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5. The French Republic has accepted from the time of filing its defence that in the light of the Court's case-law, in particular the 2. In the Commission's view, both OPACs judgments of 15 January 1998 3 and and SA HLMs are to be regarded as 10 November 1998 4 , OPACs are contract- contracting authorities within the meaning ing authorities within the meaning of of Article 1(b) of the Directive. Article 1(b) of the Directive, thereby acknowledging that such bodies are required to publish notices of contracts in the Official Journal of the European Com- munities, S series. In so far as concerns the 3. The Commission was not satisfied with OPACs, the Court can thus only declare the French Republic's reply to the formal 3 — Case C-44/96 Mannesmann Anlagenbau Austria ami Others v S t r o h a lRotationsdruck [1998] ECR I-73. 1 — Original language: French. 4 — Case C-360/96 Arnhem and Reden v BFI Holding [1998] 2 — OJ 1993 L 199, p. 54. ECR I-6821.

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(a) "public works contracts" are contracts for pecuniary interest concluded in writing between a contractor and a — having legal personality, and

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— financed, for the most part, by the rities within the meaning of Article 1(b) of State, or regional or local authorities, the Directive. or other bodies governed by public law, or subject to management supervision by those bodies, or having an admin- istrative, managerial or supervisory board, more than half of whose mem- bers are appointed by the State, regio- nal or local authorities or by other 9. To this end, it points out, first, that the bodies governed by public law. bodies in question were set up for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character, namely to provide housing for persons and families of modest means, and that they have legal personality, so that the first two conditions of Arti- cle 1(b) necessary to meet the definition of The lists of bodies and categories of bodies a body governed by public law are fulfilled. governed by public law which fulfil the criteria referred to in the second subpara- graph are set out in Annex I. These lists shall be as exhaustive as possible and may be reviewed in accordance with the proce- dure laid down in Article 35. To this end, Member States shall periodically notify the 10. Turning to the third condition, the Commission of any changes of their lists of Commission points out, without being bodies and categories of bodies; contradicted on that point, that of the three characteristics referred to in the Directive, namely that the body in question is financed for the most part by the public authorities, that it is subject to manage- ment supervision by the latter and that more than half of the members of the ...' governing board are appointed by the public authorities, only one need be satis- fied in order for a body to be deemed to fulfil that condition.

12. In its defence, the French Republic sets 16. It is therefore quite clear that the point out to demonstrate that the supervision to at issue between the parties is when the which these corporations are subject does management of a body is to be regarded as not in any way correspond to that referred subject to supervision by another. to in the Directive. The various types of supervision described by the Commission do not allow the public authorities to intervene in decisions concerning the proper functioning of SA HLMs. Such supervision is of an administrative nature, 17. To my mind, the outcome depends not and must be distinguished from the man- only on the meaning to be given to the term agement or investment controls with 'supervision' but also on what is to be which, in its view, Article 1(b) is con- understood by 'management', even if it is cerned. the interpretation of 'supervision' which is the bone of contention.

13. In its reply, the Commission maintains that the distinction is irrelevant. It main- tains that there is nothing in Article 1(b) to 18. I shall therefore consider each of these support the conclusion that only supervi- sion which gives the public authorities terms in turn. power to intervene in the day-to-day man- agement of the corporation is caught by that provision.

14. In its rejoinder, the French Republic, What is management? What is supervision? still arguing on the premiss that for there to be management supervision within the meaning of Article 1(b) there must be supervision involving an evaluation of the 19. According to the dictionary Le Petit way in which funds are administered, Robert, the term gestion (management), endeavours to show that the various types which describes the action of managing, is of supervision highlighted by the Commis- allied to administration, leadership and sion are administrative in nature and organisation, all of which connote the exclude any involvement with manage- exercise of some form of power. ment.

5 — 'todo organismo ... cuya gestión se halle sometida a un control por parte de estos últimos ...' 6 — 'organismo ... oppure la cui gestione é soggetta al controllo di questi...' 7 — 'qualquer organismo ... cuja gestão esteja sujeita a um controlo por parte destes últimos ou ...' 27. Still on the semantic level, when 8 — 'κάθε οργανισμός ... είτε η οιαχείριση υπόκειται σε έλεγχο describing a situation in which 'supervi- από το κράτος ή τους οργανισμούς αυτούς ...' 9 — 'jede Einrichtung ... die hinsichtlich ihrer Leitung der sion' means 'domination', one speaks of an Aufsicht durch letztere unterliegt...' undertaking which controls another, and 10 — 'any body ... or subject to management supervision by those bodies ...' not of an undertaking which exercises 1 1 — 'iedere instelling ... waarvan o f wel de activiteiten ... ofwel supervision over another, but the opposite het beheer is onderworpen aan toezicht door deze laat- sten ...' is not true, since the fact of being subject to 12 — 'organ ... eller er underlagt disses kontrol...' supervision does not necessarily imply the

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existence of a power to intervene in deci- German, in order to refer to the supervisory sion-making. board of a company, that is to say the body which, together with the managerial board, holds power when the company does not follow the classic model of having a board of directors, the term used is Aufsichtsrat. In a company whose administration is structured along those lines, the Aufsichts¬ 28. Since it is impossible to find a solution rat is by no means a mere supervisor of the by analysing the French version of the managerial board, but is actively involved Directive, upon which the Commission and in the management of the company, since it the French Government base their reason- participates in defining the company's ing, the rules of interpretation laid down by objectives and determining its strategy. the Court require us to turn to the other linguistic versions.

39. It is true that the same concept, which 36. To my mind, however, the exercise has also appears in Article 1(b) of another not been fruitless since it has at least shown directive in the field of public procurement, that it would not be contrary to the Council Directive 92/50/EEC of 18 June wording of the Directive to consider that 1992 on the coordination of procedures for control involving the exercise of supervi- the award of public service contracts, 14 sion of the way in which the body in was also considered in BFI Holding, cited question is run, without involvement in its above. The Court held in that judgment running, is enough for that body to be that, 'with a view to giving full effect to the regarded as a body governed by public law principle of freedom of movement, the term within the meaning of Article 1(b) of the "contracting authority" must be inter- Directive. preted in functional terms (see, to that effect, Case 31/87 Beentjes v Netherlands State [1988] ECR 4635, paragraph 11). In view of that need, no distinction should be drawn by reference to the legal form of the provisions setting up the entity and speci- fying the needs which it is to meet' (paragraph 62). Essentially, however, that 37. The next step will therefore be to judgment is concerned with the definition analyse the Court's case-law, not in the of a body established for the specific hope of finding a definition of supervision purpose of meeting needs in the general for the purposes of Article 1(b), since if interest, not having an industrial or com- such a definition existed the parties would mercial character. I shall therefore concen- clearly have referred to it and I should trate on Mannesmann Anlagenbau Austria immediately have used it as the corner- and Others. stone of my reasoning, but in order to seek any factors which may clarify the approach to be adopted in identifying bodies gov- erned by public law falling within the scope of the Directive. 40. To my mind, and contrary to what the Commission suggests, the relevance of that

— furthermore, it is subject to scrutiny by the Court of Auditors and a State control service is responsible for mon- itoring the printed matter which is subject to security measures; 43. What the Court said in respect of the supervision exercised over the ÖS therefore comes down, in one sense, to stating that the latter is clearly subject to supervision accepted by the Republic of Austria, at the time of its accession, as being such as to — finally, according to the statements meet the criterion of supervision by the made at the hearing by SRG, the majority of the shares in the ÖS are still held by the Austrian State. 15 — OJ 1994 C 241, p. 21, and OJ 1995 L 1, p. 1.

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public authorities within the meaning of tions in terms borrowed directly from the the Directive. Directive it presents the third, without pausing to consider the three alternative criteria which must be applied, as referring to a certain type of relationship with the public authorities, namely close depen- dence. We may thus conclude that the three criteria for the third condition in Arti- 44. The real relevance of Mannesmann cle 1(b) of the Directive constitute three Anlagenbau Austria and Others for the alternative means of establishing the same issue here lies in the résumé of the condi- fact, namely a situation of close depen- tions to be met for there to be a body dence on the public authorities. governed by public law, highlighted in the process of establishing that those condi- tions were met in the case of the ÖS.

49. This pragmatic approach adopted by 50. In a footnote the Advocate General the Court does not, admittedly, enable us to referred to Beentjes, cited above. Subse- decide between the two positions of prin- quently, the Court has made it clear, in ciple advanced by the Commission, on the paragraph 62 of BFI Holding, and para- one hand, and the French Republic, on the graph 36 of Commission v Ireland that not other — that is, whether mere surveillance only the meaning of 'State' but also that of of management is sufficient or whether it is 'contracting authority' must be given a necessary to establish the existence of functional interpretation. supervision entailing the power to intervene in management. In fact, it goes further, and transcends, so to speak, the conflict, invit- ing us to focus not so much on the nature of the supervision exercised as on the parti- cular situation to which the existence of this supervision gives rise. That approach is, I think, in perfect harmony with the aims of the Community provisions on public procurement as stated by Advocate General 51. In applying this approach of the Court Léger in paragraph 47 of his Opinion in one has to ask, not whether each of the Mannesmann Anlagenbau Austria and controls weighing on the SA HLMs and Others: pointed to by the Commission, taken separately, is such as to put those compa- nies in a situation of dependence on the public authorities, but whether, having regard to the legislative and regulatory framework within which the SA HLMs operate, the various controls to which they are subject in fact give rise to close dependence on the public authorities. This 'The Community public procurement leg- is because it is apparent that the same type islation was developed to ensure, at Com- of supervision may give rise to different munity level, respect for the principles of conclusions according to the context in free competition, freedom of establishment which it applies. One type may give rise to and freedom to provide services, which had different effects according to whether, by long been [undermined] by the widespread operation of the provisions which govern tendency to act in that way. Its purpose is to its application, the body subject to it enjoys ensure that traders, of whatever origin, considerable freedom of management or,

55. It will be noted not only that the type of client to which SA HLMs offer their 53. SA HLMs are commercial companies services is fixed by law, but that the and are therefore governed by the 1966 law technical characteristics and the cost price on companies. They are, however, a specific of the housing they may deal with is set by type because their inclusion, by Article administrative decision. L. 411-2 of the Code, in the list of low- cost housing bodies has the effect of making them subject to a host of rules laid down by the Code. Some of these rules apply to all low-cost housing bodies, including in particular public ones and OPACs, whilst others apply specifically to SA HLMs. 56. When an SA HLM is constituted its statutes must comply with the model sta- tutes annexed to Article R. 422-1 of the Code. These are extremely detailed. One finds there, as to the objects of the com- pany, a distinction between the primary object, the letting of housing at a rent fixed 54. Thus, under Article L. 422-2 of the in accordance with the rules laid down by Code their object is to perform, in the the Code, and the construction of such conditions determined by their statutes, housing, and the secondary object, for principally with a view to leasing, the which 17 types of activity are listed, each activities laid down by Article L. 411-1, precisely defined.

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57. The model statutes specify that the Consignment Office, and with the Minister transfer of shares must take place at a price of Housing. not exceeding a maximum, the means of calculation of which is specified, and that such transfer, unless it occurs within a family context, requires the consent of the board of directors or supervisory board, which need not disclose the reasons for its Where the shareholders' meeting is post- consent or refusal. poned, the judicial decision granting an extension of time must be similarly filed.'

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government commissioner, appointed by 63. If that provision had not been revoked decision of the Minister of Housing, shall in 1993, even interpreting management have full powers of documentary and on- supervision as including a power of inter- site investigation. vention, as advocated by the French Repub- lic and the United Kingdom, would lead to the conclusion that SA HLMs are public bodies within the meaning of Article 1(b) of the Directive. He shall be entitled to sit in on meetings of the board of directors, in an advisory capacity, and may, where necessary, call such a meeting. He shall receive, on the same terms as the members of the board of 64. However, the other provisions which I directors, notice of such meetings, agendas have just set out, and which their statutes and any other documents prior to each must include, indicate that SA HLMs are meeting. He shall further be entitled to very tightly constrained, in terms of both copies of the minutes of each meetings and the activities which they may pursue and of the decisions taken by the board. the means of pursuing them and the deployment of capital, and that the profile of a shareholder in such a company is clearly very different from that of a com- pany which is governed only by the 1966 law. He may also order, within 15 days of the date of adoption, a re-examination of all or part of any decision of the board of directors. This examination must take place within 15 days. Action on the decision in question shall be suspended pending the re- 65. This framework should not, of course, examination. be confused with the supervision to which Article 1(b) of the Directive refers. The existence of rules, no matter how precise, which a body must observe is one thing, supervision over the management of that body is another. This follows from the fact He shall file with the Minister for Housing that if monitoring compliance with such an annual report on the activity of the rules and sanctions for their breach could company. only be a matter for the courts one could not speak of supervision by the State, a public body or a body governed by public law.

67. This follows from the fact that if the rules of management are very detailed, the simple supervision of their observance will 70. The first provision of the Code cited by inevitably result in a degree of control by the Commission to show that SA HLMs are the public authorities which is hardly subject to management supervision by the distinguishable from that arising from public authorities is Article L. 422-7. This appointment by the latter of the majority provides as follows: of the members of the management body or from finance which is for the most part public, in the sense that management will be guided by the public authorities and supervision will be merely a means of furthering the domination provided for in 'In case of serious irregularity or serious the framework rules. fault of management or failure on the part of the board of directors or supervisory board of a low-cost housing company or crédit immobilier company, the Minister of Housing and Construction may, after hear- 68. In other words, and to come back to ing the company, or the latter having had the approach laid down in Mannesmann the opportunity to be heard, order the Anlagenbau Austria and Others, where winding up of the company and the there is a strict regulatory framework the appointment of a liquidator.' type of supervision envisaged by the Com- mission in its interpretation of Article 1(b) of the Directive will, from the point of view of close dependence on the public autho- rities, have the same effect as would arise, in the absence of such a framework, from the type of supervision envisaged by the 71. This provision leads me to make three French Republic in its interpretation of that observations. article.

18 — In the circumstances referred to in Article L. 422-7, the Minister for Housing may suspend the hoard of directors or the supervisory body, or the latter only, by reasoned decision, and appoint an interim administrator to whom shall he transferred the full powers of the hoard of directors or the supervisory body for the continuation of current activities. The role of the interim administrator ends either on the appointment of a new hoard of directors or supervisory- hoard by the company in general meeting at the latest within one vear, extendable once from the date of the ministerial decision, or, in the absence of such appoint- 76. Secondly, I fail to see how the Minister ment, on the appointment of a liquidator by the Minister responsible for Housing and Construction for Housing and Construction. Within two years of the appointment of the interim (hereafter 'the Minister') could find a administrator, he must he invited to and may attend all meetings of the board of directors or of the new super- 'serious fault of management' or a 'failure' visory board, and general shareholders' meetings. without exercising management supervi- If in the course of this period he determines that the necessary measures for the recovery of the company have sion, at least at regular intervals. This not been adopted tir implemented, he shall inform the Minister of Housing and Construction. The latter may, supervision is rendered possible by the together with the Minister of the Economy and F r a n c e , obligation imposed on the company to file after having heard the company, either proceed to the winding up and liquidation of the body in question, or with the Minister, amongst others, its further suspend the hoard of directors or the supervisory hoard and appoint an interim administrator for a fixed accounts and, above all, its reports to term. This administrator must, before the expiry of his term, call a general meeting to appoint a new board of shareholders (see paragraph 11 of the directors or supervisory board, failing which he will model statutes, mentioned above). proceed to the winding up and liquidation of the body.

81. Still within the legislative ambit of the Code, the Commission refers to Articles L. 423-1 and L. 423-2, 20 which empower 83. As the Commission points out, the the Minister both to order the liquidation Code does not confine ministerial interven- of an SA HLM whose activity falls below a tion to remedying serious faults or defi- minimum threshold and to order the trans- ciencies in management, or to ensuring compliance with the constraints within which SA HLMs must operate. Rather it 19 — The Commission could also have referred to Article L. establishes as a general principle, by Arti- 422-6, which provides for the power to suspend individual members of the management bodies, and to Article L. 422- cle L. 451-1, of 'administrative supervision' 9, which provides that: of low-cost housing bodies, and therefore 'Where a low-cost housing or crédit immobilier company of SA HLMs. Article R. 451-1 states that fails to file the administrative and accounting documents listed by decree provided for by Article L. 423-3 with the relevant administrative authority for two years, or if it is all low-cost housing bodies, regardless of unable to appoint a board of directors, or to call a general their legal form and method of finance, 'are shareholders' meeting, the administrative authority may order its winding up and appoint a liquidator, on terms subject to the supervision of the Ministers provided for by decree, either upon application of the members holding the majority of the capital, or upon of Finance and of Housing and Construc- application of a representative of the State in the départe- tion'. To ensure the effectiveness of this ment, or on its own initiative.' supervision, Article L. 451-2 21 grants a 20 — Article L. 423-1: 'Any low-cost housing entity which manages less than 1 power of scrutiny over documents held by 500 properties and which has built fewer than 500 properties or granted fewer than 300 loans in 10 years may be wound up and a liquidator appointed by decision of the Minister of Housing and Construction and, in the case of public low-cost housing and construction bodies, 21 — The government officials responsible for implementing the by joint decision of the said Minister and the Minister for supervision provided for by the preceding article may, for the Home Office. the purposes of that implementation only, consult any Any low-cost housing body managing more than 50 000 accounts, correspondence, receipts or records of expendi- properties may be called on, by decision of the Minister of ture in the offices of architects and contractors who have Housing and Construction, to transfer all or some of the dealt with bodies subject to this supervision. properties exceeding this number to one or more desig- Any refusal to enter into communication shall render the nated bodies.' perpetrator liable to a fine of FRF 60 000.'

86. Firstly, Article R. 423-72 of the Code, which makes a decision manifestly con- The committee shall formulate proposals cerning company management, namely the concerning the action to be taken in respect revaluation of assets, to the prior agree- of its inspection reports and to ensure the ment of the Minister. implementation by the supervised bodies of the measures taken by the Ministers to whom it reports.

The committee shall, upon request, provide 87. Secondly, Decree No 93-236 of assistance to the decentralised services of 22 February 1993, on the establishment the Ministers of the Economy, of Finance, of an interministerial committee for the of the Budget and of Industry.'

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88. Plainly, this body is not a mere obser- report in which the government inspectors ver. It may put forward to the Minister confine themselves to recording misuse or proposals concerning the management of misappropriation of funds to the Minister. the various low-cost housing bodies and, if In sum, this programme of inspection the Minister adopts them, it is responsible constitutes more a persistent threat hanging for their implementation. over the bodies concerned than manage- ment supervision in the strict sense, that is, in terms of decisions involving strategic or investment choices.'

89. The French Republic does not, of course, dispute the existence of these var- ious forms of supervision. 92. I consider, however, that I have shown, in relation to Article L. 422-7 of the Code and the model statutes with which SA HLMs must comply, that the supervision 90. In response to the various forms of of them exercised by the public authorities intervention by the Minister identified by is wider than that, embracing as it does all the Commission, the French Republic documents available to the general meeting points to the fact that they are confined to and the reports of the latter. strictly defined situations which occur only very rarely in practice.

forwarded, as well as to the managing which the public authorities exercise over director of the supervised entity, to the local their management, in a situation of close supervisory bodies (the Prefect and the dependence on the public authorities. Departmental Paymaster) and the national supervisory bodies (the Ministers of Finance and Housing respectively). By its nature, and in view of those to whom it is addressed, a MILOS report has the status 96. There is one final matter which arises of an act of administrative supervision with from the way in which the Commission a diagnostic and advisory purpose. If the arrives at a finding of a failure to fulfil managing committee of the MILOS or its obligations. In its application, it asks the permanent commission oversees the action Court to declare that the French Republic to be taken in the light of these observa- has, in making various awards of public tions, the MILOS does no more than make contracts concerning the construction of recommendations on a case by case basis housing by OPACs and SA HLMs, failed to resulting in negotiations with the body fulfil its obligations under Directive 93/37, itself to cause it to move forward, particu- and in particular under Article 11(2) larly if its financial status becomes critical.' thereof. In my opinion it is difficult to find for the Commission on these terms.

— order the French Republic to pay the costs.

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