C-272/91

COMMISSION v ITALY

OPINION OF ADVOCATE GENERAL GULMANN delivered on 14 July 1993 *

Mr President, The contract notice was published only in Members of the Court, the Italian press. On that basis the Commis­ sion has also claimed that Italy has failed to comply with its obligations under Art­ icle 9(1), (2) and (4) of Directive 77/62 by failing to publish the contract notice in the Official Journal of the European Communi- 1. In Italy only the State may conduct lot­ ties and by failing to make known at the teries. 1 In November 1990 the Italian Finance beginning of 1990 by means of an indicative Ministry published a contract notice for the notice the total procurement by product area concession for the computerization of the of which the estimated value was equal to or Italian Lotto. The right to tender was greater than ECU 750 000 and which the reserved to bodies, companies, consortia and Finance Ministry envisaged awarding in groupings the majority of whose capital, 1990. considered individually or in aggregate, was held by the public sector. In these proceed­ ings the Commission has claimed that Italy thereby failed to comply with its obligations under Articles 30, 52 and 59 of the EEC Treaty and Articles 17 to 25 of Council Directive 77/62/EEC coordinating proce­ dures for the award of public-supply con­ 2 tracts, as amended by Council Direc­ tive 88/295/EEC. 3

3. In his Order of 31 January 1992 the Pres­ ident of the Court of Justice gave the follow­ ing description of the Lotto and the key fea­ The invitation to tender provided that the 5 tures of the concession. concession was for nine years only and that when it expired the entire computerized sys­ tem, including premises, apparatus, terminals at collection points, equipment, structures, programs, records and everything else neces­ sary for operating and managing the system 4. 'It is apparent from the documents before was to be handed over without charge for the Court that the lottery is a game of the exclusive use of the Administration. chance operated by the Autonomous State Monopolies Administration ("the Adminis­ tration"), an administrative body attached to the Ministry of Finance. The system involves players betting on one or more numbers with a view to weekly draws. The stakes are It specified that the concession comprised taken at authorized collection points (in par­ three phases: in the first phase the equipment ticular, tobacconists) and there is a draw was to be supplied, installed and tested in every Saturday in each of the ten lottery- parallel with the manual system, at the end areas (mote) into which Italy is subdivided. of which the computerized system was to A bet may be entered either in the draw for become operational in one lottery area; in the area in which the relevant collection the second phase the system was to be point is situated or in the draw for all the extended to all the lottery areas; and finally areas. The amount of the winnings is deter­ in the third, fully operational, phase the mined, by reference in particular to the number of collection points was to be pro­ stake, in accordance with a formula laid gressively increased. Tenders had to indicate down by Italian legislation, and winnings are the time within which each phase would be payable at the collection point or, if they completed. exceed a certain sum, at the local offices of the Ministry of Finance.

'... the principle of equal treatment, of which Articles 52 and 59 of the Treaty embody The infringement of Articles 52 and 59 of specific instances, prohibits not only the Treaty overt discrimination by reason of nation­ ality but also all covert forms of discrim­ ination which, by application of other criteria of differentiation, lead in fact to the same result ...', and

5. The Commission claims that the condi­ tion in the invitation to tender that only companies, consortia or groupings the majority of whose capital is owned by the public sector can take part in the procedure '... Although the laws and decree-laws in corresponds to the condition which was held issue apply without distinction to all to be contrary to the Treaty in the judgment companies, whether of Italian or foreign of the Court of Justice of 5 December 1989 6 nationality, they essentially favour Italian in Case C-3/88 Commission v Italy. companies. As the Commission has pointed out, without being contradicted by the Italian Government, there are at 6 — Case C-3/88 Commission v Italy [1989] ECR 4035. present no data-processing companies

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OPINION OF MR GULMANN — CASE C-272/91

from other Member States all or the on behalf of the public administration, majority of whose shares are in Italian namely part of the lottery (that is to say public ownership'. that the concessionaire acts as the pro­ vider of services in the public administra­ tion's stead,

7 — See paragraphs 8 and 9. 8 — By application lodged at the Court on 2 December 1991 the Commission brought proceedings against Italy for the lat- ter's failure to implement the judgment of the Court in Case C-3/88. The Italian Government subsequently stated that the legislative provisions that were contrary to Community law — the concessionaire is to be responsible for were abrogated by Article 15 of Law No 142 of 19 Febru­ the operation of the computerized system ary 1992 whereupon the Commission withdrew its applica­ tion. for a period of nine years;

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COMMISSION v ITALY

— the remuneration is fixed as a percentage a concession. In other words, the decisive of the gross revenue from the lottery criterion for the existence of a concession for stakes, and a public service is whether the concessionaire is given the right to exploit the computerized system to conduct lotteries and to obtain therefrom the consideration for his work. On the other hand, if it is found that the power to conduct lotteries is retained by the — Article 7 of the special conditions for the Italian State, the setting up and operation of tender provides that everything necessary the computerized system must be regarded for operating the computerized system is as services provided to the Italian State in to be handed over without charge to the return for consideration which, irrespective State on the expiry of the nine-year con­ of the precise way in which it is calculated, is 9 cession. provided by the State.

9 — The Italian Government has pointed out that the invitation 10 — See in this context Council Directive 71/305/EEC of 26 to tender, the decree regarding the award of the concession July 1971 concerning the coordination of procedures for and the special conditions for the tender all refer to a con­ the award of public works contracts (OJ, English Special cession and that the Tribunale Amministrativo Regionale of Edition 1971 (II), p. 682), as amended by Council Direc­ Lazio has recognized in a decision of 8 July 1991 that the tive 89M40/EEC of 18 July 1989 (OJ 1989 L 210, p. 1), agreement in question relates to a concession for the provi­ Article 1(d) of which provides '"public works concession- sion of a public service and has stated in that connection is a contract of the same type as [public works contracts] inter aha that the key component of the agreement is the except for the fact that the consideration for the works to operation of the computerized system while tne provision of be carried out consists either solely in the right to exploit supplies is of only secondary importance. the construction or in this right together with payment'.

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OPINION OF MR GULMANN — CASE C-272/9I

der will be incompatible with the rules of the Is there a transfer of the power to exercise Treaty unless that invitation is to be con­ official authority? strued as entailing the transfer of public authority.

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COMMISSION v ITALY

15. The invitation to tender at issue in these to be carried out by the concessionaire in proceedings concerns, as mentioned above, connection with the computerization of the the setting up and operation of a system for lottery are of a technical nature in the same computerizing the Italian lottery. Computer­ way as was found in Case C-3/88. ization undoubtedly entails fundamental changes to the manner in which the lottery has hitherto been conducted. According to point 1 of the technical programme forming part of the special specifications, the invita­ tion covers: 'the premises to house the pro­ Even if the Court were to hold that the tasks cessing centre in each lottery area, the area in question go further than mere activities of committee, the Central Processing Office, a technical nature, I consider that they do the technical and administrative management not in any event constitute tasks which can of the company; transmission lines; the ter­ reasonably be described as being connected minals which are to be installed at the collec­ with the exercise of official authority within tion centres; the apparatus for the processing the meaning of the Treaty. It is appropriate and transmission of data; software which to point out in this connection that the must be developed by the company; the Court has held that Articles 55 and 66 are operation of the whole system for nine years; derogations from the fundamental principle support in the form of materials and services in the Treaty that there should be no dis­ for the public administration which grants crimination on grounds of nationality and the concession for everything relating to the they must therefore be interpreted in a man­ lottery; everything else that is necessary for ner which limits their scope to what is the conduct of the lottery'. strictly necessary in order to safeguard the interests which they allow the Member 13 States to protect.

centres set up and administered by the con­ been received before they are transmitted to cessionaire. On the other the concessionaire the processing centres in each area (see point must monitor, prevent and refuse stakes thai 4.1 of the technical programme) and that would give entitlement to prizes that cannoi stakes that will give entitlement to prizes be paid. which cannot be paid are refused (see Art­ icle 5(3) in the implementing regulation). It is difficult to construe those provisions as giv­ ing the concessionaire the task of actually exercising supervision over the lottery agents in order to ensure that those points are car­ ried out. But it is apparent from the technical pro­ gramme, in my view, that even after the installation of the computerized system it 1 will be the individual lottery collectors 4and not the concessionaire who are responsible 19. Secondly the Italian Government has for receiving stakes. The concessionaire is stated that in connection with the draws and responsible for installing terminals for the decisions on the winning coupons the conces­ agents and developing and installing the nec­ sionaire has on the one hand a public moni­ essary software. On the other hand it is the toring role since the Central Processing lottery agents who are to operate those ter­ Office (Ufficio centrale di elaborazione) in minals. It is apparent from point 4.1 of the Rome, which is under the authority of the technical programme that lottery agents, by concessionaire, must carry out controls on means of the data-processing equipment the result of the draws at the request of the placed at their disposal, are to be able to Area Committees (Commissioni di zona), monitor, correct, authorize and register 15 which are State bodies, and on the other stakes received and finally to issue the hand has a public task of verification since receipt which the machines will then pro­ the concessionaire determines which are the duce. If the receipt is defective or the lottery- winning coupons and in that respect is sub­ agent has otherwise made a mistake, the sys­ ject only to the control of the Area Commit­ tem must be devised in such a way that the tees. agent can cancel the stake registered and begin again from the beginning.

check that the registrations received are cor­ it may request inter alia the Central Process­ rect and inform the Area Committee in ing Office to carry out a check. question of the stakes that cannot be accept­ 16 ed. The draws are carried out by the Draw Committees (Commissioni di estrazione) 17 which are State bodies and are notified to the Central Processing Office in Rome which draws up a comprehensive list of the draws in each area which it transmits to the Area Committees through the processing centres Accordingly it can be seen that it is the Area in each area which also send the list to the Committee in question and not the conces­ individual lottery agents. On the basis of the sionaire which is primarily responsible for registrations of the stakes deposited and the carrying out checks on the result of the registrations of the draws carried out the draws and to ensure that the list of winning processing centres in question determine coupons is correct. The task of the conces­ which coupons have won prizes (see point sionaire is to operate the computerized sys­ 4.6 of the technical programme). The list of tem on the basis of the data received and the winning coupons is transmitted to the thus to provide technical assistance to the Area Commission for approval. 18 Pursuant Area Committees. to point 4.4 of the technical programme the Area Committee is to retain the 'data- processing diskettes concerning the stakes' and on that basis, if it considers it necessary,

Proceedings against decisions of the Area Committees may be brought ... before the Central Lottery Committee ... The Central Committee shall be designated by a decree of the Minister of Finance and shall consist of the Director- General of the Direzione generale delle entrate speciali (Director-General for Special Revenue), who shall preside, It is true that point 4.10, section 5, of the two officials from the same directorate-general, one official technical programme concerning winnings to from the Ministero de Tesoro and one official from the Amministrazione Autonoma dei Monopoli di Stato ...'. be paid out by the Direzione Generale

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OPINION OF MR GULMANN — CASE C-272/91

Monopoli di Stato provides that 'the com­ aire the right to exercise official authority. pany shall ensure that the coupons which are That provision precisely just gives the con­ handed in for payment are genuine and cer­ cessionaire the right and obligation to under­ tify that those coupons have won prizes and take everything that is necessary in order to that the prizes have not yet been paid out. In operate the concession and must therefore lie this connection the Central Processing within the framework of that concession. Office must be in possession of data con­ cerning all the winning coupons and the cor­ responding payments'.

19 — Winnings of less than LIT 1 250 000 are to be paid by the lottery agent who received the stake. Point 4.8 of the tech­ nical programme sets out a number of circumstances which that agent must check before paying out winnings and in this connection also details certam functions that must be 23. Finally the Italian Government has carried out by the automated system. For winnings in excess of that amount, requests for payment are to be sub­ stated that the purpose of the concession is mitted to the Intendenza di Finanza, which is the represen­ to increase and maximise tax revenue from tative of the Finance Ministry in the various provinces or the Ispettorato Compartimentale dei Monopoli di Stato, the lottery and that the transfer of a public which is a local body under the authority of the AAMS and are subsequently forwarded to the Direzione Generale power to conduct the lottery also relates to Monopoli di Stato, which is also subject to the AAMS. the levying of tax.

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COMMISSION v ITALY

It should be noted in this respect that volun­ The question of the infringement of Art­ tary payments made by individuals in order icle 30 of the Treaty to take part in the lottery are not the levying of tax even if the revenue from the lottery is entered in the State budget under the head­ ing of tax revenue. No weight therefore attaches to the Italian Government's asser­ tion that there is on this basis exercise of official authority.

25. Against that background I would pro­ pose that the Court hold that the facts at issue constitute an infringement of Art­ 20 — The Commission is probably right in pointing out that the development of new software must be regarded as the pro­ icles 52 and 59 of the Treaty. vision of services.

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OPINION OF MR GULMANN — CASE C-272/91

grounds of nationality within the meaning of authority. Finally it contends that the judg­ Article 30 of the Treaty. ment of the Court in Du Pont de Nemours is not relevant since that case related to reserv­ ing purchases to certain national undertak­ ings while this case relates to a condition affecting the choice of concessionaire.

The Commission believes that its views are borne out by the judgment of the Court 22 in Case C-21/88 Du Pont de Nemours according to which Article 30 of the Treaty precludes national rules which reserve a pro­ 28. It is not altogether easy to take a posi­ portion of public-supply contracts to under­ tion on the Commission's claims on this takings which have production units in cer­ point. 23 tain parts of national territory.

21 — In this connection the Commission has stated that it is clear from the Court's case-law that measures which are poten­ 30. It may be appropriate to illustrate the tially such as to hinder trade between Member States are incompatible with Article 30 of the Treaty and it is not nec­ problem by the following hypothetical essary for the measures to have an appreciable effect on trade between the Member States. In support of that view it example: the authorities in a Member State referred inter alia to the judgments in Case 8/74 Dasson- issue an invitation to tender for the construc­ ville [1974] ECR 837, Case 16/83 Franti [1984] ECR 1299 and Case 124/85 Commission v Greece [1986] ECR 3935. tion of a bridge. Under the tendering condi­ 22 — Case C-21/88 Du Pont de Nemours [1990] ECR 1-889. tions, only consortia of undertakings the 23 — The Commission states that the reason why it did not assert an infringement of Article 30 of the Treaty in Case C-3/88 majority of whose capital is owned by the was that the judgment in Du Pont de Nemours was not State in question may submit tenders. The given until after it had initiated the proceedings in Case C-3/88. tendering conditions do not contain any

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requirement that the consortium should panies which themselves produce the neces­ include cement and steel producers or that sary products. cement and steel produced in the State in question must be used. Three consortia sub­ mit tenders. They all meet the condition as to majority State ownership. The contract is awarded to the only one of the tendering consortia which includes national undertak­ ings producing cement and steel.

That is because I consider that the Commis­ 31. Prompted by a question from the Italian sion has not established that the Italian Government which found the Commission's authorities did in fact attach importance to arguments unclear, the Commission stressed that circumstance. As the Commission itself in its reply that it is claiming that the has pointed out, there is no requirement in infringement of Article 30 is a consequence the tendering documents that the tenderers of the condition at issue. But as is apparent should themselves be in a position to pro­ from my hypothetical example, there is no duce the products in question. The Commis­ causal connection between a condition that sion was only able to state that the three the companies taking part must be owned by consortia or groupings that were invited to the public sector and the factual circum­ tender in fact included companies which stance that the contract is awarded to com­ themselves produced data-processing sys-

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terns. But that is not in itself sufficient in the computerization of the lottery would order to assess the weight that might have have to use the concessionaire as an interme­ been attached to that circumstance by the diary for supplies to the public administra­ contracting authorities. We do not have com­ tion. That would, according to the Commis­ prehensive information about the consortia sion, entail a significant restriction on the or groupings which applied to take part in producers' freedom of contract and in that the tendering procedure or about their own­ situation too there would therefore be a seri­ ership and inter-relationships. ous disruption of trade.

35. I therefore consider that the Court 24 — It has been stated in these proceedings that two of the three should not accept the Commission's conten­ tenderers selected were Italian subsidiaries of foreign pro­ tion that the fact that participation in the ducers of data-processing systems while the Lottomatica consortium includes on the one hand Ing. C. Olivetti & C. tendering procedure for automation of the SpA which produces both hardware and software, and on Italian lottery was confined to companies, the other Sogei SpA which develops software specifically designed for computerization within the public sector. consortia or groupings the majority of

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whose capital was publicly owned consti­ meeting the technical specifications laid tutes an infringement of Article 30 of the down by such companies'. Treaty.

37. The Italian Government has claimed that Directive 77/62 is not applicable to the invi­ tation to tender in question. In support of The alleged infringement of Directive 77/62 that view it contends first that the invitation does not relate to a public supply contract within the meaning of the directive and sec­ ond that the contract in question is not being concluded by an authority whose contracts are covered by the directive.

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OPINION OF MR GULMANN — CASE C-272/91

39. But, as the Italian Government rightly comply with the rules under the directive by points out, the characteristic of this tender­ making the content of contracts giving the ing procedure is that ownership of the goods public administration the right to make use in question passes to the public administra­ of certain products such that they cannot be tion only after the expiry of the nine-year defined as supply contracts in the traditional operating period and that the consideration sense. for those goods is part of the percentage of the revenue from the lottery which consti­ tutes the consideration for the contract as a whole. It must therefore be examined whether a contract having such a content meets the conditions to be a public supply contract within the meaning of Direc­ tive 77/62.

Clearly, following the amendment of the directive the question whether the public administration acquires the right of owner­ ship of the goods in question is no longer conclusive for the existence of a supply con­ tract within the meaning of the directive. 40. Article 1 of Directive 77/62 was Thus agreements for rental of goods, with or amended by Directive 88/295 with the result without option to buy, will fall within the that public-supply contracts no longer cover scope of the directive. The fact that owner­ only contracts 'for delivery of the products' ship of the products covered by the invita­ but are contracts 'involving the purchase, tion to tender in question does not pass to lease, rental or hire purchase with or without the public administration until after the nine- option to buy, of products'. year operating period is not of conclusive significance.

41. In the alternative the Italian Government claims that in any event it is only Article 2(3) of Directive 77/62 which applies to the invi­ The actual situation under the invitation to tation to tender in question. Article 2(3) pro­ tender at issue is, in my view, that the public vides: administration has placed at its disposal the necessary hardware and any basic software for the purposes of computerization with a view to the conduct of the lottery. I consider that a contract of that nature does fall within the scope of Directive 77/62 as that scope is 'When the State ... grants to a body other defined following the adoption of Direc­ than the contracting body ... special or exclu­ tive 88/295. That result is not affected, in my sive rights to engage in a public service activ­ view, by the fact that the award relates at the ity, the instrument granting this right shall same time to the service of developing spe­ stipulate that the body in question must cial software and commissioning and operat­ observe the principle of non-discrimination ing over a nine-year period the whole com­ by nationality when awarding public-supply puterized system, including the servicing and contracts to third parties'. operation of the aforesaid products.

In support of its view the Italian Govern­ ment further states that the invitation to ten­ der concerns the grant to a concessionaire of I would finally point out in this connection a special right to provide services, namely that the practical significance of the present part of the power to conduct a lottery. That issues has diminished somewhat as view is untenable. The provisions of Direc­ from 1 July 1993 which was the time-limit tive 77/62 to which the Commission's claim for the implementation by the Member relates are applicable to this invitation to ten­ States of Council Directive 92/50/EEC der for the computerization of the lottery of 18 June 1992 relating to the coordination because the legal relationship between the of procedures for the award of public service contracting authorities and the concession­ aire does not involve the transfer of the power to conduct a lottery but — in addi-

— AAMS is not included in the list of con­ The derogation in Footnote 2 as regards the tracting authorities referred to in Art­ tobacco and salt monopoly cannot be icle 1(1) of Directive 80/767/EEC extended to the lottery. There is nothing to of 22 July 1980 adapting and supplement­ suggest that the intention of the Community ing in respect of certain contracting legislature was that all areas administered by 28 authorities Directive 77/62, and the AAMS should be excluded from the scope of the directive. On the contrary, as the Commission has emphasized, there are grounds for assuming that that footnote serves a particular purpose linked to the spe­ cial circumstances of the tobacco and salt — Footnote 2 to the aforesaid list, which sector. To hold the contrary would moreover shows that the Italian Finance Ministry is signify that activities could be kept outside included amongst the purchasing institu­ the scope of the directive merely by entrust­ tions except as regards purchases made ing the administration thereof to the AAMS. by the tobacco and salt monopolies, is Furthermore, Italy itself mentioned the intended to exclude all contracts con­ AAMS on the lists sent to the Commission cluded by the AAMS since the only rea­ and GATT of public institutions which are son why the lottery is not expressly men­ referred to in the directives. tioned is that at the time when that directive was adopted the lottery was not administered by the AAMS. 29 — Article 4(4) of Law No 528 of 2 August 1982, as amended by Law No 85 of 19 April 1990, provides: "The Finance Ministry shall establish ... after hearing the Amministrazi­ one Autonoma dei Monopoli di Stato, by means of an invi­ tation to tender (appalto-concorso), a system for computer­ 28 — OJ 1980 L 215, p. 1. izing the lottery ...'.

30 — For a more detailed consideration of those provisions sec my Opinion of 30 June 1993 in Case C-71/92 Commission v Spain, points 63 to 67 (judgment of 17 November 1993, [1993] ECR I-5923, at p. I-5945).

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(2) declare that the Italian Republic has failed to comply with the obligations incumbent upon it pursuant to Article 9 of Directive 77/62, as amended by Directive 88/295, by failing, at the beginning of 1990, to make known, by means of an indicative notice, the total procurement by product area of which the estimated value was equal to or greater than ECU 750 000 and which the Finance Ministry envisaged awarding during 1990 and by failing to publish in November 1990 a notice of invitation to tender in the Sup- plement to the Official Journal of the European Communities for a system for computerizing the lottery;

(3) for the rest, dismiss the proceedings against the Italian Republic; and

(4) order the Italian Republic to bear the costs.