Case C‑306/08, Commission v Spain

Court further clarifies application EU procurement rules to urban development

By its action, the Commission criticised Spain for awarding integrated action programmes (IAPs) for the joint urban development of several parcels in accordance with a single programme converting those parcels into building plots in breach of Directives 93/37 and 2004/18 respectively.

The Court stressed that the Commission’s complaints concerned only the procedure for approving IAPs in indirect management, which, under the legislation in question, involved the delegation, by the competent contracting authority to an individual, of the status of developer, selected according to a competitive public procedure whether or not the developer owned the plots concerned.

The Court held that the concept of “public works contracts” within the meaning of Art. 1(a) of Directive 93/37 and of Art. 1(2)(b) of Directive 2004/18 covered contracts for pecuniary interest, concluded in writing between one or more economic operators and one or more contracting authorities and having as their object either the execution, or both the design and execution, of works related to one of the activities referred to in Annex II to Directive 93/37 or Annex I to Directive 2004/18 or of a work defined in Art. 1(c) of Directive 93/37 or Art. 1(2)(b) of Directive 2004/18, or the execution, by whatever means, of a work corresponding to the requirements specified by the contracting authority. The Court held that a contract could be deemed to be a “public works contract” only if its subject-matter corresponded to this definition and that works which were incidental to, and not the subject-matter of, the contract did not justify the contract’s qualification as a public works contract.

The Court reiterated that, where a contract contained elements relating both to a public works contract and another type of contract, it was the main object of the contract which determined which body of European Union rules on public contracts was to be applied in principle (see Case C-220/05 Auroux and Others [2007]).

The Court held that that determination must be made in the light of the essential obligations which predominated and which, as such, characterised the transaction, as opposed to those which were only ancillary or supplementary in nature and were required by the very object of the contract (Case C412/04 Commission v Italy [2008]).

The Court held that the Commission confined itself to putting forward the argument that the urban development contracts at issue must be classified as “public works contracts” on the ground that the main object of IAPs was, for the purposes of Arts 1(c) of Directive 93/37 and 1(2)(b) of Directive 2004/18, a “work” of urban development of two or more parcels leading to the construction of highway access by a paved road, the distribution of drinking water and electricity, the evacuation of waste water from gutters and public lighting.

The Court furthermore observed that the Spain rejected the Commission’s assessment that IAPs should be classified as a “work’, in the sense of Directives 93/37 and 2004/18, and contended that the execution of such a work did not constitute its exclusive or even fundamental purpose. Spain contended that the contracts at issue must be classified as “service concessions’, within the meaning of Art. 1(4) of Directive 2004/18.

The Court reiterated that in proceedings under Art. 226 EC for failure to fulfil obligations, it was for the Commission to prove that failure. It was the Commission, indeed, which must place before the Court all the information needed to enable the Court to establish that failure, and in so doing the Commission might not rely on any presumptions (Case C-490/09 Commission v Luxembourg [2011] ).

The Court held that Commission had not sought to substantiate its own allegations or to refute those of the defendant Member State by detailed examination of that information. The Court therefore found that it had not been established that the works consisting of the connection and integration of the plots concerned to the existing infrastructure, energy, communications and public services networks constituted the main object of the contract concluded between the community and the urban developer within the framework of an IAP in indirect management.

The Court held that in fact, the execution of the IAP by the developer included activities which could not be classified as “works’, within the meaning of the directives relied on by the Commission in its application, namely the preparation of the development plan, the proposal and management of the corresponding land consolidation project, obtaining for the administration free of charge plots for public ownership and for the community’s public land bank, management of the legal conversion of the plots concerned or even the equitable division of the costs and profits between the parties concerned as well as the transactions for financing and guaranteeing the cost of the investments, works, installations and compensation necessary for the execution of the IAP.

The Court furthermore held that some of the activities which IAPs involved seemed to correspond, by their nature, to the activities referred to in Category 12 in Annexes IA to Directive 92/50 and IIA to Directive 2004/18, relating to the services referred to, respectively, in Art. 1(a) of Directive 92/50 and Art. 1(2)(d) of Directive 2004/18.

The Court concluded that the Commission had not proved that the main object of the contract concluded between the local authority and the urban developer was a public works contract within the meaning of Directive 93/37 or Directive 2004/18, which was a condition precedent to a declaration of the alleged failure to fulfil obligations.

The Court therefore found that Commission’s action had to be dismissed.