C-18/01

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Body governed by public law means any- which fulfil the criteria referred to in body: the second subparagraph of this point are set out in Annex I to Directive 71/305/EEC. These lists shall be as exhaustive as possible and may be reviewed in accordance with the pro- cedure laid down in Article 30b of that Directive; — established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character, and

— having legal personality, and 2. Finnish transposing act

4. Directive 92/50 was transposed into Finnish law by the Julkisista hankinnoista annettu laki (Law on public procurement) of 23 December 1992. The concept of — financed, for the most part, by the bodies governed by public law is defined in State, or regional or local authorities, Article 2 of that law on the basis of the or other bodies governed by public law; wording of Article 1(b) of Directive 92/50. or subject to management supervision by those bodies; or having an adminis- trative, managerial or supervisory board, more than half of whose members are appointed by the State, 5. In the Finnish law the term 'contracting regional or local authorities or by other authority' is defined as a legal person bodies governed by public law. 'belonging to the public administration'. This requirement is deemed to be satisfied where the legal person

(1) was established to look after tasks in The lists of bodies or of categories of the general interest with no industrial such bodies governed by public law or commercial character and

8. Taitotalo is arranging for the construc- tion of the 'Tyyskän osaamiskeskus' in district 1 of the town of Varkaus. The company intends to buy the land from the town when the site has been parcelled out. I I I— Facts of the initial proceedings The building project comprises two or three office blocks and a multi-storey car park, which are to be leased to firms in the technology sector. Taitotalo is purchasing the project management service and mar- keting and coordination of the activity 6. The main action concerns the award by from Keski-Savon Teollisuuskylä Oy (here- the defendant, Varkauden Taitotalo Oy inafter 'Teollisuuskylä'). (hereinafter 'Taitotalo') of a contract con- cerning the design and construction services for a building project. The commercial complex to be constructed by Taitotalo in the town of Varkaus is to be subsequently leased to firms in the technology sector. 9. Teollisuuskylä was established to build office premises for undertakings. According to its statutes, the company's field of activity comprises the construction, acquisition and administration of buildings and land for commercial purposes on the 7. Taitotalo is a company wholly owned by basis of ownership and leasehold rights the town of Varkaus. According to its with a view to then ceding these properties statutes, its field of activity is the adminis- at cost price primarily to undertakings. The tration of properties and shares in property company is a subsidiary of the development companies and their sale and lease and the company Keski-Savon Kehittämisyhtiö Oy organisation and supply of property main- (hereinafter 'Kehittämisyhtiö'), which has tenance services and other service activity the task of promoting the development of necessary in the administration of prop- industrial and commercial activities in the erties. The board of the company comprises central Savo economic area. Nearly half of three ordinary members appointed by the this company's shares are owned by the general meeting. The town of Varkaus town of Varkaus. Most of the other shares holds all the voting rights at the general in Kehittämisyhtiö are owned by other meeting. All the board members are offi- municipalities in the region.

11. Teollisuuskylä then again invited tenders for the design and project manage- ment works for the Tyyskän osaamiskeskus on 4 September 1999. The tender docu- ments showed the town of Varkaus and 14. The applicants in the main proceedings Teollisuuskylä to be the contracting auth- maintain that Taitotalo has infringed legis- orities. According to the request for a lation on the award of contracts. preliminary ruling, a reference to the call for tenders was also published in the Official journal of the European Commu- nities, Series S — Invitations to Tender, No 35 of 2 September 1999 under the heading 'Design contest'. This showed the town of Varkaus to be the contracting 15. On 15 May 2000 Taitotalo applied to authority for a property company to be the Kilpailuneuvosto for the applicants' established. application to be declared inadmissible on the ground that it is not a contracting authority within the meaning of Paragraph 2 of the Julkisista hankinnoista annettu laki. Although the requirements of the second and third subparagraphs of 12. Taitotalo informed the tenderers on Paragraph 2(2) were satisfied, the company 6 April 2000 — the date on which it was had not been founded to meet needs in the entered in the commercial register — that general interest not having an industrial or the design and project management of the commercial character, and it was not there- Honeywell-Measurex Oy building had fore a legal person governed by public law.

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The public funds approved for the contract award of public contracts, where the com- amounted to less than half the value of the pany acquires design and construction ser- contract. Taitotalo bases its reasoning on a vices for a building lot comprising offices to ruling of the Korkein hallinto-oikeus (Fin- be leased to undertakings? land's Supreme Administrative Court) of 1 December 1999.

V — Comments by the parties and legal 17. Given the frequency and significance of analysis these cases, the Kilpailuneuvosto considers it very important to obtain an interpre- tation of the relevant provisions of Direc- tive 92/50. It has therefore referred the following questions to the Court of Justice: 18. The defendant, the Finnish, French and Austrian Governments and the Commis- sion took part in the written proceedings before the Court. Before the hearing the Finnish Government was requested in writ- ing by the Court to describe in greater 'Is a share company which a town owns detail the conditions under which 'develop- and in which the town exercises control to ment companies' operate and especially to be regarded as a contracting authority explain whether these companies have a within the meaning of Article 1(b) of profit motive and bear their economic risk Council Directive 92/50/EEC relating to themselves. The Finnish Government and the coordination of procedures for the the Commission took part in the hearing.

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20. The Commission's view is that it is not apparent what legislation in the main action formed the basis for the call for tenders and who formally acted as the contracting authority inviting the tenders. 22. The Court takes the view in settled The request for a preliminary ruling did not case-law that it is solely for the national reveal whether Taitotalo's activity court before which the dispute has been amounted to no more than the activities brought and which must assume responsi- described or whether the defendant had a bility for the subsequent judicial decision to further area of activity. Answering the determine, with due regard for the par- abstract questions submitted for a prelimi- ticular circumstances of the case, the need nary ruling was also hampered by the fact for a preliminary ruling to enable it to that it was obviously a matter of subsuming deliver judgment.4 This principle is justi- to the scope of Directive 92/50 not one fied, according to the Court of Justice, by legal person but a group of legal persons. the national court's direct and accurate The Commission therefore wonders knowledge of the facts of the case, which whether the Kilpailuneuvosto'sexplanation places it in the best position to decide on of the factual and legal context in which its this question.5 Consequently, where the questions arise is sufficiently clear within questions submitted by the national court the meaning of the case-law of the Court of concern the interpretation of Community Justice. law, the Court of Justice is, in principle, bound to give a ruling. 6

23. However, the Court of Justice also 25. In its request for a preliminary ruling 12 emphasises in settled case-law the need the Finnish Competition Council makes it for the national court to define the factual abundantly clear that it considers the inter- and legislative context of the questions it is pretation of Article 1(b) of the Directive to asking or, at the very least, to explain the be important because this provision of assumptions of fact on which those ques- Community law is linked to the award tions are based so that the Court of Justice procedure in the main action. The parties may arrive at an interpretation of Commu- cannot agree in the main action whether nity law which will be of use to the national Taitotalo is a legal person within the court. 7 Article 234 EC does not assign to meaning of the Finnish transposing act, the Court of Justice the task of giving a Paragraph 2(2) of the Julkisista hankin- ruling on a question referred to it by a noista annettu laki, established for the national court where it is quite obvious that purpose of looking after tasks in the general the interpretation of Community law interest with no industrial or commercial sought by that court bears no relation to character. If this company is to be regarded the actual facts of the main action or its as part of the public administration, its purpose or where the problem is hypo- award of contracts is, in the Kilpailuneu- thetical, or where the Court does not have vostoa view, governed by the legislation on before it the factual or legal material the award of public contracts. necessary to give a useful answer to the questions submitted to it. 8

2. Interpretation of Article 1(b) of Direc- 31. At the hearing the representative of the tive 92/50 Finnish Government stated in response to a question from the Judge-Rapporteur that it was possible and normal practice under Finnish law for the founders of a company to act on its behalf even before it had been 28. In its main question the Kilpailuneu- entered in the commercial register. The vosto asks whether companies limited by- newly created legal person then sub- shares which are controlled by public sequently assumed the liabilities thus authorities are engaging in an industrial accrued, which were treated as if they had or commercial activity if they construct existed as company liabilities from the industrial or commercial premises for pri- outset. Until that time, however, the liabil- vate undertakings, with the result that they ity of the founders of the company was cannot be deemed to have been established unlimited. for the specific purpose of meeting needs in the general interest not having an industrial or commercial character.

32. This leaves only one requirement attached to the concept of a body governed by public law in need of interpretation in 29. In agreement with the parties to the the present case: has an undertaking such as main proceedings, the parties who have the defendant been established for the submitted comments on the request for a specific purpose of meeting needs in the preliminary ruling largely take the view general interest not having an industrial or that the defendant in the initial proceed- commercial character? ings, Taitotalo, satisfies the third as well as the second requirement of the second sub- paragraph of Article 1(b) of Directive 92/50. In the French Government's view, these requirements have at least been met since the date on which Taitotalo was entered in the commercial register. (a) Comments by the parties

34. Taitotalo does not, in its opinion, Mannesmann Anlagenbau Austria and create general conditions (infrastructure) Others. 15 It believes that the Court had for economic activities in the municipality, considered in particular whether the activ- but carries out building projects for indi- ity of an entity was associated with sover- vidual undertakings in accordance with eign powers with a view to determining their specific interests. It had a commercial whether that entity was meeting needs in purpose in that it operated at normal the general interest not having an industrial market prices. or commercial character. In the French Government's view, the defendant's activ- ity in the present case has nothing to do with sovereign powers. In this respect the defendant's activity clearly differed from the activities of other entities on whose 35. In support of its arguments Taitotalo classification as contracting authorities the refers to the Court's judgments in Case Court had already been called upon to give C-44/96 Mannesmann Anlagenbau Austria a ruling. 16 and Others 13 and Case C-360/96 BFI Holding. 14 In the former judgment it had been found that an undertaking which carried out economic activities should not be classified as a public body within the meaning of the Directive solely because it had been established by a contracting 37. To make the distinction, the French authority or because the latter provided Government also refers to the judgment in the undertaking with funds stemming from Case C-237/99 Commission v France, 17 in activities in the general interest not having which it was ruled that the building and an industrial or commercial character. In letting of low-rent housing meet needs in Taitotalo's view, the Court confirmed in the general interest not having an industrial this ruling that an undertaking belonging to or commercial character. The building of the public authorities did not fall within the low-rent housing was not, however, com- scope of the Directive if it had not been parable in this respect to the construction established for the specific purpose of and leasing of industrial or commercial meeting needs in the general interest not premises. having an industrial or commercial char- acter. The link that existed between a contracting authority and an undertaking because of the ownership structure and financing was not enough in itself to make the undertaking a public body. 38. The Finnish Government, on the other hand, takes the view that a company such as the defendant has been established for the specific purpose of meeting needs in the general interest of the citizens of the municipality within the meaning of Direc- 36. The French Government similarly tive 92/50. refers to the judgment in Case C-44/96

41. The policy of economic promotion, according to the Finnish Government, is one of the essential tasks for which the Finnish municipalities are generally respon- sible. Creating infrastructure for economic activities was regarded as a common matter 40. In its comments the Finnish Govern- which was in the interests of the munici- ment refers in particular to the legal status pality's inhabitants. Undertakings of the and the tasks of the municipalities in defendant's type were meant to create Finland. Paragraph 121 of the Finnish industrial and commercial infrastructure Constitution stated that Finland was in the area of their local authority by divided into municipalities whose adminis- constructing and leasing industrial and tration must be based on self-government commercial premises and offering com- by their inhabitants. This provision guar- parable services. Finnish local authorities anteed the local authorities a comprehen- set up 'development companies' com- sive right to govern themselves which was parable to the defendant with a view to enshrined in law. On this legal basis the attracting new branches of industry and municipalities provided a large proportion commerce and promoting the development of public services in Finland. Within the of business activities, especially when no municipalities' area of activity a distinction one in the private sector could be found to should be made between 'general' and create such infrastructure.

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43. Services like those offered by the defendant might also be provided for purely private-sector purposes. The pur- pose for which a company was established could not therefore be inferred from its activity; in particular, the area of activity of a development company could not be unequivocally deduced even from the com- 46. Like the Finnish Government, the Aus- mercial register. trian Government takes the view that the spirit and purpose of the legislation should be taken into account when determining the personal scope of the directives on the award of public contracts. In the context of the interpretation of the concept of general interest the Austrian Government refers to its written comments in Case C-373/00 Adolf Truley. 19 The restriction of those 44. The Finnish Government maintains benefiting from a given activity did not, in that it is the defendant's task to provide its view, mean that the activity itself did not the inhabitants of the municipality of serve the general interest. The promotion of Varkaus with services in connection with economic activities and therefore in the general interest. It was for this that it had 18 — Judgment in Case C-360/96 (cited in footnote 14). been established by the municipality. It 19 — See my Opinion in this case, [2003] ECR I-1931, I-1935.

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51. What is first required is an interpre- 49. At the hearing the Commission's rep- tation of the term 'need in the general resentative also reaffirmed that the Kilpai- interest' so that it may be decided whether a company such as Taitotalo is meeting needs of this nature. Account must be taken 20 — Cited in footnote 4. in this process of the special features of the

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specific case so that a useful interpretation application to be predictable for all con- may be given. Only then is it possible to cerned, 23 this finding is problematical. An comply with the Court's requirement that interpretation must therefore lead to objec- 'contracting authorities' be defined in func- tive and transparent criteria for the defini- tional terms. 21 tion of a need as being in the general interest. But if the authors of the directive had specified needs in the general interest, a functional interpretation as to the purpose of the directive would have been far from 52. The next step is to consider whether the easy. Given the objectives of the directives satisfaction of the need concerned by a on the award of public contracts, however, company such as Taitotalo is of an indus- the concept must be more accurately trial or commercial character. defined to ensure the practical effectiveness of the principles of the free movement of goods and the freedom to provide services, as the Court has ruled on several occasions in connection with the legal form of entities or the underlying provisions. 24 (i) Need in the general interest

54. As regards the principle of legal cer- tainty inherent in Community law, which requires a legal provision to beclear and its 56. As I pointed out in my Opinion in Case C-373/00 Truley v Bestattung Wien, 27 the Court has meanwhile classified a number of 21 — See the judgment in BFI Holding (cited in footnote 14, paragraph 62), with a reference to the judgment in Case 31/87 Beentjes [1988] ECR 4635, paragraph 11. 22 — Council Directive 93/36/EEC of 14 June 1993 coordinat- 23 — See the judgment in Case C-143/93 Van Es Douane ing procedures for the award of public supply contracts, Agenten [1996] ECR I-431, paragraph 27. OJ 1993 L 199, p. 1; Council Directive 93/37/EEC of 24 — See the judgments in BFI Holding (cited in footnote 14, 14 June 1993 concerning the coordination of procedures paragraph 62), Beentjes (cited in footnote 21, for the award of public works contracts, OJ 1993 L 199, paragraph 11), and Case C-306/97 Connemara Machine p. 54; Council Directive 93/38/EEC of 14 June 1993 Turf [1998] ECR I-8761, paragraph 31. coordinating the procurement procedures of entities oper- 25 — Judgment in Mannesmann Anlagenbau Austria and Others ating in the water, energy, transport and telecommuni- (cited in footnote 13, paragraph 24). cations sectors, OJ 1993 L 199, p. 84; Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of 26 — Judgment in BFI Holding (cited in footnote 14, procedures for the award of public service contracts, paragraph 51). OJ 1992 L 209, p. 1. 27 — Cited in footnote 19, paragraph 64.

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57. In my Opinion on Case C-373/00 Truley v Bestattung Wien 29 I also explained why I consider an interpretation of needs in the general interest depending on how the Member State itself defines its 59. The Finnish Government has also area of activity to be incompatible with the explained what needs a municipality may purpose of the directives on the award of seek to meet solely on the basis of its public contracts. Both the autonomy of constitutional right of self-government, Community law and the goal of its uniform alongside its specific statutory duties: they application argue for the concept of needs must serve the interests and needs of the in the general interest to be understood and inhabitants of a municipality and be of interpreted as an autonomous concept in relevance to the whole community. Community law. This view is endorsed by the purpose of the directives on the award of public contracts, which is to contribute to the completion and operation of the internal market. At the same time, how- ever, I pointed out that an autonomous interpretation of the concept based on 60. National law thus requires that the Community law must not result in national municipalities' activities benefit their law becoming irrelevant. inhabitants. This suggests that the activities of municipal companies should always be classified as being in the general interest.

58. The Finnish Government has empha- sised that the services offered by a company such as Taitotalo, i.e. the acquisition, 61. Taitotalo has emphasised, however, that its activities are guided primarily by the needs of its client undertakings. The 28 — Council Directive "1/305/EEC ot 26 July 1971 concerning question which then arises is whether this the coordination or procedures tor the award or puhhc works contraéis. OJ 1997 1. 185, p. v client orientation is inconsistent with an 29 — Cued in footnote 19, paragraphs 4 2 t o 45. activity in the general interest. It should be

63. The representative of the Finnish Gov- ernment stated at the hearing that the municipalities establish development com- panies to attract business and so to pro- mote economic activity in their area. 66. An intermediate conclusion to be drawn is that companies limited by shares which are controlled by the public auth- orities and build industrial or commercial premises for private undertakings to create more favourable conditions for business activities in a municipality can be regarded 64. The first supplementary question, as having been established for the specific which reveals the background against purpose of meeting needs in the general interest. The question is, however, whether the needs do not have an industrial or 30 — Cited in footnote 4, paragraph 34. commercial character.

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(ii) Meeting needs not having an industria 69. In its past case-law the Court has or commercial character outlined the following guides for interpre- ting the term:

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Government has proposed. 36 This presup- the defendant in the main action do not poses a definition both of the market for have a profit motive. The representative of the services in question and its geographical the Finnish Government has submitted that extent. 37 This is a task for the requesting Finnish local government law forbids the court to perform in full knowledge of the municipalities to establish companies on facts of the case. purely economic grounds to make profits. This argues against an economic activity, since business activity is, as a general rule, geared to the making of a corporate profit. If the municipalities are prevented by law from establishing companies with a profit 72. The comments of the parties suggest motive, the conclusion must be that there is that there is no significant competition in little or no room for the establishment of the area of activity of the company con- companies to meet needs having an indus- cerned. This is, however, an assumption. As trial or commercial character. the existence of competition is no more than an indication, a statement about it is not essential for an interpretation of the term 'needs having an industrial or com- mercial character'.

75. Taitotalo, on the other hand, empha- sises that it implements building projects for individual undertakings in accordance 73. All the parties agree that the activity of with their specific interests and that it does a company such as the defendant in the so at normal market prices. The French main action consists of the provision of Government's view that what is decisive for services which may also be offered by a the assessment of the task of companies private undertaking. The views of the such as Taitotalo is the activity of the entity parties differ, on the other hand, when it concerned and not the activity of those for comes to analysing the need which is whom the buildings are constructed must satisfied. be endorsed in this context.

mercially that the entity offering them a economic operators established in one certain activity or service is also doing so Member State who wish to offer goods or commercially. It is possible, after all, to services to contracting authorities estab- conceive of many needs not having an lished in another Member State. The risk of industrial or commercial character which preference being given to domestic ten- the State chooses, for reasons of public derers or certain applicants in the award of welfare, to meet itself or through entities contracts by contracting authorities — forming part of it, in order to retain a possibly without due regard for the econ- decisive influence and which arise only in omic and financial consequences — is to the case of undertakings operating com- be avoided. The Community legislature mercially. intended that the directives should be applied to entities which escape market forces in whole or in part. 39

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80. In the case of undertakings which meet 83. If, however, Taitotalo does indeed bear needs in the general interest not having an its economic and financial risk itself, with- industrial or commercial character there out any prospect of assistance from the are always likely to be means by which the public authorities, it is meeting a need public authorities can offset any losses so which has an industrial or commercial that it does not become impossible for such character. undertakings to perform the tasks entrusted to them. The public authorities will refuse to give their support only when they have no further interest in the needs being met because they have ceased to be in the 84. The conclusion is therefore that the general interest. answer to the Kilpailuneuvosto'squestion is that a company limited by shares which is owned and controlled by a town and which provides design and construction services for a building project that includes industrial or commercial premises which are leased to undertakings in the general interest should be regarded as a contracting authority within the meaning of Article 1 (b) 81. Applying this yardstick to the defend- of Directive 92/50/EEC relating to the ant in the main proceedings, the referring coordination of procedures for the award court should begin by considering the of public contracts if it is not required to extent to which Taitotalo's statutes require bear the economic risk of its activity alone, the town of Varkaus to make good any because there is a possibility of any losses deficits incurred by Taitotalo. An obli- being offset by the town. gation of this nature might also ensue from the Member State's relevant legislation or from customary practice. What should be considered in this context is not only whether there is an explicit provision on the offsetting of deficits but also standard practice. If, for example, the town of Varkaus does in fact make good or stand 3. First supplementary question surety for any deficits incurred by the defendant in the main proceedings, the referring court must take this into account. (a) Comments by the parties

89. It is therefore relevant to the assessment of the matter at issue that a building project 93. The answer to the second supplemen- implemented by the town is meant to create tary question must therefore be that the the conditions for business activities in the leasing of the buildings to be constructed to municipality, because a need in the general only one undertaking is irrelevant to the interest is then satisfied. assessment of the matter at issue.

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VI — Conclusion

94. In view of the above deliberations I propose that the questions submitted by the Kilpailuneuvosto should be answered as follows:

A company limited by shares which is owned and controlled by a town and which awards contracts for design and construction services for a building project that includes industrial and commercial premises leased to undertakings in the general interest must be regarded as a contracting authority within the meaning of Article 1(b) of Directive 92/50/EEC relating to the coordination of procedures for the award of public service contracts if it is not required to bear the economic risk of its activity alone, because there is a possibility of any losses being offset by the town.