C-399/98

OPINION OF MR LÉGER — CASE C-399/98

OPINION OF ADVOCATE GENERAL LEGER delivered on 7 December 2000 1

1. In the present case the Court is asked to I — Legal background rule on the substantive scope of Commu- nity law governing public works contracts in the context of national planning legisla- tion.

A — Community legislation

4. Article 1(a), (b) and (c) provide: 2. Where public and private interests over- lap in relation to a development project, questions necessarily arise where proce- dures under national legislation leave pri- vate operators the responsibility of provid- ing basic facilities, and even public facilities '(a) "public works contracts" are contracts for purely leisure purposes, associated with for pecuniary interest concluded in their project. writing between a contractor and a contracting authority as defined in (b), which have as their object either the execution, or both the execution and design, of works related to one of the activities referred to in Annex II or a work defined in (c) below, or the execution, by whatever means, of a work corresponding to the require- 3. Such is the nature of the issue raised in ments specified by the contracting the proceedings pending before the Italian authority; court, which has submitted questions necessitating examination of the conditions governing the application of Council Direc- tive 93/37/EEC of 14 June 1993 concerning the coordination of procedures for granting public works contracts. 2 (b) "contracting authorities" shall be the State, regional or local authorities, 1 — Original language: French. bodies governed by public law, asso- 2 — OJ L 199, p. 54, hereinafter the 'Directive'. ciations formed by one or several of

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the terms of the contract with one or more 12. Pursuant to Article 3 of the same Law, of them'. the granting of the permit entails payment of a contribution commensurate with the costs of development and the cost of construction.

10. According to Article 7(4), in all cases other than those mentioned in Article 7(2) and (3), the contracting authorities are to award their public works contracts by the 13. The infrastructure contribution is paid open procedure or by the restricted proce- to the municipality when the permit is dure granted. However, pursuant to Arti- cle 11(1) of Law No 10/77, by way of total or partial set-off against the amount payable, the permit holder may undertake to carry out direct execution of the infra- structure works, observing the procedures and safeguards laid down by the munici- pality.

B — Italian Legislation

(3) the works referred to in subparagraph (2) above must be completed within ten 17. The execution of infrastructure works years'. provided for in a development plan, on the other hand, is governed by Article 12 of the abovementioned Regional Law, as amen- ded by Article 3 of Regional Law No 31 of 30 July 1986. 8According to that article the agreement which must be concluded Article 28 (7) of Planning Law No 1150/42 before a building permit can be issued for also sets a time-limit of ten years for the the operations provided for in the project execution of infrastructure works for which plans must provide for carrying out by or the owner is to be responsible. on behalf of the owners of all the primary infrastructure works and a portion of the secondary infrastructure works or those necessary to link the area to the public services. Where execution of the works involves charges lower than those sepa- 15. By virtue of Article 4 of Law rately laid down for primary and secondary No 847/64 of 29 September 1964, 6health infrastructures, the difference must be paid. and cultural facilities constitute secondary In any event it is open to the municipality infrastructure works. to require, in lieu of the direct execution of the works, payment of a sum commensu- rate with the actual cost of the infrastruc- ture works relating to the project and with the area and characteristics of the build- ings, and in any event in an amount not 16. Article 8 of Lombard Regional Law lower than the charges laid down in the No 60 of 5 December 1977 7provides for municipal resolution referred to in Arti- cle 3. 6 — As amended by Article '14 of Law No 865 of 22 January 1971, and by Article 17 of Law No 67 of 11 March 1988. 7 — Bolletmo Regionale Lombardia, 2nd supplement to No 49, 8 — Bolletmo Regionale Lombardia, 2nd supplement to No 31, 12 December 1977. 4 August 1986.

— alterations to municipal buildings in a building complex, and 21. Article 11 of that Law provides that the administration may conclude, without pre- judice to the rights of third parties and in pursuit of the public interest, agreements with interested parties in order to deter- — construction, in the so-called 'Bicocca' mine the discretionary terms of the final area, of a new theatre, with about 2 300 seats, having an area of around 25 000 m2 (plus 2 000 m2 parking) 9 — Article 22(b) of Lombardy Regional Law No 51 of IS April intended to accommodate, in the initial 1975. 10 — Paragraph 6 of the order for reference. stage, the activities of the historic

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26. By Resolution No 82/96, the municipal council of Milan then gave a number of — MCS was to hand over the building before the end of 1998. 11 — According to the national court, the theatre is known as the 'Teatro alla Bicocca' (hereinafter 'the theatre'). 12 — The framework agreement dates from January 1990. The 13 — Now known as Fondazione Teatro alla Scala (hereinafter agreement relating to the execution of the development the 'FTS'). works was concluded on 10 May 1993, and the planning 14 — Hereinafter 'MCS'. agreement on 10 September 1994. 15 — Hereinafter 'the agreement'.

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— amended the time-limits written into the agreement for the completion of 31. In its order for reference, the Tribunale certain measures. The completion date Amministrativo Regionale per la Lombar-

16 — For convenience, those two parties to the main proceedings 17 — For convenience, those two parties to the main proceedings will be referred to hereinafter as 'OAML'. will be referred to hereinafter as 'CNA'.

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dia states that the municipality of Milan trative authorities and a private person correctly applied Italian (national and (generally permitted by Article 11 of regional) legislation in respect of town Law No 241 of 7 August 1990) be planning. On the other hand, with regard regarded as compatible with Commu- to Community law, the national court nity law in areas where the procedure is raises certain doubts as to whether direct that the administrative authorities execution of infrastructure works by way choose a party with whom a contract of set-off against the contribution payable for services is to be concluded, in cases constitutes a public works contract as where such services exceed the thresh- defined by Community law. old laid down by the relevant direc- tives?'

32. Accordingly, it decided to refer to the Court the following questions for a pre- liminary ruling: IV — Admissibility of the first question

a dispute relating to the provision of 37. A request from a national court for a services. preliminary ruling may be rejected only if it is quite obvious that the interpretation of Community law sought by that court bears no relation to the actual nature of the case 35. The municipality of Milan and the FTS or the subject-matter of the main action. 19 further maintain that the work relating to the design of the theatre was simply provided free of charge to the municipal administration by Pirelli and MCS. Its cost cannot therefore be included in the cost of the works to be offset against the infra- structure contribution. 38. In the present case, it cannot be accepted that a dispute relating to the method of appointing an economic opera- tor responsible for the construction of a By arguing thus, the parties to the main theatre bears no relation to Community proceedings appear to allege that since that law on public works contracts since the part of the project at issue involved no project was undertaken at the request of a payment, it falls outside the scope of the municipality and the building works in Directive, which is based on the assump- question are considered as community tion that the project in question should facilities under national legislation. involve a pecuniary interest.

45. It will be noted that the second ques- tion seeks to ascertain whether agreements between the administration and private V — The questions submitted for a pre- persons may be regarded as compatible liminary ruling with Community law where the public administration chooses a party with whom a contract for services is to be concluded and the costs of such services exceeds the threshold laid down by the relevant direc- 42. By both its questions, the national tives. court seeks a ruling on whether various provisions of Italian town planning law are compatible with Community law.

47. By this question, the national court such as how it might apply to the circum- seeks a ruling under Community law con- stances of the main proceedings, as com- cerning a principle of Italian law which it pared with the town-planning legislation refers to as 'consensual administration', referred to in the first question. 'that is to say where the Public Adminis- tration abandons or moderates its author- itative and unilateral stance and negotiates directly with the private operator to agree on the terms of administrative measures Under those circumstances, it appears that affecting the latter'. 23 an interpretation of the Community provi- sions relating to public contracts can pro- vide the national court with the detailed reply it requires to assess the standing of both laws. Accordingly, there is no reason to make a distinction between the two 48. The Italian court has focused upon the questions referred to the Court for a situation where the services to which those preliminary ruling. agreements may apply 'exceed the thresh- old laid down by the relevant directives'. 24 It therefore appears that, in the absence of any more detailed information on the rule of Community law in question, the ques- tion is concerned only with the interpreta- 51. Consequently, it must be concluded tion of Community law on public con- that the national court is asking, in essence, tracts. whether the Directive precludes national legislation which provides that, when implementation of a development plan requires construction works in order to provide community facilities, the holder of the building permit is to be responsible for 49. The national court also notes that 'the carrying out those works, at his expense, in present case may of course come within the return for exemption from payment of the framework of broader national legislation, amount due to the municipality in respect intended to favour negotiated proce- of the building permit, unless the munici- dures', 25citing in that context Article 11 pality decides to collect the contribution of Law No 241/90. instead of opting for direct execution of the works, without requiring any tendering procedure for the award of public works contracts provided for by the same direc- tive.

Under national law, cultural facilities, to 55. Accordingly, a theatre whose activities which category of infrastructure works this extend far beyond the locality in which it is building belongs, are classified as second- situated is subject, by virtue of that legal ary infrastructure works, there being 'no status, to town-planning provisions which limitation to the local district in any create specific obligations linked to the purposive or functional sense'. 27 Accord- needs and amenities of that locality. For ing to the national court, the deliberate example, under Italian law, private devel- omission of any such limitation clearly opers have an obligation to meet any indicates that 'the legislature specifically expenditure justified by the nature of the wished, in respect of such works, to infrastructure which, in the present case, disregard the strict referential planning amounts to a particularly large sum. 30 context'. 28

54. The fact that a national cultural insti- tution is considered an essential facility 56. It is not my task to evaluate the legal within a development project may appear provision in question. That is a matter somewhat surprising. 29 reserved exclusively to the legislature and its concept of what town planning involves.

The lack of any legal distinction between a national theatre and infrastructure works linking the area to public services — classified under Italian law as primary 57. However, the Court is responsible for ensuring that such an approach to town planning does not risk undermining the 26 — Ibid., p. 7. interests which the Community legislation 27 — Ibid., p. 10, last paragraph. on public contracts is designed to protect. 28 — Ibid. 29 — The L national court cites Italian case-law to the effect that a cultural centre for a catchment area extending beyond the municipality comes within the scope of infrastructure 30 — The works required of MCS in building the theatre amount works' (p. 12, first paragraph, of the English translation of to ITL 25 billion (p. 13, second paragraph of the English the order for reference). translation of the order for reference).

59. It might be feared that a burgeoning of similar laws in the Member States could render the Community rules on public contracts ineffectual. Member States might be tempted to include in their town-plan- ning legislation whole categories of public B — The definition of public works con- tracts 31 — Page 10 of the English translation of the order for reference. 32 — At least that is what the order for reference says (see, in particular, p.12, third paragraph of the English transla- tion). However, it should be noted that the OAML and the CNA do not share this reading of the national legislation 62. The definition of 'public works con- (footnote on page l,(iii) of the written observations of the CNA, and paragraph 1.1.1 of the written observations of tracts', for the purposes of the Directive, is the OAML) as they consider that direct execution by way of 'set-off' constitutes an option, not an obligation. On the given in Article 1(a). basis of its case-law, the Court is not competent to interpret national law. It is for the national court alone to determine the precise scope of national laws, regulations or administrative provisions (Case C-343/96 Dilexport [1999] ECR I-579, paragraph 51). Accordingly, the legal obligation to undertake direct execution by way of 'set-off' imposed on the developer subject to a contrary decision by the municipality, as described by the national court, is taken as an established principle of national law. 33 — Page 11 of the original language version of the order for 63. The six conditions laid down by that reference. provision are as follows: contracts must be 34 — Page 6, paragraph 5 of the French translation of the written observations of the Italian Government. for pecuniary interest, concluded in writing

68. However, there is something missing 65. On the other hand, I take the view that from the agreement which, in my opinion, legal relations such as those entered into by is an essential element of a contractual the City of Milan and the other defendants relationship: the power to choose the in the main proceedings, under the condi- contractor. According to the national court, tions laid down by national law, are not a party called on to carry out development contractual in nature. Moreover, the con- works is simply identified by law, in this dition relating to the status of contractor case by Article 12 of Regional Law No 60 which the Directive requires the party of 1977. 37The effect of that provision is dealing with the contracting authority to that the works must be carried out by the have is not necessarily met by legislation owner of the land. such as that in question. Finally, in my opinion, relationships of the type existing between the municipality and the developer 37 — Page 12, second paragraph of the English translation of the order for reference. Article 12 applies that designation to are not for pecuniary interest as required by all primary infrastructure works and a proportion of the Directive. secondary infrastructure works or to works which are necessary to link the area to public services (p. 11 of the original language version of the order for reference). The OAML and the CNA read that article differently. They take the view that the 'set-off' is concerned with secondary development works only where they are necessary to link 35 — Paragraph 58 of this opinion. the area to public services. Since such matters dealing with 36 — Furthermore, the value of the contract exceeds the thresh- the interpretation of national law are outside the Court's old laid down in Article 3(1)of the Directive, as pointed jurisdiction, the reading of the provision given by the out by the national court (pp. 12 and 13 of the English national court will be followed, in accordance with the translation of the order for reference. Court's case-law cited in footnote 31 of this Opinion.

74. If a contracting authority is free to 71. Let us consider for a moment the main appoint a contractor to carry out public purpose of the Directive: its precise aim is works, in return for payment, there is a real to eliminate discriminatory practices in the risk, often observed in the practices field of public contracts. It is clear that the employed by public authorities of Member wording of Article 1(a) reflects very accu- States, that those authorities may choose rately, as far as the requirement of a contractual relationship is concerned, the 39 — Case C-44/96 Mannesmann Anlagenbau Austria and Others [1998] ECR I-73, paragraph 33. 40 — Article 57(2) of the EC Treaty (now, after amendment, 38 —Judgments of 20 December 1994 (Cass. I, No 10947) and Article 47(2) EC) and Article 66 of the EC Treaty (now 17 June 1996 (Cass. III, No 5541) cited on p. 25 of the Article 55 EC) are cited in the preamble to the Directive. French translation of its written observations. Emphasis See also the second recital. added. 41 — Tenth recital.

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80. Under the national legislation at issue, the municipality may opt for payment of 77. That is also why the Directive requires, the infrastructure contribution or replace as one of the conditions determining its that obligation by direct execution of the applicability, the establishment of a con- works. tractual relationship. Indeed, the proce- dural formalities of Community law on public contracts are justified only if the contracting authorities enjoy a degree of latitude in appointing economic operators. Otherwise, those constraints would be deprived of their justification, namely the 81. It is necessary to make certain that the risk that freedom of freedom of movement réintroduction of an element of choice in and freedom of competition might be the appointment of the contractor would undermined. It should not be forgotten not entail the risk of the contracting that the freedom to choose is also the authority resorting once more to discrimi- freedom to discriminate. natory practices.

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82. That question would arise, of course, 85. Accordingly, the condition relating to only if the municipality should decide to the contractual nature of the legal relation- exercise its right to collect the infrastruc- ship cannot be regarded as satisfied. ture contribution rather than having the works carried out by way of 'set-off'.

The condition relating to the involvement of a contractor

83. It is obvious that in those circumstances the procedures laid down by the Directive ought to apply since the contracting author- ity has decided to approach other contrac- 86. The fact that the developer is not tors. But in doing so, it is exercising a always a contractor is the second reason choice, at least in the negative sense, by for rejecting the idea that national legisla- refusing the developer the right to execute tion which requires, without exception, the works himself. direct execution of development works by way of 'set-off' contravenes the Directive.

91. It remains for me to set out the reasons 90. The grounds for applying the Directive why I consider that the relationship are once again absent. The dividing line between the developer and the municipal- between public contracts and relations of a ity, for the purpose of carrying out the strictly private nature has been crossed. The works at issue, is devoid of any pecuniary developer, a private operator responsible interest as defined in Article 1(a) of the for paying for the works by way of set-off Directive. against the infrastructure contribution, is again adjusting to a purely economic reality which prompts him to make a choice that takes account of his own interests. The controlling of expenditure by a contracting 92. The national court, on the other hand, authority which could easily come to considers that where the holder of a believe itself to be free from any budgetary building permit undertakes infrastructure constraints gives way to the vigilance works, he is not providing anything free of exercised by a private operator naturally charge. Rather, he is discharging a debt of concerned to limit his expenditure. Accord- the same value that arises in favour of the ingly, effective competition is almost auto- municipality as a result of his plan to carry out works which will give rise to the need for that infrastructure. 44 43 — Sec, in this respect, the Opinion in Case C-331/92 Gestión Hotelera Internacional |1994| ECR I-I329, paragraphs 35 and 4 1 , in which Advocate General Lenz stated that a mixed contract such as that being considered by the national court, relating both to the performance of works and to the assignment of property, did not fall within the scope of Council Directive 71/305/EEC of 26 July 1971 concerning the coordination of procedures for the award of public works contracts (OJ L 185, p. 5). .Mr Lenz 93. We have seen that the aim of the explained that the prospective tenderer could not by definition be a building contractor, in view of its objects, Directive is to eliminate discriminatory with the result that, because the public contract in practices on the part of contracting autho- question, which was concerned with the award of a concession for operating a casino and a hotel, included an obligation to carry out works by entrusting them to third parties, it did not constitute a public works contract as defined in Directive 71/305. Tlie Court relied on that reasoning, in essence, m paragraph 24 of its judgment. 44 — Page 13 of the English translation of the order for reference.

94. Economic operators are motivated by 97. Either the developer carries out the the prospect of obtaining some economic works or arranges for them to be carried benefit from contracts. Discrimination in out in lieu of payment of the infrastructure awarding contracts is unacceptable because contribution, or else he pays the contribu- awards of contracts entail payment to the tion to the municipality at its request and contractors who are selected. It would be the latter then proceeds with the work in difficult, where no finance was provided compliance with the rules on public works for a contract by the contracting authority, contracts. As we have seen, the latter case to imagine any kind of favouritism which constitutes an exception to the principle of could benefit the operator chosen. If any- direct execution by way of 'set-off'. thing done free of charge or financed by the party carrying out the work offends against the principle of competition, that is because it is damaging to that party's interests and not because it gives him any advantage over his competitors. 98. The national court considers that devel- opers do not provide anything free of charge. That is correct in so far as works carried out 'by way of set-off' discharge their obligation to pay the infrastructure contribution. Their action is then economic Under those circumstances, where there is in nature on account of the existence of a discrimination in awarding to a contractor payment. Even if the latter is made in kind a contract for the performance of which he rather than in money, the debt is dis- is not paid, there is no justification for charged. following the procedures laid down by the Directive. It is sufficient, if it is assumed that circumstances might arise in which relations are of a contractual rather than a legal nature, for the economic operator to refuse to award the contract in order to eliminate the competitive disadvantage. 99. However, when the economic relation- ship —· or rather the 'fiscal' relationship in view of the nature of the contribution in lieu of which the works are executed — is examined more closely, it is clear that the risk of discrimination usually associated 95. In that respect, what are the features of with the public financing of private activ- the national legislation at issue? ities is not present in this case.

101. In contrast to the position most fre- quently encountered when public contracts 104. The argument that the Directive are awarded, it does not appear that the should be applied by virtue of Article 2 public authority provides any finance for must be rejected for the same reasons. direct execution of the works 'by way of set-off'. 45 For his part, the developer, who receives no payment, bears the costs. When the work is finally completed the assets of the municipality will have been increased by the value of the building, without its 105. It should be noted that that provision having incurred any expense, whilst the requires Member States to take the neces- developer's assets will have been reduced to sary measures to ensure that the contract- the same extent, without his receiving any ing authorities comply or ensure compli- consideration other than the waiving of the ance with the Directive where they subsi- infrastructure contribution. dise directly by more than 50% a works contract awarded by an entity other than themselves.

102. Accordingly, only the relationship between the developer and the contractor is of a pecuniary nature, whilst that between the developer and the municipality 106. That provision is intended to prevent is not. In fact, the contractual relationship practices aimed at evading the rules applic- which most closely resembles the one able to public contracts. Certain contract- envisaged in the Directive is that between ing authorities might be tempted to entrust the developer and the contractor. to private bodies responsibility for carrying out works relating to public contracts. 46 Since the latter are not themselves con- tracting authorities, it would be easy for them to find a way around the legal 103. Consequently, the relationship constraints to the detriment of interests between the municipality and the developer

Article 1(a) of Council Directive 93/37/EEC of 14 June 1993 concerning the coordination of procedures for the award of public works contracts does not preclude national legislation which provides that, when the implementation of a development plan calls for construction works to provide community facilities, it is incumbent on the holder of the building permit to carry out those works, at his expense, in return for exemption from the requirement to pay the contribution due to the municipality in respect of the building permit, unless the municipality decides to collect the infrastructure contribution in lieu of direct execution of the works, without requiring observance of the procedures for the award of public works contracts provided for by that directive.

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