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The Compatibility of the Groundhandling Services Directive with EU Procurement Legislation: Case C-701/15 Malpensa Logistica Europa SpA v Società Esercizi Aeroportuali SpA (SEA)

  • United Kingdom
  • Competition, EU and Trade
  • Automotive

05-10-2017

Introduction

This EU Court of Justice case1 deals with the question of whether the Groundhandling Services Directive2 might be inconsistent with the requirements of EU procurement legislation for not requiring the carrying out of tender procedures for the (fair) allocation of space within airports to suppliers of groundhandling services. The Court reaches some interesting, and in the author’s view, the correct conclusions.

Relevant law and facts

The Groundhandling Services Directive regulates access to the provision of groundhandling services at EU airports. The legislation requires EU Member States to take the necessary measures to open up the market for the provision of groundhandling services, at larger airports, to competition. However, there are certain exemptions to this general rule. Where those exemptions apply, the number of suppliers of groundhandling services at an airport may be limited to a minimum of two. In those cases, the allocation of rights to provide groundhandling services must be made by means of an invitation to tender which is advertised in the Official Journal of the EU and which is open to all interested suppliers.

Separately, the legislation provides that the space available for groundhandling at an airport must be divided among the various suppliers, to the extent necessary for the exercise of their rights and so as to allow effective and fair competition on the basis of “relevant, objective, transparent and non-discriminatory rules and criteria”3.

In an action at an Italian administrative court against Società Esercizi Aeroportuali SpA (“SEA”), the managing body of Milan’s Malpensa Airport, Malpensa Logistica Europa SpA (“MLE”), a supplier of groundhandling services at the airport, claimed that the direct award of space at the airport to a new supplier of groundhandling services caused it to suffer loss.

SEA argued that the allocation of storage space (of approximately 1,000 square metres) to Beta-Trans, a new supplier of groundhandling services, was temporary pending the fitting out of the space that had been allocated to that supplier for the provision of groundhandling services, following a tendering procedure in which MLE had also participated. In addition, MLE had already at its disposal substantive storage space (of approximately 24,000 square meters in total) at the airport.

In considering the claim, the referring court was of the view that the domestic legislation implementing Directive 2004/174 — the Old Utilities Directive, predecessor to Directive 2014/255 now in force — was in principle, applicable in this case but that this seemed to be at odds with the legislation implementing the Groundhandling Services Directive. This was because that legislation did not require a prior tendering procedure (whether for the allocation of rights to suppliers of groundhandling services or the allocation of space to those suppliers) in circumstances where suppliers had free access to the groundhandling services market at an airport. The legislation only required prior tendering procedures in certain cases. None of these applied here.

Accordingly, the referring court asked the Court of Justice of the European Union (“CJEU”) to consider whether the procurement obligations that stemmed from Directive 2004/17 and which required regulated airports to award certain contracts by means of tendering procedures, had to be interpreted as precluding national legislation (implementing the Groundhandling Services Directive) from not requiring the conduct of a tendering procedure prior to every allocation, even temporary, of airport space for the purposes of providing groundhandling services.

Court decision

In determining this issue, it was necessary to consider whether the contract for the allocation of airport space fell within the scope of Directive 2004/17. While the Court seems to have accepted that, as the manager of an airport, SEA was in principle capable of being subject to regulation under Directive 2004/17, it dismissed the possibility that the contract at issue fell within the scope of that Directive. For that to be the case, the contract had to involve the acquisition of a service by the manager of the airport in return for remuneration. That was not the case here.

The Court did not consider the question of whether the contract at issue could have been a concession contract on the basis that Directive 2004/17 did not, in any event, regulate concession contracts6.

Accordingly, there was no incompatibility between the provisions of the Groundhandling Services Directive and Directive 2004/17. The former, required that the allocation of space to suppliers of groundhandling services be made on the basis of relevant, objective, transparent and non-discriminatory rules and criteria. However, the legislation did not mandate the carrying out of a prior tendering procedure in this context. It was for the referring court to determine whether the legislation’s requirements for the allocation of airport space to suppliers of groundhandling services had been met in this case.

Comments

The Court’s approach in determining this reference for a preliminary ruling was clearly correct: for the tendering obligations under Directive 2004/17 to apply, the contract being awarded had to be of a type which fell within the scope of that Directive. The Court dismissed that possibility without too much difficulty on the basis that the contract for the allocation of airport space did not involve the manager of the airport acquiring a service for remuneration. The Court did not consider the wider question of whether any other form of consideration might have been present here and sufficient for it to fulfil the Directive’s requirement for the provision of a service for “pecuniary interest”. However, the facts of the case suggest that this was unlikely to have been the case.

As noted above, the Court declined to consider the question of whether the arrangement might have been a concession contract given that concession contracts were in any event outside the scope of Directive 2004/17. In his Opinion7, the Advocate General did consider that possibility, concluding that the contract was in fact a concession contract (and as such outside the scope of Directive 2004/17).

Whether that conclusion is correct, is not without doubt. Indeed, it is not always clear as to whether what is being considered in the Opinion is: (a) the award of the right to Beta-Trans to offer groundhandling services at the airport (which had been subject to a tendering procedure), or (b) the subsequent direct allocation of temporary space to Beta-Trans, pending the fitting out of the area that had been allocated to it together with the grant of groundhandling services rights, or (c) the arrangements at (a) and (b) collectively8. In fact, only the subsequent allocation of temporary space was in dispute.

Nonetheless, having concluded that Directive 2004/17 was not applicable, the Advocate General—quite helpfully—went on to consider what was needed to comply with the requirements of the Groundhandling Services Directive in this context. In that regard, he noted that the fact that the Groundhandling Services Directive did not require the manager of the airport to initiate a selection procedure in order to allocate airport space to suppliers, did not “obviously” mean that the airport manager was not able to organise such procedure. Indeed, “an open tendering procedure between authorised operators may undoubtedly be one of the mechanisms (not necessarily the only mechanism) suitable for distributing areas, if it is implemented in accordance with the criteria of objectivity, transparency and non-discrimination referred to in Article 16(2) of that directive”.

Although it was for the referring court to decide whether those requirements had been met in this case, the Advocate General considered relevant that one of the criteria for assigning airport space was the promotion of “effective and fair” competition between all operators, “including new entrants in the field”. “Effective competition precisely requires the removal of barriers preventing the entry of new operators. From that perspective, the principles of objectivity, transparency and non-discrimination may justify decisions on the allocation of areas which take account of the situation of suppliers of groundhandling services already in place and their possible dominance in the provision of those services at a given airport.9

Separately, it is worth noting that, given the narrow scope of the reference to the Court, the Court did not seek to determine whether, if the arrangement was not a contract subject to Directive 2004/17, it might have been an arrangement of a type which, nonetheless, triggered competitive tendering obligations under the principles that underlie the Treaty on the Functioning of the European Union, including the principles of transparency and non-discrimination (the “Treaty principles”). As noted above, the Advocate General’s view was that the arrangement had the characteristics of a concession. Concessions of a certain cross-border interest would have been subject to obligations under the Treaty principles at the time (they are now subject to Directive 2014/23).

While the opportunity to consider this wider question would have been useful from the perspective of clarifying further (a) the nature of a contract for the allocation of space to a supplier in this context; and (b) the extent of the obligations that may arise under the Treaty principles, there is an argument that the conclusion, in this case, would not have been any different. This is on the basis that the Groundhandling Services Directive already provides for free access to the market for the provision of groundhandling services at larger airports. To the extent that an exemption from this general obligation applies, airport managers are required to carry out an advertised competitive tender process for the grant of the right to provide such services. The question of how space is allocated between authorised suppliers so as to enable them to provide their services, is subject to a separate obligation under the Groundhandling Services Directive. As we saw, the legislation provides that the allocation must take into account not only the need to allow suppliers to exercise their rights (to provide groundhandling services) but also the need to promote effective and fair competition between all suppliers, including new entrants in the field. In that context, airport managers are required to allocate airport space on the basis of relevant, objective, transparent and non-discriminatory rules and criteria. As the Advocate General had noted, one way of complying with this obligation might be to carry out a tendering procedure. However, that is not necessarily the only way to do so. Indeed, provided that space is allocated by reference to the criteria referred to above, taking also into account the need to promote effective and fair competition between all suppliers, including new entrants in the field, then there should be no inconsistency between the requirements of the Groundhandling Services Directive and the obligations that arise under the Treaty principles, even in the absence of a prior tendering procedure.

Although the case relates to the applicability of Directive 2004/17, the Court’s conclusions are also applicable to the successor legislation, Directive 2014/25, and also the Public Sector Directive10. This is on the basis that both Directives are in all material respects essentially identical to Directive 2004/17. As noted above, concession contracts are now regulated under Directive 2014/23. The question of whether the Court’s conclusion might be equally applicable in relation to Directive 2014/23, if the contract at issue was indeed, a concession contract, is less clear, and must await further clarification from the Court.

A version of this article was first published in the Public Procurement Law Review (2017) 26 PPLR 6.


 

1. Malpensa Logistica Europa SpA v Società Esercizi Aeroportuali SpA (SEA) (C-701/15), ECLI:EU:C:2017:545.

2. Council Directive 96/67/EC of 15 October 1996 on access to the groundhandling market at Community airports [1996] OJ L272/36 (“Groundhandling Services Directive”).

3. Groundhandling Services Directive, art.16(2).

4. Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors [2004] OJ L134/1.

5. 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 Text with EEA relevance [2014] OJ L94/243.

6. The legal position has subsequently changed. As of 18 April 2016, concession contracts are regulated by 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.

7. Case C-701/15, Opinion of Advocate General Campos Sanchez-Bordona, ECLI:EU:C:2017:332.

8. At [47] to [52] of the Opinion.

9. At [75] of the Opinion.

10. 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 (“Public Sector Directive”) [2014] OJ L94/65.

 


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