C-108/98

RI.SAN. V COMUNE DI ISCHIA AND OTHERS

OPINION OF ADVOCATE GENERAL ALBER delivered on 18 March 1999 *

A — Introduction GEPI SpA, a State-owned financing com- pany, 2 on the basis of the municipal council resolution of 6 July 1966.

1. The present reference for a preliminary ruling concerns the applicability of provi- sions in the fields of freedom to provide services, freedom of establishment, compe- tition law and of Directive 92/50/EEC relating to the coordination of procedures for the award of public service contracts. 1 4. Under Italian law, in order to promote employment, the municipalities are entitled to set up public limited companies with GEPI SpA, inter alia for the purpose of operating local public services. Italian law 2. The applicant in the main proceedings, allows local authorities to select GEPI SpA RI.SAN. Srl, which brought two actions directly as partner for operating a local before the national court for the annulment public service, without any form of selec- of the two municipal council resolutions tion procedure or public tendering. GEPI mentioned below, was entrusted with the SpA is required to transfer its shareholding collection of solid urban waste in the in such mixed capital companies within five Municipality of Ischia up to 4 January years by public tender. 1997. By municipal council resolution of 7 November 1996, the urban waste removal service was entrusted to Ischia Ambiente SpA — without a public tender- ing procedure.

5. In that regard, RI.SAN Srl claims that the municipal council resolutions infringe 3. The company Ischia Ambiente SpA was Community law. The referring court con- set up by the Municipality of Ischia and siders, therefore, that the present case raises questions on the interpretation of Arti-

6. The first resolution challenged, namely Municipal Council Resolution No 25 of 19 March 1996, concerns the constitution 9. Municipal Council Resolution No 25 on with GEPI SpA of a public limited com­ the constitution of a mixed-capital public pany, Ischia Ambiente SpA, with a majority limited company with a mainly public public shareholding, for the removal of shareholding was expressly adopted on solid urban waste in the Municipality of the basis of Article 4(6) of Law No 95 of Ischia. That resolution also approved the 29 March 1995. Under that provision, the statutes of the company to be formed and municipalities and provinces are allowed, the corresponding technical, economic and in order to promote employment or the re­ financial plans. The Municipality of Ischia employment of workers, to set up public subscribed 5 1 % and GEPI SpA 49% of the limited companies with GEPI SpA inter alia share capital of Ischia Ambiente SpA. for the purpose of operating local public services. Article 4(8) of that law requires GEPI SpA to transfer its shareholdings in the aforesaid companies within five years by means of a public tendering procedure in accordance with the provisions govern­ 7. In its action for annulment relating to ing GEPI SpA's activities. these matters, RI.SAN Sri pleads infringe­ ment of several Italian laws and also procedural infringement in the absence of any public procedure for the selection of the co-shareholder.

10. According to the explanations given by the national court, the relevant provisions of national law are designed to allow the 8. Municipal Council Resolution No 99 of local authorities to choose directly and 7 November 1996 entrusted Ischia without any form of selection procedure Ambiente SpA with the removal of solid GEPI SpA as partner for the operation of urban waste in the Municipality of Ischia. local public services, provided that this

serves the purpose of promoting the tions provided for and allowed by the employment or re-employment of workers. Treaty (Articles 55, 66 and 90(2))'. The In this case that requirement is satisfied, fact that 'in the initial stage of constitution since in all the contested measures it is, of the mixed management company for inter alia, declared that the objective is to operation of the local public utilities, and ensure that employment levels in the sector for the first five years of its existence, are maintained. normal recourse to non-discriminatory competitive selection procedures for the choice of the operator of the public utility' is excluded could be considered as consti- tuting such a breach. According to the provisions referred to by the national court and to the basic concepts underlying the 11. For the national court, therefore, that Treaty, it is as a rule necessary to conduct a raises the question whether Article 4(6) of public tendering procedure or a restricted Law No 95 is compatible with Community public selection procedure in order to law. The main proceedings involve the guarantee effective competition and trans- 'direct selection of a private party — with- parency in the selection of the partner. out any competition — for the operation of Since no such procedure was conducted, 3it a local public service in accordance with a must be determined whether the action special procedure expressly provided for by taken by the municipality was 'justified'. the national Law on the administrative autonomy of local authorities (legge natio- nale sur le autonomi locali), Law No 142 of 8 June 1990, Article 22(3)(e), namely the creation of a limited company whose capital is constituted mainly by public funds from the local authority and which will automatically be entrusted with the operation of this public utility'. That there- fore rules out any competition, even at the stage of selecting the partner. For the national court those provisions are in direct conflict with the provisions on freedom to provide services and on free competition set out in the EC Treaty. 13. For the national court, therefore, the issue is not the applicability of Directive 92/50 but the general applicability of Articles 55, 60 and 90(2) of the EC Treaty. The national court moreover regards the 12. The national court therefore essentially Directive as not applicable, since the ser- seeks to ascertain whether a presumed vices in question are not provided to a breach of the principles of freedom to contracting authority for consideration on provide services and effective competition arising from the direct choice of GEPI SpA as partner by the Municipality of Ischia 3 — Moreover, Italian law generally also requires such compe- titive procedures. However, Article 4(6) of Law No 95 'can be justified by virtue of the deroga- deviates from that rule.

14. The Tribunale Amministrativo Regio- (2) In view of the abovementioned legisla- nale della Campania (Naples) therefore tion governing GEPI SpA (later Itain- referred the following questions to the vest SpA), may there be applicable to Court for a preliminary ruling: this case the derogation provided for in Article 90(2) of the Treaty according to which "[u]ndertakings entrusted with the operation of services of general economic interest... shall be subject to the rules contained in this Treaty, in particular to the rules on competition, in so far as the application of those '(1) Must Article 55 of the Treaty (which is rules does not obstruct the perfor- applicable inter alia to the services mance in law or in fact, of the parti- sector by virtue of the reference in cular tasks assigned to them"?' Article 66 of the Treaty), pursuant to which "[t]he provisions of this Chapter shall not apply, so far as any given Member State is concerned, to activ- ities which in that State are connected, even occasionally, with the exercise of official authority", must be interpreted so widely as to include the activities of C — The relevant legislation GEPI SpA (later Itainvest SpA) as a participant in local authorities' mixed companies for the operation of local public utilities, within the meaning of 4(6) of Law No 95 of 29 March 1995 (converting into a statute, with amend- ments, Decree-law No 26 of 31 Janu- Community law ary 1995), even where that participa- tion purports to be for the purpose of "promoting employment or the re- employment of workers" already 15. Directive 92/50, which finds its legal assigned to the service the management basis in Article 57(2), last sentence, and of which is at issue, having regard to Article 66 of the EC Treaty, contains the Article 5 of Law No 184 of 22 March provisions concerning the procedure for 1971 establishing GEPI SpA, which awarding public service contracts. It gives GEPI SpA the same task of defines, inter alia, the terms 'public service "contributing to the maintenance and contract' and 'contracting authority'. Con- growth of employment levels facing tracting authorities are required to award

— financed, for the most part, by the State, or regional or local authorities, (a) public service contracts shall mean or other bodies governed by public contracts for pecuniary interest conclu- law; or subject to management super- ded in writing between a service provi- vision by those bodies; or having an der and a contracting authority,... administrative, managerial or supervi- sory board, more than half of whose members are appointed by the State, regional or local authorities or by other bodies governed by public law.

(b) contracting authorities shall mean the State, regional or local authorities, bodies governed by public law, asso- ciations formed by one or more of such authorities or bodies governed by pub- lic law.

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4 —Law No 184/71 of 22 March 1971 (GURI No 105 of 28 April 1971). 6 — Law No 95/95 of 29 March 1995 (GURI No 77 of 1 April 5 — Law No 142/90 of 8 June 1990 (GURI No 105 of 28 April 1995) amending Decree Law No 26/95 of 31 January 1995 1971). (GURI No 26 of 31 January 1995).

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precludes application of the directive only 92/50 nevertheless to apply, the derogation in the specific case where a public service allowed under Article 6 would be relevant contract is awarded to an entity which is since both GEPI SpA and Ischia Ambiente itself a contracting authority and is not, SpA are contracting authorities. As a result, therefore, active commercially. Nor — so this case falls outside the scope of the RI.SAN Sri claims — is there an award of a Directive. The majority — at least — of concession in this case. As Ischia Ambiente both companies' share-capital was paid up SpA is also not part of the public admin- with public funds and over half the mem- istration, the services provided are not so- bers of the Board of Directors of Ischia called in-house services, namely services Ambiente SpA represent the Municipality: performed by way of direct management. It therefore, all the parties concerned are follows that the contract for the removal of contracting authorities. solid urban waste in the Municipality of Ischia should have been awarded by public tender in compliance with Directive 92/50.

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service was entrusted to Ischia Ambiente regards the applicability of Directive 92/50, SpA for a limited period of five years also the Commission submits that this case shows that the Italian legislation is not concerns either a concession or in-house incompatible with Community law. services. In view of the explanations pro- vided by the national court, the Commis- sion believes either hypothesis is possible, but the facts cannot be precisely classified on the basis of the individual indications provided. If either of these hypotheses were true, Directive 92/50 would not apply to the facts at issue in the main proceedings. The Commission is not in a position to provide a definitive answer in absence of more complete information. For want of 24. The Italian Government, too, main- that information, the Commission thinks tains that the provisions of the Treaty do that it is also possible that the task of not apply in this case since a purely removing urban waste in the Municipality domestic situation is concerned. Moreover, of Ischia was entrusted to Ischia Ambiente both GEPI SpA and Ischia Ambiente SpA SpA on the basis of an agreement or public are part of the public administration and contract for pecuniary interest. In that case, are not undertakings pursuing economic Directive 92/50 would in principle apply. activities. The situation in point does not However, the information provided by the fall within the scope of the provisions on national court is in this respect also too freedom to provide services or freedom of scant for the Commission to answer that establishment. Since those companies do question definitively. It is therefore for the not compete in operating the waste national court itself to determine whether removal service, there cannot be any breach Directive 92/50 applies in the light of the of the competition provision of the Treaty provisions of that directive and the criteria in this respect. The fact that this case developed by the case-law of the Court. involves in-house services precludes the applicability of Directive 92/50. Ischia Ambiente SpA is, as a part of the public administration. There is thus no contract for the provision of services for pecuniary interest.

30. According to case-law of the Court, the 27. By its first question the referring court provisions of the chapter on services are wishes to establish whether the activity of subordinate to those of the chapter on the GEPI SpA falls within the scope of Arti- right of establishment. 7 cle 55 of the EC Treaty, read in conjunction with Article 66 according to which the rules concerning freedom to provide ser- vices do not apply to activities which in a Member State are connected, even occa- sionally, with the exercise of official author- 31. Services within the meaning of Arti- ity. cle 60 of the EC Treaty are characterised by their temporary nature. That criterion is met where a service is provided only occasionally 8or for a limited duration. 9 Moreover, for the rules on freedom of 28. Although — as may be seen from the services to apply, there must be a trans- order for reference — that question ulti- frontier element. That is the case where the mately seeks to establish whether or not an person providing the service goes to the open tendering procedure for the selection Member State where the person for whom of the partner, in this case GEPI SpA, would it is provided is established, 1 0or vice have been required under the general versa, 1 1or where the service is provided principles laid down in the Treaty, it would for remuneration. 12 seem appropriate to ascertain first whether, in accordance with Articles 55 and 66 of the EC Treaty, the rules concerning free- dom to provide services and freedom of establishment apply at all in this case. Whether or not this is a general obligation to initiate a public tendering procedure is a 32. Freedom of establishment is character- question which can be left aside for the ised by a longer duration of the service time being. 7 — Case C-55/94 Gebhard v Consiglio dell'Ordine degli Avvocati e Procuratori di Milano [1995] ECR I-4165, at paragraph 22. 8 — Case 252/83 Commission v Denmark [1986] ECR 3713. 9 — Case C-180/89 Commission v Italy 'Tourist guides' [1991] 29. GEPI SpA set up a company with the ECR I-709. 10 — Case 33/74 Van Binsbergen [1974] ECR 1299, paragraphs Municipality of Ischia for the management 10 to 12. of a local public service. In that regard, 11 — Joined Cases 286/82 and 26/83 Luisi and Carbone [1984] ECR 377, paragraph 10. however, the Commission correctly sug- 12 — Case 352/85 Bond van Adverteers v Netherlands [1988] gests that as a result the rules applicable ECR 2085, paragraph 15.

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Whether a specific obligation to initiate a tion set out in Article 90(2) applies must be procedure is a matter which will fail to be undertakings within the meaning of Arti- addressed is only in the context of the cle 90(1). However, GEPI SpA is not, it applicability of Directive 92/50. maintains, such an undertaking.

The second question 42. By virtue of its wording, Article 90(2) of the EC Treaty covers both public and private undertakings. However, Arti- 39. By its second question, the national cle 90(2) by no means applies only to court wishes to know whether Article 90(2) undertakings within the meaning of Arti- of the Treaty applies to the activities of cle 90(1) of the Treaty, 13 so that there is no GEPI SpA. need to determine whether or not GEPI SpA is an undertaking within the meaning of Article 90(1).

the application of Article 90(2). GEPI SpA GEPI SpA were to fall within the scope of was constituted with the objectives to Article 90(2) of the Treaty, the other rules establishing and increasing employment. contained in the Treaty would also have to However, GEPI SpA does not, unlike Ischia be taken into account. The rules on com- Ambiente SpA, offer any services in the petition are particularly significant in the form, for example, of itself being active in context of Article 90(2): those rules can the context of services for the public. It is apply to situations which are to begin with purely a state-owned financing company purely domestic if adverse effects on the participating in companies together with common market are possible. Conse- the public authorities. That does not qua- quently, it is not possible to refuse to regard lify as a supply of services for the purposes Article 90(2) of the Treaty as applicable of Article 90(2) of the Treaty since the merely on the ground that a purely domes- financing of and participating in companies tic situation is concerned. are not public services. The fact that the companies of which GEPI SpA is a joint founder might well provide services within the meaning of Article 90(2) of the Treaty is irrelevant here since only the activities of GEPI SpA are material and these, specifi- cally, do not consist in providing services. 45. In the final analysis, however, Arti- cle 90(2) of the EC Treaty does not apply in this case since GEPI SpA is not an under- taking entrusted with the operation of services within the meaning of that provi- sion.

national court with all the necessary mate- Ischia and Ischia Ambiente SpA is based on rial for resolving the dispute, especially a public-service contract within the mean- since the national court proceeds on the ing of Article 1(a) of the Directive. In assumption that free competition is impe- accordance with the eighth recital, the ded and that Directive 92/50 is designed to Directive does not apply to the provision eliminate practices restricting competi- of services which is not based on contracts. tion. 14 The directive does not cover concessions. 16 Even in-house services provided by part of the public administration fall outside the scope of Directive 92/50 if only because there is no a public contract in the sense that a third party is entrusted with provid- ing the service. 47. In its order for reference the national court takes the view, relying on the eighth recital of the directive, 15 that the directive does not apply since the court does not regard assignment of the task of waste removal to Ischia Ambiente SpA as a public-service contract within the meaning of the directive, but rather as the grant of a 50. There is no uniform definition of a concession falling outside the scope of the concession under Community law; how- directive. ever, for there to be a concession, a number of factors must be present. 17 Thus the recipient of the services to be provided must be third, non-contracting, parties. The service to be provided must, moreover, correspond to a task in the general interest, 48. Unlike RI.SAN Sri, GEPI SpA, Ischia a task as a rule incumbent on a public Ambiente SpA and the Italian Government authority. The remuneration of the conces- also argue that Directive 92/50 does not sionaire must be commensurate with the apply, but the Commission does not wish to services provided and, lastly, the concessio- express a definitive opinion in that regard naire must bear the economic risk con- in view of the — in its opinion — insuffi- nected with the performance of the service. cient information available.

law is a matter for the national court to service is therefore involved — must be decide. However, it seems clear that the established by examining the facts. Con- beneficiaries of the waste disposal service trary to RI.SAN Srl's contention, the fact are the residents of the municipality, that Ischia Ambiente SpA is a public limited namely persons who are not parties to the company does not per se preclude it from contract. Moreover, it can be said that the being part of the public administration. necessary general interest in the removal of Ischia Ambiente SpA must instead be urban waste also does exist. The regular classified following functional criteria. 20 removal of urban waste is necessary if only In that regard, the degree of influence on grounds of public health and safety. For exerted by the public administration over this reason, the public authority must either the company is decisive. discharge this task itself or have it per- formed in a manner which enables it to retain a decisive influence. 18 In Italy, according to the written observations of the Italian Government, that task is assigned to the municipalities in implemen- tation of Directive 75/442/EEC. 19How the remuneration arrangements are governed and the economic risk is shared between the Municipality of Ischia and Ischia Ambiente SpA cannot be conclusively determined on the basis of the information supplied by the national court. It is there- fore for the national court to establish whether the various requirements for there to be a grant of a concession are satisfied, in which case Directive 92/50 would not apply. 53. The final appreciation of that aspect falls once again to the national court. It is clear from the explanations it has supplied that the Municipality of Ischia holds 5 1 % of the share capital of Ischia Ambiente SpA. The remaining 49% is held by GEPI SpA for a period of five years. GEPI SpA is in its turn wholly owned by the Italian State and acts as a finance company for the purpose, inter alia, of setting up companies with municipalities with a view to performing 52. Whether the Municipality and Ischia the tasks incumbent on the latter. GEPI SpA Ambiente SpA are part of the same public must also be classified by means of a administration — and whether an in-house

functional appraisal. Even without a full explanations provided by the national knowledge of the internal organisation of court do not show with absolute certainty GEPI SpA, it may properly be concluded whether or not such an allocation of tasks from the fact that the Italian State holds exists. But if the national court were to 100% of its share capital that the company establish that both the financial and orga- is part of the Italian State in that respect. nisational interconnections between the The Italian State, therefore, through GEPI Municipality and Ischia Ambiente SpA SpA, has a holding in Ischia Ambiente SpA. correspond to those requirements, then It follows that Ischia Ambiente SpA is the services would indeed qualify as in- controlled by public authorities. It would house services and Directive 92/50 would be unduly formalistic to seek to distinguish not apply in this case either. between the public authorities 'Municipal- ity of Ischia' and 'Italian State'. In the result, the situation differs in no respect from that which would exist if the Italian State had directly provided the Municipal- ity of Ischia with the funds required to form the company on its own. In the final 55. Applicability of the directive would analysis, the fact that the Municipality of come into question, if at all, only if Ischia Ischia chose that particular, organisational Ambiente SpA were not part of the public structure cannot lead to any other classifi- administration, or if the services provided cation of Ischia Ambiente SpA. were not in-house services or if there were not a concession within the meaning of Community law. In that case, the directive would become applicable since the Muni- cipality of Ischia, as a local authority, would be a contracting authority within the meaning of Article 1(b) of Directive 92/50. There could also be a contract within the meaning of Article 1(a) of the directive if there were an exchange of services between two distinct legal entities. However, it would have to be a contract for pecuniary interest concluded in writing, 21 which is not the case according to the indications contained in the order of refer- ence. 54. However, in addition to financial inter- connections, a delegation of tasks between the public bodies is necessary for it to be possible to say that there is a service 'in- house'. In that respect, depending on the circumstances, it might be necessary that the Municipality should control Ischia 56. GEPI SpA and the Italian Government Ambiente SpA's further activity, for exam- argue, moreover, that even if Directive ple, by making available further municipal funding and perhaps by setting tariffs for the disposal of urban waste. However, the 21 — See Article 1(a) of Directive 92/50.

22 — The Court ruled to that effect in Case C-44/96 (Mannes­ mann Anlagebau Austria and Others ν Strohal Rotations­ druck [1998] ECR I-73, at paragraphs 20 and 21) with regard to a 'body governed by public law' within the meaning of Article 1(b) of Council Directive 93/37/EEC of 14 June 1993 concerning the coordination of procedures for the award of public works contracts (OJ 1993 L 199, p. 54), which has the same wording as Article 1(b) of Directive 92/50. 23 — Those conditions are as follows: Body governed by public law means any body — established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character, and — having legal personality and — financed, for the most part, by the State, or 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.

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F — Conclusion

59. In view of the foregoing, I propose that the Court answer the questions referred by the Tribunale Amministrativo Regionale della Campania, Naples, as follows:

(1) Article 52 et seq. (or, as the case may be, Article 59 et seq.) of the EC Treaty do not apply to purely domestic situations which lack any specific Community connection where, as in the case at issue, the legality of a provision of national law — pursuant to which municipalities are authorised, freely and without a public tendering procedure, to choose a particular and specifically-named company as partner for constituting a joint undertaking — is challenged before a national court by another undertaking established in the same Member State.