prominently the rules governing free movement. A measure that is not so classified remains an expression of national regulatory autonomy – it lies beyond the reach of EU free movement law. The problem is that the Treaty on the Functioning of the European Union (TFEU) itself is reticent. It avoids definitional precision. Article 34 TFEU, the key Treaty provision governing the free movement of goods, states that ‘Quantitative restrictions on imports and all measures having equivalent effect shall be prohibited between Member States’. Quite what is meant by a measure’s ‘having equivalent effect’ goes unexplained. This is absolutely typical of the lean style in

24  Stephen Weatherill which the relevant Treaty provisions are presented. Article 56 TFEU is similar. It refers to a prohibition on ‘restrictions on freedom to provide services within the Union’. Services are defined (in Article 57 TFEU) but a ‘restriction’ is not. The consequence is that large room for interpretative manoeuvre is delegated to the Court to select the precise location of the jurisdictional threshold between EU free movement law and matters of purely local concern. The early years were the easy years. The Court dealt with discriminatory rules and measures that caused physical obstacles to importation, typically at the border. Rarely was there any awkward issue about the existence of a cross-border element to the case – usually it was obvious. Occasionally cases dealing with public procurement appeared within this crop. In Commission v Greece1 the Court found a violation of what is today Article 34 TFEU where the Greek public authorities had chosen to provide subsidies for the purchase of agricultural machinery on condition that the items purchased were manufactured in Greece. Such a discriminatory practice self-evidently obstructs inter-state trade. Dassonville is famously the landmark ruling in which the Court first set out a formula that was capable of broader application.2 What is now Article 34 catches ‘all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade’. This, the so-called Dassonville formula, emphasises as the key jurisdictional trigger the effect of the national measure on the internal market, not its form or purpose. The implication was that diversity between national technical standards could be brought within the scope of free movement law, even where there was no taint of discrimination based on origin nor any physical obstruction at the border. That this was the Court’s intent was confirmed in an even more famous ruling, Cassis de Dijon.3 French-made blackcurrant liqueur could not be sold in Germany because it did not comply with German rules governing the composition of products of this type. Put simply, there was not enough alcohol in the French-made product to meet German requirements, which led to the entertainingly absurd attempt of the German authorities to justify its measures as a means to protect public health by excluding weak drink from the market for fear it would induce tolerance to strong drink – which was freely available in Germany. But the principal interest of the ruling was not the (logically subsequent) matter of justification: it was the Court’s cold-eyed determination to assert its role in reviewing the German measure as a barrier to inter-state trade even though any non-conforming product, whether made in Germany or France or anywhere else, would have been excluded from the German market. The problem was not discrimination on the basis of origin. There was a trade barrier simply because German technical standards happened 1 Case 192/84 Commission v Greece, EU:C:1985:497. Other cases involving discrimination include Case C-3/88 Commission v Italy, EU:C:1989:606 (contrary to what are now Arts 49, 56 TFEU); Case 360/89 Commission v Italy, EU:C:1992:235 (contrary to what is now Art 56 TFEU). 2 Case 8/74 Dassonville, EU:C:1974:82. 3 Case 120/78 Rewe-Zentrale AG v Bundesmonopolverwaltung für Branntwein, EU:C:1979:42.

Internal Market Law Made Better  25 to differ from French technical standards. That did not make them automatically inapplicable, but it did place a burden on the rule-maker to show a justification for their continued application to imports, and in Cassis itself there was none. The Court’s interpretation of (what is today) Article 34 TFEU ensured that EU free movement law reaches into national regulatory autonomy even in circumstances where no origin-based discrimination is involved. Moreover, it ensures judicial oversight of such restrictions and a correspondingly diminished role for legislative action at EU level. Cassis was in this sense a judgment that reveals choices about both the vertical distribution of competences and the horizontal allocation of powers in the EU. As a deepening of free movement law beyond a discrimination-focused paradigm, Cassis empowered private litigants, who are able to rely on directly effective EU law to challenge restrictive national rules that hinder the elaboration of an integrated commercial strategy for the internal market. It has been used robustly to attack a whole range of national practices that were as worthlessly anachronistic and protectionist as those exposed in Cassis itself, not simply in the goods sector but also in application to diverse national technical standards that restrict cross-border trade in services.4 Indeed it was in the services sector that the Court first shaped the idea that would be subsequently elaborated in Cassis.5 Public procurement fits easily into this model. In Commission v Ireland the contract specification for the Dundalk Water Supply Augmentation Scheme required that pressure pipes comply with the applicable Irish standard.6 Tenders providing for use of pipes manufactured to an alternative standard were not accepted. In form it would have been possible for any economic operator to manufacture pipes meeting the Irish standard, but for non-Irish operators this would require that a special production run be set up to meet Irish specifications. The demand to use pipes that met the Irish standard was not explicitly discriminatory because any operator could in principle use such pipes, but it exerted a protectionist effect in favour of local production by excluding differently made pipes originating in other Member States. The problem was diversity among regulatory regimes in the Member States, the consequence was obstruction to cross-border competition and, as in Cassis de Dijon, EU law free movement therefore applied. The public authorities in Ireland could impose technical specifications but they were required to adapt their process to take account of the interest in market integration, competition and choice. Specifically, they should have added the words ‘or equivalent’ after the reference to the Irish standard, so as to allow room to consider tenderers proposing to use pipes made according to different but functionally equivalent standards.7 In this vein the Court, citing Commission v Ireland, held in Vestergaard that Article 34 TFEU precludes a contracting

4 See

S Weatherill, The Internal Market as a Legal Concept (OUP 2017) ch 8. 33/74 Van Binsbergen, EU:C:1974:131. 6 Case 45/87 Commission v Ireland, EU:C:1988:435. 7 Ibid para 22. 5 Case

26  Stephen Weatherill a­ uthority from ­including a clause requiring the use of a product of a specified make without adding the words ‘or equivalent’.8 It remains jurisdictionally necessary that the measure exert a sufficient impact on inter-state trade. In Tecnoedi Costruzioni Srl v Comune di Fossano, the Court was asked to consider a challenge to Italian rules that automatically excluded abnormally low tenders from consideration as part of the process for award of public contracts which had a value of less than €1 million.9 The value threshold for application of Directive 2004/18 to public contracts is €5 million, so it did not apply, but it is clear that primary EU law, specifically the rules on free movement and equal treatment, may apply to practices associated with the award of contracts by public authorities which fall outwith the material scope of directives on public procurement.10 But not in this case. The Court demanded that a finding that such practices affected cross-border trade ‘must be the positive outcome of a specific assessment of the circumstances of the contract at issue’.11 There was no evidence at all to hand. The Court noted that the value of the contract did not even reach a quarter of the threshold laid down by the Directive, and that the place of performance was located 200 km away from a border with another Member State. It treated the reference as inadmissible. But this is exceptional. Much more characteristic of the Court’s approach to identifying the necessary cross-border element to a case before it is its observation in Berlington Hungary, which concerned legislative restrictions placed by the Hungarian authorities on Hungarian operators of slot machines, that some of the players were holidaying tourists from other Member States and that it was ‘far from inconceivable’ that operators established in Member States other than Hungary might be interested in opening amusement arcades in Hungary.12 It advanced no empirical evidence for this claim, but treated it as adequate to establish that inter-state trade was sufficiently affected by the rules and that therefore the EU’s internal market laws were triggered. This approach, used generously by the Court across the several freedoms,13 ensures that it is very easy to rely on EU law even in circumstances that seem to be largely confined to a single Member State. Probably it is justified. In an internal market the very point is that one should expect economic operators to be attentive to opportunities to penetrate new markets, so the fact they are not currently doing so is not decisive – it may even be taken as a hint that obstacles prevent them from doing so. In similar vein, the Court long ago decided that a cartel operating on the territory of a single Member State and

8 Case C-59/00 Vestergaard, EU:C:2001:654. 9 Case C-318/15 Tecnoedi Costruzioni Srl v Comune di Fossano, EU:C:2016:747. 10 Eg, Joined Cases C‑147/06 and C‑148/06 SECAP and Santorso, EU:C:2008:277. 11 Ibid para 22. 12 Case C-98/14 Berlington Hungary and others, EU:C:2015:386, para 27. 13 The same phrase, ‘far from inconceivable’, appears in, eg, Case C‑470/11 Garkalns, EU:C:2012:505, para 21; Case C‑367/12 Susanne Sokoll-Seebacher, EU:C:2014:68, para 10; Case C-327/12 Ministero dello Sviluppo economic v SOA, EU:C:2013:827, para 48.

Internal Market Law Made Better  27 comprising only traders based in that Member State exerts the required effect on inter-state trade to trigger the application of what is today Article 101 TFEU, on the basis that such arrangements harm opportunities for other parties to trade into that market: such rules tend ‘to reinforce the partitioning of markets on a national basis, thereby holding up the economic interpenetration which the Treaty is designed to bring about’.14 Again, this is to assert a wide scope of application for EU internal market law, but it seems perfectly justified, and it is an approach to which the Court adheres today.15

B.  Is the Barrier to Inter-state Trade Justified? Assuming the conclusion is reached that the regulatory choice made at national level requires investigation because of its actual or potential, direct or indirect effect on the internal market, attention turns to the scope of possible justification for those national practices. The point here, then, is that discretionary choices taken at national level are subject to the disciplines asserted by EU internal market law. The interest in market integration militates against respect for state autonomy. There are two dimensions to the control exercised by EU law – substance and procedure. Article 36 TFEU allows room to justify national measures on grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection of industrial and commercial property.

It supplements this list with a second sentence, which directs that such national action shall not ‘constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States’. Grounds of ‘public policy, public security or public health’ are cited in Article 52(1) TFEU as reasons for distinct treatment of nationals of other Member States in relation to the right of establishment, and this derogation is extended into the sphere of the free movement of services by Article 62 TFEU. The Court has adopted a series of key principles of interpretation. The basic theme is very clear: any purported justification of trade barriers is scrutinised with rigour. The Court places the burden of demonstrating justification on the ­regulator.16 There is a general anti-discrimination norm: a Member State will be unable to justify repressive measures against imports in circumstances where it takes no serious action to restrict supply of comparable local products or services.17

14 Case 61/80 Cooperative Stremsel- en Kleurselfabriek v Commission, EU:C:1981:75, para 15. 15 Eg Case C-172/14 ING Pensii, EU:C:2015:484, para 48. 16 Eg Case 227/82 Van Bennekom, EU:C:1983:354; Case C-14/02 ATRAL SA, EU:C:2003:265. 17 Eg Case 121/85 Conegate, EU:C:1986:114, para 15; Joined Cases 115/81 and 116/81 Adoui and Cornuaille, EU:C:1982:183, para 8.

28  Stephen Weatherill Moreover, a Member State that has a choice between a range of measures to attain the same objective is required to choose the measure which is the least restrictive of free movement.18 The Court rules out purely economic justifications,19 although it has agreed that economic anxieties that form part of broader concerns about budgetary consequences which will affect the delivery of public services may be advanced.20 There is a structurally sceptical attitude on the part of the Court, which is in any event mandated by the second sentence of Article 36 TFEU. However, in one significant respect the scope of justification is far wider and more generous than the Treaty explicitly permits. Once again Cassis de Dijon is the key. The Court, having pushed its review of national regulatory practice beyond the scope of discrimination alone, was faced with the alarming consequence that room for justification was narrowly confined by the explicit terms of the Treaty. There is no recognition of consumer protection, defence of social welfare or environmental protection in Articles 36 or 52 TFEU. In Cassis de Dijon the Court accordingly not only decided that variation between technical standards counted as an adequate reason to subject the regulator to the discipline of EU free movement law, it also accepted that a wide range of justifications in the public interest may be advanced by a regulating authority, stretching beyond the specific and limited list contained in the Treaty. The question is whether the purposes pursued by the national measure that restricts inter-state trade ‘serve a purpose which is in the general interest and such as to take precedence over the requirements of the free movement of goods’.21 This, a general public interest test, allows room for a vast range of concerns to be advanced as potential justifications, even if they are not listed explicitly in the Treaty provisions governing free movement. So, for example, and with no pretence to exhaustive coverage, EU free movement law has collided with national regulatory choices in areas including the protection of the environment,22 the preservation and promotion of press diversity,23 respect for human dignity,24 the promotion of concern for animal welfare,25 and the preservation and promotion of the special features of sport.26 Some of these values have subsequently been

18 Eg Case 261/81 Walter Rau, EU:C:1982:382; Case C-333/14 Scotch Whisky Association, EU:C:2015:845. 19 Case 7/61 Commission v Italy, EU:C:1961:31. 20 Eg Case 158/96 Kohll, EU:C:1998:171; Case C-73/08 Nicolas Bressol, EU:C:2010:181. See S ­Arrowsmith, ‘Rethinking the Approach to Economic Justifications under the EU’s Free Movement Rules’ (2015) 68 Current Legal Problems 307; P Oliver, ‘When, if ever, can restrictions on free movement be justified on economic grounds?’ (2016) 41 European Law Review 147. 21 Cassis de Dijon (n 3) para 14. 22 Eg Case 302/86 Commission v Denmark, EU:C:1988:421; Case C-379/98 Preussen Elektra, EU:C:2001:160. 23 Case C-368/95 Vereinigte Familiapress Zeitungsverlags- und vertriebs GmbH v Heinrich Bauer Verlag, EU:C:1997:325. 24 Case C-36/02 Omega Spielhallen, EU:C:2004:614. 25 Case C-219/07 Nationale Raad van Dierenkwekers en Liefhebbers, EU:C:2008:353. 26 Case C-415/93 Bosman, EU:C:1995:463.

Internal Market Law Made Better  29 written into the Treaty superstructure and/or into the Charter of Fundamental Rights as concerns to be taken into account in the definition and implementation of all other EU policies, including that of pursuit of an internal market, but some have not, and in any event the Court’s creativity pre-dates the patterns of relevant Treaty revision. The Court’s expansion of the scope for public interest justification of trade barriers, which was elaborated in and since Cassis de Dijon, reveals its sensitivity to the accusation that judicially-driven market integration is too deregulatory. The Court has ensured that it is open in principle to national (public and private) regulators to reach across the full width of their purposes and functions in order to show justification for practices that interfere with the integration of product and service markets in the EU. However, reliance on this pot of justifications will prove fruitless unless the regulator has a sincere basis for invoking them. The hard truth is that examination of the European Court Reports shows that most of the time the Court is faced with arrant stupidity. Most measures lack plausible justification: most measures are defended by national authorities (presumably) to keep local producer interests happy. Cassis de Dijon fits perfectly into that model. So too do some cases concerning the application of free movement law to technical standards in connection with public procurement. In Commission v Ireland, the Irish Government argued that it was necessary to specify the standards to which pipes should be manufactured in order to ensure they suited the existing network. This might have been perfectly true, but, as the Court sharply observed,27 this did not address the essence of the complaint, which was that the Irish authorities had refused even to consider whether the stipulated requirements were met in the case of pipes that did not comply with the Irish standard. An additional argument based on the protection of public health was also of no assistance to Ireland, because separate requirements in the invitation to tender in any event addressed that matter. The case revealed a pattern that is very familiar in the many cases concerning obstructive technical standards that have reached the Court of Justice since Cassis de Dijon: states routinely but pointlessly seek to defend rigid practices that are anachronistic and anti-competitive in the context of the project of market integration to which the EU is committed. There are cases in the field where attempts to justify restrictive national rules are sincere and are treated with due care by the Court – some pertaining to environmental protection offer examples,28 as do some involving coherent measures of national consumer protection29 – but these are abnormal. It is not substance alone that animates the Court’s case law addressing the permitted scope of national practice. The Court has chosen ingeniously to add 27 Commission v Ireland (n 6) para 22. 28 See, eg, recently Case C-573/12 Ǻlands Vindkraft, EU:C:2014:2037; Joined Cases C-204/12 to C-208/12 Essent Belgium, EU:C:2014:2192. 29 Eg Case C-441/04 A-Punkt Schmuckhandels, EU:C:2006:141; Case C-265/12 Citroën Belux NV, EU:C:2013:498.

30  Stephen Weatherill a procedural aspect to the obligations imposed by the free movement rules. Its case law on prior authorisation systems is particularly significant in this vein. So, for example, in a case involving French legislation that required vitamins and minerals added to foodstuffs to be included on an authorised list as a pre-condition to lawful marketing, the Court was willing to accept that such a system might be compatible with EU law despite its uncontestable impact on cross-border trade in such goods, provided the legislation made provision for a procedure enabling economic operators to seek to have a nutrient included on the list, which, moreover, should be readily accessible and capable of completed within a reasonable time.30 Any refusal must be open to challenge before the courts. So the obvious route to justify such a practice – that it be shown to be a contribution to securing public health – is only part of the story. Free movement law addresses also the operation of the associated administrative regime. These are not empty words. In the case itself the Court concluded that EU law required that the procedure be expressly provided for in a measure of general application that is binding on the national authorities, and found French practice to fall below that standard. Nor were applications for authorisation submitted by economic operators dealt with either within a reasonable period or according to a procedure that was sufficiently transparent as regards the possibility of challenging refusal to authorise before the courts. Specifically, the judgment reveals that in the case of ‘Red Bull’, the applicant waited nearly seven months for acknowledgement of receipt of its application and more than two years to be informed of the decision to refuse it.31 So, quite independently of any assessment of the reality of the risk to public health (which was treated separately by the Court in its judgment), France had failed to meet the obligations imposed by EU free movement law. The case law of this type has commonly involved justifications rooted in the protection of public health,32 but it is not limited to that particular regulatory concern and has been used in other contexts where requirements associated with authorisation obstruct access to a regulated market.33 Therefore procedural requirements are properly treated as principles of general application in free movement law. Member States are subject to obligations that combine both substantive and procedural elements. This model is also applicable to the contracting practices of public authorities in the Member States. Telaustria provides one of the earliest examples.34 Among the issues at stake was the award of public service concessions, which the Court found to fall beyond the reach of the secondary

30 Case C-24/00 Commission v France, EU:C:2004:70. 31 Ibid, para 41. 32 See, eg, Case C-95/01 Greenham and Abel, EU:C:2004:71; Case C-333/08 Commission v France, EU:C:2010:44; and more recently Case C-672/15 Noria Distribution SARL, EU:C:2017:310, considered in section III. 33 See, eg, Nationale Raad van Dierenkwekers en Liefhebbers (n 25) (concerning the welfare of animals); Case C-336/14 Sebat Ince, EU:C:2016:72 (betting). 34 Case C-324/98 Telaustria, EU:C:2000:669.

Internal Market Law Made Better  31 legislation on public procurement as it applied at the time. That, however, did not conclude the Court’s investigation. It continued to observe that even so, the contracting authorities were ‘bound to comply with the fundamental rules of the Treaty, in general, and the principle of non-discrimination on the ground of nationality, in particular’, which includes subjection to an obligation of transparency comprising a need to ensure ‘a degree of advertising sufficient to enable the services market to be opened up to competition and the impartiality of procurement procedures to be reviewed’.35 Promoimpresa srl; Mario Melis and Others concerned the award of concessions for the occupancy and management of state-owned maritime land in Italy, and was addressed under the Treaty provisions on freedom of establishment and free movement of services and the Services Directive 2006/123.36 Specifically, in relation to free movement, the Court was asked whether EU law precludes national legislation that permits the automatic extension of existing concessions. Assuming the matter fell outwith the scope of the Directive (a matter for the national court to determine), the Court insisted, in line with well-established case law, that public authorities must comply with the fundamental rules of the TFEU, in general, and the principle of non-discrimination, in particular, and it made clear that award without any transparency to an undertaking located in the Member State to which the contracting authority belongs is not permitted where the required cross-border dimension is present. The Court therefore deduces an obligation of transparency from the principles of equal treatment and non-discrimination on the basis of nationality, compliance with which is required by the Treaty provisions on free movement. This does not inevitably go so far as to impose an obligation to open up a call for tenders, but it does require there to be a ‘degree of publicity sufficient to enable, on the one hand, competition to be opened up and, on the other, the impartiality of the award procedure to be reviewed’.37 There is also a body of secondary legislation that is designed to improve the management of the internal market. There are plenty of sector-specific harmonised regimes that add layers of detail to the controls exercised by primary law, but two measures of general application stand out. These are the so-called Notification Directive and the Mutual Recognition Regulation. The Notification Directive – the first version of which was adopted in 1983 and which today is Directive 2015/153538 – has as its purpose the inhibition of introduction of new trade-restrictive technical measures. It is an ‘early warning system’, and it functions by requiring Member States that are considering the adoption of technical

35 Ibid paras 60–62. 36 Joined Cases C‑458/14 and C‑67/15, Promoimpresa srl v Consorzio dei comuni della Sponda ­Bresciana del Lago di Garda e del Lago di Idro, Regione Lombardia; Mario Melis and Others v Comune di Loiri Porto San Paolo, Provincia di Olbia Tempio, EU:C:2016:558. 37 Joined Cases C‑25/14 and C‑26/14 Unis, EU:C:2015:821, para 39. See also, eg, Case C-91/08 Wall AG, EU:C:2010:182. 38 Directive 2015/1535 [2015] OJ L241/1.

32  Stephen Weatherill measures that fall within its scope to notify the Commission of their plans and to desist from introducing the measures within a defined ‘standstill period’. The vision is of prevention rather than cure – the Commission can intervene to prevent harm being done by measures it considers to violate the rules of the internal market, rather than waiting until the measures have been applied to the detriment of inter-state trade. The Court has made the regime more muscular by requiring that national measures introduced in defiance of the requirements of the Directive shall be treated as unenforceable in national legal proceedings.39 The Directive’s concern to address national practice before the emergence of obstacles to trade is supplemented by Regulation 764/2008, which deals with problems arising subsequently, when national technical rules (as defined) are applied to the detriment of imported products lawfully marketed in another Member State.40 This, the so-called ‘Mutual Recognition Regulation’, imposes a structure on the conduct of public authorities in the host state. It does not deprive them of their right to act where justified concerns militate in favour of obstructing marketing, but it does require that defined procedures be followed involving, in short, a process of dialogue between public authorities and affected economic operators in the hope of finding a way to resolve the identified problems. The pair of measures share an aspiration to promote dialogue and transparency in cases of hindrances to trade in order to improve the functioning of the internal market. Neither legislative measure subverts the basic point that a Member State may justify practices that restrict access to its market by goods that are lawfully marketed in other Member States, but they both aspire to place that prerogative in a carefully managed and procedurally transparent framework.

C. Enforcement Just as the Cassis-flavoured law of the internal market is itself a transformed version of general international economic law, so too the constitutional principles that underpin its operation transcend the patterns that normally attach to the vindication of international rules within national legal orders. The EU possesses a system of supervision that is designed to investigate and sanction violations of the rules of the Treaty. It is Article 258 TFEU, the infringement procedure that equips the Commission with the task of policing the system and, if necessary, bringing matters before the Court of Justice. This is a more sophisticated version of policing than would be found in most international treaty systems – the compulsory jurisdiction of the Court and the scope for the imposition of fines pursuant to

39 Case C-194/94 CIA Security International SA v Signalson SA and Securitel Sprl, EU:C:1996:172; Case C-443/98 Unilever Italia SpA v Central Food SpA, EU:C:2000:496. 40 Regulation 764/2008 [2008] OJ L218/21.

Internal Market Law Made Better  33 the procedure mapped out by Article 260 TFEU are particularly notable – but it is still not structurally out of the ordinary to find a Treaty system that contains its own means for holding states to the bargain they have struck. Where EU law is truly distinctive is in the way it is embedded into national legal orders. The Court of Justice deliberately steered EU law away from orthodox international law in the early years. Energised by the free flow of cases that originated before national courts but were referred to the Court of Justice via the preliminary reference procedure, which is today found in Article 267 TFEU, it insisted that EU law, a new legal order, enjoys primacy over national law41 and is capable of direct effect before national courts.42 Over time the Court has added further elements to this story of penetration of national legal orders by EU law, such as the obligation imposed on national courts to interpret national law in the light of EU secondary legislation43 and in appropriate cases to award compensation to those suffering loss as a result of violation of EU law.44 The Court’s rulings root these principles in the inherent character of the Treaty, and they serve to require adaptation of national legal practice to ensure the protection demanded by EU law as interpreted by the Court. An important, and frequently litigated, aspect of the story is the Court’s relatively unsurprising insistence that remedies attached to the vindication of rights rooted in EU law shall be no less favourable than those made available in similar domestic actions and its much more surprising and much more interventionist demand that remedies offered in support of EU law rights shall be effective, which it has used in often concrete ways to demand an up-grade on existing patterns of judicial protection at national level. This intervention, visible across matters as rich and varied as the suspension of the application of a statute45 through opening up the finality of private arbitration,46 encourages the conclusion that national procedural autonomy is a myth.47 In combination this means that EU law has sharp teeth: violation is subject to the potential for supervision by the Commission but also, and quite independently and typically much more rapidly, it is likely to generate intervention in consequence on proceedings pursued before national courts.

41 Case 6/64 Costa v ENEL, EU:C:1964:66. 42 Case 26/62 Van Gend en Loos, EU:C:1963:1. 43 Case 14/83 Von Colson and Kamann v Land Nordrhein-Westfalen, EU:C:1984:153; Case C-60/02 X, EU:C:2004:10; Cases C-397/01 to C-403/01 Pfeiffer, EU:C:2004:584. 44 Joined Cases 6/90 and 9/90 Francovich, EU:C:1991:428; Joined Cases C-46/93 and C-48/93, Factortame (No 3); Brasserie de Pêcheur, EU:C:1996:79; Case C-453/99 Courage v Crehan, EU:C:2001:465. 45 Case C-213/89 Factortame, EU:C:1990:257. 46 Eg Case C-126/97 Eco Swiss China Time Ltd v Benetton International NV, EU:C:1999:269; Case C-168/05 Elisa María Mostaza Claro v Centro Móvil Milenium SL, EU:C:2006:675. 47 M Bobek, ‘Why There is No Principle of Procedural Autonomy of the Member States’ in B de Witte and H Micklitz (eds), The European Court of Justice and Autonomy of the Member States (Intersentia 2011) 305.

34  Stephen Weatherill

III.  The Deficiencies in the Law and Practice of the Internal Market There is much to admire in this model of economic integration achieved through the application of legal rules. The use of EU law to secure the disapplication of unjustified national measures opens up the EU internal market to trade in diverse products and services, and it serves to transfer power to the consumer, able to choose between familiar and newly available goods and services, and away from regulating public authorities. There is no need to establish harmonised EU standards in these areas where free movement law does the job of integrating markets by deregulating them. Harmonisation can be targeted at those areas where national measures are shown to possess adequate justification to survive inspection conducted in the name of free movement law. The promise is of a relatively lightly regulated market: unjustified national measures are simply set aside, and not replaced, whereas EU measures are confined to areas where regulation at national level is justified. However, the elegance of this model is more appealing on paper than in practice. It expects that EU law will be employed to press regulating public authorities to set aside obstructive rules, where they are unable to justify them. This makes a virtue of litigation as a means to transform market structures, but litigation is costly and often slow. Some traders have sufficient incentives to invest in such targeted litigation, as is plain from the records found in the European Court Reports: Cassis de Dijon itself is of exactly this type. But one may readily speculate that many potentially unjustified trade barriers survive unchallenged, causing economic harm, until a sufficiently bold economic operator decides to take the litigious plunge. Since in EU free movement law it is always possible in principle for a trade barrier to be justified, a litigant is never completely confident that its quest will succeed, which acts as a further deterrent to attacking the national regulatory status quo. The Cassis de Dijon approach to building the internal market sets aside the need for a comprehensive network of harmonised rules in favour of a more decentralised model, but this means that traders are expected to plan their strategies on the basis of an unstable litigation-driven trading environment of inter-state regulatory diversity, which is strikingly more uneven than a market constructed on harmonised rules. Moreover, ingenious though the Court’s attachment of procedural obligations to the basic demands of free movement doubtless is, there is still no comprehensive set of EU-made rules establishing detailed common practice in matters of administration. This means, in short, that the internal market is unlikely to be fully realised. A small but revealing illustration is provided by the Court’s ruling in Noria Distribution SARL.48 Noria was a French company that marketed food ­supplements



48 Case

C-672/15 Noria Distribution SARL, EU:C:2017:310.

Internal Market Law Made Better  35 throughout the EU. It was the subject of criminal proceedings in France for having supplied products that, though marketable in other Member States, were not authorised in France. The nutrient content of the products was too high. Noria sought to rely on EU law, specifically Article 34 TFEU and Directive 2002/46, a measure of legislative harmonisation establishing common EU-wide rules governing the marketing of food supplements. The Court, in receipt of a preliminary reference made by a court in France, found an obstacle to trade within the meaning of Article 34 – this was obvious – and then it turned to questions of justification. It found that EU free movement law requires that traders must be able to apply for authorisation to market non-compliant food supplements, in line with the case law already considered. Then, inspecting the particular French system that had generated the litigation, it ruled that Noria had not been treated with the procedural scrupulousness on which EU law insists. So France had violated EU law. The case is trivial, in a sense: no part of the ruling expresses any new or surprising point of law. But that is why the ruling is so revealing. That such a strikingly mundane instance of impeded trade in manufactured goods could require the attention of the Court of Justice in 2017 emphasises deficiencies in the fabric of the internal market. France’s procedures were inadequate: but Noria had to trek to Luxembourg to have this authoritatively recorded. The question Noria prompts asks whether a functioning internal market can be built and maintained in the absence of a state-like institutional, constitutional and administrative infrastructure at European level. But in fact Noria offers another glimpse into the malfunctioning internal market. The obstacle the company faced appears to falls squarely within the scope of Regulation 764/2008, the Mutual Recognition Regulation mentioned in section II.B.49 But the Regulation is not mentioned in the judgment at all. It was ignored in the reference made by the national court and by the submissions of the parties: this we know from the Opinion in the case delivered by Advocate General Bobek, who simply noted en passant and in tones of mild puzzlement that the Regulation had not formed part of the litigation.50 Such evidence as exists suggests that the Regulation is of very limited significance in practice. The Commission published a Report on the application of the Regulation in 2012.51 Its largely positive tone is contradicted by the detailed data. The Report states that in the period between the entry of the Regulation into force on 13 May 2009 and the end of 2011, the Commission had received 1,524 notifications of national action taken pursuant to the Regulation. However, 1,378 of the total notifications come from one Member State and concern precious metals! The Commission remarks with understated blandness in the Report that ‘this points to the fact that Member States do not notify all decisions



49 Regulation

764/2008 (n 40). of AG Bobek in Case C-672/15 Noria Distribution SARL, EU:C:2016:961, paras 62–66. 51 COM(2012) 292. 50 Opinion

36  Stephen Weatherill falling under Articles 6(2) and 7 of the Regulation they take’. This suggests Noria is not abnormal. The Regulation seems to be widely ignored in practice. So one is left with the rules of free movement interpreted by the Court as a basis  for checking the justifiability of national restrictions on free movement, combined with a procedural dimension imposing obligations of transparency on regulatory authorities, yet this falls far short of a detailed framework for constraining national administrative discretion. There is, moreover, evidently some resistance to interpreting free movement law more aggressively in order to fix with more precision the obligations imposed on national authorities. This can be tracked in both the Court and in the Commission, and in their interaction. As far as the role of the Court is concerned, Advocate General Bobek’s Opinion in Noria is helpful on this point. He is highly suspicious of demands that primary EU law shall be interpreted to impose detailed procedural obligations on national authorities. The Court does not explicitly embrace this scepticism, but its judgment is consistent with it. A comparable attitude may be observed in the field of public procurement in Commission v Finland.52 Advocate General Sharpston was sceptical about the need for detailed intrusion by EU law into national autonomy in the matter of publicity requirements in the case of low-value contracts. The Court treated the application as inadmissible, and so did not address the point. However, the Court’s case law generally, even if (as one would expect) not as candid or discursive as the Opinions of its Advocates General in reflecting on the tension between national autonomy and the demands of EU law, fits with this thematic anxiety to paint the picture with a broad brush rather than to adopt a quasi-legislative interpretative approach. Even in Telaustria, mentioned in section II.B as one of the first examples of the Court’s readiness to add a procedural dimension to free movement law in its application to public contracting,53 the Court confined itself to sketching the obligations imposed by EU law and moved quickly to allocate to the national court the task of determining whether they were met in the case itself.54 The subsequent ruling of the Grand ­Chamber in Coname also fits this cautious model.55 The matter at hand, the award of a concession contract, did not at the time fall within the scope of the applicable directives, so the examination was conducted exclusively in the light of primary law. The Court referred to the legal significance of transparency, but left it to the national court to pursue detailed examination. There are areas of EU law where the Court is inclined to add detail to its interpretation of primary law by drawing by analogy on secondary legislation that is not materially relevant to the particular

52 Case C-195/04 Commission v Finland, EU:C:2007:248. For a similar debate about how detailed the demands made by EU law should be, a long way away from public procurement, see the Opinion of AG Bobek and the judgment of the Court in Case C-298/16 Teodor Ispas, EU:C:2017:843, concerning administrative procedures applicable to tax assessment. 53 Telaustria (n 34). 54 Ibid para 63. 55 Case C-231/03 Coname, EU:C:2005:487.

Internal Market Law Made Better  37 circumstances involved,56 but in the area of public procurement it seems easy to resist that temptation.57 On occasion the Commission has been tempted to take the soft-law route to making more concrete the procedural obligations imposed by EU free movement law. Of particular current interest is the Commission’s Interpretative Communication on the law applicable to contract awards not or not fully subject to the provisions of the Public Procurement Directives.58 This seeks to draw consequences from the Court’s case law, for example that there is a requirement to publish ‘a sufficiently accessible advertisement prior to the award of the contract’59 and that ‘the greater the interest of the contract to potential bidders from other Member States, the wider the coverage should be’.60 The question here is whether the Commission is pushing too hard in its attempt to connect up the legal requirements in situations falling outwith the directives with those that apply within their scope. In Strong Segurança, the Court confirmed that EU law applies beyond the reach of the directives, but it refused to follow the Commission’s invitation to use the general principle of ‘effective competition’ as a basis to impose specific obligations foreseen by Directive 2004/18 in circumstances not within the Directive’s scope.61 This is a constitutionally sensitive issue. Germany brought an application for the annulment of the Communication, arguing that it sets out new rules on tendering and that this goes beyond what the Commission is allowed to do under the Treaty. Objection was targeted in particular at the Communication’s inclusion of the ­statement, mentioned above, that ‘there is an obligation to ensure adequate publicity in the form of publication of a sufficiently accessible advertisement prior to the award of the contract’. The General Court, however, did not sustain the objection.62 It found that the ‘principles of equal treatment and non-discrimination on grounds of nationality imply, in particular, as the Court of Justice has consistently held, a duty of transparency which enables the awarding authority to ensure that those principles are complied with’,63 which entails an obligation to ensure ‘a degree of advertising sufficient to enable the services market to be opened up to competition and the impartiality of procurement procedures to be reviewed’.64 So, ‘the obligation of transparency in terms of adequate advertising thus presupposes a form of advertising that takes place before the award of the public contract

56 Eg Case C-165/16 Toufik Lounes, EU:C:2017:862, in which Directive 2004/38 is used in the interpretation of Art 21 TFEU. 57 See also S Arrowsmith, The Law of Public and Utilities Procurement: Regulation in the EU and UK, 3rd edn (Sweet and Maxwell 2014) chs 4.32, 4.42, 4.43. 58 [2006] OJ C179/2. 59 Ibid para 2.1.1. 60 Ibid para 2.1.2. 61 Case C-95/10 Strong Segurança, EU:C:2011:161. 62 Case T-258/06 Germany v Commission, EU:T:2010:214. Cf Case C-57/95 France v Commission, EU:C:1997:164. 63 Ibid para 76. 64 Ibid para 77, citing inter alia Telaustria.

38  Stephen Weatherill in question: in other words, prior publication of an advertisement’.65 The Communication was accordingly only explanatory in character, and since it created no new obligations for the Member States, Germany’s application for its annulment did not succeed. The Commission had therefore not stepped over the line, but the ruling shows the constraints to use of a soft-law route to harden up legal obligations. The constitutional concern is to protect the prerogatives associated with the legislative process. Secondary legislation is needed to create more ambitious procedural obligations in the field. It emerges that in matters of both substance and procedure, EU free movement law is not quite as vigorously effective as is sometimes supposed. Plainly it exerts a tighter grip over national regulatory autonomy than orthodox public international law, but it still falls well short of putting in place a single integrated system of rules and administrative support across all the 28 Member States. This is the character of EU law: it exercises a controlling influence over diverse national practice but it does not replace it. Comparable comment deserves to be directed at the law governing remedies. The constitutional principles developed by the Court to govern the interaction of EU law and national law equip individuals with rights that in turn mean that room for cost-free violation of EU law is minimised, and they mean that EU law can be used within the Member States in a way that far transcends the orthodox use of the rules of international law. However, one should not exaggerate the vigour, the virtues or the coherence of EU law’s patterns of evolved constitutionalism.66 Although the penetration of national law by EU law, combined with the EU law requirement that effective judicial protection be provided, does much to confine the scope for evasion of the agreed rules, there remains more scope for public and private actors to elude its grip than would be available in a purely national context. This is true for constitutional reasons, but also for practical reasons associated with the nature of EU law. On the constitutional level, the notorious unwillingness of the Court to attribute horizontal direct effect to directives ensures a relevant gap in the application of the rules.67 Even though the Court has chosen to find a number of routes to reduce the damage done by this stance – by attributing a generously broad scope to vertical direct effect,68 by requiring national courts to interpret national law consistently with relevant EU law69 and by opening up the possibility of pursuit of compensation from the defaulting state70 – this does not eliminate its original sin. The result is that in some circumstances a national court will not recognise a directive even

65 Ibid para 79. 66 On this notion generally see S Weatherill, Law and Values in the European Union (OUP, 2016) chapter 4. 67 Case C-91/92 Faccini Dori v Recreb, EU:C:1994:292; Pfeiffer (n 43); Case C-413/15 Elaine Farrell, EU:C:2016:745. 68 Elaine Farrell (n 67). 69 Pfeiffer (n 43). 70 Francovich (n 44).

Internal Market Law Made Better  39 where it is supposed to protect the individual in the specific circumstances that have arisen. This story is also one of imbalance in law and practice – between deregulatory provisions, which are typically apt for immediate enforcement, and re-regulatory measures, which are typically more programmatic. Free movement and competition law are more readily the subject of private enforcement than the re-regulatory provisions of directives addressing harmonisation, consumer protection or labour market regulation, not only because of the denial of horizontal direct effect to directives, but also, of more profound significance, because rules of the latter type are commonly less sharp-edged, and so legally inapt to create individual rights, and they tend to harm diffuse interests that lack the resources to vindicate rights even where they exist on paper. Inspection of the case law quickly reveals an imbalance in the control of violations of EU law, for those that affect commercial interests with access to deep pockets are in practice a good deal more likely to be tackled than those that affect diffuse interests such as consumers or the environment. So, for example, the Court’s requirement in the Francovich case law on state liability that an identifiable right shall exist in the first place is more readily satisfied by an obstruction to an individual’s freedom to trade than by a claim to the collective virtue of regulatory protection.71 In Peter Paul, bank account holders were found to have acquired no right in the Francovich sense even where the state had mishandled the EU mandate to protect them, because supervision was purely a matter in the public interest.72 The fact that the Court’s landmark case, Francovich, was driven by a state’s failure to ensure the protection of a worker pursuant to a directive is thoroughly misleading. It is atypical.73 Most cases are driven by corporate interests, and parties seeking to vindicate a right to trade are more likely to fit within the notion of a directly effective right or a right protected by Francovich than those seeking to enforce an EU measure of market (re-)regulation. More generally, although the Court’s development of the principles of nondiscrimination and of effective judicial protection have forced adaptation in national practice concerning procedure and remedies, and certainly should not be under-estimated as sources of transformation, it remains true that there is little EU legislation dealing with national remedies, and that which does exist tends to be sector-specific.74 So the starting-point is normally national law, and that will

71 Ibid. 72 Case C-222/02 Peter Paul, EU:C:2004:606; see similarly Case C-219/15 Elisabeth Schmitt, EU:C:2017:128. See generally M Dougan, ‘Addressing issues of protective scope within the Francovich right to reparation’ (2017) 13 European Constitutional Law Review 124. 73 Even Francovich himself was ultimately found to fall outside the protective scope of the Directive: Case C-479/93 Francovich, EU:C:1995:372. 74 See, eg, injunctions in consumer cases (Directive 2009/22 [2009] OJ L110/30), competition law (Directive 2014/104 [2014] OJ L349/1), enforcement of intellectual property rights (Directive 2004/48 [2004] OJ L195/16) and access to environmental justice (Directive 2003/35 [2003] OJ L156/17). See generally M Faure and F Weber, ‘The Diversity of the EU Approach to Law Enforcement – Towards a Coherent Model Inspired by a Law and Economics Approach’ (2017) 18 German Law Journal 823;

40  Stephen Weatherill certainly vary state by state, and even in some instances within states. In common with the pattern observed in discussion of substantive law, it may be that a trader faced by obstructive national practices concerning remedies will be forced to pursue costly litigation to secure their adaptation or disapplication. So the argument is relative: the EU legal order has a far more sophisticated method than is found in a typical international organisation, but it is still not as systematic as national law. That is the nature of the EU and of EU law, but this undermines the effective management of the EU’s internal market.

IV.  Public Procurement On all three counts – the substance of the control imposed on national regulatory discretion, the procedural dimensions of national administrative practice and remedies – EU public procurement law is significantly more elaborate than general internal market law. Primary law, most obviously the free movement rules, applies to public contracting – of course – but the pattern of secondary legislation goes much further in the direction of structuring and channelling national practice. It confines national choices in a much more precise way than does primary law, against a background understanding that the application of primary law is simply inadequate to crack open the abuse of discretionary powers held by public authorities at national and regional level in the field of public contracting. There have been four rounds of secondary legislation designed to promote competitive public procurement in the EU. The first set of directives, adopted in the 1970s, was subsequently amended in order to meet the challenge of completing the internal market by the end of 1992 and beyond. Then the package was the subject of further up-dating as a result of measures adopted in 2004, before the fourth and current iteration of legislative reform. With effect from 18 April 2016, the governing directive is Directive 2014/24 on public procurement,75 supported by the special sector-specific regime of Directive 2014/25 on procurement by entities operating in the water, energy, transport and postal services sectors.76 These directives are supplemented by Directive 2014/23 on concession contracts.77 All these directives are measures of legislative harmonisation and, stretching back to the 1970s, they have always been legally based on the Treaty provisions governing harmonisation as means to improve the functioning of the internal market for goods and services. Their stated aim and their constitutional justification are to promote cross-border trade in the supply of goods and services to public authorities, and to make those markets more competitive through integration. FG Wilman, ‘The End of the Absence? The growing body of EU legislation on private enforcement and the main remedies it provides for’ (2016) 53 Common Market Law Review 887. 75 Directive 2014/24 [2014] OJ L94/65. 76 Directive 2014/25 [2014] OJ L94/243. 77 Directive 2014/23 [2014] OJ L94/1.

Internal Market Law Made Better  41 Directive 2014/24, the core measure today, takes as its legal bases Articles 53(1), 62 and 114 TFEU. Directive 2014/24 seeks to impose a structure on the process of public contracting within the Member States. Put another way, its concern is to push contracting practice within defined channels, in order to promote transparency and open competition uncontaminated by bias based on the origin of the supplier of goods and services. The aim is to foster a genuine internal market – the method is to confine contractual autonomy. The intricacy of its design is readily evident from the Directive’s sheer length: it covers 94 Articles, it is padded by 138 Recitals in its Preambles and it is supported by 15 Annexes, which provide further detailed definitional support. In total, it occupies 177 pages of the Official Journal of the EU, but its essence is captured by its first Recital. Beyond the Treaty rules on free movement and the principles deriving from them, such as equal treatment, non-discrimination, mutual recognition, proportionality and transparency, ‘provisions should be drawn up coordinating national procurement procedures so as to ensure that those principles are given practical effect and public procurement is opened up to competition’. This applies to public contracts above a certain value, as defined in the directives. So the aim is to secure ‘practical effect’ for the EU’s disciplines under an understanding that without supplementary provisions established by directives the rules of primary law and supporting general principles (which operate at the same rank) are inadequate. The general rules of the internal market continue to apply to all public contracting, and they are the sole control over contracts that fall outwith the material scope of the secondary legislation (for example because they fall beneath the value thresholds78 or because they are excluded79), but within the reach of the Directive those general rules are supplemented by the more precise scheme of the Directive. Article 18 of the Directive establishes as its first principle of procurement that ‘Contracting authorities shall treat economic operators equally and without discrimination and shall act in a transparent and proportionate manner’. This echoes the Court’s interpretative case law on the directives delivered over many years.80 The Directive is broadly concerned to require equal treatment and transparency. Moreover it contains directions that immediately call to mind the development of primary law. So, for example, its Article 42, on ‘Technical specifications’, provides that technical specifications shall be formulated in particular ways, including by reference, in order of preference, to national standards transposing European standards, European Technical Assessments, common technical

78 Arts 4–6, Directive 2014/24. 79 Ibid Arts 7–12, 13–17. Exclusions are to be interpreted strictly: Case C-187/16 Commission v Austria, EU:C:2018:194. 80 See, eg, Case C-19/00 SIAC v Mayo County Council, EU:C:2001:553; Joined Cases C-226/04 and C-228/04 La Cascina, Zilch, EU:C:2006:94; Case C-213/07 Michaniki AE, EU:C:2008:731.

42  Stephen Weatherill specifications, international standards, other technical reference systems established by the European standardisation bodies or – when any of those do not exist  – national standards, national technical approvals or national technical specifications relating to the design, calculation and execution of the works and use of the supplies, it being added that each reference shall be accompanied by the words ‘or equivalent’.81 On this point of equivalence, the connection between the secondary legislation and the Court’s long-standing interpretation of primary law is helpfully illustrated by its ruling in Mediasanus d.o.o.82 The Court, dealing with Article 23 of Directive 2004/18, which is the provision on technical specifications now superseded by Article 42 of Directive 2014/24, was asked about public contracting practice in Slovenia, which required medicinal products derived from plasma to be manufactured from plasma collected in Slovenia. This was plainly discriminatory, but the Court added that ‘any reference to a technical specification, such as a specific source or origin, must be accompanied by the words “or equivalent”’, citing to that effect its judgment in Commission v Ireland, the case concerning the Dundalk Water Supply Scheme, which counts as one of the Court’s earliest applications of the Treaty rules on free movement to public procurement.83 The pattern, then, is that the Court supplies the lead, through an interpretation of primary law that requires inquiry to be made of the equivalence of standards applicable in other Member States; the secondary legislation then absorbs and makes more intricate the obligations imposed on contracting authorities. Still more significant in practice, the Directive prescribes in detail the use of procedures that will promote the likelihood of compliance with these aspirations. This is where it builds far beyond the basic free movement rules of the Treaty. So, for example (and there is no ambition here to provide an exhaustive account84), Title II of Directive 2014/24 is entitled ‘Rules on Public Contracts’. It comprises Articles 25–73 of the Directive. It sets out the several available procedures from which contracting authorities may select. It defines with precision the way in which they shall be structured and conducted, with particular concern for encouraging participation by bidders and confining the scope for excluding would-be bidders. Electronic means are widely used today and the Directive sets out in detail the governing arrangements. The animating concern is to channel contractual autonomy under an assumption that, left unrestrained, it will be exercised in a manner that will not be conducive to the achievement of an internal market for the EU. Article 67, ‘Contract award criteria’, provides that ‘contracting authorities shall base the award of public contracts on the most economically advantageous tender’. This falls to be identified ‘on the basis of the price or cost, using a cost-effectiveness approach, such as life-cycle costing in accordance with Article 68’; it ‘may include 81 Art 42(3)(b). See also Arts 42(4), 42(5), 43, 44, 60, 62 and 64 for the use of ‘equivalent’ as a requirement. 82 Case C-296/15 Mediasanus d.o.o, EU:C:2017:431. 83 Commission v Ireland (n 6). 84 See Arrowsmith (n 57).

Internal Market Law Made Better  43 the best price-quality ratio, which shall be assessed on the basis of criteria, including qualitative, environmental and/or social aspects, linked to the subject-matter of the public contract in question’. Further elucidation of the criteria is supplied, under an instruction that ‘Award criteria shall not have the effect of conferring an unrestricted freedom of choice on the contracting authority’.85 Moreover, the contracting authority shall specify ‘the relative weighting which it gives to each of the criteria chosen to determine the most economically advantageous tender, except where this is identified on the basis of price alone’.86 The thematic concern for transparency is plain. The rules are not perfect. There are areas of costly ­uncertainty87 and, moreover, the regularity with which the directives have been amended is itself a source of disruption. However, the rules obviously go into far more detail in specifying the obligations of contracting authorities than can be deduced from primary law, notwithstanding the Court’s anxiety to craft a procedural dimension to the rules on free movement. The directives on remedies, of which there are three, have been adopted according to a rhythm different from that applying to the substantive measures. They are the general remedies Directive 89/665,88 which was amended by Directive 2007/66,89 supplemented by Directive 92/13 operative in the water, energy, transport and telecommunications sectors.90 As with substance, so with remedies: the rules adopted in the field of public procurement are recognisably similar to those applicable generally in EU law, but they go much further in the detailed structure they impose on national practice. So the directives on procurement transcend the orthodox treatment of national remedies whereby national law applies in the light of the Court of Justice’s broad but vague notions that there shall be no discrimination against EU-sourced rights and that there shall be effective judicial protection of EU law rights before national courts. As mentioned ­previously,91 there is relatively little EU secondary legislation that deals directly with national remedies, and what does exist on the legislative record is mostly recent, so the public procurement sector stands as a pioneer. The aim of the directives is to make more concrete the obligations imposed by EU law, in the hope that this will improve policing of the rules governing contracts awarded by public authorities and in consequence develop further the construction of a true internal market in this sector. The original directive, Directive 89/665, occupies only three pages of the ­Official Journal of the EU, and it contains just three substantive Articles. A ­ rticle 1 directs the Member States to take the necessary measures to ensure effective



85 Art

67(4). 67(5). 87 See, eg, ch 3-73 of Arrowsmith (n 57). 88 Directive 89/665 [1989] OJ L395/33. 89 Directive 2007/66 [2007] OJ L335/31. 90 Directive 92/13 [1992] OJ L76/14. 91 See n 74. 86 Art

44  Stephen Weatherill review  of contract award procedures that infringe EU law. Article 2 stipulates that the measures available shall include interim measures, the setting aside of decisions taken unlawfully and the award of damages to persons harmed by an infringement. Article 3 provides for Commission intervention in a case of clear and manifest infringement, generating a defined path of dialogue between Commission and national authorities. The readiness in Article 2 to address damages is especially interesting because the Directive pre-dates the Court’s landmark ruling in Francovich.92 However, the detailed rules are illuminatingly cautious. To assert an EU influence over remedies risks destabilising the long-settled balancing of interests within national legal orders. Article 2 of the Directive attempts to achieve a satisfactory balance between, on the one hand, the concern to maintain contractual finality and, on the other, to promote the achievement of the objectives of market competition pursued by the EU regime. The sharpest question asks whether a violation of EU law has any impact on a contract that has already been concluded. Article 2(6) is deferential. It provides that ‘The effects of the exercise of the powers referred to in paragraph 1 on a contract concluded subsequent to its award shall be determined by national law.’ Moreover, Article 2(6) adds that, ‘except where a decision must be set aside prior to the award of damages, a Member State may provide that, after the conclusion of a contract following its award, the powers of the body responsible for the review procedures shall be limited to awarding damages to any person harmed by an infringement’. There is, then, sensitivity to the uncertainty that would flow from requiring the unravelling of contractual obligations that have come into existence. This means that a contract awarded pursuant to improper procedures may be allowed to remain in force, should a Member State so choose. The aggrieved party may then pursue a damages claim. The problem here is that this creates an incentive for the public authority to ensure that a contract is signed quickly, because it cannot later be set aside. It became plain that the possibility of a damages award recognised by Directive 89/665 was not enough to deter this so-called ‘rush to signature’. Directive 89/665 was therefore amended by Directive 2007/66.93 All three ­articles of the original Directive are renovated, but it is Article 2, which deals with review and sanction procedures to be made available at national level, that is the most substantially altered with a view to combatting the ‘rush to signature’. Directive 2007/66 inserted a new Article 2a into Directive 89/665. It establishes a ‘standstill period’: a contract may not be concluded following the decision to award it before the expiry of a period of at least 10 calendar days with effect from the day following the date on which the contract award decision is sent to the tenderers and candidates concerned if fax or electronic means are used, or longer,

92 Francovich (n 44). 93 For a collection of essays, see D Fairgrieve and F Lichère (eds), Public Procurement Law: Damages as an Effective Remedy (Hart Publishing 2011).

Internal Market Law Made Better  45 as defined by the Directive, if other means are used. Article 2b provides for derogations from the standstill period. Article 2d deals with the ‘ineffectiveness’ of contracts. This is probably the most innovative aspect of amending Directive 2007/66. It provides that ‘Member States shall ensure that a contract is considered ineffective by a review body independent of the contracting authority or that its ineffectiveness is the result of a decision of such a review body’ in any of three cases: (i) where award has been made without required prior publication of a notice in the Official Journal; (ii) where particular defined infringements have deprived the tenderer applying for review of the possibility to pursue pre-contractual remedies or the chances to obtain the contract; and (iii) in particular defined circumstances associated with a framework agreement and a dynamic purchasing system. It is the first of these that is of the widest application. Failure to publicise in the Official Journal, which is a core component of the overall structure of the regime that is designed to promote transparency, shall lead to a decision that the contract is ‘ineffective’. But what does this entail? ‘Ineffective’ is not a term of art in any system of contract law, nor is it defined in the Directive. Probably it should be granted an autonomous meaning under EU law, in line with the Court’s orthodox interpretative practice.94 Although Article 2d(2) directs that the consequences of a contract’s being considered ineffective shall be determined by national law, there is scope for the Court of Justice to develop an autonomous EU law understanding of when a contract shall be treated as ‘ineffective’.95 Article 2d(2) adds that ‘National law may provide for the retroactive cancellation of all contractual obligations or limit the scope of the cancellation to those obligations which still have to be performed’ – the emphasis is added to draw sharp attention to the point that this is a national choice. Article 2d(3) provides – and here emphasis is added for the same purpose – that: Member States may provide that the review body independent of the contracting authority may not consider a contract ineffective, even though it has been awarded illegally on the grounds mentioned in paragraph 1, if the review body finds, after having examined all relevant aspects, that overriding reasons relating to a general interest require that the effects of the contract should be maintained.

In such a case Member States shall provide for ‘alternative penalties within the meaning of Article 2e(2)’, which shall be applied instead. These cover the imposition of fines on the contracting authority or the shortening of the duration of the contract. Article 2e(2) makes explicit what is in fact a general principle of EU law, that such alternative penalties must be effective, proportionate and dissuasive. Generally Article 2e is intended to sharpen penalties in the case of disregard of the rules. 94 Eg Case 75/63 Hoekstra, EU:C:1964:19; Case C-287/98 Linster, EU:C:2000:468; Case C-343/13 Modelo Continente Hipermercados SA, EU:C:2015:146. 95 Cf S Weatherill, Contract Law of the Internal Market (Intersentia 2016) ch 4.9.

46  Stephen Weatherill So, in summary, Article 2d(3) leaves open a possibility for a Member State to block the application of the sanction of ineffectiveness. This reveals the abiding sensitivity at stake once a contract has been awarded, even if the award is procedurally flawed as a matter of EU law. It is a familiar theme in EU law that the adoption of secondary legislation tends to generate judicial interpretation, which expands the impact of the EU rules. This is visible in the area of public procurement. So, for example, in Stadt Graz v Strabag, the Court relied on ‘the wording, context and objective of the provisions of Directive 89/665’ to rule against a requirement imposed by national law that a damages claim be conditional on a finding that the contracting authority involved was at fault.96 The animating concern of the Court was effective protection of EU rights. The Court has accumulated a large body of case law in which it has been asked to judge whether time limits imposed under national law are compatible with EU law. The Court does not adopt a stance that is in principle intolerant of time limits, which are after all conducive to certainty and the efficient administration of justice, but the shorter and the more uncertain the limit, the less likely the Court is to find it compatible with EU law.97 For example in MedEval, Austrian law required that a party wishing to bringing an action for damages in respect of the violation of a rule of public procurement law had to secure a prior declaration that the procedure was unlawful; and that action for a declaration was subject to a six-month limitation period beginning on the day after the date of the award of the contract.98 No account was taken of whether the aggrieved party knew or could know of the malpractice. This, the Court ruled, is not compatible with EU law’s principle of effectiveness. The Court has not yet had much opportunity to address the notion of contractual ‘ineffectiveness’ introduced into the regime by Directive 2007/66. In Fastweb, the Court ruled that if the conditions in Article 2d(4), which carve out an exception from the sanction of ineffectiveness, are met, the effects of the contract must be maintained.99 Legal certainty is a consideration that militates against finding contracts ineffective, and so exceptions to the rules concerning ineffectiveness are to be interpreted narrowly, but they are not to be deprived of their effect. The Court added that Article 2d(4) does not violate Article 47 of the Charter, which asserts a right to an effective remedy. Instead that Article ‘seeks to accommodate divergent interests’.100 In MedEval, the Court noted that rendering a contract ineffective ‘puts an end to the existence and possibly the performance of that contract’, which can cause considerable upset and financial loss to tenderer, awarding authority and to the public, and so the concern to preserve legal certainty is more

96 Case C-314/09 Stadt Graz v Strabag, EU:C:2010:567. 97 Eg Case C-470/99 Universale Bau, EU:C:2002:746; Case C-327/00 Santex SpA, EU:C:2003:109; Case C-406/08 Uniplex, EU:C:2010:45. 98 Case C-166/14 MedEval, EU:C:2015:779. 99 Case C-19/13 Fastweb, EU:C:2014:2194. 100 Ibid para 63.

Internal Market Law Made Better  47 compelling in actions for a declaration that a contract is ineffective than in actions for damages.101 There is plainly much that requires elaboration under these several directives concerning public contracting. There are points of interpretative ambiguity and there are instances of caution (both are visible in connection with the mysterious notion of the ‘ineffectiveness’ of contracts); and they do not provide exhaustive treatment of all matters that might arise, but rather they depend in some circumstances on elaboration under national law, which will vary. However, the directives go far beyond general internal market law in channelling the methods whereby national regulatory discretion is exercised in matters of public contracting, and in specifying procedural dimensions of national administrative practice and remedies. The sensitivity associated with using EU secondary legislation to address directly questions associated with the validity of contracts and the availability of damages is plain, but the fact that this has been attempted at all serves to underline how special public procurement law really is. It provides a far more detailed legal framework within which public authorities are required to act than does free movement law generally.

V. Conclusion The law of the EU’s internal market is founded on the TFEU but over time it has been made more intricate by the interpretative rulings of the Court of Justice. The result is a relatively sophisticated system for controlling the exercise of national regulatory autonomy insofar as it harms cross-border trade. The Court has shaped the Treaty’s free movement rules into a subtle and supple basis for mediating the tension between the interest in trade integration at EU level and the interest in market regulation expressed through national rules. Where the latter harms the former, it must be shown to be justified. This includes a procedural dimension. National practice must be transparent and open to review. Furthermore, the Court has pushed beyond a simple model whereby EU law defines rights but national systems provide remedies, and it has insisted, in addition, that those remedies must conform to the EU requirements of non-discrimination and effectiveness. This is the story told in section II of this chapter. Section III cautioned that although this pattern is a remarkable achievement, marking out the EU as by far the most intensively managed inter-state trading bloc in history, it still falls short of putting in place a single predictable set of rules to underpin the operation of the EU internal market. The key structural point that Member States have room to justify trade-restrictive rules places a burden on traders to litigate to secure their removal, where local practice is resistant to



101 MedEval

(n 98) para 40.

48  Stephen Weatherill the marketing of new goods and services. This is likely to be a costly and lengthy process – the European Court Reports offer proof. Moreover, the procedural accompaniments to free movement law – those put in place both by the EU legislature and by the Court’s interpretative boldness – are incomplete and in practice too often neglected by national authorities. The Court’s innovative approach to policing available national remedies does not take away the basic starting point that it is national law, varied and sometimes inadequate, that lays the foundations. Section IV of the chapter shows how EU law governing public procurement is significantly more detailed and sophisticated in the control it exercises over national autonomy than is general internal market law. On all three counts – the substance of the control imposed on national regulatory discretion, the procedural dimensions of national administrative practice and remedies – EU public procurement law is a great deal more intricate. It confines and channels national practice in a much more precise way than does primary law, thereby to challenge more robustly abuse of discretionary powers to award contracts that are held by public authorities at national and regional level. This overview provokes two concluding reflections. The first concerns the gap between the legal framework within which public contracting is embedded in the EU, which is remarkably and atypically dense and detailed, and the reality of the market for public contracting, which is enduringly fragmented along national lines. It seems relatively easy to conceal discriminatory practices in this sector. It will frequently be hard to prove why a contract has been placed locally, and disappointed bidders have incentives not to take legal action against offending public authorities, but rather to suffer in silence in the hope of better luck next time. The size and economic strength of awarding public authorities is precisely the reason why they are able to thwart the expectations of internal market law. In April 2015 the Commission published a closely argued and empirically driven survey entitled Economic efficiency and legal effectiveness of review and remedies procedures for public contracts.102 It concedes that, over 40 years since the EU first adopted secondary legislation in the field, suppliers continue not to seek review of contracting malpractice, ‘the two most common reasons being lack of confidence in the success of the complaints and a fear of retaliation by the awarding authority’.103 So the intriguing question asks whether this reveals an ultimate structural inadequacy in the EU’s aspirations. The EU’s modus operandi is to adopt ‘top down’ rules, but it enjoys minimal legal competence or material resources to do anything further. It depends heavily on its Member States to implement the rules and, ideally, to entrench them in local administrative practice. It seems, however, that obstacles to the functioning of the internal market caused by local culture, preferences and tradition persist. So the directives on public procurement put in place much more concrete and detailed rules, under an assumption that the



102 European 103 Ibid

10.

Commission, Final Study Report MARKT/2013/072C.

Internal Market Law Made Better  49 true potential of the internal market cannot be realised without deeper cuts into national autonomy than are envisaged by the rules of primary EU law alone, and yet their impact seems to be weak. Top-down law-making is not transformative enough. The Commission is perfectly aware of this. In October 2015, in its Communication Upgrading the Single Market: more opportunities for people and business, it identifies a series of required ‘Actions’.104 One is devoted to procurement.105 The Commission plans to set up a voluntary ex ante assessment mechanism of the procurement aspects of certain large-scale infrastructure projects. It will encourage Member States to improve the review of procurement decisions by promoting networking between first-instance review bodies, providing special legal and technical assistance to Member States willing to create or strengthen specialised first-instance administrative review bodies and improving the monitoring of effectiveness by regular assessment including through the Single Market Scoreboard. The Commission commits to work with Member States to improve the transparency and quality of national procurement systems through better data, by the establishment of contract registers covering the whole life-cycle of contracts, and by supporting the development and deployment of a data analytics and anomaly-detection tool to better uncover existing or prospective procurement irregularities. One cannot sensibly quarrel with these well-intentioned strategies. But the empirical evidence suggests that the obstacles to deep integration in markets for public contracting within the EU are largely resistant to the EU’s longstanding attempts to provoke change. The second concluding reflection asks whether the story has in fact turned full circle. The regulation of the public procurement sector as a matter of primary EU law alone was abandoned long ago in favour of more detailed treatment under secondary legislation. The assumption – and this is the narrative portrayed in this chapter – has been that this shift from generally applicable rules to more sectorspecific detailed provision is necessary in order to channel national discretion more tightly, in order to open up the market for public contracts across national lines (even if, as noted, that transformation remains elusive in practice). However, the rules contained in the directives have been periodically adapted and made more flexible, to the point where one might wish to question whether in truth the virtues of channelling have now been surrendered. That is, the law governing public procurement in the EU may not be any better, or at least not much better, than general internal market law now that so much space has been allowed for choice about procedure and method by contracting authorities.



104 COM(2015) 105 Ibid

550. para 3.2.

50

3 The Drivers and Boundaries of Discretion in the Award of Public Contracts CHRISTOPHER H BOVIS

I. Introduction Public procurement regulation1 is decentralised2 but reflects upon the establishment of a number of doctrines that have guided the application of rules by defining essential legal concepts such as public contracts,3 contracting authorities,4

1 See Directive 2014/24 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts; Directive 2014/25 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors; and Directive 2014/23 on the on the coordination of procedures for the award of concessions [2014] OJ L94. 2 The decentralisation of public procurement regulation is depicted in Member States’ exclusive jurisdiction in both application and enforcement of the substantive provisions of the EU Directives. See C Bovis, The Law of EU Public Procurement (OUP 2015). 3 See Cases C-399/98 Ordine degli Architetti and Others [2001] ECR I-5409; C‑324/98 Telaustria and Telefonadress [2000] ECR I‑10745; C‑59/00 Bent Mousten Vestergaard and Spøttrup Boligselskab [2001] ECR I‑9505 (‘Vestergaard’); C-26/03 Stadt Halle and RPL Lochau [2005] ECR I-1; C-264/03 Commission v France [2005] ECR I-8831; C-231/03 Consorzio Aziende Metano (Coname) v Comune di Cingia de’ Botti [2005] ECR I‑7287; C-507/03 Commission v Ireland (An Post) [2007] ECR I-9777; C‑458/03 Parking Brixen [2005] ECR I‑8585; C‑412/04 Commission v Italy [2008] ECR I‑0000; C-295/05, Asociación Nacional de Empresas Forestales (Asemfo) v Transformación Agraria SA (Tragsa) and Administración del Estado [2007] ECR I-2999; C-220/05 Jean Auroux and Others v Commune de Roanne, [2007] ECR  I-385; C‑382/05 Commission v Italy [2007] ECR I‑6657; C-6/05 Medipac-Kazantzidis AE v ­Venizelio-Pananio (PE.S.Y. KRITIS) [2007] ECR I‑4557; C-480/06 Commission v Germany [2009] ECR I-04747; C‑148/06 SECAP SpA and Santorso Soc coop arl [2008] ECR I-3565; C-220/06 Asociación Profesional de Empresas de Reparto y Manipulado de Correspondencia v Administración General del Estado [2007] ECR I-12175; C‑324/07 Coditel Brabant SA v Commune d’Uccle, Région de BruxellesCapitale [2009] 1 CMLR 29; C‑437/07 Commission v Italy [2008] ECR I‑0000; C‑147/06 Commission v Ireland [2007] ECR I‑0000; C-206/08 WAZV Gotha v Eurawasser Aufbereitungs [2009] ECR I-8377. 4 See Cases C-31/87 Gebroeders Beentjes BV v State of Netherlands [1988] ECR 4635 (Beentjes); C-343/95 Diego Cali et Figli [1997] ECR 1-1547; C-44/96 Mannesmann Anlagenbau Austria AG and others v Strohal Rotationsdruck GesmbH [1998] ECR I-73; C-360/96 BFI Holding [1998] ECR I-6821; C-360/96 Gemeente Arnhem Gemeente Rheden v BFI Holding BV [1998] ECR 6821; C-380/98 University of Cambridge [2000] ECR I-8035; C‑107/98 Teckal [1999] ECR I‑8121; C-470/99 Universale-Bau and

52  Christopher H Bovis the remit of selection and qualification criteria,5 and the parameters for contracting authorities to use environmental and social considerations6 as award criteria, and which have influenced public procurement law making. These doctrines were created by judicial developments, which have shaped the interpretation and application of the procurement acquis and have positioned public procurement regulation as an instrument that creates compliance safeguards by authenticating established principles of European Union (EU) law and which verifies compatibility links with European policies. This chapter intends to establish that discretion as a principle in the application of public procurement regulation represents the most influential factor in the evolution of the public procurement acquis, which has been experiencing conceptual and regulatory vagueness, limited interoperability with legal systems of Member States and continuous market-driven modality changes in financing and delivering public services. The discretion in public procurement regulation can be traced in the doctrine of flexibility, which is present in the instruments and concepts of the acquis and has been moulded by the instrumental role of the Court of Justice of the European Union (CJEU), which has provided intellectual support to the efforts of the European institutions to strengthen the fundamental principles that underpin public procurement regulation. The chapter has two aims. Its main aim is to critically assess the band-width of discretion in public procurement, by identifying the grounds on which it can be exercised by contracting authorities in their attempt to apply public procurement law as the conduit for the delivery of public services. The second parallel aim of this chapter is to expose the boundaries of discretion in the format of non-exhaustive harmonisation, which appears as the main shortcoming of public procurement law from its inception until the most recent reforms of the 2014 Procurement Directives prompted by the Single European Act of 2011, and the cause of significant porosity in the procurement acquis. The non-exhaustive harmonisation of the public procurement rules has resulted in a legal lacuna

Others [2002] ECR I-11617; C-237/99 Commission v France (OPAC) [2001] ECR I-939; C-223/99 Agora Srl v Ente Autonomo Fiera Internazionale di Milano; C-260/99 Excelsior Snc di Pedrotti runa & C v Ente Autonomo Fiera Internazionale di Milano [2001] ECR 3605; C-373/00 Adolf Truley [2003] ECR-193; C-26/03 Stadt Halle, RPL Recyclingpark Lochau GmbH v Arbeitsgemeinschaft Thermische Restabfallund Energieverwertungsanlage TREA Leuna [2005] ECR I-1; C-18/01 Korhonen and Others [2003] ECR I-5321. 5 See Cases C-176/98 Holst Italia [1999] ECR I-8607; Telaustria and Telefonadress (n 3); C-399/98 Ordine degli Architetti and Others [2001] ECR I-5409; C‑285/99 and C‑286/99 Lombardini and Mantovani [2001] ECR I‑9233; C-315/01 (GAT) and Österreichische Autobahnen und Schnellstraßen AG (ÖSAG) ECR [2003] I-6351; C-314/01 Siemens and ARGE Telekom & Partner [2004] ECR I-2549; C‑57/01 Makedoniko Metro and Mikhaniki [2003] ECR I‑1091; C-126/03 Commission v Germany [2004] ECR I-11197. 6 See Beentjes (n 4); Case C-225/98 Commission v French Republic (Nord-Pas-de-Calais) [2000] ECR 7445; Case C-513/99 Concordia Bus Filandia Oy Ab v Helsingin Kaupunki et HKL-Bussiliikenne [2002] ECR 7213; Cases C-448/01 EVN AG, Wienstrom GmbH and Republik Österreich [2003] ECR I-14527.

The Drivers and Boundaries of Discretion  53 and a recurrent danger of weakening the discretion in the application of public procurement regulation, and in limiting the effectiveness of the public procurement acquis. The chapter will be presented in a threefold structure: in section II the drivers of public procurement regulation will be exposed; in section III the notion of discretion and its roots in the application of public procurement will be presented; lastly, in section IV, the boundaries of discretion and the limitations of the public procurement regime to a flexible application will be uncovered.

II.  The Drivers of Public Procurement A liberalised and integrated system of public procurement is an essential component of the single market in the EU.7 The origins of the regulation of public procurement in the EU derive from soft law, which identified purchasing practices of Member States as considerable non-tariff barriers and as factors hindering the functioning of a genuinely competitive market.8 The need for competitiveness and transparency in public procurement markets has been also considered as a safeguard of fundamental Treaty principles,9 such as the free movement of goods and services, the right of establishment and the prohibition of discrimination on grounds of nationality. Economic justifications for regulating public procurement have pointed towards introducing competitiveness into the relevant markets in order to increase cross-border trade of products and services destined for the public sector, and to achieve price transparency and price convergence across the EU, thus achieving significant savings.10 The strategic importance of public procurement for the European integration process has been recognised by the 2011 Single Market Act,11 which has prompted a series of reforms to the EU Public Procurement acquis.12 These reforms aim at linking

7 See Commission, Communication to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions, Towards a Single Market Act, COM(2010) 608 final. 8 See Commission, White Paper for the Completion of the Internal Market, COM(85) 310 final, 1985; also Green Paper on Public Procurement in the European Union: Exploring the way forward, European Commission 1996; also Commission, Communication on Public Procurement in the European Union, COM(98) 143. 9 See Cases C-223/99 Agora Srl v Ente Autonomo Fiera Internazionale di Milano; C-260/99 Excelsior Snc di Pedrotti Runa & C v Ente Autonomo Fiera Internazionale di Milano [2001] ECR 3605; C-360/96 Gemeente Arnhem Gemeente Rheden v BFI Holding BV [1998] ECR 6821; Mannesmann Anlangenbau Austria (n 4). 10 See Commission, The Cost of Non-Europe, Basic Findings, vol 5: ‘Part A: The Cost of Non-Europe in Public Sector Procurement’ (Official Publications of the European Communities 1988). Also P Cecchini, M Catinat, and A Jacqemin, The European Challenge 1992 – The Benefits of a Single Market (Wildwood House 1988). 11 See Commission, Communication: Europe 2020, A strategy for smart, sustainable and inclusive growth, COM (2010) 2020 final. 12 See Green Paper on the modernization of EU public procurement policy: Towards a more efficient European Procurement Market, COM(2011) 15/47.

54  Christopher H Bovis public p ­ rocurement directly with the European 2020 Strategy, which focuses on growth and competitiveness. The drivers of public procurement regulation have been promoted by the following doctrines, which have been utilised to construct the interpretation of concepts of the Public Procurement Directives. First, the doctrine of ­objectivity, which is intended to provide a restrictive interpretation of rules governing selection procedures (quantitative and qualitative suitability criteria) and award procedures, in particular negotiated procedures, as well as, with the support of the test of equivalence, to eliminate non-tariff barriers in the fields of technical standards, product specification and standardisation. Second, the doctrine of effectiveness, which has been applied through the tests of functionality and dependency in order to define the notion of contracting authorities, and also with a view to meeting the requirements of swift dispute resolution at national level and of enforceability of decisions of national courts or tribunals. The doctrine of effectiveness presumes that national remedies, which are left to the discretion of Member States, must be effective in adhering to and observing public procurement law and EU law by reference to enforcement mechanisms. Effectiveness is measured by the ability to enforce public procurement law. Third, the doctrine of procedural equality, expressed through the explicit obligation conferred on Member States to avoid introducing review procedures for public procurement disputes, as well as procedures for actions for damages that differ, in a discriminatory context, from other review procedures and procedures for actions for damages under national law. The doctrine of procedural equality is a boundary of Member States’ discretion in their autonomy to establish remedies for enforcing public procurement rules. Procedural equality presumes that the procedural autonomy for public procurement remedies granted to Member States must not result in differentiated systems when compared with redress procedures for other disputes within their legal orders.

III.  Discretion in Public Procurement Regulation The discretion of Member States in applying public procurement law emanates from the fact that its incorporation into the respective domestic legal orders is based on the integration vehicle of harmonisation. Harmonisation does not stop at the discretion of national systems to implement the prescribed acquis; it also expands upon a whole new concept of decentralisation, where compliance with and enforcement of public procurement law is entrusted to the Member States. The Remedies Directives13 offer clear evidence of such decentralisation effects,

13 Directive 89/665 [1989] OJ L395/33 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public

The Drivers and Boundaries of Discretion  55 where the national legal system is exclusively assigned the task of enforcing the substantive procurement rules for the public sector and utilities. Decentralisation of public procurement runs parallel to the similar effects in EU anti-trust application and enforcement. There are two main categories where discretion of Member States in applying public procurement law may emerge. First, there is procedural discretion, particularly in the choice of award procedures and the ability to establish autonomous remedies for redress and access to justice in public procurement contracts. Secondly, discretion in substantive terms in applying public procurement rules exists in the fields of selection and qualification of economic operators, exclusion of candidates, and the choice and features of contract award criteria, mainly the most economically advantageous tender. Discretion has been inherent in public procurement acquis. First, through harmonisation, discretion appears as the most influential factor in the evolution of public procurement regulation and its decentralised application. Directives have been entrusted to carry the principles and concepts of the regime. Second, discretion is evident in the procurement concepts, such as contracting authorities and public contracts, and the process itself, such as the selection and qualification phase, the award procedures and the award criteria phases. Third, discretion in the application of public procurement regulation is verified by the CJEU’s jurisprudence, where judicial doctrines attempt to align it with the underlying EU legal principles. Discretion in public procurement surfaces through two judicially developed doctrines: the doctrine of flexibility in the application of substantive public procurement rules, and the doctrine of procedural autonomy in the application of remedies in the award of public contracts. The doctrine of flexibility, which is defined through the tests of dualism, commercialism and competitiveness, has been applied in order to determine the remit and thrust of public procurement rules, particularly in relation to the concept of contracting authorities and through the test of compatibility of socio-economic and environmental policies with the economic approach to public procurement regulation, to verify public procurement as a policy instrument of the European integration process. The doctrine of procedural autonomy is depicted through the wide discretion afforded to Member States to create the appropriate fora to receive complaints against decisions of contracting authorities and utilities, as well as actions for damages.

works contracts and Directive 92/13 [1989] OJ L76/14 on the coordination of the laws, regulations and administrative provisions relating to the application of Community rules on the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors, as amended by Directive 2007/66/EC [2007] OJ L335/31.

56  Christopher H Bovis

A.  The Doctrine of Flexibility and Contracting Authorities The flexibility doctrine, relying on the tests of dependency14 and competitiveness,15 provides the parameters for the inapplicability of the Public Procurement Directives. The test of dependency reveals two distinctive features: the similarity of control of an undertaking to that exercised by contracting authorities over their own departments; and the operational connection of the undertaking’s activities to the objectives of the contracting authority. The test of competitiveness indicates that any element of competition from private undertakings in the activities of an undertaking, dilutes the assumption that for that undertaking to be considered as a body governed by public law, it must be established for the specific purpose of meeting needs in the general public interest not having an industrial or commercial character. The doctrine of flexibility is also reflected in the legislative provisions of both the Public Sector and Utilities Procurement Directives respectively. Public service contracts awarded on the basis of an exclusive right granted by a contracting authority to another contracting authority, or to an association of contracting authorities, on the basis of an exclusive right they enjoy pursuant to a published law, regulation or administrative provision that is compatible with the Treaty,16 do not fall under the provisions of the Public Sector Directive.17 Furthermore, the Utilities Directive does not apply to contracts awarded by a contracting entity to an affiliated undertaking,18 nor to contracts awarded by a joint venture formed 14 See Case C-107/98 Teckal Slr v Comune di Viano [1999] ECR I-8121; Case C-237/99 Commission v France [2001] ECR I-939; Case C-380/98 The Queen and HM Treasury, ex parte University of Cambridge [2000] ECR I-8035. 15 See Joined Cases C-223/99 & C-260/99 Agora Srl v Ente Autonomo Fiera Internazionale di Milano and Excelsior Snc di Pedrotti Runa & C v Ente Autonomo Fiera Internazionale di Milano [2001] ECR I-3605; also Case C-18/01 Korhonen and Others [2003] ECR I-5321, para 51. 16 See Art 18 of the Directive 2014/24/EU of the European Parliament and of the Council of 26  ­February 2014 on public procurement and repealing Directive 2004/18/EC (The Public Sector Directive) [2004] OJ L134/114, as amended by Directive 2014/24 [2014] OJ L94/65. 17 However, Art 3 of the Public Sector Directive includes a non-discrimination clause for cases of granting special or exclusive rights. Where a contracting authority grants special or exclusive rights to carry out a public service activity to an entity other than such a contracting authority, the act by which that right is granted must provide that, in respect of the supply contracts it awards to third parties as part of its activities, the entity concerned must comply with the principle of non-discrimination on the basis of nationality. 18 See Art 23(2)(a) of the Directive 2014/25/EU of the European Parliament and of the Council of 26  February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC (The Utilities Directive) [2004] OJ L134/1, as amended by Directive 2014/25 [2014] OJ L94/243. For the preceding three years at least 80% of the average turnover of the affiliated undertaking must derive from the provision of works, supplies and services to undertakings with which it is affiliated. An affiliated undertaking is an undertaking the annual accounts of which are consolidated with those of the contracting entity in accordance with the requirements of the Seventh Council Directive on consolidated accounts, Directive 83/349/EEC [1983] OJ L193/1,or, in the case of entities not subject to that Directive, any undertaking over which the contracting entity may exercise, directly or indirectly, a dominant influence or that may exercise a dominant influence over the contracting entity or which, in common with the contracting entity, is subject to the dominant influence of another undertaking by virtue of ownership, financial participation or the rules which govern it. According to Art 2(1)(b) of the Utilities Directive, contracting

The Drivers and Boundaries of Discretion  57 exclusively by a number of contracting entities to an undertaking that is affiliated with one of those contracting entities.19

B.  The Doctrine of Flexibility and In-House Entities The constituent features of the dependency test between a contracting authority and an entity controlled in a manner similar to the former’s own departments, and which is operationally dependent on the former in the sense that it carries out the essential part of its activities for the benefit of the controlling contracting authority, have been developed in jurisprudence.20 A public authority has the possibility of performing the public interest tasks conferred on it by using its own administrative, technical and other resources, however, without being obliged to call on outside entities not forming part of its own departments.21 That possibility, for public authorities to use their own resources to perform the public interest tasks conferred on them, may be exercised in cooperation with other public authorities.22 Commission v Germany23 provided for a display of flexibility in the hands of contracting authorities in relation to their freedom to organise and deliver public services. Public cooperation between independent contracting authorities, in the form of establishing an entity over which no control is exercised similar to that exercised over their own departments, resulting in the entrusting of a contract on behalf of the participant contracting authorities, can be deemed to meet the criteria for an in-house exception, provided that the remit of such public cooperation exists in relation to a public task or service specified under EU law, that there is no intention to circumvent public procurement rules, and that the contractual relation is not based on any pecuniary interest consideration nor any payments between the entity and the participant contracting authorities. To reach such a conclusion, an interpretative analogy with Coditel Brabant24 was used, where contractual relations between inter-municipal cooperative societies, whose members are contracting authorities and a jointly controlled entity, can be deemed in-house contractual relations.

authorities exercise a dominant influence on public undertakings when, directly or indirectly, in relation to an undertaking, they hold the majority of the undertaking’s subscribed capital, or control the majority of the votes attaching to shares issued by the undertaking, or can appoint more than half of the undertaking’s administrative, management or supervisory body. 19 See Art 23(2)(b) of the Utilities Directive. 20 See M Comba and S Treumer (eds), The In-House Providing in European Law (Djøf Jurist-og Økonomforbundet 2010). 21 See Case C-26/03 Stadt Halle, RPL Recyclingpark Lochau GmbH v Arbeitsgemeinschaft Thermische Restabfall- undEnergieverwertungsanlage TREA Leuna [2005] ECR I-1, para 48. 22 See Case C-295/05 Asociación Nacional de Empresas Forestales (Asemfo) v Transformación Agraria SA (Tragsa) and Administración del Estado [2007] ECR I-2999, para 65. 23 Case C-480/06 Commission v Germany [2009] ECR I-4747. 24 Case C‑324/07 Coditel Brabant SA v Commune d’Uccle, Région de Bruxelles-Capitale [2009] ECR I-8457.

58  Christopher H Bovis

C.  The Similarity of Control Feature in Contracting Entities The requirement that control must be similar to that which the contracting entity exercises over one of its own departments represents the Teckal25 first criterion. The notion of control and the similarity requirement merit a comprehensive approach, and not one solely based on company law features nor one based on the level of the contracting authority’s shareholding or, conversely, that of the minority shareholder. Normally, corporate control indicates decisive influence over management, operational and strategic decisions, in a fashion similar to the concept of majority shareholder control found in various company laws of the Member States. Nevertheless, any appraisal of the legal position of a majority shareholder in order to assert control must be taken in conjunction with the statutes governing the relevant entity over which the control is exercised and not by sole reference to national company law provisions, as often minority shareholdings give rights of decisive influence, such as specific oversight and blocking rights. The notion of control for the purposes of in-house contracts entails much more than the ingredients of ‘dominant influence’ as a company law notion, or as a public procurement notion to define certain bodies as contracting authorities. For the purposes of in-house relations, the object of such control should not be confined to strategic market decisions or procurement decisions, but should embrace individual management and operational decisions as well. Corporate control is exercised by conclusive influence on both strategic objectives and significant decisions. In Parking Brixen,26 the important point in relation to the control criterion is that there should be ‘a potential power of decisive influence over both strategic objectives and significant decisions’. With respect to the means of control, the ability to possess and evidence of rights to give instructions, supervisory powers and rights to make appointments reflect upon a guiding principle that is de facto conclusive of the power to influence corporate behaviour and is not emanating from legislative provisions alone. In theory, joint-stock public companies, where various contracting authorities hold together all of the share capital in an entity, are capable of meeting the similarity of control requirement. However, if a joint-stock company is vested with the broadest possible powers for the management of the company and in the absence of any control or specific voting powers for restricting its freedom of action, the similarity of control requirement is not present. If control exercised by a contracting authority over an entity can be viewed as consisting essentially of the majority shareholders’ rights conferred by company law, such control cannot be deemed as similar to the that exercised upon the contracting authority’s own departments. Moreover, if control is exercised through an intermediary, such as a holding company, the intervention of such an intermediary may render the



25 See 26 See

Teckal (n 14). Parking Brixen (n 3) para 65.

The Drivers and Boundaries of Discretion  59 similarity of control requirement irrelevant.27 Nevertheless, if a joint-stock entity is jointly controlled by several contracting authorities, the similarity of control criterion is satisfied, provided that all contracting authorities exhibit control over the relevant entity similar to that exercised over their own departments.28 In such situations, as in the case of inter-municipal cooperative societies whose members are contracting authorities themselves, if joint control is exercised by the majority of controlling contracting authorities, the similarity of control criterion is met.29 Therefore, the concept of control must be understood in functional and not in formal terms. The use of the term ‘departments’ derives from the original reason for setting up autonomous bodies, which was to entrust particular departments with a function or the delivery of a specific public service. The control exercised over an entity or an undertaking by a public authority must be similar to that the authority exercises over its own departments, but not identical in every respect, and it must be effective but it is not essential that it be exercised individually.30 There is nothing to prevent its being applied to a relationship between a contracting authority and legal persons governed by private law, such as a limited liability company. However, the existence of private capital participating in an entity that has corporate links with a contracting authority negates the similarity of control requirement. Stadt Halle31 held that private sector participation cannot emulate the pursuit of public interest objectives entrusted to public sector entities. The relationship between a public authority that is a contracting authority and its own departments is governed by considerations and requirements proper to the pursuit of objectives in the public interest. Any private capital investment in an undertaking follows considerations appropriate to private interests and pursues objectives of a different kind.32 The participation, even as a minority, of a private undertaking in the capital of a company in which the awarding public authority is also a participant excludes in any event the possibility of that public authority’s exercising over such a company a control similar to that it exercises over its own departments. Semi-public entities or undertakings that are regarded as contracting authorities in their own right cannot be viewed as entities over which a contracting authority can exercise control similar to that exercised over its own departments. Mödling33 followed the Stadt Halle reasoning and, interestingly, held that if the award of an in-house public contract took place in accordance with the Teckal criteria, but within a very short period the controlling contracting authority transferred shares

27 See Case C-340/04 Carbotermo SpA, Consorzio Alisei v Comune di Busto Arsizio, AGESP SpA [2006] ECR I-4137. 28 Ibid para 37; Case C-295/05 Asemfo [2007] ECR I-2999, para 57. 29 See Coditel Brabant (n 24). 30 See Parking Brixen (n 3) para 62. 31 See Stadt Halle and RPL Lochau (n 3) para 49. 32 Ibid para 50. 33 Case C-29/04 Commission v Austria [2005] ECR I-9705.

60  Christopher H Bovis in the controlled entity to a private undertaking, this would be tantamount to a device designed to conceal the award of public service contracts to semi-public companies, and as a result it would prejudice the effectiveness and the principles of the Public Procurement Directives. Parking Brixen extended their remit to situations where there is visibility of imminent participation of private capital in a wholly owned public undertaking or entity. ANAV34 extends the Teckal criteria to companies limited by shares, but appears to link prospective privatisations as a ground for not meeting the Teckal exception. If, for the duration of a contract, the capital of the controlled entity that has been awarded that contract based on the Teckal in-house criteria is open to private shareholders, the effect of such a situation would be the award of a public contract to a semi-public company without any call for competition, which would interfere with the objectives pursued by the Procurement Directives and the principles of EU law.35 The combination of inferences from Parking Brixen and ANAV should be viewed as defence mechanism in order to prevent the abuse of the Teckal exception, even when at the time of the award of an in-house public contract there is no private sector participation in the capital of the controlled entity. In situations where future privatisation exercises are envisaged‚ or opening up wholly owned public undertakings’ capital to private investors, dictated by either law or regulation, or selected as policy choices by the contracting authority, special consideration should be paid to classifying such contractual arrangements as in-house relations. Emphasis was given to the concept of institutional public-private partnerships, where contracting authorities entrust the delivery of public services. Additionally, prospective privatisations could cause problems with the actual contractual arrangements, if ANAV is to apply to in-house relations, when a contract is into its delivery phase. Sea36 also corrects the potential problems deriving from ANAV. As a general rule, the existence of a private holding in the capital of the company to which a public contract is awarded must be determined at the time of that award.37 Account should be taken of cases where national applicable legislation provides for the compulsory opening of that company whose entire capital it holds, in the short term, to other capital.38 However, when shares in the contracting entity, which were previously wholly owned by the contracting authority, are transferred to a private undertaking shortly after the award of a contract to that undertaking, the in-house exemption is not applicable39 because the transfer is viewed as an artificial device to circumvent public procurement rules. Nevertheless, shares in a public company

34 Case C-410/04 Associazione Nazionale Autotrasporto Viaggiatori (ANAV) v Comune di Bari, AMTAB Servizio SpA [2006] ECR I-3303. 35 Commission v Austria (n 33) para 48. 36 Case C-573/07, Sea Srl v Comune di Ponte Nossa [2009] ECR I-8127. 37 See Case Stadt Halle and RPL Lochau (n 3) paras 15 and 52. 38 See Parking Brixen (n 3) paras 67 and 72. 39 See Commission v Austria (n 33) paras 38-41.

The Drivers and Boundaries of Discretion  61 could be sold at any time to third parties. It would be inconsistent with the principle of legal certainty not to apply the in-house exemption on the mere possibility that the capital structure of a publicly controlled company might change in the future. If a company’s capital is wholly owned by the contracting authority, alone or together with other public authorities, when the contract in question is awarded to that company, the potential opening of the company’s capital to private investors may not be taken into consideration unless a real prospect of such an opening exists at that time. That conclusion does not contradict Coname,40 which indicated that the fact that a public company is open to private capital prevents any arrangement from being regarded as ‘in-house’. In that case, a public service contract was awarded to a company whose share capital was mixed at the time of that award. Sea made clear that in a situation when a contract was to be awarded directly to a public company, the fact that subsequently the company’s share capital was opened up to private shareholders would constitute alteration of a fundamental condition of the contract. This scenario could not allow the contract to be viewed as an in-house arrangement, and it would require the full applicability of the Public Procurement Directives.

D.  The Operational Dependency Feature in Contracting Entities The second criterion in Teckal41 specifies that an essential part of the controlled entity’s activities must be carried out for the benefit of the controlling contracting authority or authorities. Sea held that the control exercised over that company by the shareholder authorities may be regarded as similar to that which they exercise over their own departments when that company’s activity is limited to the territory of those authorities and is carried on essentially for their benefit. In Parking Brixen in was held that the essential part of the controlled entities’ activities cannot be carried out for the benefit of the controlling public authority if the geographical area of those activities has been extended to the entire country and abroad. The ‘essential part’ criterion relates to a certain minimum proportion of the total activities performed by the controlled body. However, not only quantitative elements must be taken into account in determining the term ‘essential’. While it could have been convenient to define the ‘essential part’ criterion in line with the provision that establishes the 80 per cent turnover requirement applicable in utilities procurement for affiliated undertakings, such approach has been rejected by the Court.



40 Coname 41 See

(n 3) paras 5 and 28. Teckal (n 14) (fn 3).

62  Christopher H Bovis Cabotermo42 revealed interesting insights into the criterion of operational dependency. The concept of operational dependency, which is based on the 80 per cent rule of affiliated undertakings in the utilities sectors, cannot be imported into public sector procurement for the simple reason that that provision is regarded as a restrictively interpreted exception covering undertakings affiliated to utilities that are distinctly different from public sector authorities. Thus, although an ‘essential part’ indicates a quantitative measure in relation to turnover or financial quantum of the volume of activities performed by the controlled entity, qualitative factors such as strategic services, organisational planning, market analysis, the profitability of the entity in pursuit of the activities for the controlling authority and also the market dynamics under which the controlled entity operates should be taken into account. Cabotermo also ruled that to determine whether an undertaking carries out the essential part of its activities with the controlling authority, account must be taken of all the activities that undertaking carries out on the basis of an award made by the contracting authority, regardless of who pays for those activities and irrespective of whether it is the contracting authority itself or the user of the services provided. The territory where the activities are carried out is highly relevant for determining the ‘essential part’ feature of the Teckal exception. If the public authority that receives an essential part of an entity’s activities controls that entity through another company, the control criterion is still present, provided that control is demonstrable at all levels of the contracting authority’s corporate interface, being intermediate or indirect shareholding levels.

E.  The Doctrine of Flexibility and Public Contracts Sales of public assets or land do not represent public contracts, unless entry into a directly related public contract to use that asset or land is imminent by the contracting authority or another contracting authority, in which case the land or asset sale and the consecutive public works should be viewed in their entirety as a public contract.43 Sales of assets by contracting authorities to economic operators or other contracting authorities are not deemed public contracts, as a public contract is based on the ‘purchasing’ capacity of contracting authorities and on the imperative of a contracting authority in being able to determine standards and specifications suitable to meet the conditions of immediate economic benefit. The concept of public works contracts does not require that the works that are the subject of the contract be materially or physically carried out for the

42 Carbotermo (n 27). 43 See Case C-451/08 Helmut Müller v Bundesanstalt für Immobilienaufgaben [2010] ECR I-2673. The case concerned the question whether the rules on public contracts and, more specifically, the rules on public works concessions applied when a public authority sold assets and land to the prospective buyer who, in the opinion of the local authority responsible for town planning, presented the best and most interesting plans for the use of the land and the construction of buildings.

The Drivers and Boundaries of Discretion  63 c­ ontracting authority, provided that they are carried out for that authority’s immediate economic benefit. The conditions that reflect the direct economic benefit to a contracting authority have been restricted by imposing an element of functionality on the notion of public contracts, and have rendered the ownership of assets irrelevant to the determination of direct economic benefit on the part of contracting authorities. In fact, the necessary conditions to satisfy an immediate economic benefit to contracting authorities reflect only on the legal right of a contracting authority over the use of an asset, or on the future economic advantages enjoyed or risks assumed by the contracting authority in relation to the relevant asset.

F.  The Treatment of Sub-Dimensional Public Contracts Due to non-exhaustive harmonisation, certain public contracts are excluded from the scope of the Public Procurement Directives by virtue of contract value thresholds;44 but nevertheless, contracting authorities are bound to comply with the fundamental rules of the Treaty45 and abide by the general principles of EU law, such as the principle of transparency, the surrogate principle of equal treatment46 and the principle of non-discrimination on grounds of nationality.47 However, the application of the fundamental rules and general principles of the Treaty to procedures for the award of contracts below the threshold for the application of the Public Procurement Directives is based on the assumption that the contracts in question are of certain cross-border interest.48 A contract is likely to be of certain cross-border interest, and therefore attract operators from other Member States, on the grounds of its estimated value in conjunction with its technical complexity, or the fact that the works are to be located in a place likely to attract the interest of foreign operators. It is in principle for contracting authorities to assess whether there may be cross-border interest in sub-dimensional public contracts. Nevertheless, such assessment should be subject to judicial review. It is permissible, however, for legislation at national level to lay down objective criteria stipulating certain cross-border interest for public contracts that fall below the thresholds of the Public Procurement Directives. Such criteria could include, inter alia, the quantum of the monetary value of a contract, or its strategic importance to economic operators, in conjunction with the place where the work is to be carried out. The projected profitability to an economic operator from a sub-dimensional contract may also be part of such criteria to determine

44 See Vestergaard (n 3); Medipac-Kazantzidis AE (n 3); SECAP (n 3); see also Commission v Italy (n 3) para 65. 45 See Telaustria and Telefonadress (n 3) para 60. 46 See Coname (n 3) paras 16 and 17; and Parking Brixen (n 3) paras 46–48. 47 See Telaustria and Telefonadress (n 3) para 60; Vestergaard (n 3) paras 20 and 21; Commission v France (n 3) para 32; and Medipac-Kazantzidis AE (n 3) para 33. 48 See Case C‑507/03 Commission v Ireland [2007] ECR I‑9777, para 29.

64  Christopher H Bovis certain cross-border interest for public contracts. Where the financial returns in the relevant contracts are modest,49 the likelihood of a cross-border interest is considerably weakened. However, in certain cases, the geography and the particular location of the performance of a public contract could trigger crossborder interest, even for low-value contracts. Exclusion of sub-dimensional public contracts of certain cross-border interest from the application of the fundamental rules and general principles of the Treaty could undermine the general principle of non-discrimination, could give rise to collusive conduct and anti-competitive agreements between national or local undertakings, and could impede the exercise of freedom of establishment and freedom to provide services.50 Correos51 ruled that although certain contracts are excluded from the scope of the Procurement Directives because of value thresholds, contracting authorities are nevertheless bound to comply with the fundamental rules of the Treaty,52 and in particular with the principle of non-discrimination on grounds of nationality.53 Even in the absence of any discrimination on grounds of nationality, the principle of equal treatment of tenderers is also applicable to such public contracts.54 Observance by contracting authorities of the principles of equal treatment and non-discrimination on grounds of nationality is verified by adhering to the principle of transparency, which is utilised as verification mechanism.55

G.  The Treatment of Non-Priority Service Contracts An Post56 touched on contracts concerning services that fall under Annex IB of the Public Sector Directive. The contracting authorities are bound only by the obligations to define the technical specifications by reference to national standards implementing European standards, which must be given in the general or contractual documents relating to each contract, and to send a notice of the results of the award procedure to the Publications Office. However, the limited advertisement requirements for non-priority service contracts cannot justify the absence of any transparency, especially when the relevant contract is of certain cross-border interest. If a contract of certain cross-border interest is awarded to an undertaking located in the same Member State as the contracting authority without any

49 See Coname (n 3) para 20. 50 See Case C-79/01 Payroll and Others [2002] ECR I‑8923, para 26; Case C‑442/02 CaixaBank France [2004] ECR I‑8961, paras 12 and 13; and Case C‑452/04 Fidium Finanz [2006] ECR I‑9521, para 46. 51 See Case C‑220/06, Asociación Profesional de Empresas de Reparto y Manipulado de Correspondencia v Administración General del Estado [2007] ECR I-12175. 52 See Vestergaard (n 3) para 19. 53 See Commission v France (n 3) para 32. 54 See, by analogy, Parking Brixen (n 3) para 48; and ANAV (n 34) para 20. 55 See Parking Brixen (n 3) para 49; and ANAV (n 34) para 21. 56 See An Post (n 3).

The Drivers and Boundaries of Discretion  65 prior call for competition, this could amount to a difference in treatment to the detriment of undertakings that might be interested in that contract but which are located in other Member States.57 Such a difference in treatment, by excluding all undertakings located in other Member States, amounts to indirect discrimination on grounds of nationality.58 The purpose of the Public Procurement Directives is to eliminate barriers to intra-community trade,59 and the award of public contracts is to remain subject to the fundamental principles of EU law, and in particular to the rights of establishment and the freedom to provide services.

H.  The Doctrine of Flexibility and Award Criteria Throughout the evolution of public procurement acquis, the procedural phase in the procurement process culminated in the application of objectively determined criteria that demonstrate the logic behind the behaviour of contracting ­authorities. There are two criteria on which the contracting authorities must base the award of public contracts: (i) the most economically advantageous tender; or (ii) the lowest price. When the award is to be made to the most economically advantageous tender from the point of view of the contracting authority, various criteria linked to the subject matter of the public contract in question – for example quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, cost-effectiveness, after-sales service and technical assistance, delivery date and delivery period or period of completion – can be taken into consideration. The above-listed criteria, which constitute the parameters of the most economically advantageous offer, are not exhaustive and the factors listed therein serve as a guideline for contracting authorities in the weighted evaluation process of the contract award. For the purposes of defining what does constitute a most economically advantageous offer, the contracting authority must specify in the contract notice or in the contract documents, or, in the case of a competitive dialogue, in the descriptive document, the relative weighting it gives to each of the criteria chosen to determine the most economically advantageous tender. Those weightings can be expressed by providing for a range with an appropriate maximum spread. Where, in the opinion of the contracting authority, weighting is not possible for demonstrable reasons, the contracting authority must indicate in the contract notice or contract documents, or, in the case of a competitive dialogue, in the descriptive document, the criteria in descending order of importance.

57 See Telaustria and Telefonadress (n 3) paras 60 and 61; and Coname (n 3) para 17. 58 See Coname (n 3) para 19. 59 See Case C‑380/98 University of Cambridge [2000] ECR I‑8035, para 16; Case C‑19/00 SIAC Construction [2001] ECR I-7725, para 32.

66  Christopher H Bovis

I.  Social Considerations as Award Criteria The most economically advantageous offer as an award criterion has provided the opportunity to balance the economic considerations of public procurement with policy choices. Although, in numerous instances, the importance of the economic approach60 to the regulation of public sector contracts has been maintained, the relative discretion of contracting authorities to utilise non-economic considerations as award criteria has also been recognised. In Beentjes,61 however, it was ruled that social policy considerations, and in particular measures aiming at the combating of long-term unemployment, could only form part of the award criteria of public contracts, especially in cases where the most economically advantageous offer is selected. It was accepted that the latter award criterion contains features that are not exhaustively defined in the Directives, therefore discretion is conferred on contracting authorities to specify what the most economically advantageous offer would be for them. But contracting authorities cannot refer to such measures as a selection criterion and disqualify candidates that cannot meet the relevant requirements. The selection of tenderers is a process based on an exhaustive list of technical and financial requirements expressly stipulated in the relevant Directives, and the insertion of contract compliance as a selection and qualification requirement would be considered ultra vires. A contractual condition relating to the employment of long-term unemployed persons is compatible with the Public Procurement Directives, provided it has no direct or indirect discriminatory effect on tenders from other Member States. Furthermore, such a contractual condition must be mentioned in the tender notice.62 Rejection of a contract on the grounds of a contractor’s inability to employ long-term unemployed persons bears no relation to the checking of the contractor’s suitability on the basis of its economic and financial standing and its technical knowledge and ability. Measures relating to employment could be utilised as a feature of the award criteria only when they are part of a contractual obligation in the public contract in question, and on condition that they do not run contrary to the fundamental principles of the Treaty. The significance of that qualification has revealed the Court’s potential stance over the issue of contract compliance in public procurement. In Nord-Pas-de-Calais,63 it was considered whether a condition linked to a local project to combat unemployment could be considered as an award criterion of the relevant contract. The Commission alleged that the French Republic had infringed Article 30(1) of Directive 93/37 purely and simply by referring to the criterion linked to the campaign against unemployment as an award criterion in

60 See University of Cambridge (n 59) 17; Mannesmann Anlagenbau Austria (n 4) para 33; BFI (n 9) paras 42 and 43; OPAC (n 4) paras 41 and 42. 61 See Beentjes (n 4). 62 See Case 28/86 Bellini Case [1987] ECR 3347. 63 Nord-Pas-de-Calais (n 6).

The Drivers and Boundaries of Discretion  67 some of the disputed contract notices. Under Article 30(1) of Directive 93/37, the criteria on which contracting authorities are to base the award of contracts are the lowest price only, or, when the award is made to the most economically advantageous tender, various criteria according to the contract, such as price, period for completion, running costs, profitability and technical merit. It was held in Beentjes that the most economically advantageous offer does not preclude all possibility for the contracting authorities to use as a criterion a condition linked to the campaign against unemployment, provided that that condition is consistent with all the fundamental principles of EU law, in particular the principle of non-­discrimination deriving from the provisions of the Treaty on the right of establishment and the freedom to provide services.64 Furthermore, though, even if such a criterion is not in itself incompatible with the Public Procurement Directives, it must be applied in conformity with all the procedural rules laid down in those Directives, in particular the rules on advertising.65 It was clearly accepted that employment considerations can be a legitimate award criterion, part of the most economically advantageous offer, provided that the application of that criterion is consistent with the fundamental EU principles, such as the principle of non-discrimination, and it is advertised in the contract notice.

J.  Environmental Considerations as Award Criteria In Concordia,66 it was asked, inter alia, whether environmental considerations such as low emissions and noise levels of vehicles could be included amongst the factors making up the most economically advantageous criterion, in order to promote certain types of vehicles that meet or are able to better certain emission and noise levels. The answer followed the Beentjes principle, establishing that contracting authorities are free to determine the factors under which the most economically advantageous offer is to be assessed, and that environmental considerations could be part of the award criteria, provided they have been clearly publicised in the tender or contract documents. However, the inclusion of such factors in the award criteria should not prevent alternative offers that satisfy the contract specifications being taken into consideration by contracting authorities. Clearly a boundary was established, in that the Court wanted to exclude any possibility of environmental considerations being part of selection criteria or disguised as technical specifications, capable of discriminating against tenders that could not meet them. Criteria relating to the environment, in order to be permissible as additional criteria under the most economically advantageous offer, must satisfy 64 See Beentjes (n 4) para 29. 65 See, to that effect, para 31 of the judgment in Nord-Pas-de-Calais (n 6), where the Court stipulated that an award criterion linked to the campaign against unemployment must be expressly mentioned in the contract notice so that contractors may become aware of its existence. 66 See Concordia (n 6).

68  Christopher H Bovis a number of conditions, namely, they must be objective, universally applicable, strictly relevant to the contract in question and clearly contribute an economic advantage to the contracting authority.67

K. Variants The obligation to set out the minimum specifications required by a contracting authority in order to take variants into consideration, is not satisfied where the contract documents merely refer to a provision of national legislation requiring an alternative tender to ensure the performance of work that is qualitatively equivalent to that for which tenders are invited, without further specifying the comparative parameters on the basis of which such equivalence is to be assessed.68 According to the Public Procurement Directives,69 where the criterion for the award of the contract is that of the most economically advantageous tender, contracting authorities may take account of variants that are submitted by a tenderer and which meet the minimum specifications required by the contracting authorities. Contracting authorities may not reject the submission of a variant on the sole grounds that it has been drawn up with technical specifications defined by reference to national standards transposing European standards, to European technical approvals or to common technical specifications referred to in the Public Procurement Directives. Where the contracting authority has not excluded the submission of variants, it is under an obligation to set out in the contract documents the minimum specifications with which those variants must comply. Consequently, a reference made in the contract documents to a provision of national legislation cannot satisfy the requirements of transparency and equal treatment of tenderers wishing to forward a variant bid.70 Tenderers may be deemed to be informed in the same way of the minimum specifications with which their variants must comply in order to be considered by the contracting authority only where those specifications are set out in the contract documents. This involves an obligation of transparency designed to ensure compliance with the principle of equal treatment of tenderers, which must be complied with in any procurement procedure governed by the Directives.71 A question arose as to whether a contracting authority can reject an alternative tender that differs from a tender conforming to the contract specifications in that it proposes different technical specifications, without specifying the comparative 67 See the analysis in the Opinion of the Advocate General, ibid, paras 77–123. 68 See Case C-421/01 Traunfellner GmbH and Österreichische Autobahnen und Schnellstraßen Finanzierungs-AG [2003] ECR I-11941 (Asfinag). 69 See Art 19 of the Public Works Directive 93/37 [1993] OJ L199/54 and the equivalent provisions in all Public Procurement Directives, amended by Directive 97/52/EC [1997] OJ L328/1, Directive 2001/78/EC [2001] OJ L285/1, Directive 2004/18 [2004] OJ L134/114 as amended by Directive 2014/24 [2014] OJ L94/65. 70 See Beentjes (n 4) para 35; and Nord-Pas-de-Calais (n 6) para 73. 71 See SIAC Construction (n 59) paras 41 and 42.

The Drivers and Boundaries of Discretion  69 parameters to be used to assess the equivalence of all tenders.72 The Court asserted that that consideration of variants is subject to fulfilment of the requirement that the minimum specifications with which those variants must comply be set out in the contract documents, and that a mere reference in those documents to a provision of national legislation is insufficient to satisfy that requirement. Variants may not be taken into consideration where the contracting authority has failed to comply with the requirements with respect to the statement of the minimum specifications, even if they have not been declared inadmissible in the tender notice. The Court held that award criteria based on the most economically advantageous offer can apply only to variants that have been properly taken into consideration by a contracting authority.

L.  The Doctrine of Flexibility and Changes of Circumstances in Public Contracts A change in the terms and conditions of a contract that was previously awarded in accordance with the Public Procurement Directives may necessitate the initiation of fresh award procedures. In Pressetext,73 various changes were introduced by the contracting authority, in particular instituting an internal reorganisation by transferring the contract to a subsidiary of the economic operator that was carrying out the contract and waiving the right to terminate contract for three years. These changes were not sufficient to constitute a new award. The key test appears to assert that amendments during the duration of an awarded public contract necessitate new award procedures when they are materially different in character from the original contract and therefore demonstrate the intention of the parties to renegotiate the essential contractual terms. In practice, it is not easy to distinguish between material and non-material amendments in a public contract. An amendment may be regarded as material when it would have extended significantly the duration of the initial contract; when it would have allowed for admission of different bidders or selection of a different bid in the original tender; when it extends the scope of the contract considerably to encompass services not initially covered; or when it changes the economic balance of the contract in favour of the contractor. However, if the change in terms and conditions was foreseen in the initial contract, such change is normally regarded as a variation of the execution of the contract, thus not meriting new award procedures.

M.  The Doctrine of Procedural Autonomy in Remedies The exercise of national procedural autonomy must respect the principle of effectiveness. Article 1(3) of the Remedies Directive imposed an obligation on the

72 See 73 See

Asfinag (n 68). Case C-454/06, Pressetext Nachrichtenagentur [2008] ECR I-4401.

70  Christopher H Bovis Member States to ensure, under their own detailed rules, that review procedures are accessible at least to any person having or having had an interest in obtaining a particular contract, and who has been or risks being harmed by an alleged infringement.74 The scope of national procedural autonomy has been considerably reduced by the very adoption of specific harmonised remedies. Matters like the actual determination of limitation periods, access to file, effect of the national decisions, quantification of harm, and rules on evidence and the burden of proof have been left to the discretion of the Member States, with the amendment that the national choices must be effective. The following remedies are generally made available by Member States: • setting aside a decision of award partially or fully, or amending it; • setting aside any other decision for public procurement; • interim measures against the procurement procedure (an automatic interim bar is available in some countries, but in most countries the suspension is not automatic but a proportionality test is required); • annulment of a concluded contract; • damages, which are granted if the following standard criteria are met: • loss suffered by the claimant, • a breach of the law by the contracting authority or entity, • causality; • pecuniary penalties and periodic penalty payments, which form part of the public procurement remedy systems.

i.  Time Limits to Enact Review Proceedings Member States have wide discretion to establish the procedural framework for review procedures and the logistics for its operation. The existence of national legislation that provides that any application for review of decisions of contracting authorities must be commenced within a specific time limit, and that any irregularity in the award procedure relied upon in support of such application must be raised within the same period, is compatible with the public procurement acquis,75 provided that, in pursuit of the fundamental principle of legal certainty, such specific time limits are reasonable.76

74 Directive 2007/66/EC (n 13). 75 Case C-470/99 Universale-Bau AG, Bietergemeinschaft [2002] ECR I-11617. 76 Case C-261/95 Palmisani [1997] ECR I-4025, para 28; and Case C-78/98 Preston and Others [2000] ECR I-3201, para 33.

The Drivers and Boundaries of Discretion  71

ii.  The Notion of Ineffectiveness in Public Contracts The threat of ineffectiveness is a deterrent factor in the award of public contracts in breach of the relevant directives, and offers a great deal of discretion in the hands of national law. Ineffectiveness may result in retrospective cancellation of contractual obligations, or reduction of contractual obligations, or appropriate penalties in the sense of fines levied on contracting authorities or shortening of concluded public contracts. Grounds for deviation from ineffectiveness reflect overriding reasons relating to a general interest and must be subject to alternative penalties. Overriding reasons are economic interests, in exceptional circumstances, that manifest the conclusion of the contract due to the disproportionate consequences arising from its ineffectiveness. Economic interests directly linked to the contract, such as costs resulting from delay in the execution of the contract, costs resulting from the launching of a new procurement procedure, costs resulting from the change of the economic operator and costs of legal obligations resulting from the ineffectiveness, are not deemed overriding reasons. Member States may provide that application for review regarding the ineffectiveness of contracts must be made before 30 calendar days after publication of the contract award notice, provided that decisions of the contracting authority to award the contract without prior publication of the contract notice was justified, or in any case before expiry of period of at least six months after conclusion of contract.

iii.  Ex Proprio Motu Investigation of the Unlawfulness of Decisions of Contracting Authorities National courts responsible for hearing review procedures in actions brought by aggrieved tenderers, with the ultimate aim of obtaining damages, may declare on their own motion the unlawfulness of a decision of the contracting authority other than the one contested by the tenderer.77 However, a tenderer harmed by a decision to award a public contract, the lawfulness of which he is contesting, cannot be denied the right to claim damages for the harm caused by that decision on the ground that the award procedure was in any event defective owing to the unlawfulness, raised ex proprio motu, of another decision of the contracting authority. Therefore, national courts cannot dismiss an application for damages on the ground that, owing to the unlawfulness raised of the courts’ own motion, the award procedure was in any event unlawful, and that the harm the tenderer may have suffered would therefore have been caused even in the absence of the unlawfulness alleged by the tenderer.

77 Case C-315/01 Gesellschaft für Abfallentsorgungs-Technik GmbH (GAT) and Österreichische ­Autobahnen und Schnellstraßen AG (ÖSAG) [2003] ECR I-6351.

72  Christopher H Bovis

iv.  Failure to Participate in the Contract Award Procedure Member States are not obliged to make review procedures available to any person wishing to obtain a public contract; instead, the person concerned must have been or risks being harmed by the alleged infringement.78 In that sense, participation in a contract award procedure may validly constitute a condition that must be fulfilled before the person concerned can show an interest in obtaining the contract at issue or that he risks suffering harm as a result of the allegedly unlawful nature of the decision to award that contract.

IV.  The Boundaries of Discretion in Public Procurement The current public procurement acquis has prescribed different regulatory treatment to public sector procurement and utilities procurement, for two reasons. First, a more relaxed regime for utilities procurement, irrespective of utilities’ public or privatised ownership, has been justified and accepted as a result of the positive effects of liberalisation of network industries, which has stimulated sectoral competitiveness. Second, a codified set of rules, covering supplies, works and services procurement in a single legal instrument for the public sector, aims at producing legal efficiency, simplification and compliance in order to achieve the opening up of the relatively closed and segmented public sector procurement markets. At first sight, the main boundary of discretion of public procurement has been the de lege ferenda interpretation of Public Procurement Directives in order to provide a platform upon which Member States can effectively implement the acquis into domestic legal systems. Although the deficiencies and conceptual limitations of the Public Procurement Directives have been recognised, jurisprudence has pointed towards the strategic goal to arm the regime with direct effect, in order to enhance access to justice at the national level, to improve compliance and to streamline public procurement regulation by introducing an element of uniformity in its application. The most pronounced deficiency of the Public Procurement Directives is their porosity, which is caused by non-exhaustive harmonisation. This porosity undermines the effectiveness of the Directives by preventing their applicability to certain contractual situations, and as a result restricting a de lege ferenda extension of their provisions. Non-exhaustive harmonisation excludes de lege lata from the scope of the Public Procurement Directives public contracts below certain thresholds and certain contractual relationships that reflect inter-administrative interfaces in

78 See

Case C-249/01 Hackermüller [2003] ECR I-6319, para 18.

The Drivers and Boundaries of Discretion  73 the public sector, or contractual relations based on dominant influence between utilities and affiliated undertakings, and in particular service concessions, public contracts based on exclusive rights, public contracts in pursuit of services of general economic interest, in-house contracts and non-priority services contracts. Non-exhaustive harmonisation reflects the mutual exclusivity of the Public Sector Directive and the Utilities Directive, as well as their non-applicability in cases of public contracts awarded pursuant to international rules, or secret contracts and contracts requiring special security measures or contracts related to the protection of Member States’ essential interests. In addition, the Public Sector Directive does not cover public contracts of which the object is to provide or exploit public telecommunications networks; contracts for the acquisition or rental of land; contracts related to broadcasting services; contracts related to financial securities, capital-raising activities and central bank services; employment contracts; and research and development contracts that do not benefit the relevant contracting authority. The Utilities Directive does not apply to contracts awarded in a third country; contracts awarded by contracting entities engaged in the provision or operation of fixed networks for the purchase of water and for the supply of energy or of fuels for the production of energy; contracts subject to special arrangements for the exploitation and exploration of oil, gas, coal or other solid fuels; contracts and framework agreements awarded by central purchasing bodies, contracts of which their object activity is directly exposed to competition on markets to which access is not restricted; and contracts related to works and service concessions. Non-exhaustive harmonisation in lex specialis legal instruments such as the Public Procurement Directives cannot impose limits on the application of primary EU law to supplement their legal thrust. The lacuna in the limited effectiveness of the Procurement Directives, and particularly in areas which cannot de lege ferenda be conducive to regulatory control and the need for conformity with EU law, has been noted. Although the application of primary European law is not precluded in the presence of exhaustive provisions of secondary law,79 it has been explicitly recognised that the lex specialis character of the Procurement Directives aims at complementing fundamental freedoms of EU law. The Court responded to and treated the porosity of the Procurement Directives by signalling the necessity to supplement their remit with acquis deriving from fundamental principles of EU law. Thus, the supplementary applicability of primary EU law is intended to close the gap that exists in contracts falling outside the Procurement Directives, such as service concessions and sub-dimensional contracts,80 and in contracts that fall within the remit of the Directives but escape from the full thrust of the principles

79 See Case C‑37/92 Vanacker and Lesage [1993] ECR I‑4947, para 9; Case C‑324/99 DaimlerChrysler [2001] ECR I‑9897, para 32; and Case C‑322/01 Deutscher Apothekerverband [2003] ECR I‑14887, para 64. 80 See Coname (n 3) para 16; and Commission v France (n 3) para 32.

74  Christopher H Bovis enshrined therein, such as non-priority services contracts.81 The need to increase compliance of contracting authorities by promoting the objectivity of the Procurement Directives and enhancing their justiciability, whilst in parallel limiting their inherent flexibility, has been manifested. The porosity of the Public Procurement Directives has been treated further by relying on the principle of transparency for their interpretation and application. The principle of transparency is surrogate to the principle of equal treatment, and both principles encapsulate the fundamental EU law principles that underpin public procurement, such as the free movement of goods, the right of establishment and the freedom to provide services, as well as the principle of non-discrimination. The conceptual link between transparency and the principle of equal treatment is evident from jurisprudential developments. Transparency is intended to ensure the effectiveness of equal treatment in public procurement by guaranteeing the conditions for genuine competition. As the principle of equal treatment is a general principle of EU law, Member States are required to comply with the duty of transparency too. The duty of transparency represents a concrete and specific expression of the principle of equal treatment,82 which assumes that similar situations should not be treated differently unless differentiation is objectively justified.83 There has been an opportunity to define the scope of the principle of equal treatment in the context of public procurement in Commission v Denmark84 and Commission v Belgium.85 It was held that compliance with the principle of equal

81 See Case 45/87 Commission v Ireland [1988] ECR I‑4929, para 27, where the Court held that the inclusion in the contract specification of a clause stipulating exclusively the use of national specifications infringed Art 30 EC; Case C-243/89 Commission v Denmark (Storebælt) [1993] ECR I‑3353, where the Court found that contract clauses concerning preference for national specifications and nominated sub-contractors infringed Arts 30, 48 and 59 EC; Case C‑158/03 Commission v Spain and Case C‑234/03 Contse SA and Others v Instituto Nacional de Gestión Sanitaria (Ingesa), formerly Instituto Nacional de la Salud (Insalud) [2005] ECR I‑9315, where the content of tendering specifications, and in particular sub-criteria for the award of contracts, ran contrary to Art 49 EC; Case C-92/00 HI [2002] ECR I‑5553, para 42, where the Court ruled that contracting authorities’ decisions are subject to fundamental rules of Community law, and in particular to the principles on the right of establishment and the freedom to provide services; Case C-244/02 Kauppatalo Hansel Oy [2003] ECR I‑12139, paras 31 and 33, where the Court confirmed the principle under which primary law is to be taken into account in a supplementary capacity for evaluating the effectiveness of the Public Procurement Directives; Case C-57/01 Makedoniko Metro and Mikhaniki AE v Hellenic Republic [2003] ECR I‑1091, para 69, where the Court held that even if the Community directives on public procurement ‘do not contain specifically applicable provisions, the general principles of Community law … govern procedures for the award of public contracts’; Case C‑275/98 Unitron Scandinavia [1999] ECR I‑8291, paras 30 et seq, where the Court held that Community law principles such as the principles of transparency and the prohibition of discrimination on grounds of nationality must embrace the remit of the Public Procurement Directives. 82 See Joined Cases C-117/76 and C-16/77 Ruckdeschel and Others [1977] ECR 1753, para 7. 83 See Joined Cases 201/85 and 202/85 Klensch and Others [1986] ECR 3477, para 9; and Case C‑442/00 Rodríguez Caballero [2002] ECR I‑11915, para 32. 84 Storebælt (n 81) paras 37–39. 85 Case C‑87/94 Commission v Belgium [1996] ECR I‑2043, in particular paras 51–56. See also Case C‑496/99 P Commission v CAS Succhi di Frutta [2004] ECR I‑3801, para 108.

The Drivers and Boundaries of Discretion  75 treatment requires an absence of discrimination on grounds of nationality and a duty of transparency that enables contracting authorities to ensure that that principle is complied with. The duty of transparency was defined in Telaustria86 and Parking Brixen.87 Accordingly, the duty of transparency is intended to preclude any risk of favouritism or arbitrariness on the part of contracting authorities by ensuring a sufficient degree of advertising, which would result in opening up the market to competition, and by guaranteeing effective review mechanisms of the impartiality of the procurement procedures. The duty of transparency also implies that all the conditions and detailed rules of the award procedure must be drawn up in a clear, precise and unequivocal manner in the notice or contract documents, in order to enable all reasonably informed tenderers to understand their significance and to allow their unequivocal interpretation. The duty of transparency must also enable contracting authorities to ascertain whether the tenders submitted satisfy the award criteria applied to the relevant contract.88

V. Conclusions The European institutions, through the enactment of the Single Market Act,89 have identified public procurement reforms as essential components of competitiveness and growth,90 and as indispensable instruments for delivering public services.91 The results of public procurement reforms have been registered in a positive manner. The flexibility of the public procurement regulatory regime is reflected in important recent case law developments, in particular case law on the definition of contracting authorities, the use of award procedures and award criteria, and the possibility for contracting authorities to use environmental and social considerations as criteria for the award of public contracts. Furthermore, flexibility

86 See Telaustria and Telefonadress (n 45). 87 See Parking Brixen (n 3). 88 See Commission Interpretative Communication on the Community Law applicable to contract awards not or not fully subject to the provisions of the Public Procurement Directives [2006] OJ C179/02. The Commission drew up best practice by recommending means of adequate and commonly used publication of notices in the Member States, such as the Internet, the contracting authority’s website, or specific portal websites, national official journals and other means of publication, including a voluntary submission to the Official Journal/Tenders Electronic Daily for larger-value contracts. 89 See Commission, Communication to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions, Towards a Single Market Act, COM(2010) 608 final. 90 See Communication, Europe 2020 (n 11). 91 See Commission, Guide to the application of the European Union rules on state aid, public procurement and the internal market to services of general economic interest, and in particular to social services of general interest, SEC(2010) 1545 final. See Commission, Buying Social: A Guide to Taking Account of Social Considerations in Public Procurement, SEC(2010) 1258, final.

76  Christopher H Bovis underpins the relaxation of the competitive tendering regime and the disengagement of the public procurement rules in industries that operate under competitive conditions in the utilities sectors. Flexibility reveals the links between procurement regulation and anti-trust regulation. The non-applicability of the regime to telecommunications entities is an important development, indicative of the future legal and regulatory blueprints. The recent reforms of the public procurement regime will be limited and focus mainly upon the way service concessions and contracts awarded by a contracting authority to another contracting authority on the basis of exclusive rights are regulated, in the light of the interface of the public procurement acquis with the Services Directive.92 On the other hand, public-public partnerships and in-house contractual relations between contracting authorities and undertakings which are under their control and operational dependency reflect on the inherent flexibility in the engagement of the 2014 Public Procurement Directives. Contracts awarded by utilities to their affiliated undertakings and public service contracts relating to services of general economic interest (SGEI) and contracts having the character of a revenue-producing monopoly are conceptually similar to public-public partnerships and contracts covering in-house relations. Public contracts that fall below the stipulated value thresholds (sub-­ dimensional contracts) represent the most difficult category for reform and the biggest opportunity for discretionary exercises in public purchasing. On the one hand, they encapsulate a significant amount of Member States’ public expenditure, which escapes the clutches of the public procurement acquis. On the other hand, there is an imperative requirement to subject these contracts to some form of competition, and the Public Procurement Directives have been supplemented with EU law principles that ensure a parallel process of procurement with dimensional public contracts. This development has created uncertainty in the market place and resulted in a dysfunctional application of procurement rules to those contracts. The administrative and procedural burdens on the part of contracting authorities often surpass any potential efficiency benefits resulting from competitively tendering sub-dimensional contracts. In addition, adequately sufficient safeguards against intentional division of dimensional contracts into lots in order to avoid the applicability of the Public Procurement Directives exist in the current acquis. All Public Procurement Directives benefit from the principles of discretion and flexibility in their application by Member States. Discretion of Member States in applying public procurement law is surrogate to the principle of proportionality. The conceptual link is the principle of flexibility in public procurement law, which has been developed and deployed by the jurisprudence of the CJEU. The discretion

92 See Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market [2006] OJ L376/36.

The Drivers and Boundaries of Discretion  77 is reflected in the fact that the EU public procurement rules are enacted and implemented in domestic legal systems by reference to harmonisation, but procurement rules are inherently flexible to accommodate compliance and legal interoperability with EU principles and policies. The doctrine of flexibility allows the principle of proportionality to be employed in the application of public procurement rules by national legal systems. Further legal reforms are needed. The public procurement rules and mainly the Public Sector Directive suffer from legal porosity as a result of non-exhaustive harmonisation, which represents a de lege lata approach to public procurement regulation on the part of the European legislature. Such approach has developed certain deficiencies. The effectiveness of the procurement rules is compromised and the CJEU has applied, through a rule-of-reason approach, a hybrid transplant of EU legal principles into the Public Procurement Directives in order to control their porosity. However, this treatment is temporary and not conducive to legal certainty and legitimate expectation.

78

4 Some Reflections on the ‘Artificial Narrowing of Competition’ as a Check on Executive Discretion in Public Procurement ALBERT SANCHEZ-GRAELLS

I. Introduction Since its emergence in the case law of the Court of Justice of the European Union (‘Court’) over 25 years ago,1 the principle of competition has progressively acquired central relevance in the field of public procurement. This evolution has generally been framed by the Court as a clarification of the main goal of the successive generations of EU public procurement rules. In one of its latest formulations, the Court has emphasised that ‘the main objective of the rules of EU law in the field of public contracts [is] the free movement of goods and services and the opening-up of undistorted competition in all the Member States’.2 The Court has also recently stressed that ‘the EU rules on public procurement were adopted in pursuance of the establishment of a single market, the purpose of which is to ensure freedom of movement and eliminate restrictions on competition’.3 Therefore, from a systemic perspective, limited doubt can be cast on the competition orientation of the EU public procurement rules.4 However, the implications of the pursuit of this competition goal are debated. Arrowsmith considered it a mere reinforcement of the internal market logic of

1 See the seminal judgment in Case C-243/89 Commission v Denmark (Bridge over the Storebaelt), EU:C:1993:257, para 33: ‘the [Procurement Directive’s] purpose is … to ensure in particular the development of effective competition in the field of public contracts’. 2 Case C-553/15 Undis Servizi, EU:C:2016:935, para 28 (emphasis added). 3 Case C-144/17 Lloyd’s of London, EU:C:2018:78, para 33 (emphasis added). 4 C Bovis, ‘The Regulation of Public Procurement as a Key Element of European Economic Law’ (1998) 4 European Law Review 220; R Caranta, I contratti pubblici, 2nd edn (Giappichelli 2012) 20.

80  Albert Sanchez-Graells the procurement rules;5 a simple manifestation of the more general principle of equal treatment.6 Kunzlik tried to link it to a peculiar concept of ‘structure of competition’ concerned with the protection of the structure of the market and equality of competitive opportunity of traders in the interests of customers, competitors and ultimately consumers.7 Elsewhere, I have argued that the ultimate implications of this principle are that: (i) public procurement rules have to be interpreted and applied in a pro-competitive way, so that they do not hinder, limit or distort competition; and (ii) contracting entities must refrain from implementing any procurement practices that prevent, restrict or distort competition.8 In other words, I have sustained the argument that the principle of competition acts as a limit on contracting authorities’ discretion in procurement covered by the EU rules and the general principles that underpin them. That discretion is thus subjected to a strict proportionality test informed by competition considerations.9 These ‘competition-based constraints’ mainly apply to the exercise of ‘executive discretion’10 in the context of procurement; that is, the adoption by a contracting authority of discrete decisions relating to a specific procurement procedure or any of its different stages. To be sure, similar pro-competitive constraints apply in the exercise of ‘legislative discretion’ at a higher level of procurement regulation – and in particular in the context of the transposition decisions taken by Member States, where the EU public procurement rules leave space for domestic preferences,11 or in the design of general policies application of which becomes mandatory or at least a ‘sticky default’ for contracting authorities.12 However, the focus of this chapter is solely on the exercise of ‘executive discretion’ and applicable competition-based constraints. The importance of this concentration lies in the fact that, as I have previously argued, administrative practices based on 5 S Arrowsmith, ‘The Purpose of the EU Procurement Directives: Ends, Means and the Implications for National Regulatory Space for Commercial and Horizontal Procurement Policies’ (2012) 14 Cambridge Yearbook of European Legal Studies 1 passim. 6 S Arrowsmith, The Law of Public and Utilities Procurement. Regulation in the EU and the UK, vol 1, 3rd edn (Sweet & Maxwell 2014) 631. 7 P Kunzlik, ‘Neoliberalism and the European Public Procurement Regime’ (2013) 15 Cambridge Yearbook of European Legal Studies 283, esp 312–56. 8 A Sanchez-Graells, Public Procurement and the EU Competition Rules, 2nd edn (Hart Publishing 2015) chapter 5. 9 A Sanchez-Graells, ‘Truly Competitive Public Procurement as a Europe 2020 Lever: What Role for the Principle of Competition in Moderating Horizontal Policies?’ (2016) 22 European Public Law Journal 377; A Sanchez-Graells, ‘Regulatory Substitution between Labour and Public Procurement Law: The EU’s Shifting Approach to Enforcing Labour Standards in Public Contracts’ (2018) 24 European Public Law Journal 229. 10 For discussion of a functionally equivalent term in the US constitutional context, see C Coglianese and C Yoo, ‘Introduction: The Bounds of Executive Discretion in the Regulatory State’ (2016) 164 University of Pennsylvania Law Review 1587, 1597–600. 11 For an overview of some of these choices in the context of the transposition of the 2014 EU Public Procurement Package, see the contributions to S Treumer and M Comba (eds), Modernising Public Procurements: The Approach of the Member States, vol 8 (Edward Elgar Publishing 2018). 12 Sanchez-Graells (n 8) 217–18.

‘Artificial Narrowing of Competition’  81 executive discretion are much more likely to result in competitive distortions than the public procurement rules themselves. Indeed, most of the anti-competitive restrictions in public tenders will take place as a result of the decisions that public purchasers make within the discretionary limits set up by public procurement legislation. In other words, even if it might seem that there are very few restrictions derived from public procurement legislation in the books, my view is that there is wide scope for the generation of competition distortions by the conduct carried out in practice or in action,13 as a result of the discretion left to contracting authorities.14 In this context, it is worth stressing that Article 18(1) of Directive 2014/24/EU15 has now consolidated the principle of competition by establishing that ‘[t]he design of the procurement shall not be made with the intention of … artificially narrowing competition. Competition shall be considered to be artificially narrowed where the design of the procurement is made with the intention of unduly favouring or disadvantaging certain economic operators.’ This has placed the principle of competition on a par with those of equality, non-discrimination, proportionality and transparency, and stressed its role as a general principle of EU public procurement law. This strengthens the constraint that the competition principle imposes on the exercise of executive discretion by contracting authorities, and even if the drafting of Article 18(1) of Directive 2014/24/EU raises difficult interpretive questions,16 I would expect the general principle of competition to gain further prominence in procurement litigation based on the 2014 rules and domestic transposition in the Member States.17 With this background in mind, in this chapter I go beyond the previous general discussion on the place for and implications of a competition goal or principle within the EU public procurement architecture, and aim to operationalise through workable tests the ‘competition-based constraints’ on the exercise of executive discretion that derive from the prohibition on ‘artificially narrowing competition’ in Article 18(1) of Directive 2014/24/EU. Given the focus of this edited collection,

13 The distinction is a classical one; see R Pound, ‘Law in Books and Law in Action’ (1910) 44 American Law Review 12. 14 Ibid 24. 15 Directive 2014/24/EU [2014] OJ L94/65. 16 A Sanchez-Graells, ‘A Deformed Principle of Competition? The Subjective Drafting of Article 18(1) of Directive 2014/24’ in G Skovgaard Ølykke and A Sanchez-Graells (eds), Reformation or Deformation of the EU Public Procurement Rules (Edward Elgar Publishing 2016) 80. See also A Sanchez-Graells, ‘Assessing the Public Administration’s Intention in EU Economic Law: Chasing Ghosts or Dressing Windows?’ (2016) 18 Cambridge Yearbook of European Legal Studies 93. 17 A contrary view could consider that competition ranks lower than the other principles of procurement listed in Art 18(1) of Directive 2014/24/EU. Within the context of the discussion of sustainable or responsible procurement in this book, it is also possible to advance arguments supporting the prevalence of the mandate for ‘responsible procurement’ in Art 18(2) of the same Directive over the requirements of the principle of competition – on which see ch 6 by Andhov in this volume. However, the normative position I take in this chapter is that, in simple terms, the principle of competition comes first.

82  Albert Sanchez-Graells I do so in relation to the exercise of discretion for the inclusion of social, green and human rights clauses in tender documentation,18 and with particular regard to the mandate contained in Article 18(2) of Directive 2014/24/EU, whereby ‘Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law’. Section II of the chapter revisits the Court’s case law on the inclusion of environmental, social and labour requirements in procurement procedures, and fleshes out the ways in which competition considerations have underpinned the Court’s assessment of the exercise of discretion in the design of tender procedures. In doing so, the discussion interweaves considerations on the limits of discretion that result from regulatory instrumentalisation of the procurement function beyond the ‘subject-matter of the contract’ at hand.19 Section III proposes a presumptionbased substantive balancing test between, on the one hand, the ‘competition-based constraints’ derived from Article 18(1) of Directive 2014/24/EU and, on the other hand, the mandate to ensure environmental, social and labour compliance that Article 18(2) imposes on Member States (ie what I term ‘responsible procurement’ for convenience).20 Section IV takes the alternative approach of a test of procedural traceability, and considers the documentary obligations that contracting authorities need to discharge in relation to the exercise of executive discretion to propose the creation of a safe harbour to modulate the operation of the substantive presumption – or, in other words, to propose a counter-presumption of conformity where the decision-making is transparent and traceable. The conclusion in section V reflects on the desirability of the proposed tests in the context of future litigation.

18 There are other contexts in which the exercise of discretion can be assessed, such as comparing it in the context of different types of procedures, and this phenomenon can of course be analysed beyond the legal perspective – see eg D Coviello, A Guglielmo and G Spagnolo, ‘The Effect of Discretion on Procurement Performance’ (2017) 64 Management Science 715. However, the chapter will limit itself to the exercise of discretion in relation to clauses oriented towards secondary policies, and the analysis will be carried out solely from a legal perspective. For discussion of the general EU framework in which this discretion is exercised, see A Sanchez-Graells, ‘Public Procurement and “Core” Human Rights: A Sketch of the EU Legal Framework’ in O Martin-Ortega and CM O’Brien (eds), Public Procurement and Human Rights: Risks, Dilemmas and Opportunities for the State as a Buyer (Edward Elgar Publishing, forthcoming). 19 Cf A Semple, ‘The Link to the Subject-Matter: A Glass Ceiling for Sustainable Public Contracts?’ in B Sjåfjell and A Wiesbrock (eds), Sustainable Public Procurement under EU Law: New Perspectives on the State as Stakeholder (CUP 2016) 50. See also J Gutman, ‘Is There Room for Discretion? Reforming Public Procurement in A Compliance-Oriented World’ (2014) Brookings Global Economy & Development Working Paper 74, available at brookings.edu/wp-content/uploads/2016/06/Room-forDiscretion_Gutman_FINAL.pdf. 20 For recent discussion, see C Barnard, ‘To Boldly Go: Social Clauses in Public Procurement’ (2017) 46(2) Industrial Law Journal 208. See also GS Ølykke and P Telles, ‘Sustainable Procurement: A Compliance Perspective of EU Public Procurement Law’ (2017) 12 European Procurement & Public Private Partnership Law Review 239.

‘Artificial Narrowing of Competition’  83

II.  Case Law on Green, Social and Labour Responsible Procurement: Underpinning Competition-Based Constraints In this section, I aim to evidence how, since the tensions between ‘strictly ­economical’ and ‘responsible’ procurement first came to a head before the Court, its case law has consistently imposed competition-based constraints on the exercise of executive discretion in procurement. I acknowledge that the same constraints have not been necessarily as clear or dominating concerning the exercise of legislative discretion, where the Court has shown more deference towards Member States’ legislative competence, in particular in the area of labour standards.21 But this should not overshadow the functional insight that the exercise of executive discretion in public procurement is systematically subjected to competition-based constraints by the Court. This is clear from case law concerning environmental, labour and social considerations. To date, however, there is no relevant case law on the inclusion of human rights-related considerations. Therefore, the analysis in this section will be limited to the first two types of ‘responsible procurement’.

A.  Case Law on Environmentally Responsible Procurement In relation to the inclusion of environmental requirements in tender documentation, the Court expressed the relevance of competition concerns as restrictions on executive discretion seeking to implement responsible procurement most clearly in EVN and Wienstrom.22 In that case, the contracting authority sought to procure energy from suppliers that could commit to producing as much energy as possible using renewable sources. In order to identify the best tender from that perspective, the contracting authority included an award criterion whereby tenderers had to state how much electricity they could supply from renewable energy sources to a non-defined group of consumers (that is, not only to the contracting authority), and the evaluation team was to allocate the maximum number of points to whichever tenderer stated the highest amount. Importantly, the supply volume subject to positive evaluation had to exceed the expected consumption by the contracting authority. Among other reasons regarding the absence of a sufficient link to the subject matter of the contract, the Court of Justice considered that such an award criterion was incompatible with the EU public procurement rules due to its anticompetitive effects: [I]n accordance with the award criterion … it is the amount of electricity in excess of the expected annual consumption as laid down in the invitation to tender 21 For extended discussion, see the contributions to A Sanchez-Graells (ed), Smart Public Procurement and Labour Standards – Pushing the Discussion after RegioPost (Hart Publishing 2018). 22 Case C-448/01 EVN and Wienstrom, EU:C:2003:651.

84  Albert Sanchez-Graells which is … liable to confer an advantage on tenderers who, owing to their larger production or supply capacities, are able to supply greater volumes of electricity than other tenderers. That criterion is thus liable to result in unjustified discrimination against tenderers whose tender is fully able to meet the requirements linked to the subject-matter of the contract. Such a limitation on the circle of economic operators in a position to submit a tender would have the effect of thwarting the objective of opening up the market to competition pursued by the directives coordinating procedures for the award of public supply contracts.23

A similar competition-focused reading of the earlier Concordia Bus Finland24 shows functional alignment. In Concordia, the contracting authority sought to purchase transport services from economic operators planning to use low-­ emission buses. Crucially, though, the evaluation of the pollution created by the fleet of buses formed part of a broader set of quality-related criteria, and the relative advantages of tenders under those criteria could be off-set against one another. As the Court put it, the emissions-related criteria formed an ‘integral part of a system of awarding points … [U]nder that system, additional points could be awarded on the basis of other criteria linked to the fleet, such as the use of low-floor buses, the number of seats and tip-up seats and the age of the buses’.25 Therefore, in these circumstances, ‘the fact that one of the criteria … could be satisfied only by a small number of undertakings, one of which was an undertaking belonging to the contracting entity, [was] not in itself such as to constitute a breach of the principle of equal treatment’.26 It is also worth noting that the Court had, for these purposes, interpreted the principle of equal treatment in terms of its competition-enabling features; that is, ‘the duty to observe the principle of equal treatment lies at the very heart of the public procurement directives, which are intended in particular to promote the development of effective competition in the fields to which they apply and which lay down criteria for the award of contracts which are intended to ensure such competition’.27 The same logic applies to the Dutch coffee case,28 where the contracting authority sought to acquire fair trade and organic supplies for its vending machines. In that case, the Court found the contracting authority at fault due to the prescription of the specific labels that the supplies had to bear in order to obtain points linked to the fair trade and organic production requirements. In the words of the Court, by providing, in the specifications, that the fact that certain products to be supplied bore specific labels would give rise to the grant of a certain number of points in the choice of the most economically advantageous tender, without having listed the criteria underlying those labels and without having allowed proof that a product satisfies those



23 Ibid

para 69 (emphasis added). C-513/99 Concordia Bus Finland, EU:C:2002:495. 25 Ibid para 83. 26 Ibid para 85. 27 Ibid para 81, with reference to Commission v Denmark (Bridge over the Storebaelt) (n 1). 28 Case C-368/10 Commission v Netherlands (fair trade coffee), EU:C:2012:284. 24 Case

‘Artificial Narrowing of Competition’  85 underlying criteria by all appropriate means, the [contracting authority] established an award criterion that was incompatible [with the EU procurement rules].29

I submit that the Dutch coffee case follows the same competition logic the Court had clearly established in EVN and Wienstrom (ie that the contracting authority cannot unduly restrict the pool of potential suppliers by prescribing rigid or disproportionate requirements), as well as the nuance or granularity that derives from Concordia (ie that incidental restrictions of competition are justified where they form part of a larger trade-off between different characteristics of the tenders, and that the contracting authority needs to create a system of awarding points that allows for diversity of offers with different strengths and weaknesses). This is, once more, underpinned by the Court’s framing of the competition implications derived from compliance with the applicable general principles in Dutch coffee: compliance with the principles of equality, non-discrimination and transparency requires that the award criteria are objective, ensuring that tenders are compared and assessed objectively and thus in conditions of effective competition. That would not be the case for criteria having the effect of conferring on the contracting authority an unrestricted freedom of choice …30

B.  Case Law on Social and Labour Responsible Procurement This functional approach to the imposition of competition constraints on the exercise of executive discretion is also evidenced in the case law concerning employment-related responsible procurement. This approach was already identifiable in the seminal judgment in the Storebaelt bridge case,31 where the Court found fault with a ‘Danish content’ clause requiring the use to the greatest possible extent of Danish materials, consumer goods, labour and equipment, because ‘the tendering procedure was conducted on the basis of a clause which was not in conformity with [Union] law and which, by its nature, was likely to affect both the composition of the various consortia and the terms of the tenders submitted’.32 Although the reasoning of the Court was rather succinct on this occasion, in my view this is an expression of the incompatibility with EU procurement rules of requirements that limit or distort competition (both in terms of the economic operators able to respond to the call for tenders, and in terms of the content of those tenders, which can relate to further issues of subcontracting).33

29 Ibid para 97. 30 Ibid para 87 (emphasis added). 31 Commission v Denmark (Bridge over the Storebaelt) (n 1). 32 Ibid para 26, emphasis added. 33 For extended discussion, see R Caranta, ‘Sustainable Public Procurement in the EU’ in R Caranta and M Trybus (eds), The Law of Green and Social Procurement in Europe, vol 1 (DJØF Publishing 2010) 15. See also R Caranta, ‘Upholding General Principles versus Distinguishing Cases: On the Use of Precedent in EU Public Procurement Law’ in Sanchez-Graells (ed) (n 21) ch 4.

86  Albert Sanchez-Graells This approach was more clearly visible in Rüffert,34 where the contracting authority sought to impose compliance with labour standards set by collective agreements on its contractors, regardless of whether they were directly covered by the collective agreement or not. The imposition of such requirement was considered incompatible with primary EU law by the Court, on the basis that requiring undertakings performing public works contracts and, indirectly, their subcontractors to apply the minimum wage laid down by the ‘Buildings and public works’ collective agreement … may impose on service providers established in another Member State where minimum rates of pay are lower an additional economic burden that may prohibit, impede or render less attractive the provision of their services in the host Member State.35

This is clearly reflective of competition-based constraints on the exercise of discretion, and in particular the unacceptability of clauses that diminish or exclude competition from tenderers that derive their competitive advantage from existing regulatory divergence. This was spelled out in even clearer terms in ­Bundesdruckerei,36 where the Court declared the incompatibility of a similar minimum wage requirement on the basis that imposing … a fixed minimum wage corresponding to that required in order to ensure reasonable remuneration for employees in the Member State of the contracting authority in the light of the cost of living in that Member State, but which bears no relation to the cost of living in the Member State in which the services relating to the public contract at issue are performed and for that reason prevents subcontractors established in that Member State from deriving a competitive advantage from the differences between the respective rates of pay … goes beyond what is necessary to ensure that the objective of employee protection is attained.37

On the whole, this line of case law shows that, in the exercise of their executive discretion, contracting authorities seeking to engage in responsible procurement geared towards the enforcement of employment standards are subjected to competition-based constraints that prevent them from doing so where, as a result of the relevant requirement, there would be a distortion of the potential competition for the contract, in particular on a cross-border dimension. This is not to say that contracting authorities cannot include such requirements, but that they cannot do so in a disproportionate manner (eg they could require payment of domestic minimum wage, or payment of jurisdictionally-adjusted wage levels to the workers employed in the execution of a specific contract).

34 Case C-346/06 Rüffert, EU:C:2008:189. Please note that this case could be considered an exercise of legislative rather than executive discretion. However, given that the Court did not consider the measure covered by the exemption for legislative (and equivalent) measures, I class it as a case on executive discretion. Cf Case C-115/14 RegioPost, EU:C:2015:760. 35 Rüffert (n 34) para 37 (emphasis added). 36 Case C-549/13 Bundesdruckerei, EU:C:2014:2235. 37 Ibid para 34 (emphasis added).

‘Artificial Narrowing of Competition’  87

C. Recapitulation This section has provided evidence that the case law of the Court has consistently imposed competition-based constraints on the exercise of executive discretion oriented towards the inclusion of environmental, social or labour considerations in procurement. In the operationalisation of such constraints, the Court has shown a very strict approach against requirements that would absolutely exclude specific types or categories of potential tenderers (such as small and medium-sized enterprises in EVN and Wienstrom, or economic operators not accredited under a specific label system in Dutch coffee), a strict approach towards requirements that would significantly disadvantage entire categories of tenderers or reduce their incentives to tender (such as cross-border tenderers, eg in Storebaelt bridge, Rüffert or Bundesdruckerei), and a more nuanced approach towards requirements that can be considered ‘one amongst many’ dimensions of the competition for public contracts (eg in Concordia Bus). Some of these considerations are framed in terms of the link between the relevant requirement and the subject matter of the contract, and sometimes from the perspective of equal treatment of tenderers, but that should not detract from the fact that the competition-based constraints apply even where there is a sufficient link with the subject matter of the contract and the requirements are specified in a seemingly non-discriminatory manner (eg in Dutch coffee, Rüffert or Bundesdruckerei). That is, while instances of insufficient proximity between the requirement and the subject matter or the existence of discrimination between economic operators will always infringe relevant competition-based constraints (eg EVN and Wienstrom), the opposite is not true, in the sense that requirements justified by the subject matter or not (openly) discriminatory will not necessarily comply with competition-based constraints if they are disproportionate. That stresses the relevance of carrying out a competition-oriented proportionality assessment that is not always fully encapsulated in a simple proportionality check regarding the link to the subject matter of the contract or the (formal) equal treatment of economic operators.38 What is less explicit in the case law of the Court and requires some additional thought and analysis is whether the assessment of specific requirements in light of these competition-based constraints on the exercise of executive discretion should be based on either a substantive or a formal analysis of the decision-making by the contracting authorities. The rest of the chapter considers both potential approaches, and formulates proposals for their operationalisation in the context of procurement litigation.

38 For extended discussion of the non-coincidental requirements of the principles of non-­ discrimination and competition in this setting, see Sanchez-Graells (n 8) 227–37.

88  Albert Sanchez-Graells

III.  Substantive Balancing Test Between ‘Responsible Procurement’ and ‘Artificial Narrowing of Competition’ for Public Contracts The discussion in the previous section largely concerned situations where the inclusion of environmental, social or labour requirements was found to breach the EU procurement rules because those requirements unduly restricted competition either by excluding it (EVN and Wienstrom, Dutch coffee), or by threatening to distort it (Storebaelt bridge, Rüffert or Bundesdruckerei). From the perspective of the required balancing of competing interests between carrying out responsible procurement and ensuring that competition is not artificially narrowed, these cases only offer some clarity concerning situations towards the tail end of the spectrum, where a satisfactory balance does not ensue because the contracting authority has sacrificed competition on the altar of responsible procurement. However, the way in which cases involving less of an imbalance should be addressed remains unclear. Indeed, as also mentioned in the previous section, some cases where competition is still possible despite the inclusion of responsible procurement requirements can be considered compliant with the relevant competition-constraints (eg Concordia). The difficulty is in establishing limits to the balancing exercise and, in particular, in designing an operational test. One of the difficulties in establishing the test concerns the need to objectify the assessment of when competition is artificially narrowed due to the exercise of executive discretion. In that regard, it is worth considering how similar constraints on the exercise of executive discretion have been addressed in comparable procurement settings, such as in relation to the decisions that contracting authorities can take on how to bundle or split their requirements into single or multiple procurement exercises. This is important, because the value of the tendered contracts determines the applicability of the 2014 Public Procurement Package, and an artificial split of requirements into smaller contracts could allow contracting authorities to circumvent their application and exclude or restrict competition for those (smaller) contracts. Similar considerations apply to the exercise of executive discretion leading to the direct award of contracts without competition. Thus, as argued elsewhere,39 I also submit here that the existing case law of the Court, in particular concerning anti-circumvention rules, can form the basis for a substantive test oriented towards the consideration of the counterfactual pro-competitive decision adopted by a diligent contracting authority. In that regard, it is important to stress that the Court has systematically adopted an objective assessment based on the effects and consequences of the contracting authorities’ executive decisions concerning the estimation of the value of contracts that should have been tendered under the applicable EU rules. 39 Sanchez-Graells, ‘Assessing the Public Administration’s Intention in EU Economic Law’ (n 16) 10–14.

‘Artificial Narrowing of Competition’  89 In a consistent line of case law, the Court has stressed that the analysis needs to be based on objective elements that create indicia of the artificial split of the contract, such as ‘the simultaneous issuance of invitations to tender … similarities between contract notices, the initiation of contracts within a single geographical area and the existence of a single contracting authority’, all of which ‘provide additional evidence militating in favour of the view that, in actual fact, the separate works contracts relate to a single work’.40 The Court has upheld the exercise of executive discretion where there were objective reasons that justified the decision adopted by the contracting authority.41 Overall, the existing case law of the Court clearly establishes that the analysis of a decision based on executive discretion on whether to split procurement requirements into separate contracts or not, solely needs to be conducted on the basis of objective evidence and arguments regarding two aspects: first, whether objectively the conduct of the contracting authority created the effect proscribed by the rule; and, second, whether there were objective good reasons for such behaviour. The same line of reasoning can be found in cases dealing more generally with infringements of specific obligations concerning the choice of particular procurement procedures, where contracting authorities also retain executive discretion. Generally, contracting authorities have shown a clear tendency towards abusing the grounds that authorise resorting to non-competitive procedures and, in particular, negotiated procedures without prior publication of contract notices42 – which allow them to proceed to a direct award of the contract, with the exclusion of any competition therefor. Given the gravity of such violation of the EU public procurement rules, if they entered into a direct award in violation of the limited grounds that authorise resorting to such non-competitive procedure, the contract would be declared ineffective under the applicable Remedies Directive.43 One way of avoiding the ineffectiveness of those contracts would be for contracting authorities to publish voluntary transparency notices disclosing the reasons why they considered that such direct award was lawful. This possibility has also proved controversial, and contracting authorities have been accused of using it strategically to avoid the ineffectiveness of contracts that they knew (or ought to have known) they were directly awarding in contravention of the applicable rules. This gave rise to a recent case before the Court, which ruled that the relevant test required an assessment of whether, when the contracting authority took the decision to award a contract by means of a negotiated procedure without prior publication of a contract notice, it

40 As recast in Case T-384/10 Spain v Commission, EU:T:2013:277, paras 65–68. 41 Case C-411/00 Felix Swoboda, EU:C:2002:660, paras 57–60. 42 Such grounds need to be interpreted strictly, as repeatedly stressed by the Court. See, eg, Case C-480/06 Commission v Germany, EU:C:2009:357, paras 34–35. 43 See Art 2d of Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts, as amended by Directive 2007/66/EC.

90  Albert Sanchez-Graells acted diligently and whether it could legitimately hold that the conditions laid down in [the Directive] were in fact satisfied.44

Consequently, it also seems clear that the interpretation of the conditions for the exception to the ineffectiveness to apply needs to be restrictive and ultimately rely on objective tests, without any consideration being given to the (presumed) intention of the contracting authority.45 This case law of the Court regarding the anti-circumvention provisions in the successive generations of procurement directives provides strong support for an ‘objectified’ interpretation of Article 18(1) of Directive 2014/24/EU, leading to a substantive test controlling the balance of interests between responsible procurement and undistorted competition for public contracts. I submit that the only way to approach the interpretation and enforcement of Article 18(1) of Directive 2014/24/EU in a possibilistic and pragmatic manner is to subject the exercise of executive discretion to a reasonable objective assessment of the existing circumstances, based on the effects or consequences of the way in which the procurement procedure is designed and carried out by the contracting authority. Such assessment should be carried out by establishing a rebuttable presumption of artificial restrictiveness in cases where the tendering procedure has been designed in a manner that is in fact restrictive of competition – as evidenced by some counterfactual analysis (as discussed in the next paragraph).46 The disproval of this rebuttable presumption of artificial narrowing would require the contracting authority to justify the exercise of its executive discretion on the existence of objective, legitimate and proportionate reasons for the adoption of the criteria restrictive of competition – that is, to provide a plausible justification on objective grounds for the imposition of restrictive conditions of competition in tendering the contract – and to justify that competition was not completely excluded nor disproportionately distorted within the narrower boundaries resulting from that discretion. In other words, if it could be shown that a ‘reasonable and disinterested contracting authority’ in an impartial position would have taken the same decision on the design of the tender in a form restrictive of (maximum potential) competition due to environmental, social, employment or human

44 Case C-19/13 Fastweb, EU:C:2014:2194, para 50 (emphasis added). See A Brown, ‘When Will Publication of a Voluntary Ex Ante Transparency Notice Provide Protection against the Remedy of Contract Ineffectiveness? Case C-19/13 Ministero Dell’interno v Fastweb Spa’ (2015) 24 Public Procurement Law Review NA10. 45 See R Caranta, ‘Remedies in EU Public Contract Law: The Proceduralisation of EU Public Procurement Legislation’ (2015) 8 Review of European Administrative Law 75, 83–84. 46 In my view, this would be compatible with the existing case law of the Court concerning the operation of presumptions in the context of procurement litigation, because it would exclude any element of fault from the assessment, which consideration was rejected in Case C-314/09 Strabag, EU:C:2010:567. For discussion, see S Treumer, ‘Enforcement of the EU Public Procurement Rules: The State of Law and Current Issues’ in S Treumer and F Lichère (eds), Enforcement of the EU Public Procurement Rules, vol 3 (DJØF Publishing 2011) 17, 38; and R Caranta, ‘Many Different Paths, But are They All Leading to Effectiveness?’ ibid 53, 71.

‘Artificial Narrowing of Competition’  91 rights-responsible procurement considerations, the presumption of artificial narrowing would be disapplied and, ultimately, the tender would be compliant with Article 18(1) of Directive 2014/24/EU. However, it must be acknowledged that one of the main practical difficulties with such a substantive test concerns the construction of the relevant counterfactual scenario47 – that is, the ‘non-artificially narrowed’ competitive scenario – which should not be crafted in a way that creates risks of ex post facto reassessment of decisions that originally would not have been seen as artificially restrictive of competition by a reasonable and disinterested contracting authority. Or, put differently, the main difficulty lies in both (i) establishing what would be the undistorted competitive field,48 and (ii) ensuring that it was observable or foreseeable ex ante by a diligent contracting authority. The second aspect will almost always unavoidably require some difficult judgement by the court or procurement review body on whether a contracting authority knew about, or ought to have been able to anticipate, the (anti-)competitive effects of the inclusion of specific requirements in the tender documentation – which can link to the procedural test discussed in section IV. The first aspect is also difficult to establish, and there are few parallels that can be usefully drawn from other areas of economic law,49 such as competition law. In competition law, economic operators and enforcement agencies are usually concerned with the definition of the market,50 which provides a view of the likely competitive relationships between different agents, including potential competitors. However, market definition is data- and time-intensive, and usually is carried out with a degree of imprecision51 (eg vertical differentiation of products according to quality characteristics)52 that would not necessarily be helpful in a procurement context – where requirements linked to responsible

47 See generally R Strassfeld, ‘If …: Counterfactuals in the Law’ (1992) 60 George Washington Law Review 339. Although concerned with the exercise of legislative discretion, see also A Estella de Noriega, ‘Rationality and Counterfactual Legal Analysis’ (2016) 2 Italian Law Journal 105. 48 This is the other side of the coin of the difficulties concerning an assessment of the extent to which collaboration between potentially competing tenderers can be construed as an anti-competitive agreement in violation of Art 101(1) TFEU. This is a controversial issue. For discussion, see C Ritter, ‘Joint tendering under EU competition law’ (2017) 2 Concurrences Review 60; I Herrera Anchustegui, ‘Joint Bidding and Object Restrictions of Competition: The EFTA Court’s Take in the Taxi Case’ (2017) 1 European Competition and Regulatory Law Review 174; A Sanchez-Graells, ‘Ski Taxi: Joint Bidding in Procurement as Price-Fixing?’ (2017) 8 Journal of European Competition Law & Practice 161. 49 For broader discussion of the challenges in relying on empirical analysis for the enforcement of economic law, see C Coglianese, ‘Empirical Analysis and Administrative Law’ (2002) University of Illinois Law Review 1111. 50 See Commission notice on the definition of the relevant market for the purposes of [Union] competition law [1997] OJ C372/5. See also European Commission, EU merger control and innovation, Competition Brief 2016-01, available at ec.europa.eu/competition/publications/cpb/2016/ 2016_001_en.pdf. 51 S Davies and P Ormosi, ‘Assessing Competition Policy: Methodologies, Gaps and Agenda for Future Research’ (2010) CCP Working Paper 10-19. 52 OECD, Roundtable on the Role and Measurement of Quality in Competition Analysis, DAF/ COMP(2013)17.

92  Albert Sanchez-Graells procurement are likely to create difficulties in establishing patterns of substitutability, particularly because the executive discretion of the contracting authority is determinative of the substitutability of the products within the tender. An alternative to the need to establish a full-fledged counterfactual analytical scenario would be to engage in some simpler tests, such as ‘but for’ approaches, whereby the contracting authority could be required to justify the inclusion of any requirements but for which the competitive field would have been wider. The difficulty and impracticality of this type of approach is also evident, unless it is mitigated by some additional threshold of materiality in the narrowing of competition. Yet other approaches could be based on benchmarks, aiming to identify, for example, instances where the receipt of an abnormally low number of tenders could be indicative of artificially narrowed competitive conditions. However, here also, and in particular given the multiplicity of factors that can influence the level of intra-tender competition, it is hard to think about useful benchmarks to be used, even as proxies or filters to identify cases worth looking into in detail. In my view, these difficulties do not necessarily justify the abandonment of the substantive approach I advocate, for two reasons. First, because this approach may be difficult to operationalise in relatively balanced scenarios where the introduction of responsible procurement requirements generates a small but non-trivial restriction of competition, but it would work well in more imbalanced scenarios, such as those covered in the existing case law of the Court of Justice (including Concordia Bus Finland). Second, because the practical difficulty in engaging with a full-fledged substantive assessment to rebut a presumption of artificial narrowing of competition triggered with relative ease (eg on the basis of a material significance ‘but for’ test) can be mitigated through the creation of a procedural safe harbour or counter-presumption that allows contracting authorities to demonstrate the existence of overriding (or at least compensatory) gains in terms of responsible procurement. Given these considerations, it seems adequate to consider whether a procedural approach could offer more promise for the enforcement of Article 18(1) of Directive 2014/24/EU, either as a substitute for or as a complement to the substantive balancing test discussed so far.

IV.  Procedural Traceability Test: Documentary Evidence of Executive Discretionary Decisions This section assesses whether, in view of the documentary requirements and the transparency opportunities given to contracting authorities, it is possible to create a procedural safe harbour or counter-presumption that avoids the need for the more complicated substantive assessment discussed in the previous  section.53 53 This would move in the same direction as developments in other areas of EU economic law, such as state aid. See GM Galletti, ‘A Further Step towards a “Proceduralisation” of the Market Economy

‘Artificial Narrowing of Competition’  93 Thus, the following analysis considers the documentary obligations that contracting authorities need to discharge in relation to the exercise of discretion subjected to the competing requirements of paragraphs (1) and (2) of Article 18 of Directive 2014/24/EU – mainly on the basis of Article 84(2) of Directive 2014/24/EU and the Court’s case law on the duty to state reasons as part of the right to good administration enshrined in Article 41 of the EU Charter of Fundamental Rights,54 which has implications for the purposes of ensuring access to justice under Article 47 of the Charter. As a matter of governance and oversight, and in order to foster a policy of increasing transparency in public procurement, it is worth noting that Article 84(2) of Directive 2014/24/EU has created strict documentary obligations for contracting authorities, which now have to document the progress of all procurement procedures, whether or not those are conducted by electronic means. To that end, they shall ensure that they keep sufficient documentation to justify decisions taken in all stages of the procurement procedure, such as documentation on communications with economic operators and internal deliberations, preparation of the procurement documents, dialogue or negotiation if any, selection and award of the contract.55

This provision effectively requires the creation of a paper trail for the adoption of decisions involving the exercise of executive discretion, and this should support contracting authorities facing challenges due to claims of artificial narrowing of competition, which should then be able to draw on this documentation to provide evidence of the existence of objective, legitimate and proportionate reasons for the adoption of the criteria restrictive of competition – as well as to explain the way in which trade-offs between the goals of responsible procurement are pursued and that the ensuing potential restrictions of competition were given due consideration in the decision-making process. These documents are not necessarily prepared for public disclosure as a general rule, and contracting authorities have significant (although often unused) powers to control the confidentiality of these documents during the procurement procedure under Article 21 of Directive 2014/24/EU. However, in the context of a procurement dispute, the contracting authority can be forced to disclose these internal documents, either to the review body (depending on domestic

Investor Test: Annotation on the Judgment of the Court of Justice (Grand Chamber) of April 3, 2014, in European Commission v Netherlands (C-224/12 P)’ (2014) 35 European Competition Law Review 509. See also A Sanchez-Graells, ‘Bringing the “Market Economy Agent” Principle to Full Power’ (2012) 33 European Competition Law Review 35. 54 EU Charter of Fundamental Rights [2012] OJ C326/391. For in-depth discussion of due process issues, in particular in the context of the extraterritoriality of EU public procurement law, see A Sanchez-Graells, ‘Territorial Extension and Case Law of the Court of Justice: Good Administration and Access to Justice in Procurement as a Case Study’ (2018) 2(1) Europe and the World 4, available at doi.org/10.14324/111.444.ewlj.2018.04. 55 Emphasis added.

94  Albert Sanchez-Graells administrative procedure rules) or to a potential claimant, or even to third parties showing sufficient interest (under relevant freedom of information or public transparency rules).56 In that regard, it is worth noting that the General Court has been imposing increasingly demanding disclosure requirements on the basis of the combined application of Articles 41 and 47 of the EU Charter of Fundamental Rights, by establishing a strong link between disclosure obligations and the interested economic operators’ right to access to justice to challenge procurement decisions,57 which the General Court considers in line with the duties foreseen in Article 296 TFEU.58 It is also important to stress that the intensity of the obligation to provide reasons grows with the breadth of the discretion enjoyed by the institution adopting the relevant decision,59 which can result in a particularly stringent approach towards the disclosure of documentation supporting the adoption of the key decisions in the design or operation of public procurement procedures. The position that is emerging is that only by having access to significant parts of the documentation generated by the contracting authority (and, in particular, tender evaluation documents) can tenderers assess their legal position and decide whether to launch a challenge or not.60 Regardless of the desirability of this approach,61 discussion of which exceeds the scope of this chapter,62 it seems clear that contracting authorities will tend to generate the paper trail required by Article 84(2) of Directive 2014/24/EU as if the relevant documentation was going to be disclosed. This may have some undesirable effects in terms of incentives for box-ticking or the documentation of minimalistic justifications. However, the creation of a safe harbour such as that discussed below could act as an effective counter-balance. In addition to the mandatory documentation just discussed, contracting authorities can engage in additional transparency exercises of particular relevance

56 See K-M Halonen, R Caranta and A Sanchez-Graells (eds), Disclosure Rules within Public Procurement Procedures and During Contract Period, vol 9 (Edward Elgar Publishing, forthcoming). 57 Case T-183/10 Sviluppo Globale v Commission, EU:T:2012:534, para 40. 58 Ibid para 21. 59 Ibid para 35. 60 Given the link between Art 47 of the EU Charter of Fundamental Rights and the Remedies Directive (n 43), these considerations carry over to litigation at Member State level. See recital (36) of the Remedies Directive, which stresses that ‘this Directive seeks to ensure full respect for the right to an effective remedy and to a fair hearing, in accordance with the first and second subparagraphs of Article 47 of the Charter’. 61 For a case fleshing out the potential excesses that result from this approach, which can generate undue pressure on evaluation teams through the risk that candid or excessively detailed evaluation comments result in the risk of cancellation of the procurement where they are seen to illegally introduce sub-award criteria or their weighting, see Case C-677/15 P EUIPO v European Dynamics Luxembourg and Others, EU:C:2017:998. 62 For general discussion, see K-M Halonen, ‘Disclosure Rules in EU Public Procurement: Balancing between Competition and Transparency’ (2016) 16 Journal of Public Procurement 528; A SanchezGraells, ‘The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives’ (2013) University of Leicester School of Law Research Paper No 13-11.

‘Artificial Narrowing of Competition’  95 in the context of the analysis of competition-based constraints on the exercise of executive discretion. Notably, Article 40 of Directive 2014/24/EU explicitly allows contracting authorities to engage in preliminary market consultations with a view to preparing the procurement and informing economic operators of their procurement plans and requirements. In particular, they can seek or accept advice from independent experts or authorities, or from market participants, and Article 40 foresees that ‘[t]hat advice may be used in the planning and conduct of the procurement procedure, provided that such advice does not have the effect of distorting competition and does not result in a violation of the principles of non-discrimination and transparency’. In my view, this is another mechanism that contracting authorities can effectively use to create an additional paper trail for their decision-making, as well as to ‘market test’ the requirements of a specific procurement exercise (both those linked to responsible procurement considerations and any others) and engage in a constructive dialogue with potentially interested tenderers. In that regard, a diligent contracting authority could use preliminary market consultations to gauge the negative competitive impact specific requirements could have, and use the feedback it receives from the market to inform final decisions in the exercise of its executive discretion. On the whole, it seems to me that the existence of these documentary requirements and further opportunities for voluntary transparency concerning key aspects of the contracting authority’s decision-making processes could be used to create a procedural safe harbour or counter-presumption that any restrictions of competition embedded in the way it has designed or carried out the procurement procedure are not artificial or disproportionate – thus effectively excluding the need to engage in a substantive assessment as discussed in the previous section, except in cases where the claimant could provide sufficient evidence to the contrary. My proposal would be that where a contracting authority is faced with the need to rebut a presumption that it has artificially narrowed competition for a specific tender on the basis of responsible procurement considerations (or more broadly), it should benefit from a procedural safe harbour that deactivates the presumption of artificial restrictiveness where the contracting authority can demonstrate that it has duly complied with its obligation to create a paper trail under Article 84(2) of Directive 2014/24/EU, and where those documents reflect decision-making procedures that have given adequate consideration to the potential (anti-)competitive implications of the different aspects of the design of the tender procedure. This would result in two prongs of the procedural traceability test: (i) formal compliance with Article 84(2), and (ii) diligence or good administration concerning whether the contracting authority was properly informed and whether it took the relevant factors into account in its decision-making processes, which could be facilitated, inter alia, through demonstrably effective engagement in a preliminary market consultation under Article 40 of Directive 2014/24/EU. The review bodies and courts would need to apply a light-touch regime in the assessment of the second element of the proposed test, and avoid substituting their own discretion for that of the contracting authority – in a manner akin to the

96  Albert Sanchez-Graells so-called business judgement rule in the context of directors’ duties in company law and corporate governance. Therefore, where a contracting authority was able to benefit from the procedural safe harbour or counter-presumption, the challenger of its procurement decision would lose any advantage derived from the initial presumption of artificiality in the narrowing of competition for the public contract, and would then need to be able to demonstrate to the required evidentiary standards consistent with judicial review procedures that the contracting authority abused its discretion.63 In doing so, the challenger would benefit from access to detailed documentation, but also have to overcome the burden of demonstrating the untenability of the contracting authority’s decision. Conversely, where a contracting authority was unable to meet either of the two prongs of the procedural traceability test, it would find itself needing to rebut the presumption of artificial narrowing of competition under the general evidentiary rules (subject to the difficulties discussed in the previous section) and starting from a position of weakness due to the lack of useable self-generated evidence. The creation of the procedural safe harbour seems to create adequate incentives for contracting authorities to comply with their Article 84(2) documentary obligations, not only formally. Moreover, the simultaneous existence of the presumption of artificiality and the procedural safe harbour or counter-presumption to deactivate it would hardly seem to alter the stringency of current review procedures for diligent defendant contracting authorities. It could be argued that the substantive presumption may be unnecessary and that the test of procedural traceability could be used to assess the contracting authority’s decision-making without more. However, I would still consider the need for potential claimants to overcome the low hurdle of offering the review body or the court sufficient indicia of narrowing of competition before its artificiality is assessed at all. More importantly, from a broader governance perspective, the creation of this procedural safe harbour could also result in a reason for reconsideration of the contracting authority’s goals and ability to engage in responsible procurement. Given that the inclusion of environmental, social, labour and human rights considerations makes the procurement process more sophisticated and difficult to manage (in terms both of design and execution), the potential liability derived from being exposed to challenges on claims of artificial narrowing of competition under Article 18(1) of Directive 2014/24/EU, and the duty to ensure adequate documentation of the decisions adopted and their likely consequences as the most conducive way to avoid such liability, would likely raise the level of skills required for the carrying out of procurement capable of fulfilling the mandate of Article 18(2) of Directive 2014/24/EU to ensure environmental, social and labour 63 This would bring the analysis close to situations of general ‘abuse of EU law’ by public administrations; see A Saydé, Abuse of EU Law and Regulation of the Internal Market (Hart Publishing 2014) 16–19. See also the contributions to R de la Feria and S Vogenauer (eds), Prohibition of Abuse of Law: A New General Principle of EU Law (Hart Publishing 2011).

‘Artificial Narrowing of Competition’  97 compliance in the execution of public contracts. This seems adequate to me. An alternative situation where Article 18(1) of Directive 2014/24/EU was given no teeth would probably result in scenarios where competition for public contracts could be significantly reduced as an unforeseen(?) consequence of misguided attempts at providing effectiveness to Article 18(2) of the same Directive, either out of the best intentions to engage in responsible procurement, or as a result of an abuse of the executive discretion that could be associated with that provision.

V. Conclusion After providing evidence that the Court had been imposing competition-based constraints on the exercise of executive discretion in the context of responsible procurement in a consistent manner well before the entry into force of the 2014 EU Public Procurement Package, I have explored different possibilities to facilitate the enforcement of Article 18(1) of Directive 2014/24/EU, which enshrines in legislative language those competition-based constraints by prohibiting the artificial narrowing of competition for public contracts. I have explored the possibility of subjecting such enforcement to substantive requirements, and proposed the creation of a rebuttable presumption of artificial restrictiveness in cases where the tendering procedure has been designed in a manner that is in fact restrictive of competition – as evidenced by counterfactual, or ‘but for’ or benchmark analysis. The disproval of that rebuttable presumption would require the contracting authority to justify the exercise of its executive discretion on the existence of objective, legitimate and proportionate reasons for the adoption of the criteria restrictive of competition, and to justify that competition within the narrower boundaries resulting from that discretion was not completely excluded or disproportionately distorted. I have also assessed the possibility of subjecting the enforcement of Article 18(1) of Directive 2014/24/EU to procedural requirements, and proposed that, in rebutting the proposed presumption of artificial narrowing, contracting authorities should benefit from a safe harbour or counter-presumption based on a procedural traceability test in two parts, requiring formal compliance with the documentary obligations resulting from Article 84(2) of Directive 2014/24/EU, and also an element of diligence or good administration concerning whether the contracting authority was properly informed and whether it took the relevant factors into account in its decision-making processes. Meeting this test could be facilitated, inter alia, through demonstrably effective engagement in a preliminary market consultation under Article 40 of Directive 2014/24/EU. In my view, both aspects of the proposal are intimately connected, and one should not be developed without the other. By the same token, I consider that their simultaneous development would offer a good balance of evidentiary burdens for parties engaged in litigation. The claimant would have to generate sufficient indicia

98  Albert Sanchez-Graells of anti-competitive effects derived from the design of the tender as to justify the trigger of the substantive presumption. This would hardly result in an incentive for spurious litigation, because a claimant facing a diligent contracting authority would anticipate the need to engage in a fully-fledged substantive assessment of the decisions covered by executive discretion. At the same time, the contracting authority would need to engage thoroughly with its documentary obligations and make sure that its information-gathering and decision-making procedures are up to the task of carrying out more sophisticated responsible procurement. However, once that is done, it would hardly be additionally burdened by the existence of the substantive presumption benefitting claimants, as it should be in a position to deactivate it by recourse to the procedural safe harbour or counter-presumption. The additional benefits of this approach would be that contracting authorities would have more incentives to carefully consider the exercise of their executive discretion for the pursuit of responsible procurement, and that all parties would have more incentives to engage in constructive exchanges in the context of preliminary market consultations. The creation of the presumption and safe harbour could also facilitate the role of review bodies and courts tasked with procurement disputes, as these mechanisms should enhance the quality of available documentary evidence. I hope the reader will be persuaded that, in its general aspects, the proposal is in the right direction. Of course, I must acknowledge that there are some loose ends – in particular concerning the trigger of the substantive presumption, whether by counterfactual assessment, ‘but for’ analysis, benchmarking or in some other way. The proposal is also relatively weak concerning the degree of judicial deference required in the assessment of the reasons recorded for decisions adopted in the exercise of executive discretion, as documented. However, these are issues that would affect the enforcement of Article 18(1) of Directive 2014/24/EU (and many of its other provisions), with or without the proposed presumption and safe harbour. Therefore, inasmuch as they can contribute to enhancing decisionmaking and its documentation, and to the extent they can assist review bodies and courts to dispose of easy cases, I hope to have persuaded the reader of their desirability.

5 The Obligation of Transparency in EU Public Procurement Law ANGELICA ERICSSON AND XAVIER GROUSSOT

I. Introduction At the general level, the expansion of the obligation of transparency in European Union (EU) law lies at the heart of the development of EU administrative law. As shown by Shapiro, there was an emergent concern and a common distrust in the Europe of the 1980s and 1990s as to the place and role of EU technocracy.1 The principle of transparency was seen as a magic solution to this concern that would restore European citizens’ trust in the bureaucratic systems.2 The tendency to have recourse to this principle has also led to the imposition of an increasing number of limits on national administrative discretion, gradually shaping a certain ­‘judicialisation’ of administrative procedures across Europe.3 The phenomenon of the limitation of discretion at the national level by EU law was driven by the adjudicative application of the principles of equivalence and effectiveness, which can be viewed as ‘the foundation stones of EU administrative law’.4 Moreover, this process has also been fuelled by the application by the European Court of Justice (ECJ or ‘the Court’) of the principle of proportionality, whereby it has invited national courts to undertake a stricter review of discretionary administrative decisions.5 In the end, it appears very clear that these principles are not only closely intertwined, but also constitute the core principles of EU administrative law, equivalence and effectiveness flowing from the ideology of transparency. Importantly, effectiveness, equivalence and proportionality also constitute fundamental principles of

1 See M Shapiro, ‘The Institutionalization of the European Administrative Space’ in A Stone Sweet et al, The Institutionalization of Europe (OUP 2001). 2 Ibid 97–98. 3 D Kelemen, Eurolegalism: The Transformation of Law and Regulation in the European Union (Harvard UP 2011). 4 Ibid 53. 5 Ibid 54.

100  Angelica Ericsson and Xavier Groussot EU public procurement law, together with the obligation of transparency.6 This chapter will show that a study of the public procurement and free movement case law of the ECJ on the obligation of transparency confirms its symbiosis with the principles of proportionality, equivalence and effectiveness. To this effect, the present chapter will first explore the rise of the obligation of transparency in the ECJ’s case law related to public procurement (section II). Then it will examine the relationship between this obligation and the other fundamental principles of EU administrative law, that is the principle of proportionality (section III) and the principles of equivalence and effectiveness (section IV).

II.  The Rise of the Obligation(s) of Transparency The principle of transparency has experienced quite a remarkable development through the Court’s case law in the area of public procurement. Over the years, this principle has come to embody a number of decidedly procedural requirements, and has been deemed a useful means to ensure that the Member States respect their Union law obligations.7 It was once described as a budding principle of Community law, the components of which had reached different stages of maturity but together represented an important judicial tool, far from being just a ‘fashionable word’.8 In the following, we shall take a closer look at the transparency requirements that have been most prevalent in the area of public procurement. In general, transparency can, according to Georgieva, be said to have both representative features and control features.9 However, we would venture to say that it is the features that she describes as control features – namely, clarity regarding the rights and obligations of institutions and the monitoring of public action  – that have appealed the most to the Court when it has made use of the principle of transparency in its case law regarding the area of public procurement. Indeed, the Court has framed the obligations of transparency as being the corollary of the principle of equal treatment, and ‘essentially intended to preclude any risk of favouritism or arbitrariness on the part of the contracting authority with respect to certain tenderers or certain tenders’.10 Obligations of transparency in the area of public procurement thus range from specific obligations to advertise calls for tenders widely, to more general obligations concerning the clarity, accessibility and foreseeability of regulations and selection criteria.

6 See eg Directive 2014/24 EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC [2014] OJ L94/65, particularly recital 1. 7 P Craig, EU Administrative Law (OUP 2006) 350. See also ch 2 by Stephen Weatherill in this volume. 8 B Vesterdorf, ‘Transparency – Not Just a Vogue Word (1999) 22 Fordham International Law ­Journal 902, 925. 9 I Georgieva, Using Transparency Against Corruption in Public Procurement (Springer 2017) 13. 10 Case C-538/13 eVigilo, EU:C:2015:166, para 34.

The Obligation of Transparency  101 To take a closer look at how these obligations have been developed in this area, we shall begin by examining an early public procurement case involving social clauses, the Beentjes case.11 There, the Court was faced with a Dutch call for tenders concerning a public works contract, where the awarding authority explicitly required fulfilment of an obligation to hire long-term unemployed persons. Although the Court admitted that such a social clause lay, in principle, within the discretion of the Member States,12 it specified that in order to meet the [existing public procurement] directive’s aim of ensuring development of effective competition in the award of public works contracts, the criteria and conditions which govern each contract must be given sufficient publicity by the authorities awarding contracts.13

Hence, it has long been established that the EU public procurement framework is laced with certain general obligations of transparency, in the sense that the awarding criteria and conditions have to be sufficiently public. More specifically, any extraordinary awarding criterion (ie a criterion other than ‘lowest price’) should have been stated in the contract notice or the contract documents, and a general reference to a provision of national legislation was held not to satisfy the publicity requirement.14 Furthermore, it follows from the Court’s reasoning in the Beentjes case that an awarding criterion may never be framed in such a way as to confer on the awarding authority an unrestricted freedom of choice as regards the awarding of the contract in question to a tenderer.15 It can be argued that such an open-ended criterion – regardless of whether it has been sufficiently ­publicised  – would be inherently problematic from a transparency perspective, as the awarding authority would be free to apply it in an arbitrary and unforeseeable manner. Nevertheless, although a number of transparency obligations had in substance been outlined in the Beentjes case, the Court did not employ the term ‘­transparency’ at the time. It was only eight years later, in the Walloon buses case,16 that such obligations were framed by the Court in terms of transparency. In that case, the Court referred to the preamble to the public procurement directive prevailing at the time, which announced that this piece of legislation ‘aims to ensure a minimum level of transparency in the award of the contracts to which it applies’.17 On the basis of this stated aim, the Court squarely concluded that the procedure for comparing tenders had to comply at every stage with both the principle of the equal treatment of tenderers and the principle of transparency, so as to afford



11 Case

31/87 Beentjes, EU:C:1988:422. para 20. 13 Ibid para 21 (emphasis added). 14 Ibid para 35. 15 Ibid paras 26 and 27. 16 Case C-87/94 Commission v Belgium (Walloon buses), EU:C:1996:161. 17 Ibid para 53. 12 Ibid

102  Angelica Ericsson and Xavier Groussot equality of ­opportunity to all tenderers when formulating their tenders.18 Framed in this way – as a principle and not just one aim amongst others – transparency would lend itself more readily to being used as a standard in judicial review of public procurement measures. In the case at hand, the Court concluded that the transparency of the procurement procedure is impaired when a contracting entity takes into account an amendment to the initial tenders of only one tenderer.19 When examining the rise of transparency obligations in the ECJ’s public procurement case law, one cannot omit the judgments in the Unitron ­Scandinavia case20 and the Telaustria case.21 Both of these judgments expand the material scope of the transparency obligations to factual contexts where no such obligations have been explicitly provided for in the EU regulatory framework for public procurement. The Unitron Scandinavia case concerned a directive22 that did not lay down specific transparency requirements for bodies other than contracting authorities. In fact, the only requirement laid down in this directive that could concern such a body was the obligation to comply with the principle of nondiscrimination on grounds of nationality.23 However, it follows from the Court’s reasoning that this principle cannot be interpreted restrictively, and that in order to enable control of whether such as body has actually complied, it must entail an obligation of transparency.24 The Telaustria case, which followed suit, concerned an extension of the application of transparency obligations to new types of contracts, rather than to new types of contracting bodies. In essence, the Court concluded that although the public service concession contracts at hand did not fall within the scope of the applicable harmonised rules on public procurement, the contracting entities concluding such contracts were, nonetheless, bound by the fundamental rules of the Treaty, in general, and the principle of non-discrimination on the basis of nationality, in particular.25 In this way, the Court used the link already established between transparency and non-discrimination in relation to the harmonised rules to impose the obligation of transparency on contracting entities that conclude contracts falling outside the scope of these rules.26 The Court’s judgment in this case has earned quite a reputation. It has been said in practice to impute an additional element to the EU principle of free movement in the context of public procurement, namely, the obligation of transparency.27

18 Ibid para 54. 19 Ibid para 56. 20 Case C-275/98 Unitron Scandinavia, EU:C:1999:567. 21 Case C-324/98 Telaustria, EU:C:2000:669. 22 Directive 93/36/EEC of 14 June 1993 coordinating procedures for the award of public supply contracts [1993] OJ L199/1. 23 Case C-275/98 Unitron Scandinavia, EU:C:1999:567, para 29. 24 Ibid para 31. 25 Telaustria (n 21) paras 57 and 60. 26 Ibid para 61. 27 Georgieva (n 9) 20.

The Obligation of Transparency  103 In the context of the case, this obligation was defined as consisting of ‘­ensuring, for the benefit of any potential tenderer, a degree of advertising sufficient to enable the services market to be opened up to competition and the impartiality of procurement procedures to be reviewed’.28 It follows that the sufficient degree of advertising must be assessed with regard to both the accessibility and the content of the advertisement. However, through further case law, it has been clarified that this obligation only applies in the presence of at least a potential cross-border interest.29 Upon examining the case law with the aim of ascertaining what the obligations of transparency actually are, one has to conclude that these obligations have developed beyond just ‘sufficient advertising’. Transparency can also include the clarity, foreseeability and accessibility of regulation and selection criteria. A revelatory case in this regard is EVN and Wientrom,30 involving the award of a public supply contract by an Austrian contracting authority. In its judgment, the Court drew on the principles of equal treatment and transparency to conclude, on the one hand, that contracting authorities are obliged to interpret the award criteria uniformly throughout a public procurement procedure and that the award criteria themselves must therefore not be amended in any way during this procedure.31 On the other hand, an award criterion must be accompanied by requirements that permit the information provided by the tenderers to be verified effectively by the contracting authority, since the evaluation of different tenders cannot be objective and transparent if it is based on unverifiable claims.32 Moreover, in a series of cases regarding service concession contracts and gambling licences, the Court has reiterated the following conception of the transparency obligation: [As] a corollary of the principle of equality, [it] is designed essentially to ensure that any interested operator may take the decision to tender for contracts on the basis of all relevant information and to ensure the elimination of any risk of favouritism or arbitrariness on the part of the licensing authority. It implies that all the conditions and detailed rules governing the award procedure must be drawn up in a clear, precise and unequivocal manner in the contract notice or specifications so that, first, all reasonably informed tenderers exercising ordinary care can understand their exact significance and interpret them in the same way and, second, the contracting authority is able to ascertain whether the bids submitted satisfy the criteria applying to the contract in question.33

28 Ibid 62. 29 See, eg, Case C-49/16 Unibet International, EU:C:2017:491, para 42. 30 Case C-448/01 EVN and Wientrom, EU:C:2003:651. 31 Ibid paras 92 et seq. 32 Ibid paras 50 and 52. 33 Cases C-72/10 and C-77/10 Costa and Cifone, EU:C:2012:80, para 73; Case C-336/14 Ince, EU:C:2016:72, para 87; and Unibet International (n 29) para 46.

104  Angelica Ericsson and Xavier Groussot Thus we return to the reach of the principle of transparency rather than the concrete obligations emanating from it. The general rapporteur of the Public Procurement Law volume of the 2014 FIDE conference in Copenhagen concluded that (then) recent cases seemed to indicate that this principle is one of the principles that might constitute the foundation for the EU’s overall administrative law.34 He actually ventured as far as stating that general principles, such as that of transparency, are ‘potentially applicable to all instances where the State or any other public law entity disburses money or grants benefits or privileges (including the right to carry out an economic activity), on a selective basis, choosing among a number of market participants’.35 His statements are supported, at least to some extent, by the fact that obligations of transparency have not only been extended to public contracts that fall outside the scope of the harmonised EU rules on public procurement, but the Court has also invoked them in relation to the award of exclusive rights. In fact, in the Sporting Exchange case,36 the Court stated that they appear to be ‘a mandatory prior condition of the right of a Member State to award to an operator the exclusive right to carry on an economic activity, irrespective of the method of selecting that operator’.37 In the context of the present volume, it might be interesting to relate the rise of the obligation of transparency to Member State discretion. In an attempt to address the question regarding what a high level of Member State discretion would mean for the judicial review of contracting authorities’ decision-making power with regard to, for example, social clauses, we must first acknowledge that Member State discretion can play out at both the legislative and the administrative level. In light of the case law presented above, it is therefore possible to argue that even when Member States’ legislative discretion will be subject to only low-intensity judicial review with regard to the assessment of the proportionality of the substantive choices made, a review based on the obligation of transparency would remain strict, limiting administrative discretion severely. In this regard, it follows from the case law in the gambling area that the wide discretion accorded to the Member States primarily means freedom not to liberalise the market for gambling services by choosing, for example, a single-operator licensing system.38 The Court has been adamant, however, in asserting that such a system does not legitimise such conduct on the part of national authorities that is liable to hamper the effectiveness of provisions of EU law.39 Furthermore, with reference to the obligation of transparency, the Court has held that when a system of prior administrative authorisation for the provision of certain types of

34 U Neergard, C Jacqueson and G Skovgaard Ølykke (eds), Public Procurement Law: Limitations, Opportunities and Paradoxes (DJØF Publishing 2014) 42. 35 Ibid 133. 36 Case C-203/08 Sporting Exchange, EU:C:2010:307. 37 Ibid para 47. 38 Ince (n 33) paras 48 and 92. 39 Ibid para 49.

The Obligation of Transparency  105 games of chance is introduced in a Member State, this must be based on objective, non-discriminatory criteria that are made known in advance, in such a way as to circumscribe the exercise of the national authorities’ discretion and prevent arbitrariness.40

III.  The Obligation of Transparency and Proportionality Having analysed the rise of transparency in EU public procurement law, it is now time to look more closely at the obligation of transparency in relation to the principle of proportionality and the free movement case law of the ECJ, as well as to compare its application in the two fields. After all, public procurement is an emanation of EU free movement law. And in the context of the economic freedoms, the obligation of transparency is rooted in the free movement of goods case law from the 1980s concerning additives in food. In fact, this obligation can be traced back to the ECJ’s judgments in the Muller41 and German Beer cases.42 In Muller, the Court had to decide whether the French ban on food additives in cakes was in breach of the free movement of goods. The Court considered that while the prevailing directive, relating to emulsifiers, stabilisers, thickeners and gelling agents for use in foodstuffs,43 was intended to achieve only partial harmonisation as regards these additives (the conditions governing the use of these additives having not yet been determined at the Community level), the power of the Member States to adopt rules related to foodstuffs was not unlimited.44 Apart from the substantive limits put up by the Treaty rules on the free movement of goods, Advocate General Darmon pointed out that ‘the harmonization for which [the directive] provides, even though embryonic, has the [effect that a] Member State must follow [a certain] Community procedure in order to prohibit the use of an additive previously authorized’.45 In other words, the Member State had neither unlimited substantive discretion nor unlimited procedural discretion to ban an additive in foodstuffs.

40 Ibid para 55. 41 Case 304/84 Muller, EU:C:1986:194. 42 Case 178/84 Germany v Commission (German Beer Case), EU:C:1987:126. 43 Council Directive 74/329 of 18 June 1974 on the approximation of the laws of the Member States relating to emulsifiers, stabilisers, thickeners and gelling agents for use in foodstuffs [1974] OJ L189/1. 44 Muller (n 41) paras 12–15. In fact, in merely specifying the emulsifiers, stabilisers, thickeners and gelling agents ‘for use in foodstuffs’, this Directive allowed the Member States to lay down their own rules on the use of such agents, particularly as regards the foodstuffs in which they might be used and the conditions for their use. Nevertheless, it is clear from the scheme of the Directive and from other rules of Community law that the power of the Member States to adopt such rules is not unlimited, as the existence of harmonising directives does not exclude the operation of the treaty provision on free movement. 45 Opinion of AG Darmon in Muller (n 41).

106  Angelica Ericsson and Xavier Groussot Regarding the relationship between transparency and the principle of proportionality, moreover, it clearly follows from a correct understanding of paragraph  23 of the Muller judgment46 that the Court draws on this principle when justifying the requirement that an authorisation procedure should be ‘easily accessible to manufacturers and traders’. In fact, the core of the Court’s reasoning in this paragraph is that the marketing of foodstuffs from other Member States containing additives can only be made subject to an authorisation procedure if this procedure is easily accessible to manufacturers and traders, and the authorisation can only be refused when such an authorisation would be contrary to the aim of protecting health. Moreover, it follows from the Court’s reasoning that authorisation procedures that are not easily accessible to manufacturers and traders, or which would result in the authorisation’s being refused even when such an authorisation would be compatible with the aim of protecting health, would not be deemed necessary to attain the legitimate aim of protecting health and, hence, would not respect the requirements flowing from the principle of proportionality. The famous German beer case concerned, amongst other issues, a ban on additives in beer.47 In this infringement procedure against Germany, the Commission questioned whether the national laws applicable to the production and marketing of beer were compatible with the free movement of this beverage lawfully produced and marketed in another Member State. For one thing, it followed from the general German law on foodstuffs, based on health considerations, that all additives were in principle prohibited, unless they had been authorised. However, beer had a special status as a consumable good in Germany and, as a result, no additives were allowed in the manufacture of beer – not even additives that had been authorised for general or specific use in the national regulation on additives. Therefore, the national legislation at hand effectively prohibited the import into Germany of beers containing substances banned as food additives.48 This complete ban constituted an import barrier for some beer from Member States that had authorised the use of certain additives in beer, a fact that was not contested. Instead, the Court moved to examine whether it was possible to justify such a ban under Article 36

46 ‘However, the principle of proportionality which underlies the last sentence of Article 36 of the [Treaty Establishing the Economic Community] requires that any [prohibition on the marketing of foodstuffs from other Member States containing additives] be restricted to what is necessary to attain the legitimate aim of protecting health. Consequently, authorizations to market such products should be granted, under a procedure easily accessible to manufacturers and traders, when they are compatible with that aim.’ The emphasised words should have been included but were for some reason left out in the official English translation of the Muller judgment. They reflect the French version of point 23 in this judgment, which includes a condition regarding the accessibility of the authorisation scheme: ‘Dès lors, des autorisations de commercialiser ces produits doivent être accordées, selon une procédure facilement accessible aux opérateurs économiques, lorsqu’elles sont compatibles avec les objectifs ­indiqués.’ (emphasis added). 47 German Beer Case (n 42). 48 Ibid paras 7–12.

The Obligation of Transparency  107 of the Treaty on grounds of the protection of human health.49 In this case, the ECJ, building on its holding in the Muller case, considered that by virtue of the principle of proportionality, traders must be able to apply for authorisation to use specific additives, and the application procedure must be easily accessible and not take an unreasonable amount of time.50 Furthermore, in Greenham and Abel,51 the ECJ considered that the Treaty articles concerning the free movement of goods must be interpreted as meaning that a Member State is precluded from prohibiting the marketing (without prior authorisation) of foodstuffs lawfully manufactured and marketed in another Member State. In Greenham and Abel, it appears essential that there is a procedure available for the applicant to obtain authorisation of its products.52 In a way similar to the case law on consistency, the obligation of transparency has spilled over into areas not concerned strictly with the free movement of goods. The monopoly case law is yet another area where the obligation of transparency has appeared. In both the Franzén case,53 about Sweden’s alcohol monopoly, and the Hanner case,54 concerning Sweden’s one-time pharmaceutical monopoly, the Court emphasised that the selection system of a sales monopoly must be based on criteria that are independent of the origin of the products and which must be transparent by providing justifications for decisions and allowing for an independent monitoring procedure.55 In a similar vein, the Court ruled in Dynamic Medien that the examination procedure established by the national legislature for the purposes of protecting children from information and materials injurious to their wellbeing must be readily accessible and allow for completion within a reasonable timeframe.56 The seminal Laval case57 on free movement of services is also clearly imbued with transparency obligations. At issue was collective bargaining about minimum pay, and under what conditions a company operating in one Member State but based in another can be made to comply with conditions agreed upon in such negotiations in its country of operation. Paragraph 110 of the Court’s judgment in this case states that, in light of the public interest objective, collective action cannot be justified if there is a lack of provisions, or if provisions are insufficiently precise or inaccessible, so that it becomes impossible or excessively difficult in practice for a foreign company to know precisely what obligations it has regarding, when operating in that country, minimum pay.

49 Ibid para 40. 50 Ibid para 45. 51 Case C-95/01 Greenham and Abel [2004] ECR I-1333. 52 Ibid paras 35 and 50. This approach has more recently been confirmed in Case C-672/15 Noria Distribution, EU:C:2017:310. 53 Case C-189/95 Franzén, EU:C:1997:504. 54 Case C-438/02 Hanner, EU:C:2005:332. 55 Franzén (n 53) paras 44 and 51; and ibid, paras 38–39. 56 Case C-244/06 Dynamic Medien, EU:C:2008:85, paras 49–50. 57 Case C-341/05 Laval, EU:C:2007:809.

108  Angelica Ericsson and Xavier Groussot Though this string of cases has been said to constitute a ‘proceduralization of proportionality’,58 it remains closely related, in our view, to the concept of transparency. It appears that this proceduralisation of the test of proportionality may be relied upon either as an ‘in addition’ argument, as in Laval and Dynamic Medien, or as a per se argument, as was done in Greenham Abel and Franzén. In the latter situation, the argument was a very powerful tool for judicial review of the national legislation falling within the scope of EU law. Recently, the Court clarified its Greenham Abel case law on the need to respect procedural requirements in the context of free movement of goods. In the Noria Distribution case,59 the Court had to assess a piece of French legislation prohibiting the marketing of food supplements whose nutrient contents exceeded a certain limit. The legislation did not provide any procedure for placing such food supplements on the market, and was found to constitute a measure with an effect equivalent to a quantitative restriction for the purposes of Article 34 TFEU. Such a restriction could be justified, provided it complied with the double ‘requirements’ of Article 36 TFEU as interpreted in paragraph 34 of the Greenham Abel case.60 The Court describes the double requirements as follows, in paragraphs 22 and 23 of the Noria Distribution judgment: (a) The national legislation must make provision for a procedure enabling economic operators to obtain authorisation to market food supplements, including nutrients, in doses exceeding the set limits. The procedure must be one that is readily accessible and can be completed within a reasonable time, and such that, if it yields a refusal, this decision can be challenged before the courts. (b) An application to obtain authorisation to market those supplements may be refused by the competent national authorities only if the supplements pose a genuine risk to public health. The first requirement, notably, contains a transparency obligation. In the case at issue, the Court found that although a procedure existed for introducing dietary supplements to a national market, the procedure did not apply to supplements whose nutrient contents exceeded the set maximum dose, as determined by that legislation, and which were lawfully manufactured or marketed in another Member State.61 The French legislation was deemed incompatible with EU law since it did not provide a procedure in circumstances like those of the case.62

58 C Barnard, The Substantive Law of the EU (OUP 2007) 86. She claims that the proceduralisation of proportionality is becoming an increasing preoccupation of the Court. See, in relation to state aids and public procurement, Cases C-280/00 Altmark, EU:C:2003:415 and T-289/03 BUPA v Commission, EU:T:2008:29. 59 Noria Distribution (n 52). 60 Ibid para 21. 61 Ibid para 25. 62 Ibid para 28.

The Obligation of Transparency  109 In Noria Distribution, the Court views the procedural requirement as the first requirement aiming to ensure legitimacy or proportionality for measures taken by Member States. This is an interesting and welcome development, particularly if one contrasts the case with the Court’s reasoning in Laval. Noria Distribution may open the path to a procedural test for the transparency of national legislation before undertaking a substantial assessment of the proportionality of a national measure that restricts free movement, that is an assessment of whether the measure is suitable and necessary. This new test can fit the Gebhard framework of reasoning, particularly its first element, which focuses on the principle of nondiscrimination.63 Noria Distibution illustrates the importance of respecting the principle of equivalence or non-discrimination in a procedural situation. The lack of a national procedure in one Member State that exists in another – the lack of procedural equivalence – imperils the free movement of goods between Member States by creating a procedural no-go zone, and therefore constitutes a breach of the principle of non-discrimination. In that sense, the transparency obligation appears crucial for ensuring mutual recognition à la Cassis, and thus can also be conceived as the procedural facet of the principle of mutual trust.

IV.  The Obligation of Transparency and the Principles of Equivalence and Effectiveness This section studies the relationship between the obligation of transparency and the principles of equivalence (or non-discrimination) and effectiveness (or effective judicial protection). It is worth stressing that in this chapter, we understand non-discrimination as identical to the principle of equivalence, and effective judicial protection as identical to the principle of effectiveness, but only when individual interests overlap with EU interests. This is the case when individuals rely on EU law against a Member State that is not implementing EU law correctly, or which is derogating from EU freedoms by invoking a national public interest contrary to the individual interest.64 In those instances, the individuals also act as (undercover) agents of EU law. 63 Case C-55/94 Gebhard, EU:C:1995:411, para 37. According to the ECJ, it follows ‘from the Court’s case-law that national measures liable to hinder or make less attractive the exercise of fundamental freedoms guaranteed by the Treaty must fulfil four conditions: they must be applied in a nondiscriminatory manner; they must be justified by imperative requirements in the general interest; they must be suitable for securing the attainment of the objective which they pursue; and they must not go beyond what is necessary in order to attain it.’ 64 An individual interest will differ from an EU interest when EU law obligations are imposed on the individual directly by the Union institutions (eg a Commission decision against an undertaking) or by the Member States (under the duty of) applying EU law (and thus acting as an agent of EU law). In this situation, the institution or state may rely on the effectiveness of EU law against the individual, and in such a situation the concept of effectiveness does not overlap with effective judicial protection. In EU public procurement law, this is the case when, for instance, a contracting authority grants a public contract to a company in a direct award procedure in breach of the rules of transparency.

110  Angelica Ericsson and Xavier Groussot We rely on the ECJ case law concerning public procurement law to show the synergy between the obligation of transparency and the principles of equivalence and effectiveness.65 As already made clear in Telaustria,66 the contracting authorities are bound by the fundamental rules of the Treaty, such as the economic freedoms and, more specifically, the principle of non-discrimination. The obligation of transparency flows from the economic freedoms and is implied by the application of the principle of non-discrimination, as is stated very explicitly in the Union des Syndicats Immobilier (UNIS) case.67 There, a public authority had granted an exclusive right to a single authority to manage a (compulsory supplementary) social insurance scheme. The national court asked whether the obligation of transparency applies when a Member State extends a collective agreement to all employers and employees within a sector (the agreement having been concluded by the employers’ and employees’ respective representatives), such that a single economic operator, chosen by the parties, is entrusted with managing a compulsory supplementary social insurance scheme established for employees. The Court concluded that the obligation of transparency prohibits such a situation if the national rules do not provide for sufficient publicity to enable the competent public authority to take full account of information which has been submitted concerning the existence of a more favourable offer.68 This case is in our view an important addition to the Laval saga, as it clarifies the scope of the obligation of transparency vis-à-vis the fundamental rules of the Treaty and the principle of non-discrimination – a key element missing in the Court’s reasoning in Laval. In UNIS, the Court made clear that a public authority creating an exclusive right is under a duty to comply with the obligation of ­transparency.69 The public authority must have given potentially interested

65 The ECJ has notably relied on the principles of equivalence and effectiveness in its case law on national procedural autonomy of the Member States. Though the principles of non-discrimination and effective judicial protection have a more ‘substantive’ face/denomination, they are also used as procedural principles. This is the case in EU public procurement law, where the obligation of transparency is described as flowing from those principles and the fundamental rules of Treaty by the ECJ. With the entry into force of the EU Charter of Fundamental Rights, the Court tends to view the principles of effectiveness and effective judicial protection as interchangeable. We witness a ‘fundamentalisation’ of the rules of procedure in EU law in the increase in references made, in procedural situations, to the fundamental rights provisions enshrined in the Charter, eg Art 47 of the EU Charter. 66 Telaustria (n 21). 67 Joined Cases C-25/14 and C-26/14 Union des Syndicats Immobilier (UNIS), EU:C:2015:821. 68 Ibid para 46. 69 See, to that effect, the judgment in Case C‑203/08 Sporting Exchange, EU:C:2010:307, para 47, which concerned a licence to operate a game of chance. The Court considered that the obligation of transparency should apply in the context of a system whereby the national authorities, by virtue of their public order powers, grant a licence to a single operator, because the effects of such a licence on undertakings established in other Member States and potentially interested in that activity are the same as those of a service concession contract. See also AG Jääskinen, in UNIS (n 67) para 54. Accordingly, the judgment in Sporting Exchange, which has been cited by both the referring court and the parties that submitted written observations, continued a line in the Court’s case law pertaining to service concession contracts (the Parking Brixen line of case law). In Sporting Exchange itself, which did not relate to a service concession, the Court extended its case law on service concession contracts to the granting of

The Obligation of Transparency  111 operators other than the one appointed an opportunity to express their interest in providing such management, and must have acted with full impartiality when appointing the operator entrusted with management of that supplementary scheme.70 According to the ECJ, the obligation of transparency is required by Article 56 TFEU. After all, in the absence of all transparency, an award to an undertaking located in the Member State in which the award procedure takes place, amounts to a difference in treatment which operates mainly to the detriment of all undertakings which might be interested but which are located in other Member States, since those undertakings have had no real opportunity of expressing their interest, and that difference in treatment amounts, in principle, to indirect discrimination on grounds of nationality, which is, in principle, prohibited by Article 56 TFEU.71

Although this obligation does not inevitably entail a new tender, it does necessitate a sufficient degree of publicity to ensure competition and impartiality in the award procedure.72 The obligation of transparency and the principle of equality also influence what level of discretion a contracting authority enjoys in its relationship with the tenderer. In Archus and Gama,73 the Court clarifies the scope of a contracting authority’s discretion in altering the content of tenders submitted. First, the Court stresses the close link between the principle of equality and the need to promote the expansion of healthy and effective competition in the public procurement procedure.74 Tenderers must be afforded equality of opportunity when formulating their tenders. For the ECJ, the principle of equal treatment and the obligation of transparency preclude any negotiation between the contracting authority and a tenderer during a public procurement procedure, which means that once submitted, a tender cannot generally be amended, whether requested by the contracting authority or the tenderer.75 Nevertheless, the ECJ has also previously held that the principle of equal treatment does not preclude the correction or amplification of the details in a tender, should they obviously require clarification or the correction of clerical errors. Yet when exercising its discretion by asking a tenderer to clarify its tender, the contracting authority must treat tenderers equally and fairly, in such a way that a request for clarification does not appear unduly to have favoured or disadvantaged the tenderer or tenderers to which the request was addressed, once the procedure for selection of tenders has been completed and in the light an exclusive right, insisting that the obligation of transparency was a mandatory prior condition of a Member State’s right to award an operator the exclusive right to carry on an economic activity, irrespective of the method of selecting that operator. 70 UNIS (n 67) paras 35–36. 71 Ibid para 38. 72 Ibid para 39. 73 Case C-131/16 Archus and Gama, EU:C:2017:358. 74 Ibid para 25. 75 Ibid para 27. To that effect, see also Cases C‑599/10 SAG ELV Slovensko and Others, EU:C:2012:191, para 36, and C‑336/12 Manova, EU:C:2013:647, para 31.

112  Angelica Ericsson and Xavier Groussot of its outcome.76 The discretion of the contracting authority is thus limited by the principle of equality and the obligation of transparency. The transparency obligation is also intimately connected to the issue of effective remedies and the right to effective judicial protection, enshrined in Article 47 of the EU Charter of Fundamental Rights. In that regard, it is worth stressing the importance of Directive 89/665,77 the so-called ‘Remedies Directive’ in the context of the public procurement procedure. This Directive is in fact intended to protect tenderers from arbitrariness on the part of the contracting authority, and is designed to reinforce existing arrangements for ensuring the effective application of EU rules to the award of public contracts, in particular where infringements can still be rectified. Such protection cannot be effective if the interested party is unable to rely on those rules vis-à-vis the contracting authority.78 As the Court put it in Fastweb II,79 effective legal protection requires that the interested parties be informed of an award decision in a reasonable period before the contract is concluded so that they have a real possibility of bringing proceedings and, in particular, of applying for interim measures pending conclusion of the contract …80

We can see here the close link between effective judicial protection and the obligation of transparency understood as a duty to inform the interested parties within a reasonable timeframe. In this case (of direct award or award without publication of prior notice), Fastweb argued that the publishing of a notice for voluntary ex ante transparency in the Official Journal and the observance of a 10-day minimum standstill period between that publication and conclusion of the contract did not ensure consistency with the principle of effective judicial protection. Such publication did not guarantee that potential competitors were informed of the award of a contract to a particular economic operator, especially if publication took place during a period when activities were reduced or suspended. For the Court, Directive 89/665 is intended to guarantee the transparency of the award procedure. In particular, Article 2(d)(4) of this Directive is designed to ensure that all the candidates potentially concerned are in a position to take cognizance of the contracting authority’s decision to award the contract without prior publication of a contract notice, and hence to bring proceedings for a review of its legality.81 Moreover, in accordance with the third indent of that provision, the contracting authority must observe a 10-day standstill period. The interested parties are thus given the opportunity to

76 Archus and Gama (n 73) para 32. 77 Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts [1989] OJ L 395, 33. 78 Case C-19/13 Fastweb II, EU:C:2014:2194, para 59. 79 Ibid. 80 Ibid para 60. 81 Ibid para 65.

The Obligation of Transparency  113 challenge the award decision in court before the contract is concluded.82 It clearly follows from Fastweb II that the obligation of transparency is necessary to ensure that the principles of effective judicial protection and of non-discrimination are respected, and that it constitutes an essential requirement for the application of those two principles. The obligation of transparency enshrines both a time element and a quality element: the information must be sufficient and provided within a reasonable timeframe. This obligation should be viewed and understood as flowing from the need to respect the fundamental rules of the Treaty, that is, the economic freedoms.

V. Conclusion The obligation of transparency is a core principle of EU administrative and public procurement law. Its application has substantially grown since the ­Telaustria ruling. Indeed, the obligation to provide a ‘sufficient degree of information’ has now grown into a broad obligation of transparency carried by the application of the principles of non-discrimination and effective judicial protection, or respect for the fundamental rules of the Treaty (ie the economic freedoms) as well as detailed EU secondary legislation. This special multi-socket connection offers a certain visibility to the obligation of transparency in the case law on EU public procurement. In that respect, it is worth noting that the obligation of transparency is less visible in the free movement case law, where its application is often integrated and diluted in the proportionality test when the ECJ has to assess the level of discretion granted to a Member State that has derogated from the free movement rules. This point confirms the thesis – put forward by Stephen Weatherill – that EU public procurement law is in fact EU free movement law made better.83 Yet in both situations, the obligation of transparency fulfils a similar function by allowing the control and limitation of the discretion exercised by Member States and their authorities. The study undertaken in the context of EU public procurement law allows us to conclude that we are witnessing the elaboration of a set of enforceable principles (non-discrimination, effective judicial protection and proportionality) that require Member States’ administrative decisions to be transparent when they act as agents of EU law (implementation) and when they derogate from EU freedoms because of national public interests. This institutionalisation of the European administrative space (in the name – spoken or not – of transparency) thus allows a check on technocratic decision-making in EU Member States and an adjudicative control on their discretionary administrative powers when acting in the field of application of EU law.84

82 Ibid

para 61. ch 2 in this volume. 84 See also Shapiro (n 1) 97–98. 83 See

114

part iii Discretion in Pursuing Strategic Goals under the EU Public Procurement Regime

116

6 Contracting Authorities and Strategic Goals of Public Procurement – A Relationship Defined by Discretion? MARTA ANDHOV (NÉE ANDRECKA)

I. Introduction The EU procurement regime changed significantly in the period from 2004 to 2014 in terms of the increased importance placed on green, social and innovative considerations in public procurement processes. Previously, under the regime laid down in the 2004 Directives,1 the inclusion of innovative, environmental and social considerations in the tender process was either not directly considered (innovation), or was considered for the first time and with limited scope in the text of Directives (environmental and social issues).2 Environmental and social considerations were cumulatively referred to as ‘secondary’ and ‘horizontal’ policies, thus being understood as ‘objectives that are not necessarily connected with the procurement’s functional objective’,3 that is acquiring goods, works or services. The tension between internal market integration and horizontal policies was omnipresent. This is the well-known tension between the primary goal of European Union (EU) public procurement, with its focus on opening national procurement markets to competition from bidders established abroad, and the secondary policies that sought to consider environmental and social issues in the

1 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 service sectors [2004] OJ L134/1; Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts [2004] OJ L134/114 (hereinafter ‘Public Sector Directive’). 2 S Arrowsmith, ‘A Taxonomy of Horizontal Policies in Public Procurement’ in S Arrowsmith and P Kunzlik (eds), Social and Environmental Policies in EC Procurement Law: New Directives and New Directions (CUP 2009) 108. 3 S Arrowsmith and P Kunzlik, ‘Public Procurement and Horizontal Policies in EC Law: General Principles’ in Arrowsmith and Kunzlik (eds) (n 2) 9.

118  Marta Andhov procurement process. Hence, the place of secondary policies in public procurement has been uncertain. Some have questioned and criticised such policies, deeming them a potential smoke-screen for preferential treatment of local suppliers and thus non-compliant with EU public procurement law.4 Ultimately, though, it was the Court of Justice of the European Union (CJEU) that confirmed that taking into consideration social factors, the environment and technological innovation can be consistent with EU public procurement law, and as such allowed in public procurement as long as it does not hinder competition in the internal market.5 In the 2014 public procurement regime, innovation as well as environmental and social issues are clearly supported, and their importance emphasised even further, thereby seeming to lessen the regulatory risks attached to these issues under the 2004 Directives.6 Procurement strategising that includes environmental, social and innovation issues may in fact be considered one of the objectives of the EU Public Procurement Directives.7 So-called ‘strategic public procurement’ has been widely promoted since the introduction of the new 2014 regime. In its six strategic priorities for public procurement policy, the European Commission strongly emphasises the importance of using strategic public procurement as a policy instrument, by pointing out that it ‘should play a bigger role for central and local governments to respond to societal, environmental and economic objectives, such as the circular economy’.8 Accordingly, the goal is that criteria referring to innovation or social and environmental factors should be mainstreamed and used more extensively at the 4 A Sánchez Graells, Public Procurement and the EU Competition Rules (Hart Publishing 2011); Arrowsmith and Kunzlik (n 3). 5 See, eg, Case C-225/98 Commission v France, EU:C:2000:494, [2000] ECR I-07445; Case C-513/99 Concordia Bus Finland Oy Ab, formerly Stagecoach Finland Oy Ab v Helsingin kaupunki and HKL-Bussiliikenne, EU:C:2002:495, [2002] ECR I-07213; Case C-448/01 EVN AG and Wienstrom GmbH v Republic of Austria, EU:C:2003:651, [2003] ECR I-14527; Case C-368/10 Commission v Netherlands (Dutch Coffee), EU:C:2012:284; Case C-115/14 RegioPost, EU:C:2015:760. 6 Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC [2014] OJ L94/65 (hereinafter ‘Directive 2014/24/EU’). For overviews of this Directive, see F Lichère, R Caranta and S Treumer (eds), Modernising Public Procurement:The New Directive (DJØF Publishing 2014). Directive 2014/24/ EU is part of the 2014 procurement reform package, which also includes two further directives: Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC [2014] OJL94/243 and Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts [2014] OJ L94/1. For an overview of the reform, see G Skovgaard Ølykke and A Sánchez Graells (eds), Reformation or Deformation of the EU Public Procurement Rules (Edward Elgar 2016). 7 ‘The Commission explicitly declared many times that the original objectives of the procurement Directives, as first enacted in the 1970s are now to be matched with (if not substituted by) further aims, like strategic procurement’, as explained in ME Comba, ‘Variations in the scope of the new EU public procurement Directives of 2014’ in Lichère, Caranta and Treumer (eds) (n 6) 29, 41. 8 Commission, ‘Making Public Procurement work in and for Europe’, COM(2017) 572 final 8; Commission, ‘Public Procurement for a circular economy’ (European Union 2017) available at ec.europa.eu/environment/gpp/pdf/Public_procurement_circular_economy_brochure.pdf.

Contracting Authorities and Strategic Goals  119 pre-market consultation and qualitative assessment (‘most economically advantageous tender’ (MEAT)) stage. In addition, strategic criteria need to be applied systematically.9 Similarly, recital 123 of Directive 2014/24/EU10 states: In order to fully exploit the potential of public procurement to achieve the objectives of the Europe 2020 strategy for smart, sustainable and inclusive growth, environmental, social and innovation procurement will also have to play its part.

Nevertheless, of the 450 amendments to Directive 2014/24/EU tabled in the ­European Parliament, most of which concerned social considerations, the majority were rejected by the Council and the Commission in the negotiation procedure leading up to the enactment of the 2014 public procurement regime.11 The prostrategic public procurement amendments that found their way to the final version of Directive 2014/24/EU are often facultative. The facultative character of the provisions means that contracting authorities may decide to consider strategic objectives, but are not obliged to do so. Consequently, we are left to wonder what legal status the pro-strategic provisions in the EU Public Procurement Directives enjoy. Are the Commission’s policy statements for the promotion of green, social and innovation considerations finding their way into the legal text of the Directives? Or has an opportunity been missed to establish a sustainable public procurement market? Lastly, what is the scope of the discretion entrusted to contracting authorities in pursuing, or in fact ignoring, the strategic objectives outlined? This chapter is structured as follows. Section II introduces the concept of strategic public procurement. Section III analyses EU competence in regulating strategic public procurement, while section IV investigates the scope of the discretion entrusted to the contracting authorities in the area of strategic public procurement. Section V discusses the limits of this discretion, focusing especially on Article 18(2) of Directive 2024/14/EU, which obliges Member States to ensure compliance with environmental, social and labour laws in the implementation of public contracts. Section VI concludes the chapter.

II.  Strategic Public Procurement ‘Strategic public procurement’ is an umbrella term encompassing public procurement that is used as a policy tool, and therefore includes considerations other

9 COM(2017) 572 (n 8). 10 Further reference will be made solely to Directive 2014/24/EU, as it covers the widest scope of governmental contracts in the EU. Nevertheless, the discussion and its considerations can be equally applied to the other EU Public Procurement Directives from 2014. 11 The Committee on Internal Market and Consumer Affairs within the European Parliament was responsible for reviewing the draft legislation on public procurement put forward by the Commission.

120  Marta Andhov than  solely economic ones.12 Consequently, strategic public procurement will complement green public procurement (environmental considerations);13 social public procurement (eg labour issues); and sustainable public procurement, understood as aiming to achieve the appropriate balance between the three pillars of sustainable development – economic, social and environmental – when procuring public contracts.14 The new generation of EU Public Procurement Directives came into force on 18 April 2016, and with their introduction the Commission broadly advocated for more ‘strategic’ public procurement.15 By ‘strategic public procurement’ the Commission means procurement used as a tool to support environmental and social policy objectives as well as innovation.16 Strategic public procurement is not addressed formally in the text of Directive 2014/24/EU, but it is encapsulated in its recital 2, which refers to the key role to be played by public procurement in achieving the Europe 2020 strategy for smart, sustainable and inclusive growth. It is also evident in the Directive’s ambition to enable ‘procurers to make better use of public procurement in support of common societal goals’.17 The Commission promotes the idea of public procurement not just as an administrative process, but also as an opportunity to deliver sustainable growth and value for money. Following the 2014 reform, today’s EU public procurement rules are more detailed and provide extended space to contracting authorities for strategic considerations. At the same time, the legal provisions are more complex than ever before, and consequently there is a great deal of uncertainty about how to apply the law in the context of strategic policies. In its communications, the Commission has cast itself in the role of adviser, expressing a readiness to develop a range of support tools for contracting authorities such as guidelines and good practices. While this is not a novelty in all areas of EU law, it marks a new trend in EU public procurement, whereby the Commission focuses on practical improvements and assistance to Member States rather than on the creation of extensive new legislation or challenging Member States’ procurement practices.18 12 See Commission, ‘Strategic Public Procurement: Facilitating Green, Inclusive and Innovative Growth’ (2017) 12 European Procurement and Public-Private Partnership Law Review 220. 13 The Commission, Buying Green – A handbook on green public procurement, 3rd edn (Publications Office of the European Union 2016) available at ec.europa.eu/environment/gpp/pdf/Buying-GreenHandbook-3rd-Edition.pdf. See also B Martinez Romera and R Caranta, ‘EU Public Procurement Law:Purchasing Beyond Price in the Age of Climate Change’ (2017) 12 European Procurement and Public-Private Partnership Law Review 281. 14 The Commission, Green and Sustainable Public Procurement (8 June 2016), available at ec.europa. eu/environment/gpp/versus_en.htm. 15 The Commission, ‘Proposal for a directive on public procurement’, COM(2011) 896 final, 2. 16 COM(2017) 572 (n 8) 3. 17 The Commission, ‘Europe 2020 on a strategy for smart, sustainable and inclusive growth’, COM(2010) 2020 final. 18 There will not be revisions to the Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007 amending Council Directives 89/665/EEC and 92/13/EEC with regard to improving the effectiveness of review procedures concerning the award of public contracts or to D ­ irective 2009/81/EC of the European Parliament and of the Council of 13 July 2009 on the

Contracting Authorities and Strategic Goals  121 While using public procurement as a policy tool for different purposes (eg achieving equal pay for men and women, fighting unemployment) is not a new concept, strategising through environmental, social and innovative considerations has reached new heights under Directive 2014/24/EU.19 The new reform reinforced the importance of sustainable development20 by facilitating the strategic use of public procurement for wider economic, environmental and societal benefits.21 It could be argued that the new revised Directives expand the scope of the coverage (eg Article 72 on contract modification), but also the objectives of the EU public procurement regime understood as a strategic tool, as well as the promotion of efficiency in public spending.22 The question is how we should characterise the change in EU Public Procurement Directives and their expansion from having a solely economic, market-oriented focus to a multi-layered rationale considering the health of the internal market, with environmental and social dimensions as well as with regard to innovation.23 To investigate this, we must first examine EU competence to pursue the strategic objectives in public procurement at the EU level, and then scrutinise the discretion afforded Member States and their contracting authorities in pursuing or ignoring the Commission’s strategic public procurements agenda.

III.  The Legitimacy of Pursuing Strategic Procurement at the EU Level European Union public procurement law, as secondary law, derives from the EU Treaty’s provisions on free movement. The fact that the EU Public Procurement Directives are firmly grounded in internal market laws is repeatedly confirmed by the CJEU, which sees the objective of public procurement as that of ‘opening-up

c­ oordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security, and amending Directives 2004/17/EC and 2004/18/EC. 19 C McCrudden, Buying Social Justice: Equality, Government Procurement and Legal Change (OUP 2007) 37–48; for historical development see C McCrudden, ‘Using public procurement to achieve social outcomes’ (2004) 28 Natural Resources Forum 257. 20 ‘Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.’ World Commission on Environment and Development, Report of the World Commission on Environment and Development: Our Common Future (UN 1987) ch 2, para 1. See M Andrecka and K Peterkova Mitkidis, ‘Sustainability Requirements in EU Public and Private Procurement – a Right or an Obligation?’ (2017) Nordic Journal of Commercial Law 55, 64. 21 Directive 2024/14/EU, recital 47. 22 For the critique of spending efficiency as an EU public procurement objective, see Comba (n 7) 29, 42. 23 Environmental and social considerations have been part of the broader internal market rationale for a long time. See, eg, S Weatherill, Law and Values in the European Union (OUP 2016).

122  Marta Andhov the internal market to undistorted competition in all the Member States’.24 The preamble to Directive 2014/24/EU refers directly to provisions concerning the internal market.25 At the same time, the claims of ‘general genetic modification of procurement directives’ have acknowledged strategic consideration as a valid objective of the 2014 EU Public Procurement Directives.26 Dragos and Neamtu note that the specific concern with sustainability ‘is almost taking over the realm of public procurement’.27 Recital 91 of Directive 2014/24/EU supports this: This Directive clarifies how the contracting authorities can contribute to the protection of the environment and the promotion of sustainable development, whilst ensuring that they can obtain the best value for money for their contracts.

While scepticism exists about pursuing spending efficiency at the EU level, there seems to be a clear legitimacy to pursuing the strategic objectives in the EU Public Procurement Directives.28 First, environmental, social and innovation issues can be connected to specific EU policies, such as Europe 2020.29 At the same time, references to sustainable development can be found in the Treaty Articles,30 including Article 3(3) of the Treaty on European Union (TEU), which states that the Union shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment.31

Based on Article 4(2) TFEU, the Union and its Member States have shared competences in areas such as the internal market, the environment and social policy. Article 7 TEU states that the EU institutions shall consider all Treaty objectives when adopting measures falling within their competences. The connection between public procurement and innovation is established under Article 6 TFEU

24 Case C-26/03 Stadt Halle and RPL Lochau, EU:C:2005:5, para 44; Case C-553/15 Undis Servizi, EU:C:2016:935, para 28; Case C-144/17 Lloyd’s of London, EU:C:2018:78, para 33. 25 Consolidated Version of the Treaty of the Functioning of the European Union (TFEU) [2016] OJ C202/47, Arts 53(1), 62 and 114. 26 Directive 2014/24/EU, recital 2; Comba (n 7). 27 DC Dragos and B Neamtu, ‘Sustainable Public Procurement in the EU: Experiences and Prospects’ in Lichère, Caranta and Treumer (eds) (n 6) 304. 28 R Caranta, ‘The Changes to the Public Contract Directives and the Story They Tell About How EU Law Works’ (2015) 52 Common Market Law Review 391; Comba (n 7) 41; Arrowsmith and Kunzlik (n 3) 31. 29 COM(2010) 2020 (n 17). 30 See Consolidated Version of the Treaty on European Union (TEU) [2016] OJ C202/13, Art 21(2)(d). 31 Ibid. See also the Charter of Fundamental Rights of the European Union [2012] OJC 326/391, preamble (‘[The Union] seeks to promote balanced and sustainable development …’) and Art 37 (‘A high level of environmental protection and the improvement of the quality of the environment must be integrated into the policies of the Union and ensured in accordance with the principle of sustainable development’). Emphases added.

Contracting Authorities and Strategic Goals  123 read together with Article 7 (which provides for the principle of consistency), allowing the Union to take supporting actions in the field of industry. Article 9 TFEU provides that the institutions must also take into account requirements linked to the promotion of a high level of employment, and the guarantee of adequate social protection. In regard to environmental considerations in public procurement, we find even stronger wording in Article 11 TFEU, calling for integrated environmental protection: ‘Environmental protection requirements must be integrated into the definition and implementation of the Union policies and activities, in particular with a view to promoting sustainable development.’32 Whilst it is generally recognised that the principle codified in Article 11 is legally binding, there is significant ambiguity as to the precise scope and effects of the obligations arising from Article 11 TFEU.33 Since the provision addresses EU institutions, it has been argued that the EU legislator is bound by the obligatory requirements of environmental integration when setting secondary legislation and policies (including public procurement), while the legal implications for the Member States are less obvious.34 Although it seems doubtful that the EU legislator should be obliged to introduce environmental standards as part of all public procurements, it seems clearly legitimate to allow environmental (and social and innovation) considerations in public procurement at the EU level.

IV.  Limiting or Expanding Discretion in the Area of Strategic Public Procurement? Public procurement is partly harmonised through the enactment of the EU Public Procurement Directives. By their nature, the Directives bind the Member States in terms of the result that is to be achieved, leaving the means of achieving that result to the discretion of Member States. The need for a certain level of discretion in the application of EU law is already observable in primary law, where the competences are shared between the Union and the Member States; and this need is confirmed in the EU Public Procurement Directives, where a certain level of discretion afforded to the Member States and contracting authorities may be observed.35 Discretion may be linked to the need for further flexibility in the procurement system, which is one of the main goals of the EU public procurement law revision,

32 Emphasis added. Art 11 TFEU is referred to in recital 91 of Directive 2014/24/EU. See also Caranta (n 28) 391; as well as TFEU, Art 191. 33 See PG Davies, European Union Environmental Law: An Introduction to Key Selected Issues (Ashgate 2004) 32; D Grimeau, ‘The integration of environmental concerns into EC policies: a genuine policy development?’ (2000) 9 European Environmental Law Review 207. 34 A Wiesbrock, ‘An obligation for sustainable procurement? Gauging the potential impact of Article 11 TFEU on public contracting in the EU’ (2013) 40 Legal Issues of Economic Integration 105, 109. 35 Art 4(2) TFEU, which refers to national identity.

124  Marta Andhov aside from the need to simplify the procurement rules.36 At first glance, simplicity and flexibility may seem to be mutually exclusive goals, and also hard to reconcile with the aim of using public procurement strategically – another goal of the EU Public Procurement Directives.37 The Commission’s so-called ‘toolbox approach’ to the EU Public Procurement Directives can be seen as an attempt to balance simplicity, flexibility and strategy in public procurement, in line with the Directives’ goals and objectives. This toolbox approach is a design of the EU Public Procurement Directives that enables contracting authorities to use a flexible legal framework with a view to ensuring transparency and equal treatment, while allowing contracting authorities to tailor their procurement to their needs by choosing their own procedure and the requirements and criteria for selection and award of contracts.38 This is achieved, inter alia, by ensuring that almost all procurement procedures are transposed into national legislations, giving contracting authorities greater flexibility in deciding which procedure meets their needs.39 Additionally, contracting authorities may take into account a range of facultative considerations, such as environmental and social ones, as well as innovation, in awarding public contracts.40 Discretion comes into play at different stages of the procurement process. First, the contracting authority is not limited when it comes to what it wishes to purchase, or in the matter of whether it decides to meet its own needs or prefers to outsource such needs to private suppliers. The contracting authority is limited in its discretion by the obligation to comply with the EU Public Procurement Directives if the works, goods and supplies it wishes to procure fulfil the definition of a public contract, and if the value of the contract is above the EU threshold.41 In the area of strategic procurement, the EU legislator left the Member States, and subsequently contracting authorities, a substantial level of discretion. Here more than in other areas of procurement, Member States may decide if they wish to implement some of the provisions (eg the transposition of Article 20 of Directive 2014/24/EU on reserved contracts, which permits buying socially, is ­facultative).42 On this basis, public contracts may be reserved for sheltered employment undertakings, whose main aim needs to be the social and professional integration of disabled and/or otherwise disadvantaged persons (provided they make up more than 30 per cent of staff). The 2014 EU public procurement rules have changed access to reserved contracts, dropping the threshold of

36 COM(2011) 896 (n 15). 37 See Directive 2014/24/EU, recital 47; COM(2017) 572 (n 8). 38 Commission (n 12) 220. 39 The exception applies to negotiated procedures without publication for which implementation is not mandatory. 40 See M Andrecka, guest editor, special issue, ‘Public Procurement Beyond the Price’ (2017) 3 ­European Procurement and Public-Private Partnership Law Review. 41 Directive 2014/24/EU, Arts 1–4. 42 Cartana (n 28) 391.

Contracting Authorities and Strategic Goals  125 ­ isadvantaged ­workers needing to be employed from 50 per cent to 30 per cent. d They also expand the ranks of the workers themselves (beyond the disabled workers previously considered) and now include all categories of disadvantaged workers, covering the unemployed, people from disadvantaged minorities, or otherwise socially marginalised groups. Contracts for certain health, social and cultural services, the so-called ‘light-touch regime’, can be reserved for non-profit undertakings pursuing a public service mission and organised on the basis of participation, with a maximum duration of three years.43 It needs to be underlined that public contracts are reserved for a particular type of enterprise; they cannot be reserved for a specific enterprise. Whenever possible there must still be competition between reserved contract providers, and at the end of this process tenders will be assessed on the basis of their offer, with the contract being awarded to the enterprise offering the best price-to-quality ratio or the most economically advantageous tender. While there is an increase in provisions directly referencing e­ nvironmental, social and innovative consideration, there is a limited amount of mandatory provision in the area of strategic procurement. Consequently, contracting authorities are left with discretionary power to decide whether to apply the facultative provisions on strategic procurement. The facultative provision relates to Article 42 of Directive 2014/24/EU on technical specifications where the contracting authority defines the subject matter of the public contract. In doing so, the contracting authority may refer to the specific process or method of production or provision of the requested works, supplies or services or to a specific process for another stage of its life cycle even where such factors do not form part of their material substance provided that they are linked to the subject-matter of the contract and proportionate to its value and its objectives.

The one limitation placed on the contracting authority’s discretion regarding technical specifications is the demand that in all public procurements intended for use by natural persons, technical specifications must take into account accessibility criteria for persons with disabilities or be designed for all users.44 At the selection stage, it may be possible for contracting authorities to exclude bidders who have proved unreliable (which encompasses violations of environmental or social obligations, including rules on accessibility for disabled persons or other forms of grave professional misconduct, such as violations of competition rules or of intellectual property rights).45 In addition, the contracting authority may include strategic considerations in the award criteria,46 or in the contract



43 Directive

2014/24/EU, Title III (Arts 74–77). 2014/24/EU, Art 42(1). 45 Ibid recital 101. 46 Ibid Art 67. 44 Directive

126  Marta Andhov performance conditions47 of the public contracts.48 These may include the requirement that the manufacturing of the purchased products did not involve toxic chemicals; that the purchased services are provided using energy-­efficient machines; or that the purchased product is of fair-trade origin, including the requirement to pay a minimum price and a price premium to producers.49 Contract performance conditions related to environmental considerations may include, for example, the delivery, packaging and disposal of products, and – in the case of works and services contracts – waste minimisation or resource efficiency.50 The possibility of awarding a contract partly on the basis of life-cycle costing is connected to the environmental and social considerations in the award criteria.51 Life-cycle costing shall, to the extent relevant, cover part or all of the costs over the life-cycle of a product, service or works including: (a) costs, borne by the contracting authority or other users (such as costs pertaining to acquisition; costs of use, such as consumption of energy and other resources; maintenance costs; end-of-life costs, such as collection and recycling costs); and (b) costs imputed to environmental externalities linked to the subject matter of the framework agreement during its life cycle, provided their monetary value can be determined and verified; such costs may include the cost of emissions of greenhouse gases and of other pollutant emissions and other climate change mitigation costs.52 It follows from the preceding discussion that the contracting authorities are given a wide range of discretion about whether and how to incorporate environmental, social and pro-innovation consideration into their procurements design.53 Evidently, the level of discretion given to the Member States has reached a new height with the 2014 reform.

47 Ibid Art 70. 48 See Case 31/87 Gebroeders Beentjes BV v State of the Netherlands, EU:C:1988:422, [1988] ECR 4635; Concordia Bus (n 5); EVN and Wienstrom (n 5); Case T-331/06 Evropaïki Dynamiki – Proigmena Systimata Tilepikoinonion Pliroforikis kai Tilematikis AE v European Environment Agency (AEE), EU:T:2010:292, [2010] ECR II-136; Commission v Netherlands (Dutch Coffee) (n 5). 49 Directive 2014/24/EU, recital 97. 50 Ibid. 51 Ibid Art 68. 52 Ibid. 53 B Sjåfjell and A Wiesbrock (eds), Sustainable Public Procurement under EU Law – New Perspectives on the State as Stakeholder (CUP 2016); R Caranta and M Trybus (eds), The Law of Green and Social Procurement in Europe (DJØF Publishing 2010); S Arrowsmith, ‘The Purpose of the EU Procurement Directives:Ends, Means and the Implications for National Regulatory Space for Commercial and Horizontal Procurement Policies’ (2012) 14 Cambridge Yearbook of European Legal Studies 1; P Kunzlik, ‘Neoliberalism and the European Public Procurement Regime’ (2013) 15 Cambridge ­Yearbook of European Legal Studies 283.

Contracting Authorities and Strategic Goals  127

V.  Limits to Discretion: Can We Ignore the Strategic Goals? The limitation on contracting authorities’ discretion in strategic public procurement can be viewed from two perspectives. First, we can consider limitations to the contracting authority’s discretion in pursuing strategic goals. Not all strategic considerations are allowed under EU public procurement law. Here, the main limitation is provided by the requirement on a ‘link to the subject matter’ of the contract.54 This means that general corporate, social or environmental policies and practices are excluded.55 Another limitation on pursuing strategic goals is provided by the procurement principles in Article 18(1) of Directive 2014/24/EU, which requires compliance with principles of equality, non-discrimination, transparency and proportionality, as well as open competition: The design of the procurement shall not be made with the intention of excluding it from the scope of this Directive or of artificially narrowing competition. Competition shall be considered to be artificially narrowed where the design of the procurement is made with the intention of unduly favouring or disadvantaging certain economic operators.56

From the second viewpoint, we see limitations on the Member States’ (and, by extension, a contracting authority’s) freedom to ignore strategic procurement goals by the mandatory character of the pro-strategic public procurement provisions. Therefore, it is necessary to discern whether there are any obligatory pro-strategic provisions, and to consider what their effect (if any) might be on the rest of the provisions in Directive 2014/24/EU. There is a very limited volume of mandatory pro-strategic procurement provisions in the EU public procurement regime. Within Directive 2014/24/EU, there is: (i) the compliance obligation in Article 18(2);57 (ii) Article 69, which obliges a contracting authority to reject an abnormally low tender in case of non-compliance with Article 18(2); and (iii) Article 71, which refers to the obligation of compliance with Article 18(2) in subcontracting.58 The three points will be analysed in the next section. However, it is worth noting that the obligation to consider strategic issues when procuring will, in particular circumstances, follow from EU legal acts other than the Public Procurement Directives. For example, the Clean Vehicles D ­ irective 54 See A Semple, ‘The Link to the Subject Matter: A Glass Ceiling for Sustainable Public Contracts?’ in Sjåfjell and Wiesbrock (eds) (n 53) 50. 55 Directive 2014/24/EU, recital 97; on issues of corporate social responsibility (CSR) in public procurement, see M Andrecka, ‘Corporate Social Responsibility and Sustainability in Danish Public Procurement’ (2017) 3 European Procurement and Public-Private Partnership Law Review 333. 56 For analysis of competition principle as a limit to contracting authorities’ discretion, see ch 4 of this volume by Sanchez-Graells. 57 See Directive 2014/23, Art 30(3) and Directive 2014/25, Art 36(2). 58 See also the mandatory exclusions for corruption, child labour and human trafficking (Art 57(1)) and exclusions for non-payment of tax and social security (Art 57(2)), which can be considered as part of the pro-strategic objective public procurement provisions. However, these will not be discussed further in this chapter.

128  Marta Andhov requires public authorities to consider fuel consumption and greenhouse gas emissions when purchasing road transport vehicles;59 the Energy Star Regulation obliges central government authorities to purchase only such IT office equipment as fulfils specific minimum energy-efficiency levels;60 the Energy Performance of Buildings Directive specifies that all new buildings owned and occupied by public authorities from the end of 2018 must be ‘nearly zero-energy’;61 and in the proposal for the European Accessibility Act, obligations concerning the accessibility of products and services are outlined.62

A.  Article 18(2) of Directive 2014/24/EU The inclusion of Article 18(2) in Directive 2014/24/EU is perceived as an undeniable milestone in achieving a sustainable market of governmental contracts.63 The provision is seen as an essential tool that has the potential to ensure ethical sourcing, fight social dumping and force compliance with environmental laws in the context of public procurement.64 In other words, Article 18(2) limits the freedom to ignore the strategic objectives in public procurement that concern environmental, social and labour issues. Article 18(2) reads: Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X.

The provision seeks to ensure that public contracts are implemented in compliance with what this chapter will refer to collectively as sustainable laws (environmental, 59 Directive 2009/33/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of clean and energy-efficient road transport vehicles [2009] OJ L120/5. 60 Regulation (EC) No 106/2008 on a Community energy-efficiency labelling programme for office equipment (recast version) OJ [2008] L39/1. 61 Directive 2010/31/EU on the energy performance of buildings OJ [2010] L153/13. 62 Commission, ‘Proposal for a Directive of the European Parliament and of the Council on the approximation of the laws, regulations and administrative provisions of the Member States as regards the accessibility requirements for products and services’, COM(2015) 615 final. 63 Art 18(2) refers to this as: a ‘horizontal clause’. See A Wiesbrock, ‘Socially Responsible Public Procurement – European value or national choice?’ in Sjåfjell and Wiesbrock (eds) (n 53) 78; ‘mandatory social considerations’ (European Trade Union Confederation (ETUC)‚ ‘New EU framework on public procurement. ETUC key points for the transposition of Directive 2014/24/EU’ (2015) 9, available at www.etuc.org/sites/default/files/publication/files/ces-brochure_transpo_edited_03.pdf); ‘mandatory social clause’, see A Semple, ‘Living Wages in Public Contracts:Impact of the RegioPost Judgment and the Proposed Revisions to the Posted Workers Directive’ in A Sánchez Graells (ed), Smart Public Procurement and Labour Standards (Hart Publishing 2018) 83. 64 Art 18(2) could be seen as a continuation – with several important changes – of Art 27 of the Public Sector Directive on obligations relating to taxes, environmental protection, employment protection provisions and working conditions.

Contracting Authorities and Strategic Goals  129 social and labour laws at the national, EU and international level). It represents the traditional idea of directives that bind parties to a result to be achieved, but which leave it up to Member States to choose an appropriate method. Nevertheless, the use of ‘shall’ suggests an obligation. Yet the mandatory character of the provision, or rather the legal consequence of this provision, is unclear, as Article 18(2) creates a general duty. The Article is addressed to the Member States, and thus the obligatory character is watered down, leaving accountability to Member States. This has an important legal consequence. We must ask: if a Member State has not transposed Article 18(2) and the contracting authority has failed at some point in the procurement procedure to take measures to check the compliance mentioned in Article 18(2), is it possible for a bidder to challenge the procurement process on the basis of non-compliance with EU law?65 This remains uncertain. On the one hand, Article 18(2) read in conjunction with recital 37 refers to both Member States and contracting authorities: With a view to an appropriate integration of environmental, social and labour requirements into public procurement procedures it is of particular importance that Member States and contracting authorities take relevant measures to ensure compliance with obligations in the fields of environmental, social and labour law … (emphasis added)

On the other hand, the legal power of recitals is non-binding. At the same time, if one looks at the definition of the contracting authority in Directive 2014/24/EU, it expressly points out that it means the ‘State’.66 The CJEU has considered the scope of ‘State’ for purposes of directives in several of its judgments, and it uses the terms ‘state’, ‘state authority’ and ‘public authority’ interchangeably.67 In Melgar, the CJEU stated that directives are ‘binding on all authorities of Member States, including decentralised authorities such as municipalities’.68 In her book on directives, Sacha Prechal points out that the answer to the question of which organ or authority of a Member State is actually bound by a directive will, depending on the subject matter of the directive at issue, vary from Member State to Member State, according to the internal distribution of tasks and competences.69

Notably, though, the literal interpretation of the provision intentionally refers to Member States. It has been argued that it was a political choice at the EU level not to impose an excessive burden on local authorities.70 65 Of course, the Commission could potentially hold the Member State liable for inadequate implementation of Directive 2014/24/EU. 66 Directive 2014/24/EU, Art 2(1)(1). 67 See S Prechal, Directives in EC Law, 2nd edn (OUP 2005) 58. 68 Case C 438/99 Melgar, EU:C:2001:509, [2001] ECR I-6915, para 32. For broad interpretation of a state, see also Case C-188/89 Foster and Others v British Gas, EU:C:1990:313, [1990] ECR I-3313, para  18; and Joined Cases C252/96 to C-258/96 Kampelmann, EU:C:1997:585, [1997] ECR I-6907, para 46. 69 Prechal (n 67) 63. 70 ETUC (n 63) 9–11.

130  Marta Andhov For the provision to transfer rights to individuals (bidders), it would need to have a direct effect. It is doubtful that Directive 2014/24/EU’s provision in Article 18(2) is sufficiently precise to allow for proper national judicial enforcement. The provision does not prescribe which specific actions Member States should take to ensure compliance with Article 18(2). It refers solely to ‘appropriate measures’, to be taken in conformity with EU law and principles.71 Consequently, if Article 18(2) is literally transposed to national legislation, little change may be expected.72 A proactive approach can be seen in the Scots Regulation on public procurement, where contracting authorities are obliged to include such conditions in public contracts where they are reasonably necessary for ensuring contractors’ compliance with applicable sustainability laws.73 The use of the phrases ‘appropriate’ and ‘reasonably necessary’ seems to provide certain limits to the extent of the due diligence that is required from a contracting authority; this limit will be sketched by the application of the proportionality principle.74 The notion of applying a contractual clause recurs in recital 39 of the Directive, which points to the possibility of considering non-compliance with the relevant obligations to constitute grave misconduct on the part of the economic operator concerned. This brings in another aspect of Article 18(2), namely the fact that the appropriate measures should be applied to ensure compliance in ‘the performance’ of public contracts. This testifies to a shift in focus away from the tendering process toward the actual implementation of the public contract.75 Clarification is given in recital 40, which indicates that the relevant control should be performed at the pertinent stages of the procurement procedure: at the selection stage when considering the exclusion criteria, at the award stage and when applying the provisions on abnormally low tenders. In the context of Article 18(2), ‘applicable’ obligations in the area of sustainable laws should be interpreted broadly, as referring not only to the place where the public contract is to be implemented, but also to any relevant obligation applicable to a bidder in a place where it operates.76 If applying a narrow interpretation, limiting the applicable obligation solely to the place of the contract’s execution, then a competitive advantage would be given to bidders from elsewhere, in breach of the procurement rules, specifically the equality principle. The applicable obligations should follow from Article 18(2), which enumerates sustainability laws and refers inter alia to Annex X. The latter is to secure respect for core ILO Conventions on: • Freedom of Association and the Protection of the Right to Organise • The Right to Organise and Collective Bargaining 71 See Directive 2014/24/EU, recital 37. 72 Wiesbrock (n 63) 80. 73 Public Contracts (Scotland) Regulations 2015 (SI 2015/446) reg 19. 74 Directive 2014/24/EU, art 18(1). 75 On the issue of a shift to contractual regulation in regard to innovation partnership, see M  Andrecka, ‘Innovation Partnership in the new public procurement regime – shift of focus from procedural to contractual issues?’ (2015) 24 Public Procurement Law Review 18. 76 Semple (n 63) 83.

Contracting Authorities and Strategic Goals  131 • • • • • •

Forced Labour The Abolition of Forced Labour Minimum Age Discrimination (Employment and Occupation) Equal Remuneration Worst Forms of Child Labour.77

Annex X also refers to environmental law obligations in conventions on the protection of the ozone layer; hazardous wastes and their disposal; on persistent organic pollutants; and on hazardous chemicals and pesticides.78 Several voices – including participants from Belgium and France – advocated for the inclusion in Annex X of Directive 2014/24/EU of other ILO conventions that constitute fundamental social and employment provisions.79 Such conventions cover labour inspections; labour clauses in public contracts; the protection of wages; minimum standards of social security; employment policy; and occupational health and safety.80 However, their inclusion was not possible, since only 10 Member States have formally ratified them, and those Member States that had not ratified the conventions did not want to be legally bound by them.81 Thus, the question arises whether these other fundamental conventions not listed in Annex X enjoy a comparable advantage and status. From the wording of ­Article 18(2) and Annex X, it seems that a narrow interpretation should be applied and that the list of conventions is exhaustive. The challenge in assessing compliance with the above-mentioned conventions is that they are usually couched in very general terms, making it hard to enforce legal consequences based on such instruments. Furthermore, the conventions do not help with the issues arising when a contracting authority must monitor whether a supplier complies with the provisions; ensure that the supplier proves that it has not violated the provisions; or establish guidelines for remedial action against suppliers if the provisions are found to be violated during the performance of the public contract. Of the ‘EU laws’ mentioned in Article 18(2), recital 37 of Directive 2014/24/EU specifically refers to the Posted Workers Directive 96/71, which concerns working conditions for workers posted in other Member States.82 This may be linked to the influence in recent years of several relevant CJEU judgments pertaining to the crossover between public procurement and posted workers rules. That is, the  rulings have considered the question whether a contracting authority may 77 In chronological order: ILO Conventions 87, 98, 29, 105, 138, 111, 100, 182. 78 See Directive 2014/24/EU, Annex X. 79 É van den Abeele, ‘Integrating social and environmental dimensions in public procurement: one small step for the internal market, one giant leap for the EU?’, ETUI Working Paper 2014.08, 10. 80 In chronological order: ILO Conventions 81, 94, 95, 102, 122, 155. 81 van den Abeele (n 79) 11. 82 Directive 96/71/EC of the European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services [1997] OJ L18/1.

132  Marta Andhov require a minimum salary to be paid to all workers employed under a public contract. In earlier cases, such as Ruffert83 and Bundesdruckerei GmbH,84 the CJEU ruled that it was impossible to require a minimum wage under a public contract. Nevertheless, the line of judgments changed with the most recent Regio Post85 case, where the CJEU allowed a minimum wage requirement.86 Further development in this area may be observed in the planned reform of the Posted Workers Directive 96/71, which, if adopted, will enhance the pro-strategic public procurement approach by giving host states the ability to enforce labour requirements, in particular the wage requirements, and this also with regard to subcontractors.87

i.  Article 18(2) – A General Principle or Not? The ETUC, in its key points for transposition of Directive 2014/24/EU, underlines that ‘Art 18.2 can be considered as a general principle, which is later substantiated in specific articles.’88 Also, Article 18 is entitled ‘Procurement Principles’, which would suggest that its second paragraph, requiring compliance with sustainability laws, is a procurement principle.89 However, classifying Article 18(2) as a general procurement principle is quite controversial. Several authors, including myself, disagree with such an approach. Arrowsmith points out that Article 18(2) has stronger similarities to a rule concerned with one specific subject than to a principle of broad relevance for interpreting the Directives.90 Caution is also urged by Sanchez-Graells, who states that Article 18(2) can hardly be seen as creating any obligation of its own.91 Principles have an important role in public procurement, as can be seen in the line of cases starting with Teleaustria.92 This case law establishes that principles may apply even in the context of contracts fully outside the EU Public Procurement Directives. Principles are an essential aid in interpreting and explaining a  specific provision in the Directives, where certain overriding considerations

83 Case C-346/06 Ruffert, EU:C:2008:189, [2008] ECR I-01989. 84 Case C-549/13 Bundesdruckerei GmbH, EU:C:2014:2235. 85 RegioPost (n 5). 86 For an in-depth analysis of the cases, see Sánchez Graells (ed) (n 63). 87 Commission, ‘Proposal for a Directive of the European Parliament and of the Council amending Directive 96/71/EC of The European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services’, COM(2016) 128 final. 88 The European Trade Union Confederation (ETUC) is the major trade union organisation representing workers at the European level. The ETUC is a European social partner, which means that the Commission consults it when developing social and economic policies. See ETUC (n 63) 9. 89 The author has already considered whether sustainable development is a pending procurement principle in her PhD thesis: see M Andrecka, Public-Private Partnerships in the EU Public Procurement Regime (GlobeEdit Publishing 2014). 90 S Arrowsmith, The Law of Public and Utilities Procurement, 3rd edn (Sweet & Maxwell 2014) 631. 91 A Sanchez-Graells, ‘Regulatory Substitution between Labour and Public Procurement Law:The EU’s Shifting Approach to Enforcing Labour Standards in Public Contracts’ (2018) 24 European Public Law 229, 240–41. 92 Case 324/98 TeleAustria [2000] ECR I-10745.

Contracting Authorities and Strategic Goals  133 are taken into account.93 By contrast, strategic policies have commonly been seen as goals that public procurement should aim to achieve rather than principles of how the procurement process should be conducted.94 Article 18(2) would need to manifest some additional characteristics in order to be regarded as expressing a principle. To a large extent, principles are created by the CJEU, which is also the case for environmental and social considerations in public procurement.95 However, if we consider other traditionally recognised principles in Article 18, such as equal treatment, non-discrimination and transparency (recall that since 2014, the Directive includes additional wording about proportionality and open competition), all of these have been developed by the CJEU using strong, obligatory language. For example, in regard to the equal treatment principle, the CJEU stated that ‘Comparable situations must not be treated differently and different situations must not be treated in the same way, unless such treatment is objectively justified.’96 When reflecting upon the transparency principle in Embassy Limousine,97 the General Court held that authorities ‘must’98 provide bidders with prompt and precise information on the conduct of the procedure. By comparison, the language concerning strategic considerations has always been facultative, meaning the contracting authority ‘may’99 consider social and environmental issues, and the procurement law does not ‘preclude the contracting authority from applying’ strategic considerations as long as procurement principles are respected.100 The content of the principles is developed as an ongoing process through case law. It could be argued that this is also the case when it comes to sustainability considerations in procurement. Starting with Concordia Bus,101 where the notion of a ‘link to the subject matter of a contract’ was introduced, through to Dutch Coffee,102 where that notion was expanded by underlining that there is no requirement for award criteria to relate to a core characteristic of a product or something that alters its material substance. In this way, specific processes of production, and the provision of trade or a specific process for another stage of their life-cycle, are considered to be linked to the subject matter of a contract, even where such factors do not make up the material substance of a product.103 93 S Troels Poulsen, PS Jakobsen and SE Kalsmose-Hjemborg, EU Public Procurement Law – The Public Sector Directive, The Utilities Directive, 2nd edn (DJØF Publishing 2012) 51. 94 See Andrecka (n 89) 77. 95 See eg Gebroeders Beentjes (n 48); Commission v France (n 5); Concordia Bus (n 5); EVN AG and Wienstrom (n 5); Commission v Netherlands (Dutch Coffee) (n 5); RegioPost (n 5). 96 Joined Cases C-21/03 and C-34/03 Fabricom SA v État belge, EU:C:2005:127, [2005] ECR I-01559, para 27 (emphasis added). 97 Case T-203/96 Embassy Limousine and Services v Parliament [1998] ECR II-04239. 98 See also Joined Cases T-191/96 and T-106/97 Cas Succhi di Frutta v Commission, EU:T:1999:256, [1999] ECR II-3181, para 110. 99 Concordia Bus (n 5) para 64. 100 EVN and Wienstrom (n 5) para 34. See also Gebroeders Beentjes BV v State of the N ­ etherlands (n  48); Case C-225/98 Commission v France (n 5); Evropaïki Dynamiki (n 48); Commission v Netherlands (Dutch Coffee) (n 5); RegioPost (n 5). 101 Concordia Bus (n 5). 102 Commission v Netherlands (Dutch Coffee) (n 5). 103 Directive 2014/24/EU, Art 67.

134  Marta Andhov The principles are often overriding considerations, applicable to many sets of rules, and thus are not necessarily specific to the application of the EU Public Procurement Directives.104 Compliance with sustainability laws in Article 18(2) could be linked to the over-arching EU consideration about achieving a sustainable development, which is regulated in the EU Treaties and is the basis of the Europe 2020 strategy.105 Nevertheless, as Prechal notes, ‘[d]irectives adopted for the purposes of harmonization in the internal market differ indeed from directives aiming at social protection or at environmental protection’.106 The universal application requirement of principles – their status as an interpretative tool for all provisions of the EU Public Procurement Directives and not only for those to which the provision refers directly – creates doubt in regard to Article 18(2) of Directive 2014/24/EU. As already noted, Article 18(2) is addressed to Member States, inter alia, allowing Member States not to implement the provision, which Denmark and the UK indeed did not.107 Therefore, there is no legal consequence for derogating from Article 18(2), as long as the effect of its substance is implemented in the other provisions that refer to it (facultative exclusions of bidders for non-compliance;108 the general right not to award a contract in case of non-compliance;109 the obligation to reject an abnormally low tender in case of non-compliance;110 the requirement on subcontractors’ compliance).111 Even though Article 18(2) is later substantiated in specific articles in Directive 2014/24/EU, a large majority of these articles are of a facultative nature, giving contracting authorities a choice about whether to apply them.

B.  Abnormally Low Tender Arguably, Article 69 is the most clearly stated mandatory provision in regard to the environmental and social aspects of the strategic public procurement in Directive 2014/24/EU. It stipulates: Contracting authorities shall require economic operators to explain the price or costs proposed in the tender where tenders appear to be abnormally low in relation to the works, supplies or services.

104 Poulsen, Jakobsen and Kalsmose-Hjemborg (n 93) 51. 105 Consolidated Version of the Treaty on European Union (TEU) [2016] OJ C202/13; COM(2010) 2020, Art 3(3). 106 Prechal (n 67) 40. 107 On issues of sustainability and CSR in Danish public procurement, see Andrecka (n 55). 108 Directive 2014/24/EU, Art 57(4)(a). 109 Ibid Art 56(1). 110 Ibid art 69(3). On issues of abnormally low tender, see Case C-599/10 SAG ELV Slovensko and Others, EU:C:2012:191; Joined Cases C-285/99 and C-286/99 Lombardini and Mantovani, EU:C:2001:640, [2001] ERC I-09233; Joined Cases C-147/06 and C-148/06 SECAP and Santorso, EU:C:2008:277, [2008] ERC I-03565. 111 Directive 2014/24/EU, Art 71(1).

Contracting Authorities and Strategic Goals  135 The required explanation may relate to compliance with the obligations laid down in Article 18(2) particularly, or to compliance with the obligations laid down in Article 71 (subcontracting) of Directive 2014/24/EU, which also refers to Article 18(2). Contracting authorities are obliged to reject a tender that is found to be abnormally low because it violates some obligation under the sustainability laws enumerated in Article 18(2).112 This may occur, for example, if employment protection provisions or the working conditions at the place where the service is to be provided have been violated, or if there has been non-payment of social security contributions.113 However, the contracting authority must first request an explanation from the tenderer suspected of such violation before rejecting the tender as abnormally low.114 Under the Public Sector Directive, it was already permissible to reject a tender that was abnormally low due to non-compliance with employment protection provisions and working conditions at the place where services, supplies or works were performed.115 Therefore, the provision on rejection of an abnormally low tender changed from being a facultative one to a mandatory one, and the scope of the pro-strategic legal basis for rejection was extended, since Directive 2014/24/EU explicitly broadens the scope of legal acts that must be complied with. Article 69 constitutes a major improvement in the creation of a sustainable internal market for public contracts, as it clearly limits contracting authorities’ discretion to consider or ignore the strategic goals of public procurement. The mandatory rejection of abnormally low tenders on the basis of non-compliance with Article 18(2) constitutes a very positive step in the fight against social and environmental dumping.

C. Subcontracting The last mandatory provision concerns subcontractors in a contract for services, supplies or works, requiring them to respect the social, environmental and labour law dimensions of Article 18(2).116 Article 17(1) is rather vague about the nature of this obligation, offering a general statement that the compliance of subcontractors with Article 18(2) is to be secured by ‘appropriate action by the competent national authorities acting within the scope of their responsibility and remit’.

112 Ibid Art 69(4). 113 van den Abeele (n 79) 19. 114 See SAG ELV Slovensko and Others (n 110). 115 See Directive 2004/18/EC, Art 55(1)(d). See also G Skovgaard Ølykke ‘The provision on abnormally low tenders: a safeguard for fair competition?’ in G Skovgaard Ølykke and A Sanchez-Graells (eds), Reformation or Deformation? Who played the negotiating game better in the 2014 Reform of the EU Public Procurement Rules (Edward Elgar 2016) 146. 116 See Directive 2014/24/EU, Art 71.

136  Marta Andhov Directive 2014/24/EU’s recitals indicate that with regard to the provision on subcontracting, the relevant national authorities may include labour inspection or environmental protection agencies.117 Therefore, as with Article 18(2), the effect of the provision will largely depend on its implementation in national regulation. The obligatory character of the provision is reinforced further when the provision stipulates: Where the national law of a Member State provides for a mechanism of joint liability between subcontractors and the main contractor, the Member State concerned shall ensure that the relevant rules are applied in compliance with the conditions set out in Article 18(2).118

Contracting authorities may verify (or may be required by the Member State to verify) whether there are grounds for exclusion of subcontractors pursuant to Article 57. This provision should be considered a positive step toward a more effective fight against exploitive subcontracting chains.

VI. Conclusions The relationship between contracting authorities and the strategic goals of EU public procurement is characterised by wide discretion. On the one hand, the contracting authorities’ discretion concerns their pursuit of strategic goals, as long as these objectives do not breach internal market principles and laws. On the other hand, the contracting authorities are still free to ignore the strategic goals of public procurement that are so extensively promoted by the Commission. The revision of EU public procurement law resulted in both expanded and limited discretion in the area of strategic public procurement. The expansion of discretion is evidenced in the inclusion of more pro-strategic options in the provisions of Directive 2014/24/EU. These include an expansion of the requirement on a ‘link to the subject matter’; provisions on life-cycle costing; facultative exclusions of bidders for non-compliance with Article 18(2); and the general right not to award a contract due to non-compliance with Article 18(2). These changes widen the scope of contracting authorities’ discretion in pursuing strategic objectives, and to a certain extent lower the regulatory risks attached to these issues under the 2004 Directives. In contrast, there are also several limitations to the contracting authorities’ discretion in regard to taking strategic goals under the EU public procurement regime into consideration or ignoring them. The limitations are established in the mandatory pro-strategic provisions in Directive 2014/24/EU. Article 18(2) is particularly relevant, because it requires compliance with what this chapter has



117 Ibid 118 Ibid

recital 105. Art 71(6)(a).

Contracting Authorities and Strategic Goals  137 termed ‘sustainability laws’. Though included in the provision on ‘procurement principles’, Article 18(2) is not, in fact, a principle. The ambiguity of the provision is disappointing, and suggests that, failing a proactive approach on the part of Member States, Article 18(2) may become just a policy statement rather than a valuable legal provision. Other provisions are nudging the Member States to be more strategically accountable, including provisions that mandate the rejection of abnormally low tenders and others that require observation of compliance with Article 18(2) by subcontractors. These provisions, while welcomed and assessed positively by this chapter based on a systematic interpretation of the Directives, constitute an unsatisfactory approach to sustainability in the EU more broadly, and also to the use of public procurement as a strategic tool. Context matters, since the great majority of provisions pertaining to strategic procurement have a facultative character or are included in the recitals of the Directives. The combination of ambiguous provisions and vast discretion reduces the force of the strategic objectives.

138

7 Public Procurement and European Standards: Fair Competition or Limits to Discretion? JÖRGEN HETTNE

I. Introduction In this chapter I shall first describe the role and function of European standards in enhancing cross-border trade in the internal market of the European Union (EU). Standards have in this context served to supplement EU legislation in a unique manner through the so-called ‘New Approach’, by which technical standards have become a key instrument for harmonising national technical requirements so as to remove trade barriers. The position of E ­ uropean standards in the internal market has also contributed to the development of a common framework for public procurement in the EU, and has made it necessary to regulate, specifically, contracting authorities’ obligation to comply with ­European technical standards in the EU Public Procurement Directives. Second, I shall discuss, on the one hand, the relationship between EU harmonisation and standardisation, and on the other hand the discretion of contracting authorities in public procurement. I shall show that the development of technical standards clearly limits the discretion afforded to contracting authorities, and at the same time ensures fair competition between tenderers, which is perfectly in line with the objectives of the internal market. Third, I shall problematise this relationship in light of the criticism that the development of standards is undemocratic as the process mainly favours larger companies that have contributed to the development of standards. It is certainly true that standards, which are not binding, are not the output of a democratic law-making process, but does this mean that the use of standards unfairly limits the discretion of contracting authorities?

140  Jörgen Hettne

II.  The Position of Technical Standards in EU Internal Market Law Standardisation is a quasi-legal form of self-regulation and, depending on the circumstances and the legal context, it can be a form of co-regulation, or a kind of (hybrid) public-private partnership.1 Standardisation serves as a complement to traditional command-and-control regulation. Therefore, non-binding standards can act as gap-fillers for ‘harder’ forms of law. This view of standards is based on an acknowledgement of the fact that in our increasingly complex and diverse world with an inconceivable pace of technological progress, the traditional state does not have the resources or the savvy to regulate efficiently in all areas.2 Modern states concede part of their power to other actors that can act more effectively and swiftly, mainly because of their expertise, thereby allowing non-state voices to be heard and accordingly reshuffling the state’s regulatory behaviour and supervisory role (for instance, by focusing on ex-post control of a certain activity).3 In the early development of the EU, it was observed that the difference between national standards in the various Member States could entail trade barriers in a similar way to different technical regulations. In the cases before the ­European Court of Justice (ECJ), the question was whether standards, despite being voluntary, were caught by the prohibition on measures having effects equivalent to quantitative restrictions (presently Article 34 of the Treaty on the Functioning of the European Union (TFEU)). A good example is Commission v Ireland,4 a case that concerned public procurement but which fell outside the scope of the procurement directive applicable at the time. In this case the Court found that by allowing the contract specification for tender to include a clause stipulating that certain pipes must be certified as complying with an Irish standard, Ireland failed to fulfil its obligations under what is now Article 34. However, the Court pointed out that by incorporating into the notice in question the phrase ‘or equivalent’ after the reference to the Irish standard, the Irish authorities could have verified compliance with the technical conditions without restricting the contract, from the outset, to tenderers proposing to utilise Irish materials. When the Commission realised that national standards had the same effect as national technical regulations, it also saw the prospect of developing European standards as a great opportunity that would have a positive effect on trade similar to that of the harmonisation of divergent national regulations. This is clearly stated in a Green Paper from 1990, where the Commission points out: Only European standards will bring about a common economic area. National standards on the contrary compartmentalise the common market. They cannot be 1 See P Delimatsis, ‘Introduction: continuity and change in international standardisation’ in P Delimatsis (ed), The Law, Economics and Politics of International Standardisation (CUP 2015) 5. 2 Ibid. 3 Ibid. 4 Case 45/87, Commission v Ireland, EU:C:1988:435.

Public Procurement and European Standards  141 the subject of mutual recognition, since, not laid down by the authorities, they are not obligatory.5

Moreover, with the so-called New Approach, the EU started to benefit more extensively from the work carried out by the European standards organisations. According to this method, EU legislation is concerned with the most important safety issues but not all the technical details. It is for the European standards organisations – CEN (Comité Européen de Normalisation), CENELEC (Comité Européen de Normalisation Electro Technique) and ETSI (European Telecommunication Standard Institute) – to draw up European standards that set these technical details in accordance with specific mandates from the Commission. Application of these standards is voluntary for manufacturers, but their existence creates a presumption that the requirements in EU legislation are met. Therefore European standards, often based on international standards, were connected to the essential safety requirements in EU law, which was very successful. Directives could now be drafted more easily since they were less detailed. Safety objectives were stipulated, but there was flexibility on the standards through which this compliance could be achieved. More EU directives could be drafted, and in this way the gap between EU harmonisation and the volume of national technical regulations could be reduced.6 Directives under the New Approach contain, in addition to basic safety standards, rules on the assessment of conformity with the requirements. Proof that a product meets the essential requirements in a certain directive is that it is labelled with the symbol ‘CE’. Standards developed by the European standardisation bodies on a mandate from the Commission thus became known as ‘harmonised standards’. Regulation (EU) No 1025/2012 on standardisation7 defines four different types of standard. In Article 2 of the Regulation, the following definitions are given: (1)  ‘standard’ means a technical specification, adopted by a recognised standardisation body, for repeated or continuous application, with which compliance is not compulsory, and which is one of the following: (a) ‘international standard’ means a standard adopted by an international standardisation body;

5 See Commission Green Paper, ‘Action for faster technological integration in Europe’, COM(1990) 456 final, at 1, 3. See also H Schepel, The Constitution of Private Governance: Product Standards in the Regulation of Integrating Markets (Hart Publishing 2005) 51. 6 P Craig, ‘The Evolution of the Single Market’ in C Barnard and J Scott (eds), The Law of the Single European Market: Unpacking the Premises (Hart Publishing 2002) 1, 23–25. On the New Approach strategy, see J Pelkmans, ‘The New Approach to Technical Harmonization and Standardisation’ (1987) 25 Journal of Common Market Studies 249. 7 Regulation (EU) No 1025/2012 of the European Parliament and of the Council of 25 October 2012 on European standardisation, amending Council Directives 89/686/EEC and 93/15/EEC and Directives 94/9/EC, 94/25/EC, 95/16/EC, 97/23/EC, 98/34/EC, 2004/22/EC, 2007/23/EC, 2009/23/EC and 2009/105/EC of the European Parliament and of the Council and repealing Council Decision 87/95/EEC and Decision No 1673/2006/EC of the European Parliament and of the Council [2012] OJ L316/12.

142  Jörgen Hettne (b) ‘European standard’ means a standard adopted by a European standardisation organisation; (c) ‘harmonised standard’ means a European standard adopted on the basis of a request made by the Commission for the application of Union harmonisation legislation; (d) ‘national standard’ means a standard adopted by a national standardisation body …8

In the context of this contribution the focus will mainly be on harmonised standards. These are fully integrated into the harmonisation legislation of the Union and constitute, in reality, the instruments for driving the development of product standards in the internal market.9 Thus, harmonised standards are in practice part of EU law.10 A good example of the practical impact of harmonised standards is the case Nordiska Dental.11 There, the question was whether Article 4(1) of Directive 93/42 on medical devices (‘Medical Devices Directive’)12 should be interpreted as precluding Swedish legislation under which the commercial export of dental amalgams containing mercury and bearing the CE marking, provided for in Article 17 of that Directive, was prohibited on grounds of environmental and health protection. The Court held that the Directive aims to harmonise provisions for safety and  the protection of health in medical devices, in order to guarantee the free movement of such devices within the internal market. In view of that purpose, Article 4(1) of the Medical Devices Directive, which requires Member States not to create any obstacle to the placing on the market or the putting into service within their territory of medical devices bearing the ‘CE’ marking provided for in ­Article 17 thereof, must be interpreted as precluding the adoption by Member States of measures that might obstruct the free movement of medical devices bearing that marking, by prohibiting export, for instance. In that regard, the Court noted that, in accordance with Article 17(1) of the Medical Devices Directive, devices bearing the ‘CE’ marking are considered to meet the essential requirements referred to in Article 3 of that Directive. The Court then stressed that the presumption of compliance can be rebutted in certain circumstances. In particular, if a Member State has found risks linked to medical devices that have

8 See also Annexe VII: Definition of certain technical specifications, point 2, to Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC [2014] OJ L 94/65. 9 See J Hettne, ‘Standards, Barriers to Trade and EU Internal Market Rules: Need for a Renewed Approach?’ (2017) 4 Legal Issues of Economic Integration 1, 6. 10 See Case C-613/14, James Elliott Construction, EU:C:2016:821. However, this is not so if the standard is not accepted as a harmonised standard: see Case C-185/08, Latchways and Eurosafe Solutions, EU:C:2010:619, para 36. 11 Case C-288/08, Nordiska Dental, EU:C:2009:718. 12 Council Directive 93/42/EEC of 14 June 1993 concerning medical devices [1993] OJ L169/1.

Public Procurement and European Standards  143 been certified as compliant with the Directive, it has a duty to take all appropriate interim measures to withdraw those medical devices from the market, or to prohibit or restrict their being placed on the market or put into service. In such circumstances, the Member State concerned is required immediately to notify the Commission of the measures taken, indicating in particular the reasons for those measures. The Commission must in turn examine whether the interim measures are justified and, if so, immediately inform the Member States involved accordingly. The Swedish legislation was found in Nordiska Dental not to be in compliance with the Medical Devices Directive. The Court explained that a measure prohibiting the export of dental amalgams containing mercury could not be deemed consistent with the Directive merely by virtue of the fact that, although one of the aims of that legislation is health protection, it is also based on considerations relating to protection of the environment. From a business perspective, harmonised European standards, through the ‘CE’ marking, provide a gateway to the internal market, even if these standards are not legally binding.13 It is certainly true that businesses remain free to comply with the mandatory basic legal requirements via their own production standards, provided they meet the harmonised European standards. However, reference to the harmonised standards is a cheaper and safer way to meet the requirements in the European directives.14

III.  The Position of Technical Standards in EU Public Procurement Law A.  The Construction of EU Public Procurement Law In the 1992 Single Market Programme, public procurement received particular emphasis.15 The idea was to foster competition for public contracts throughout the EU. The guiding principles were transparency, non-discrimination and objectivity. These principles were supposed to be respected when the public sector awarded contracts. The procurement rules were considered necessary and integral components of the rules concerning the free movement of goods and services, the right of establishment and the prohibition of discrimination on grounds of nationality.

13 R Van Gestel and HW Micklitz, ‘European integration through standardization: How judicial review is breaking down the club house of private standardization bodies’ (2013) 50 Common Market Law Review 145, 157. 14 Ibid. 15 ‘Completing the Internal Market: White Paper from the Commission to the European Council’, COM(85) 310.

144  Jörgen Hettne The White Paper thus stated: 81. Public procurement covers a sizeable part of GDP and is still marked by the tendency of the authorities concerned to keep their purchases and contracts within their own country. This continued partitioning of individual national markets is one of the most evident barriers to the achievement of a real internal market. 82.  The basic rule, contained in Article 30 et seq of the EEC Treaty [now Article 34 TFEU], that goods should move freely in the common market, without being subject to quantitative restrictions between Member States and of all measures having equivalent effect, fully applies to the supply of goods to public purchasing bodies, as do the basic provisions of Article 59 et seq [now Article 56 TFEU] in order to ensure the freedom to provide services.

From an historical perspective, it is thus obvious that the Treaty Articles and fundamental principles are intended to apply fully to decisions made by contracting authorities. Therefore, the preamble to Directive 2014/24/EU on public ­procurement16 commences with the following statement: The award of public contracts by or on behalf of Member States’ authorities has to comply with the principles of the Treaty on the Functioning of the European Union (TFEU), and in particular the free movement of goods, freedom of establishment and the freedom to provide services, as well as the principles deriving therefrom, such as equal treatment, non-discrimination, mutual recognition, proportionality and transparency. However, for public contracts above a certain value, provisions should be drawn up coordinating national procurement procedures so as to ensure that those principles are given practical effect and public procurement is opened up to competition.

This historical development explains why some procurement principles manifest themselves outside the scope of the specific Directives. The Court of Justice of the European Union (CJEU) has held that also for contracts falling outside the scope of the Directives, contracting authorities are bound by the fundamental rules of the Treaty, and in particular the principle of non-discrimination on the grounds of nationality.17 This also explains why the Treaty articles can be applied in parallel with the Procurement Directives. The application of the Directives does not exclude the application of the Treaty Articles. In Medisanus, for instance, the Court held: 71.  With regard to the Member States’ powers and responsibilities under A ­ rticle 168(7) TFEU in respect, inter alia, of blood donations, in the field of health policy, of the management of health services and medical care and of the allocation of the resources assigned to them, it must be noted that in exercising those powers, especially in the context of public procurement, Member States must comply with EU law, in particular the provisions on the free movement of goods (see, to that effect, judgment of

16 Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC [2014] OJ L94/65. 17 See, eg, Case C-324/98 Telaustria and Telefonadress, EU:C:2000:669, para 60; Case C-264/03 Commission v France, EU:C:2005:620, para 32; and Case C-6/05 Medipac-Kazantzidis, EU:C:2007:337, para 33.

Public Procurement and European Standards  145 11 September 2008, Commission v Germany, C‑141/07, EU:C:2008:492, paragraphs 22 to 25 and the case-law cited). 72.  It follows that, with regard to both the discriminatory obstacles to the free movement of goods and the grounds for their justification, examination of the national origin requirement at issue in the main proceedings, according to which medicinal products derived from plasma must be obtained from plasma collected in Slovenia, cannot be limited to an assessment under Directive 2004/18; it must also take the provisions of primary law into account.18

In Medisanus the Court concluded that Article 2 and Article 23(2) and (8) of Directive 2004/18 on public procurement (applicable at the time),19 and Article 34 TFEU read in conjunction with Article 36 TFEU, must be interpreted as precluding a clause in tender specifications for a public contract that, in accordance with the law of the contracting authority’s state, required medicinal products derived from plasma (the object of the public procurement at issue) to be obtained from plasma collected in that Member State. This confirms that primary law and the fundamental rules of the internal market can never be disregarded in the context of public procurement. There is no separate area of law arising from the Public Procurement Directives. Public procurement is an integrated part of the bigger (internal market) picture.20 Therefore, the only limitation on the application of general EU law in public procurement seems to be that contracts with a certain type of cross-border interest are excluded.21 The possibility of such an interest may be ruled out in a case where, for example, the economic interest at stake in the contract is very modest.22 However, in certain instances one must also take into account the fact that borders cut through conurbations situated in the territory of different Member States, and that in those circumstances, even low-value contracts may be of certain crossborder interest.23

B.  Harmonisation of Technical Regulations and Public Procurement If fundamental Treaty rules must be respected in public procurement procedures, the same should reasonably be true regarding such EU legislation as is 18 Case C-296/15, Medisanus, EU:C:2017:431. 19 Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts [2004] OJ L 134/114. 20 See also Case C-234/03, Contse and others, EU:C:2005:644 and Case C-376/08, Serrantoni and Consorzio stabile edili, EU:C:2009:808. Cf J Hettne, ‘Sustainable Public Procurement and the Single Market – is there a conflict of interest?’ (2013) 1 European Procurement & Public Private Partnership Law 31. 21 See Case C-507/03, Commission v Ireland, EU:C:2007:676, para 29. 22 See Case C-231/03, Coname, EU:C:2005:487, para 20. 23 See Joined Cases C-147/06 and C-148/06, Secap, EU:C:2008:277, para 31. See, however, Case C-318/15, Tecnoedi Costruzioni, EU:C:2016:747.

146  Jörgen Hettne the concrete expression of those fundamental rules, especially when it comes to harmonised conditions regarding which exceptions are permissible to the four freedoms. It follows that harmonised rules adopted in order to achieve the internal market objectives (in areas other than procurement) have consequences for contracting authorities’ discretion in public procurement. If there are harmonisation measures relating to a product or service the contracting authority is interested in purchasing, the conditions imposed during the tendering procedure must comply with these measures.24 However, the level of harmonisation, that is the degree of legal unity pursued, varies widely within the harmonised area. It is therefore difficult to determine how much space is left for national regulations, that is the remaining national regulatory competence, which also affects the space in which contracting authorities can manoeuvre without first carefully analysing the content of the relevant legal act. However, we can discern a few principles that indicate the scope of national rules. In this context, it is possible to speak of different techniques or methods of harmonisation. The most important distinction is between full or exhaustive harmonisation and minimum harmonisation. As has been explained, harmonised standards are connected to the New Approach, which means they typically contribute to exhaustive harmonisation.25 As regards exhaustive harmonisation, the Court has held that Member States can no longer justify national measures that impose restrictions on the free movement of goods when an area has been fully harmonised, since in that event the Member States have transferred legislative power to the Union and no legal space remains for national regulatory measures to occupy.26 In such a case, it is no longer possible to have recourse to Treaty exceptions, or to mandatory requirements in compliance with the case law.27 If the Union decides on minimum harmonisation, however, the situation is different. There are several legal grounds for minimum harmonisation in the TFEU. Such harmonisation is provided for in Article 193 with regard to the protection of the environment, in Article 153(2.b) in respect of employment and working conditions, and in Article 169(4) for the purposes of consumer protection. Minimum harmonisation yields less regulatory intrusion by the Union, which

24 See, eg, Case C-6/05, Medipac-Kazantzidis, EU:C:2007:337; Case C-489/06 Commission v Greece, EU:C:2009:165, discussed in section II.C; and Case C-346/06 Rüffert, EU:C:2008:189. See also Hettne (n 20). 25 As explained by Bogojević in ch 8 of this volume, however, individual exceptions to fully harmonised measures are possible in accordance with the procedure laid down in Art 114 (4) and (5) TFEU. 26 See Case 5/77, Tedeschi, EU:C:1977:144; Case 251/78, Denkavit Futtermittel, EU:C:1979:252; Case 28/84, Commission v Germany, EU:C:1985:386; and Case C-246/91, Commission v France, EU:C:1993:174. 27 Precisely the same approach applies to Regulations, see Case C-324/99, DaimlerChrysler, EU:C:2001:682, para 42.

Public Procurement and European Standards  147 gives Member States more room for national regulations.28 However, when a Member State imposes requirements beyond the minimum level, it must respect the Treaty provisions as well as the principles of equal treatment, mutual recognition and proportionality, amongst others. Another way for Member States to deviate from the harmonised rules is by using a so-called ‘safeguard clause’, normally inserted into the New Approach directives. This was the case in Nordiska Dental, discussed in section I. Such clauses have also been invoked in other public procurement cases concerning the Medical Devices Directive.

C.  Harmonised Standards in Public Procurement In Medipac,29 a public hospital issued an invitation to tender for the supply of surgical sutures bearing the ‘CE’ marking provided for in the Medical Devices Directive.30 However, it proceeded to dismiss as technically unsuitable a particular tender for sutures bearing that marking. The question was therefore if the contracting authority, in this case a public hospital, was allowed to reject medical products safe enough to bear the ‘CE’ mark. Advocate General Sharpston addressed this question from a principle point of view.31 She pointed out that even a legitimate desire from a contracting authority to protect public health must find expression in a way that does not cut right across the principles of free movement, equality of tenders, transparency and proportionality arising from the Treaty. The Advocate General distinguished between two kinds of situation. In the first type, no New Approach Directive providing for the ‘CE’ marking of (or other directive establishing harmonised standards for) the supplies in question is applicable. In the second situation, there is a New Approach Directive (or similar) in place. In the former case, a certain discretion is conferred on the contracting authority if it can show a legitimate public health concern, place all tenders on an equal footing and respect the principles of transparency and proportionality. The latter type of situation, however, is analysed differently. By rejecting a tender for CE-certified goods on grounds of public health, the contracting authority is questioning the validity of the CE mark. It thus contests either the assessment of conformity made by the competent certification authority granting the ‘CE’ marking, or, where harmonised European standards have been used by the supplier to show compliance with the essential requirements, the validity of the harmonised



28 Cf

Case 382/87, Buet v Ministère Public, EU:C:1989:198. C-6/05, Medipac-Kazantzidis, EU:C:2007:337. 30 Council Directive 93/42/EEC of 14 June 1993 concerning medical devices [1993] OJ L 169/1. 31 Opinion in Case C-6/05, Medipac-Kazantzidis, EU:C:2006:724. 29 Case

148  Jörgen Hettne standard itself, or both. The Advocate General underlined the specific procedures laid down in New Approach directives, designed to deal with such situations. Those procedures balance the protection of public health and safety against the requirements of free movement of goods. They are mandatory procedures, which Member States are required to follow. The CJEU followed the same line of reasoning. First, it argued on the basis of settled case law that the obligations arising from EU directives are binding, inter alia, on bodies or entities that are subject to the authority or control of a public authority or the state. Consequently, the obligation to presume that medical devices that meet the harmonised standards and bear the ‘CE’ marking comply with the requirements of the Medical Devices Directive extends to contracting authorities in their capacity as bodies governed by public law. According to the Court, the hospital was required (as an entity governed by public law) to assist in the correct application of the Medical Devices Directive and to inform the competent national authority of its doubts about the technical reliability of the surgical sutures proposed by Medipac, so that the competent national authority could conduct its own checks and, if necessary, implement additional safeguard measures. Outside that safeguard procedure, however, and on grounds of technical inadequacy, a contracting authority is precluded from rejecting medical devices that are certified as complying with the essential requirements provided for by that Directive. The ruling in Medipac was confirmed in Commission v Greece.32 This case concerned the same practice by Greek hospitals, of rejecting tenders for the supply of sutures on the grounds that they did not meet health needs, despite the fact that the products in question bore the ‘CE’ mark indicating that they complied with the requirements of the Medical Devices Directive. Citing its decision in Medipac, the Court clarified that an authority cannot reject a medical device that bears the ‘CE’ mark. As will be further explained in section VII, I regard it as logical from an internal market perspective that a contracting authority is obliged to take account of and respect harmonised Union rules if they are relevant for the subject matter of the contract. This includes harmonised standards that are part of EU law. Having said that, it is of course crucial that the safeguard mechanism inserted into the New Approach directives, as well as the more general certification procedure, works in practice. In this connection, the CJEU has more recently held that a body involved in the certification procedure under a New Approach Directive (notified body) cannot be totally immune from product liability. In the Schmitt case,33 the Court held that the Medical Devices Directive34 should be interpreted 32 Commission v Greece (n 24). 33 Case C-219/15, Schmitt, EU:C:2017:128. 34 Council Directive 93/42/EEC of 14 June 1993 concerning medical devices [1993] OJ L169/1, as amended by Regulation (EC) No 1882/2003 of the European Parliament and of the Council of 29 September 2003 [2003] OJ L284/1.

Public Procurement and European Standards  149 as saying that in the procedure pertaining to the CE declaration of conformity, the purpose of the notified body’s involvement is to protect the end users of medical devices. Moreover, notified bodies are under a general obligation to act with all due ­diligence when engaged in a procedure relating to the CE declaration of conformity. However, as regards the conditions under which culpable failure by such a body to fulfil its obligations under the Directive may give rise to liability on its part vis-à-vis those end users, the Court referred to national law, subject to the principles of equivalence and effectiveness.

D.  Obligations to Respect Technical Standards in EU Legislation The obligation for contracting authorities to respect technical standards has also been clearly expressed by the Union legislature. Recital 30 of the preamble to Regulation 1025/2012 on standardisation, emphasises that public authorities shall make best use of the full range of relevant technical specifications when procuring hardware, software and information technology services, for example by selecting technical specifications that can be implemented by all interested suppliers, allowing for more competition and reducing the risk of a lock-in. Reference is thereafter made to the Public Procurement Directive, which states that technical specifications in public procurement should be formulated by reference either to national standards transposing European standards, European technical approvals, common technical specifications, international standards or other technical reference systems established by the European standardisation organisations; or – when these do not exist – national standards, national technical approvals or national technical specifications relating to the design, calculation and execution of the works and use of the products, or equivalent. If we take a closer look at the text of Directive 2014/24/EU, we find the following very detailed instruction to the contracting authorities in Article 42: 2. Technical specifications shall afford equal access of economic operators to the procurement procedure and shall not have the effect of creating unjustified obstacles to the opening up of public procurement to competition. 3.  Without prejudice to mandatory national technical rules, to the extent that they are compatible with Union law, the technical specifications shall be formulated in one of the following ways: (a) in terms of performance or functional requirements, including environmental characteristics, provided that the parameters are sufficiently precise to allow tenderers to determine the subject-matter of the contract and to allow contracting authorities to award the contract; (b) by reference to technical specifications and, in order of preference, to national standards transposing European standards, European Technical Assessments, common technical specifications, international standards, other technical

150  Jörgen Hettne r­ eference systems established by the European standardisation bodies or – when any of those do not exist – national standards, national technical approvals or national technical specifications relating to the design, calculation and execution of the works and use of the supplies; each reference shall be accompanied by the words ‘or equivalent’; (c) in terms of performance or functional requirements as referred to in point (a), with reference to the technical specifications referred to in point (b) as a means of presuming conformity with such performance or functional requirements; (d) by reference to the technical specifications referred to in point (b) for certain characteristics, and by reference to the performance or functional requirements referred to in point (a) for other characteristics.

Thus, when formulating technical specifications, the contracting authorities must take full account of the existence of European standards. In case reference to a national standard or similar is necessary due to the absence of European standards, each must be accompanied by the words ‘or equivalent’, as defined by the ECJ already in 1988 as a requirement in public procurement.35

IV.  Is the Prominent Position of Standards in Public Procurement Problematic? European technical standards, especially harmonised standards, thus have a prominent position in EU public procurement law, facilitating equal treatment of tenderers and contributing to the aim of fair competition. The CJEU has consistently emphasised that Member States’ obligation to respect the presumption of conformity of products produced in accordance with harmonised standards can be rebutted only through the initiation of the safeguard procedure by the competent national authority.36 In light of this, the question has been raised as to whether blind trust (and free movement) should take precedence whenever a ‘CE’ marking has been assigned.37 This has caused concern in relation to public procurement procedures as described in section III.C. Indeed, the reliance on standards in public procurement obviously requires a high level of trust in the standard-setting process. In Medipac and Commission v Greece, the Court made it abundantly clear that disregarding products that conform with harmonised standards is highly cumbersome.

35 Commission v Ireland (n 4), see section II. 36 Besides Medipac and Commission v Greece (see section II.C), see Case 815/79, Cremonia and Vrankovich, EU:C:1980:273, para 10 and Case C-112/97, Commission v Italy, EU:C:1999:168, para 39. See also HCH Hofmann, ‘European regulatory union? The role of agencies and standards’ in P Koutrakos, and J Snell (eds), Research Handbook on the Law of the EU’s Internal Market (Edward Elgar Publishing 2017) 475. 37 C Janssens, The Principle of Mutual Recognition in EU Law (OUP 2013) 82.

Public Procurement and European Standards  151 Against this backdrop, the use of standards is subject to some scepticism. Even if standards are not binding, standard-setting resembles law-making, in that standards, like laws, are the outcome of discussion, bargaining, deliberation and compromise among non-state actors.38 However, standards are not considered the output of a comparable democratic law-making process, and they lack the same degree of transparency. There was fear already in the early days that business interests would be the dominant force in the European standardisation bodies, and that social policy (most relevant at the time) would very much take a back seat. These anxieties were addressed in part in 1992 by the establishing of ANEC, the European Association for the Coordination of Consumer Representation in Standardisation, a body that is independent of the European standardisation bodies. There nonetheless remained problems concerning ANEC’s access to the CEN technical board, and also to the Commission’s own standing committee.39 Van Gestel and Micklitz have pointed out that the establishment of ANEC was in no way integrated into a binding European legal frame.40 They also observe that a more recent legal instrument, Regulation 1025/2012 on European standardisation, seems to provide only rather soft requirements with respect to stakeholder involvement, such as a call upon European and national standardisation bodies to ‘encourage’ and ‘facilitate’ participation and ensure that stakeholders have ‘the opportunity’ to submit comments.41 Craig summarises these problems in relation to international standards in general, stating that it is evident that those proposing a standard, together with those stakeholders best informed and organised, have a considerable influence on the draft that emerges from the technical committee and thus on the resulting standard. Moreover, the preceding concerns about the value-laden nature of standardisation generate concern, in turn, about who has a ‘voice’ in the standardsetting process, and the extent to which consumer interests and the interests of the developing world are adequately represented.42 Calls for a reform of the standard-setting process have consequently been sounded in relation to international standards in general. According to Panagiotis Delimatsis, information about sustainability should feed into the preparation of a given standard. Environmental sustainability in particular should be taken into account at every stage of standards development, in view of the significance of global warming.43

38 Cf B Kingsbury, N Krisch and RB Stewart, ‘The Emergence of Global Administrative Law’ (2005) 68 Law and Contemporary Problems 15. 39 Craig (n 6) 26. 40 Gestel and Micklitz (n 13) 179. 41 Ibid. 42 P Craig, UK, EU and Global Administrative Law: Foundations and Challenges (OUP 2015) 788. 43 See P Delimatsis, ‘“Relevant international standards” and “recognised standardisation bodies” under the TBT Agreement’ in Delimatsis (ed) (n 1) 104, 134–35.

152  Jörgen Hettne

V.  A New Role for Standards in the Public Procurement Directive? The latest Public Procurement Directives are thought to enhance strategic and sustainable procurement.44 This suggests that procurement is about more than just saving money. Other important interests, such as social and environmental considerations, can be promoted through public procurement.45 According to the Public Procurement Directive, procurers should make better use of public procurement in support of such societal goals. Thus, the Member States may use their purchasing power to procure goods and services that foster innovation, respect the environment and combat climate change, while also improving employment, public health and social conditions. An issue of importance is therefore whether Directive 2014/24/EU enhances the discretion afforded to contracting authorities in relation to European standards in comparison with earlier directives. In recital 74 in the preamble to the Directive, the Union legislature announces that: The technical specifications drawn up by public purchasers need to allow public procurement to be open to competition as well as to achieve objectives of sustainability. To that end, it should be possible to submit tenders that reflect the diversity of technical solutions standards and technical specifications in the marketplace, including those drawn up on the basis of performance criteria linked to the life cycle and the sustainability of the production process of the works, supplies and services. Consequently, technical specifications should be drafted in such a way as to avoid artificially narrowing down competition through requirements that favour a specific economic operator by mirroring key characteristics of the supplies, services or works habitually offered by that economic operator. Drawing up the technical specifications in terms of functional and performance requirements generally allows that objective to be achieved in the best way possible. Functional and performance-related requirements are also appropriate means to favour innovation in public procurement and should be used as widely as possible. Where reference is made to a European standard or, in the absence thereof, to a national standard, tenders based on equivalent arrangements should be considered by contracting authorities. It should be the responsibility of the economic operator to prove equivalence with the requested label.

Article 18 of the Directive addresses the question of artificially narrowing ­competition. It provides that the design of the procurement must not be made with the intention of artificially narrowing competition, that is unduly favouring or disadvantaging certain economic operators.46 The same Article refers to functional and performance-related requirements when it comes to non-economic aims. Member States shall take appropriate measures to ensure that in the performance of public contracts, economic operators comply with applicable obligations



44 See

Andhov’s contribution to this volume in ch 6. J Hettne, Strategic Use of Public Procurement – Limits and Opportunities (SIEPS 2013). 46 See Sanchez Graells’ contribution to this volume. 45 See

Public Procurement and European Standards  153 in the fields of environmental, social and labour law established by Union law, national law or collective agreements; or by the international environmental, social and labour law provisions listed in Annex X, where international conventions recognised by the Union are mentioned.47 Directive 2014/24/EU accordingly encourages contracting authorities to use technical specifications in terms of functional and performance requirements. This is different from the technical requirement in relation to safety, health and consumer protection, which must be fulfilled in order for a product to bear a ‘CE’ mark. Thus, the Directive does not change the fact that the contracting authorities are bound by European standards, especially harmonised standards, if they are relevant for the subject matter of the contract. Moreover, Article 44 (6) of the Directive adds that if a contracting authority chooses to formulate technical specifications in terms of performance or functional requirements, it must not reject a tender for works, supplies or services that complies with a national standard transposing a European standard, a European technical approval, a common technical specification, an international standard or a technical reference system established by a European standardisation body, where those specifications address the performance or functional requirements the contracting authority has laid down. Hence, the presence of European technical standards may indirectly play an important role in this context too. Seen as a whole, contracting authorities’ discretion remains largely constrained by harmonised conditions agreed upon in the Union, as well as conditions defined by the European standardisation bodies. Put otherwise, a contracting authority may encourage non-economic aims and be engaged in sustainable and strategic procurement, as long as these aims are in the interest of the Union as a whole. More ambitious national aims, however, are still suspected of distorting competition and trade in the internal market.48 This conclusion is further supported by recital 95 in the preamble to Directive 2014/24/EU, which urges exploiting public procurement in order to achieve the objectives of the Europe 2020 strategy for smart, sustainable and inclusive growth; and recalls that public procurement is a crucial driver of innovation, which is of great importance for future growth in Europe. This, however, is especially true if the Union itself requires contracting authorities to promote such interests in sectorial legislation. One example is the European Parliament and Council Regulation (EC) No 106/2008 on a Community energy-efficiency labelling programme for office equipment.49 Article 6 of this Regulation provides that central government authorities must, without prejudice to Community

47 See, for a more detailed analysis, Andhov’s contribution in ch 6 of this volume, and Methven O’Brien and Martin-Ortega’s contribution in ch 9. 48 On the balancing of competition-based constraints derived from Article 18(1) and the mandate to ensure environmental, social and labour compliance that Article 18 (2) imposes on Member States, see the contribution from Albert Sanchez-Graells to this volume. 49 [2008] OJ L39/1.

154  Jörgen Hettne and national law and economic criteria, specify energy-efficiency requirements not less demanding than the common specifications. There are also mandatory procurement requirements set for achieving specific goals regarding road transport vehicles in Directive 2009/33/EC of the European Parliament and the Council on the promotion of clean and energy-efficient road transport.50

VI.  A Way Out – A New Role for Standardisation in the EU? It should finally be discussed whether the European standards themselves could be more flexible and provide more discretion to contracting authorities. In 2011, the Commission voiced concerns that standardisation was moving into new areas.51 It noted that standards were traditionally created for purposes of technical coordination. Nowadays, standards are also developed for wider use within organisations, for example to provide guidance on management systems, services, or environmental and social issues. In addition, although standards are developed by private actors, the more traditional standards often have a significant impact on wider society, affecting the safety and well-being of citizens, the efficiency of networks, the environment and other public policy fields. Therefore, small and medium-sized enterprises and societal stakeholders who represent these wider groups (eg consumers, trade unions, environmental non-governmental organisations, organisations for and of persons with disabilities) must be closely involved in the standardisation process. According to the Commission, one way for the European standards organisations to achieve this goal is to look to the model used for developing the ISO guidance standard (ISO 26000) on social responsibility, the so-called ‘alternative production line’. This model is particularly relevant for work items that are very sensitive or of particular public interest.52 It should be added in that connection that ISO 26000 was developed not from a traditional standardisation policy perspective but from a public policy perspective. It contributes to more responsible companies and the overall objective of sustainable development, but no certification system is available to demonstrate compliance with the standard. Instead, certifiable variations of ISO 26000 have been drawn up at the national level. However, it is debatable whether these market-based measurement tools are the best way to enhance objectives of public policy, due to the complex and evolving nature of social responsibility.53 50 [2009] OJ L120/5. See, for further details, Andhov’s contribution to this volume in ch 6. 51 A strategic vision for European standards: Moving forward to enhance and accelerate the sustainable growth of the European economy by 2020, COM(2011) 311 final. 52 Ibid 12. See also the discussion of the 2017 Sustainable Procurement Guidance (ISO 20400) in the contribution from Methven O’Brien and Martin-Ortega in ch 9 of this volume. 53 See S Bijlmakers and G van Calster, ‘You’d be surprised how much it costs to look this cheap! A case study of ISO 26000 on social responsibility’ in P Delimatsis (ed), The Law, Economics and Politics of International Standardisation (CUP 2015) 302.

Public Procurement and European Standards  155 Nevertheless, the Commission considers that standards have great potential as a policy tool.54 In line with this potential, European standards developed by the European standardisation bodies will need to respond to an increasing demand for standards as tools in the service of many European policies and legislation. The Commission believes that the use of standards as a policy tool is made possible by a longstanding tradition of strong partnership between voluntary experts from industry, EU public authorities, the European standardisation organisations, the national standardisation bodies and other standard-developing organisations. The European standardisation organisations are responsible for managing the development and the adoption of European standards in consultation with their members.55 In ‘European Standards for the 21st Century’,56 the Commission confirms that the standardisation field is changing. New technologies and the progressive integration of digital solutions in industrial global value chains, as well as the rapidly evolving international scene, are putting pressure on the European standardisation system, which can still be leveraged to contribute more to EU jobs and growth. The Commission argues that a new momentum is needed to respond effectively to the standards needs of industry, consumers and other stakeholders. Building on that new momentum would ensure that Europe remains a global hub for standardisation. If not, standards will be set elsewhere and Europe will lose the first-mover advantage. In its Communication, the Commission sets out its vision for a single and efficient European standardisation system that adapts to the changing environment, supports multiple policies and brings benefits to companies, consumers and workers alike.57 In connection to the Communication from 2016, the ‘Joint Initiative on Standardisation’ was endorsed. It sets out a shared vision for European standardisation in order to prioritise and modernise the current European standardisation system, as well as to strive for timely delivery of standardisation deliverables. It supports the relevant aspects of the EU’s policy objectives and claims to clearly respect the distribution of different competences between the EU and the Member States. It should furthermore enable the EU to strengthen its driving force globally. At the beginning of 2018, the Joint Initiative had been signed by 104 participants, which represents a high level of engagement from every segment of the European standardisation system.58 54 See also the more recent report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the implementation of EU standardisation policy and the contribution of European standards to EU policies, COM(2018) 26 final. 55 ‘A strategic vision for European standards: Moving forward to enhance and accelerate the sustainable growth of the European economy by 2020’, COM(2011) 311 final, at 4. 56 COM(2016) 0358 final. 57 Ibid 2. 58 See the Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the implementation of EU standardisation policy and the contribution of European standards to EU policies, COM(2018) 26 final.

156  Jörgen Hettne The Commission also confirmed its ambition to use standardisation as a policy tool in its most recent Communication, ‘The implementation of EU standardisation policy and the contribution of European standards to EU policies’.59 Hence, European standards can support a public policy perspective and contribute to EU policies, such as strategic and sustainable public procurement. This all sounds great, but how is it possible to ensure that this important task, which is not the traditional mission assigned to the European standardisation bodies, is carried out in a transparent and legitimate way? That issue will be discussed in the concluding section.

VII. Conclusions As initially pointed out, Directive 2014/24/EU announces in its first recital that the award of public contracts has to comply with the principles of the TFEU, and in particular the free movement of goods, freedom of establishment and the freedom to provide services, as well as the principles deriving therefrom, such as equal treatment, non-discrimination, mutual recognition, proportionality and transparency. In addition, a fair competition objective has been expressed in Article 18 of the Directive. In line with these objectives, it is of fundamental importance for EU procurement law that various tenders can be accurately compared. The CJEU has stated that the purpose of the procurement rules is, inter alia, effective competition, ‘by promoting the widest possible expression of interest among contractors in the Member States’.60 Indeed, a contracting authority must ensure that a comparison may be carried out between all bids that cannot on objective and legitimate grounds be excluded from the procedure. As we have seen, it is in general difficult to reject products complying with the technical specifications of a European standard in a procurement procedure. Similarly, if contracting authorities use functional and performance requirements, they cannot ignore European standards. If such standards are relevant for the subject matter of the contract, they must be respected, and a tender fulfilling them can hardly be rejected. The language in Directive 2014/24/EU therefore seems to suggest that the scope of strategic and sustainable procurement is larger than it actually is. Public procurement is still mainly about equal treatment of tenderers in the Member States and fair competition between their bids. It is therefore not surprising that the CJEU has so far been tolerant toward national non-economic considerations (interests not yet integrated into EU law 59 Ibid. 60 See, to that effect, Case C-225/98, Commission v French Republic, EU:C:2000:494, para 34; Case C-399/98, Ordine degli Architetti and Others, EU:C:2001:401, para 52; Joined Cases C-285/99 and C-286/99 Lombardini and Mantovani, EU:C:2001:640, para 34; Case C-470/99 Universale-Bau and Others, EU:C:2002:746, para 89; and Case C-213/07, Michaniki, EU:C:2008:731, para 39.

Public Procurement and European Standards  157 or European standards), especially in the context of award criteria that, unlike the mandatory technical specifications, allow a comparison of quality and price for all products or services that legally circulate freely on the EU internal market.61 The non-economic interest thus becomes just one of several award criteria that also have predictive importance in the weighting that will take place when the most economically advantageous tender is chosen. These criteria are easier to justify than admission conditions, selection criteria, technical specifications, etc, which are capable of totally excluding tenderers who cannot meet them. Award criteria (in terms of performance or functional requirements) may therefore be an important addition to the permitted ways of narrowing down the object of a contract.62 If used wisely, they can increase the discretion of contracting authorities, allowing them to buy what they want as long as they truly know what they want.63 A more solid strategy for widening the discretion of contracting authorities in public procurement is to include additional non-economic interests in the public procurement framework, but this is a long-term prospect. As demonstrated, this framework is not limited to the specific Public Procurement Directives in force but constitutes an integral part of the broader internal market framework. It is therefore dependent on policy orientations in a much larger context. Concrete examples were given in section III of cases where the Union requires contracting authorities to promote non-economic interests in sectorial legislation regarding an energy-efficiency labelling programme for office equipment and the promotion of clean and energy-efficient road transport. In these cases, permissible national restrictions in public procurement are transformed into general requirements emanating from EU law. Hence, it is obvious that what direction the law of the internal market takes also affects the scope of pursuing non-economic interests in public procurement, and determines the degree of discretion afforded to contracting authorities. The situation for European standards resembles this general legal development. Albeit not binding, European standards are also part of the internal market framework.64 The harmonised standards are expressions of the requirements in the New Approach directives and depend on the political ambitions (essential safety requirements) stated in those directives. However, the corresponding technical conditions in the standards are much more concrete and explicit than the essential requirements, which in turn facilitates equal treatment and contributes to the aim of fair competition in public procurement. This exercise of concretisation (the standard-setting process following a mandate from the Commission) is obviously not dissociated from conflicting political interests.

61 See Case C-513/99, Concordia Bus, EU:C:2002:495; Case C-448/01, Wienstrom, EU:C:2003:651; and Case C-368/10, Commission v Netherlands, EU:C:2012:284. See also Hettne (n 45). 62 See Hettne (n 20) 31. 63 Ibid. See also the contribution by Bogojević in ch 8 of this volume. 64 Cf Case C-613/14, James Elliott Construction, EU:C:2016:821, ‘part of EU law’.

158  Jörgen Hettne As in any process where general requirements must be turned into explicit conditions, there is room for discretion. In fact, standards are products of discussion, negotiation, deliberation and compromise between engineers, manufacturers, academic experts, professionals, trade unionists, representatives of consumer organisations and public officials meeting in boards, committees, task forces and working groups in associations and other organisations. They bring to the table economic, political, moral and technical arguments, and ultimately arrive at a solution that aims at balancing the interests represented in the technical committee in charge.65 As has been demonstrated, European standards (not only harmonised standards) have a prominent position in public procurement. The discretion of contracting authorities is therefore often dependent on the material content of technical standards. We have also seen that this has raised the issue whether contracting authorities should blindly trust the safety and quality of products marked ‘CE’ in accordance with a harmonised standard. From a market integration perspective this is perfectly logical. A contracting authority is part of the state, and is obliged to take account of and respect harmonised Union rules and standards if they are relevant for the subject matter of the contract. Harmonised standards are part of EU law in general, and therefore also part of EU public procurement law. However, it is perfectly understandable that this causes some worry as to the further use of European standards in relation to procurement. In that connection, the very clear ambition from the Commission to put more emphasis on standards as a policy tool is of great interest. Such a development can increase the contracting authorities’ discretion when it comes to the possibility of taking non-economic interest into account in public procurement. Indeed, European standards developed by the European standardisation bodies should always support European policies and legislation. If policies change, so should the corresponding standards. It is therefore important that the European standardisation bodies respond constructively to this renewed approach. In the early days, the specific tasks delegated to these bodies under the New Approach did not attract much political interest, but this has changed dramatically in line with the evolution of the integration process. Politicians and different stakeholders now realise that the tasks delegated to the European standardisation bodies are increasingly more important for voters and consumers. The internal market framework is evidently becoming increasingly complex, especially as regards the multitude of interests that have to be considered. At the same time, it is also important to find solutions for how best to balance the conflicting aims (legitimacy/inclusivity versus speed) in the standardisation process.66 65 See, eg, G Majone, ‘Science and Trans-Science in Standard Setting’ (1984) 9 Science, Technology & Human Values 15. 66 See Hettne (n 9) 11.

Public Procurement and European Standards  159 In that regard it should be pointed out that addressing safety concerns through common technical specifications remains the main task for European standardisation and represents about 60 per cent of all Commission standardisation requests.67 Thus, reformed procedural requirements that take into account a greater variety of interests of an increased number of stakeholders, and probably slowing the process down as a result, are hardly an urgent need in the whole area of standardisation. A better way to address criticism voiced in the doctrine in relation to the standardisation process would be to take a more flexible approach, distinguishing between the traditional technical standards that focus on safety and standards focusing on more complex societal issues, such as different forms of sustainability. Against this backdrop, it is my opinion that the scope of control over the ­European standardisation system must be flexible enough not to hamper the efficiency of the standard-setting and standard-making process. Not all standardisation projects concern the same number of stakeholders (range of participants). If standardisation is valued for its ability to produce social consensus on product safety (relevant state-of-the-art technical specifications) and commonly accepted test methods to measure compliance of goods and services, the worst thing to do is to subject the process to the features of political and administrative rulemaking that prevented the political administrative process from producing the necessary consensus in the first place.68 This is perfectly in line with the previous statement that European standards should support European policies and legislation. Legislation and standardisation should be seen as complementary means for achieving the same aim, and should therefore adapt to the political issues at stake. The change of the internal market framework in general (law as well as standards) is clearly a challenging endeavour in a Union of many Member States and numerous divergent views. The transformation from an economic market-oriented focus to a multi-layered rational one cannot be expected to happen overnight, and will not follow directly from the recent reform of the Public Procurement Directives. It is, nevertheless, an important issue for the future of the European integration project.



67 COM(2018) 68 Schepel

26 final, at 4. (n 5) 256.

160

8 Mapping Public Procurement and Environmental Law Intersections in Discretionary Space SANJA BOGOJEVIĆ

I. Introduction Public procurement law is a highly technical field of law, long guided by a ­seemingly straightforward ideal: ensuring that the government uses public funds most cost-effectively in providing public services.1 In the European Union (EU) context, it is a niche area of internal market law where the objectives are slightly more expansive and refer to the integration of markets and their ‘opening-up to undistorted competition in all the Member States’.2 Attempts to pursue parallel national policies, such as increasing the levels of environmental protection when procuring, were long met with suspicions of protectionism, which, in conflicting with the basic free movement provisions, is prohibited under the EU procurement regime.3 This position has been revisited – first by the Court of Justice of the European Union (CJEU)4 and subsequently by the EU legislators in detailed secondary law.5 As this chapter explains, the current EU procurement regime

1 P Trepte, Regulating Procurement: Understanding the Ends and Means of Public Procurement ­Regulation (OUP 2004) 27. 2 Case C-26/03 Stadt Halle and RPL Lochau, EU:C:2005:5, para 44; Case C-553/15 Undis Servizi EU:C:2016:935, para 28; Case C-144/17 Lloyd’s of London EU:C:2018:78, para 33. Similarly explained by Andhov in ch 6 of this volume. Note, however, that the regulation of public procurement in the EU has multiple dimensions, as explained in C Bovis, EU Public Procurement Law, 2nd edn (Edward Elgar 2012) 2. 3 See section II.B of this chapter. 4 The core case law, as explained ibid, includes: Cases C-31/87 Gebroeders Beentjes BV v State of the Netherlands (‘Beentjes’), ECLI:EU:C:1988:422; C-225/98 Commission v France (‘Nord-Pas-deCalais’), ECLI:EU:C:2000:494; C-513/99 Concordia Bus Finland v Helsingin Kaupunki (‘Concordia Bus’), ECLI:EU:C:2002:495; C-448/01 EVN AG and Wienstrom GmbH v Austria (‘EVN-Wienstrom’), ECLI:EU:C:2003:651; C-368/10 Commission v Netherlands (‘Dutch Coffee’), ECLI:EU:C:2012:284. 5 Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC [2014] OJ L94/65 (‘the Directive’).

162  Sanja Bogojević entrusts a range of discretionary powers to the Member States and the national procurement authorities to promote environmental policies whilst completing the objectives of the internal market. This move aligns with the concept of the internal market, which, while remaining ambiguous as a legal notion,6 is not exclusively guided by free market principles.7 This is evident from the Treaties that describe the internal market as ‘a highly competitive social market economy’ steered toward social progress and environmental protection.8 The idea is also clearly embedded in the Commission’s obligation to consider ‘a high level of environmental and consumer protection’ when proposing to harmonise internal market laws.9 What is more, the principle of subsidiarity, which is a core EU constitutional principle that helps determine the allocation of regulatory power between the Member States and the EU, also in establishing the internal market,10 first emerged in the EU legal order in relation to environmental decision-making.11 From this point of view, the construction and maintenance of the internal market and environmental protection are clearly part of a symbiotic relationship. Symbiotic relationships, however, may take a variety of forms,12 and the relationship between environmental considerations and internal market law is no different. Focusing on public procurement law as an example of internal market law,13 this chapter takes off from the usual starting-point: that is, an assessment of the extent to which the EU procurement regime gives discretion to the contracting authorities to pursue environmental objectives. This has been a prevalent theme in public procurement scholarship,14 but it is one that tends to be understood as a strictly binary choice: either to interfere, or to leave the national discretionary space be.15 The rationales for choosing either option differ. In some contexts, it is a 6 S Weatherill, The Internal Market as a Legal Concept (OUP 2017) 1. 7 See MP Maduro, We, the court: The European Court of Justice & the European Economic Constitution (Hart Publishing 2002) 164. In the context of EU public procurement law, see P Kunzlik, ‘Neoliberalism and the European Public Procurement Regime’ (2013) 15 Cambridge Yearbook of European Legal Studies 283. 8 Art 3(3), Treaty on European Union (TEU). 9 Art 114(3), Treaty on the Functioning of the European Union (TFEU). 10 X Groussot and S Bogojević, ‘Subsidiarity as a Procedural Safeguard to Federalism’ in L Azoulai (ed), The Question of Competence in the European Union (OUP 2014) 234, 234. 11 R Schütze, From Dual to Cooperative Federalism: The Changing Structure of European Law (OUP 2009) 248–49. 12 Symbiosis includes any interaction between two or more organisms, ranging from parasitic to mutualistic: see NH Barton et al, Evolution (Cold Spring Harbor Laboratory Press 2007) 163. 13 According to the Monti Report, ‘EU public procurement law plays a key role in the creation and maintenance of the single market’: see M Monti, ‘Report to the President of the European Commission Jose Manuel Barroso: A New Strategy for the Single Market’ (9 May 2010), available at: www. kfw.de/migration/Weiterleitung-zur-Startseite/Homepage/KfW-Group/Research/PDF-Files/Monti_ Report.pdf. 14 See, eg, S Arrowsmith and P Kunzlik (eds), Social and Environmental Policies in EC Procurement Law: New Directives and New Directions (OUP 2009); B Sjafjell and A Wiesbrock (eds), Sustainable Public Procurement under EU Law: New Perspectives on the State as Stakeholder (CUP 2016). 15 This description of a binary view of public administration is greatly inspired by E Fisher and S  Shapiro, The Law of Public Administration: The Need to Reimagine Administrative Law (CUP ­forthcoming) ch 1.

Mapping Public Procurement and Environmental Law  163 question about what legal architecture would make social policies, including environmental ones, succeed,16 while in other instances it is an issue of the risk that discretion entails of undermining legal certainty, which demands a high level of detail.17 The significance of legal certainly ties into bigger and bolder ideas about public administration,18 but the point I make here is much narrower. It is that this either/or view of discretion has meant that much of the mutual benefit between trade and environmental protection, which is visible elsewhere in internal market law,19 has largely been absent from the EU public procurement regime. The crux of my argument here is to move away from this binary approach, and I do so through several mapping exercises. In the first instance, the current EU procurement law regime is surveyed with a view to charting the possibilities for contracting authorities to pursue environmental goals. This part of the mapping exercise is aimed at helping to navigate the regime complex that is EU public procurement law. I then go on to map intersections between environmental law and environmental law scholarship with that of EU public procurement law. It needs to be emphasised that this is not an exhaustive study but rather a sample of significant points of connection between the two areas of law, focusing on the role of environmental principles, the impact of climate change law and policy, and the justiciability of environmental models. The point of these maps is two-fold. First, it is to show the interconnectedness between public procurement law and environmental law. I do not claim to be the first or only legal scholar to see these links,20 but the existing studies tend be contained within specific sub-legal disciplines where environmental and public procurement law scholarship are separated from each other.21 My maps of environmental and public procurement law thus purport to act as ‘the translation service the subject so badly needs’.22 More precisely, they seek to encourage ‘legal interdisciplinarity’, where legal problems, concepts and constructs can be discussed across legal fields.23 Second, and relatedly, the aim is to spark the reader’s imagination in thinking about environmental problems and their legal responses.24 As Fisher explains, legal orders ‘did not evolve with ­environmental 16 ACL Davies, ‘Government as a Socially Responsible Market Actor After RegioPost’ in A SanchezGraells (ed), Smart Public Procurement and Labour Standards: Pushing the Discussion after RegioPost (Hart Publishing 2018) 165, 194. 17 In this volume, Weatherill makes the point that as national discretionary powers under the EU public procurement regime expand, the laws originally ‘made better’ under this regime are at risk of being undermined. 18 Fisher and Shapiro (n 15). 19 In particular, with regard to free movement provisions, see J Nowag, Environmental Integration in Competition and Free-Movement Laws (OUP 2017) ch 1. 20 See, eg, n 14 and ch 6 of this volume. 21 Cf, eg, P Kunzlik, ‘Green Public Procurement – Environmental Law, Environmental Standards and “What To Buy” Decisions’ (2013) 25 Journal of Environmental Law 173. 22 E Fisher et al, ‘Maturity and Methodology: Starting a Debate about Environmental Law Scholarship’ (2009) 21 Journal of Environmental Law 213, 246. 23 Ibid 230. 24 The significance of imagination is explained in E Fisher, Environmental Law: A Very Short Introduction (OUP 2017) 128.

164  Sanja Bogojević problems as their focus’,25 which is certainly true for the internal market that evolved as a social market economy to include environmental concerns. Following from this, it is clear that constant re-evaluation of existing legal regimes is necessary. This is a task for public procurement law and environmental law scholars alike; this chapter merely suggests a direction.

II.  Internal Market Laws and Environmental Considerations: A Brief Overview of a Symbiotic Relationship As explained by Weatherill in this volume, internal market law aims to discipline the use of discretion by national actors, ‘insofar as it collides with the project of market integration’.26 This means that Member States can pursue a variety of market-related policies only insofar as these comply with applicable conditions imposed by the EU. Determining the legal contours of the European market is not a straightforward exercise. As described by Armstrong, it has ‘the qualities of Russian dolls’,27 meaning that increasingly narrow and increasingly broad definitions are equally applicable, and similarly, in the Commission’s view, it is subject to constant reconfiguration.28 It is as part of this dynamic legal context that a European environmental law and policy slowly emerged, ‘[d]riven by fear of a disintegration of the internal market, concerns over portraying a less mercantile image of the EU, as well as the intention of safeguarding ecosystems and species under threat’.29 Against the background of the mixed motivations for establishing an EU environmental law, it is important to stress the close connection between market integration and environmental protection. The two have been pushed through negative integration – that is, the adjudicative function of courts in removing national barriers to trade – as well as positive integration – which is the legislative function of EU institutions in adopting common rules30 – with the result of creating a symbiotic relationship between the two. In a broader perspective, this shows the co-production of the market and the state that I have discussed elsewhere.31

25 Ibid. 26 See ch 2, section I. 27 K Armstrong, ‘Governance and the Single Market’ in P Craig and G de Búrca (eds), The Evolution of EU Law (OUP 1999) 745, 747. 28 Commission, ‘White Paper on Completing the Internal Market’, COM(85) 310 final. For an overview, see L Gormley, ‘The Internal Market: History and Evolution’ in Niamh Nic Shuibhne (ed), Regulating the Internal Market (Edward Elgar Publishing 2006) 14. 29 N de Sadeleer, EU Environmental Law and the Internal Market (OUP 2014) i. 30 K Armstrong, ‘Governing Goods: Content and Context’ in A Arnull and D Chalmers (eds), The Oxford Handbook of European Union Law (OUP 2015) 208, 209. 31 See S Bogojević, Emissions Trading Schemes: Markets, States and Law (Hart Publishing 2013).

Mapping Public Procurement and Environmental Law  165 In terms of positive integration, EU legislators have a long history of adopting laws to safeguard and uphold environmental standards – even when the Union lacked specific environmental decision-making powers – in the name of furthering the internal market. The earliest example is the Drinking Water Directive,32 which aimed to eliminate disparities in national provisions on the quality of water, which were thought to create different conditions of competition.33 Such measures might seem to stymie the ability of national authorities to take unilateral action on environmental matters, but the reality is somewhat more nuanced. Even though the Drinking Water Directive prescribed the same quality of drinking water across the Union, it is doubtful whether it actually resulted in such uniformity, due to differences in implementation and the baseline in environmental quality across the Member States.34 Moreover, the Treaty permits derogations on environmental grounds once the EU has harmonised an area of environmental policy through regulation, either before it comes into force or in post-harmonising instances.35 Although such derogations need to be approved by the Commission, and are open to review by the CJEU, their inclusion in the Treaty shows the careful shaping of market integration in relation to national environmental considerations. In any case, not all measures adopted to help the internal market function result in full harmonisation. This is evidenced by the Environmental Impact Assessment Directive,36 which is another example of an environmental ­measure – here, establishing a procedure that seeks to ensure that the environmental effects of a proposed project are considered by the decision-maker in advance of approving it – that, at least initially, was adopted under Articles 100 EEC and 235 EEC (now Articles 114 and 352 TFEU). This Directive has evolved to confer broad discretion on the national decision-makers about when to rely on the Directive,37 and although this has given rise to a debate on whether compliance is sacrificed for the sake of regulatory flexibility, a more significant finding, as noted by Arabadjiev, is that discretion of this type creates a valuable space for the decision-maker to consider a vast array of relevant factors and to deliberate on environmental value within that space.38 The close link between environmental protection and the internal market is also evident in CJEU case law. Through its broad judicial powers,39 the CJEU has 32 Directive 80/778/EEC [1980] OJ L229/11. 33 See J Holder and M Lee, Environmental Protection, Law and Policy, 2nd edn (CUP 2007) 159. 34 E Fisher, B Lange and E Scotford, Environmental Law: Text, Cases, and Materials (OUP 2013) 142–43. 35 See Art 114(4) and (5) TFEU respectively. 36 The Directive was first adopted in 1985 under the common market provisions, Arts 100 EEC and 235 EEC, but has since undergone revisions; and the most recent amendment, adopted in 2014, is based on environmental competence provisions. See Directive 2014/52/EU [2014] OJ L124/1 and, for a brilliant analysis, K Arabadjieva, ‘Vagueness and Discretion in the Scope of the EIA Directive’ (2017) 29 Journal of Environmental Law 417. 37 Arabadjieva (n 36). 38 Ibid 418. 39 As outlined in Art 19 TEU.

166  Sanja Bogojević produced rich jurisprudence enhancing negative harmonisation by determining when internal market laws apply to national environmental rules, and whether inter-state barriers to trade may be justified on environmental grounds. The jurisprudence is too rich to discuss in any detail here,40 but a few illustrative examples are useful in showing the importance granted to environmental protection in applying free movement provisions. Classic cases now include Bluhme41 and Mickelsson & Roos,42 where national measures with overt environmental dimensions breached Article 34 TFEU but were exempted, subject to a proportionality test, under Article 36 TFEU, which contains no explicit reference to environmental protection. Similarly, the CJEU has expanded its Cassis-doctrine by adding environmental protection to the list of mandatory requirements able to exempt indistinctly applicable trade barriers.43 This has not stopped the Court from also treating distinctly applicable measures on environmental protection as a mandatory requirement.44 It has meant that national authorities have also been entrusted with significant regulatory autonomy in regulating environmental matters domestically when operating in the context of free movement provisions. Naturally, the process of European market integration is not linear. It has been exposed to pulls and tensions regarding the extent to which EU internal market law ought to allow flexibility, enhance subsidiarity, refrain from full harmonisation and assist deregulation. After all, central questions in EU law are how to allocate regulatory power, to whom and to what extent.45 Still, through law-making and judicial observance, EU institutions have permitted national authorities to unilaterally determine national environmental standards, and thereby have helped create an ambitious internal market that pursues multiple objectives, including working towards ‘a high level of protection and improvement of the quality of the environment’.46 This is not to say that the full force of EU environmental law resides in market integration – environmental law and its foundations are far more complicated.47 Nor is it to overlook the negative effects that concerns about trade barriers have on environmental protection in the EU context.48 The potential disadvantages of environmental considerations to the internal market should not be disregarded either. According to Weatherill, the CJEU has sacrificed ‘purity of reasoning in 40 See, eg, de Sadeleer (n 29). 41 Case C-67/97 Bluhme, ECLI:EU:C:1998:584. 42 Case C-142/05 Mickelsson & Roos, ECLI:EU:C:2009:336. 43 Case C-302/86 Commission v Denmark (‘Danish Bottles’), ECLI:EU:C:1988:421. 44 Case C-379/98 Preussen Elektra, ECLI:EU:C:2001:160; Case C-2/90 Commission v Belgium, ECLI:EU:C:1992:310. 45 See Bogojević (n 31) ch 3. 46 Art 3(3) TEU. 47 For a brilliant overview, see Fisher (n 24). 48 R Lee, ‘Always Keep a Hold of Nurse: British Environmental Law and Exit from the European Union’ (2017) 29 Journal of Environmental Law 155; B Pontin, The Environmental Case for Brexit: A Socio-legal Perspective (Hart Publishing 2019) ch 1.

Mapping Public Procurement and Environmental Law  167 order to achieve a result that is consistent with good environmental practice’.49 In this volume, he similarly shows how internal market law, as a constraint on regulatory discretion practised at the national level, ‘has holes in it’,50 and in comparing it to public procurement law, where discretion ‘is confined still more closely and at a much more intricate level of detail’, concludes that this niche legal field is internal market law ‘made better’.51 The point that I emphasise in this chapter, however, is a different one; my view is that in permitting a polycentric, even if ‘imprecise and unpredictable’,52 approach to discretion, internal market law has permitted a symbiotic relationship between market integration and environmental protection to unfold that has led, more than occasionally, to mutual benefit. This has historically not been the case in EU public procurement law, as outlined next.

A.  EU Public Procurement Law: Discretion Polarised? The roots of the current EU public procurement regime run deep into the history of European market integration. The early directives, adopted in the 1970s, sought to ensure that the process of purchasing goods and services by public bodies would allow market actors to partake – without discrimination – of public tenders across the Union. These include the so-called ‘liberalisation directives’ that aimed to eliminate trade restrictions relating to contract award procedures, and ‘coordination directives’ that meant to streamline aspects of national public procurement practices.53 Although EU public procurement law has enjoyed much legislative attention and has, as such, undergone numerous reforms since,54 ‘opening-up to undistorted competition in all the Member States’55 remains, as identified by the CJEU, the ‘principal objective of the Community rules in the field of public procurement’.56

49 S Weatherill, ‘Free Movement of Goods in the European Community’ (2003) 28 European Law Review, 756, 758. 50 See ch 2, section I. 51 Ibid. 52 Ibid. 53 For an overview, see Trepte (n 1) 349–54. 54 A major legal overhaul was undertaken through the adoption of the 2004 Directives for public sector and utilities procurement, and more recently in 2014 by the adoption of the 2014 Public Procurement Package. In 2007 the remedies mechanisms were also revised, as they were again in 2015. For an overview, see G Skovgaard Olykke and A Sanchez-Graells (eds), Reformation or Deformation of the EU Public Procurement Rules (Edward Elgar Publishing 2016) ch 1. 55 Stadt Halle and RPL Lochau (n 2) para 44; Undis Servizi (n 2) para 28; Lloyd’s of London (n 2), para 33. 56 Stadt Halle and RPL Lochau (n 2) para 44. Similar phrasing is found in Undis Servizi (n 2) and Lloyd’s of London (n 2).

168  Sanja Bogojević The insistence of public procurement law on exposing national procurement markets to EU-wide competition is not surprising. According to the Commission, public procurement represents around 19 per cent of EU GDP, or more precisely over €2.3 trillion spent each year by public authorities and utilities.57 Any attempt at realising market integration will need to ensure that national public procurement procedures do not distort competition or create barriers to trade.58 This is where EU procurement law has long generated a deep clash with the pursuit of national environmental measures, which internal market law has, as already explained, been much better at reconciling. To explain further, on the one hand, EU procurement law seeks to ‘promote transparency and open competition uncontaminated by bias based on the origin of the supplier of goods and services’.59 One the other hand, the pursuit of environmental goals has traditionally sought to protect environmental standards from competition altogether.60 In the EU public procurement regime, the space for environmental considerations exists at the national levels to the extent that it is not confined by EU law. This has meant that one of the focal points in public procurement law scholarship is the question whether national environmental policies are merely used as ‘smokescreens’ for preferential treatment of local suppliers, necessitating interference with national autonomy; or, seen differently, whether national space needs to be freed from pan-EU rules to pursue environmental goals.61 Although a variety of rationales informs each view, discretion is, in any case, understood in relation to the need to either constrain or empower national contracting authorities – a choice that is often projected as binary. Arguably this narrow view of discretion mirrors the longstanding institutional approach to discretion under the EU public procurement regime. Historically, discretional powers of national authorities have been tightly constrained; it was only in the late 1980s, and again in 1990s, when the EU had developed much of its environmental competence, that the CJEU acknowledged that national authorities might choose the criterion by which to award public contracts as ‘the most economically advantageous tender’.62 This opened the door to the possibility of including environmental criteria in public procurement procedures, although the CJEU did not discuss environmental concerns directly.63 Subsequently, the Commission issued two so-called ‘interpretative communications’, one on

57 COM(2015) 550 final at 13. 58 Commission (n 28). 59 Weatherill, ch 2, section IV. 60 Davies makes this point in relation to social policies (n 16) 194. 61 A Ochoa, V Fuhr and D Gunther, ‘Green Purchasing in Practice’ in C Erdmenger (ed), Buying into the Environment: Experiences, Opportunities and Potential for Eco-Procurement (Greenleaf Publishing 2003) 20, 27; ch 6 in this volume by Andhov and Trepte (n 1) 175. 62 See Beentjes (n 4) paras 18–19, and 29; as well as Nord-Pas-de-Calais (n 4) para 50. 63 Note that the this is based on the condition that the choice is consistent with ‘all the fundamental principles of Community law, in particular the principle of non-discrimination’, see Beentjes (n 4) and Nord-Pas-de-Calais (n 4).

Mapping Public Procurement and Environmental Law  169 social  policy64 and one on the environment,65 the latter outlining the possibilities for integrating environmental considerations into public procurement. The document insisted that there ‘is no inherent contradiction between economic growth and the maintenance of an acceptable level of environmental quality’‚66 but in the same breath it asserted that ‘the Commission cannot, in an interpretative document such as this one, propose solutions which go beyond the existing public procurement regime’.67 For a long time, therefore, discretion was a topic that saw national procedural choices, insisting on environmental protection under procurement law, as severely limited, and discretion, as a scholarly topic, as one concerning constraint. Indeed, it would take almost 30 years, following the enactment of the first directives on public procurement, for explicit recognition of national discretionary powers to pursue environmental matters under the EU public procurement regime. More precisely, in Concordia Bus, and relying on the integration principle,68 the Court found that EU public procurement law ‘does not exclude the possibility for the contracting authority of using criteria relating to the preservation of the environment when assessing the economically most advantageous tender’.69 Thus in the case at hand, national authorities could consider the nitrogen oxide emissions and noise levels of the bus fleet offered by the parties seeking the tender for the operation of a city bus service – subject to a list of conditions.70 The Court is here seen conditioning national environmental unilateral actions on procedural safeguards, and, what is more, using environmental principles to determine ambiguous public procurement provisions.71 Much of this case law was finally, almost 15 years later, codified in the current body of public procurement law.72 What this later case law and the current EU public procurement regime show is that the national procedural discretion to pursue environmental considerations is neither completely constrained, nor unfettered; rather, multiple choices,

64 Interpretative communication of the Commission on the Community law applicable to public procurement and the possibilities for integrating social considerations into public procurement, COM(2001) 566 final. 65 Interpretative communication of the Commission on the Community law applicable to public procurement and the possibilities for integrating environmental considerations into public procurement’, COM(2001) 274 final. 66 Ibid at 2. 67 Ibid. 68 Now codified in Art 11 TFEU. 69 Concordia Bus (n 4) para 57. 70 These include that the set condition is ‘linked to the subject’ of the contract and that fundamental principles of EU law, such as non-discrimination, are complied with: see ibid, paras 58–68. 71 E Scotford, Environmental Principles and the Evolution of Environmental Law (Hart Publishing 2017) 157. 72 For a detailed account of the incorporation of case law in the set directive, see C de Koninck, T  Ronse and W Timmermans, European Public Procurement Law: The Public Sector Procurement ­Directive 2014/24/EU explained through 30 years of case law by the Court of Justice of the European Union, 2nd edn (Wolters Kluwer 2015).

170  Sanja Bogojević methods and procedures exist that determine where discretion may operate and how it is assessed. For a long time, however, the discussion about discretion under EU public procurement law concerned whether national procedural autonomy could be constrained. It is possible, as Weatherill suggests in this volume, that the ‘story has in fact turned full circle’,73 meaning that the initial, limited approach to discretion has been adapted to create a more flexible public procurement regime. What demands our attention is thus not a binary view of discretion; on the contrary, we must focus on learning to navigate this facelifted, sprawling legal regime. The first step in that direction is to examine the space made available to environmental considerations as explained, in more detail, next.

III.  EU Public Procurement Law: A Regime Complex Public procurement law, in terms of both its scholarship and its practice, is developing at a tremendous speed that can be experienced as a ‘revolution’.74 In the EU context, the Treaties, and especially the free movement provisions together with their many principles, including equal treatment, non-­ discrimination, mutual recognition, proportionality and transparency, provide the core of  the public procurement regime.75 The Treaties, however, contain no specific mention of public procurement; rather, these rules are outlined in secondary law that governs procurement contracts above a set threshold.76 This means that Directive 2014/24/EU, which is the focus of this study, requires unpacking in its own right but also in light of primary law, as well as in relation to the many policies and strategies developed by the Commission for the Union as a whole.77 Here, the CJEU has contributed a rich jurisprudence that, as mentioned, has defined some of the key concepts in public procurement and thereby helped develop the field.78

73 See ch 2, section V. 74 Trepte (n 1) 3; S Arrowsmith and A Davies (eds), Public Procurement: Global Revolution (Kluwer Law International, 1998). 75 See recital 1, Directive 2014/24/EU. 76 In 2016, Member States had to transpose the following three Directives into national law as part of the EU public procurement regime: Directive 2014/24/EU on public procurement (n 5); Directive 2014/25/EU on procurement by entities operating in water, energy, transport and postal services sectors [2014] OJ L94/243; and Directive 2014/23/EU on the award of concessions contracts [2014] OJ L94/1. 77 For instance, the Directives were revised in light of the EU’s leading policy document, the Europe 2020 strategy, which projects public procurement as a key market-based measure for pursuing ‘a more resource efficient, greener and more competitive economy’ that would achieve ‘smart, sustainable and inclusive growth while ensuring the most efficient use of public funds’: see Communication from the Commission, ‘Europe 2020 – a strategy for smart, sustainable and inclusive growth’, COM(2010) 2020, at 8. Similar expression is found in, eg, Communication from the Commission, ‘Sustainable Consumption and Production and Sustainable Industrial Policy-Action Plan’, COM(2008) 397 final. For an overview, see B Sjafjell and A Wiesbrock, ‘Why should public procurement be about sustainability?’ in Sjafjell and Wiesbrock (eds) (n 14) 1, 1–5. 78 de Koninck, Ronse and Timmermans (n 72).

Mapping Public Procurement and Environmental Law  171 In fact, cases concerning public procurement rules are estimated to represent 3.4 per cent of the CJEU’s annual case load,79 and according to Pedersen and Olsson  the Court has heard more than 240 public procurement cases since the inception of the EU procurement rules.80 This is not to overlook the domestic legal fronts. In Sweden alone, national courts reportedly hear 240 public procurement cases ‘by mid-February every year’.81 In the United Kingdom (UK), public procurement is a devolved matter, meaning that delegated legislation needs to be considered.82 In addition to the EU and national legal layers, public procurement law is also influenced by an ever-increasing ‘internationalisation’ of public procurement regulation.83 This means that at least rules as agreed under the General Agreement on Tariffs and Trade (GATT) demand consideration. This is all to say that EU public procurement is a regime complex – not in the sense that its laws are loose and independent of each other,84 but rather in that it is not entirely clear how they interconnect. As a result, recent public procurement scholarship engages with the subject under the heading of constitutional law.85 My purpose in this study is to map instances and methods according to which contracting authorities may pursue environmental matters, and then tie this to parallel debates in environmental law scholarship.

A.  Mapping Environmental Considerations under the EU Public Procurement Law Regime The regime complex previously described is applicable to a wide range of procurement procedures that may broadly be divided into three key phases: the contracting authority’s initial preparation of tender; its award of contracts; and the assessment of contract performance. European Union procurement law is only concerned with certain conditions regarding how public bodies buy,86 when the

79 For an overview, see G Skovgaard Olykke and A Sanchez-Graells, ‘Introduction’ in Skovgaard Olykke and Sanchez-Graells (eds) (n 54) 3, 9. 80 Or more precisely 240, as described in K Pedersen and E Olsson, The Role of the European Court of Justice in Public Procurement’ in C Bovis (ed), Research Handbook on EU Public Procurement Law (Edward Elgar Publishing 2016) 390, 393. 81 Ibid. 82 See, eg, Procurement Reform (Scotland) Act 2014. 83 For an overview, see A Georgopoulos, B Hoekman and PC Mavroidis (eds), The Internationalization of Government Procurement Regulation (OUP 2017). 84 Note that ‘regime complex’ in climate change law allows a different meaning, and one that signifies the lack of an integrated regime: see RO Keohane and DG Victor, ‘The Regime Complex for Climate Change’ (2011) 9 Perspectives on Politics 7. 85 See, eg, Sanchez-Graells (ed) (n 16). 86 Similarly emphasised in R Caranta, ‘Sustainable Public Procurement in the EU’ in R Caranta and M Trybus (eds), The Law of Green and Social Procurement in Europe (DJOF Publishing 2010) 15, 28; N Boeger, ‘Public Procurement and Business for Value: Looking for Alignment in Law and Practice’ in Sanchez-Graells (ed) (n 16) 115, 129.

172  Sanja Bogojević purchase is above certain thresholds,87 leaving procuring authorities with full autonomy to decide what to purchase. This means that the main characteristics of the Directive are of procedural nature, although it pursues substantive goals.88 Environmental considerations under the Directive are mainly expressed as discretion given to the relevant public bodies to use. Notably, there are different senses of the term ‘discretion’,89 which, in the broadest sense and in Galligan’s view, signifies ‘a sphere of autonomy within which one’s decisions are in some degree a matter of personal judgment and assessment’.90 Relying on this definition, two initial points regarding environmental considerations and discretion, as outlined in the Directive, are significant. First, it is not always clear who, in the context of public procurement, enjoys a ‘sphere of autonomy’ and the concomitant possibility to consider environmental matters. Article 18(2) of the Directive, which falls under the so-called ‘principles of procurement’, suggests that environmental considerations are relevant to each step of the procurement procedure and that Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental … law established by Union law, national law, collective agreements or by the international environmental … law provisions listed in Annex X.

Although this provision only proposes that existing environmental laws and agreements be respected, it is disputed to what extent it can be used in interpreting each of the provisions of the Directive,91 and whether it is only an instruction to the Member States in implementing the Directive or also applicable to the contracting authorities.92 Elsewhere in the Directive the two actors are ­explicitly mentioned by outlining, for example, that ‘it is of particular importance that Member States and contracting authorities take relevant measures to ensure compliance with obligations in the fields of environmental … law’.93 Discretion to pursue environmental considerations is thus in part enjoyed by the Member State in implementing secondary legislation, and in part entrusted to public authorities when they fall under the scope of the Directive, with an unclear or, at least, contested line drawn between the two. Second, a key concern that has attracted much scholarly discussion94 is the extent to which public authorities and/or Member States may enjoy ‘a sphere of autonomy’ in considering environmental matters. Recital 1 makes clear that the

87 These are outlined in Art 4, Directive 2014/24/EU. 88 See, eg, recital 2, ibid. 89 See ch 1 in this volume, as well as Arabadjieva (n 36). 90 D Galligan, Discretionary Powers: A Legal Study of Official Discretion (Clarendon Press 1986) 6. 91 Note that recital 40 outlines that this principle applies when choosing the tenderers, when awarding the contract and when assessing abnormally low tenders. 92 This dilemma is explained in ch 6 of this volume by Andhov. 93 Recital 37, Directive 2014/24/EU (emphasis added). 94 See n 14.

Mapping Public Procurement and Environmental Law  173 award of public contracts by or on behalf of Member States’ authorities must comply with the Treaties, and the free movement provisions ‘in particular’, as well as with principles of ‘equal treatment, non-discrimination, mutual recognition, proportionality and transparency’. It is useful to note that the Directive echoes Article 36 TFEU by stipulating that its provisions ‘should not prevent the imposition or enforcement of measures necessary to protect … human and animal life, the preservation of plan life or other environmental measures, in particular with a view to sustainable development’,95 although this is seemingly a more extensive derogation than the Treaty provision mentioned. Similarly, and as mentioned, the Directive outlines that ‘obligations from international agreements ratified by all Member States and listed in Annex X should apply’,96 and where the EU has set mandatory environmental procurement requirements – for example, promoting clean and energy-efficient road transport vehicles as specified in the Clean Vehicles Directive97 – these must be followed.98 This is an example of how environmental considerations take a variety of forms in the Directive, including that of derogations, international obligations and mandatory standards set by the EU. In addition, a long list of discretionary powers is available to the procuring authorities for pursuing environmental goals. In the first phase of preparing a tender they may choose to take non-economic objectives into account when defining eligibility criteria for participation in the tendering process, as well as refuse to consider bids that do not adhere to environmental law and international environmental obligations.99 In the subsequent phase, the contracting authority has several ways of insisting on environmental issues by defining environmental factors as contract award criteria that can then be considered and weighted in addition to the offered price.100 Such environmental factors may take a range of forms, including insisting on technical environmental standards, eco-labels or life-cycle costing.101 Finally, contracting authorities may also insist on environment-related considerations as conditions for performance of a contract.102 Although this list is not exhaustive,103 it serves to show that procuring authorities and the Member States may choose a broad range of paths to pursue environmental considerations. Each path, however, is subject to various conditions, including the free movement provisions and their principles, which threatens to infringe on discretionary autonomy. It is not a matter of either/or,



95 Recital

41, Directive 2014/24/EU. 37 and Art 18(2), ibid. 97 See Directive 2009/33/EC [2009] OJ L120/5. 98 Recital 95 and Art 42(6), Directive 2014/24/EU. 99 Art 57(4)(a), ibid. 100 Art 67(2), ibid. 101 Ibid. 102 Art 70, ibid. 103 See, eg, Sjafjell and Wiesbrock, ‘Why should public procurement be about sustainability?’ (n 77) 18. 96 Recital

174  Sanja Bogojević however – a complete stifling of national procedures or letting them be. To illustrate this point, technical specifications and life-cycle costing, both requirements that can be included in award criteria, will briefly be outlined.

i.  Technical Specifications As Hettne explains in this volume,104 technical specifications may be set out as award criteria in terms of performance or functional requirements, and include environmental characteristics. For instance, contracting authorities can demand that contractors achieve a 50 per cent recycling rate. It would be left to bidding contractors to show how they aim to accomplish this goal. The advantage lies in allowing the contracting authorities to express their environmental needs, and this in turn motivates the contracting parties to find innovative solutions105 – the latter being a hallmark of the EU public procurement regime.106 Another way in which a technical specification may be formulated is requiring compliance with an eco-label that, in turn, acts as a proof that the contracted good, work or service corresponds to the required environmental characteristics set out in the award criteria or contract performance conditions.107 As Caranta puts it, ‘[l]abels are information shortcuts. Through a symbol, maybe a few words, they convey the message that a given product or service present a number of valuable characters.’108 Both types of technical specifications, however, are subject to numerous conditions. First, they must be ‘sufficiently precise to allow tenders to determine the subject-matter of the contract and to allow contracting authorities to award the contract’.109 The so-called ‘link to the subject-matter requirement’ was first identified by the CJEU in Concordia Bus. Here the Court held that an award criterion specifying the levels of nitrogen oxide emissions and noise in determining the most economically advantageous tender is legitimate, provided that it does not confer unrestricted freedom of choice on the contracting authority, that the criterion is explicitly mentioned in the contract notice, that it is linked to the subject matter of the contract (here the matter concerned a contract for renewing the bus network in Helsinki) and that it complies with the general Treaty principles.110 Assessing the linking-test is not a straightforward judicial exercise. In EVN and Wienstrom, the Court applied an implicit proportionality test, which, as detailed

104 See ch 7. 105 Z Haseman, Integrating Environmental Sustainability into Airport Contracts (Airport Cooperative Research Program 2017) 16. See also Art 42(1) of the Directive, which outlines examples of characteristics that may be included in technical specifications. 106 See n 77. 107 Art 43(1) of the Directive. 108 R Caranta, ‘Labels as Enabler of Sustainable Development’ in Sjafjell and Wiesbrock (eds) (n 14) 99, 100. 109 Art 42(3)(b) of Directive 2014/24/EU concerns technical standards more specifically, and Art 43(1)(a) concerns labels. 110 Concordia Bus (n 4) para 64.

Mapping Public Procurement and Environmental Law  175 by Semple, contrasts with the more pragmatic approach the Court took in cases dealing with a similar subject matter – that is, renewable electricity generation support.111 Although this chapter cannot engage with these issues in detail, the most relevant point for my purposes is that the Court’s assessment allows both a restrictive and a broad application, which raises numerous questions not only about the actual test applied, but also about the use of the proportionality principle in procurement law.112 Second, each reference to a technical specification is required to ‘be accompanied by the words “or equivalent”’113 to ensure openness to competition and enable tenders to ‘reflect the diversity of technical solutions’.114 Indeed, the Dutch Coffee ruling evidences that it is not possible to require that the supplied goods bear a specific label. Here the contracting authority is under an obligation to give reasons for its decision of ‘non-equivalence or its decision that the works, supplies or services do not meet the performance or functional requirements’.115 Both requirements insist on transparency; that is, clarifying what is demanded and why, as the case may be, any given bid fell short of the demand. Ericsson and Groussot see transparency here operating as a ‘control feature’ that is available to the CJEU to ensure that any risk of ‘favouritism or arbitrariness on the part of the contracting authority’116 is precluded. The insistence on justifications, however, suggests that the Court will not simply constrain discretion in this context but engage in intensive review of the reasons provided, which ties into broader debates about the legitimacy of public administration.117

ii.  Life-cycle Costing Life-cycle costing is a mechanism that is often presented as the key ‘tool … to be used to advance the goals of sustainable development’118 under the Directive. Its aim is to present ‘from-cradle-to-grave’ analysis of the costs for a contracted product, service or work, including costs relating to acquisition (of, for example, raw materials) and use (covering energy consumption), as well as end-of-life costs (for instance, the cost of recycling).119 Here the Directive is understood to internalise ‘environmental externalities’, and enable contracting authorities to

111 For a fuller analysis on this point, see A Semple, ‘The Link to the Subject-Matter: A Glass Ceiling for Sustainable Public Contracts?’ in Sjafjell and Wiesbrock (eds) (n 14) 50, 58–59. 112 See ch 12 in this volume. 113 Art 42(3)(b) for technical standards more specifically and Art 43(1)(e) in the case of labels. 114 Dutch Coffee (n 4) para 1, which refers to the then current EU public procurement regime. 115 Article 55(2)(b), Directive 2014/24/EU. 116 Case C-538/13 eVigilo, EU:C:2015:166, para 34, as quoted in ch 5 of this volume. 117 On the virtues of reason-giving under administrative law, see eg M Fordham, ‘Reasons: The Third Dimension’ (1998) Judicial Review 158. 118 DC Dragos and B Neamtu, ‘Life-cycle costing for sustainable public procurement in the European Union’ in Sjafjell and Wiesbrock (eds) (n 14) 114, 116. 119 Article 68(1)(a), Directive 2014/24/EU.

176  Sanja Bogojević consider ‘cost of emissions of greenhouse gases and of other pollutant e­ missions and other climate change mitigation costs’ on the basis that ‘their monetary value can be determined  and verified’.120 This is a quantification-driven narrative that offers a narrow view of environmental problems,121 but it is overall thought to be a better indicator of ‘value for money’ than the initial acquisition/ construction cost, and also to provide a useful economic evaluation of alternative sustainability options.122 Like technical standards, life-cycle costing requirements are conditioned on several points. The linking-test is applicable and requires that specific processes relating to a certain stage of the life-cycle, including production processes, are linked to the subject matter of the contract, ‘even where [they] do not form part of their material substance’.123 However, the main challenge for national authorities in relying on life-cycle costing is the methodology used to assess it. The Directive explains that ‘[w]henever a common method for the calculation of life-cycle costs has been made mandatory’124 then these need to be applied. In all other cases it is for the contracting authority to develop set methods for assessment, provided they are, inter alia, verifiable and non-discriminatory.125 Dragos and Neamtu explain that when legislators drafted the Directive, who should be responsible for outlining the methodology and which test should be applied in judicially reviewing it were some of the core questions with which they ­grappled.126 The final text allows the adoption of national requirements for the type of data that can be used in this context, but the question remains how potential conflicts between national and EU methodologies, or even international ones, are to be resolved, even if general principles of EU law, including the proportionality principle, are applicable. As Dragos and Neamtu conclude, this will be not only technically challenging, ‘but also a tough mission from a legal point of view’.127

iii.  A Brief Point of Reflection Ultimately, what this rough overview shows are the extensive discretionary powers  entrusted to national contracting authorities to pursue environmental considerations, and the multiple conditions applicable once such discretion is ­exercised. Arguably the procedures, tests and methods that are part of the conditioning exercise are murky, imprecise and unpredictable.128 In fact, it is often

120 Article

68(1)(b) ibid. (n 31) ch 1. 122 Dragos and Neamtu (n 118) 116–17. 123 Article 68(3), Directive 2014/24/EU. 124 Ibid. 125 Full list of requirements set out in Art 67(2), ibid. 126 Dragos and Neamtu (n 118) 131. 127 Ibid 133. 128 See ch 2 in this volume. 121 Bogojević

Mapping Public Procurement and Environmental Law  177 reported that the complexities of public procurement procedures make it a challenge both to comply with and to enforce them.129 Increased discretion, however, does not automatically mean fewer rules, or legal obscureness and i­ mprecision.130 To better navigate and make sense of the opportunities open for pursuing environmental protection in public procurement law, it is useful to draw lines between this regime and key themes in environmental law and environmental law scholarship.

IV.  Environmental Law and EU Public Procurement Law: Mapping Intersections Before embarking on the second mapping exercise, where I outline issues that are relevant for both environmental law scholars and public procurement law specialists to consider, especially in the context of environmental protection, which is chiefly a discretionary measure under the EU public procurement regime, it is useful to recall why such an exercise is significant. First, and as outlined previously, public procurement law is, like environmental law, a rapidly developing subject. Mapping exercises are useful tools for scholars in their responses to high-paced developments, ‘in so far as they provide a wide frame for critical reference’.131 In brief, mapping exercises translate key concepts from one legal field to another. They are not intended to be exhaustive accounts: in the present case, the focus is on the role of environmental principles, the significance of climate change law and policy, and the justifiability of environmental models – each reference frame sketched in broad brush strokes. Establishing frames of reference is particularly significant here, as public procurement and environmental law scholars rarely speak to each other; instead their debates are often contained within their specific sub-legal discipline.132 To encourage ‘legal interdisciplinarity’, however, is not to by itself to resolve problems faced by each sub-legal field. Rather, it is an exercise in fostering imaginative approaches to these scholarly problems, and inviting scholars to see links between problems across different legal systems. This, in a nutshell, is the purpose of the following maps.

129 Dragos and Neamtu (n 118) 134; E Aspey and R Craven, ‘Regulating Complex Contracting: A  Socio-legal Study of Decision-making Under EU and UK Law (2018) 81 Modern Law Review 191; European Committee of the Regions, Opinion: Public Procurement Package’ (130th plenary session, 4–5 July 2018) ECON-VI/030. 130 See ch 1 in this volume, as well as Fisher and Shapiro (n 15). 131 Fisher et al (n 22) 245–346. 132 Naturally, many examples to the contrary exist, see section V.

178  Sanja Bogojević

A.  The Role of Environmental Principles in Law Broadly defined, environmental principles are ‘an amorphous group of policy ideas  concerning how environmental protection and sustainable development ought to be pursued’.133 One of their obvious qualities is that they are ‘everywhere’: in the case law of the CJEU and domestic jurisprudence; international, EU and national environmental acts and policies; and environmental law s­ cholarship.134 Similarly, they are present in the EU public procurement regime. In fact, it was by relying on the integration principle found in Article 11 TFEU, which demands that ‘[e]nvironmental protection requirements must be integrated into the definition and implementation of the Union policies and activities’, that the CJEU interpreted the public procurement rules then in force135 to mean that ‘the most economically advantageous tender’ may include ‘criteria of an ecological nature’.136 This view is now an integral part of the Directive, which stipulates that contracting authorities should be allowed to refer to environmental considerations when procuring, ‘with a view to the better integration of social and environmental considerations in the procurement procedures’.137 As a result, the integration principle may be seen as the ‘core idea of sustainable development’, which, although legally ambiguous, is often taken to require that environmental, social and economic considerations are ‘integrated’ in decision-making.138 Indeed, this echoes the Commission’s definition of public procurement as a policy strategy to achieve ‘sustainable and inclusive growth’139 – although the precise definition of each term is tenuous. Public procurement law scholars have, similarly to environmental law scholars, struggled to understand the fine-grained detail and impact of these principles and the role they play or ought to play in law. Attempts are often made to detract from their significance, especially in the case of sustainable development, by linking them to similar mentions in international environmental treaties.140 As explained by Scotford, the difficulty lies in part in seeing environmental principles in detail ‘whilst they also occupy a global stage’, and in part in navigating the debate where environmental principles are ‘expected to achieve many things’.141 In more basic terms, the difficulty is to figure out, as a lawyer, how to make sense of them.142 Sustainable development, for example, is referenced more than 10 times in the preamble to the Directive, including as ‘sustainable and inclusive growth’, ‘­sustainable economic growth’ and ‘sustainable high quality’, without any



133 Fisher,

Lange and Scotford (n 34) 402. (n 71) 1. 135 More precisely, eg, in Art 36(1)(a), Directive 92/50/EC. 136 Concordia Bus (n 4) para 54. 137 Recital 97, Directive 2014/24/EU. 138 Fisher, Lange and Scotford (n 34) 429. 139 Europe 2020 (n 77). 140 Sjafjell and Wiesbrock, ‘Why should public procurement be about sustainability? (n 77) 3. 141 Scotford (n 71) 2. 142 Ibid 1. 134 Scotford

Mapping Public Procurement and Environmental Law  179 clear distinction drawn between the various formulations. This terminological vagueness is not specific to public procurement law but is prevalent in secondary environmental law,143 as well as in the case law of the CJEU. For instance, Advocate General Leger has referred to sustainable development as constituting the ‘fundamental concept of environmental law’,144 which in later cases, however, was reformulated to signify an approach that prioritises environmental protection,145 and later again qualified to suggest that it must be understood in light of the ‘rule that natural resources must be used in a rational manner’.146 Certainly sustainable development is ‘an even more amorphous legal concept than other EU environmental principles’147 due to its strong presence in international environmental obligations, but the integration principle is similarly fraught with legal uncertainties. These relate to its ability to act as a stand-alone test under judicial review,148 as well as its relationship with other Treaty provisions, including Article 37 of the Charter.149 In grappling with these conundrums, environmental law scholars have chosen a variety of paths, ranging from that of challenging the operability of environmental principles150 to advocating for a normative re-evaluation of their meaning.151 Attempting to understand what environmental principles actually do, and which roles they actually play in law, Scotford establishes a valuable framework of analysis, namely that of observing environmental principles in legal isolation.152 This involves digging deep into the case law of comparative jurisdictions and mapping connections between judicial competences, environmental provisions and the legal context in which environmental principles are applied. The careful pattern of environmental principles that is thus drawn is one that is dutiful to legal precision and academic rigour.153 It is in this approach that public procurement law scholars may find comfort and inspiration.

143 For an overview of the ambiguous application of the principle by EU institutions, see L Krämer, EU Environmental Law, 8th edn (Sweet & Maxwell 2016) 9–12. 144 Opinion of Advocate General Leger, Case C-371/98 Ex parte Corporate Shipping, ECLI:EU:C:2000:600, para 56. 145 Opinion of Advocate General Leger, Case C-277/02 EU-Wood-Trading, ECLI: ECLI:EU:C:2004:810, para 9. 146 Opinion of Advocate General Leger, Case C-36/98 Spain v Council, ECLI:EU:C:2001:64, para 77. 147 Scotford (n 71) 192; and for a more detailed about the above-listed case law, see ibid 193–96. 148 J Nowag, ‘Article 11 TFEU and Environmental Rights’ in S Bogojević and R Rayfuse (eds) Environmental Rights in Europe and Beyond (Hart Publishing 2018) 155, 166. 149 E Scotford, ‘Environmental Rights and Principles: Investigating Article 37 of the EU Charter of Fundamental Rights’ in Bogojević and Rayfuse (eds) (n 148) 133, 138. 150 See, eg, Krämer (n 143); AD Tarlock, ‘Ideas without Institutions: The Paradox of Sustainable Development’ (2001) 9 India Journal of Global Legal Studies 35. 151 See, eg, K Bosselman, The Principle of Sustainability: Transforming Law and Governance, 2nd edn (Routledge 2016) ch 1. 152 Scotford (n 71). 153 For a review, see O Pedersen, ‘Review of Environmental Principles and the Evolution of Environmental Law by Eloise Scotford’ (2018) 30 Journal of Environmental Law 359.

180  Sanja Bogojević Arguably, the CJEU case law concerning environmental principles in public procurement law is scarce, albeit significant.154 What is more, and as mentioned previously, national courts are producing a rich case law on public procurement,155 and domestic legislators are similarly responding with a rich body of law, which includes environmental principles, in implementing the Directive. Scotland, for instance, offers a fascinating study of the creation of a so-called ‘sustainable procurement duty’ under the Procurement Reform (Scotland) Act 2014,156 which is worth exploring in detail and possibly as a comparative study with EU and UK public procurement laws. As Fisher, Lange and Scotford explain, detailed work on environmental principles goes into ‘uncharted legal territory’ and is a pioneering journey for the environmental lawyer’,157 especially as environmental principles and their application are under constant development. Procurement law ought to consider joining the expedition.

B.  The Legal Force of Climate Change Law and Policy Climate change law and policy are embodied in an array of legal documents, frameworks and guidelines at multiple jurisdictional levels. These are often perceived as developed top-down under the umbrella of the United Nations Framework Convention on Climate Change (UNCCC), where the current commitments, adopted by the consensus of almost 200 state parties, are outlined under the Paris Agreement.158 The EU has long enjoyed the role of a global leader on climate action159 and subsequently set out ambitious climate goals,160 as have its Member States and most notably the UK, which, through the Climate Change Act 2008, became what was deemed ‘a world leader in climate change legislation’.161 Adjudication on climate change similarly sprawls across jurisdictions where legal disputes relating directly or indirectly to climate change are regarded as ‘disrupting’ – in other words, as challenging existing legal orders.162 In short, this rich body of law, policy and jurisprudence has long been an ‘obsession’ with environmental law scholars.163 154 See n 4. 155 For a brief overview of relevant case law in the Swedish context, see, eg, C Syavenow and L Sennström, Miljö och sociala hänsyn I offtentlig upphandling: Juridik och Praktik (Jure 2013) 47–51. 156 In s 9. 157 Fisher, Lange and Scotford (n 34) 402. 158 UNFCCC, Decision 1/CP.21, ‘Adoption of the Paris Agreement’ (29 January 2016) FCCC/CP/2015/10/Add 1, 2 Annex: Paris Agreement (‘Paris Agreement’). 159 A Jordan et al (eds), Climate Change Policy in the European Union: Confronting the Dilemmas of Mitigation and Adaption (CUP 2010). 160 For an overview of the EU’s climate action, see europa.eu/european-union/topics/climate-action_en. 161 R Macrory, Regulation, Enforcement and Governance in Environmental Law, 2nd edn (Hart Publishing 2014) 261. 162 E Fisher, E Scotford and E Barritt, ‘The Legally Disruptive Nature of Climate Change’ (2017) 80 Modern Law Review 173. 163 E Fisher, ‘Climate Change Litigation, Obsession and Expertise: Reflecting on the Scholarly Response to Massachusetts v EPA’ (2013) 39 Law and Policy 236.

Mapping Public Procurement and Environmental Law  181 Turning to the Directive, the significance of climate change law in the public procurement law regime is implicit in multiple ways. First, Member States are obliged to follow international environmental agreements listed in Annex X, as well as (more broadly), EU and national environmental law.164 Annex X pre-dates the Paris Agreement, but ratified international agreements can be added to its list by the Commission through delegated acts.165 Second, ‘climate change mitigation costs’,166 as well as ‘climate performance’,167 enjoy special mention as examples of life-cycle costing and technical specifications that are permitted under the Directive. This is not to overlook the Commission’s projection of ‘smart public procurement’ as a way in which public bodies can help comply with commitments to deal with climate change.168 Moreover, the CJEU has played a significant role in recognising climate change as a problem both in specific public procurement cases169 and in internal market disputes170 more generally. In both instances, it did so based on existing EU legislation promoting electricity produced from renewable energy sources.171 More precisely, in EVN & Wienstrom the Court acknowledged that this type of energy source is ‘useful for protecting the environment in so far as it contributes to the reduction in emissions of greenhouse gases which are amongst the main causes of climate change’.172 In principle, it thus allowed procuring authorities to pursue a climate change policy pledged to by the EU and its Member States,173 but it left uncertain the context in which such objectives could be pursued by individual Member States.174 This is where it is useful to link public procurement law to current debates on climate change law and policy in environmental law scholarship. For instance, an important point in current environmental law and environmental law scholarship is whether governments are legally obliged to act on climate change and, if so, to what degree. Such debates are largely triggered by the uncertainties of the enforceability of international climate change laws. For example, the Paris Agreement is a treaty under international law, and its ­binding 164 Recital 37 and Art 18(2), Directive 2014/24/EU. 165 Art 56(4), ibid. 166 Art 68(1)(b), ibid. 167 Annex VII, 1(a), ibid. 168 Commission, Buying Green! A Handbook on Green Public Procurement, 3rd edn (Publications Office of the European Union 2016). 169 EVN & Wienstrom (n 4). 170 Case C-379/98 PreussenElektra AG v Schhleswag AG, ECLI:EU:C:2001:160, paras 73–75; Case C-573/12 Ålands Vindkraft AB v Energimyndigheten, ECLI:EU:C:2014:2037, paras 77–82; Case C-204/12 Essent Belgium NV v Vlaamse Reguleringsinstantie voor de Elektriciteits- en Gasmarkt, ECLI:EU:C:2014:2192, paras 90–95. 171 Directive 2001/77/EC of the European Parliament and of the Council of 27 September 2001 on the promotion of electricity produced from renewable energy sources in the internal electricity market, [2001] OJ L283/33, recitals 2 and 3. Now amended to Directive 2009/28/EC on the promotion of the use of energy from renewable sources [2009] OJ L140/16. 172 EVN & Wienstrom (n 4) para 40 (emphasis added). 173 Ibid. 174 See J Hettne, ‘Strategic Use of Public Procurement – Limits and Opportunities (2013, April) SIEPS 1.

182  Sanja Bogojević force is prescribed under the usual procedure for treaties.175 Yet the so-called ‘nationally determined contributions’ (NDCs), which represent individual parties’ climate action plans that are pursued in light of the objective and purpose of the ­Agreement,176 are not a legal part of the Agreement. As a result, environmental law scholars have grappled with the question of legality in downgrading or scaling back on existing NDCs.177 Questions regarding the enforceability of states’ climate change commitments have similarly been framed as disputes before courts. Often, and under the broad banner of ‘climate change litigation’, the judiciary is seen as a ‘critical forum’178 in which climate change as a legal issue can be debated, and where the need for legislative action or compliance can be flagged. This raises important questions about the role that the judiciary plays, or ought to play, in mobilising comprehensive laws to address pressing issues like climate change, and the extent to which, if at all, courts can be relied upon to redress institutional failure.179 Public procurement law offers several exciting opportunities for considering overlaps between the climate change regime and discretionary powers under the Directive. One such question is the extent to which national discretionary powers for pursuing environmental goals could be reframed, in light of the Paris Agreement and in the case of scaling back on existing NDCs, as an obligation that national authorities would have to insist on when engaged in procurement. Arguably, this may not resolve the underlying problem of effective legal remedy. As Macrory explains: [Imagine that legal] action was taken too early: say, five or ten years before the [compliance] date, on the basis that the target would not be reached, the courts would be likely to reject the case as premature. However, if one waited until 2049 before taking legal action, it would be difficult to know what sort of effective legal remedy would then be available – a mere declaration by the court that the government was in breach would be something of a pyrrhic victory.180

Yet as Bouwer argues, the future of climate change litigation is ‘unsexy’.181 Her argument is that the real matter for reflection lies in thinking about where future 175 R Bodle and S Oberthur, ‘Legal Form of the Paris Agreement and Nature of Its Obligations’ in D Klein et al (eds), The Paris Agreement on Climate Change: Analysis and Commentary (OUP 2017) 91, 92. 176 In short, the aim is to prevent dangerous human interference with the climate system: Art 2, Paris Agreement. 177 L Rajamani and J Brunnee, ‘The Legality of Downgrading Nationally Determined Contributions under the Paris Agreement: Lessons from the US Disengagement’ (2017) 29 Journal of Environmental Law 537. On a more general note about the potential force of NDCs, see Lord Carnwath, ‘Climate Change Adjudication after Paris: A Reflection’ (2016) 28 Journal of Environmental Law 5. 178 H Osofsky, ‘The Continuing Importance of Climate Change Litigation’ (2010) 1 Climate Law 3, 4. 179 See, eg, S Bogojević, ‘EU Climate Change Litigation, the Role of the European Courts, and the Importance of Legal Culture’ (2013) 35 Law & Policy 184. 180 Macrory (n 161) 263. 181 K Bouwer, ‘The Unsexy Future of Climate Change Litigation’ (2018) 30 Journal of Environmental Law 483.

Mapping Public Procurement and Environmental Law  183 litigation may occur. In other words, the unsexy element is appealing to ‘small scale, local and immediate issues’ that may bring climate change issues to the (legal) fore. Now is therefore an ideal time for environmental law and procurement law scholars to turn to one another to consider at least some of the issues mentioned here.182 In addition to imagining future climate change pursuits, national climate change laws and policies similarly offer interesting case studies. Returning to the example of Scotland, its climate change legislation has gone further than its English counterpart by extending duties to all public bodies to assist in achieving its climate change targets.183 In the same vein, it has introduced a duty on public bodies to report on carbon emissions reduction targets, climate change adaption and actions on sustainability.184 This raises interesting questions about reporting as a regulatory strategy, and variations in the implementation of the Directive across and within Member States.

C.  Justiciability of Environmental Models Environmental models, though traditionally of limited interest to lawyers – including public procurement specialists – play an increasingly significant role in environmental decision-making.185 As Fisher, Pascual and Wagner explain, their roles are diverse and vary from that of informing policy where no regulatory action is yet put in place, carrying out an institutional mandate and constituting a regulatory strategy.186 Each version involves technical, institutional, interdisciplinary and evaluative complexities, which this chapter is unable to discuss in any detail. The important point to make is that environmental modelling plays an important role in the Directive too. More precisely, environmental modelling becomes r­ elevant should national authorities insist on the use of lifecycle costing. If a common method for the calculation of such costs has been made mandatory by a legislative act by the Union then that common method needs to be applied;187 in all other cases, however, it is for the contracting authorities to determine the method used to determine life-cycle costing.188 As outlined earlier, assessing the validity of such methods is a predictable legal challenge.

182 Previous examples include H van Asselt, N van der Grijp and F Oosterhuis, ‘Greener public purchasing: opportunities for climate-friendly government procurement under WTO and EU rules’ (2006) 6 Climate Policy 217. 183 Climate Change (Scotland) Act 2009, s 44. Targets are outlined in pt 1 of the Act. 184 The Climate Change (Duties of Public Bodies: Reporting Requirements) (Scotland) Order 2015 (SI 2015/347), sch 1. 185 E Fisher, P Pascual and W Wagner, ‘Understanding Environmental Models in Their Legal and Regulatory Context’ (2010) 22 Journal of Environmental Law 251. 186 Ibid. 187 Art 68(3), Directive 2014/24/EU. 188 Art 68(2), ibid.

184  Sanja Bogojević The Directive, however, insists on transparency. As such, it outlines that ­ ethods (which would include modelling) that are used for the assessment of m costs must be ‘based on objectively verifiable and non-discriminatory criteria’ and ‘accessible for all interested parties’.189 Insisting on openness in this regard may seem a straightforward demand. As Ericsson and Groussot explain, transparency is a leading principle of the Directive, and its aim is to restore confidence in the bureaucratic, domestic systems.190 From this perspective, it emerges as a response to the concern regarding mistrust.191 In consequence, transparency may be viewed as setting out two aims: first, to make things visible and, second, to thereby make ‘life and society better’192 – here, that would mean unmasking any protectionist measures and ensuring an level playing field for economic actors across the Union. The set principle in legal terms, however, is far more complex than it may at first seem. To start with, transparency alone is not sufficient, as we need to know what we see, often with expert help.193 This becomes particularly important in the context of environmental modelling, which inevitably relies on science for its observations. In a recent case before the UK Court of Appeal, the Environment Agency’s decision to impose a catch limit without compensation for the protection of fish stocks was challenged, and an important aspect of the challenge concerned whether the estimates as to the percentage of salmon that were Wye salmon and would return were robust enough to provide a rational basis for the Agency’s decisions. Here Beatson LJ made clear that a ‘reviewing court needs to be given a sufficient explanation by a regulator operating in a technical or scientific area of how the science relates to its decision so that the court can consider whether it embodies an abuse of discretion or an error of law’.194 In this particular case the Court clearly identified the intersections of science and law. The implications are that national agencies are expected to explain the analytical methods used by them to reach their scientific inferences.195 This may again seem a straightforward demand, but as environmental problems often involve scientific uncertainty, such demands are not without legal quandaries. This is illustrated in ClientEarth No 2,196 another case before the UK courts, pertaining to the Air Quality Directive, which purports to improve the quality of

189 Art 68(2)(a)–(b), ibid. 190 See ch 5 in this volume. 191 This asks interesting questions about public procurement law outside the EU legal framework: see Peter Walker, ‘Public contracts should go to UK firms, says Jeremy Corbyn’ Guardian (24 July 2018). 192 E Fisher, ‘Exploring the Legal Architecture of Transparency’ in P Ala’i and R Vaughn (eds), Research Handbook on Transparency (Edward Elgar Publishing 2014) 59, 60. 193 P Pascual, W Wagner and E Fisher, ‘Making Method Visible: Improving the Quality of ScienceBased Regulation’ (2013) 2 Michigan Journal of Environmental and Administrative Law 429. 194 Mott [2016] EWCA Civ 564, [64]. 195 For a detailed expose of these issues, see Pascual, Wagner and Fisher (n 193). 196 ClientEarth (No 2) v Secretary of State for the Environment, Food and Rural Affairs [2016] EWHC 2740 (Admin).

Mapping Public Procurement and Environmental Law  185 ambient air within Member States.197 The litigation concerned, in part, the UK Government’s modelling method in its response to the Directive’s demands to set out plans where the quality of ambient air fails to comply with certain thresholds. Two points should be highlighted here. First, the Government had used the same method for generating projections on a five-year cycle ‘as a matter of routine for a number of years’,198 and the method was routinely used by the Commission.199 Second, the Government had made use of a specific set of estimates, known as the ‘COPERT’ estimates,200 of the quantity of nitrogen dioxide emitted by diesel vehicles, at a time when it was commonly believed that such vehicles emitted a considerably greater quantity than the estimates suggested. Ultimately the Court found the Government’s response under the set Directive to be illegitimate. In doing so it demonstrated the extent to which judges may engage in judicial review of environmental modelling, and the degree to which judicial deliberations on environmental modelling and administrative discretion help push legal reasoning and our thinking about the role of judicial review.201 Clearly these cases are not about public procurement law, but they raise questions that are of the essence in thinking about the use of life-cycle costing, the impact of judicial review and the role of judges in framing the law’s demands for transparency in environmental matters. Public procurement law scholars should be able to track several useful references.

V. Conclusion This chapter is a reflective piece in the sense that it maps intersections between public procurement law and environmental law not as an exhaustive account thereof, but rather to encourage legal imagination and engagement across the two sub-legal disciplines. This is significant, as often discretionary space, as found in the EU public procurement regime, is seen in binary terms. What this means is that core legal problems tend to be conceptualised as relating to whether such an allocation of discretion should or should not be secured. By moving away from this view, we can start appreciating the impact that environmental principles, international environmental law and legal reasoning on environmental modelling may have on public procurement law, and how it evolves in considering environmental interests. The possible points of connections between the two subjects outlined in the present chapter are, it is hoped, mere starting points.

197 Directive 2008/50/EU on ambient air quality and cleaner air for Europe [2008] OJ L152/1. 198 Ibid para 57. 199 Ibid. 200 Ibid para 27. 201 For a detailed account of the case, see J Bell, ‘ClientEarth No 2: A Case of Three Legal Dimensions’ (2017) 29 Journal of Environmental Law 343.

186

part iv Discretion in Public Procurement Regimes Beyond the EU

188

9 Discretion, Divergence, Paradox: Public and Private Supply Chain Standards on Human Rights CLAIRE METHVEN O’BRIEN AND OLGA MARTIN-ORTEGA

I. Introduction In Europe and globally, expectations on businesses to manage human rights risks in their supply chains are becoming increasingly more detailed, demanding and widespread.1 The European Commission’s 2011 Communication on Corporate Social Responsibility calls for enterprises ‘[t]o identify, prevent and mitigate their possible adverse impacts’ on human rights, as well as environmental and social concerns. ‘Large enterprises’, it states, ‘and enterprises at particular risk of having such impacts, are encouraged to carry out risk-based due diligence, including through their supply chains’.2 The Council of Europe, recognising ‘that business enterprises have a responsibility to respect human rights’, has called for its Member States to ‘apply such measures as may be necessary’ to encourage or require business enterprises to apply human rights due diligence ‘throughout their operations’.3 Based on the UN Framework on Business and Human Rights and the Guiding Principles that implement it (the UN Guiding Principles on Business and Human Rights, (UNGPs)),4 a large volume of guidance has been

1 For background and an overview of relevant normative developments, see C Methven O’Brien and S Dhanarajan, ‘The Corporate Responsibility to Respect Human Rights: A Status Review’ (2016) 29 Accounting, Auditing and Accountability Journal 542. 2 European Commission, A renewed EU strategy 2011–14 for Corporate Social Responsibility, COM(2011) 681 final, at 6. 3 Recommendation CM/Rec(2016)3 of the Committee of Ministers to Member States on human rights and business (2 March 2016), Appendix, para 20. 4 UNHRC, Protect, Respect and Remedy: a Framework for Business and Human Rights, UN Doc A/HRC/8/5, 7 April 2008 and UNHRC, Human Rights and Transnational Corporations and Other Business Enterprises, UN Doc A/HRC/Res 17/4, 16 June 2011, para 1, endorsing HRC, Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy Framework, UN Doc A/HRC/17/31, 21 March 2011, Annex, para 2.

190  Claire Methven O’Brien and Olga Martin-Ortega produced to describe how businesses should implement ‘human rights due diligence’5 in areas including supply chain management, most recently by the OECD.6 High-level statements in similar terms have been adopted by the G7 and G20.7 Legislation has been enacted by France and the United Kingdom (UK), as well as in the United States (US), defining corporate responsibilities with human rights dimensions in the context of supply chain management.8 Many large corporations have responded to such developments by establishing, besides human rights policies, detailed performance standards for their suppliers that take legal form via incorporation into purchase contracts. In stark contrast, the supply chain responsibilities of public buyers for human rights have scarcely been addressed by new legislation, official guidance or contractual terms, notwithstanding increasing concerns about the human rights impacts of public purchasing.9 Such a divergence between norms applicable in the public and private supply chain contexts appears paradoxical, we contend, for at least four reasons. First, human rights laws designate states and public authorities as primary duty-bearers, in other words, as the actors on whom the role of safeguarding human rights in the first place falls. As non-state actors, however, corporations lack direct obligations in relation to human rights.10 Rather, it is states who are responsible and potentially liable, under human rights standards, for abuses resulting from the acts of businesses within their jurisdiction. It would seem to contradict this position if, in the context of supply chain management, these roles are reversed. Second, state duties to respect, protect and remediate human rights abuses are still generally restricted to the state’s territorial jurisdiction.11 Historically, states

5 O Martin-Ortega, ‘Human rights due diligence for corporations: from voluntary standards to hard law at last?’ (2014) 32 Netherlands Quarterly of Human Rights Law 44. 6 OECD, Due Diligence Guidance for Responsible Business Conduct (2018), available at mneguidelines.oecd.org/OECD-Due-Diligence-Guidance-for-Responsible-Business-Conduct.pdf. 7 Leaders’ Declaration G7 Summit, 7–8 June 2015, at 5; G20 Leaders Declaration Shaping an interconnected world, Hamburg 7/8 July 2017, at 4. 8 Loi no 2017-399 du 27 Mars 2017 relative au devoir de vigilance des sociétés mères et des entreprises donneusesd’ordre, available at www.legifrance.gouv.fr/affichTexte.do?cidTexte=JORFTEXT0 00034290626&categorieLien=id; UK Modern Slavery Act 2015, available at www.legislation.gov.uk/ ukpga/2015/30/contents/enacted; California Transparency in Supply Chains Act 2010, available at oag. ca.gov/SB657. 9 R Stumberg, A Ramasastry and M Roggensack (International Corporate Accountability ­Roundtable), Turning a Blind Eye. Respecting Human Rights in Government Purchasing (ICAR 2016); C Methven O’Brien et al (International Learning Lab on Public Procurement and Human Rights), Public Procurement and Human Rights: A Survey of Twenty Jurisdictions (DIHR/ICAR 2016), available at www.hrprocurementlab.org/resources/reports/. 10 See section II below for the discussion of the distinctions between state obligations and corporate responsibilities with regard to human rights. 11 C Methven O’Brien, ‘The Home State Duty to Regulate the Human Rights Impacts of TNCs Abroad: A Rebuttal’ (2018) 3 Business and Human Rights Journal 47; C Methven O’Brien, ‘Are European Home States of Transnational Corporations Responsible for Their Impacts Abroad Under The ECHR?’ in A Bonfanti (ed), Business and Human Rights in Europe: International Law Challenges (Routledge 2019).

Discretion, Divergence, Paradox  191 in Europe as elsewhere have often used their purchasing power to promote social goals, including, prominently, labour market integration of vulnerable or marginalised groups.12 Yet the objective of relevant measures has usually been to protect domestic constituencies, rather than to advance social and labour concerns, or human rights, beyond national borders. On the other hand, supply chain standards addressed to businesses do not usually acknowledge such a distinction, or operationalise it. Corporations are enjoined to take measures to advance the enjoyment of human rights by persons beyond, as well as inside, the jurisdiction of the country of their seat or domicile. This may also be thought contradictory from the point of view of the status, noted above, of states as primary duty-bearers and subjects of international human rights norms.13 Third, the use of public procurement to advance social aims has generally been understood in doctrinal terms as an exercise of discretion to achieve ‘secondary’ objectives, within restricted parameters defined by the logic of competition, its embodiment in trade law and more specifically by procurement law’s ‘primary’ objectives, understood as encompassing efficiency, value for money and nondiscrimination if, at least in the EU, no longer lowest price per se. In the universe of human rights laws, on the other hand, their underpinning fundamental values, including human dignity, and states’ obligations to honour these, should take precedence over states’ obligations flowing from other sources of law, national or international, and so including procurement laws, deriving from the World Trade Organization (WTO) or EU, for instance.14 Securing such lexical priority, indeed, can readily be understood as the raison d’être of the post-World War II human rights framework. If this premise is accepted, particularly in the EU setting, given the Union’s foundational commitments to human rights,15 states’ discretion in the area of trade and procurement laws should be determined by, and where necessary extended insofar as needed to protect human dignity, at the very least within jurisdictional contours. Vice versa, the suggestion that the objectives of competition and non-discrimination between bidders might provide a pretext for public actors to avoid needed safeguards to avoid, for instance, complicity in the abuse of fundamental rights amongst supply chain workers or users of public services, would not on this view be entertained.16

12 C McCrudden, Buying social justice. Equality, government procurement and legal change (OUP 2007); S Arrowsmith and P Kunzlik, Social and environmental policies in EU procurement law: New directives and new directions (CUP 2009). 13 Assuming this category is accepted. Cf R Higgins, Problems and Process: International Law and How We Use It (Clarendon 1994) 50. 14 Subject, of course, to the discretion allowed to states in their manner of implementing human rights norms, as recognised, eg, in the concepts of proportionality and the margin of appreciation in the jurisprudence of the European Court of Human Rights (ECtHR). 15 Art 6, Consolidated Version of the Treaty on European Union [2008] OJ C115/13. 16 Acknowledging the existence of more nuanced discussions of the interaction between human rights and international trade laws than space allows us to engage with here, see, eg, EU Petersmann, ‘Human Rights, International Economic Law and “Constitutional Justice”’ (2008) 19 European Journal

192  Claire Methven O’Brien and Olga Martin-Ortega Lastly, public buyers are highly significant in the global marketplace. Governments are mega-consumers of a vast array of manufactured products and services. The member states of the EU spend around 14 per cent of GDP on the purchase of services, works and supplies.17 Globally, public procurement accounts for 15 to 20 per cent of GDP. Public procurement commitments under the WTO’s Agreement on Public Procurement (GPA) are estimated at around EUR 1.3 trillion.18 Governments ought correspondingly to be able to influence, through procurement, the terms of trade and corporate conduct across a wide range of sectors. Through their purchase contracts, they might exercise leverage over immediate suppliers and, through supply chain requirements, over second and subsequent tiers of the supply chain. By forgoing the imposition of minimum human rights standards in their supply chains, public actors undermine the achievement, and credibility, of the ‘sustainable value chain’ standards they promote to businesses and other stakeholders. This chapter explores the context for these developments and considers their implications for law, policy and practice.19 Our focus is on Europe, though in broad terms the analysis is of worldwide application. Section II extends the analysis sketched above, of the framework of norms applicable to purchasing by public and private actors linked to human rights abuses, as understood from the perspective of international human rights law. That section addresses, in particular, how the state duty to protect human rights and the doctrine of positive obligations play out in the procurement scenario with reference to the European Convention on Human Rights (ECHR). Section III illustrates, by contrast, how public buyers’ discretion to promote the achievement of social objectives has conventionally been construed from the standpoint of EU public procurement law, namely as an exceptional derogation from the logic of competition. Section IV surveys new supply chain standards, demonstrating the existence of a growing discrepancy between the conduct expected of corporations and public buyers as regards human rights due diligence. Section V concludes.

of International Law 769; R Howse, ‘Human Rights, International Economic Law and Constitutional Justice: A Reply’ (2008) 19 European Journal of International Law 945. See also L Bartels, ‘Human Rights and Sustainable Development Obligations in EU Free Trade Agreements’ (2013) 40 Legal Issues of Economic Integration 297. 17 See at ec.europa.eu/growth/single-market/public-procurement_en. 18 Ibid. The GPA only covers a fraction of global public procurement, therefore the global figures are much higher. 19 See further O Martin-Ortega and C Methven O’Brien, ‘Advancing Respect for Labour Rights Globally through Public Procurement’ (2017) 5 Politics and Governance 69; O Martin-Ortega, O  Outhwaite and W Rook, ‘Buying power and working conditions in the electronics supply chain: Legal options for socially responsible public procurement’ (2015) 19 International Journal of Human Rights 341; O Outhwaite and O Martin-Ortega, ‘Human Rights in Global Supply Chains: Corporate Social Responsibility and Public Procurement in the European Union’ (2016) 10 Human Rights & International Legal Discourse 41.

Discretion, Divergence, Paradox  193

II.  The Human Rights Lens: Dignity Defines Discretion (within Limits) A.  Duties of States to Protect Human Rights Under international human rights treaties, states are bound to protect, respect and  fulfil the human rights of persons within their jurisdiction. In particular, the duty to protect human rights extends to taking reasonable steps to preclude actions harmful of human rights by third parties, including both natural and legal persons. Generally speaking, such obligations are defined with reference to states’ territorial jurisdiction.20 Exceptionally, human rights jurisdiction has been recognised in relation to extraterritorial acts, in two scenarios: where the state exercises ‘effective overall control’ of a geographical area beyond its own borders (‘spatial model’ of jurisdiction),21 or where a state ‘exercises authority or control over an individual’ outside its own territory (the ‘personal’ or ‘state agent authority and control’ model of jurisdiction).22 A state is only responsible for acts or omissions that are attributable to it.23 Where a business actor, rather than the state itself, is the immediate perpetrator of conduct amounting to human rights abuses, before a state breaches its human rights obligations, it is required that either (i) the act of the business that harms human rights is attributable to the state, or (ii) the state has defaulted on ­‘positive obligations’ to protect rights-holders against abuses by non-state actors. In either case, the harm to human rights that occurs must breach an obligation arising under a treaty to which the state is a party, a customary norm or principle of international law binding on the state in question. Attribution of acts (or omissions) is addressed by Articles 4 to 11 of the International Law Commission’s Draft Articles on State Responsibility (‘ILC Articles’).

20 O’Brien, ‘The Home State Duty to Regulate’ (n 11). 21 Eg Loizidou v Turkey, App no 15318/89, Judgment (Preliminary Objections), 23 March 1995, para 62; Bankovic and Others v Belgium and Others [GC] (dec), App no 52207/99; ICJ, Legal Consequences of the Construction of a Wall in the Occupied Palestinian Territory: Advisory Opinion (9 July 2004), 136, paras107–12; Armed Activities on the Territory of the Congo (Congo v Uganda), Judgment, 19 December 2005, paras 178–80. 22 See Lopez Burgos v Uruguay (1981) 68 ILR 29, Communication no R12/52, UN Doc Supp no 40 (A/36/40) at 176); Celiberti de Casariego v Uruguay, Communication no R 13/57, UN Doc Supp no 40 (A/37/40) at 157 (1981); Öcalan v Turkey, App no 46221/99, Judgment, 12 March 2003, para 93; Öcalan v Turkey [GC] App no 46221/99, Judgment, 12 May 2005; Al-Skeini and others v UK [GC], App no 55721/07 7, Judgment, 7 July 2011. 23 International Law Commission (ILC) Draft Articles on Responsibility of States for Internationally Wrongful Acts, extract from the Report of the ILC on the work of its fifty-third session, November 2001, Supplement no 10 (A/56/10), chp.IV.E.1, available at legal.un.org/ilc/texts/instruments/english/ draft_articles/9_6_2001.pdf, ch I, ‘General Principles’, Art 2.

194  Claire Methven O’Brien and Olga Martin-Ortega According to Article 4, states are responsible for the acts of their organs, including de facto organs. Article 8 provides that states are responsible for the acts of non-state actors where these are done under the state’s instructions, or where the state otherwise ‘directs or controls’ such actions.24 The doctrine of positive obligations, which arises under international human rights instruments, amongst them the ECHR, can require states to protect rightsholders against abuses committed by private persons or entities, for instance, via deterrent measures, such as legislation, policies or, in the case of known threats, specific operational steps. It may also require of states certain responses to abuses once they have occurred.25 Hence, a state may be responsible for abuses arising from its failure to take such measures, and states have been found liable for harms arising from a failure to regulate businesses.26 By virtue of positive obligations, complicity or acquiescence with the acts of individuals may also engage state responsibility in certain circumstances.27 Yet besides the requirement of jurisdiction, the establishment of positive obligations requires the existence of a ‘sufficient nexus’.28 That is to say, the defaults of the state or specific public actors should have ‘sufficiently direct repercussions’29 on human rights. At the same time, positive obligations are circumscribed by requirements of reasonableness: their scope is influenced by the need for states to balance rights, interests and the potential resource implications of safeguarding measures, for example. At least under the ECHR, proportionality and the doctrine of margin of appreciation may also be in play, devices which influence the exact character of scrutiny exercised by the ECtHR if called on to review state action, and which hence function to decide what discretion states should enjoy in implementing rights, or curtailing them, as the case may be. Relatedly, the precise scope and extent of positive obligations vary across human rights instruments, as well as between enumerated human rights within them.

24 ILC Art 8, ‘Conduct directed or controlled by a State’, provides that ‘The conduct of a person or group of persons shall be considered an act of a State under international law if the person or group of persons is in fact acting on the instructions of, or under the direction or control of, that State in carrying out the conduct.’ 25 Eg Velasquez Rodriquez Case, Judgment 29 July 1988, Inter-AmCtHR (Ser c), No4 (1988); X and Y v Netherlands, App no 8978/80, Judgment, 26 March 1985, para 23; Osman v UK [GC], App no23452/94, Judgment, 28 October 1998. See also Human Rights Committee, General Comment No 3: The Nature of the General Legal Obligation Imposed on States Parties to the Covenant (2004), CCPR/C/21/Rev.1/ Add 1326, para 8. 26 Eg Fadeyeva v the Russian Federation, App no 55273/00, Judgment, 30 November 2005, paras 89 and 92. 27 Eg Ireland v UK, App no 5310/71, Judgment, 18 January 1978, para 159. 28 Fadeyeva v the Russian Federation (n 26), para 92. 29 Moldovan and Others v Romania, App nos 41138/98 and 64320/01, Judgment, 30 November 2005, para 95, citing llaşcu and others v Moldova and Russia, [GC] App no 48787/99, Judgment, 8 July 2004.

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B.  The State Duty to Protect Human Rights as Applied to Public Procurement Applying these principles, it can be seen that human rights abuses linked to public procurement activity, if they occur within a state’s jurisdiction, could potentially give rise to a state’s international legal liability (as well as domestic liability in monist systems) at least in certain cases, if by no means in all and every circumstance. First, subject to the provisos noted in section II.A, a state’s failure to implement adequate deterrent measures, such as legislation or policies to prevent human rights abuses by businesses with whom it contracts, or operational steps in the case of known threats, could entail a breach of positive obligations and hence international legal liability in the case of abuses occurring within the state’s territorial jurisdiction. Arguably, this could apply to procurements of goods in sectors where workers in local supply chains are at high risk of serious human rights abuses, such as forced labour and human trafficking (as could be true, for example, in the apparel, agricultural produce and seafood sectors). Equally it could apply to procurements of services posing a known high risk in terms of serious human rights abuses either of local workers (as could be the case in contract cleaning and construction) or of service users, with potential application in social care, the management and operation of prisons and other detention facilities, immigration removals and social benefit administration. Second, beyond its territorial jurisdiction, but within a territory subject to its ‘effective overall control’ (for example, a territory under military occupation) or where individuals are under the control of state agents, a state may be liable in similar circumstances to those described above in relation to public procurement within the territorial jurisdiction. Though at first sight an apparently marginal case, the continuing trend towards ‘contractorisation’ of military and diplomatic support services renders this scenario increasingly salient.30 Third, private and state-owned businesses are not generally assimilated to the status of de facto organs of the state. Yet, in addition, the requirement of attribution could, it seems, be satisfied by some types of procurements in relation to the delivery of certain services and works or some procurements by certain state-owned enterprises, at least in specific circumstances. States are not generally responsible for the acts or omissions of state-owned or controlled enterprises. State responsibility requires that a corporate entity is exercising elements of governmental authority, or that the state is using its ownership interest in or control of the

30 J Sinclair, ‘Outsourcing and bonded labour in military and diplomatic security services’ in O Martin-Ortega and C Methven O’Brien (eds), Public Procurement and Human Rights: Opportunities, Risks and Dilemmas for the State as Buyer (Edward Elgar, forthcoming 2019).

196  Claire Methven O’Brien and Olga Martin-Ortega corporate entity specifically to achieve a particular result. According to the ILC Commentary to Article 8 of the Draft Articles on State Responsibility: [I]nternational law acknowledges the general separateness of corporate entities at the national level, except in those cases where the ‘corporate veil’ is a mere device or a vehicle for fraud or evasion. The fact that the State initially establishes a corporate entity, whether by a special law or otherwise, is not a sufficient basis for the attribution to the State of the subsequent conduct of that entity. Since corporate entities, although owned by and in that sense subject to the control of the State, are considered to be separate, prima facie their conduct in carrying out their activities is not attributable to the State unless they are exercising elements of governmental authority within the meaning of article 5 …

However, the ECtHR has held states directly responsible for breaches of human rights by government-owned or government-controlled enterprises, applying a combination of criteria to determine whether a corporation acted as an agent of the state in a given case, including the degree of its institutional and operational independence with reference, for instance, to de jure or de facto state supervision and control; and the context in which the activity in question is carried out, where issues such as whether the corporation has a monopoly position in the market may be considered.31 If European state-owned or state-controlled enterprises do qualify as state agents, they might have potential liabilities, in relation to human rights abuses linked to their procurements, on the same footing as other public authorities, as already outlined. On the other hand, whether procurements by state-owned or state-controlled enterprises fall within, or outside, the scope of national procurement rules may be a matter specifically addressed by such regimes themselves, and such provisions could be expected to bear on any determination of this issue by human rights mechanisms or other tribunals. Returning to the private delivery of public services, where a state ‘contracts out’ essential public services or establishes hybrid public-private bodies to deliver such services, the ECtHR has held that the ‘State cannot absolve itself entirely from its responsibility by delegating its obligations to secure the rights guaranteed by the Convention to private bodies or individuals’.32 Accordingly, states may be liable for the actions of private actors performing public functions. It is thus foreseeable that human rights may be engaged generally by arrangements for the delivery of contracted-out public services, or by specific services provided to particular users, for example: (a) where access to the services in question is a prerequisite to respect for the human rights of service users; 31 Ališić and Others v Bosnia and Herzegovina, Croatia, Serbia, Slovenia and the Former Yugoslav Republic of Macedonia (Grand Chamber Judgment of 16 July 2014) para 114; Mykhaylenky and Others v Ukraine (Judgment of 6 June 2005) para 44; and Liseytseva and Maslov v Russia (Judgment of 9 ­January 2015) paras 187–90. 32 Van der Mussele v Belgium, Judgment, 23 November 1983, Series A no 70, at 14–15, paras 28–30; Costello-Roberts v UK, App No 1314/87, Judgment, 25 March 1993, para 27; Storck v Germany, App No 61603/00, Judgment, 16 June 2005, para 103.

Discretion, Divergence, Paradox  197 (b) where the quality or manner of delivery of the services may impact on the enjoyment of human rights by service users; or (c) where the terms of contracts between public authorities and private providers fail to secure respect for workplace rights of the employees or other workers of such providers, where these are also recognised as human rights. If, in these scenarios, a public authority’s failure to take ‘reasonable and appropriate’ measures to protect the rights of services users or workers results in their breach, the above principles may provide a basis for state liability.33 This will be particularly relevant where the services in question relate to at-risk groups (for instance, detained persons or rights-holders at risk of vulnerability or marginalisation, such as children, the elderly or persons with disabilities).34 Beyond these situations, human rights treaties, including the ECHR, do not currently provide a general basis for state liability for human rights abuses occurring outside its territorial jurisdiction and linked to it by its procurement activity, because states do not usually have positive obligations in relation to extraterritorial acts by non-state actors, even if they are corporations linked to the state by a chain of purchase contracts, as discussed above. Consequently, as the law stands, European public purchasers would not be responsible for abuses in their supply chains occurring beyond national borders, apart from the scenarios outlined above, even if some international human rights bodies now appear keen for this to change.35

C.  Corporations and Human Rights Until recently, corporations, whether in the capacity of private buyer, supplier to government or otherwise, were not viewed as responsible for international supply chain human rights abuses, not even local ones. As noted earlier, human rights instruments recognise states as duty-bearers, and not private actors, such as businesses, as a general rule. Consequently international human rights treaties do not generally impose direct obligations on corporate actors. The ECHR applies to violations of rights by a state and does not usually have direct effect between private parties. Under Article 34 ECHR, individual applications may only be received by the ECtHR from a person, non-governmental organisation or group of

33 C Methven O’Brien, Essential Services, Public Procurement and Human Rights in Europe (University of Groningen Faculty of Law Research Paper No 22/2015), available at papers.ssrn.com/sol3/ papers.cfm?abstract_id=2591898. 34 See further C Emberson and A Trautrims, ‘Public procurement and modern slavery risks in the English adult social care sector’ in Martin-Ortega and Methven O’Brien (eds) (n 30) ch 11. 35 UN Committee on Economic Social and Cultural Rights, General Comment No 24 (2017) on State obligations under the International Covenant on Economic, Social and Cultural Rights in the context of business activities, UN Doc E/C.12/GC/24, 10 August 2017), Section C, ‘Extraterritorial Obligations’, paras 25 et seq.

198  Claire Methven O’Brien and Olga Martin-Ortega individuals, ‘claiming to be the victim of a violation by one of the High Contracting Parties’. Articles 1 and 2 of the Additional Protocol to the European Social Charter have similar effect.36 Individuals cannot rely upon these instruments to raise complaints against business enterprises directly before human rights supervisory mechanisms, even if they may seek to make claims against states for businessrelated abuses. Nonetheless, a consensus is emerging amongst states, social actors and, not least, businesses themselves, that companies have a ‘responsibility to respect’ human rights, understood as a duty to refrain from interfering with human rights as well as to take measures, in particular human rights due diligence, to ensure that they do not impact adversely on human rights in practice37 – a remarkable development, given the limited extent of the formal legal duties of public buyers as analysed in section II.B. The scope of private buyers’ responsibilities for human rights in supply chains is discussed in greater detail in section IV. First, though, we revisit the manner of public procurement law’s engagement with ‘social’ policy concerns in the past, before highlighting how this would seem to differ from the character of legal reasoning demanded by today’s emergent human rights-based analysis.

III.  The Public Procurement Lens: Competition before Discretion The principal policy objectives or ‘primary’ aims of public procurement, as defined by national, supranational or international procurement rules are: (i) the achievement of value for money (‘efficiency’); (ii) non-discrimination between tenderers; and (iii) open competition.38 Yet governments often seek to use public purchasing to promote other policy objectives, typically labelled ‘secondary’ or ‘horizontal’ aims. Such ‘social’, environmental or other objectives, such as local or national industrial and economic development, are not necessarily connected with a procurement’s functional objective of obtaining services and products at the best value for money.39

36 European Social Charter of 1961 (ETS No 035); its Additional Protocol (ETS No128) of 1988; the 1995 Additional Protocol Providing for a System of Collective Complaints (ETS No158); and the 1996 European Social Charter (revised) (ETS No163). 37 UNGPs (n 4). 38 S Arrowsmith, ‘Horizontal Policies in Public Procurement: A Taxonomy’ (2010) 10 Journal of Public Procurement 149. 39 Arrowsmith and Kunzlik (n 12) 9. In this chapter, for brevity, we refer to horizontal policies as including environmental, social and human rights considerations, even if, for reasons described above, we maintain that human rights have a binding character that other ‘social’ policy considerations may lack. In addition, as discussed later, it should also be noted that the interpretation of ‘social’ considerations in the procurement context so as to include human rights beyond ‘core labour rights’, is currently contested by some public procurement scholars (see n 63).

Discretion, Divergence, Paradox  199 Links between social policy concerns and public procurement have manifested at least since the beginning of the nineteenth century.40 As noted earlier, public procurement has often been harnessed to advance the integration of marginalised or disadvantaged groups into domestic labour markets. Attempts have also been made to use it in support of labour standards generally. As early as 1936, the ILO considered establishing minimum standards for those directly employed in public works and producing goods and services for the public sector.41 In 1949, it adopted the Labour Clauses (Public Contracts) Convention (No 94), followed and supplemented by Recommendation No 84. The aim of such instruments was that public buyers ensure socially acceptable labour conditions in the course of work performed on the public’s account.42 The temptation to economise on the cost of public works by diminishing labour protections was to be resisted, and governments ‘should not be seen as entering into contracts involving the employment of workers under conditions below a certain level of social protection, but on the contrary, as setting an example by acting as model employers’.43 Under these ILO instruments, the required level of labour protection is set with reference to preexisting national standards, while the scope of government obligations under them is domestic. Their main goal has therefore been to ensure consistent conditions for workers within a given country, whether labouring in the service of the public or private sector, albeit that they may indirectly tend to promote labour rights abroad by discouraging ‘race to the bottom’ dynamics. However, the ILO Convention has not been widely signed by states, and even signatory states have shown little interest in applying it.44 According to the ILO, this can be explained by reference to the fact that ‘modern’ public procurement has ‘promot[ed] competition at all costs among potential contractors’, even if this ‘go[es] against the Convention’s aim of requiring the application by all bidders of the best locally established working conditions’.45 Closely linked, another broad tendency has been that, in mediating between procurement law’s primary aims and secondary policy objectives, procurement law regimes have tended to attach greater weight to the former46 on grounds, for instance, that measures supporting secondary aims within the procurement process embody market distortion or protectionism.47 In the EU, the award of 40 McCrudden (n 12). 41 ILO, Report III (Part 1B), ‘General Survey concerning the Labour Clauses (Public Contracts) Convention, 1949 (No 94) and Recommendation (No 84)’, Report of the Committee of Experts on the Application of Conventions and Recommendations (International Labour Office 2008) 2. 42 Ibid 5. 43 Ibid 1. 44 Ibid xiii. 45 Ibid. 46 Martin-Ortega and Methven O’Brien, ‘Advancing Respect for Labour Rights’ (n 19). 47 C Hanley, ‘Avoiding the issue: The Commission and human rights conditionality in public procurement’ (2002) 6 European Law Review 714; C McCrudden and SG Gross, ‘WTO government procurement rules and the local dynamics of procurement policies: A Malaysian case study’ (2006) 17 European Journal of International Law 151; McCrudden, (n 12) chs 4 and 11; A Coravaglia, Towards Coherence in International Instruments of Procurement Regulation (Hart Publishing 2017) 56. See also

200  Claire Methven O’Brien and Olga Martin-Ortega public contracts above a certain monetary value by Member State authorities is required to comply with the principles of the Treaty on the Functioning of the European Union (TFEU) and the four freedoms guaranteed by the ­European Union’s legal regime, namely, free movement of goods, services, capital and people within EU boundaries, as well as principles deriving therefrom, such as equal treatment, non-discrimination, mutual recognition, proportionality and transparency.48 Hence, public procurement may limit cross-border flows in these four areas only if restrictions pursue the public interest while also meeting certain other conditions.49 Relevant government purchases must also comply with the EU’s specialised procurement regime. Currently this includes Directive 2014/24 (the Public Sector Directive) and Directive 2014/25, which regulates procurement by entities operating in the water, energy, transport and postal services sector (the Utilities Directive).50 The preceding Procurement Directives (Directives 2004/18 and 2004/17) were particularly restrictive of public buyers’ freedom to refer to secondary ­considerations.51 This position was only marginally altered by cases in which the Court of Justice of the European Union addressed secondary considerations.52 In Wienstrom, for example, it was held lawful to use an ecological award criterion and to establish an award criterion related to the production method of the purchased product, but on condition that such a criterion is relevant for the contract and is expressly linked to its subject matter.53 Evropaïki Dynamiki v ­European E ­ nvironment Agency54 considered if a public purchaser could refer to whether bidders had a general environmental policy as part of award criteria. While the Court held that they could, it noted that a buying authority’s discretion in assessing bids was restricted. Though a purchaser could refer to third party certifications as evidence of a supplier’s environmental standards, it could not require certifications as such. In the Max Havelaar case55 it was eventually held Sanchez-Graells in ch 4 of this volume, on the primacy of competition as a principle in the EU procurement legal framework. 48 That is, where the EU Procurement Directives are applicable, unless the contract in question has a certain cross-border interest: Cases C-147/06 and C-148/06 Secap, EU:C:2008:277, para 31. 49 Case 2/74 Reyners, EU:C:1974:68. 50 Directive 2014/24 of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18 [2014] OJ L94/65; Directive 2014/25 of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sector and repealing Directive 2004/17/EC [2014] OJ L94/243. 51 Directive 2004/17 of the European Parliament and of the Council of 31 March 2004 consolidating the procurement procedures of entities operating in the water, energy, transport and postal services sectors [2004] OJ L134/1; Directive 2004/18 of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts [2004] OJ L134/114. 52 Case C-225/98 Commission v France [2000] ECR I-7445 (Nord-Pas-de-Calais); Case C-513/99 Concordia Bus Finland v Helsingin kaupunki & HKL-Bussiliikenne [2002] ECR I-7213; Case C-31/87 Gebroeders Beentjes BV v the Netherlands [1988] ECR 4635. 53 Case C-448/01 EVN and Wienstrom [2003] ECR I-14527. 54 Case T-331/06 Evropaïki Dynamiki v European Environment Agency [2010] ECR II-00136. 55 Case C-368/10 Max Havellaar, EU:C:2012:284.

Discretion, Divergence, Paradox  201 that  award criteria may concern aspects of the production process that do not materially alter the final product, so that fair trade label requirements can constitute elements of contract performance under public contracts. Other decisions also reinforce the impression of persisting tensions between primary and secondary criteria under the 2004 regime.56 In the decade of practice until the current Directives were adopted, public buyers in the EU periodically attempted to secure increased flexibility to pursue social objectives, with some allowance for this reflected gradually in interpretive guidance supplied by the European Commission.57 The 2014 Procurement Directives were then enacted with an explicit intention of enabling public bodies to use procurement to further common societal goals, including sustainability, at the same time as increasing the efficiency of public spending. The 2014 Public Sector Directive refers to sustainable development both in its recitals and in its provisions.58 In addition, it requires EU Member States to take appropriate steps to ensure that in the performance of public contracts, economic operators comply with applicable social, environmental and labour law obligations.59 The last are defined with reference to the ILO’s Core Labour Standards, as reflected in the ILO Declaration on Fundamental Principles and Rights at Work.60 Amongst other relevant measures, the Directive provides for the exclusion of economic operators from relevant tenders following convictions for offences including child labour or human trafficking, for example.61 Yet if the Preamble to the new Directive gestures towards social considerations, these remain clearly subordinate to non-discrimination and competition principles in the rest of the text.62 States can only require economic operators to commit to corporate social responsibility or other sustainability measures that can be ‘linked’ to the specific goods or services purchased, that is, to the subject matter of the contract.63 Existing procedural and evidentiary requirements undoubtedly pose further challenges to public buyers wishing to take advantage of the discretionary room to pursue social objectives that, at first glance, the new legislation affords. Some procurement law scholars, moreover, go so far as to question whether new discretionary space, as notionally provided for in the 2014 Directives to allow EU public buyers to safeguard minimum labour standards, can,

56 See, eg, Case C-115/14 RegioPost GmbH & Co KG v Stadt Landau in der Pfalz, EU:C:2015:760. 57 See European Commission, Buying Green! A Handbook on Green Public Procurement, 3rd edn (Publications Office of the European Union 2016). 58 Directive 2014/24, recitals 2, 41, 47, 91, 93, 95, 96, 123 and Arts 2(22), 18(2), 42(3)(a), 43, 62, 68, 70. 59 Ibid Art 18(2). 60 Annex 10; ILO Declaration on Fundamental Principles and Rights at Work, Adopted by the International Labour Conference at its Eighty-sixth Session, Geneva, 18 June 1998 (Annex revised 15 June 2010). 61 Directive 2014/24, Art 57(1)(f). 62 Outhwaite and Martin-Ortega (n 19). 63 Ibid.

202  Claire Methven O’Brien and Olga Martin-Ortega in reality, have any practical significance at all.64 However, this interpretation, we suggest, for reasons set out in this chapter, appears unduly restrictive when judged in terms of the overall aims of the Directive and states’ (and the EU’s) human rights obligations. It is also runs counter to the trajectory of states’ development and promotion of ‘responsible’ and ‘sustainable’ supply and value chain standards, as discussed in the next section.

IV.  Divergence: The Growing Gap between Public and Private Supply Chain Standards A.  New Human Rights Standards for Businesses If sustained in the future, the orthodox procurement law analysis described would situate government buyers in a reality increasingly different from that experienced by large private sector buyers. From the early 1990s, attention to the negative impacts of multinational corporations on human rights became central to popular and academic critiques of globalisation.65 Subsequently a transition to sustainable global value chains has been identified as critical to achieving inclusive development, global growth and ‘decent work’.66 ‘Responsible business conduct’, understood as business behaviour that avoids, mitigates and addresses adverse human rights impacts in value chains, so ‘contributing positively to economic, environmental and social progress’,67 features centrally in a recent wave of supply chain initiatives intended to achieve these ends. One milestone, and the culmination of a process starting in 2005, is the UNGPs, endorsed by the UN Human Rights Council in 2011. Consolidating the evolution of expectations on companies beyond voluntary social commitments, that is corporate social responsibility (CSR), and philanthropy, the UNGPs recognise the ‘role of business enterprises as specialized organs of society performing specialized functions, required to comply with all applicable laws and to respect human rights’.68 On the other hand, the UNGPs afford businesses a discrete and ‘complementary’ role to that of states, while also acknowledging that the diversity of businesses, in terms of size, industry sector, corporate structure and operating location, poses a challenge for legislating any single human rights standard for all companies: UNGPs 11 to 24 outline

64 See ch 4 by Sanchez-Graells in this volume; A Sanchez-Graells, ‘Public Procurement and “Core” Human Rights: A Sketch of the EU Legal Framework’ in Martin-Ortega and Methven O’Brien (eds) (n 19). 65 Eg, N Klein, No Logo (Picador 1999); D Held and M Koenig-Archibugi (eds), Taming Globalization: The Frontiers of Governance (Polity Press 2003). 66 ILO, ‘Decent Work’, available at www.ilo.org/global/topics/decent-work/lang--en/index.htm. 67 OECD, Responsible business conduct in government procurement practices, available at mneguidelines.oecd.org/Responsible-business-conduct-in-government-procurement-practices.pdf. 68 UNGPs (n 4) 1.

Discretion, Divergence, Paradox  203 elements of the ‘corporate responsibility to respect human rights’, the second ‘pillar’ of the UN ‘Protect, Respect, Remedy’ framework on business and human rights.69 This responsibility, in principle embracing any human right,70 entails that ‘Business enterprises should respect human rights. This means that they should avoid infringing on the human rights of others and should address adverse human rights impacts with which they are involved.’ An ‘adverse human rights impact’ occurs when an action removes or reduces the ability of an individual to enjoy his or her human rights. A business may be implicated in such impacts in three ways: (i) causing adverse human rights impacts through its own activities; (ii) contributing to adverse human rights impacts through its own activities – either directly or through another entity, whether government, business or otherwise; (iii) neither causing nor contributing to adverse impacts but still being indirectly involved in impacts directly linked to its operations, products or services because of relationships with business partners, entities in the value chain, or any other non-state or state entity directly linked to its business operations, products or services.71 While modalities (ii) and (iii) encompass supply chain amongst other business relationships, each of the three demands a different corporate response. Where a business causes an adverse impact, it should cease or change its own activities to prevent any further impact or recurrence. If the abuse cannot be prevented, an enterprise should actively engage in remediation directly or in cooperation with others. Where a business contributes to an impact, it should use its leverage to mitigate any remaining impact. If the business is merely directly linked to the impact, it should still use its leverage to encourage the offending entity to prevent its recurrence or at minimum mitigate it.72 The concept of leverage is thus an important one. It refers to the ability of a business ‘to effect change in the wrongful practices of the party that is causing or contributing to the impact’.73 Such parties include suppliers. If a supplier is abusing human rights, a purchaser should assess its leverage to influence it, referring to a series of factors including: its degree of direct control over the supplier; the terms of the purchase contract; the proportion of the total business it represents for the supplier; its ability to incentivise the supplier to improve its human rights performance through measures relating to future business, reputational

69 UN Framework (n 4). 70 UNGP 12 lists the human rights instruments containing rights that should be respected, at a minimum, by business enterprises: based on their particular industry sector and operational context, business enterprises should also consider additional human rights standards, especially where they may impact on groups and populations at risk of vulnerability or marginalisation, see UNGPs (n 4). 71 UNGP 13. 72 Report of the Special Representative of the Secretary-General on the issue of human rights and transnational corporations and other business enterprises, Guiding Principles on Business and Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework, A/HRC/17/31, 2011, ­Guiding Principles 13, 19. 73 UNGP 19, Commentary, 21.

204  Claire Methven O’Brien and Olga Martin-Ortega advantage and capacity building assistance, for example. Where a buyer is unable to increase its leverage, in the face of persisting abuses, it should consider ending the business relationship, particularly where abuses are severe. If this is not possible, because the relationship is crucial, or because terminating the relationship would itself have serious human rights consequences, a buyer should demonstrate a continuing effort to mitigate the adverse impacts and be prepared to accept the consequences of such relationship.74 The key to avoiding adverse impacts, according to the UNGPs, is ‘human rights due diligence’. A ‘core requirement’ of the corporate responsibility to respect human rights, this is a proactive process adaptable to all businesses, irrespective of individual characteristics.75 After adopting and publishing a policy commitment to respect human rights, this comprises four steps. These are: (i) human rights risk and impact assessment; (ii) integrating assessment findings into company policies and procedures and taking appropriate action; (iii) monitoring the effectiveness of company responses to human rights impacts; (iv) communicating and reporting on human rights impacts and due diligence. Besides, as a final element of due diligence’s minimum requirements, where they cause or contribute to abuses, businesses should provide for, or cooperate in, remediation, for instance via judicial or non-judicial state-based remedy mechanisms.76 Because the corporate responsibility to respect human rights is based on social and political expectations, even if these in turn mirror the norms embodied in human right treaties, it applies across all jurisdictions. Accordingly, wherever they operate, companies should not seek to exploit gaps in domestic laws or their enforcement. They may also need to go further than required by applicable ­legislation.77 If national rules and international human rights instruments conflict, a company should use its best efforts to respect internationally recognised rights. If this is not ultimately achievable, it should at minimum be able to demonstrate its efforts in this regard.78 Companies do not, as already discussed, have direct human rights obligations. Yet Pillar II of the UNGPs has provided a platform for a proliferation of standards addressing the human rights supply-chain responsibilities of the private sector. Indeed, since 2011, the scope and content of such responsibilities has been extensively expounded. For the OECD, since 2011, when the Organisation’s Guidelines for Multinational Enterprises were last revised, ‘responsible business conduct’ implies in particular that companies undertake human rights due diligence as defined by the UNGPs. In turn, as seen, the UNGPs indicate that companies’ responsibility to respect human rights extends beyond their own operations to the



74 Ibid

22: UNGPs – Interpretative Guide, 18. of the Special Representative (n 72) para 6. 76 UNHRC 2011, GPs 15, 17–20; UNGP 22, Commentary, 24. 77 UNGPs – Interpretative Guide at 77; UNGP 23 (b). 78 UNGP 23 – Commentary, 26. 75 Report

Discretion, Divergence, Paradox  205 activities of business partners, including suppliers and subcontractors, wherever they are located.79 This has provided a basis for the OECD to develop detailed supply-chain management guidance encompassing human rights by industry sector, for instance addressing the banking and financial sectors, footwear and apparel, beyond its prior focus on precious metals.80 Most recently, it has issued comprehensive ‘responsible business conduct’ due diligence guidance.81 Multistakeholder initiatives, industry associations and governments have likewise produced guidance to support implementation of human rights due diligence on a sector-specific basis.82 In the European context, the ‘responsible management of global supply chains’ has been identified as essential ‘to align trade policy with European values’,83 and is a key element of the European Commission’s last Corporate Social Responsibility Strategy.84 Under the Strategy, ‘To identify, prevent and mitigate their possible adverse impacts, large enterprises, and enterprises at particular risk of having such impacts, are encouraged to carry out risk-based due diligence, including through their supply chains.’85 There has thus been, in the context of the EU, an increased focus on integrating respect for human rights, including but not limited to ILO Core Labour Standards, into company supply-chain standards and management, which has triggered inter alia the development of binding obligations in the context of so-called conflict minerals, timber trade and non-financial reporting.86 Supplementing and in some instances responding to the above international initiatives, at national level a number of governments have adopted standards embodying requirements on companies to undertake human rights due diligence across the supply chain. These include new legislation requiring companies to disclose information on their supply chain and their efforts to perform human rights due diligence in the US, UK and France.87

79 Ibid; Martin-Ortega (n 5). 80 All available at www.oecd.org/investment/due-diligence-guidance-for-responsible-businessconduct.htm. 81 OECD (n 6). 82 See, eg, material produced by the Responsible Business Alliance, at www.responsiblebusiness.org/. 83 European Commission, Trade for All: Towards a more responsible trade and investment policy, COM(2015) 0497, at 4.2.3. 84 European Commission (n 2) at 1.3. 85 Ibid 3.1. 86 Regulation (EU) No 2017/821 of the European Parliament and the Council of 17 May 2017 laying down supply chain due diligence obligations for Union importers of tin, tantalum and tungsten, their ores and gold originating from conflict-affected and higher-risks areas; Regulation (EU) No 978/2012 of the European Parliament and of the Council of 20 October 2010 laying down the obligations of operators who place timber and timber products on the market; Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertaking and groups, respectively. 87 See (n 8).

206  Claire Methven O’Brien and Olga Martin-Ortega

B.  Public Procurement: Limited Policy Developments Such initiatives focus on ‘responsible business conduct’ and the contribution ­business can make to sustainable development.88 Albeit aimed primarily at business, at the same time new supply-chain standards inevitably turn the spotlight on government consumption. It appears arguable that if fulfilling specific responsibilities to avoid and address adverse impacts in value chains is demanded by government of business, it should also be demanded of government itself. Yet public procurement standards analogous to those elaborated for the private sector as previously highlighted are largely lacking, even if, in recent years, civil society organisations, media and national human rights institutions have exposed public purchasing practices associated with human rights abuses via supply chains, with numerous instances highlighted in which state buyers have purchased products, from textiles to electronics, produced with forced or child labour, or under otherwise abusive conditions.89 To date the UNGPs are the most important soft-law development linking public procurement and human rights in global supply chains. The ‘State duty to protect’, Pillar I of the UN Framework, encompasses interactions between states and businesses of a commercial nature. UNGP 1 provides that ‘States shall take appropriate steps to prevent, investigate, punish and redress [business-related human rights abuses] through effective policies, legislation, regulation and adjudication’. As UNGP 6 notes, this entails that states should promote awareness and respect for human rights by businesses in the context of public procurement, while UNGP 5 recalls that where states privatise or ‘contract out’ public services, they retain their human rights obligations and must ‘exercise adequate oversight’ to ensure that these are met, including by ensuring that contracts or enabling legislation communicate the state’s expectation that service providers will respect the human rights of service users. UNGP 4 meanwhile provides that states should, where appropriate, require state-owned or controlled enterprises to exercise human rights due diligence, implicitly encompassing their purchasing function, and UNGP 8 calls for ‘policy coherence’ to be achieved by alignment of goals and practice across governmental departments, agencies and institutions. Yet between 2011 and 2015, by contrast with the private supply-chain management context,

88 OECD Global Forum on Responsible Business Conduct, Session Note, ‘Contributing to the Sustainable Development Goals through responsible business conduct’, 30 June 2017, available at mneguidelines.oecd.org/global-forum/2017-GFRBC-Session-Note-Contributing-to-SDGs.pdf. 89 Methven O’Brien et al (n 9); Stumberg et al (n 9); C Methven O’Brien and O Martin-Ortega, ‘The Role of the State as Buyer under Guiding Principle 6’ (submission to UN Working Group on Business and Human Rights consultation on The State as an economic actor: the role of economic diplomacy tools to promote business respect of human rights) BHRE Research Series, Policy Paper no 4, September 2017, available at static1.squarespace.com/static/56e9723a40261dbb18ccd338/t/5a1be556f9619af a6a6a6d08/1511777629220/UNWG+PP+submission+-+The+Role+of+the+State+as+Buyer+under+ Guiding+Principle+6+-+OBrien+Martin-Ortega+03.10+3.pdf.

Discretion, Divergence, Paradox  207 scarcely any governments produced new guidance, soft standards or tools on human rights and public procurement.90 Latterly, the OECD, apparently responding to analysis and advocacy by scholars and civil society practitioners, has acknowledged links between public procurement, its responsible business agenda and sustainable development.91 The ISO’s 2017 Sustainable Procurement Guidance (ISO 20400) urges the integration of human rights as well as green and other considerations in supply-chain management, whether private or public. Adopted in 2015 by UN Member States, the 2030 Agenda for Sustainable Development sets new objectives on public procurement as part of the drive towards sustainable production and consumption and more inclusive economies. Goal 12 (‘Ensure sustainable consumption and production patterns’) calls for a systemic approach and cooperation among actors operating in the supply chain, from producer to final consumer. In particular Goal 12.7 calls on all countries to promote sustainable public procurement practices and to implement sustainable public procurement policies and action plans, though without any specific mention of human rights, despite their centrality and integration across the Sustainable Development Goals package as a whole. Addressing ‘Responsible Supply Chains’, the G7’s 2015 Leaders’ Declaration committed to strive ‘for better application of internationally recognized labour, social and environmental standards, principles and commitments (in particular UN, OECD, ILO and applicable environmental agreements) in global supply chains’. It further recognised that governments and business have a joint responsibility ‘to foster sustainable supply chains and encourage best practices’, calling for tools to support public procurers in meeting social and environmental commitments.92 Referring rather to ‘Sustainable Global Supply Chains’, the 2017 G20 Leaders’ Declaration undertook to ‘work towards establishing adequate policy frameworks in our countries’ to ‘foster … the implementation of labour, social and environmental standards and human rights in line with internationally recognised frameworks’ though without specific reference to public procurement.93 The ILO recently approved its Revised Programme of Action 2017–21 on Decent Work in Global Supply Chains with the aim of assisting ILO Member States to make ‘significant strides in reducing the governance gaps and decent work deficits in global supply chains, thereby strengthening the role of supply chains as engines of inclusive and sustainable growth’.94 Again, however, in this document mention of public procurement is lacking.

90 Methven O’Brien et al (n 6). 91 OECD, Responsible business conduct in government procurement practices (2017), available at mneguidelines.oecd.org/Responsible-business-conduct-in-government-procurement-practices.pdf. 92 G7 Leaders’ Declaration, Summit 7–8 June 2015, available at sustainabledevelopment.un.org/ content/documents/7320LEADERS%20STATEMENT_FINAL_CLEAN.pdf. 93 G20 Leaders’ Declaration: Shaping an interconnected world, Hamburg, 7/8 July 2017, available at www.g20.utoronto.ca/2017/2017-G20-leaders-declaration.pdf. 94 ILO, 2017, para 6

208  Claire Methven O’Brien and Olga Martin-Ortega Lastly, in the EU context, the 2011 CSR Strategy explicitly referred to public procurement as one potential area for measures to enhance and promote ‘responsible business conduct’, identifying government buying as a means to strengthen market incentives for CSR, which the EU should leverage together with other policies in the field of consumption and investment.95 Yet today there remain significant legal obstacles to giving full effect to this goal, as this chapter has already considered.

V. Conclusion This chapter has exposed an increasing imbalance in international policy and regulatory developments addressing human rights in public and private supply chains. It seems likely that constraints imposed on public buyers’ discretion in the notional pursuit of ‘free’ and ‘fair’ competition as a primary goal of public procurement law regimes have been the principal driver of this discrepancy. As we have shown, this is despite the fact that public buyers have more compelling obligations to protect human rights‚ emanating not just from human rights treaties voluntarily entered into, such as the ECHR, but also from laws, internal and external policies of the EU, the overall demand for coherence and consistency imposed via A ­ rticles 7 and 11 TFEU and by domestic constitutional frameworks in many countries. We have further demonstrated that constraints on public buyers’ discretion to use purchasing decisions to advance respect for human rights in their supply chains have a number of important consequences. They appear to exclude, or at least render marginal, the use of public buying to promote the objective, publicly and repeatedly espoused by government, of promoting respect for human rights and sustainability by the private sector. In particular, whereas it might be expected that governments would use public buying to enhance the effectiveness of recently adopted legislation on corporate non-financial (and human rights) reporting, this appears to be ruled out by public procurement laws. In addition, even if some c­ ountries have already enacted statutory requirements on certain classes of ­businesses to undertake human rights due diligence‚ as called for by the UNGPs and OECD Guidelines for Multinational Enterprises, it would seem that the allocation of public contracts cannot be used to support companies’ uptake of this process. Lastly, given the market value of public procurement, besides these constraints on the use of public procurement to buttress other aspects of sustainable business policies, there are significant direct human rights consequences for workers locally and in global production systems and supply chains, as well as for vulnerable users of essential and non-essential public services.



95 COM(2011)

681 final (n 2) 11.

Discretion, Divergence, Paradox  209 In the past three decades, the international community, encompassing the EU and its Member States, as well as business, labour and civil society actors, has dedicated significant efforts to defining frameworks to analyse and address business-related human rights abuses. The fundamental aim of such activity can be seen as being that of rooting out of the economy unfair, market-distorting behaviour by corporations. If public actors are precluded from eliminating such actors and practices from their own procurement, with reference to the need to advance and safeguard fair and open competition, this entails a contradiction in terms, and one that seriously undermines the credibility of government sustainable production and consumption measures. Further analysis and clarification is thus needed of states’ obligations to safeguard the rights of workers and others implicated in their supply chains, inside and beyond national borders, and how these interact with European regional and global as well as national procurement regimes. Careful consideration must next be exercised in identifying how greater discretion can be returned to public actors to use their buying power in the pursuit of shared sustainability goals. For the EU, given its foundational commitments to human rights, and a bank of associated internal and external policy measures, this exercise should be tackled with urgency, and the counterproductive paradox of divergent public and private supply-chain standards resolved.

210

10 EU and US Discretion in Public Procurement Law: The Role of Eco-Labels and Life-Cycle Costing JASON J CZARNEZKI*

I. Introduction This chapter addresses the nature of discretion in public procurement as it relates to the emergence of eco-labels and life-cycle costing (LCC), and the role of these mechanisms in furthering environmental interests through public procurement programmes in the European Union (EU) and United States (US). Green public procurement (GPP), of which eco-labels and LCC are a part, can serve as an effective environmental regulatory tool in a mode of alternative environmental governance, allowing public institutions to create markets for environmentally friendly goods, thereby bridging the gap between traditional environmental law1 and private environmental governance.2 The US has begun to consider GPP at the federal level,3 and American States and municipalities have significant sovereignty and broad discretion in their procurement decisions, especially via the so-called market participant exception. More precisely, an American State, when acting as a consumer in the market or a ‘market participant’, has significant discretion and can make restrictive choices in public procurement (eg, preferring eco-friendly or locally produced goods) that might otherwise be found to violate the Commerce Clause of the US ­Constitution.4 * This chapter is partly based on my PhD dissertation entitled ‘Green Public Procurement: Promoting Environmental Interests in the United States and European Union’, as well as on my work States as Market Participants in the US and the EU? Public Purchasing and the Environment (Swedish Institute for European Policy Studies 2013). 1 J Salzman, ‘Teaching Policy Instrument Choice in Environmental Law: The Five P’s’ (2013) 23 Duke Environmental Law & Policy Forum 363. 2 M Vandenbergh, ‘Private Environmental Governance’ (2013) 99 Cornell Law Review 129. 3 US Executive Order 13693, 2015. 4 DT Coenen, ‘Untangling the Market-Participant Exception to the Dormant Commerce Clause’ (1989) 88 Michigan Law Review 395, 397; and RH Seamon, ‘The Market Participant Test in Dormant Commerce Clause Analysis – Protecting Protectionism?’ Duke Law Journal 697, 697–98, 1985.

212  Jason J Czarnezki In the EU, the revised Public Procurement Directive 2014/24/EU broadens the discretion of the public sector (though not to the extent found in the US) and now permits GPP, though perhaps EU Member States do retain discretion in determining how to employ GPP tools. This chapter, first, discusses the nature of public procurement discretion in the US; second, discusses emerging GPP techniques adopted in the EU that could be used as a model for the US; and, third, addresses the emergence of two tools that are employed when in engaged in GPP – LCC and eco-labels. In both the US and the EU, can GPP be effectively used to promote environmental interests while creating new innovative markets through the use of eco-labels and LCC? Perhaps so – if the two jurisdictions can learn from each other. The US legal system can be helpful to the EU in designing its GPP programme in terms of suggesting opportunities for creativity and flexibility. And ultimately the EU GPP programme, its perhaps forthcoming LCC methodology and the common ecolabel technical criteria it uses can be a model for US, and global, implementation.

II.  US Public Procurement and the Environment The notion of federalism5 allows American States, as sovereign entities, to pursue legislation and policies that further State interests,6 so long as they are not preempted by federal (ie national) legislation.7 In the US, the term ‘environmental federalism’ refers to the ability of States to establish more rigorous or creative environmental protection legislation than that of the national Government.8 This idea is not new. In his Dissenting Opinion in New State Ice Co v Liebmann, US Supreme Court Justice Louis Brandeis stated, ‘It is one of the happy incidents of the federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.’9 These ‘experiments’ can be crafted by State legislatures, with the legislation being interpreted by the entire layer of State courts that are bound to State law, State constitutions, and, ultimately, the US Constitution. In the US, laws that require, or which provide incentives for, the purchasing of products produced within a defined geographic boundary or products m ­ eeting

5 See, eg, J McGinnis and I Somin, ‘Federalism vs States’ Rights: A Defense of Judicial Review in A Federal System’ (2004) 99 Northwestern University Law Review 89. 6 US Constitution, Amendment X, 1791: ‘The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.’ 7 US Constitution, Art VI, cl 2: ‘This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.’ 8 See generally RV Percival, ‘Environmental Federalism: Historical Roots and Contemporary Models’ (1995) 54 Modern Law Review 1141. 9 New State Ice Co v Liebmann, 285 US 262, 311 (1932) (Brandeis J dissenting).

EU and US Procurement Discretion   213 certain environmental standards may be ‘vulnerable to challenge under the US Constitution’s restrictions on local and state laws that discriminate against goods and commerce from other states, known as the dormant Commerce Clause doctrine’.10 However, American States may use the ‘market participant e­ xception’ to apply such constraints or conditions to direct government purchasing. The exception draws a distinction between State governments acting as market regulators (such as when imposing a tax or banning an unhealthy ingredient) and acting as market participants (by directly buying or selling goods).11 This means that ‘state and local governments can act as any private buyer or seller would in deciding with whom and on what terms they will deal’12 – consumers with unfettered discretion. Under the principles of federalism, for example, a State has the right to create regulations requiring State governmental entities to give geographic preference to local businesses. A State as a regulator, however, may also have the ability to pass even-handed regulations, outside the context of public procurement, to promote environmental interests in the State,13 where a court will balance the impact of a statute on inter-State commerce against the State’s justifications for the statute.14 As the environmental (and economic) benefits of ecologically preferential characteristics become more obvious,15 States and local governments are considering the implementation of such regulations and legislation; yet fears of constitutional challenges and retaliatory measures from other States may prevent legislative passage.16 This section of the chapter defines the market participant exception under US law; offers examples of how US States are using the exception; offers guidance for how policy makers, if they desire, can more effectively use the market participant exception to support the purchase of locally produced and environmentally sound products; and considers the legality of legislation to promote environmental considerations in purchasing beyond the context of public procurement. It also summarises GPP efforts by US States and the US federal Government, the latter lagging behind the efforts of the States. This is an inverted

10 BP Denning et al, ‘Laws to Require Purchase of Locally Grown Food and Constitutional Limits on State and Local Government: Suggestions for Policymakers and Advocates’ (2010) 1 Journal of Agriculture, Food Systems, and Community Development 139, 139; see also AS Ackerman, ‘Buy Healthy, Buy Local: An Analysis of Potential Legal Challenges to State and Local Government Local Purchase Preferences’ (2011) 43 The Urban Lawyer 1015. 11 Denning et al (n 10) 139. 12 Ibid 142. 13 See Minnesota v Clover Leaf Creamery Co, 449 US 456–61 (1981) (where the US Supreme Court held a State law prohibiting the use of non-recyclable plastic containers for milk non-discriminatory and valid). 14 Coenen (n 4) 395–99. 15 See JJ Czarnezki, ‘Food, Law & the Environment: Informational and Structural Changes for a Sustainable Food System’ (2011) 31 Utah Environmental Law Review 263. 16 See Denning et al (n 10) 140, stating that ‘[w]e have heard anecdotally that some cities or counties have expressed concerns about considering any local purchase policies due to legal questions about the [dormant commerce clause] and a lack of clarity on how to avoid challenges’.

214  Jason J Czarnezki policy outcome compared to the EU, in that American federal law, unlike EU law, does not dictate the parameters under which States can use GPP, and implementation of GPP by the US Government lags behind that of EU Member States.

A.  What is the Market Participant Exception? The US Constitution delegates authority to the Congress ‘[t]o regulate commerce … among the several states’.17 While, in the federal system, the individual States maintain sovereignty, a judicially created dormant commerce clause doctrine limits State action that may place burdens on successful inter-State commerce. Despite this, American States maintain their ability to act as consumers via public procurement, and may pass generally applicable legislation that benefits State interests. The ‘market participant exception’ allows States to restrict inter-State trade when acting as purchasers or sellers rather than as regulators.

i.  The Commerce Clause The commerce clause, found in Article I of the US Constitution, grants Congress the power to regulate inter-State commerce.18 In the seminal case Gibbons v Ogden,19 the US Supreme Court concluded that a 1793 federal law authorising the operation of a ferry in New York waters was valid, and determined that federal law pre-empted the New York-granted monopoly to another ferry company.20 The Court also found the New York monopoly to be an impermissible restriction of inter-State commerce.21 Three main conclusions survive from Gibbons: (i) ‘commerce’ describes the commercial intercourse between nations, and parts of nations, in all its forms, including navigation;22 (ii) ‘among the several states’ means ‘that commerce which concerns more States than one … The completely internal commerce of a State, then, may be considered as reserved for the State itself ’;23 (iii) that State sovereignty and the Tenth Amendment do not limit Congress’s powers:24 ‘This power, like all others vested in Congress, is complete in itself, may be exercised to its utmost extent, and acknowledges no limitations, other than are prescribed in the constitution.’25



17 US

Constitution, Art I, § 8, cl 3.

18 Ibid.

19 Gibbons 20 Ibid

21 Ibid. 22 Ibid.

3.

v Ogden, 22 US 1 (1824).

23 Ibid

195.

25 Ibid

196.

24 Ibid.

EU and US Procurement Discretion   215 In Wickard v Filburn,26 the US Supreme Court cemented the expansive power and scope of the federal Government in regulating inter-State commerce. The Court upheld the application of the Agricultural Adjustment Act, and the resulting wheat production allotment for individual farmers, to a farmer who grew wheat primarily for his own consumption,27 which, the farmer argued, was not part of inter-State commerce and was therefore beyond the federal Government’s regulatory authority under the commerce clause.28 The Court ruled that, in the aggregate, homegrown wheat can have a substantial effect on inter-State commerce,29 as while the farmer’s ‘own contribution to the demand for wheat may be trivial by itself [, it] is not enough to remove him from the scope of federal regulation where, as here, his contribution, taken together with that of many others similarly situated, is far from trivial’.30 The Court has found few federal laws to unconstitutionally exceed the scope of Congress’s power pursuant to the commerce clause,31 and continues to broadly construe federal commerce power.32

ii.  The Dormant Commerce Clause While the commerce clause functions to authorise congressional legislation related to inter-State commerce, it also serves the function of limiting State and local law that may restrain inter-State commerce. This so-called ‘dormant commerce clause’ is the judicially created principle, not explicitly stated in the US Constitution though inferred from the commerce clause, ‘that state and local laws are unconstitutional if they place an undue burden on interstate commerce’.33 A two-part test is used by courts to determine if a law or regulation violates the dormant commerce clause.34 First, the court asks: Is the law facially ­discriminatory,35 or is the purpose or effect of the law discriminatory?36 The court considers whether the State law discriminates against individuals or entities not from the State that passed the legislation, whether it treats all citizens alike regardless of residence,37 or whether it has a discriminatory impact.38 Those State 26 Wickard v Filburn, 317 US 111 (1942). 27 Ibid 114. 28 Ibid 118. 29 Ibid 127. 30 Ibid 127–28. 31 But see US v Lopez, 514 US 549 (1995). 32 See, eg, Pierce Cnty, WA v Guillen, 537 US 129 (2003). 33 E Chemerinsky, Constitutional Law: Principles and Policies (Aspen Publishers 2006) 391. See also Coenen (n 4) 399. 34 See, eg, United Haulers Association, In v Oneida-Herkimer Solid Waste Management Authority, 550 US 330–38, 345–47 (2007). 35 See City of Philadelphia v New Jersey, 437 US 617–28 (1978). 36 See, eg, Dean’s Milk Co v City Madison, 340 US 349, 354 (1951) (holding that an even-handed local milk ordinance ‘in practical effect’ discriminated against out-of-State milk suppliers). 37 See, eg, Pike v Bruce Church Inc, 397 US 137, 142 (1970). 38 See, eg, C & A Carbone Inc v Town of Clarkstown, 511 US 383 (1994); Hunt v Washington State Apple Advertising Commission, 432 US 333 (1977).

216  Jason J Czarnezki laws that are ‘simple economic protectionism’ are essentially invalid per  se.39 Second, if the regulation at issue is not invalidated on the basis of facial discrimination or discriminatory impact, the court conducts a judicially-developed balancing test, where it weighs the State’s interest in promulgating a statute against the burden that the statute imposes on inter-State commerce.40 In other words, it considers whether the state law imposes ‘an undue burden on inter-State commerce’.41 Under the first part of the test, in cases where State law overtly discriminates against out-of-State economic interests through means such as a tariff, tax, quota or outright embargo, the Supreme Court has routinely adopted a rule of almost per se invalidity.42 The Supreme Court has also struck down laws as discriminatory under the dormant commerce clause when the law draws an express distinction between in-State and out-of-State entities, such as prohibiting out-of-State ownership of certain business interests or imposing price restrictions on out-of-State products,43 and when local a regulation discriminates against both out-of-State and in-State ventures in the interests of local economic protectionism.44 Also, if the law is facially neutral but the purpose or the effect is to discriminate, it will be found unconstitutional. Discriminatory impact is sufficient for invalidation.45 If the law or regulation at issue is not found to be facially discriminatory and the purpose or effect of the law is not discriminatory, the court will move to the second part of the test. The court conducts a balancing test, weighing the State interest in promulgating a statute against the burden the law imposes on interState commerce:46 Where the statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.47

While courts have significant discretion, they generally uphold State laws once the law has already been determined to be non-discriminatory. For example, in Minnesota v Clover Leaf Creamery Co, the Court upheld a State law prohibiting the use of non-recyclable plastic containers for milk,48 since the environmental benefits of the law outweighed any harms to inter-State commerce.49 That said, despite a finding that the State law is non-discriminatory, the law may place a significant



39 Coenen

(n 4) 399. (n 37) 142. 41 Coenen (n 4) 399. 42 Granholm v Heald, 544 US 460, 476 (2005) (quoting City of Philadelphia v New Jersey (n 35) 624). 43 See Lewis v BT Investment Managers, 447 US 27, 44 (1978). 44 See Dean’s Milk Co (n 36). 45 See, eg, C & A Carbone Inc (n 38). 46 Pike (n 37) 142. 47 Ibid (citing Huron Portland Cement Co v City of Detroit, 362 US 440, 443 (1960). 48 Minn v Clover Leaf Creamery Co, 449 US 456, 461 (1981). 49 Ibid 473. 40 Pike

EU and US Procurement Discretion   217 burden on inter-State commerce and thus be found unconstitutional. For example, in Bibb v Navajo Freight Lines, the Court declared unconstitutional a State law that required all trucks in the State to use curved mudguards to prevent spatter and enhance road safety.50 The Court found the law to substantially burden inter-State commerce because straight mudguards were legal in 45 other States and curved mudguards were illegal in one other State.51 Furthermore, since the trial court found that curved mud flaps had no safety benefits over straight ones and might create ‘hazards previously unknown’ by increasing the heat around a truck’s tyres, the Court declared the law unconstitutional.52 The Court described it as ‘one of those cases – few in number – where local safety measures that are nondiscriminatory place an unconstitutional burden on interstate commerce’.53 Despite the existence of the dormant commerce clause, two exceptions exist for constitutional permissibility. First, ‘[e]ven a clearly unconstitutional, discriminatory state law will be allowed if approved by Congress because Congress has plenary power to regulate commerce among the states’.54 Second, under the market participant exception, ‘A state may favor its own citizens in receiving benefits from government programs or in dealing with government-owned businesses.’55 Indeed, ‘The federal courts of appeal have rejected most Commerce Clause challenges to in-state preference laws, holding that the market participant exception applies.’56

iii.  The Market Participant Exception The market participant exception may prove to be a useful tool for States to encourage the production of locally produced or environmentally preferred goods and services. As noted in the preceding section, the market participant exception provides that a State may favour its own citizens in dealing with governmentowned business and in receiving benefits from government programmes.57 Thus, a State, when acting as a consumer in the market or as a ‘market participant’, rather than as a ‘market regulator’, can make restrictive choices in public procurement that might otherwise be found to violate the commerce clause of the US Constitution.58 In Hughes v Alexandria Scrap Corp, the Supreme Court first recognised the market participant exception and stated that ‘Nothing in the purposes animating the Commerce Clause prohibits a State, in the absence of congressional action, 50 Bibb v Navajo Freight Lines, 359 US 520, 530 (1959). 51 Ibid 523. 52 Ibid 525. 53 Ibid 529. 54 Chemerinsky (n 33) 499. 55 Ibid 56 Ackerman (n 10). 57 Chemerinsky (n 33) 451. See also Coenen (n 4) for a comprehensive overview of the market participant exception. 58 Coenen (n 4) 397; RH Seamon, ‘Note, The Market Participant Test in Dormant Commerce Clause Analysis – Protecting Protectionism?’ Duke Law Journal 697, 697–98, 1985.

218  Jason J Czarnezki from participating in the market and exercising the right to favor its own citizens over others.’59 Four years later, the Court held in Reeves that ‘[t]here is no indication of a constitutional plan to limit the ability of the States themselves to operate freely in the free market’.60 The market participant exception suggests that States can favour their own citizens and local businesses when wanting to encourage local interests and when engaged in the purchasing itself. For example, in White v Massachusetts ­Council of Construction Employers,61 the Supreme Court upheld a city’s ordinance that required all construction projects financed by the city to use a workforce comprised at least 50 per cent of residents of the city.62 In upholding the ordinance, the Court noted that ‘Alexandria Scrap and Reeves … stand for the proposition that when a state or local government enters the market as a participant it is not subject to the restraints of the Commerce Clause.’63 Invoking the market participant exception, the US Supreme Court has ‘shielded from commerce clause attack favoritism of local interests when a state or municipality buys printing services, sells cement, purchases goods, or hires workers’.64 While the market participant exception makes valid State discrimination when acting in the marketplace, this seemingly per se validity does not always operate. Even if a State looks quite like a buyer or seller choosing trading partners, the Court has left itself room not to treat the State as such. The Court may accomplish this result by recognising an ‘exception’ to the ‘general rule’, or by characterising the State as a ‘market regulator’ notwithstanding its superficial appearance as a ‘market participant’. Both roads lead to the same place. The key point is that they remain open.65 One important limitation that the Court has imposed on the scope of the market participant exception is that State businesses may favour in-State producers and vendors, but they may not attach conditions to a sale that discriminate against inter-State commerce.66 For example, a State can require that all government agencies purchase potatoes grown within the State, but it cannot require that any purchaser (in- or out-of-State) have the potatoes processed in the State before they can be exported.67 Thus, despite years of judicial interpretation, ‘[t]he precise contours of the market participant doctrine have yet to be established’.68 ‘What exactly comprises market participation versus market regulation is still being explored in the realm 59 Hughes v Alexandria Scrap Corp, 426 US 794, 810 (1976). 60 Reeves Inc v Stake, 447 US 429, 437 (1980). 61 White v Mass Council of Construction Employers, 460 US 204 (1983). 62 Ibid 206. 63 Ibid 208. 64 Coenen (n 4) 397. 65 Ibid 404–05 (internal citations omitted). 66 See, eg, South Central Timber Development Inc v Wunnicke, 467 US 82, 98 (1984). 67 E Mihaly, ‘How to Promote Local Food Economies Through State and Local Public Procurement Practices’ (2012) 14–15 (unpublished manuscript on file with the author). 68 South Central Timber Development Inc v Wunnicke (n 66) 93.

EU and US Procurement Discretion   219 of climate change, electric power regulation, and more recently, public food procurement.’69 It is clear that States and local governments can rely on the market participant exception to enact laws that allow public procurement agencies to give preference to local goods. But more generally, when courts consider whether any activity falls within the market participant exception, they assess whether the programme reflects an effort of State government to favour State residents when selecting the recipients of the State’s own resources; whether the programme is consistent with the values of federalism, local experimentation and responsiveness to local concerns; to what extent the programme threatens the underlying commerce clause values of a free market; and whether the State appears to be ‘participating in’ rather than ‘­regulating’ the market.70 Even when falling into the contours of the market participant exception, there are risks to States who invoke it in a discriminatory fashion. It may induce neighbouring States to retaliate and undermine current inter-State trade: Because such protectionist policies have detrimental effects on out-of-state foreign bidders, negatively impacted jurisdictions … sometimes employ reciprocal or retaliatory responses to exclude or inhibit bidders from the ‘offending’ state from participating in procurement.71

For example, the State of Pennsylvania took an eye-for-an-eye approach, enacting a reciprocal preference against States that instituted preferences with respect to supplies, equipment or materials produced, manufactured, mined or grown in their own States.72 Under the statute, ‘[t]he amount of the preference shall be equal to the amount of the preference applied by the other state for that particular supply’.73 New York used a penalty provision, applying retaliatory sanctions against bidders with a principal place of business located in a State that penalised New York vendors through bid price distortions and procurement preferences.74 The New York State Commissioner of Economic Development developed a list of six States as jurisdictions that discriminated against New York bidders in the procurement of commodities or services.75 Pursuant to the statute, New York agencies, public authorities and public benefit corporations were required to deny the award of contracts to businesses from these jurisdictions.76 Thus, there are both potential costs and benefits when invoking the market participant exception. 69 Mihaly (n 67) 15. See AF Adams, ‘It’s Getting Hot in Here: California Senate Bill 1368 and the Dormant Commerce Clause’ (2011) 1 San Diego Journal of Climate & Energy Law 287, 289–90. 70 Coenen (n 4) 441. 71 KS Osei, ‘The Best of Both Worlds: Reciprocal Preference and Punitive Retaliation in Public Contracts’ (2011) 40 Public Constitutional Law Journal 715, 716. 72 Pennsylvania Reciprocal Limitations Act, 62 PA Const Stat Ann § 107 (West 1986). 73 Ibid. 74 New York State Omnibus Procurement Act (1994) (codified as amended at 1994 NY Laws 3553 and 2000 NY Laws 3032). 75 Ibid. 76 Ibid.

220  Jason J Czarnezki

B.  The Environment and the Market Participant Exception The mechanisms by which American States and localities define the ‘procurement regulatory environment’ are varied, ranging from legislation to administrative law and policy statements.77 Through this variety of mechanisms, it has been State and local governments, not the federal Government, that have been the key players in GPP in the US. For example, by 2010, nearly every State had established a programme to address environmentally preferable purchasing and/or sustainable procurement.78 Professor Conway asserts that State and local governments act as ‘launch customers’ to create markets for innovative green technology, products and services, leading towards the promotion of green technology innovation and efficient use of public resources.79 They have laid out a number of strategies whereby States can generally implement GPP:80 • ‘[S]etting specific purchasing targets or identifying preferable products with particular attributes represents a much more aggressive approach to achieving sustainable procurement. For example, the State of Oregon issued executive order 00-07 setting a goal for the state to become sustainable by 2025. To this end, the order directed the Department of Administrative Services to (1) aggressively pursue cooperative purchasing agreements; (2) appoint a Sustainable Supplier Council; (3) work with the Sustainable Supplier C ­ ouncil to develop sustainable purchasing policies, targets, and benchmarks for five product areas; and (4) coordinate efforts to better market Oregon’s sustainable products, industries, and services.’ • ‘Changing organizational behavior and adopting a culture of sustainability among state procurement professionals … An example of a mandate to change state agency culture in connection with procurement is the State of Washington’s executive order 02-03, titled Sustainable Practices by State Agencies. The order provides in its preamble that “state government should model sustainable business practices that contribute to the long-term protection and enhancement of [the] environment, [the] economy and the health of current and future generations” and goes on to direct that “[e]ach state agency shall establish sustainability objectives and prepare a biennial Sustainability Plan to

77 The National Association of State Procurement Officials (NASPO), Executive Summary, NASPO 2009 Survey of State Government Purchasing Practices Survey Questions 6 (2009) (hereinafter ‘NASPO Survey’), available at www.naspo.org/documents/2009_Survey_of_State_Government_Procurement_ Exec_Summary.pdf. 78 DM Conway, ‘Sustainable Procurement Policies and Practices at the State and Local Government Level’ in KH Hirokawa and PE Salkin (eds), Greening Local Government: Legal Strategies for Promoting Sustainability, Efficiency, and Fiscal Savings (American Bar Association Book Publishing 2012) 43. Currently, at least 31 States are listed as having active GPPs and/or activities, see at www.naspo.org/ dnn/greenmap/­California.aspx. 79 Conway (n 78) 47. 80 Ibid 51–55.

EU and US Procurement Discretion   221 modify its practices regarding resource consumption; vehicle use; purchase of goods and services; and facility construction, operation and maintenance.” …’ • Integrating sustainability throughout the entire acquisition process. • Environmental and human health issues must be contemplated during the earliest phases of the acquisition planning process. • During acquisition planning, contracting officers generally have the flexibility to determine how to integrate sustainability into an acquisition. Using some of these principles, States, aware of not just a national but also the global orientation toward sustainability, have, over the past several years, implemented variations of GPP. For example, New Jersey implemented green procurement at a State level by initiating a policy regarding energy and water conservation throughout all of the New Jersey Department of Military and Veterans Affairs (DMAVA) facilities. In issuing its ‘NJARNG Energy and Water Conservation Policy’, Governor Christie (NJ) directed all New Jersey Army National Guard (NJARNG) individuals, offices, tenants, leases and organisations to inaugurate an energy and water conservation programme in collaboration with the members of the NJARNG, to reduce and manage energy and water consumption within their respective ­facilities.81 The three identified goals of the DMAVA programme, which generally reflect the green procurement mission of President Obama’s Executive Order (EO) 13693 (discussed in section II.D), are: (i) to reform facility operations by enforcing strategies to promote considerable life-cycle cost savings; (ii)  to increase use of clean and renewable energy; and (iii) to reduce emissions and overall adverse environmental impact of present actions to mitigate the impact on future ­generations.82 Specifically, Governor Christie’ Policy Letter instructs the NJARNG to ‘promote sustainable acquisition and procurement by ensuring that all equipment, products, and fixtures purchased meet or exceed’ existing US Environmental Protection Agency (EPA) standards.83 Other States also have taken strides toward achieving sustainability through self-imposed green procurement programmes. Massachusetts, for example, predated New Jersey’s action and EO 13693 with a State policy aimed at protecting public health and the environment, by promoting the use of clean technologies, recycled materials and non-toxic products.84 In 2009, weeks after Obama’s signing of EO 13514 (discussed in section II.D), Massachusetts passed EO 515 establishing an Environmental Purchasing Policy, in which all Commonwealth Executive

81 Tag Policy Letter 15-1 State of NJ (15 May 2015). 82 Ibid. 83 Tag Policy Letter 15-1 3(g) State of NJ (15 May 2015). See Energy Star and WaterSense Standards (18 November 2015) at www.energystar.gov/, http://www3.epa.gov/watersense/products/bathroom_ sink_faucets.html. 84 Learn About EPPs and the EPP Purchasing Program, at www.mass.gov/anf/budget-taxes-andprocurement/procurement-info-and-res/procurement-prog-and-serv/epp-procurement-prog/learnabout-epps/#EO_515 (18 November 2015).

222  Jason J Czarnezki Departments are required to participate.85 Targeted purchasers include schools, municipalities, public institutions of higher education and county governments. Though Massachusetts EO 515 pre-dates EO 13693, it mimics Obama’s ambition to implement GPP within government agencies. The goals of Obama’s EO 13693 are to be implemented through revision of the Federal Acquisitions Regulations, as explained later. Massachusetts and New Jersey are not alone in the effort to ‘green’ state and local government.86 California mandates a Statewide Environmental Preferable Purchasing programme to buy green products and services as ordained through State law.87 In 2014, Oregon issued a Statewide policy to revise State procurement practices to reduce use of toxic chemicals in products used by State agencies, by applying ‘Green Chemistry’ in purchasing.88 Colorado offers less comprehensive GPP requirements, narrowly offering green specifications only for purchasing paper.89 Arkansas gives preference to products with the highest bio-based composition that meet or exceed federal standards.90 However, while a majority of States have laws, programmes and/or guidelines formally intended to mandate, promote and facilitate Statewide GPP, the efforts are varied and inconsistent, with many States not yet having followed the sustainability trend. American States are afforded significant discretion and can directly exert their procurement power in a manner that would be prohibited in the EU through simply purchasing local goods – something often perceived as State actors in the US bridging the gap between supporting local economies and supporting what is at least perceived to be, in some cases, more sustainable products (eg local food, reducing transportation and shipping externalities). Regardless of their ultimate efficacy, State local preference laws have grown more popular, and legal challenges to them are likely to be unsuccessful.91 These laws illustrate the power of the market participant exception. States and localities are using the market participant exception to prefer local goods. If States can engage in sheer economic protectionism using the market participant exception, they can certainly make environmental requirements in procurement decisions: Before bringing a bill to the table however, lawmakers should run through an analysis to ensure that the law can claim the market participant exception. This entails making sure that the state government is merely acting as a player in the market, and is not venturing outside of the protective scope of the market participant exception.92 85 See Executive Order 13,514, 74 Fed Reg 194 (8 October 2009). 86 Hirokawa and Salkin (eds) (n 78). 87 See CA Public Contract Code §§ 12400–12404. 88 See Green Chemistry Procurement Guidelines, ORS 279A.140, 279B.205, and 184.423(1)(j) (10 September 2014). 89 See at www.naspo.org/dnn/greenmap/California.aspx. 90 Ibid. 91 Ackerman (n 10). 92 Mihaly (n 67) 25.

EU and US Procurement Discretion   223 From a policy standpoint, States must consider where their interests would be most greatly met. In other words, where should the public purchasing power be focused? Public schools (K-12 schools), universities, hospitals or correctional facilities? In the US, according to 2004 figures, K-12 schools rank first as the nation’s largest institutional purchaser.93 State colleges and universities are the secondlargest institutional purchasers in the US,94 followed by the healthcare sector.95 It would be prudent to perform such an analysis, regardless of the locale, whether in the US or Europe, and in other market sectors, including environmental preferences on any durable or consumable goods.

C.  Generally Applicable Environmental Standards and Regulation American States, as market participants, can lawfully support State and local economies,96 but what if the rationale is the environment or public health? For virtually any public procurement decision, including environmental standards, dormant commerce clause analysis does not apply due to the market participant exception – the decision will be upheld. But what if the State is acting as a regulator to promote State interests in environmental protection and sustainability? Could American States create these sorts of environmental conditions? Or would this violate the commerce clause? Even-handed and non-discriminatory in its intent or application, environmental regulation is the norm and will likely be upheld. Nevertheless, there is a real risk that a State may pass legislation without adequately considering its impact elsewhere in the country. In addition, the risk exists that a State will use what appears to be non-discriminatory legislation as a covert means of burdening out-of-State businesses. Thus, some degree of judicial scrutiny seems warranted.97 In order to guard against these risks, the US Supreme Court subjects non-discriminatory state legislation to a balancing test, known as the Pike test. In Pike v Bruce Church, Inc,98 the Court stated that, in evaluating such regulation, the impact of a statute on inter-State commerce is balanced against the State’s justifications for the statute. Where the statute regulates even-handedly to

93 M Beery and M Vallianatos, ‘Center for Food Justice and Urban and Environmental Policy Institute, Occidental College, Farm to Hospital: Promoting Health and Supporting Local Agriculture’ 3 (2004), available at departments.oxy.edu/uepi/cfj/publications/farm_to_hospital.pdf. 94 Ibid. 95 Ibid. 96 See Smith Setzer & Sons Inc v SC Procurement Review Panel, 20 F3d 1311 (4th Cir 1994). 97 D Farber, ‘Legal Guidelines for Cooperation Between the EU and American State Governments’ in D Vogel and JFM Swinnen (eds), Transatlantic Regulatory Cooperation: The Shifting Roles of the EU, the US and California (Edward Elgar 2011) 3, 7–8. 98 Pike (n 37).

224  Jason J Czarnezki effectuate a legitimate local public interest, and its effects on inter-State commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.99 Environmental laws have fared well under this commerce clause doctrine test.100 For example, in Minnesota v Clover Leaf Creamery Co, the Supreme Court upheld a State law prohibiting the use of non-recyclable plastic containers for milk.101 The Court said that the environmental benefits of the law outweighed any harms to inter-State commerce.102 In Maine v Taylor, the Supreme Court upheld a State ban on the importation of out-of-State baitfish under the theory that the State has a ‘legitimate interest in guarding against imperfectly understood environmental risks, despite the possibility that they may ultimately prove to be negligible’.103 The State of Maine was concerned that fishing bait travelling across State boundaries would have an adverse ecological impacts on Maine’s freshwater lakes and streams by introducing invasive species. This reasoning prevailed.

D.  GPP by the US Federal Government With an environmental footprint arising from its 360,000 buildings, 650,000 fleet vehicles, and $400 billion products and services output, the US federal Government is under scrutiny from environmentalists, legal authorities and politicians alike, who are not only encouraging but compelling federal agency procurement officers to prioritise green procurement when purchasing good and services.104 ‘Since 1993, the US Government has accelerated the process of leveraging its purchasing power by setting more stringent, mandatory environmental performance standards in the procurement context’.105 More recently, President Obama endeavoured to imprint sustainability at a federal level by issuing several Executive Orders (EOs) that expressly and peripherally relate to an agenda to transform the US into a leading sustainable nation, by formally calling for GPP among federal agencies.106 Obama’s EO 13693, ‘Planning for Sustainability in the Next Decade’, was signed on 19 March 2015.107

99 Ibid 142. 100 Farber (n 97) 12. 101 Minn (n 48). 102 Ibid 473. 103 Maine v Taylor, 477 US 131, 148 (1986). 104 Pilot Testing EPA Guidelines for Environmental Performance Standards and Ecolabels (12 November 2015), available at www.resolv.org/site-guidelines/background-information-andresources/. 105 SE Light and E Orts, ‘Public and Private Procurement in Environmental Governance’ in K Richards and J Van Zeben (eds), Encyclopedia of Environmental Law (Edward Elgar 2017) 5. 106 EO 13423, 72 Fed Reg 17 (26 January 2007) and EO 13514, 74 Fed Reg 194 (8 October 2009). 107 Acquisition, Federal Facilities Environmental Stewardship and Compliance Assistance Center (12 November 2015), available at www.fedcenter.gov/programs/buygreen.

EU and US Procurement Discretion   225 It remains to be seen whether the Trump Administration will issue final rules under EO 13693.108 The explicit goal of EO 13693 is ‘to maintain Federal leadership in sustainability and greenhouse gas emission reduction … where life-cycle cost-effective’.109 In section 3(i) of the 2015 EO, Obama echoes the plea of the predecessor EO 13514110 and EO 13101,111 renewing the need for federal agencies to promote sustainable acquisition by safeguarding distinct factors that are not only considered but also incorporated, ‘to the maximum extent practicable’, for all appropriate procurements within the scope of the planning, award and execution of the agency’s acquisition.112 The factors EO 13963 emphasises are: (i) purchasing preferences for recycled content products; (ii) energy- and water-efficient products and services; (iii) bio-based designated products, sustainable services and products; and (iv) environmentally preferable products that exceed EPA recommended labels.113 Outwardly, Obama’s mandate seems to merely accomplish the establishment of good faith agency shopping, cloaked as ‘purchasing preference’;114 though perhaps this leads to increased agency discussion and cooperation. In this way, the federal Government lags behind State action. In addition, embodying the starkest difference between the EU and US, and ‘[n]otwithstanding its commitment to competition in contracting, the US procurement system remains fundamentally premised upon a preference for the purchases of domestic rather than non-­ domestic goods’.115 However, there are various influential collateral laws, regulations and agreements that embody the ambition of the Obama Executive Order.116 The Federal Acquisitions Regulations,117 in response to the direct initiatives of EO 13693 and 108 E Johnson and R Burnette, ‘New Policies on Sustainable Acquisition: Among Last Proposed FAR Rules of Obama Administration’, The National Law Review (7 February 2017), available at www. natlawreview.com/article/new-policies-sustainable-acquisition-among-last-proposed-far-rulesobama. 109 EO 13,693, 80 Fed Reg 57 (25 March 2015). 110 It must be noted that that the General Services Administration (GSA) has played a key role, in relation to EO 13514, in furthering sustainable procurement practices throughout the federal Government, as it is responsible for formulating and maintaining government-wide policies covering a variety of administrative actions, including those related to procurement and management. Sustainability Considerations for Procurement Tools and Capabilities: Summary of Workshop (National Academies Press 2015) at 1–2. 111 C McCrudden, Buying Social Justice (OUP 2007) 390–91. 112 Acquisition (n 107). 113 EO 13,693 (n 109), available at www.fedcenter.gov/_kd/go.cfm?destination=Page&pge_id=4167& dialog=0 Nov. 12, 2015. 114 Sustainability Considerations (n 110) 6. 115 The Environmental Performance of Public Procurement: Issues of Policy Coherence (OECD 2003) 202. 116 For example, the Comprehensive Procurement Guideline (CPG) programme, as part of the EPA’s ongoing initiative to promote the repurposing of solid waste residual materials, established a list of 61 recycled-content products to be re-used in the manufacture of new products. Once a product is designated as made with recovered materials, the EPA requires federal agencies to purchase such materials following their suggested purchase practice. EO 13,423, 72 Fed Reg 17 (26 January 2007), available at www3.epa.gov/epawaste/conserve/tools/cpg/. 117 SW Feldman and WN Keyes, Government Contracts in a Nutshell (West 2011) 3.

226  Jason J Czarnezki implementing executive branch policy, dictate acquisition policies and procedures to presently safeguard and proactively promote the quality of the global environment by fostering markets for sustainable technologies, materials, products and services.118 Specifically, federal agencies must facilitate sustainable acquisition by ensuring that 95 per cent of new contract actions for the supply of products and for the acquisition of services (including construction) require that the products are: (i) energy efficient; (ii) water-efficient; (iii) bio-based; (iv) environmentally preferable; (v) non-ozone depleting; and (vi) made with recovered materials.119 For bio-based products, and those made with recovered materials, purchase procedures apply to all agency acquisitions of the EPA and United States Department of Agriculture (USDA) designated items if the price of the item exceeds $10,000.120 Once the EPA or USDA designates an item for green procurement, agencies have one year to re-examine and amend their procurement programmes, and are exempt from green procurement only if the item cannot be acquired within a reasonable time period at a reasonable cost, or cannot meet reasonable performance standards.121 In a robust effort to facilitate federal purchasers in selecting products that meet sustainable procurement goals, the EPA proposed Draft Guidelines for Product Environmental Performance Standards and Ecolabels for Voluntary Use in Federal Procurement.122 Following majority support, the EPA decided to contract with Resolve Inc to assemble a diverse Governance Committee to construct and carry out a 2015 pilot test for three product panels: building paints/coatings/removers, building floors, and furniture.123 The express purpose of the guidelines currently being tested is to generate a ‘transparent, fair, and consistent’ set of criteria that will help purchasers in recognising strict federal green standards and eco-labelling for energy and water efficiency, and safer chemicals when buying products.124 The EPA has also developed ‘Recommendations of Specifications, Standards, and Ecolabels for Federal Purchasing’, a laundry list of eco-labels that is ‘intended to help federal purchasers identify and procure environmentally sustainable products and services’.125 Transcending extant EPA eco-labels was one of the Obama

118 Federal Acquisitions Regulations §23.400 (12 November 2015), available at www.acquisition.gov/ sites/default/files/current/far/html/Subpart%2023_1.html#wp1071602. 119 Federal Acquisitions Regulations §§23.103–23.104 (12 November 2015). 120 Federal Acquisitions Regulations §23.400 (12 November 2015). 121 Federal Acquisitions Regulations §23.404(b) (12 November 2015). 122 EPA Draft Guidelines for Product Environmental Performance Standards & Ecolabels for Use in Federal Procurement (December 2014), available at www2.epa.gov/sites/production/files/2015-09/ documents/draftguidelines_i_-_iii_-_iv_-_nov2013_and_revised_ii_-_dec2014.pdf. 123 Draft Guidelines for Product Environmental Performance Standards and Ecolabels for Voluntary Use in Federal Procurement, available at www.regulations.gov/#!docketDetail;D=EPA-HQ-OPPT-2013-0579, http://www2.epa.gov/greenerproducts/draft-guidelines-product-environmental-performancestandards-and-ecolabels-voluntary, http://www.resolv.org/site-guidelines/. 124 See at www2.epa.gov/greenerproducts/draft-guidelines-product-environmental-performancestandards-and-ecolabels-voluntary, http://www.resolv.org/site-guidelines/. 125 US EPA, ‘Recommendations of Specifications, Standards, and Ecolabels’, available at www.epa.gov/ greenerproducts/epas-recommendations-specifications-standards-and-ecolabels-federal-purchasing.

EU and US Procurement Discretion   227 EPA’s candid objectives. The Safer Choice labelling system, for example, is a voluntary opportunity for chemical product manufacturers to acquire retail recognition for their initiative in chemical safety.126 Thus, one of the pilot test’s primary objectives is to promote deliberate assimilation and discernment among existing green procurement standards and coordinating eco-labels; ‘for example distinguishing between baseline and higher performing criteria, and considering how to address purchase categories that have both single-attribute or life-cycle stage standards as well as multi-attribute, multi-life-cycle stage standards’.127 In April 2016, as a result of the pilot testing, the EPA’s Environmentally Preferable Purchasing Program released its pilot criteria for assessing standards and eco-labels.128 However, the EPA programme has not monetised the environmental assessments or engaged in LCC. Life-cycle cost methodology, intended to provide an acquisition method that is consistent with the concept of sustainability while simultaneously incurring the lowest cost and acquiring the best value, calculates a savings-to-investment ratio as guidance.129 Thus, the EPA to date has the tools (in a few test product areas) to help inform criteria to include in government contracts/ tender offers and to evaluate eco-labels (in those product areas), but not to do LCC. The EPA’s preferred eco-labels list illustrates the practical and user-friendly preference of government agencies, and smaller municipalities in particular in both the EU and US, simply to use a list of highly-thought-of private labels and certifications when doing green procurement, rather than engage in LCC. It also explains the EU desire to develop a standardised LCC methodology, if possible.

III.  EU Public Procurement and Environmental Interests A key reason behind the creation of the EU is market integration, which is created by allowing the free movement of goods, services, persons and capital throughout the Continent. Businesses registered in the EU have the right to compete for public contracts in other EU countries. To create a level playing field for all businesses across Europe, EU law may provide minimum harmonised rules. Now, EU Member States may explicitly take into account environmental considerations in public procurement decisions. 126 J McPartland, ‘EPA rolls out its redesigned labels under the newly minted Safer Choice Program’ (4 March 2015), available at blogs.edf.org/health/2015/03/04/epa-rolls-out-its-redesignedlabels-under-the-newly-minted-safer-choice-program/. 127 See Pilot Testing EPA Guidelines (n 104). 128 US EPA EPP Program, Final Pilot Assessment Criteria (2016), available at www.epa.gov/sites/ production/files/2016-12/documents/guidelines_-_final_pilot_guidelines_-_clean_12-29-2016_1.pdf. 129 See Oregon Department of Transportation Life Cycle Costing 731-147-0020. The savings-toinvestment ratio compares ‘the present value of net cost savings attributable to an energy conservation measure to the present value of the net increase in investment, maintenance and operating, and replacement costs less salvage value or disposal cost attributable to that measured over a study period’. 10 CFR § 455.64(a)(c)).

228  Jason J Czarnezki The Recitals of Directive 2014/24/EU on public procurement (‘the Directive’) lay out why public contracts play ‘a key role in the Europe 2020 strategy’ and are useful ‘market-based instruments to be used to achieve smart, sustainable and inclusive growth while ensuring the most efficient use of public funds’.130 Going further, the Directive makes clear that environmental and social considerations should be incorporated into the public procurement procedures of the Member States and contracting authorities.131 The new Directive has gone a long way towards empowering contracting authorities to engage in sustainable procurement, and more specifically green procurement, to a certain extent lowering the regulatory risks attached to this approach under the 2004 Directives. As has been remarked, the ‘sustainability paradigm is almost taking over the realm of public procurement, and it is marketed as a major “selling point” of the new legislation’.132 Thus, the new Directive makes GPP ‘more mainstream’, though the success of the Directive will depend on the implementation and political will of national governments and contracting authorities.133 The result is that the new Directive contains ‘provisions which are innovative in many respects’.134 This section focuses on two key areas: (i) provisions allowing award criteria to refer directly to the inclusion of eco-labels; and (ii) the emergence of LCC as a way to determine the true cost of a tender. In particular, the development of eco-labelling requirements and LCC methodology may result in significant innovation, though also to potentially complex implementation.135

A. Eco-Labels Directive 2014/24/EU defines ‘label’ as ‘any document, certificate or attestation confirming that the works, products, services, processes or procedures in question meet certain requirements’.136 The new rules allow public purchasers to refer to a specific label or eco-label when laying down the environmental characteristics of the works, goods or services they wish to purchase.137 The contracting authority can require an eco-label, so long as the criteria are linked to the subject matter of the contract, based on objectively verifiable and 130 Recital 2, Directive 2014/24/EU. 131 Recital 24, ibid. 132 R Caranta, ‘The Changes to the Public Contract Directives and the Story They Yell About How EU Law Works’ (2015) 52 Common Market Law Review 391, 397 (citing DC Dragos and B Neamtu, ‘Sustainable Public Procurement in the EU: Experiences and Prospects’ in F Lichère, R Caranta & S Treumer (eds), Modernising Public Procurement: The New Directive (DJØF 2014) 301-02, 304). 133 A Semple, A Practical Guide to Public Procurement (OUP 2015) 171. 134 Caranta (n 132) 391. 135 Ibid 391(noting that the rules are ‘very complex, and at times obscure’, making this area even more technical than it already was). 136 Art 2(1)(23), Directive 2014/24/EU. 137 Art 43(1), ibid.

EU and US Procurement Discretion   229 non-discriminatory criteria, established in an open and transparent procedure, accessible to all interested parties and set by a third party over which the economic operator applying for the label cannot exercise a decisive influence.138 Interestingly, where an economic operator has no possibility of obtaining the specific label indicated by the contracting authority or an equivalent label, the contracting authority shall accept other appropriate means of proof that the works, supplies or services to be provided by it will fulfil the requirements of the specific label or the specific requirements indicated by the contracting authority.139 This puts governments/public contracting entities in the unique, and perhaps challenging, position of functionally certifying some producers/providers themselves. This may increase costs and administrative burdens for contracting entities, which may also lack necessary expertise. A key point must be made. The Directive ‘stops short of enabling contracting authorities to insist on third-party certification in most circumstances’,140 permitting verified self-declarations. While this may promote greater competition,141 especially where more ambitious environmental criteria are applied, one must be concerned that this may undercut investments in thirdparty certification.142 Ultimately, the data will answer this empirical inquiry based on whether contracting entities are requiring technical specifications based upon labels, and whether operators are receiving those certifications or self-declaring that they are meeting the criteria.

B.  Life-cycle Costing Likely the most significant part of the new Directive is the allowable inclusion of LCC in contract award criteria in determining the lowest cost tender. This will require significant methodological innovation by both contracting entities and economic operators to measure all the externalities during the course of a product’s life-cycle, from ‘cradle to grave’. But, going further, these costs will have to be monetised, and thus the use of the term ‘life-cycle costing’ rather than ‘life-cycle analysis’ or ‘assessment’ remains significant. Under Article 67(1) of Directive 2014/24/EU, addressing contract award criteria, ‘contracting authorities shall base the award of public contracts on the most economically advantageous tender’. Article 67(2) provides: The most economically advantageous tender from the point of view of the contracting authority shall be identified on the basis of the price or cost, using a cost-effectiveness approach, such as life-cycle costing in accordance with Article 68, and may include



138 Art

43(1)(a)–(e) ibid. 43(1), ibid. See also Recital 88. 140 Semple (n 133) 184. 141 Caranta (n 132) 420–21. 142 Semple (n 133)184. 139 Art

230  Jason J Czarnezki the best price-quality ratio, which shall be assessed on the basis of criteria, including qualitative, environmental and/or social aspects, linked to the subject-matter of the public contract in question. Such criteria may comprise, for instance: (a) quality, including technical merit, aesthetic and functional characteristics, accessibility, design for all users, social, environmental and innovative characteristics and trading and its conditions …

Since the ‘most economically advantageous tender’ must use a ‘cost-effective approach’ such as ‘life-cycle costing’, economic operators must be able to monetise and contracting entities must be able to value all the costs occurring during the life-cycle of a product or service, if the life-cycle approach is used. The outcome of the EU legislative process is that Directive 2014/24 both provides a working definition of LCC and lays down award criteria through which contracting authorities (and entities) may take account of externalities in their purchasing decisions.143 Under Article 2(1)(20), ‘life cycle’ is defined as all consecutive and/or interlinked stages, including research and development to be carried out, production, trading and its conditions, transport, use and maintenance, throughout the existence of the product or the works or the provision of the service, from raw material acquisition or generation of resources to disposal, clearance and end of service or utilization …

Measurement of the environmental externalities of the life-cycle will have to occur first, followed by monetisation. Article 68 of Directive 2014/24/EU goes further in defining LCC award criteria.144 For now, the challenges posed by LCC are left to the Member States (ie no EU legislation exists except for the requirements of the Clean Vehicles Directive145) and private innovation of LCC methodology, perhaps in combination with ecolabels and third-party certification. Without national guidance or EU legislation installing a specific LCC methodology, significant burdens may be placed on the court system.146 In time, a universal approach may be accepted and legislated upon as ‘the definition of common methodologies for life cycle costing has significantly advanced’.147 It is clear that the Directive allows contracting authorities to evaluate bids based on the total life-cycle cost (including the carbon footprint) of goods or services; for example, a local authority wishing to purchase a school bus could favour buses that, even though they are more expensive initially, consume less fuel, require less maintenance and have a longer life span.148

143 Caranta (n 132) 398. 144 See also Recital 96, Directive 2014/24/EU. 145 Directive 2009/33/EC of the European Parliament and of the Council of 23 April 2009 on the promotion of clean and energy-efficient road transport vehicles [2009] OJ 120/5. 146 See Dragos and Neamtu (n 132). 147 Recital 95, Directive 2014/24/EU. 148 See at ec.europa.eu/internal_market/publications/docs/public-procurement-and-concessions_ en.pdf.

EU and US Procurement Discretion   231 Recital 97 in Directive 2014/24/EU offers other examples: requiring manufacturing that does not involve toxic chemicals, the purchased services being provided using energy-efficient machines, or requiring waste minimisation or resource efficiency. However, considerable complexity exists when making procurement decisions based on environmental life-cycle costs, such as the efficiency of newer versus existing products, embedded energy and emissions involved in production, the way in which current units will be disposed of, the lifespan of new equipment, and the transportation, packaging and installation of replacements. Innovation certainly will be necessary in moving beyond the summation of costs incurred in production of a good or service to creating LCC methodologies.149 Caranta writes that public procurement practice and law were of course aware of further costs, ultimately borne by the contracting authority, such as, for instance, running costs, cost-effectiveness, after-sales service and technical assistance. Where the uncertainties arose was in how to deal with externalities – and particularly environmental externalities such as pollution – in the production, the use and the decommissioning phases of the life-cycle of a good or service.150 How will these environmental externalities be measured and valued? This question is foreshadowed in Recital 96, which declares that the life-cycle costs (eg research and development, production, transport, use, maintenance, disposal, environmental externalities) can be considered, ‘provided that they can be monetised and monitored’. Can they be effectively monetised? Environmental law and policy has already shown the challenges in measuring the costs of pollution and natural resource extraction, and it remains to be seen whether institutions involved in GPP (eg countries, municipalities, businesses, third-party certifiers) can create innovative LCC methodologies. Of note, one could interpret Article 67 of the new Directive to require mandatory LCC or some other ‘cost-effectiveness approach’ when considering the response to a tender and determining the most economically advantageous tender. Article 67(2) uses the word ‘shall’, stating that ‘[t]he most economically advantageous tender from the point of view of the contracting authority shall be identified on the basis of the price or cost, using a cost-effectiveness approach, such as life-cycle costing’(emphasis added). That said, Recital 97 uses the phrase ‘should be allowed’, perhaps limiting the notion that this is a mandatory obligation.151 But the Article, not the Recital, carries greater force. So is sustainable public procurement mandatory in the EU? If not then Member States are free to introduce GPP measures (but not required to do so), and contracting authorities have discretion whether to include contract performance conditions. But if the ‘shall’ language presents a mandatory obligation, does Article 67 have

149 Caranta (n 132) 397. 150 Ibid. 151 S Treumer, ‘Evolution of the EU Public Procurement Regime: The New Public Procurement Directive’ in Lichère, Caranta and Treumer (eds) (n 132) 281.

232  Jason J Czarnezki direct effect? Would procurement decisions be appealable by non-governmental organisations? Regardless of whether LCC methodology is required or recommended, it is unclear who would come up with the appropriate methodology. Eventually, the EU may develop a common EU LCC method (or perhaps a common method for each product/service category) and it will be added to the Directive Annex, but it is unclear when this might occur, whether Member States will be required to use it and, as discussed below, what this methodology might be. Recital 96 states: Common methodologies should be developed at Union level for the calculation of life-cycle costs for specific categories of supplies or services. Where such common methodologies are developed, their use should be made compulsory.

Furthermore, the feasibility of establishing a common methodology on social LCC should be examined, taking into account existing methodologies, such as the Guidelines for Social Life Cycle Assessment of Products adopted within the framework of the United Nations Environment Programme. Of course, while EU environmental law is a floor and not a ceiling, and does ‘not prevent … more stringent measures’ in terms of environmental protection,152 Member States cannot simply declare mandatory increased environmental standards for all products, as trade is a harmonised area of law.153 This, ultimately, is the main rationale for EU- or nation-wide LCC standards to be incorporated into the public procurement process. The efforts in Europe have also given rise to several green procurement networks and projects to aid Member States in implementing green procurement, such as the Public Procurement Network, the Procura Campaign and the Buy Smart project.154 Despite initial progress in GPP, there remains the question of who should have the larger role in fostering GPP – the EU or the Member States. For example, the Directive ‘treads a thin line between empowering contracting authorities to develop [LCC] methodologies and worrying that this could be done to favour certain economic operators’.155 Given the costs of creating and implementing LCC methodologies, the obvious next step is for the EU to develop uniform LCC methodologies. However, at this point, the Directive relies on ‘the traditional idea of the directive as an instrument binding as to the result to be achieved but leaving to the national authorities the choice of form and methods’.156

152 Art 193 TFEU. 153 P Oliver, ‘Book Review of Nicolas de Sadeleer, EU Environmental Law and the Internal Market (Oxford Univ Press 2014)’ (2014) 51 Common Market Law Review 1874. 154 See European Commission, ‘Networks and Initiatives: Environment’ (last updated 17 September 2015), available at ec.europa.eu/environment/gpp/initiatives_en.htm; Buy Smart (2014) available at www.buy-smart.info/ (project co-funded by the Intelligent Energy Europe Programme of the European Union, to establish helpdesks for green procurement in various countries, to set guidelines and assist in implementing green procurement, running from 2012–14). 155 Caranta (n 132) 457. 156 Ibid 458.

EU and US Procurement Discretion   233 A step further would be for Member States or the EU to require contracting authorities to purchase environmentally friendly goods and services (or provide incentives to do so).157 There are implementation benefits to EU-wide standards, or, perhaps (relying on American notions of sovereignty and the ‘laboratory of democracy’), creating EU incentives for a race to the top for GPP. Unfortunately, the Union seems opposed to mandatory requirements or quotas in respect to environmental procurement. But will the lack of mandatory obligations in the Directive stifle any innovation? Ultimately, mandatory GPP reform will need to come from the EU or its Member States, to create market demand and define LCC methodologies for all product areas (or at least the most environmentally costly ones). Prior to that, however, the future of GPP lies with public and private implementing institutions and firms that will develop standards for eco-labels and LCC.

IV.  The Future of Green Procurement: Life-cycle Costing and Eco-labels As result of the decline of public environmental law, there is greater reliance on private environmental governance, where industry changes its actions to be more environmentally friendly in response to shifting corporate norms, and on softer public regulations that can influence the market, like informational tools and public procurement.158 Green public procurement provides a compelling example of this transition, though in a middle space involving both public and private entities, as it invokes both product eco-labelling and evaluation of product supply chains, whereby public institutions will influence changes in industry by demanding certain label criteria and better sustainability within products’ life-cycles. Through these tools, GPP seeks to increase demand for environmentally friendly goods and create innovation in the marketplace.159 This section addresses two key components of the Directive that will play an outsized role in achieving these goals – the development of LCC methodologies and the role of eco-labelling and their criteria, as requirements for products to meet these standards in order to be purchased. How can such requirements lead to new markets and re-define the share of eco-friendly goods in some markets, especially when these reforms are voluntary? While evaluating ‘success’ will prove challenging, one can look at trends in the marketplace in terms of the use of eco-labels and the evolution of life-cycle methodologies that will be adopted in the GPP process. If GPP is to be an effective policy instrument, ‘the new rules should encourage public purchasers to implement environmental policies’, and ‘[t]hus, public

157 Cf ibid 396–99. 158 See JJ Czarnezki, ‘The Neo-Liberal Turn in Environmental Regulation’ (2016) 1 Utah Law Review 1. 159 Caranta (n 132) 394.

234  Jason J Czarnezki authorities will be able to base their decision on the best life cycle cost of the goods offered, while more is done to encourage social integration’.160 Green criteria can be included in multiple sections of public tender offers,161 though the ‘most common means of implementing environmental objectives into regulated procurement procedures appears to be via technical specifications’.162 It is in these technical specifications that allow for consideration of production processes.163 Tender award criteria may include externalities linked to consumption (eg bus pollution); externalities linked to production (eg renewable electricity); LCC (acquisition, use, maintenance and disposal; it can again include externalities).164 Eventually, as noted in Recital 96 of the Directive, the EU will come up with a common EU LCC method and it will be added to the Directive Annex, but it is unclear when this might occur. Will a global standard for LCC methodology be established? And by whom (government entities, or a consortium of private industry)? Thus, this section considers how LCC and eco-labels are put into practice by current public institutions (ie contracting authorities) and private firms, as well as by non-contracting government entities and non-profit organisations, in particular focusing on existing LCC methodologies and trends in eco-labels. For example, efforts in Europe have given rise to several green procurement networks and projects to aid Member States in implementing green procurement, in addition to the efforts of the European Commission.165 This section considers, in an effort to inform about the most effective practices, the evolution and development of eco-labels and LCC methodologies, and looks at how firms have developed LCC methodologies to calculate, and ultimately monetise, cradle-to-grave environmental externalities. Ultimately, the prediction is that a common LCC methodology will be created in the EU though partnerships between the public and private sector in a market-by-market context. Private industry will be the dominant player in creating any LCC methodology in the US, given the lack of public sector interest in sustainable public procurement. Less certain, the EU may modify its legislation to allow specific eco-labels to be required in the procurement process, especially as more eco-labels use life-cycle assessment (LCA) and LCC methodologies. This would result in a merger of ecolabelling and LCC evaluations.

A.  Life-cycle Costing and Impact Valuation Purchase price reflects only a narrow range of product information. Prices fail to incorporate indirect supply chain costs (environmental and social externalities)

160 Dragos

and Neamtu (n 132) 313. Semple (n 133) 183. 162 Ibid 177. 163 Dragos and Neamtu (n 132). 164 Ibid 318. 165 See European Commission (n 154); Buy Smart (2014) (n 154). 161 See

EU and US Procurement Discretion   235 and benefits (generated eco-system services). Life-cycle costing is designed to fill this gap by evaluating the costs and benefits of a product throughout its entire life-cycle, though methodologies remain in their infancy.166 It builds on existing life-cycle assessment tools that assess environmental impacts associated with all the stages of a product’s life from ‘cradle to grave’,167 by translating these impacts into a single metric – monetary cost. Article 68 of Directive 2014/24/EU allows contracting authorities to take an LCC approach when determining the costs in the procurement process. Under the EU procurement rules, a contract can be awarded based on lowest price or most economically advantageous tender. This means that contracting authorities or economic entities, or perhaps both, can assess the environmental externalities of a product over all phases of its life-cycle (acquisition, costs of use, maintenance costs, end-of-life costs) and, significantly, monetise those costs so as to be able to effectively compare the bids of different economic entities. As seen in Figure 10.1,168 consideration of monetised environmental externalities can change the determination of what is the lowest-priced good. Figure 10.1  Example of cost difference when considering environmental externalities

Waste

Waste Use

Use

Price

Price

Cost

166 Dragos and Neamtu (n 132). 167 National Risk Management Research Laboratory, Office of Research & Development, US EPA, Life Cycle Assessment: Principles and Practice, EPA/600/R-06/060, 1 (May 2006). 168 Ibid.

236  Jason J Czarnezki This section defines LCC, considers what LCC methodologies might be used, building on LCA principles, and notes the challenges that LCC entails. For example, how do you monetise pollution and other environmental externalities of production? Environmental law policy has shown the challenges in measuring the costs of pollution and natural resource extraction. While the idea of LCA is well developed, firms are beginning to determine how to cost out all stages of a product’s life-cycle.

i.  What is LCC? It is claimed that ‘The absolute novelty of the 2014 Directives regards the reference to the concept of life cycle costing.’169 Purchase price alone does not reflect the financial and non-financial gains that are offered by environmentally and socially preferable assets as they accumulate during their operations and use stages, and LCC is a tool that evaluates the costs of an asset throughout its life-cycle.170 While life-cycle assessment is well known and assesses environmental impacts associated with all the stages of a product’s life from ‘cradle to grave’, this is different from developing a monetary cost to these impacts. Life-cycle assessment is a scientific, structured and comprehensive method that is internationally standardised in ISO 14040 and ISO 14044. For practitioners of LCA, ISO 14044 details the requirements for conducting an LCA that addresses the environmental aspects and potential environmental impacts (eg use of resources and the environmental consequences of releases) throughout a product’s life-cycle, from raw material acquisition through production, use, end-of-life treatment, recycling and final disposal.171 There are three phases in an LCA study – (i) the goal and scope definition phase; (ii) the inventory analysis phase; and (iii) the impact assessment phase – but there is no mention of costing.172 The International Reference Life Cycle Data System Handbook (ILCD Handbook) further specifies the broader provisions of the ISO 14040 and ISO 14044 standards on environmental LCA.173 Life-cycle assessment quantifies resources consumed and emissions, as well as the environmental and health impacts and resource depletion issues associated with any specific goods or services, covering climate change, summer smog, toxicity, human cancer effects, and material and energy resource depletion.174 ‘Crucially, it allows for direct comparison of products, technologies and so on

169 Dragos and Neamtu (n 132) 323. 170 Ibid 324. 171 ISO 14044, Environmental management – Life cycle assessment – Requirements and Guidelines. 172 EPA/600/R-06/060 (n 167) iv. 173 European Commission, ‘JRC Conference Reports, The International Reference Life Cycle Date System (ILCD)’ ILCD Handbook (Publications Office of the European Union 2012) 7. See also Greenhouse Gas Protocol, Product Life Cycle Accounting and Reporting Standards (World Resources Institute and World Business Council for Sustainable Development 2011). 174 ILCD Handbook (n 173) 8.

EU and US Procurement Discretion   237 based on the quantitative functional performance of the analysed alternatives.’175 It is increasingly being used in a market context in communications by industry to business customers, often through published environmental product ­declarations.176 (Note that in the public procurement context economic entities will be the ones delivering this information to contracting authorities.) Life-cycle assessment relies on five principles: (a) bringing a wide range of environmental problems into an integrated assessment framework; (b) capturing these problems in a scientific and quantitative manner; (c) allowing environmental pressures and impact potentials to be related to any defined system, such as a particular type of goods, a service, a company, a technology strategy, a country, etc; (d) integrating the resource use and emissions over the entire life-cycle of the analysed system, from the extraction of natural resources through material processing, manufacturing, distribution and use, up to recycling/energy valorisation and the disposal of any remaining waste; and (e) facilitating comparisons of the environmental performance of different systems/options on an equal basis, and helping to identify areas for improvement.177 Environmental LCA is ‘structurally open’ to growing into the full sustainability assessment that is LCC, where cost is integrated.178 As noted by the European Commission in 2012, an integrated, authoritative approach to such a life-cycle sustainability assessment still needs to be developed.179 In other words, an authoritative LLC methodology is the next step. In the context of sustainable public procurement, the use of LCC is a very important element in the effort to shift the paradigm of public procurement beyond the confinement of using solely the purchase price of a good or service.180 Under the EU procurement rules, a contract can be awarded based on the lowest price or most economically advantageous tender (MEAT). Where the second option is chosen, costs may be calculated on the basis of the whole lifecycle of the supplies, services or works, and not solely on the purchase price. This allows costs associated with the use, maintenance and end of life of the supplies, services or works to be taken into account. A movement towards LCC is important since the purchase price alone does not reflect the financial and non-financial gains that are offered by environmentally preferable assets as they accumulate during their operations and use stages.181 175 Ibid 8. 176 Ibid 16. 177 Ibid 17. 178 Ibid 20. 179 Ibid. 180 Dragos and Neamtu (n 132) 324. 181 D Dragos and B Neamtu, ‘Sustainable Public Procurement: Life Cycle Costing (LCC) in the New EU Directive Proposal’ (2013) 1 European Procurement & Public Private Partnership Law Review 20.

238  Jason J Czarnezki While a dominant LLC methodology does not yet exist, differing approaches (often proprietary) are utilised in a number of sectors. Life-cycle costing has proved to be feasible in the following markets: office and server IT equipment; v­ ehicles; indoor and outdoor lighting; fuel and furniture; services such as electricity, transport, waste handling and beverage catering; and works such as construction of new buildings or refurbishment of existing buildings, railways and roads.182 Moderate applicability has been experienced for paper and food catering, couriers and postal services, as well as landscaping.183

ii.  LCC Methodologies An environmental LCC methodology takes into account the main internal environmental cost categories, plus external environmental costs. Relying on the LCA framework, LCC considers costs borne by one or more actors who are connected to the product’s life-cycle, indirectly and directly, extending both upstream and downstream in the product’s lifespan occurring within the ‘decision relevant future’.184 These actors might be suppliers, manufacturers, users, consumers or end-of-life actors.185 Figure 10.2186 displays the conceptual framework of environmental LCC. Figure 10.2  Conceptual framework of environmental LCC Externalities Costs

Resources (Externalities)

Materials or Component Suppliers

Externalities Costs

Costs Rev.

Revenues Externalities

Externalities Costs

Costs

Costs Consumers or Costs Product Manufacturer Rev. Users Rev.

Revenues Externalities

Economic system = Boundaries of LCC

Externalities

Revenues Externalities

End-of-Life Actors

Final Disposal (Externalities)

Revenues Externalities

Social and natural system: Boundaries of social and environmental assessment

To be introduced into an ‘accounting’ LCC process, environmental costs must be expressed in monetary terms. In other words, environmental costs should be quantified and monetised so they can be considered as an additional cost input in a LCC analysis. 182 Dragos and Neamtu (n 132) 332. 183 Ibid. 184 See K Fiedler, S Lord, JJ Czarnezki and M Pollans, ‘Life Cycle Costing and Food Systems: Concepts, Trends, and Challenges of Impact Valuation’ (2018) 8 Michigan Journal of Environmental and Administrative Law. 185 Ibid. 186 Ibid xxix.

EU and US Procurement Discretion   239 An argument for environmental LCC, albeit a subtle one, is that assessment methods such as LCA are often viewed as obstacles to business development, particularly in the short term. A new methodology that provides a sound combination of both the environmental and economic performance of a product can help with guiding technological development and managerial decisions in a more rational direction, identifying win-win situations, and optimising tradeoffs between the environmental view and the economic and business view.187 A case study of organic versus conventional extra-virgin olive oil illustrates the need for LCC and the need to account for external costs. If one does not consider the external costs, the organic oil has a higher cost profile due to its lower agricultural yields. However, when external costs and less tangible, hidden and indirect costs are included, this results in the organic oil having a lower total cost compared to the conventional oil.188 Life-cycle costing, however, is information intensive, requiring data on costs of the complex interaction between a product and the environment from cradle to grave.189 Data may not be readily available for analyses of products and systems, or for certain categories of externalities: ‘if all needed data are not available, then scenario development, forecasting, or other estimation methods may have to be employed’.190 Environmental costs that might be considered in a life-cycle costing analysis for a food product or system include, but are not limited to: air pollution, biodiversity loss, climate change, deforestation, greenhouse gas emissions, land use, soil erosion, waste and water pollution. Some of these costs overlap with social and health costs, and vice versa.191 Material Input Per Service Units (MIPS) assess product life-cycle impacts, and the total material input of a product system (development through manufacturing through delivery) should be measured per these units for effective results (to determine the most economically advantageous offer).192 The question is, what tools and methodologies can economic entities (or contracting authorities) use in carrying out this cost accounting and valuing the environmental impacts listed above along the supply chain? Due to implementation costs, it is unlikely that all individual contracting authorities (eg local governments) will develop their own LCC methodologies for businesses to use when bidding on government contracts. The dominant and/or 187 D Hunkeler, K Lichtenvort and G Rebitzer (eds), Environmental Life Cycle Costing (CRC Press 2008) 7. 188 Ibid 120. 189 Dragos and Neamtu (n 132). 190 A Ciroth et al, ‘Life Cycle Costing Case Studies’ in Hunkeler, Lichtenvort and Rebitzer (eds) (n 187) 12. 191 Food Tank, The Real Cost of Food: Examining the Social, Environmental, and Health Impacts of Producing Food (2015) 13, see https://futureoffood.org/wp-content/uploads/2016/09/The-Real-Costof-Food-Food-Tank-November-2015.pdf. 192 HC Bugge and C Voigt, Sustainable Development in International and National Law (Europa Law Publishing 2008) 425.

240  Jason J Czarnezki required methodologies will likely come from large public entities like the EU, national governments or large cities. Large non-profit organisations, third-party certifiers and for-profit sustainability auditors, as well as private for-profit businesses, certainly will also develop their own methodologies. The challenge, however, in public use of these tools is that many of the methods in the last two categories remain private and proprietary. Private firms engage in LCC but the data are not publicly available, resulting in a lack of LCC data being available to consumers as well.

iii.  LCC Efforts Full application of LCA by industry is limited, but industry has recognised the importance of valuing environmental and social externalities and comparing ­alternatives.193 Industry is acting in response to opportunities and risks presented by dependencies on natural capital (and, therefore, pressure from shareholders and investors), changing demand of consumers and regulatory influence.194 A study found that of 184 companies across industries, 80 per cent reported that they measured and valued their impacts, but upon further analysis only 25 per cent actually did so.195 Sixty-five per cent of the companies that undertook impact valuations were monetising value, perhaps indicating a certain need for this functionality.196 Some firms have implemented basic frameworks that aim to accomplish the goals of more robust LCC techniques, yet perhaps do not employ the full methodologies of monetising all costs and benefits of the life-cycle.197 For example, Nestlé’s Creating Shared Value performance index represents an introductory LCC of the company’s product lines as a whole – from which a true LCC might be developed.198 In the end, the dominant LCC methodology for the EU, its Member States and municipalities in the EU is expected to come from the Commission which, to be accomplished effectively, requires the input of private industry. Absent strong public governance, a very plausible alternative, however, is an LCC methodology developed by an industry-funded consortium of academics, government policymakers, civil society and sustainable professionals within the businesses themselves. Industry feels the rise of private environmental governance and a response to the reality of institutional isomorphism, whereby institutions and



193 Fielder 194 Ibid. 195 Ibid. 196 Ibid. 197 Ibid. 198 Ibid.

et al (n 184).

EU and US Procurement Discretion   241 consumers are pressured to conform to the preferences of others in their environmentally friendly goods and sustainable business practices.199 And most certainly in the US, any standardised LCC methodology would have to be birthed in the private sector. The EU began this process in 2011 with the attempt to define LCC, and in recognising the need to determine the cost of natural resources (eg water, energy), even if their market price is undervalued, foreseeing the challenge in pricing environmental externalities and recognising that effective LCC must consider produce lifespan, discount rate, and data availability and reliability.200 Perhaps the best existing methodological baselines on which we may see further improvement are the National Capital Protocol, a standardised framework for business to identify, measure and value direct and indirect impacts on natural capital;201 the forthcoming ISO 14007 and 14008 standards on valuing environmental costs and benefits;202 and insights from the March 2017 White Paper, Operationalizing Impact Valuation: Experiences and Recommendations by Participants of the Impact Valuation Roundtable.203 ISO 20400 will also provide sustainable procurement guidance, but not certification. The EU has already developed environmental externality costing models as part of existing directives and through LCC calculating tools.204 For example, the Clean Vehicles Directive costs externalities, as its ‘model allocates a m ­ onetary value to several types of emission – carbon dioxide (CO2), nitrogen oxides (NOx), nonmethane hydrocarbons (NMHC) and particulate matter [PM]’.205 This suggests the likelihood, and importance, of a sector-by-sector analysis, costing environmental externalities in the course of sustainable public procurement. There are already EU environmental obligations in the specific sectors of office IT equipment, road transport vehicles and buildings. The Commission has developed the SMART-SPP LCC and Emissions Online Tool to compare bids. This is designed to help public authorities calculate the lifecycle costs and emissions (CO2, NOx, SO2, NMHC and PM) of different products, work and services to assist in procurement decision-making.206 With this tool in 199 Czarnezki (n 158). 200 European Commission, Buying Green! A Handbook on Green Public Procurement, 2nd edn (Publications Office of the European Union 2011) 42, 44–45. 201 National Capital Coalition, ‘Natural Capital Protocol’, available at naturalcapitalcoalition.org/ protocol/. 202 ISO 14007 – Environmental management: Determining environmental costs and benefits – Guidance, available at committee.iso.org/sites/tc207sc1/home/projects/ongoing/iso-14007.html; ISO 14008 – Monetary valuation of environmental impacts and related environmental aspects, available at committee.iso.org/sites/tc207sc1/home/projects/ongoing/iso-14008.html. 203 The Impact Valuation Roundtable, Operationalizing Impact Valuation: Experiences and Recommendations by Participants of the Impact Valuation Roundtable (2017), available at www.basf.com/ documents/corp/en/sustainability/management-and-instruments/quantifying-sustainability/wecreate-value/IVR_Impact_Valuation_White_Paper_2017.pdf. 204 Dragos and Neamtu (n 181). 205 European Commission (n 200) 44. 206 ‘LCC Public Procurement Tool calculate your real costs’, available at tool.smart-spp.eu/.

242  Jason J Czarnezki the background, the Commission is also developing a formal LCC calculation tool to facilitate the use of the LCC approach amongst public procurers in accordance with Article 68 of Directive 2014/24/EU. Reports suggest it will focus on specific product categories, such as Office IT Equipment, Lighting (Indoor Lighting), White Goods, Vending Machines and Medical Electrical Equipment, perhaps relying on the Joint Research Center’s Product Environmental Footprint as the technical conceptual framework for EU GPP. There have been several projects (SENSE EU project, and the European Commission initiatives for Product Environmental Footprint and Organisation Environmental Footprint) looking at generating tools that can calculate LCA, and an attempt to standardise the many LCAs out there, which businesses might use as calculators to make ‘accepted’ sustainable procurement arguments. The future trajectory of LCC methodology faces many barriers in development and implementation by government entities. A survey found that 83 per cent of purchasing professionals considered themselves ill-equipped to deliver sustainability through procurement.207 To achieve success in GPP, a number of conditions will likely have to be met: • Increased reliance on technology to compute life-cycle costs.208 • Agreement on what environmental indicators to include and price in the LCC process.209 • Access to reliable data and agreement on consideration of co-benefits, discounting and unquantifiable benefits.210 • Limiting geographic discrimination under the guise of GPP, as LCC can include environmental externalities resulting from transportation, creating the potential for discrimination against suppliers further from consumption sites via monetisation of emissions.211 • Agreement on pricing, as it will be a challenge to assess the costing of the whole life-cycle of products, services and supplies – especially due to fluctuations in commodity and electricity prices.212 • Agreement on the price of carbon and greenhouse gas emissions. • And ultimately, of course, ‘[o]ne problem that is arising when considering sustainable public procurement is that procuring goods, services or works on the basis of life cycle costing may mean paying more in the beginning’,213 until demand, and thus scale, increases.



207 Dragos

and Neamtu, (n 181) 29. (n 133) 204. 209 Dragos and Neamtu (n 181) 20–21. 210 Ibid 27–28. 211 Semple (n 133)192. 212 Dragos and Neamtu, (n 181) 29. 213 Ibid 28–29. 208 Semple

EU and US Procurement Discretion   243 In order to solve the challenges of LCC in the GPP context, the EU might consider making GPP mandatory (if it has not done so already, given the use of ‘shall’ in Article 67 of the Directive, as noted in section III.B). Effective GPP also requires LCC tools that are easily implemented, life-cycle incorporation into eco-labels, and standardisation in LCC methods and data transfer. A proposed path to greater GPP effectiveness might look like this: (a) National governments of the EU Member States and American States in the US federal system must create mandatory GPP legislation in order to lower the costs and information burdens of green procurement. (b) More effective and user-friendly procedures, tools and technologies must be created for municipalities to engage in effective GPP. (c) Eco-labelling must be fully embraced in the GPP project to make purchasing decisions easier. As discussed in section IV.B, eco-labelling will begin to incorporate LCC methodologies, and the EU Public Sector Directive may need revision to allow for an eco-labelling requirement, rather than ecolabels just being viewed as evidence of products’ meeting technical criteria. In the US, absent more aggressive public GPP regulation, LCC data will most likely be found in private eco-labels. (d) Lastly, standards must be the long-term aim. Standards are needed in LCC methodology. The EU wants to be a leader in developing LCC tools so that there is not a patchwork quilt of local or private tools that favour local companies or entrenched industry actors, which would lead to discrimination or lack of innovation. Equally importantly are standards in data transfer. One of the main problems associated with costing is that LCA tends to be based on average, generic modelling. To cost properly requires precise knowledge of the flow of commodities, the cost of processing and the cost of consuming. This requires improved technology, standardised datagathering and transfer techniques, and consistent valuation methodology, with the challenge being how to cost out future benefits based on abating current environmental costs.

B.  Trends in Eco-Labels Given the proliferation of eco-labels, and the technical criteria they convey, LCC will likely be integrated into eco-label criteria, making certain eco-labels in demand for public procurement purposes. This will be especially true in the US, where LCC data will have to be incorporated into labels rather than as part of a large-scale GPP implementation plan created by public law. In this way, US GPP will be more ‘neo-liberal’ than efforts in the EU. In the public procurement process, eco-labels can help draw up technical specifications in order to define the characteristics of the goods or services that are being purchased and to check compliance with these requirements

244  Jason J Czarnezki by accepting the label as one means of proof of compliance with the technical specifications.214 This reliance on eco-labels also perhaps foreshadows the end of the ‘linked to the subject matter of the contract’ requirement in the new EU Directive. Ultimately, economic entities in need of LCC to pursue tender offers may rely on third-party methodology to do this work,215 even if the EU defines the methodology. As a form of information regulation, eco-labels contain many different types of information that come from many different sources. In terms of a taxonomy of eco-labels, labels have content – the type of information that the label contains – and require validation – by an entity that determines what information is conveyed and assesses its validity.216

i.  Integrating LCC into Eco-Label Criteria Ultimately, LCC data will be incorporated into eco-label criteria. Already, eco-labels are used to provide verification of technical criteria. For example, the Swedish National Procurement Agency’s basic technical criteria can be verified by listed EU eco-label and Nordic Ecolabel standards that need to be met if displaying that label. The natural evolution will be for eco-labels to verify measures of LCC. These eco-labels will have to (i) determine what LCC factors to incorporate, (ii) develop product categories by which to compare product performance, and (iii) make the label impactful. According to ISO 14024, ‘The objective of reducing environmental impacts and not merely transferring impacts across media or stages of the product life cycle is best served by considering the whole product life cycle when setting product environmental criteria.’ Life-cycle costing methods help ‘expose the hidden costs of ownership that are too often neglected in favour of the investment costs’.217 These hidden costs include energy and water consumption, extraction of resources, manufacturing, distribution, use and disposal.218 Of course, the elephant in the room is valuation. How does one cost out or put a value or dollar amount on such environmental externalities as extraction of raw materials and biodiversity loss, let alone price carbon? This question has

214 European Commission, Buying Green! A Handbook On Green Public Procurement 30 and Semple (n 133) 189. 215 US General Services Administration and US Department of Energy, ‘Verification Guide for Federal Purchasers of Sustainable Products’ (notes preference of third-party certification), available at www. sustainablepurchasing.org/wp-content/uploads/2015/11/Verification-Guide-for-Federal-Purchasersof-Sustainable-Products.pdf, at 1. 216 See JJ Czarnezki and M Pollans, ‘Eco-labelling’ in Oxford Handbook on Comparative Environmental Law (OUP 2019, forthcoming). 217 UNOPS, 2009 ‘A Guide to Environmental Labels for Procurement Practitioners of the United Nations System’ 19, available at www.ungm.org/Areas/Public/Downloads/Env_Labels_Guide.pdf. 218 Ibid 19–20; ISO 14024.

EU and US Procurement Discretion   245 moved in the direction of natural capital accounting, which is currently too coarse to use to understand individual businesses and products, but represents the most developed thinking on economic valuation.219 Once a standardised LCC methodology exists with accompanying monetary values for environmental externalities, product categories must be developed in order to effectively compare product performance. Such categories are less important in the public procurement process, as public entities are looking for a specific good (eg lightbulbs) and can simply compare costs. But for consumers considering a wider range of goods (eg what to eat for dinner), a ranking or scale or colorcode evaluation of life-cycle costs within product categories is necessary (until, of course, all life-cycle environmental externalities are built into the actual costs of a good). In order to create product categories, one needs to consider the nature of the market (eg the size of market, the demand for a good), the nature of suppliers in the market, environmental impacts of the products and the scope of the product categories, in terms of equivalence and fitness of use of comparable products.220 Then, in order to compare products within a group, products must be evaluated based on differentiation of environmental impacts along their life-cycles, among the products within the category.221 Once the LCC data are known (a significant challenge) and products assessed within categories, LCC information must be conveyed via an informational label in a manner that is impactful. Another challenge for eco-labels is in determining how to best convey information to consumers in a manner that will effectively shift buying preferences. Eco-labels require a good quality assurance scheme, which would benefit from governmental ownership of the label, and a successful marketing programme. Centralised government eco-labels are more effective than numerous private ones: Alignment with the EU Ecolabel or national eco-labels has been part of the process, contributing to the ability of suppliers to demonstrate that products or services meet the criteria developed and facilitating the verification process for authorities.222

Private labels can be successful if they are well known with long-standing tradition and space in the market (eg Blue Angel of Germany, KRAV in Sweden, the Nordic Swan eco-label); simple, clear, obvious and transparent seal-of-approval logos and labels have generally shaped consumer behaviour more than the complex information-disclosure labels.

219 UN FAO, ‘Natural Capital Accounting’, available at www.fao.org/nr/sustainability/naturalcapital/en/. 220 ISO 14024, s 6.3.1. 221 ISO 14024, s 6.4.2.2. 222 Semple (n 133) 203.

246  Jason J Czarnezki

ii.  Integrating LCC into Labels Eco-labels incorporating LCC will provide greater ease in the GPP context: Choosing to base your procurement on an ecolabel – that covers several product and service categories, offers a complete impact assessment over the life cycle and guarantees the impartiality of the scheme – is an assurance of the quality and reliability of the criteria.223

In order for LCC to be an effective tool going forward, it must be integrated into the eco-labelling process by both industry and public law, and national governments will need to require labels or develop environmental product declaration systems. This will require a standardised process where business can supply data, and a ramp up in technology, where Radio-Frequency Identification (RFID) systems track materials along the supply chain, with data incorporated into QR codes and Smartlabels to be read by smartphones. Life-cycle costing eco-labels are the future of GPP, as they reduce the information and verification burden on municipal purchasers. Explicitly allowing eco-labels to be required as a criterion in a tender offer in the EU (and not having to consider ‘equivalent’ criteria) will also reduce litigation that freezes the procurement process.

V. Conclusion This chapter has argued that GPP can serve as an effective environmental regulatory tool in a mode of alternative environmental governance beyond the traditional model, allowing public institutions to create both public and private markets for more environmentally friendly goods, creating a model for environmental progress that bridges the gap between traditional environmental law and private environmental governance. Green public procurement, especially in the EU given the new Directive, will lead to product innovation and improved measurement tools in evaluating environmental externalities within supply chains, due to the broad economic power and scope of public procurement, as well as market demand for environmentally friendly products. Innovation will arise in thirdparty certification labelling and LCC, and new innovative/efficient industries and business practices will develop in response. While it is not clear in what market sector innovation will occur most rapidly, industry consortiums are already developing true cost accounting tools and figuring out how to value natural capital.224

223 UNOPS (n 217). 224 See, eg, L MacCarthy, ‘Unilever, Google, Nestlé Join Forces to Transform Global Food Systems’, available at www.sustainablebrands.com/news_and_views/collaboration/libby_maccarthy/unilever_ google_nestl%C3%A9_join_forces_transform_global_foo.

EU and US Procurement Discretion   247 We shall also see significant technological innovation to help track products and their externalities along the supply chain. However, due to the data and information intensity of LCC and true cost accounting, coupled with the need to convey this information to individual and institutional consumers, it is possible that there will be a merger of LCC information into more simplified eco-labels that will be able to be used explicitly in the public procurement process. This may result in EU public authorities’ requiring specific eco-labels (rather than only their technical criteria) and removal of the ‘linked to the subject matter of the contract’ requirement from the Public Sector Directive as it relates to eco-labels. In the US, it will mean that private eco-labels will be at the forefront of LCC methods and informational distribution. Also due to the complexity of gathering and disseminating LCC data, and in the absence of direct regulation of product production, mandatory GPP requirements in public law through national/EU law in Europe and State/federal law in the US will be necessary to make significant gains in private behaviour. Mandatory GPP is necessary to lower costs for environmentally friendly goods, reduce the informational burdens of GPP, and create standardised LLC methods and data transfer processes so that municipalities can effectively engage in GPP. Finally, in both the US and the EU, GPP can be effectively used to promote environmental interests while creating new innovative markets through the use of eco-labels and LCC, especially if the two jurisdictions are able to learn from each other. The US legal system can be helpful to the EU in designing the latter’s GPP programme, in terms of suggesting opportunities for creativity and flexibility. Ultimately, the EU GPP programme, its perhaps forthcoming LCC methodology and the common eco-label technical criteria it uses can be a model for US, and global, implementation.

248

11 Regulating Procurement by European Research Infrastructure Consortia (ERICs) and the Exemption for International Organisations OHAD GRABER-SOUDRY

I. Introduction Research infrastructures are structures, facilities, resources or services that ­significantly increase research capability and scientific reach, foster innovation and have a positive impact on society. They are used by the research community to achieve excellence, and their establishment or operation requires large-scale investment and collaborative effort, often interdisciplinary, by way of pooling resources on a national or an international level. They may take the form of a single-sited or distributed infrastructure, or e-infrastructure, and enable a shared research capability to address state-of-the-art or fundamental questions. A European Research Infrastructure Consortium (ERIC) is a specific legal form to facilitate the establishment and operation of research infrastructures with European interest. It is based on Article 187 of the Treaty on the Functioning of the European Union (TFEU), which provides for the setting up of joint undertakings or any other structure necessary for research and technological development. According to Council Regulation (EC) No 723/2009 (the ‘ERIC Regulation’),1 ERICs qualify as international organisations for the purpose of Directive 2004/18/EU2 (now 2014/24/EU)3 on public procurement, and they may

1 Council Regulation (EC) No 723/2009 of 25 June 2009 on the Community legal framework for a European Research Infrastructure Consortium (ERIC) [2009] OJ L206/1, 1–8. 2 Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts [2004] OJ L134/114. 3 Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014, on public procurement and repealing directive 2004/18/EC [2014] OJ L94/65.

250  Ohad Graber-Soudry adopt their own procurement procedures, which must be based on the principles of transparency, non-discrimination and competition. This chapter discusses the regulatory framework that underlines ERIC procurement activity and the limits of the discretion ERICs enjoy in formulating their own procurement rules. This is done by looking at relevant obligations derived from EU law, the EU public procurement regime and the EU legal framework for ERICs that is aimed at addressing the special needs of major European research infrastructures by granting these, inter alia, the ability to adopt their own procurement procedures in a similar way to international organisations. The chapter concludes with the submission that although ERICs are exempt from the scope of the EU directives on public procurement, they remain subject to the TFEU and the general EU principles applicable to procurement as interpreted by the Court of Justice of the European Union (CJEU). This is despite the assumed intention behind the ERIC Regulation,4 to grant ERICs the possibility to develop a fully independent procurement regime in a way similar to that employed by other international organisations, such as CERN5 or ESO.6 The result is that, when compared with other international organisations, ERICs are more restricted in the development of their procurement rules, they may have less freedom to deviate from established EU policy and related obligations, and they may be subject to more scrutiny by national courts, the European Commission and the CJEU.

II.  Procurement by European Research Infrastructure Consortia While the focus of this chapter is on procurement by ERICs, it is important first to summarise the general framework in which public procurement is regulated in the EU, and to examine the specific case of ERICs in light of this regulatory framework. It is well known that the primary source of law for public procurement regulation in the EU is the TFEU7 together with the EU directives on public procurement,8

4 And the common practice in some of the ERICs. 5 The European Organisation for Nuclear Research (CERN). 6 The European Organisation for Astronomical Research in the Southern Hemisphere (ESO). 7 In particular the provisions on free movement, such as Arts 28, 34, 49 and 56 TFEU. 8 Directive 2014/24/EU (n 3); Directive 2014/25/EU of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC [2014] OJ L94/243; Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts [2014] OJ L94/1; Directive 2009/81/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of procedures for the award of certain works contracts, supply contracts and service contracts by contracting authorities or entities in the fields of defence and security, and amending Directives 2004/17/EC and 2004/18/EC [2009] OJ L216/76; Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007 amending Council Directives 89/665/EEC

Regulating Procurement by ERICs  251 although there are several layers of applicable regulation that govern the activity of public procurement in the EU.9 While the TFEU does not address public procurement explicitly and is considered insufficient to do so,10 it has been consistently used by the CJEU to clarify and, more importantly, expand the scope of public procurement law to contracts falling partially or fully outside the remit of the public procurement directives. As will be discussed further, this has been done by reference to relevant TFEU provisions and general principles of EU law, which are relevant to procurement activity.11 Before looking at the specific case of procurement regulation applicable to ERICs, it would be useful to be reminded of the conditions for general applicability of the EU directives on public procurement.

A.  Scope of Application of the EU Directives on Public Procurement The Public Procurement Directives12 set out detailed rules on the procedural aspects of carrying out procurement activity by covered entities. The Directives apply to the procurement activities carried out by ‘contracting authorities’, defined as ‘the State, regional or local authorities, bodies governed by public law or associations formed by one or more such authorities or one or more such bodies governed by public law’.13 The last concept, ‘bodies governed by public law’, is assumed to include entities influenced by the state, hence at risk of using their procurement activities as a tool to support national contractors (and thereby discriminate against contractors from other Member States). The concept of a ‘body governed by public law’ is defined in the Directive and has been the subject of further clarification by a relatively large body of case law.14 In essence it relates to a separate legal entity that has been established in order to meet needs in the general interest, not having an industrial or commercial character and that is financed for the most part or controlled by another contracting authority.15 and 92/13/EEC with regard to improving the effectiveness of review procedures concerning the award of public contracts [2007] OJ L335/31. 9 EU public procurement law is also influenced by international, regional and bilateral treaties on public procurement, the most prominent being the WTO Government Procurement agreement (GPA). The recent Comprehensive Economic and Trade Agreement (CETA) with Canada and the EU-Ukraine Association Agreement are good examples of other significant bilateral agreements with public procurement implications. 10 See C Bovis, The Law of EU Public Procurement, 2nd edn (OUP 2015) 23. 11 See further discussion on such general principles in section III.B. 12 For the purpose of this chapter, the terms ‘Public Procurement Directives’, ‘Procurement Directive’ or ‘the Directive’ shall mean Directive 2014/24/EU. 13 Art 2(1)(1), Directive 2014/24/EU. 14 More recently see, eg, Case C-567/15 LitSpecMet UAB v Vilniaus lokomotyvu remonto depas UAB, EU:C:2017:736 and the case law quoted therein. 15 The more extensive definition is a ‘body which, firstly, was established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character, secondly, has

252  Ohad Graber-Soudry Contracting authorities will be subject to the Public Procurement Directives only when they enter into contracts for pecuniary interest,16 concluded in writing with a third party, having as their object the execution of works, and/or the supply of products or services. However, the Directive also provides for specific exemptions, covering, for instance, contracts for the acquisition or rental of existing buildings, land or other immovable property; employment contracts; arbitration and conciliation services; and, as will be discussed further, contracts the contracting authority is obliged to award or organise in accordance with procurement procedures of an international organisation.

B.  What are European Research Infrastructures? European research infrastructures are structures, facilities, resources or services that significantly increase research capability and scientific reach, foster innovation and have a positive impact on society. They are used by the research community to achieve excellence, and their establishment or operation requires large-scale investment and collaborative effort, often interdisciplinary, by way of pooling resources on a national or international level. They may take the form of a single-sited or distributed infrastructure, or e-infrastructure, and enable a shared research capability to address state-of-the-art or fundamental questions.17 Inspired by the Lisbon Strategy for growth, jobs and a dynamic and knowledgebased European economy, a European policy for research infrastructures has been the subject of high-level discussions since the beginning of the new millennium.18 It was considered that, apart from scarcity of resources and the complexity of technical and organisational issues, a major difficulty for setting up new European research infrastructures was the lack of an adequate legal framework allowing the creation of a partnership among the different countries.19

legal personality and, thirdly, is financed, for the most part, by the State, regional or local authorities, or other bodies governed by public law, or subject to management supervision by those bodies, or having an administrative, managerial or supervisory board, more than half of whose members are appointed by the State, regional or local authorities, or by other bodies governed by public law’: LitSpecMet UAB v Vilniaus lokomotyvu remonto depas, ibid para 29. See also Art 2(1)(4), Directive 24/2014/EU. 16 Above certain financial values, which are revised every two years. For the current applicable thresholds, see at https://ec.europa.eu/growth/single-market/public-procurement/rulesimplementation/thresholds_en (last accessed 4 June 2018). 17 See also the definition offered by the Directorate-General for Research at the European Commission, Art 2(a), ERIC Regulation. 18 See Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions, ‘Towards a European Research Area’, COM(2000) 6. 19 See Commission staff working document, accompanying the Commission Proposal for a Council Regulation on the Community legal framework for a European Research Infrastructure (ERI) – Impact Assessment, SEC(2008) 2278, at 6 (hereinafter ‘Impact Assessment’).

Regulating Procurement by ERICs  253 The European Commission (‘Commission’) envisaged that a new legal instrument should include arrangements that, similar to other international organisations, would facilitate cross-border cooperation and financing but avoid the lengthy and complex legal negotiations and administrative processes that precede the establishment of international organisations. This would be achieved, inter alia, by a legal instrument that would include certain provisions on exemption from taxation, staff rules, derogations from national laws, limitation of liability and public procurement procedures. Although this would take the form of European legislation, the intention was to keep monitoring by the Commission at a minimum level in order to avoid an excessive administrative burden for the operation of such research infrastructures.20 It was also thought, back then, that a specific legal instrument would be useful in particular for the new EU Member States (that joined in 2004), as it was argued that these countries had no previous experience in operating major research infrastructures and lacked the national legal form that would be appropriate.21 With the above in mind, the ERIC Regulation was adopted, aiming at the provision of a new legal framework tailored to the needs of setting-up and operating European research infrastructures.

C.  The ERIC Regulation In recent years a growing number of European-based research infrastructures chose to organise themselves under the ERIC Regulation,22 which, as already explained, provides for a specific legal form aimed at facilitating the establishment and operation of research infrastructures with European interest. The ERIC Regulation provides European research infrastructures with a separate legal entity with ‘the most extensive legal capacity’ recognised in all EU Member States. According to the ERIC Regulation, ERICs should have as their principal task the establishment and operation of a research infrastructure on a non-economic basis, although they may carry out limited economic activities, provided that such economic activities are closely related to their principal task and that they do not jeopardise the achievement thereof.23 Only states and intergovernmental organisations may become members of an ERIC,24 provided that at least one EU Member State and two other countries,

20 Ibid 9–10. 21 Ibid 9. 22 As at June 2018 there were 19 established ERICs and 6 more in the active application phase. Further information is available on the Commission’s dedicated website at https://ec.europa.eu/research/ infrastructures/index.cfm?pg=eric-landscape (last accessed 4 June 2018). 23 See recital 8, ERIC Regulation. The possibility to carry out ‘limited economic activities’ is permitted with a view to promoting innovation, as well as the transfer of knowledge and technology. 24 Ibid Art 9(1).

254  Ohad Graber-Soudry which are either Member States or EU associated countries, are members of the ERIC at any given time, and that in any event EU Member States and EU associated countries hold the majority of the voting rights in the Assembly of Members (also referred to as the ‘Council’).25 The member countries of the ERIC hold responsibility for the budget of the ERIC and are obliged to make contributions in order to ensure a balanced budget.26 It follows from the above that, given their composition, objectives, noncommercial character and financing sources, ERICs fall neatly within the definition of a ‘body governed by public law’ for the purpose of Directive 2014/24/EU27 and, in principle, would have been subject to the Public Procurement Directive when performing their purchasing activity. However, and as discussed further in section II.D, ERICs are also classified as ‘international organisations’ for the purpose of the Directive, meaning that they may benefit from a specific exemption. The scope of the exemption and its consequences to ERICs are considered in section III of this chapter.

D.  ERICs as International Organisations for the Purpose of the EU Public Procurement Directive As already mentioned, the adoption of the ERIC Regulation was aimed at providing arrangements that, similar to international organisations, will facilitate cross-border cooperation between countries. The Impact Assessment28 considered that this would include certain provisions on exemption from taxation, staff rules, derogations from national laws, limitation of liability and public procurement procedures. It is not entirely clear why the Impact Assessment considered that ERICs require special provisions in the field of public procurement, similar to those of international organisations, and in what way this would be instrumental in facilitating the establishment and operation of ERICs. Neither the ERIC Regulation nor the Impact Assessment set out any compelling reasons, other than merely stating that these are ‘arrangements common in international organisations’.29 Indeed, although not expressly stated, the Impact Assessment implies that the intention was to adopt a regulatory framework for procurement activities that would be similar to that of other research infrastructures organised as international organisations, such as CERN, ESO, the European Molecular Biology Laboratory (EMBL) or the International Thermonuclear Energy Reactor (ITER). 25 Ibid Art 9(2) and (3). 26 Ibid Art 10(h). 27 See more generally a discussion in relation to international organisations composed of EU Member States, B Heuninckx, ‘Applicable law to the procurement of international organisations in the European Union’ (2011) 20 Public Procurement Law Review 103, 111–12. 28 See n 19. 29 Ibid 10 and 23.

Regulating Procurement by ERICs  255 CERN, for example, has adopted its own procurement rules and procedures that differ from the procedures set out in the EU Public Procurement Directives. One noteworthy difference is the principle of ‘juste retour’ that is implemented by CERN, and which aims at achieving a balanced industrial return for all member countries of CERN. It is there to ensure that contracts are allocated to the members of the organisation, by sourcing supplies from them wherever possible and thereby ensuring that money flows back to those countries that support it. This is almost common practice in other centralised research infrastructures organised as international organisations, and some would argue a legitimate expectation of the member countries of such research infrastructures. Member countries make significant contributions, in cash as well as in kind, to the construction of large-scale research infrastructures that are being established in the territory of a third country rather than their own. It is known that the construction of large-scale research infrastructures usually brings about economic and societal benefits to the national economy in which the research infrastructure is established. It would require some effort to convince a national government of the importance of making a major investment in a large-scale research infrastructure to be constructed in a different country, often perceived to be to the detriment of investment in domestic research projects. There is no need to engage public choice theory in order to understand that from a political perspective, allocating budget to be invested abroad is a choice hard for a government to justify. Obviously, there are many factors that will play a role in the final decision, but it will certainly be advantageous for those advocating for the investment to be made if they can also demonstrate a direct return to their national economies in the form of contracts flowing back to national suppliers. It is likely that, although not stated explicitly, this was one of the considerations in support of granting ERICs the status of international organisations for the purpose of the EU Public Procurement Directive. As will be argued in section III.C, it is doubtful that ERICs, as opposed to ‘genuine’ international originations, are allowed to implement a policy of ‘juste retour’ in their procurement rules.

III.  The Exemption for International Organisations and Implications for ERICs Article 7(3) of the ERIC Regulation provides that an ‘ERIC is an international organisation within the meaning of Article 15(c) of Directive 2004/18/EC’.30 Article 9(1)(b) of the current Directive31 provides that this directive shall not apply to public contracts and design contests which the contracting authority is obliged to award or organise in accordance with procurement 30 Note that this is now Art 9(1)(b) in Directive 24/2014/EU, although the wording of the Articles is not entirely identical. 31 As per n 30, now Directive 2014/24/EU.

256  Ohad Graber-Soudry procedures different from those laid down in this directive established by any of the following: … an international organisation.

A simple reading of this provision suggests that the Article covers not only international organisations (ERICs) carrying out procurement activity for their own use, but also procurement carried out by (other) contracting authorities that are ‘obliged to award or organise’ in accordance with the procedures of the ERIC. Depending on how the term ‘obliged to award or organise’ is interpreted, situations in which other contracting authorities are ‘obliged’ to award or organise a procurement procedure in accordance with the ERIC procurement rules may be common in distributed ERICs (ie a network of distributed resources or hubs of the ERIC), or in arrangements known as ‘in-kind’ between the ERIC and its members. In the latter case, a member country is obliged to provide a non-cash contribution that may cover technical components needed for the construction or operation of the ERIC, and personnel needed to perform testing, installation, integration of any such components, and any other specific task that may be required by the ERIC during its construction or operation phases. A discussion of the meaning of the term ‘obliged to award or organise’ and the conditions under which this criterion is fulfilled in the case of ERICs exceeds the scope of this chapter. Suffice to say, however, that, provided the conditions for ‘obliged to award or organise’ are fulfilled, the exemption from the Directive applicable to the ERIC itself would also apply to procurement carried out by contracting authorities that are ‘obliged to award or organise’ in accordance with the ERIC procurement rules.

A.  Scope of the Exemption for International Organisations In the absence of a definition in the Procurement Directives of the term ‘international organisation’, it has been suggested that an organisation with a membership consisting only of EU Member States is not an ‘international organisation’ for the purpose of the Directive.32 According to this view, the exemption for contracts awarded in accordance with procurement procedures of an international organisation does not cover organisations whose membership is composed of EU Member States only.33 This view is based on the understanding that derogations from the procurement rules should be interpreted strictly,34 and that the purpose of the exemption for international organisations is to facilitate cooperation with third

32 M Trybus, Procurement for the armed forces: balancing security and the internal market (2002) 27 European Law Review 692, 710. 33 See also S Arrowsmith, The Law of Public and Utilities Procurement: Regulation in the EU and UK, 3rd edn (Sweet & Maxwell 2014) 495. 34 See, eg, Case C-385/02 Commission v Italy, EU:C:2004:522.

Regulating Procurement by ERICs  257 countries rather than between EU Member States.35 Furthermore, EU Member States are obliged to take all appropriate measures to ensure fulfilment of the obligations arising out of the EU acquis,36 meaning that the exemption is not meant to afford organisations formed by EU Member States, which would otherwise be considered as ‘contracting authorities’, a way in which to avoid the application of the EU Procurement Directives.37 Opponents38 to this view argue that the exemption in Article 9(1)(b) covers all types of international organisations, including those of which only EU Member States are members. According to this view, if the intention was to limit the application of the exemption to international organisations involving countries other than EU Member States, this should have been expressly reflected in the wording of the Directive. It has also been argued that this view is supported by the fact that international bodies set up by the EU institutions are also exempt from the Directives.39 The view that the exemption is applicable to all international organisations, whatever their composition, is also implied by the usual meaning of the term ‘international organisation’ in everyday language.40 In the absence of further guidance of CJEU case law on this matter, the correct interpretation remains a point for future clarification. In the author’s view, it is difficult to see how the view that the exemption for international organisations does not cover organisations involving EU Member States only could be applied to ERICs in a coherent manner consistent with the ERIC Regulation. This is mainly because Article 7(3) of the ERIC Regulation aims at allowing ERICs to benefit from procurement arrangements ‘common in international organisations’.41 It would seem contrary to the purpose of the ERIC Regulation to argue that ERICs with EU Member States only are excluded from this exemption, especially as some ERICs are constituted by EU Member States only and in all currently existing ERICs, EU Member States hold the majority of votes in the Assembly of Members and control the decision-making process, at least as regards decisions requiring a simple or a qualified majority.42 It would have made little sense for Article 7(3) to be included 35 Arrowsmith (n 33) 495. 36 Art 4(3) of the Treaty of the European Union (TEU). 37 Trybus (n 32) 710. 38 Heuninckx (n 27) 114. 39 Ibid. Arrowsmith (n 33) 495, doubts this argument on the grounds that EU institutions are guided by considerations that are unlikely to give rise to discrimination on grounds of nationality, and therefore the objectives underlying their procurement rules are different from those underlying the rules applicable to the EU Member States. 40 Heuninckx (n 27) 114. 41 See in this regard also recital 10, ERIC Regulation, providing that ‘the ERIC should also benefit from certain exemptions as an international organisation for the purpose of applying Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts’. 42 Note that the Statutes of the ERIC will include provisions on voting majority required for different matters, with a list of a limited number of matters that require approval of the Council by unanimous voting. Procurement decisions do not form part of the matters requiring unanimous voting.

258  Ohad Graber-Soudry in the ERIC Regulation if the meaning of Article 9(1)(b) would be such as to leave some or all ERICs outside the scope of the exemption. Alternatively, it could be argued that even if Article (9)(1)(b) does not cover organisations involving EU Member States only, ERICs are a special case regardless of their composition, justified by the specific wording of Article 7(3) of the ERIC Regulation. Whatever the case may be, the correct view must be that ERICs are considered as ‘genuine’ international organisations for the purpose of Article 9(1)(b), and therefore the Directive does not apply to their procurement activity or to procurement by other entities that are obliged to procure in accordance with the ERIC procurement procedures. This is conditional on ERICs’ adopting their own procurement procedures that are different from those laid down in the Directive, and that these procedures are based on the principles of transparency, non-discrimination and competition.

B.  The Application of the TFEU and General Principles of EU Law to ERICs Having established that, provided the conditions set out in Article 9(1)(b) are met, ERICs are released from the obligations set out in the Directive and can exercise discretion in drafting their own procurement rules, this section will examine whether and, if so, to what extent such discretion is limited by relevant TFEU provisions and related principles of EU law applicable to public procurement. As has been clarified by the CJEU case law, public contracts that are excluded or partially excluded from the scope of the Directives and which are of certain cross-border interest43 may still be subject to the fundamental TFEU provisions on free movement.44 In addition, several principles of law have emerged from the CJEU case law, the most important of these in the procurement context being the principle of equal treatment, the principle of mutual recognition, the principle of proportionality and the principle of transparency (the ‘General Principles’). The meaning and practical implications of the TFEU provisions and the General Principles to procurement falling outside the scope of the Directives may best be illustrated by reference to examples from case law of the CJEU. In a case concerning a public concession service (not subject to the Directive at the time), the principle of transparency was interpreted to ‘consist in ensuring, for the benefit of any potential tenderer, a degree of advertising sufficient to enable the services market to be opened up to competition and the impartiality of the procedures to be reviewed’.45 This conclusion was repeated in later 43 See Case C-412/04 Commission v Italy, EU:C:2008:102 and Case C-507/03 Commission v Ireland, EU:C:2007:676. 44 In particular Art 34 TFEU on the free movements of goods, Art 49 TFEU on the freedom of establishment and Art 56 TFEU on the free movement of services. 45 See Case C-324/98, Telaustria, EU:C:2000:669, paragraph 62.

Regulating Procurement by ERICs  259 cases concerning contracts falling outside the scope of the Directives, where the Court held that ‘the award, in the absence of any transparency … to an undertaking located in the latter Member State amounts to a difference in treatment to the detriment of the undertaking located in the other Member State’,46 and that a complete lack of any call for competition would be in breach of the Treaty provisions.47 Thus, if applicable, the principle of transparency would require an ERIC to apply sufficient means of EU-wide advertisement of its procurement opportunities so as to enable the market to be opened up to effective EU-wide competition. Likewise, the principle of equal treatment applies to contracts partially or fully exempted from the Directives, ‘the aim of which is to promote the development of healthy and effective competition between undertakings taking part in a public procurement procedure’.48 It requires that ‘all tenderers must be afforded equality of opportunity when formulating their tenders, which therefore implies that the tenders of all competitors must be subject to the same conditions’.49 The principle of equal treatment, for example, forbids contracting authorities from changing the weightings given to award criteria after the evaluation of tenders has begun,50 and in general it requires that award criteria must not be amended in any way during the tender procedure.51 The cases Parking Brixen52 and ANAV53 further demonstrate that the principles of equal treatment and transparency mean not only treating tenderers without discrimination on the grounds of nationality, but also that they require the affording of equality of treatment to all tenderers when formulating their bids, regardless of their nationality,54 and this principle applies both to contracts covered by the Procurement Directives and to contracts falling outside the scope of the Directive.55 In Medipac,56 concerning a below-threshold contract, the Court held that the principles of equal treatment and mutual recognition preclude contracting authorities from adding additional requirements to the tender specification (after the tender has begun) and rejecting tenders that fail to meet such additional requirements. 46 Case C-231/03, Consorzio Aziende Metano (Coname) v Comune di Cingia de’ Botti, EU:C:2005:487, para 17. 47 Case C-458/03 Parking Brixen GmbH v Gemeinde Brixen and Stadtwerke Brixen AG, EU:C:2005:605, para 50. 48 Case C-496/99 P, Commission of the European Communities v CAS Succhi di Frutta SpA, EU:C:2004:236, para 111. 49 Ibid para 110. 50 In relation to Part B services (now so called light touch regime), see Case C-226-09 Commission v Ireland, EU:C:2010:697. 51 Ibid, para 60. 52 Parking Brixen (n 47). 53 Case C-410/04 ANAV v Comune di Bari, EU:C:2006:237. 54 Parking Brixen (n 47) para 48. 55 In this case the contract concerned was a public service concession, which at the time, was excluded from the scope of the directives. 56 Case C-6/05 Medipac-Kazantzidis AE v Venizeleio-Pananeio (PE.S.Y. KRITIS), ECLI:EU:C:2007:337.

260  Ohad Graber-Soudry Another case of interest in demonstrating how the TFEU introduces positive obligations in relation to contracts not covered by the Directive is SECAP,57 which dealt with the application of the Treaty principles to abnormally low tenders. The contract was below the thresholds (hence outside the scope of the Directives) but of cross-border interest. The Court held that Italian legislation that allowed the automatic exclusion of a tender as abnormally low on the basis of a mathematical formula might constitute indirect discrimination.58 In its communication,59 the Commission sets out further obligations on contracting authorities in relation to contracts and their procedural elements, such as advertisement, time limits, award criteria, judicial review and remedies. More recent case law by the CJEU suggests, however, that the burden of proof to demonstrate a cross-border interest as a condition to the application of these principles to contracts excluded or partially excluded may be substantial.60 This, and the cases referred to above, suggest that the CJEU has been drawing significant inspiration from the procedural obligations set out in the Directive when interpreting the TFEU provisions. This, in turn, results in the introduction of positive obligations based on such provisions and the General Principles also in cases of contracts falling outside the scope of the Directives. It follows from the above that, if applicable, the relevant TFEU provisions and the General Principles would limit, to a considerable extent, the degree of discretion available to ERICs to develop their procurement rules in a way they deem fit with the purpose and nature of their activities. For example, certain practices, which are common in ‘genuine’ international organisations, such as ‘juste retour’ and the relatively common use of non-competitive procedures or limited publication of contract opportunities, will not be available to ERICs if they were subject to the TFEU, even though ERICs are considered as ‘international organisations’ for the purpose of the Directive. As yet, there is no case law on the question of whether and, if so, to what extent the TFEU provisions and General Principles apply to ERICs.61 As demonstrated by the case law discussed above, procurement arrangements that are excluded from the Directive are not necessarily excluded from the TFEU provisions or the General Principles, although some would be. For example, the exclusion from the Directive of contracts between entities within the public sector,62 or use of the noncompetitive procedure for reasons connected with the protection of ­intellectual

57 Joined Cases C‑147/06 and C‑148/06, SECAP SpA, EU:C:2008:277. 58 Ibid para 26. 59 The interpretative communication on the community law applicable to contract awards not or not fully subject to the directive, [2006] OJ C179/02. 60 Case C-532/03 Commission v Ireland, EU:C:2007:801 and Case C-95/10 Strong Seguranca v Municipio de Sintra, EU:C:2011:161. 61 In a broader context, this question is also relevant to the discussion of international organisations composed of mainly or only EU Member States. 62 See Arts 11 and 12 of Directive 24/2014/EU.

Regulating Procurement by ERICs  261 property rights63 or for reasons of extreme urgency,64 are likely to be wholly excluded from the TFEU provisions and the General Principles as well. Would that be the case for ERICs too? This question is discussed in section III.C.

C.  Obligations Derived from the TFEU and the ERIC Regulation It may be argued that international organisations in general have a legal personality separate from that of the states, and under international law they are not party to the TFEU and cannot be bound by EU law.65 This view may derive some support from recital 22 of Directive 24/2014/EU, which provides that ‘being addressed to Member States, this directive does not apply to procurement carried out by international organisations on their own behalf and for their own account’.66 However, as discussed in section II.B, an ERIC is established under, and governed by, EU law.67 Although Member States are free to apply or to adopt any laws, regulations or administrative measures applicable to the ERIC, these must not conflict with the scope or objectives of the ERIC Regulation68 and EU law in general. Furthermore, there is a close link between ERICs and the Commission that does not exist in many other international organisations. The Commission retains control over ERICs by way of various mechanisms set out in the ERIC Regulation, for example by requiring that ERICs transmit to the Commission an annual report and any information about circumstances threatening to seriously jeopardise the achievement of their tasks.69 The Commission may also request explanations or actions from an ERIC if it finds that the ERIC acts in serious breach of the ERIC Regulation or applicable EU law,70 and in extreme cases the Commission could repeal the decision setting up the ERIC, thus triggering its winding up.71 In addition, the decision of establishment of the ERIC is published in the Official Journal of the European Union and forms part of EU law.72 In terms of

63 Art 32(2)(b)(iii) of Directive 24/2014/EU. 64 Art 32(2)(c) of Directive 24/2014/EU 65 See discussion at Heuninckx (n 27) 106. 66 However, Heuninckx suggests that not only are international organisations with EU Member State participation required in general terms to comply with EU law, subject to the substance of the EU law provisions concerned and to their privileges and immunities, but EU Member States also have important EU law obligations related to their roles in such international organisations. Ibid 106–09. 67 See ERIC Regulation, preamble 21. Art 15 of the ERIC Regulation further provides that ‘the setting-up and internal functioning of an ERIC shall be governed: by Community law, in particular this Regulation, and the decisions referred to in Articles 6(1)(a) and 11(1)’. 68 Ibid preamble 22. 69 Ibid Art 17(1). 70 Ibid Art 17(3). 71 Ibid Art 17(5). 72 Ibid Art 6(2).

262  Ohad Graber-Soudry governing law, the CJEU has jurisdiction over litigation among the members of the ERIC in relation to the ERIC, between the members and the ERIC, and over any litigation to which the EU is a party. EU legislation on jurisdiction also applies to disputes between the ERIC and third parties.73 Lastly, as discussed, the ERIC Regulation specifically requires that the procurement procedures adopted by ERICs are based on the principles of transparency, non-discrimination and competition.74 Since the ERIC Regulation is a creation of and part of EU law, and in light of the provisions in the ERIC Regulation, the meaning of these principles must be interpreted in light of EU law, which implies that the case law of the CJEU on public procurement, in particular in relation to the interpretation of these principles, would apply. It follows from the above that while ERICs are exempt from the Public Procurement Directives and enjoy a degree of freedom to exercise their discretion in drafting their own procurement procedures, these must not contradict the obligations flowing down from the TFEU provisions and the General Principles already discussed.75 For example, ERICs may choose to promote a certain industrial policy goal through their procurement rules, but only as long as the methods used for achieving this goal are compliant with the fundamental TFEU provisions and the General Principles. Against this background, it is clear that the incorporation of principles such as ‘juste retour’, which aims at achieving a balanced industrial return for all members of the ERIC, would likely be in breach of the obligations of non-discrimination on grounds of nationality. Contracts awarded by ERICs, or pursuant to ERICs’ rules, that incorporate the ‘juste retour’ principle, will necessarily amount to a difference in treatment to the detriment of undertakings located in a Member State that is not a member of the ERIC.

D. Remedies The Commission considers that without an adequate review mechanism for public procurement decisions, compliance with the basic standards of fairness and transparency cannot be effectively guaranteed.76 In support of it statement, the Commission refers to the Telaustria judgment,77 in which the CJEU stressed

73 Ibid Art 15. 74 Ibid Art 10(g)(vi). 75 Art 3(1) of the procurement rules of the European Spallation Source ERIC, for example, require respect for the additional EU principles of proportionality, mutual recognition and equal treatment. Art 40 of these rules further provides that the procurement rules shall be interpreted in light of principles of EU legislation and Swedish law. See European Spallation Source ERIC Procurement Rules, at https://europeanspallationsource.se/sites/default/files/downloads/2017/09/ERIC%20Procurement %20Rules%20ESS-0039684.pdf (last accessed 4 June 2018). 76 See interpretative communication (n 59) 6. 77 Telaustria (n 45).

Regulating Procurement by ERICs  263 the importance of the possibility to review the impartiality of the procurement procedure. The Commission further considers that the principle of effective judicial protection and the principle of equivalence apply in cases of awards of contracts not subject to the EU Public Procurement Directives. In light of the analysis provided in this chapter, this view seems to be applicable to procurement activity carried out by ERICs or pursuant to ERICs procurement procedures as well. The principle of effective judicial protection would require that decisions adversely affecting a party who has or had an interest in obtaining a contract award, for instance a decision to exclude a tenderer from the procurement procedure or reject its tender for not being economically advantageous, should be subject to the possibility of legal review for potential violation of the TFEU provisions or the General Principles. Obviously, the procedure must be impartial and, in accordance with the principle of equivalence, the available remedies must be not less efficient than remedies available in similar claims based on domestic law. Furthermore, according to the Commission, the principle of effectiveness requires that the remedies must ‘not be such as in practice to make it impossible or excessively difficult to obtain judicial protection’.78 According to some commentators, the remedies available for contracts falling outside the scope of the Procurement Directives must not be more limited in scope and strength than the remedies available in case of contracts that are covered by the Procurement Directives.79 If one accepts that effective judicial protection, effective remedies and a fair trial are basic EU law principles having been developed independently from public procurement regulation,80 the consequences for the ERIC procurement rules are clear – being subject to EU law, they must also comply with such principles, and must provide for effective judicial protection and remedies in public procurement procedures, at minimum, to bidders established in the EU.

IV. Conclusion The ERIC Regulation is a unique EU legal framework, which is meant to facilitate the establishment and operation of research infrastructures with European interest. In order to achieve this goal, the ERIC legal framework includes certain provisions that are supposed to substitute what would otherwise be a result of lengthy

78 See interpretative communication (n 59) 7. 79 R Caranta, ‘The Borders of EU Public Procurement Law’ in D Dragos and R Caranta (eds), Outside the EU Procurement Directives – Inside the Treaty? (DJØF 2012) 56, but note the ensuing discussion at 56–57, suggesting the position is not clear. 80 Ibid 55; and Art 47 of the EU Charter of Fundamental Rights.

264  Ohad Graber-Soudry and complex legal negotiations that precede the establishment of international organisations. One of these provisions accords ERICs the status of international organisations for the purpose of the EU Public Procurement Directives. This chapter has considered the limits on discretion that ERICs enjoy in developing their own procurement rules, by looking at the relevant obligations derived from EU law, the EU public procurement regime and the EU legal framework for ERICs. The analysis suggests that all ERICs, including those composed exclusively of EU Member States, are considered to be ‘international organisations’ for the purpose of Article 9(1)(b) of the Directive and are exempt from the scope of application of the Public Procurement Directives. However, it is also submitted that, despite the assumed intention behind the ERIC Regulation to grant ERICs the possibility to develop an independent procurement regime in a way similar to that utilised by other international organisations, ERICs remain subject to the relevant TFEU provisions and General Principles, which have been consistently used by the CJEU to clarify and expand the scope of public procurement law to contracts falling partially or fully outside the remit of the Public Procurement Directives. This, in turn, imposes considerable limits on the level of discretion that ERICs enjoy in developing their own procurement practices, and limits their ability of choice when compared to ‘genuine’ international organisations. In practice, it means that ERICs will have to consider EU law, as interpreted by the CJEU, for the procurement procedures they propose to adopt and for the level of remedies that must be made available for aggrieved bidders from the different EU Member States.

part v Looking Ahead

266

12 Looking Ahead: A ‘New Age’ of Proportionality? SANJA BOGOJEVIĆ, XAVIER GROUSSOT AND JÖRGEN HETTNE

I. Introduction This chapter returns to the theme of proportionality that was first considered at the outset of this volume. The principle of proportionality is often seen as the control mechanism of discretion in the EU public procurement regime and EU law more broadly.1 Proportionality is not alone in this regard: rules on free movement and their accompanying principles, including equal treatment, non-­ discrimination, mutual recognition and transparency, have been identified as ‘provisions [that] should be drawn up coordinating national procurement procedures so as to ensure that those principles are given practical effect and public procurement is opened up to competition’.2 Still, it is worthwhile to zoom in on proportionality, as the EU public procurement regime relies on the national legislatures and their contracting authorities to carry out the delicate balancing act between equally valid policy objectives. To borrow Bovis’s description, discretion in EU public procurement law is the ‘surrogate to the principle of proportionality’.3 Directive 2014/24/EU, which has been the focal point of our study,4 entrusts Member States and their public bodies with wide discretionary space to pursue social and environmental objectives in public procurement contexts. As explained in Part III of this volume, the award criteria and subject matter of a contract are the obvious points where proportionality assessments play a major role, but their application is not a straightforward legal exercise. In EVN and Wienstrom,5 for example, the Court of Justice of the European Union (CJEU) applied an implicit

1 See ch 1 in this volume. 2 Preamble 1, Directive 2014/24/EU. 3 Bovis, ch 3, section V. 4 In Bovis’s chapter, ibid, proportionality assessments in relation to the Remedies Directive are also outlined and their links to effective judicial protection explained. 5 Case C-448/01 EVN AG and Wienstrom GmbH v Austria, ECLI:EU:C:2003:651.

268  Sanja Bogojević, Xavier Groussot and Jörgen Hettne proportionality test, which, as detailed by Semple, contrasts with the more pragmatic approach the Court has taken in other, similar cases.6 Which test is then required by proportionality? In Sanchez-Graells’ view, public procurement rules must be interpreted and applied in a ‘pro-competitive way’,7 so as not to hinder, limit or distort competition. This understanding does justice to the wording of the Directive, which maintains that competition is a central force behind EU public procurement rules.8 ­Sanchez-Graells, however, further distils his argument and infers from competition rules limits on contracting authorities’ discretion, amounting to ‘a  strict proportionality test informed by competition considerations’.9 Ericsson and Groussot, also in this volume, offer a different approach by suggesting that the application of the proportionality test inevitably depends on the type of discretion assessed. More precisely, their argument is that Member State legislative discretion will only be subject to low-intensity judicial review when it concerns the substantive choices made, whilst a procedural proportionality review would be strict and applicable to administrative discretion.10 The level of harmonisation is also relevant to their argument. For example, the implementation of the principle of effective judicial protection, as found in the Remedies Directive,11 seems to reduce the legislative leeway of Member States in adopting legislation that may impede the effectiveness of EU law in this regard.12 To appreciate the variety of uses of proportionality assessments, we devote this final chapter to investigating CJEU jurisprudence on the application of proportionality tests to discretionary space in public procurement law. Most cases here pre-date the 2014 overhaul of the EU public procurement regime, but the findings have maintained their relevance for thinking about the significance of proportionality in this area of EU law. We confine the study to administrative discretion in derogating from EU public procurement law (section II) and legislative discretion in implementing the EU public procurement regime (section III), before outlining the basic ideas about proportionality that seem to underpin the EU public procurement regime (section IV).

6 A Semple, ‘The Link to the Subject-Matter: A Glass Ceiling for Sustainable Public Contracts?’ in B Sjafjell and A Wiesbrock (eds), Sustainable Public Procurement under EU Law: New Perspectives on the State as Stakeholder (CUP 2016) 50, 58–59. This is a point also mentioned in Bogojević, ch 8, section III.A.i. 7 A Sanchez-Graells, Public Procurement and the EU Competition Rules, 2nd edn (Hart Publishing 2015) ch 5. 8 Eg Preamble 1, Directive 2014/24/EU. 9 Sanchez-Graells, ch 4, section I. 10 Ericsson and Groussot, ch 5, section II. 11 Directive 89/665 [1989] OJ L395/33, as amended by Directive 2007/66/EC [2007] OJ L335/31. 12 The Remedies Directive can also be applied in tandem with the principle of effective judicial protection enshrined in Art 47 of the EU Charter.

Looking Ahead  269

II.  Administrative Discretion in Derogating from EU Public Procurement Law We start this analysis with Michaniki.13 This case is a preliminary reference concerned, in part, with the Greek Constitution, which defined media undertakings as incomptible with state undertakings, with the effect that media undertakings were excluded from consideration for public work contracts. In this case, Advocate General Maduro saw a close link between discretion entrusted to the Member States in derogating from EU law, and fundamental principles found in EU public procurement law: [I]t is appropriate to grant each Member State, subject to review by the Court, a certain discretion concerning the definition of the grounds of exclusion suitable to ensure transparency and equal treatment in procedures for the award of public contracts. The Member State concerned is the best placed to assess which are, in the national context, the conflicts of interest most likely to arise and to threaten the principles of transparency and equal treatment which must be observed when public contracts are entered into. The assessment carried out by the Greek authorities led them to fear, in the Greek context, conflicts of interest which could lead to active and passive corruption on the part of contracting authorities, if they did not exclude works undertakings connected to media undertakings from procurement procedures. This resulted in the incompatibility laid down in Article 14(9) of the Greek Constitution. In that specific assessment of what appears to them to be required for observance, in Greece, of the Community principles of transparency and equal treatment in the award of public contracts, the Greek authorities therefore put forward, in a sense, a national constitutional assessment. It is apparent from the grounds of the order for reference that submissions were made as to whether that fact was such as to influence the decision as to the compatibility of that ground of exclusion with Community law.14

Relying on Article 4(2) of the Treaty on European Union and the Omega case,15 the Advocate General stressed that the EU must respect the constitutional identity of the Member States, suggesting thereby that a wide margin of discretion needs to be granted to Member States – subject, however, to the principle of proportionality.16 He found that the Greek Constitution failed in this regard to observe EU law, because it encompasses all works undertakings connected to media undertakings, regardless of the extent or their broadcasting or circulation. Such an incompatibility exceeds what is necessary so as to observe equal treatment and, thus, to ensure effective competition … That is also so particularly because the incompatibility affects all works contractors who are in any way related to a businessman in the media sector. It does seem unlikely that a contracting authority could exert pressure on a businessman in the media sector who

13 Case

C-213/07 Michaniki, EU:C:2008:731. Maduro, ibid, para 28 (emphasis added). 15 Case C-27/00 Omega, EU:C:2002:161. 16 AG Maduro (n 13) paras 31–34. 14 AG

270  Sanja Bogojević, Xavier Groussot and Jörgen Hettne is distantly related to a works contractor or, conversely, that such a businessman would exert pressure on the contracting authority.17

Here Advocate General Maduro applies the principle of proportionality, connecting it directly to the necessity of ensuring equal treatment and effective competition in public procurement. What is most important to note, however, is that he tests this against the backdrop of a national constitutional assessment. What we thus see is ‘cultural discretion’18 having been granted to the Member States, which, at least in this case, was deemed disproportionate, as it fully severed media undertakings from public works contractors and so went beyond what the Court deemed necessary. The CJEU took a similar view. More precisely, it stipulated that EU law does not preclude the adoption of national measures designed to avoid, in procedures for the award of public works contracts, practices ‘capable of jeopardising transparency and distorting competition’. In this case, that meant ‘fraud and corruption’, which the Court recognised could arise if important boundaries between the public and media sectors were blurred.19 Ultimately, the Court found that a national measure that effectively excludes ‘an entire category of public works contractors’ on the basis provided in the Greek case impairs competition, and ‘goes beyond what is necessary to achieve the claimed objectives of transparency and equal treatment’.20 The significance of the Opinion and the Court’s ruling is that both understand discretion – even when dealing with constitutional issues – to be subject to the proportionality principle. The same idea was at work more recently in ­Medisanus21 and Commission v Austria.22 Similarly to Michaniki, both cases concern Member States and their national authorities attempting to derogate from EU public procurement law – now on the basis of public health and national security respectively. Specifically at issue in Medisanus was Slovenian legislation that required certain medical products to be manufactured using blood plasma from Slovenia only, with the aim of encouraging voluntary blood donations and ensuring national self-sufficiency with regard to blood reserves. This rule was included as a clause in a tender specification for a public contract on which the CJEU was asked to rule. The Court found that the Member State must be allowed a ‘measure of discretion’, especially as it is for the Member States to determine what degree of protection they wish to afford public health and how this is to be achieved.23 Such discretion, however, must be subject to the proportionality test, which requires



17 Ibid

para 35 (emphasis added). ch 1. 19 Michaniki (n 13) para 60. 20 Ibid para 63. 21 Case C-296/15 Medisanus, EU:C:2017:431. 22 Case C-187/16 Commission v Austria, EU:C:2018:194. 23 Medisanus (n 21) para 82. 18 See

Looking Ahead  271 that ‘any national legislation must be necessary to achieve the declared objective and it must not be possible to achieve that objective by prohibitions or restrictions that are less extensive or have less effect on trade within the European Union’.24 On that basis, the Court found the domestic law disproportionate, as it failed to contribute ‘decisively to encouraging the Slovenian population to make voluntary unpaid blood donations’ and, as such, failed to justify the national origin requirements at issue in the proceedings.25 The Court applied the same logic in Commission v Austria, an infringement action concerning an Austrian measure to reserve the manufacturing of securityrelated documents, such as biometric passports and identity cards, exclusively to a formerly state-owned undertaking. Here, Austria appealed to essential national security interests, as protected by Article 346(1) TFEU and related EU ­secondary legislation. Advocate General Kokott identified this as an important case in ‘shed[ding] light on the leeway available to Member States to derogate from EU law’,26 explaining that Article 346(1)(a) TFEU makes clear at the level of primary law that no Member State is to be obliged to supply information the disclosure of which it considers contrary to the essential interests of its security … In secondary law, the possibility set out in Article 346(1)(a) TFEU to derogate from duties under EU law is fleshed out for public procurement law … in Article 4(2) of Directive 92/50 and Article 14 of Directive 2004/18.27

As a result, any Member State is accorded ‘a wide discretion in security matters’, yet it is not entirely free, but is subject to review by the Court. In particular, it is for that Member State to prove that it is necessary to have recourse to the measures taken by it in order to protect its essential national security interests. The Member State concerned must therefore ultimately undergo a proportionality test.28

Here, Austria offered three reasons for restricting its tender processes: the need for centralised performance of printing contracts; the effectiveness of official controls; and the trustworthiness of the contractor. Advocate General Kokott discussed each in detail, and ultimately concluded that although certain derogations from the procurement procedures prescribed by EU law may actually be justified by the fact that a Member State does not wish simply to disclose security-related information to foreign undertakings or undertakings controlled by foreign nationals … a measure is appropriate for ensuring attainment of the objective pursued only if it genuinely reflects a concern to attain it in a consistent and systematic manner. In the present case, Austria has not, as far as can be seen, taken precautions which could effectively prevent Staatsdruckerei [the undertaking in question] falling



24 Ibid

para 95. paras 96–98. 26 AG Kokott in Commission v Austria (n 22) para 4. 27 Ibid paras 42–43. 28 Ibid para 54. 25 Ibid

272  Sanja Bogojević, Xavier Groussot and Jörgen Hettne under the control of foreign shareholders or becoming a subsidiary of a foreign legal person. The Austrian State has neither stipulated, for reasons of security, voting rights in Staatsdruckerei in the form of a special share (‘golden share’) nor made the sale of shares in Staatsdruckerei subject to any restrictions on security grounds.29

Based on these considerations, Advocate General Kokott argued that there was no security-related justification for Austria’s categorical refusal to consider undertakings other than the one company listed. In contrast to Advocate General Kokott, the CJEU argued that ‘it is for the Member States to define their essential security interests’,30 and so offered broad discretion in determining the scope and interests of public policies. In the same breath, however, and following the logic in Medisanus, the Court pointed out that derogations are not automatically excluded from the scope of EU law, insisting that they must ‘be interpreted strictly’ and ‘in accordance with the settled caselaw relating to derogations from fundamental freedoms’.31 Without mentioning proportionality by name, the Court forcefully stated that even if certain articles of EU public procurement law (here Directive 2004/18) afford the Member States discretion in deciding the measures considered to be necessary for the protection of their essential security interests, those articles cannot … be construed as conferring on Member States the power to derogate from the provisions of the FEU Treaty simply by invoking those interests.32

What the Court required from Member States wishing to avail themselves of those derogations was that they ‘establish that the protection of such interests could not have been achieved within a competitive tendering procedure as provided for by the set legislation’.33 Finding support in the Advocate General’s reasoning about the proportionality assessment of the domestic procurement procedures, outlined above, the Court concluded that these were disproportionate and therefore in breach of EU law.34 In sum, there are at least three reasons why these cases are significant. First, they show that proportionality assessments are a natural part of discretion under EU public procurement law – even in cases dealing with sensitive issues, such as constitutional law provisions, health policies and national security. Second, even if the CJEU appreciates that Member States are entrusted with broad discretion in this regard, any derogation from the EU Treaties is narrowly defined. Third, and following from the above, the proportionality test on which the Court insists is rarely delegated to the national authorities but is instead enforced by the Court, which willingly assesses the aims and necessity of domestic legislation against



29 Ibid

paras 70–72 (emphasis added). paras 75–76. 31 Ibid para 77. 32 Ibid para 78. 33 Ibid paras 78–79. 34 Ibid para 95. 30 Ibid

Looking Ahead  273 requirements on equal treatment and effective competition as found in EU public procurement laws. Ultimately, the cases demonstrate that discretion is not an empty legal space but rather heavily concerned with legal tests in balancing equally significant interests and policies.

III.  Discretion and Implementation of EU Public Procurement Legislation The Member States and their national authorities also enjoy discretion in implementing the EU public procurement regime in domestic law. The scope of such discretion was discussed in Connexxion Taxi Services,35 where ‘grave professional misconduct’ was included under optional grounds of exclusion in the implementation of the now repealed Directive 2004/18/EC,36 which was challenged before the CJEU. A crucial fact in this case is that the option to exclude an economic operator guilty of professional misconduct was set out in a non-binding Explanatory Memorandum, rather than in domestic legislation, and moreover provided the contracting authorities with interpretative powers to consider whether an exclusion on the grounds listed was proportionate.37 Thus ‘the exclusion and its length must be proportional to the gravity of the misconduct’, but that ‘assessment is made on an individual basis’.38 The Court ruled that the principle of proportionality applies in a ‘general manner to public procurement procedures’,39 and that the contracting authorities have ‘a wide margin of discretion’40 regarding the inclusion of the conditions of applicability found in the set directive. However, the Court ruled that a test of proportionality, as included here, threatens transparency and equal treatment, as it would not be apparent to tenderers what rules apply.41 Equally, and in line with cases such as Forposta, the Court maintained that automatic exclusion of a tenderer on the basis of grave professional misconduct ‘could result in a breach of the principle of proportionality’.42 What this means, and as suggested in Mantonavi,43 is that Member States ‘enjoy some discretion’44 in determining the requirements governing the application of the optional grounds for exclusion, but they must pursue a balanced

35 Case

C-171/15 Connexxion Taxi Services, EU:C:2016:948. for exclusion are now outlined in Art 57, Directive 2014/24/EU. 37 Connexxion Taxi Services (n 35) para 42. 38 Ibid para 11. 39 Ibid para 32. 40 Ibid para 35. 41 Ibid paras 42–44. 42 Case C-465/11 Forposta, ECLI:EU:C:2012:801, para 13. 43 Case C-178/16 Impresa di Costruzioni Ing E Mantovani SpA, EU:C:2017:1000. 44 Ibid para 32. 36 Grounds

274  Sanja Bogojević, Xavier Groussot and Jörgen Hettne approach in turning these into national law; they cannot be too flexible, nor can they automatically exclude. This a priori proportionality requirement seems particularly significant in cases where provisions are not harmonised, that is, where the Member States ‘have the power to make the criteria [here, optional exclusion grounds] less onerous or more flexible’.45 This point is clear when examining the implementation of the principle of effective judicial protection found in the Remedies Directive, previously outlined in recital 3 of Directive 89/665: [T]he opening-up of public procurement to Community competition necessitates a substantial increase in the guarantees of transparency and non-discrimination; … for it to have tangible effects, effective and rapid remedies must be available in the case of infringements of Community law in the field of public procurement or national rules implementing that law.

This necessity to strengthen protection for transparency and non-discrimination through the functional help of the principle of effective judicial protection also concerns the contracting authority whose decisions are subject to review.46 In Fastweb, the CJEU stated that the provisions of Directive 89/665, which are intended to protect tenderers against arbitrary behaviour on the part of the contracting authority, are designed to reinforce existing arrangements for ensuring the effective application of the EU rules on the award of public contracts, in particular where infringements can still be rectified.47

The Court continued by arguing that such protection cannot be effective if the interested party is unable to rely on those rules vis-à-vis the contracting authority: Accordingly, effective legal protection requires that the interested parties be informed of an award decision a reasonable period before the contract is concluded so that they have a real possibility of bringing proceedings and, in particular, of applying for interim measures pending conclusion of the contract.48

In Marina del Mediterranneo, for instance, the CJEU found that Articles 1 and 2 of Directive 89/665 must be interpreted as precluding national legislation under which a decision allowing a tenderer to participate in a procurement procedure – a decision allegedly adopted in breach of EU public procurement law or the national legislation transposing it – is not classed among the preparatory acts of a contracting authority that may be subject to an independent judicial review.49

45 Ibid para 31. 46 Art 1(1) of Directive 89/665 states that ‘Member States shall take the measures necessary to ensure that, as regards contracts falling within the scope of Directive [2004/18], decisions taken by the contracting authorities may be reviewed effectively and, in particular, as rapidly as possible … on the grounds that such decisions have infringed Community law in the field of public procurement or national rules implementing that law’. 47 Case C-19/13 Fastweb, EU:C:2014:2194, para 59. 48 Ibid paras 59–60. 49 Case C-391/13 Marina del Mediterranneo, EU:C:2017:268, para 39.

Looking Ahead  275 In the words of the Court,50 ‘the detailed procedural rules governing the remedies intended to protect rights conferred by EU law on candidates and tenderers harmed by decisions of contracting authorities must not compromise the effectiveness of Directive 89/665’. What this shows is that the Remedies Directive, together with the principle of effective judicial protection enshrined in Article 47 of the EU Charter, is a powerful tool in the hands of the CJEU when reviewing national legislation on EU public procurement law. Yet this does not necessarily strangle discretion. As the Court has stated in several cases, Directive 89/665 lays down only the minimum conditions that review procedures established in domestic law must fulfil in order to ensure compliance with the requirements of EU law concerning public procurement.51 The situation is best illustrated by Star Storage.52 In this case, the CJEU concluded that the principle of effective judicial protection under both primary law, as codified in Article 47 of the EU Charter, and secondary law, here the Remedies Directive, does not preclude such national legislation as makes the admissibility of any action against an act of the contracting authority subject to the obligation for the applicant to provide a ‘good-conduct guarantee’ to the contracting authority, if that guarantee must be refunded to the applicant whatever the outcome of the action. It is interesting to note that the Court sees ‘good-conduct guarantees’ as a limitation on the right to effective judicial protection, which can be justified only if provided for by law if it respects the essence of that right, and if it is necessary and meets objectives of general interest recognised by the EU or the need to protect the rights and freedoms of others.53 Similarly, as in previous cases, proportionality plays a key role in establishing the legal test against which discretion entrusted to the Member States and their national authorities can be assessed, measured and discussed.

IV.  Looking Ahead Ultimately, what this chapter shows is the prevalence of proportionality assessments in relation to derogations, as well as to implementations of the EU public procurement regime. The discretion afforded to the Member States and their contracting authorities in this context is not an empty legal space but rather an area heavily concerned with legal tests in balancing equally significant interests and  policies. Following from this, discretion cannot be seen as falling outside

50 See Joined Cases C‑21/03 and C‑34/03 Fabricom, EU:C:2005:127, para 42; Case C‑61/14 Orizzonte Salute, EU:C:2015:655, para 47; Joined Cases C‑439/14 and C‑488/14 Star Storage and Others, EU:C:2016:688, para 43. 51 See Case C‑327/00 Santex, EU:C:2003:109, para 47; Case C‑315/01 GAT, EU:C:2003:360, para 45; Case C‑314/09 Strabag and Others, EU:C:2010:567, para 33. 52 Star Storage (n 50). 53 Ibid para 49.

276  Sanja Bogojević, Xavier Groussot and Jörgen Hettne Union law; on the contrary, and as this chapter demonstrates, the CJEU upholds proportionality tests that seek not only to control discretion entrusted to the Member States and their national authorities, but which also establish legal reasoning around which regulatory power-sharing between the EU and its Member States can be better understood. In short, the legal developments in the EU public procurement regime demonstrate that we are witnessing the elaboration of a set of enforceable principles, of which the principle of proportionality is and will surely continue to be a significant part.

INDEX access, disabled proposed Accessibility Act  128 public procurement  125, 128 administrative procedure judicialisation  99 advertising calls for tenders publicity/transparency  31, 37–38, 64, 67, 75, 100, 101, 103, 111, 258–260 Air Quality Directive  184–185 Andhov, M  15 Armstrong, K  164 Arrowsmith, S  79–80, 132, 257n award criteria discretion see discretion economic  83, 119, 168–169 environmental  67–68, 173, 234 equal treatment principle  101–102 extraordinary  101 flexibility, doctrine of  65 impartiality  103 life-cycle costing see life-cycle costing link to subject matter  174–175, 176 lowest price  65 most economically advantageous tender  42–43, 65, 66–69, 119, 168–169, 178, 235 non-economic interests  157 objectivity  68, 85, 88, 89 proportionality  267–268 social considerations as  66–67 strategic considerations  125–126 technical specifications  174–175, 234 transparency  100, 101–102, 111 variants, minimum specifications  68–69 balance of interests substantive balancing test  82, 88–92 Barak, A  6 Beatson LJ  184 bidder previous violations by  125 professional misconduct by  125 unreliable  125

bilateral treaties generally  251 Bobek AG  35–36 Bogojević, S  16 Bouwer, K  182–183 Bovis, CH  13–14, 267 Brandeis J  212 Buy Smart project  232 Caranta, R  174, 231 CE mark see EU technical standards Charter of Fundamental Rights access to justice  93, 94, 94n internal market and  29 principle of effectiveness  110n, 112–113 right to good administration  93, 94 sustainable development  122n child labour see human rights Christie, Governor (NJ)  221 Clean Vehicles Directive generally  157, 173 life-cycle costing  241–242 mandatory strategic procurement  127–128, 154, 230 climate change international agreements  180–182 law and policy on  163, 180–183 life-cycle costing  181, 239, 242 mitigation costs  181 nationally determined contributions  182 Paris Agreement  180, 181–182 strategic procurement  152 UNCCC  180 United States  225 Comité Européen de Normalisation (CEN)  141 Comité Européen de Normalisation Electro Technique (CENET)  141 command-and-control regulation standardisation and  140 commercialism flexibility, doctrine of  55 competition anti-circumvention rules  88–91

278  Index artificial narrowing  79–98, 152–153 collaboration between tenderers  91n corruption and  270 cross-border tenderers  87, 103 direct award without  88–90 discretion see discretion disproportionate requirements  80, 85, 86, 87 distortion  80, 81 effective  37 environmental measures and  168 equal treatment and  80 ERICs  250, 262 EU technical standards  150, 152–153, 156, 157–158 flexibility, doctrine of  55, 56 goal of procurement rules  79, 117, 167–168, 198–202, 208 human rights risks and  17, 198–202 internal market  41 market definition  91–92 market test to gauge negative impact  95 objectivity of award criteria  85, 88, 89 obligation, generally  127, 156 prevention  80 principle of, generally  81 private enforcement  21, 24–25, 34–35, 39 procedural traceability test  14, 82, 92–97 proportionality  270 public procurement law, generally  14, 53, 168 rebuttable presumption of artificial restrictiveness  90–91, 95–96, 97 restriction  80, 85 single market  79, 143–144 strategic procurement  127 structure of  80 sub-dimensional public contracts  64 substantive balancing test  82, 88–92 technical specifications and  175 unduly favouring or disadvantaging  81, 111, 127, 152 Comprehensive Economic and Trade Agreement (CETA)  251n constitutional tolerance federalism  6–7 contract see also award criteria annulment  70 award  171 award procedure, failure to participate in  72

changes of circumstances  69 environmental conditions  173 ineffectiveness  45, 46–47, 71 performance, assessment  171 retroactive cancellation  45 variants, minimum specifications  68–69 contracted out services human rights risks  195, 196–197 contracting entity award criteria see award criteria Directives, scope of application  73–77, 251–252 ex proprio motu investigation of decisions  71 flexibility doctrine and  56–57 operational dependency  61–62 public procurement by  251–252 similarity of control feature in  58–61 contract value anti-circumvention rules  88 artificially split into smaller contracts  88–89 threshold for public procurement rules  26, 41, 63–64, 72–73, 76, 144, 170, 172, 200 Conway, DM  220 coordination directives  167 COPERT estimates  185 corporate social responsibility (CSR) EU strategy  189, 205, 208 generally  202–205 human rights risks see human rights corruption competition and  270 mandatory exclusion for  127n Craig, P  151 cross-border interest certain, contracts of  63–65 cross-border tenderers competition  87, 103 discretion  87, 103 transparency  103 cross-border trade application of internal market  23–27 arbitrary discrimination  27 decisions obstructing  21–22 disguised restrictions  27 EU technical standards  139, 145 free movement rules see free movement rules internal market, generally  21–27, 200 public procurement rules  40–41

Index  279 transparency  31 when trade barriers justified  23, 27–32, 34–35 Cruz-Villalón AG  11 cultural discretion generally  11, 12 Czarnezki, JJ  17–18 damages award of  44, 46–47, 70, 71 Darmon AG  105 Dassonville formula internal market  24 decentralisation discretion and  54–55 public procurement, generally  51 Delimatsis, P  151 Delmas-Marty, M  3 Denmark non-implementation of Directive 2014/24/ EU Article 18(2)  134 deregulation harmonisation and  34 discretion administrative  4, 268, 269–273 anti-circumvention rules  88–91 artificial narrowing of competition  79–98 boundaries of  72–77 case law  55 changes of circumstance  69 competition and  80, 83, 198–202 conceptualising  4, 5–9 contexts for  82, 82n cross-border tenderers  87, 103 cultural  11, 12 decentralisation  54–55 de lege ferenda interpretation of Directives  72, 73 derogation from public procurement law  4, 11–12, 268, 269–273 direct award without competition  88–90 documenting decisions  93–97 elements of  11–12 environmental see environmentally responsible procurement equivalence principle and  111–112 evidentiary  11, 12 executive  6, 79–80 expansion  136 ex proprio motu investigation of decisions  71

failure to participate in contract award procedure  72 federal  6–7, 12 harmonisation and  11, 14, 52–53, 54, 55, 139, 165 human rights  16–17, 82, 189–192, 198–202 implementation of public procurement law  4, 268, 269–273 ineffectiveness of contract  71 innovation, consideration of  117–119, 121, 126 internal market and  13–15, 21, 22, 164 judicial  5, 6, 7–12 labour considerations  82, 83–85, 101, 113, 126 legislative  4, 6, 80, 268, 273–275 life-cycle costing see life-cycle costing light-touch regime  125 limitation for review proceedings  70 meaning  172 minimum wage requirements  86, 132 national identity clause  7 non-economic interests  157 non-priority service contacts  64–65 objectivity of award criteria  85, 88, 89 operational dependency in contracting entities  61–62 policy-making  11–12 principle, generally  3–4, 13–15, 22, 51–77, 167–170, 172–177, 191, 200 procedural  55 procedural autonomy, doctrine of  22, 55, 69–72 procedural safe harbour  95–96 procedural traceability test  14, 82, 92–97 proportionality  5–6, 9–12, 80, 85, 86, 87, 99, 113, 267–275 rebuttable presumption of artificial restrictiveness  90–91, 95–96, 97 remedies, as to  69–72 rights  12 rule of law and  5–6, 12 secondary legislation  8, 12 separation of powers and  5, 6–7, 12 similarity of control in contracting entities  58–61 social considerations  82, 83–85, 101, 117–119, 121, 126 strategic procurement see strategic procurement sub-dimensional public contracts  63–64, 76 subsidiarity and  5, 8

280  Index substantive balancing test  82, 88–92 sustainable procurement  120 technical standards and  139, 146–147, 152–154, 158–159 TFEU  8–9 transparency and  111–112, 113 variants, minimum specifications  68–69 discrimination see also equivalence principle arbitrary  27–28 ERICs  250, 262 nationality, on grounds of  31, 143, 144–145 national regulatory autonomy  22 non-priority service contacts  64–65 obligation as to, generally  127, 133, 143–145 principle, generally  41, 48–49, 143–144, 156, 198, 200 public procurement law  48–49, 170, 173, 200 strategic procurement  127 sub-dimensional public contracts  63–64 TFEU  31 transparency and  31, 37–38, 111 documentation discretionary decisions  93–97 obligations for contracting authorities  93–94, 96 Dragos, DC and Neamtu, B  122, 176 Drinking water Directive  165 dualism flexibility, doctrine of  55 Dworkin, Ronald  3, 7 eco-labels as award criteria  173, 174 future development  233–234, 243–246 government schemes  245, 246, 247 life-cycle costing and  234, 243–247 marketing programmes  245 private sector  245, 246, 247 QR coding  246 RFID tracking  246–247 role, generally  17, 211, 228–229 self-declarations  229 Smartlabels  246 United States  17, 226–227, 243, 246, 247 Economic efficiency and legal effectiveness of review and remedies procedures for public contracts  48 effectiveness, principle of competition  37

dependency test  54 effective judicial protection  110, 110n, 263, 268, 275 functionality test  54 ineffectiveness of contract  45, 46–47, 71 limitation of discretion and  22, 99–100 national autonomy  22, 69–72 rule of law  5 transparency and  99–100, 109–113 efficiency as public procurement goal  198 Emissions Online Tool life-cycle costing  241–242 employment see labour responsible procurement energy-efficiency office equipment, labelling  153–154, 157 strategic procurement  126 Energy Performance of Buildings Directive  128 Energy Star Regulation mandatory strategic procurement  128 Environmental Impact Assessment Directive  165 environmental law private governance and  233 public procurement law and  177–180, 233 terminological vagueness  178–179 environmentally responsible procurement see also climate change; sustainable development; sustainable procurement abnormally low tenders  134–135 Annex X  128, 130–131, 153, 172, 173, 181 autonomy, sphere of  172–173 case law  83–85, 87, 165–166 contract conditions  173 discretion in relation to  16, 82, 117–119, 121, 161–169, 172–177, 227–228 eco-labels see eco-labels economic considerations and  168–169 eligibility criteria for tenderers  173 Europe 2020 strategy  122, 228 EU rules, generally  15, 133, 201, 227–228 generally  211–212 implementation strategies  220–221 increasing importance  117–118 innovative solutions  174, 220, 233 internal market  15, 16, 161–167 international conventions, respecting  131, 153, 172, 173, 181 Interpretative Communication on  169–170

Index  281 ISO Sustainable Procurement Guidance  207 justiciability of environmental models  163, 183–185 life-cycle costing see life-cycle costing locally produced goods  211, 212, 213, 218–219, 222 Member States’ discretion  212 previous violation by bidder  125 procedural traceability test  14, 82, 92–97 strategic procurement  117–118, 121, 124, 126, 128–137, 152 substantive balancing test  82, 88–92 sustainable laws  128–129 technical specifications  174–175, 181, 234 tender documentation  83 transparency in environmental modelling  184–185 Treaty on the Functioning of the European Union  123, 165 US green public procurement  17–18, 211–227 environmental principles role in law  178–180 environmental sustainability see also climate change; sustainable development; sustainable procurement award criteria  67–68, 173, 234 competition and  168 EU technical standards  151, 152, 153 green procurement networks  232, 234 harmonisation of environmental policy  165–166 national measures  168 public procurement rules and  161–185, 201 subsidiarity, principle of  162 equality, procedural doctrine of  54 equivalence principle award criteria  101–102 competition and  80, 85, 150 discretion and  111–112 duty of, generally  84, 85, 109, 127, 147, 200 ERICs  258, 259–260 EU technical standards  149, 150 limitation of discretion and  99–100 obligatory nature  133 proportionality  270 public procurement rules  41, 54, 144, 156, 170, 173, 200 rule of law and  5

strategic procurement  124, 127, 130 sub-dimensional public contracts  63–64 technical specifications  25–26, 42, 175 tenderers  111–112, 150 transparency and  37–38, 74, 99–100, 103, 109–113 Ericsson, A and Groussot, X  14–15, 175, 184, 268 establishment right of  10, 27, 53, 64, 67, 74, 143–144, 156, 200 ethical sourcing strategic procurement  128 Europe 2020 strategy EU technical standards  153 key role of public procurement  53–54, 120, 122, 134, 153, 170n, 228 European Convention on Human Rights (ECHR) see human rights European Research Infrastructure Consortia (ERICs) application of General Principles  258–261, 264 application of TFEU  258–261, 264 budget  254, 255 competition  250, 262 cross-border cooperation  253, 254 equal treatment principle  258, 259–260 ERIC Regulation  18, 249, 253–254, 261–262, 264 exemption from public procurement directives  18, 250, 255–264 generally  18, 249–250, 252–253 Impact Assessment  252n, 254 international organisations, classification as  254–255, 264 mutual recognition principle  258, 259–260 non-discrimination  250, 262 procurement by  250–255, 262, 264 proportionality  258 purpose  249, 252–253 qualification for membership  253–254 regulating procurement by  249–264 regulation  250–251 remedies  262–263 transparency  250, 258–259, 262 European Social Charter human rights  198 European Telecommunication Standard Institute (ETSI)  141 European Union interests individual interests and  109n

282  Index European Union law embeddedness into national legal orders  33, 38–39 EU technical standards ANEC  151 CE mark  141, 142–143, 146–147, 150, 158 Clean Vehicles Directive  154 creating unjustified obstacles  149 cross-border trade  139, 145 definition  142 development  140–141 discretion and  139, 146–147, 152–154, 158–159 drafting  151, 152, 154–159 environmental sustainability  151, 152, 153 equal treatment principle  54, 149, 150 EU public procurement law  139, 143–159 Europe 2020 strategy  153 ‘European Standards for the 21st Century’  155 fair competition  150, 156, 157–158 formulation  149–150 functional and performance requirements  54, 153 harmonisation and  15–16, 139, 141, 145–147 harmonised  141, 142, 150, 157, 158 innovation and  153 internal market  15–16, 24–25, 29, 139, 140–143, 157–158 Joint Initiative on Standardisation  155 New Approach  15, 139, 141, 146, 147, 157, 158 obligation to comply  139, 149–150 policy tools, as  155, 158 presumption of conformity  150 problems arising  150–151 public procurement, generally  15–16, 41–42, 158–159 purpose  154 transparency and  151, 156 trust, and CE mark  150, 158 European Union-Ukraine association agreement  251n evidentiary discretion generally  11, 12 executive discretion see discretion fair-trade product strategic procurement  126 federalism constitutional tolerance  6–7

European Union  6–7 federal discretion  6–7, 12 policy-making discretion  11–12 Fisher, E  163–164 Fisher, E, Lange, B and Scotford, E  180 Fisher, E, Pascual, P and Wagner, W  183 flexibility, doctrine of award criteria and  65 changes of circumstance  69 competitiveness test  55, 56 contracting authorities and  56–57 dependency test  56, 57 in-house entities and  57 proportionality and  77 public contracts and  62–63 public procurement rules  52, 55, 75–77, 123–124 forced labour see human rights France corporate responsibility for human rights  190, 205 free movement rules see also internal market decisions obstructing  21–22 discretion in internal market  13–15 discrimination  27–28, 31, 67 effectiveness  38–39 enforcement  32–33 ERICs  258 food additives  105–107, 106n harmonisation and  34–40, 105, 146 internal market  79, 143–144, 227 mutual recognition, principle of  22 procedural aspect  22, 27, 30–31, 36, 47, 48 procurement rules, generally  13–15, 40, 53, 67, 74, 79, 121–122, 144–145, 156, 170, 173, 200 proportionality  10, 105 protectionism  161 public interest test  28–29 review of decisions obstructing  21, 47 sub-dimensional public contracts  64 TFEU  23–27, 144, 156 transparency, principle of  21, 22, 31, 36, 47, 102, 105–109, 113, 200 G7 Responsible Supply Chains  207 G20 Sustainable Global Supply Chains  207 Galligan, D  172

Index  283 General Agreement on Tariffs and Trade (GATT)  171 Georgieva, I  100 Gestel, R Van and Micklitz, HW  151 globalisation human rights risks  202–205, 206, 207 global warming see climate change good administration right to  93 Graber-Soudry, O  18 green procurement networks  232, 234 green public procurement (GPP) see eco-labels; environmentally responsible procurement; life-cycle costing harmonisation consumer protection  162 deregulation and  34 discretion and  11, 14, 52–53, 54, 55, 139, 165 environmental policy  165–166 EU technical standards  15–16, 150 four freedoms and  105, 146 full  146 internal market  15, 34–40, 134, 139, 147–148, 162, 165–167, 227 minimum  146–147 negative  166 New Approach  15, 139, 141, 146, 147, 157, 158 policy-making discretion  11 principle, generally  105 public procurement  14, 40–41, 72–73, 123, 147–149 remedies, harmonised  70 safeguard clause  147 sub-dimensional public contracts  63–64, 76 Hettne, J  15–16, 174 human rights abuses, operator with previous conviction for  127n, 201 competition and  17, 198–202, 208 conflicting national and international rules  204 contracted out services  195, 196–197 corporate human rights standards  202–205 corporate responsibility  17, 189–190, 197–198 Corporate Social Responsibility Strategy  189, 205

discretion and  16–17, 82, 189–192, 198–202 ECHR  17, 192, 194, 197–198, 208 European Social Charter  198 globalisation and  202–205, 206, 207 high risk sectors  195 ILC Articles  193–194, 196 ILO  130–131, 199, 201, 205, 206, 207 ISO Sustainable Procurement Guidance  207 legislation  190 leverage, concept of  203–204 margin of appreciation doctrine  194 multinational corporations  202–205 OECD Guidelines  204–205, 208 positive obligation doctrine  194, 195 primary duty-bearers  190–191 proportionality  194 public procurement  17, 190, 195–197, 206–209 reasonableness  194 risk and impact assessments  204 state duties  190–191, 193–197 supply chain  17, 189–191, 193, 195, 197–198, 203–204, 206–207 territory subject to effective overall control  195 third party, harmful act by  193 UNGPS  189, 202–207, 203n, 208 UN Protect, Respect, Remedy framework  203 within state’s jurisdiction  195 human trafficking see human rights impartiality procurement procedures  103 in-house contract control  58–61 innovation, procurement and discretion  117–119, 121 Europe 2020 strategy  122, 153 EU technical standards  153 generally  15 green public procurement  174, 220, 233 strategic procurement  117–119, 120, 121, 124, 126, 152, 220 technical specifications  174 United States  220 internal market competition  41, 79, 143–144 conditional mutual recognition  22 Dassonville formula  24

284  Index deficiencies in law and practice  34–40, 47–48 deregulation and  34 discretion and  13–15, 21, 22, 164 enforcement  32–33 environmental protection and  15, 16, 161–167 EU technical standards  15–16, 24–25, 139, 140–143, 157–158 free movement rules see free movement rules harmonisation  15, 34–40, 134, 139, 147–148, 162, 165–167, 227 horizontal policies and  15 Mutual Recognition Regulation  31–32 national regulatory autonomy and  21–33, 34–36, 47 Notification Directive  31–32 positive and negative integration  164–165 private enforcement  21, 24–25, 34–35, 39 procedural aspect  22, 27, 30–31, 36, 47, 48 public interest test  28–29 public procurement  22, 40–49, 121–122, 143–144, 161, 162 regulatory discretion at national level  22, 23–33 review of decisions obstructing  21, 47 secondary legislation  31–32, 40–47 social policies  15, 162 technical standards  15–16, 29, 139, 140–143, 157–158 TFEU  23–28, 41, 47 transparency and  21, 22, 31, 41, 47 Upgrading the Single Market  49 when internal market law applies  23–27 when trade barriers justified  23, 27–32, 34–35 international agreements Annex X  128, 130–131, 153, 172, 173, 181 climate change agreements  180–182 generally  251n human rights treaties  193–194, 197 respecting  17, 130–131, 171, 181 International Labour Organization (ILO) Convention  130–131, 199 Core Labour Standards  201, 205 Decent work in Global Supply Chains  207 Declaration on Fundamental Principles and Rights at Work  201 International Law Commission (ILC) Draft Articles on State Responsibility  193–194, 196

international organisation ERICs classified as  254–255 public procurement exemption  18, 250, 254, 255–264 ISO 20400 Sustainable Procurement Guidance  207 ISO 26000 development  154 ISO Life-cycle assessment standards  236, 241, 244 judicial discretion generally  5, 7–9 judicial review  9–12 proportionality and  9–12 judicial protection effective, right to  109, 109n, 112–113, 263, 268, 275 judicial review discretion and  9–12 Kelemen, D  5–6 Kokott AG  271–272 Kunzlik, P  80 labour responsible procurement abnormally low tenders  134–135 case law  85–87, 101 disadvantaged/unemployed workers  66–67, 124–125, 199 discretion in relation to, generally  82, 117–119, 121 Europe 2020 strategy  122 EU rules, generally  15, 133, 201–202 human rights risks see human rights ILO  130–131, 199, 201 increasing importance  117–118 labour responsible procurement  124–125 minimum wage legislation  86, 132 Posted Workers Directive  131–132 procedural traceability test  14, 82, 92–97 sheltered employment  124–125 strategic procurement  117–118, 121, 124, 126, 128–137 subcontracting  127, 135–136 substantive balancing test  82, 88–92 sustainable laws  128–129 transparency  101 Leger AG  179 liberalisation directives  167

Index  285 life-cycle costing as award criteria  126, 136, 173, 175–176, 229 Clean Vehicles Directive  241–242 climate change mitigation costs  181 climate performance  181 definition of life cycle  230 eco-labels and  234, 243–247 Emissions Online Tool  241–242 environmental sustainability  175–176 future development  232–234 generally  17, 211, 229–233 ILCD Handbook  236 impact valuation  229–232, 234–236, 240–243, 244–245 implementation costs  239–240 inventory analysis  236 ISO standards  236, 241, 244 life-cycle assessment  236–238, 239 link to subject matter  176 markets for which feasible  238 Material Input Per Service Units (MIPS)  239 meaning and purpose  175–176 measuring externalities  230–232, 241–243 methodologies  183–184, 238–243 monetising externalities  229–232, 234–236, 238–241, 244–245 most economically advantageous tender  229–230, 235, 237–238 National Capital Protocol  241 Operationalizing Impact Valuation  241 private sector  234, 240–241 SMART-SPP  241 strategic procurement  126, 136 supply chain  234, 244, 246–247 transparency  184 UN Guidelines  232 United States  17, 225, 227, 227n, 234, 241, 247 light-touch regime generally  125 link to contract subject matter life-cycle costing  176 strategic procurement  127, 136, 174–175 Lisbon Strategy  252 Lisbon Treaty  7, 11 Macrory, R  182 Maduro AG  269–270 margin of appreciation doctrine human rights  194

market definition competition and  91–92 market test gauging negative competitive impact  95 Martin Ortega, O  16–17 Material Input Per Service Units (MIPS) life-cycle costing  239 Medical Devices Directive  142–143, 147–149 Methven O’Brien, C  16–17 minimum price strategic requirements  126 minimum wage legislation discretion in public procurement  86, 132 transparency  107–108 Monti Report  162n most economically advantageous tender (MEAT) environmental issues and  67–68, 168–169, 178 life-cycle costing  229–230, 235, 237–238 public procurement rules  42–43, 65, 66–69 strategic procurement  66–68, 119, 178 multinational corporations human rights risks  202–205 mutual recognition ERICs  258, 259–260 free movement and  22 Mutual Recognition Regulation  31–32, 35–36 principle of  41, 144, 147, 156, 170, 173, 200 national autonomy effectiveness, principle of  22, 69–72 internal market and  21–33, 34–36, 47 non-discrimination  22 remedies  69–72 National Capital Protocol life-cycle costing  241 national identity clause discretion and  7 national legal orders embeddedness of EU law  33, 38–39 Nestlé Creating Shared Value  240 non-discrimination see discrimination non-economic interests award criteria  157 non-profit undertaking strategic procurement  125 Notification Directive  31–32

286  Index Obama, Barack  221, 222, 225, 226–227 objectivity award criteria  68 principle, generally  54, 143 Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises  204–205, 208 Paris Agreement  180, 181–182 Pedersen, K and Olsson, E  171 policy tool public procurement as  119–121, 124, 198–199 technical standards as  155, 158 positive obligation doctrine human rights  194, 195 Posted Workers Directive strategic procurement  131–132 Prechal, S  129, 134 pre-market consultation strategic procurement  119 price premium strategic requirements  126 principles in EU law universal application requirement  132–134 procedural autonomy doctrine discretion and  55, 69–72 procedural equality doctrine of  54 procedural traceability test discretion in public procurement  14, 82, 92–97 Procura Campaign  232 proportionality administrative discretion  268, 269–273 assessment  4, 10, 18, 273–275 award criteria  267–268 discretion and  5–6, 80, 85, 86, 87, 99–100, 113, 267–275 effective competition and  270 equal treatment and  270 ERICs  258 flexibility, doctrine of  77 food additives  106–107, 106n human rights obligations  194 judicial discretion and  9–12 legislative discretion  268, 273–275 obligation, generally  127, 144, 147, 156, 200 principle, generally  267–276 public procurement rules  41, 170, 173, 175, 200

rule of law and  9 strategic procurement  127, 130 sustainable procurement  130 transparency and  99–100, 105–109, 113, 270 protectionism prohibition  161 US dormant Commerce Clause  216 US market participant exception  217–219 publicity see advertising calls for tenders; transparency public procurement bilateral treaties  251n contracted out services  60, 195, 196–197 contracting authorities  58–62, 251–252, 257 corporate social responsibility  189, 202–205, 208 efficiency as goal  198 ERICs see European Research Infrastructure Consortia green procurement networks  232, 234 human rights risks see human rights international regulation  171, 173, 251n size of sector  168, 192 strategic see strategic procurement supply chain see supply chain WTO Government Procurement agreement  251n Public Procurement Directive see Directive 2014/24/EU Public Procurement Network  232 public procurement rules autonomy, sphere of  172–173 award criteria see award criteria competition as goal  41, 53, 79, 117, 167–168, 198–202, 208 conceptual and regulatory vagueness  52 construction  143–145 contracts not covered by  73 cross-border interest, contracts of  63–65 cross-border trade  40–41 decentralisation  51, 54–55 deficiency  72–75 de lege ferenda interpretation of Directives  72, 73 derogation from  4, 11–12, 268, 269–273 development of law  170–171, 178 Directives, scope of application  73–77, 251–252 discretion see discretion effectiveness, doctrine of  54

Index  287 environmental law and  161–185 environmental principles, role  178–180 equivalence, doctrine of  54 establishment, right of  10, 27, 53, 64, 67, 74, 143–144, 156, 200 EU technical standards  15–16, 41–42, 139, 143–159 exemption for international organisations  250, 255–264 flexibility, doctrine of  52, 55–57, 62–63, 69, 75–77, 123–124 free movement and  13–15, 40, 53, 74, 79, 121–122, 144–145, 156, 170, 173 generally  40, 53–54, 200 harmonisation  14, 40–41, 72–73, 123, 147–149 implementation, discretion as to  4, 268, 269–273 ineffectiveness of contract  45, 46–47, 71 internal market  22, 40–49, 121–122, 144, 161 Interpretative Communication on  37–38, 75, 260, 262, 263 non-discrimination see discrimination non-priority service contacts  64–65 objectivity, doctrine of  54 price convergence across EU  53 primary EU law  73–75 primary objectives  15, 191, 198, 208 principles of procurement  172 procedural autonomy doctrine  55, 69–72 procedural equality, doctrine of  54 procedural nature  171–172 public works contracts, concept of  62–63 remedies  43–45, 46–47, 48, 69–72 review procedures  54 ‘rush to signature’  44–45 secondary (horizontal) aims  15, 198–200, 198n secondary law  40–47, 49, 121–122, 170 similarity of control feature in contracting entities  58–61 single market and  143–144, 162 ‘standstill period’  44–45 sub-dimensional public contracts  63–64, 76 TFEU rules and  144–145, 178, 200 toolbox approach  124 transparency see transparency Radio-Frequency Identification (RFID) supply chain tracking  246 Regulation (EC) No 106/2008  128, 153–154

Regulation (EC) No 723/2009  18, 249, 253–254 Art 7(3)  255, 257–258 Recital 10  257n Regulation (EC) No 764/2008  31–32, 35–36 Regulation (EC) No 1025/2012  141–142, 149, 151 Remedies Directive see Directive 89/665/EEC research infrastructures see European Research Infrastructure Consortia reserved contract strategic procurement  124–125 resource efficiency strategic procurement  126 responsible procurement concept, generally  81n, 83 environmental  82–85 procedural traceability test  14, 82, 92–97 social and labour  82, 85–86, 101 substantive balancing test  82, 88–92 supply chain see supply chain review proceedings ex proprio motu investigation of decisions  71 failure to participate in contract award procedure  72 generally  9–12, 21, 47, 54 ineffectiveness of contract, where  71 time limits to enact  70–71 rights see also human rights rights discretion  12 Rivers, J  11 rule of law discretion and  5–6, 12 meaning  5 proportionality and  9 ‘rush to signature’ public procurement rules  44–45 Sanchez-Graells, A  14, 132 Scotford, E  178, 179 Scotland climate change legislation  180 public procurement regulation  130 sustainable procurement duty  180 Semple, A  175, 268 separation of powers discretion and  5, 6–7, 12 Services Directive  31 Shapiro, M  99 Sharpston AG  36, 147–148

288  Index Single European Act  52, 53, 75 single market see internal market SMART-SPP life-cycle costing  241 social dumping strategic procurement  128 socially responsible procurement abnormally low tenders  134–135 case law  85–87, 101 discretion in relation to, generally  82, 113, 117–119, 121, 228 Europe 2020 strategy  122, 228 EU rules, generally  15, 133, 201–202 globalisation and  202–205 human rights risks see human rights Interpretative Communication on  169–170 multinational corporations  202–205 previous violation by bidder  125 procedural traceability test  14, 82, 92–97 reserved contracts  124–125 strategic procurement  117–118, 121, 124, 126, 128–137, 228 subcontracting  127, 135–136 substantive balancing test  82, 88–92 supply chain see supply chain sustainable laws  128–129 social policy Corporate Social Responsibility Strategy  189, 205 human rights risks see human rights internal market  15, 162 ISO 26000  154 marginalised or disadvantaged groups  66–67, 124–125, 199 public procurement as policy tool  119–121, 124, 198–199 social considerations as award criteria  66–67 social security non-payment  127n standardisation command-and-control regulation and  140 definition of standard  141 European Union see EU technical standards harmonised  141, 142 international standards  141 national standards  140–141, 142, 149 nature of, generally  140 non-binding  140 self-regulation, as  140 ‘standstill period’ public procurement rules  44–45

strategic procurement abnormally low tenders  127, 134–135 award criteria  125–126 concept generally  15, 118–121, 152, 178 equivalence principle  124, 127, 130 Europe 2020 strategy  122, 228 facultative provision  15, 119, 124, 125, 133, 134, 135, 136–137 green issues see environmentally responsible procurement increasing importance  122 innovation see innovation, procurement and labour issues see labour responsible procurement legitimacy  121–123 light-touch regime  125 limits of discretion  125, 127–136 link to contract subject matter  127, 136, 174–175, 176 mandatory pro-strategic provisions  127–134, 136–137 meaning  15 non-profit undertakings  125 performance conditions  126, 130 policy tool, use as  119–121, 124, 198 proportionality principle  127, 130 reserved contracts  124–125 scope of discretion  119, 123–137 social issues see socially responsible procurement; social policy sustainable see sustainable development; sustainable procurement systematic application  119 transparency and  124 uncertainty of provisions  120 unreliable bidders  125 whether obligatory  132–134, 136–137 subcontracting obligation as to  127, 135–136 subsidiarity discretion and  5, 8 environmental decision-making  162 substantive balancing test discretion in public procurement  82, 88–92 supply chain Corporate Social Responsibility Strategy  189, 205 G7 Declaration  207 G20 Declaration  207 human rights risks  17, 189–191, 195, 203–204, 206–207

Index  289 ILO Decent work in Global Supply Chains  207 international  191, 193, 197–198, 206, 207 ISO Sustainable Procurement Guidance  207 life-cycle costing  234, 244, 246–247 RFID tracking  246–247 sustainable development see also climate change; environmentally responsible procurement, sustainable procurement Charter of Fundamental Rights  122n Commission Communication  170n environmental principles, role  178–180 globalisation and  202–205 importance  121, 228 meaning  121n Treaty on European Union  122–123, 134 sustainable procurement see also climate change; environmentally responsible procurement abnormally low tenders  127, 134–135 adopting culture of sustainability  220–221 eco-labels see eco-labels globalisation and  202–205 implementation strategies  220–221 increasing importance  122 international conventions, respecting  130–131, 181 ISO Sustainable Procurement Guidance  207 life-cycle costing see life-cycle costing limits of discretion  127–136 meaning  120 performance of public contracts  130 proportionality principle  130 strategic procurement  120, 228 subcontracting  127, 135–136 sustainable laws  128–129 whether obligatory  132–134, 136–137 tax non-payment  127n technical specifications climate change mitigation costs  181 climate performance  181 competition and  25–26, 175 environmental, as award criteria  174 equivalence, doctrine of  54 market integration  24–26 ‘or equivalent’  25–26, 42, 175

technical standards see EU technical standards technological innovation see innovation, procurement and tender see also award criteria; bidder abnormally low  127, 134–135, 260 advertising calls for  31, 37–38, 64, 67, 75, 100, 101, 103, 111, 258–260 documentation  83 eligibility criteria for tenderers  173 environmental requirements  83 equivalence principle  111–112, 150 non-discrimination see discrimination preparation  171, 173 social and labour requirements  85, 101 transparency  100, 101, 103 toxic chemicals strategic procurement  126 transparency accessibility of regulations  100 advertising calls for tenders  31, 37–38, 64, 67, 75, 100, 101, 103, 111, 258–260 award criteria  100, 101–102, 111 control features  100 cross-border tenderers  103 direct award without competition  89–90 discretion and  111–112, 113, 175 documentation obligations  93–94 effectiveness, principle of  99–100, 109–113 environmental modelling  184–185 equivalence principle and  37–38, 74, 99–100, 101–102, 103, 109–113 ERICs  250, 258–259, 262 EU technical standards and  151, 156 failure to publicise  45 internal market and  21, 22, 31, 36, 41, 47, 102–109, 113, 156 life-cycle costing  184 monopoly law  109 non-discrimination and  37–38 non-priority service contacts  64–65 principle, generally  74–75, 85, 99–100, 113, 127, 133, 143–144, 156, 184, 200 proportionality and  99–100, 105–109, 113, 270 public procurement law, generally  14–15, 41, 53, 168, 170, 173, 200

290  Index purpose  99 quality element  113 reach of principle  99, 100–105, 113 regulations, clarity and foreseeability  100 representative features  100 strategic procurement  124, 127 sub-dimensional public contracts  63–64 time element  113 variants, minimum specifications  68–69 Treaty on European Union (TEU) national identity clause  7 shared competences  122 sustainable development  122–123, 134 Treaty on the Functioning of the European Union (TFEU) Art 4(2)  122 Art 6  122–123 Art 7  208 Art 11  123, 178, 208 Art 34  23–26, 35, 108, 140, 144, 145, 166 Art 36  27, 28, 108, 145, 166, 173 Art 49  10 Art 52  28 Art 52(1)  27 Art 53(1)  41 Art 56  24, 111, 144 Art 57  24 Art 62  27, 41 Art 101  27 Art 114  41, 165 Art 153(2.b)  146 Art 168(7)  144 Art 169(4)  146–147 Art 187  18, 249 Art 193  146 Art 258  32 Art 260  33 Art 267  8–9, 33 Art 296  94 Art 346(1)  271 Art 352  165 environmental protection requirements  123, 165–166, 178 ERICs  258–263, 264 four freedoms  23–27, 41, 144, 156 fundamental rules  31, 144–145, 200, 208 harmonisation  146–147, 165 internal market  23–28, 41, 47 national standards  140 non-discrimination  31 primacy of EU law  33 research infrastructures  249

trust, mutual principle of  109 United Kingdom Climate Change Act  180 Modern Slavery Act  190, 190n, 205 non-implementation of Directive 2014/24/ EU Article 18(2)  134 public procurement as devolved matter  171 United Nations Framework Convention on Climate Change (UNCCC)  180 Guidelines for Social Life Cycle Assessment of Products  232 Guiding Principles on Business and Human Rights (UNGPS)  189, 202–207, 203n, 208 International Labour Organization (ILO)  130–131, 199, 201 Protect, Respect, Remedy framework  203 United States Agricultural Adjustment Act  215 Arkansas  222 Bibb v Navajo Freight Lines  217 California Environmental Preferable Purchasing  222 California Transparency in Supply Chains Act  190, 190n, 205 climate change  225 Colorado  222 commerce clause  214–215 Comprehensive Procurement Guideline  225n dormant commerce clause doctrine  213, 215–217, 223 eco-labels  17, 226–227, 243, 246 environmental federalism  211, 212, 213, 220 Environmental Protection Agency (EPA)  221, 225, 226–227 Executive Order (EO) 13101  225 Executive Order (EO) 13514  221, 225, 225n Executive Order (EO) 13693  221, 222, 224–225 Federal Acquisitions Regulations  222, 225–226 General Services Administration  225n Gibbons v Ogden  214 GPP (green public procurement)  17, 211–227

Index  291 GPP by federal government  224–227 GPP implementation strategies  220–221 Hughes v Alexandria Scrap Corp  217–218 innovation, procurement and  220 life-cycle costing  17, 225, 227, 227n, 234, 241 locally produced goods  211, 212, 213, 218–219, 222 Maine v Taylor  224 market participant exception  213, 214, 217–223 Massachusetts environmental Purchasing Policy  221–222 Minnesota v Clover Leaf Creamery Co  216–217, 224 New State Ice Co v Liebmann  212 NJARNG Energy and Water Conservation Policy  221 Oregon  222, 227n Pike test  223–224 Pike v Bruce Church, Inc  223 Reeves Inc v Stake  218

Safer Choice labelling system  227, 229 White v Massachusetts Council of Construction  218 Wickard v Filburn  215 unreliable bidder exclusion  125 Upgrading the Single Market  49 Utilities Directive see also Directive 2014/25/EU contracts not covered by  73 utilities procurement regime, generally  72 value of contract see contract value waste minimisation strategic procurement  126 Weatherill, Stephen  13, 113, 164, 166–167, 170 Weiler, JHH  6 World Trade Organisation (WTO) Government Procurement agreement (GPA)  251n

292