C-360/96

I — Introduction for that purpose. Those tasks had previously been carried out by the relevant municipal services. The two municipalities decided to hive off the work and entrust it to ARA, since, in view of the scale of the service and the cost of providing it, it was considered advisable 2 1. The purpose of the questions referred to for the sake of economy to combine the man- the Court for a preliminary ruling in the agement of those tasks and place it in the present case is to clarify the concept of a body hands of a separate body established for that governed by public law within the meaning purpose. of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of proce- dures for the award of public service con- tracts 1 (hereinafter the 'Directive') and in particular to ascertain the precise meaning of the expression 'body ... established for the 3. In particular, the Arnhem Municipal Coun- specific purpose of meeting needs in the gen- cil's proposal of 25 May 1994 stated at point eral interest, not having an industrial or com- 10 that: 'The municipalities participating in mercial character'. N V ARA shall grant concessions to ARA in respect of operations in any way connected with their legal obligations regarding refuse disposal and municipal cleansing. Those oper- ations concern the collection of all household II — Facts refuse and related activities, as well as the cleansing of public highways and market- places, gritting, weeding of paved areas, cleaning of street drains and elimination of vermin. In granting those concessions, the Municipality of Arnhem is not bound by the 2. In July 1994, the two municipalities that European rules concerning public service ten- are the appellants in the main proceedings dering with regard to those activities. The (Gemeente Arnhem and Gemeente Rheden, public services directive does not therefore hereinafter the 'municipalities') entrusted the apply. A "framework agreement" will be tasks of refuse collection and disposal to a entered into between the Municipality of new legal entity, ARA Holding BV (herein- after 'ARA'), established expressly by them 2 — The decision to combine their municipal cleansing services and entrust them to a body established for the purpose was also based on the study commissioned by the municipalities from a firm of consultants. The consultants made a number * Original language: Italian. of suggestions, which the municipalities accepted and put into 1 — OJ 1992 L 209, p. 1. effect.

(c) the performance of all economic opera- 'The Environment and Public Works Depart- tions which are connected with the fore- ment has hitherto been responsible for the going or may be conducive to the opera- refuse collection service pursuant to the appli- tions, activities and action defined above cable legislation and this regulation. As from (provided that needs in the general interest 1 July 1994, that responsibility shall be trans- are thereby met).' ferred to N V ARA, the independent municipal cleansing agency.'

7. O n 21 October 1994, the Municipality of 6. ARA had been established in the mean- Arnhem and ARA entered into a framework time on 1 July 1994 and Article 2 of its agreement covering the tasks to be performed.

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The Municipality of Rheden subsequently (b) or on the basis of a fixed price agreed entered into a similar agreement with ARA. beforehand for a particular task;

(c) or on the basis of an invoice for costs Article 8 of those agreements, covering remu- actually incurred. neration for the services in question, reads as follows:

The amount of the remuneration to be paid 4. ARA submits to the municipalities a pursuant to the financial clauses referred to in monthly statement of costs incurred and paragraph 2 shall thereafter be fixed annually income received; in agreement with the authorities responsible for the budget. Should agreement not be reached with those authorities, an indepen- dent expert appointed by the most appro- priate trade organisation for the operation in question will deliver a binding opinion on the 5. a statement for tax purposes is prepared at actual amount of remuneration to be paid.' the end of each financial year, showing costs incurred and income received in con- nection with the service, together with deductions in respect of the advances paid.'

8. In the event, it appears from statements made by the municipalities in the course of 9. It appears from the municipalities' plead- the proceedings that the procedure by which ings that the work plan prepared for ARA by ARA is in fact paid for services rendered is as the municipal councils also specified that the follows: remuneration paid to ARA should 'cover the costs of the operations at socially and com- mercially acceptable rates.'

' 1 . ARA informs the municipal authorities in 10. BFI Holding BV (hereinafter 'BFI') is a general terms of developments in the refuse private undertaking whose activities include collection sector and the effects they are the collection and treatment of household expected to have on costs and income; refuse and industrial waste. BFI brought an action before the Rechtbank te Arnhem (Dis- trict Court, Arnhem), contesting the munici- palities' decision to entrust the refuse collec- tion and disposal service to ARA. BFI contended that the public services Directive applied to the relationship between the munic- 2. the municipal authorities prepare a provi- ipalities and ARA, and that the municipali- sional budget; ties in question had failed to follow the pro- cedure for the award of contracts laid down in the Directive.

11. By judgment of 18 June 1995, the Recht- bank rejected the municipalities' contention that the arrangements at issue were conces- sions which did not fall within the ambit of '1. For the purposes of interpreting Article the Directive. The court of first instance con- 6 of Council Directive 92/50/EEC of 18 sequently ruled that the relationship in ques- June 1992 relating to the coordination of tion constituted a service contract and that procedures for the award of public ser- the exception referred to in Article 6 of the vice contracts (OJ 1992 L 209, p. 1, here- Directive did not apply in this case. inafter referred to as "the Directive"), is the first indent of the second subpara- graph of Article 1(b) of the Directive, which specifies that "body governed by publicl a w means any body ... established The municipalities brought an appeal against for the specific purpose of meeting needs the decision at first instance before the Gere- in the general interest, not having an chtshof te Arnhem claiming that, on the con- industrial or commercial character", to trary, the exception referred to in Article 6 of ' be interpreted as distinguishing the public services Directive ought to apply in the case in question.

The court of appeal considered it necessary, for the purpose of resolving the dispute, to (i) between needs in the general interest ascertain whether or not ARA was a body and needs having an industrial or governed by public law within the meaning commercial character, or of the public services Directive and whether, in consequence, the municipalities were justi- fied in claiming that Article 6 of the public services Directive exempted them from the obligation to follow the procedure for the award of contracts laid down in the Directive in so far as the task of providing the service at issue had been entrusted to ARA as a 'body (ii) between needs in the general interest governed by public law' within the meaning not having an industrial or commer- of the Directive. cial character and needs in the general

5. If not, must a body meet needs in the and general interest, not having an industrial or commercial character, almost exclu- sively, substantially, preponderantly or to some other degree in order to be or remain able to meet the requirement that it must be established for the specific purpose of meeting such needs? (b)if so, is the phrase "needs having an industrial or commercial character" to be understood as meaning that needs having an industrial or com- mercial character are met whenever private undertakings meet such needs? 6. Does it make any difference to the answers to Questions 1 to 5 whether the needs in the general interest, not having an industrial or commercial character, which the body was set up to meet, 3. If the answer to the first question is that derive from legislation in the formal the distinction to be drawn is that set sense, from administrative provisions, out in (ii), is the difference between from acts of the administration or oth- "needs in the general interest not having erwise?

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OPINION OF MR LA PERGOLA — CASE C-360/96

7. Does it make any difference to the answer (b) "contracting authorities" shall mean the to Question 4 if responsibility for the State, regional or local authorities, bodies commercial activities is entrusted to a governed by public law ... separate legal entity forming part of a single group or concern within which activities meeting needs in the general interest are also carried out?'

"Body governed by public law" means any body: III — The relevant Community provisions

— established for the specific purpose of meeting needs in the general interest, not 13. The eighth recital in the preamble to the having an industrial or commercial char- Directive reads as follows: acter,

The lists of bodies or of categories of such 17. Article 9 of the Directive provides: bodies governed by public law which fulfil the criteria referred to in the second subpara- graph of this point are set out in Annex I to Directive 71/305/EEC. These lists shall be as exhaustive as possible and may be reviewed in accordance with the procedure laid down in Article 30b of that Directive.' 'Contracts which have as their object services listed in Annex I B shall be awarded in accor- dance with Articles 14 and 16.'

15. Article 6 of the Directive provides: 18. Article 10 of the Directive provides:

'This Directive shall not apply to public ser- 'Contracts which have as their object services vice contracts awarded to an entity which is listed in both Annexes I A and I B shall be itself a contracting authority within the awarded in accordance with the provisions of meaning of Article 1(b) on the basis of an Titles III to VI where the value of the services exclusive right which it enjoys pursuant to a listed in Annex I A is greater than the value published law, regulation or administrative of the services listed in Annex I B. Where this provision which is compatible with the Treaty.' is not the case, they shall be awarded in accordance with Articles 14 and 16.'

16. Article 8 of the Directive provides: 19. Annex I A, Services within the meaning of Article 8, lists under item 16:

'Contracts which have as their object services 'Subject: Sewage and refuse disposal services; listed in Annex I A shall be awarded in accor- sanitation and similar services. C P C Refer- dance with the provisions of Titles III to VI.' ence N o : 94'

The categories of services listed in Annex I A A — Matters covered by the Directive include, under item 16, 'sewage and refuse disposal services; sanitation and similar ser- vices.' For details of those services, the Annex refers to the C P C (United Nations common product classification) number quoted in the adjoining column for the category of services (a) The concept of service in question. The reasons that prompted the Community legislature to adopt this method of identifying the services falling within the 21. The first matter to be considered in con- ambit of the Directive are given in the sev- nection with the present dispute is the con- enth recital in the preamble to the Directive. cept of 'service' within the meaning of the In drafting the Directive, it was considered Directive and it must be determined first of that 'the field of services is best described, for all whether the services that are the subject of the relationship at issue fall into the category for which the Directive requires the open competitive tendering procedure to be used. 3 — The obligation under Article 9 in conjunction with Article 16, to publish a notice of the results of the award procedure after the award has been made, does not apply in the case of the services listed in Annex I B, where publication is purely optional. See Flamme and Flamme, 'Les marchés publics de services et la coordination de leurs procédures de passation', Revue du Marché Commun et de l'Union Européenne, 1993, p. 150; Greco, 'Gli appalti pubblici di servizi', Rivista Italiana di Diritto Pubblico Comunitario, 1995, p. 1285; La Marca, 'Gli appalti pubblici di servizi e l'attività bancaria', Rivista di diritto europeo, 1996, p. 13; Mensi, 'L'ouverture à la concur- It is scarcely necessary to point out, in this rence des marchés publics de services', Revue du Marché Unique Européen, 1993, p. 59. connection, that under Article 8 of the Direc- 4 — Academic writers are unanimous on this point. See Flamme tive the award of contracts for services listed and Flamme, op. cit., La Marca, op. cit.

It must therefore be determined, first of all, whether the service in question is among those listed in Annex I A. 7 If that is not the case, it will of necessity be among those sub- 22. Academic writers have already had occa- ject to the rules laid down in the Directive for sion to draw attention to the various legal services listed in Annex I B. limitations and complications caused by this reference to rules originating outside the Com- munity. 5 I should add, in this connection, that the C P C is not available in all the Com- munity languages. This certainly does not help to put Member States' citizens on an equal linguistic footing and it clearly presents a problem for national authorities and national bodies required to apply the Directive when 24. As regards the services at issue in the their working language is not the language in present proceedings, another aspect of the which the C P C is framed. wording used in item 16 of Annex I A requires clarification: refuse collection, which repre- sents no small part of the work the munici- palities entrusted to ARA, does not at first sight appear to be among the services listed under item 16, which relate on the contrary — to use the term employed in that item — to refuse disposal. However, in the text sup- plied to the Court by the Commission, C P C 23. Writers on the subject 6take the view that Reference N o 94, quoted for the category in the list of services given in Annex I A is an question, cites the following services under exhaustive and restrictive list of the services sub-heading '94020 Refuse disposal services': required to comply fully with the Directive. 'Collection service of garbage, trash, rubbish The list of services in Annex I B also refers and waste, whether from households or from to the C P C nomenclature but ends with the industrial and commercial establishments, generic residual category, 'Other services'. transport services and disposal services by This suggests, first, that the reference to the incinerators or by any other means. Waste reduction services are also included.'

The view commonly taken, 1 1in the absence 25. The second point to be considered in of a specific Community definition embodied connection with the scope of the Directive in legislation, 12 is that the distinction in Com- ratione materiae is the nature of the relation- munity law between service contracts and ship between the municipalities and ARA. service concessions is based on a number of criteria. The first concerns the recipient or beneficiary of the service provided. In the case of a contract the beneficiary of the ser- vice is deemed to be the contracting authority, whereas in the case of a concession the ben- The eighth recital in the preamble to the eficiary of the service is a third party uncon- Directive 8 states in that connection that the nected with the contractual relationship, usu- Directive covers contracts only. The provi- ally the community, which receives the service sion of services on other legal bases 'is not and pays an appropriate sum for the service covered'. We also know from Article 1(a) that, rendered. Under Community law, the service for the purposes of the Directive, service con- •that is the subject of a service concession must tracts mean 'contracts for pecuniary interest also be in the general interest, so that a public concluded in writing between a service pro- authority is institutionally responsible for pro- vider and a contracting authority.' viding it. The fact that a third party provides the service means that the concessionaire

replaces the authority granting the concession emphasis on the nature of the consideration in respect of its obligations to ensure that the as an aspect of the legal relationship. There- service is provided for the community. fore, by virtue of the term used by the Com- Another characteristic feature of concessions munity legislature ('for pecuniary interest'), it is the remuneration of the concessionaire, must in any event take a pecuniary form: the which derives wholly or in part from the pro- pretium. vision of the service to the beneficiary. This is connected with another important feature of service concessions in the Community con- text, namely that the concessionaire automati- cally assumes the economic risk associated with the provision and management of the services that are the subject of the concession. 28. I shall now consider whether those con- ditions are fulfilled in the present case. The relationship between the municipalities and ARA is characterised by the fact that ARA is under an obligation to provide certain ser- vices. The first point to be settled is the iden- tity of the beneficiaries of those services. In Those criteria, partly borrowed from the that connection, the Gerechtshof te Arnhem sphere of build-and-manage concessions or to mentions the municipalities' decisions to be precise from the Directive on public works transfer to ARA the activities in question, contracts, 13 were also mentioned by the Court which they had previously performed, and in its judgment in Case C-272/91 concerning the contracts concluded between the munici- the concession for the lottery computerisa- palities and ARA as a result. It is clear from tion system. 14 the details given that the beneficiaries of the refuse collection and disposal services, pro- vided initially by the municipalities and sub- sequendy by ARA, remained the same. They continued to be, as they had been in the past, the private individuals and firms living and working within the two municipal districts. 27. Although, as I have just remarked, the definition of the term 'contract' is somewhat defective in respect of the subject of the con- tract and the purpose of the service, 15 the subject of the contract can nevertheless be identified, purely by deduction, as the activity of providing a service for consideration. O n the other hand, the definition the legislature While these considerations as to the identity gives in the Directive lays considerable of the potential beneficiaries of the service in question are not, on the basis of the criteria specified earlier, sufficient to allow it to be determined whether the relationship between 13 — Council Directive 89/440/EEC of 18 July 1989 (OJ 1989 L 210, p. 1). the municipalities and ARA can be described 14 — Case C-272/91 Commission v Italy [1994] ECR I-1409, as a contract, they do nevertheless cast light paragraphs 22 to 25 and 32. on some aspects in which that relationship 15 — See the remarks on this subject in Flamme and Flamme, op. cit., and La Marca, op. cit. differs from a genuine service contract.

30. The United Kingdom Government, in particular, stated its position on this aspect of the case, to the effect that the relationship between the municipalities and ARA cannot be regarded as a contract. In the U K Gov- ernment's view, that relationship amounts on It is claimed that that view, maintained by the contrary to a service concession because BFI Holding and partly adopted by the Com- a public authority has delegated to a distinct mission, 16 is also supported by recent judg- legal entity the performance of certain func- ments of the Court, notably in Van Schijn- tions which the authority granting the con- del 17 The Court held on that occasion that cession originally performed itself. According 'Community law does not require national to the UK Government, this is one 'way courts to raise of their own motion an issue among many in which the authority may concerning the breach of provisions of Com- arrange and organise its administrative func- munity law where examination of that issue tions. The relationship between the authority would oblige them to abandon the passive granting the concession and the concession- role assigned to them by going beyond the aire therefore falls outside the normal scope ambit of the dispute defined by the parties of contracts as such because it is essentially themselves and relying on facts and circum- an administrative relationship not a contrac- stances other than those on which the party tual relationship. with an interest in application of those provi- sions bases his claim.'

16 — However, the Commission's view is based on the fact that the parties agree that the arrangement in question is not to be regarded as a concession. 31. Incidentally, it should also be noted in 17 — Joined Cases C-430/93 and C-431/93 Van Schijndel andVan this connection that, according to the Gere- Veen v SPF [1995] ECR I-4705.

In short, according to BFI, in view of the inviolable and which the national court and procedural situation described by the Gere- the Community court are required to respect. chtshof te Arnhem, that court would be unable That point was fully recognised and accepted to make use of the ruling given by the Court as a matter of law by the Court in its judg- of Justice if the latter were to rule that the ment in Van Schijndel, cited above.

32. I am not, however, convinced by the problem raised by the national court had no defendant's arguments in that connection. The bearing, from the point of view of Commu- Court is required to give a full interpretation nity law, on the facts of the case. 19 of Community provisions, placing them in their legislative context and explaining their connection with the actual situation to which they refer or to which they are to apply. To give an interpretation out of context would be extremely difficult because of its abstract nature and could also mislead the court that had requested it, in that such an interpreta- tion might not take due account of the par- ticular problem to be solved. This view of the matter is supported by a substantial number 33. However, it seems to me that the situa- of judgments delivered by the Court, declaring tion in the present case is very different from questions referred by national courts for pre- the one I have just been considering.

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OPINION OF MR LA PERGOLA — CASE C-360/96

21 — Judgment in Case C-272/91 Commission v Italy, cited above, paragraph 26. 20 — Case C-272/91 Commission v Italy, cited above. 22 — Judgment in Case C-272/91 Commission v Italy, cited above.

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ARNHEM A N D RHEDEN v BFI H O L D I N G

manner in which they are paid for, the tasks the existing structures of the two municipali- performed by ARA cannot be classified as ties could no longer handle on their own. activities of an industrial or commercial char- acter and cannot therefore be the subject of a genuine call for tenders.

23 — For further observations on this concept, see Greco, op. cit., 36. As regards the connection between the id., 'Appalti di lavori affidati da SpA in mano pubblica: un revirement giurisprudenziale non privo di qualche para- municipalities and ARA, it is therefore clear dosso', Rivista Italiana di Diritto Pubblico Comunitario, that the relationship between them arose from 1995, p. 1062. the need to merge municipal refuse collection 24 — O n this point, see Greco, op. cit., Righi, 'La nozione di organismo di diritto pubblico nella disciplina comunitaria and disposal services in order to deal with a degli appalti: società in mano pubblica e appalti di servizi', Rivista Italiana di Diritto Pubblico Comunitario, 1996, demand which, in terms of scale and quality, p. 347.

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40. The French Government has argued that ARA is not so much a public body as simply 38. To sum up, I consider that there is no an association between municipalities within 'third party' element, that is to say no essen- the meaning of Article 1(b) of the Directive. tial distinction between ARA and the two This view is based on the fact, mentioned municipalities, in the present case. What is above, that the municipalities are the only involved here is a form of inter-departmental two shareholders of ARA. delegation that remains within the adminis- trative ambit of the municipalities. In assigning the activities in question to ARA, the munici- palities had absolutely no intention of priva- tising the functions they themselves had pre- viously performed in this sector. In short, I The French Government's opinion must be take the view that the relationship between accorded due consideration. In particular, it the municipalities and ARA cannot be must be considered in this connection whether, regarded as a contract within the meaning of for the purposes of the definition of 'con- the Directive. tracting authority' referred to in Article 1 of

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ARNHEM AND RHEDEN v BFI HOLDING

the Directive, the terms 'body governed by ality but are also not local authorities and public law' and 'association' refer to two cannot be regarded as bodies governed by separate and mutually exclusive concepts or public law. whether on the contrary the Directive may include in that definition entities that fall into both categories at once.

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ARNHEM A N D RHEDEN v B F I H O L D I N G

needs differs considerably, for example, I have described and there will be no reason depending on the priority accorded at national to include the body in question among the level to privatisation of the public services bodies covered by the Directive. I should just designed to meet those needs. Moreover, the like to say that this interpretation of the pro- Directive was not intended to cover uniform visions at issue is also fully in line with the Community-wide categories. Remember that Court's judgments on the subject of public it confines itself to coordinating — not har- undertakings 30 and with the relevant Com- monising — the various national provisions munity legislation. 31 relating to contracts. I do not think, there- fore, that the Directive established a Commu- nity category by means of the definition in question. It was simply referring to the pro- visions on the subject contained in the legisla- tion of the Member States.

I therefore take the view that the concept of a body governed by public law within the meaning of the Directive includes bodies that 44. Within the framework I have described, meet general needs 'independently of the rules it is very difficult — if not impossible — to of normal commercial management', 32 so long define the needs that are relevant for the pur- as the other requirements of the definition are poses of the Directive. For the purposes of also met. interpretation, therefore, the only general cri- terion that can properly apply in this area is the link between the satisfaction of the needs and the structure of the State (understood in the broad sense, of course) and especially the factor of economic dependence on the State.

lished to fulfil 33 and does fulfil institution- nesmann, 35 in which it recognised that the ally, together 'with the manner in 'which it fact that a body performs other activities in performs its tasks, are among those defined in addition to the main activity it was estab- the Directive as meeting 'needs in the general lished to perform is not in itself such as to interest, not having an industrial or commer- change the nature of the body in question for cial character.' the purposes of applying the public contracts directives.

46. It should also be pointed out, inciden- tance it receives from the municipalities, and tally, that it is irrelevant for the purposes of that there is consequently no element of risk, the present case that, as the order for refer- means that its activities cannot be regarded as ence mentions in passing, ARA — directly or being competitive in any real sense. through a company entirely owned by it — not only performs the tasks entrusted to it by the municipalities but also provides similar services for third parties in return for appro- priate remuneration. In my opinion, those activities, which, it appears, account for a The service provided by ARA meets a public small proportion of all the functions that need that has to be met, namely the collec- body performs 34 and, from an economic point of view, have no appreciable effect on its financial structure, are not, however, such as 35 — Judgment in Case C-44/96 Mannesmann Anlagenbau Aus- to cause me to alter the conclusion I reached tria and Others v Strohal Rotationsdruck, cited above.

. .' in the definition given in the Directive connection that, to my mind, it is impossible to distinguish must of course be interpreted in the light of changing cir- between activities that do not have an industrial or commer- cumstances. The aims originally set out in the body's instru- cial character and those that do, when the body in question ment of incorporation must be compared with the present is one of those classified as contracting authorities within the situation and the aims it is actually pursuing, as stated, for meaning of the public works or public services directive. example, in the objects of the company in the case of bodies The absence of risk that is characteristic of the way in which incorporated as companies. the body in question operates means that any activity it per- 34 — It appears from the documents before the Court that ARA's forms, even if it may in theory be a profit-making activity, turnover for 1995 was N L G 39 392 000, comprising is ultimately indistinguishable in financial terms from its NLG 32 791 000 for the collection and disposal of house- institutional activity, which consequently absorbs other hold refuse and NLG 6 601 000 for the collection and dis- activities and radically alters their commercial or industrial posal of industrial waste. character.

(2) An entity of the type described above is also a body governed by public law within the meaning of Directive 92/50/EEC.

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