C-380/98

OPINION OF MR ALBER — CASE C-380/98

OPINION OF ADVOCATE GENERAL ALBER delivered on 11 May 2000 *

I — Introduction cedures for the award of public works contracts, 1 adding the phrase 'financed for the most part by other contracting autho- rities'.

1. In these proceedings the High Court of Justice of England and Wales seeks a ruling from the Court of Justice on questions I I— Law concerning the definition of a contracting authority. The main question is, under what conditions is a body 'financed for the most part' by the State, regional or local authorities, or other bodies governed by public law with the result that it is to be regarded as a contracting authority for the (1) Community law purposes of the directives on public pro- curement? 3. In Article 1 of Directive 93/37 contract- ing authorities are defined as follows:

'For the purpose of this directive: 2. The question has arisen in proceedings brought by the University of Cambridge (or 'the applicant') against the United Kingdom Treasury. The applicant challenges the Treasury's proposal to retain universities in the list for the United Kingdom of bodies governed by public law in Annex I to Council Directive 93/37/EEC of 14 June 1 — OJ 1993 L 199, p. 54; amended by European Parliament 1993 concerning the coordination of pro- and Council Directive 97/52/EC of 13 October 1997 amending Directives 92/JO/EEC, 93/36/EEC and 93/37/ EEC concerning the coordination of procedures for the award of public service contracts, public supply contracts and public works contracts respectively (OJ 1997 L 328, * Original language: German. p. 1).

5. As far as the United Kingdom is con- cerned, the list of bodies and categories of — financed, for the most part, by the bodies governed by public law in Annex I State, or regional or local autho- includes 'universities and polytechnics, rities, or other bodies governed by maintained schools and colleges'. public law, or subject to manage- ment supervision by those bodies, 2 —OJ 1992 L 209, p. 1. or having an administrative, man- 3 — OJ 1993 L 199, p. 1. Those two directives were likewise agerial or supervisory board, more amended by Directive 97/52 (referred to in footnote 1).

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6. The contents of Annex I may be changed law based on the Community law defini- in accordance with the procedure set out in tion. Article 35 of Directive 93/37, according to which the Commission may amend the Annex in order to ensure as far as possible that it reflects the actual state of affairs.

I I I— Facts

(2) National legislation 9. The Committee of Vice-Chancellors and Principals of the Universities in the United Kingdom communicated to the Treasury in 7. The Community legislation was trans- 1995 and 1996 its view that the public posed into national law by the following procurement directives did not apply uni- measures: versally to universities, so that the reference to 'universities' for the United Kingdom in Annex I to Directive 93/37, and to which Directives 92/50, 93/36 and 93/37 refer, should be abandoned. — Directive 92/50 by the Public Services Contracts Regulations 1993 (S.I. 1993/3228)

12. It was common ground in the main proceedings that most universities in the United Kingdom, in particular the Univer- sity of Cambridge, were indeed established for the specific purpose of meeting needs in the general interest, not having an indus- trial or commercial character, and had legal 1. (a) Funds allocated by the Higher personality; they were not, however, sub- Education Funding Councils and ject to management supervision by con- the Teacher Training Agency, tracting authorities, and such bodies did which are themselves recognised not appoint more than half of the members to be contracting authorities, for of the administrative, managerial or super- academic, research and related visory boards of the universities. The only activities. More than 90% of the issue in this case, therefore, was whether research funding is allocated on the the universities were 'financed, for the most basis of the quality of the research part, by one or more contracting autho- activities, which are periodically rities'. assessed. The university itself deci- des how the funds are to be used.

(b) Funds supplied by the Research Councils, which are likewise recog- 13. In the order making the reference the nised to be contracting authorities, national court states inter alia that univer- to the university on request by sities in the United Kingdom are financed in individual applicants wishing to different ways, not all of them receiving conduct a research project in which funds from contracting authorities. Funds the Research Councils themselves are obtained from a variety of sources, and have no interest at stake, the are provided for a variety of purposes and monies going directly to the uni-

Overseas (non EU) students 5

Research Grants and Contracts 33 3. Tuition fees, which are paid by local education authorities (recognised as Of which: contracting authorities) direct to the universities. These funds are in the form of grants to students in respect Research Councils 14 of the tuition fees payable by them. Many students are eligible for manda- Grants and contracts tory, or at least discretionary, grants from other public from the paying authorities; others must find the means to pay themselves, and private bodies 19 or are funded from abroad. Other operating income 12

Of which:

4. Various other sources of financing, Catering 1 such as the provision of residential accommodation and catering, as well Transferred from as gifts and endowments. Local Examinations Syndicate 3

Health and Hospital authorities 2

15. The High Court of Justice appended to Valued Added Tax Rebate 1 the reference for a preliminary ruling the following summary of sources of income Other 5 from the accounts of the university (of Endowment Income and I - 8042 Interest Receivable 11 TOTAL 100

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4. Over what period should any calcula- (a) Observations submitted to the Court tion be made for determining whether a university is a "contracting author- ity" in respect of any particular pro- curement, and how are foreseeable or future changes to be taken into account?' 19. The view taken by the Netherlands Government, and by the United Kingdom in the oral procedure, is that Annex I is purely declaratory. That is indicated, according to the Netherlands Government, both by Article 35 of Directive 93/37, which provides for a procedure for amend- 17. The applicant, the United Kingdom, ing the lists, and from the Commission's Netherlands and Austrian Governments, answer of 16 June 1992 to written question and the Commission took part in the No 1443/92. 4 written procedure and the French Govern- ment took part in the oral procedure. I shall come back to their observations.

(b) Opinion

23. Whether such control is exercised or not must be ascertained in the applicant's view on the basis of quantitative and qualitative criteria. A body will not be (2) The first question one governed by public law solely because another contracting authority supplies it with a number of financial payments, since not every payment by the contracting authority gives it such control. The purpose (a) Observations submitted to the Court of the funding should also be taken into account. The only payment to be regarded as financing by a contracting authority is that which is provided to enable the establishment to fulfil its basic purpose — in the case of a university, teaching and 22. The applicant considers that the pur- research — and which therefore also pose of Directives 93/36, 93/37 and 92/50 enables the contracting authority making is to impose special requirements on bodies the payment to exercise direct or indirect in relation to which the State is in a control over public procurement. In this position to exercise actual or potential argument the applicant relied at the hearing control in the procedure for the award of also on the fact that were a different and public contracts. It relies in that respect on broader interpretation to be adopted, the case-law of the Court of Justice. 5 The churches or religious organisations, for directives serve to prevent distortion of the instance, parties, State-funded charitable single market. Where a body is not subject organisations or State-run lotteries might to such control, or where it is merely likewise be taken to be bodies governed by public law if they derived income from public resources. In any event 'financing' 5 — Case C-306/97 Comiemara Machine Turf v Codite Teor- denotes payments made in order to enable anta [1998] ECR I - 8 7 6 1 ; Opinion of Advocate General the university to fulfil its basic purposes. Lenz in Case C-247/89 Commission v Poringai [ 1991] ECR 1-3659, at p. 3670; Case C-44/96 Mannesmann Anlagenbau Accordingly, financing for specific research Austria v Strohal Rotationsdruck [1998| LCR 1-73, para- graph 18 (paragraph 28 is meant); Case 31/87 Beentjes projects or other types of contribution, [1988| ECR 4635, paragraph 8; and Opinion of Advocate General Van Gerven in Case C-188/89 /osier |1990| ECR such as endowments, fall outside the defi- I-3313, at p. 3326, paragraphs 13 and 16. nition. Since, in addition, the sources of

26. For those reasons, the United Kingdom Government maintains, payments such as 24. The United Kingdom Government con- those mentioned in Question 1(b) and (c) siders that all funds provided by contract- are purely commercial and therefore to be ing authorities which serve to fulfil tasks in excluded from the concept of financing by the sphere of education and thus to meet a a contracting authority. Payments to the need in the general interest fall within the university such as those mentioned in concept of financing by a contracting Question 1(a) would fall within the defini- authority. That does not include commer- tion, however, even if they were coupled to cial payments by a contracting authority, an application made by an individual which must thus be left out of account. As applicant. They are ultimately intended to to the question whether a payment serves provide the universities with the means to educational or commercial purposes, the achieve educational and academic aims. judgment in Case 263/86 Belgian State v Payments by contracting authorities to a Humbel 6is a useful reference. university towards tuition fees as described in Question 1(d) also constitute such finan- cing, since they provide the body with the means of fulfilling the task it has in the general interest, even if they are made for specific named students.

25. In addition, the United Kingdom Gov- ernment submitted at the hearing that what ultimately counts is whether a service is 27. The Netherlands Government observes provided free, that is to say without any that the three criteria set out in Article 1(b), claim for consideration, or as a result of third indent, of the directives, namely public law duties or, by contrast, under a financing provided primarily by the State, particular contractual obligation. It relies State supervision and influence in staff

31. The Commission also refers to the purpose of the directives, which is to prevent disturbance of the free movement 29. The Austrian Government refers in of goods and services. The provision is suggesting an interpretation to the history intended to cover bodies which owing to of the concept of the contracting authority. their close dependency on the State or The three criteria in Article 1(b), third contracting authorities are not subject to indent, describe bodies which participate in economic life without being exposed to 9 — It refers in that respect to the Opinion of Advocate General Léger in Mannesmann, cited in footnote 5, at p. 77, and to the judgment in Case C-160/96 Gemeente Arnhem, Gemeente Rbedcn v BU Holding [1998] ECR I-6821, 8 — Cited in footnote 5, paragraph 20. paragraph 62.

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market forces as are others. 10 The decision tuition fees for students are intended to in Mannesmann 11 has made it clear that provide funds for the university. Any dis- the alternative conditions referred to in tinction between the types of funding listed Article 1(b), third indent, relate to 'close in Question 1(a) to (d) is not compatible dependency' on the contracting authority. with the purpose of the directives and There is such dependency, if only indirect, would be most difficult in practice to apply. where financing comes for the most part from a contracting authority. At the hear- ing the Commission pointed out that even in commercial relationships there may be 'close dependency'. That is taken entirely into account in the purpose of the direc- tives, since even when a contracting author- ity is acting as a contractual partner it may (b) Opinion have a very strong position of influence.

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tive 92/50 in BFI Holding 12 and Directive 'close dependency' 18 of the body on the 93/37 in Mannesmann; 13 see also the State, a local or regional authority, or other Opinion of Advocate General Léger in that bodies governed by public law. The provi- case, 14 and, with reference to an earlier sion thus defines, according to the Court of directive, Directive 71/305/EEC, in Case Justice, the three manifestations of a body 31/87. 15 governed by public law as three variants of 'close dependency' on another contracting authority.

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38. It is also not possible, at least in this 40. It is therefore necessary also to clarify case, to apply the conclusions drawn by the meaning of 'financing' in order to be Advocate General Lenz in Portugal v able to conclude that there is close depen- Commission, 22 which the applicant relies dency between the recipient and the provi- on in support of its argument, since der of the payment. As the Commission Annex I to the relevant directive (Directive also rightly observes, such dependency 77/62) requires in the case of Portugal that exists in the case of public financing only there be State control over public supply indirectly. As a result, it is not possible to contracts. regard every payment from public sources automatically as public financing, which only covers funding which does not con- stitute payment for a particular considera- tion, that is to say, which amounts to a financial subsidy to fund or support the general activities of the establishment in question.

42. It is questionable, however, whether interest, that is to say, in the case of a that extends, in accordance with the prin- university, education and research services, ciples set out above, to the payments may overlap with activities of a commercial referred to Question 1(b) and (c). The character, as Question 1(b) shows. purpose of the payment, the criterion suggested by the United Kingdom Govern- ment inter alia, is not sufficient to deter- mine whether public financing includes consideration paid by a contracting author- ity for services provided by the university 43. In the same way, it is not possible to under contract. In Humbel 25 the Court apply by analogy the principles developed decided that teaching services did not fall by the Court of Justice in BFI Holding. 27 within the scope of services for the pur- In that case the Court decided, with regard poses of Articles 59 and 60 of the EC to Article 1(b), second subparagraph, first Treaty (now Articles 49 EC and 50 EC). indent, of Directive 92/50, that the fact that However, the Court distinguished between services were also supplied by private the case where there was economic con- undertakings or could be supplied by them sideration for a service and that where did not prevent a task from being one that payment was made for the fulfilment by the was in the general interest. At first sight, State of an obligation incumbent upon it in the judgment might be taken to indicate the social, cultural and educational that a distinction between commercial and sphere. 26 The reason for that given by the other services cannot be made in the case of Court was that the protection which free- public financing under the third indent, dom to provide services was designed to either. However, the three cumulative cri- afford did not extend to the latter sphere. teria for defining a body governed by The question whether a payment falls in public law raise quite different issues. The this case under the heading of public separate issue raised here is whether parti- financing cannot be answered on that basis, cular payments to a body which was however, since the protection which the undoubtedly established for the purpose directives are designed to afford (described of meeting needs in the general interest are above) is one entirely different to that to be regarded as public financing. afforded by freedom to provide services. The fact is that the nature of the payment as consideration raises precisely the ques- tion whether it is possible for there to be close dependency even where the service provided by the establishment nevertheless 44. If one is to be guided by the purpose of serves purposes which are in the general the directives and by the question whether interest. That criterion makes it more close dependency between university and difficult, moreover, to draw the distinction, contracting authority is created or rein- since activities which are in the general forced, the answer must be that it is not public financing if the combined effect of the service and the consideration paid is that the contracting authority has an eco- nomic interest in obtaining the service

45. As a rule such dependency does not arise precisely where an establishment 47. Since the payments referred to in Ques- receives payment as consideration for an tion 1(b) and (c) are made in respect of a activity which it offers in the same way as claim based on an autonomous contractual an undertaking operating on the market foundation and do not therefore create independently in competition with private close dependency on a contracting author- undertakings and on the basis of a specific ity within the meaning of the directive, they agreement for the supply of services. That do not constitute public financing. is because the establishment acquires its entitlement to payment on a reciprocal basis. The services are supplied on request in the interest of the establishment, as in the case of research for specific purposes, consultancy or the organisation of confer- ences. The right to obtain services is there- fore not based on the decision of principle 48. The last question to be discussed in this to support the establishment in its duties, regard is whether tuition fees, as described but is rather a contractual entitlement. in Question 1(d), paid by the contracting authority to a university for named stu- dents may be counted as public financing.

46. A business relationship of that type can, of course, give rise to dependency, but 49. It is true that such payments also that dependency is not of the same kind as constitute a social measure for individual that which arises from the mere provision students, for whom it represents a grant

51. The second question seeks to know 54. The United Kingdom Government how the expression 'for the most part' in argues that if the financing provided by Article 1 of the directives is to be under- the contracting authority exceeds 50%, stood. there should be control over the use of

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those funds by the financing body. That is agraph of Article 3(4) of Directive 93/37 29 the approach taken in Article 2(1) of and in Article 1(3) of Directive 93/38 30 can Directive 93/37, according to which the also be referred to for comparison, each of directive extends to contracting authorities them employing the criterion of 'more than who subsidise by more than 50% a con- half'. tract awarded by a different body.

56. The Commission considers that taking the expression to mean more than 50% is a simple test to apply and also follows logically from the fact that the assessment is based on only two aspects, financing from contracting authorities and financing from other sources.

55. The Netherlands Government consid- ers that that approach is also justified on (b) Opinion systematic grounds, since there is another instance in Article 1(b), third indent, of the directives where a simple majority is deter- minative: where more than half the mem- bers of an administrative, managerial or supervisory board are appointed by the board there is assumed to be dependency. 57. The ordinary meaning of the words 'for In addition, the definition of a public the most part' suggests that they should be undertaking in Article 1(2) of Directive interpreted as referring to an arithmetical 93/38/EEC, 28 and the definition of an 'more', that is to say 'over half' or 'more affiliated undertaking in the third subpar- than 50%'. Even if the words are not

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considered to be unequivocal in that (4) The third question respect, any interpretation such as that suggested by the applicant, for instance depending on funds of a particular sort, would not meet the purpose of the provi- sion. It must be borne in mind that close dependency, with the corresponding possi- bility of influence, might arise in certain circumstances even where the financing is less than 50%, if it comes as a single 59. The issue of what contributions fall contribution among a large number of within the concept of financing by a smaller amounts. A qualitative approach contracting authority has already been is therefore not an appropriate one for dealt with in connection with the first determining the meaning of 'for the most question. The third question posed by the part' because of the many imponderables it national court, namely what funds are to be raises. The possibility need not be discussed included in the calculation, should there- here, since all that is necessary is to fore not be understood as meaning what establish the meaning of 'for the most kind of funds should be taken into account part'. What is required is a practical in calculating the public financing, but as interpretation which satisfies the purpose asking what is to be the basis for calculat- of the provision. ing the whole financing. In other words, it asks how to define the total income, of which the funds provided by public finan- cing are to constitute 'the most part'.

(a) Observations submitted to the Court 58. We can also refer to the definition in Article 1(2) of Directive 93/38, in which 'public undertaking' is defined inter alia as an undertaking in which the State owns, directly or indirectly, at least half of the capital. 31 If that quantitative criterion is what makes an undertaking a public under- taking, it must certainly apply to a body governed by public law, when determining the conditions under which financing is to be regarded as 'for the most part' public. 60. The applicant and the United Kingdom Government argue that the calculation should cover all income. The French Gov- 31 — See footnote 28. ernment supported that view at the hearing.

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65. The Austrimi Government considers 67. The Netherlands Government consid- that the assessment must be made for given ers that the assessment should be made periods, and suggests an annual approach, rather on structural lines, since any other since contracting authorities draw up their approach would be incompatible with the budgets annually. Reference might be made principle of legal certainty. to the calendar, accounting or budgetary year. That would also be appropriate in view of the fact that a yearly assessment is also made in other cases (Article 7(6) and the notification provisions in Article 15(1) of Directive 92/50).

68. The French Government supported that view at the hearing. The difficulties of application and the considerable uncer- tainty which would arise particularly in the case of more lengthy award procedures could only be overcome by adopting a structural approach. Any other approach might have the result of making the status of the body vary in the course of the award procedure purely as a result of temporary and short-term changes in funding.

66. The Commission takes the view that Article 15(1) of Directive 92/50 and Arti- cle 9(1) of Directive 93/36 indicate that contracting authorities retain their status for 12 months. 33 Whether a body is a (b) Opinion contracting authority or not may thus change from one budgetary year to another. Accordingly, it suggests that the determina- tion be made annually on the basis of anticipated sources of finance for the coming budgetary year.

70. Determining status on the basis of structural elements would admittedly have 73. On the other hand, the basis for the advantage of legal certainty and clarity; making the abovementioned calculations it would not, however, enable actual or must be certain, correct and transparent. It future variations in funding to be taken into ought therefore to be reasonable to do it on account. Isolated instances of public fund- an annual basis in any event; not for a year ing, for example for building projects, in the past calculated from the time of the would then be disregarded, contrary to procurement procedure, however, but for the intention of the directive. the budgetary year in which the contract is awarded. For reasons of legal certainty and protection of tenderers that should be expanded, however, in order to ensure that in the course of the procurement procedure the establishment retains until completion of the contract the status it had at the time of the award procedure, even if the contract 71. Taking the time of the procurement extends over a period of more than a procedure as the time at which status is to budgetary year in the course of which the be determined likewise does not necessarily institution's financing changes. reflect longer-term, and thus actual, finan- cing. It would also open the way to manipulation.

72. Annual reassessment of their status, by contrast, might not offer the foreseeability 74. The new assessment of the financing required by the principle of legal certainty, for the purposes of determining the estab- since the status of the institution could lishment's status is only to be undertaken within a budgetary year (also to prevent manipulation) in the case of significant 35 — See also Case C-143/93 Van Es Douane Agenten [1996] changes in funding which have already ECR 1-431, paragraph 27; Case C-202/97 Fitzwilliam Executive Search [2000] ECR 1-883, paragraph 54; and occurred or in the case of foreseeable future Case C-54/99 Scientology [2000] ECR 1-1335, paragraph 22. changes.

(b) Payments made by one or more contracting authorities under a specific contract for the supply of services as consideration for the supply of services or for research work, and I - 8059

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(c) for the supply of other services, such as consultancy or the organisation of conferences, do not constitute 'financing by one or more contracting authorities'.

(d) Student grants paid by local education authorities to universities in respect of tuition for named students constitute 'financing by one or more contracting authorities'.

(2) 'For the most part' means 'more than 50%'.

(3) Whether financing is 'for the most part' is determined on the basis of all funds accruing to the body.