The concept of a body governed by public law has been the subject of much debate in the field of public procurement for quite some time.
The Court of the Central Netherlands and the Arnhem-Leeuwarden Court of Appeal, for instance, have both ruled that NS Stations, a division of the NS group, engaged in managing and operating railway stations, is a body governed by public law within the meaning of the Aanbestedingswet 2012 (Public Procurement Act 2012).
However, there is still a great deal of ambiguity.
For example, according to the European Commission, housing corporations are subject to the obligation to invite tenders, but the Dutch government is of the opinion that this is not the case. The courts have not yet ruled on that question. In 2014, the preliminary relief judge of the Court of Zeeland-West-Brabant classified healthcare insurers as bodies governed by public law and therefore as entities subject to procurement requirements, but this opinion was not shared by the Den Bosch Court of Appeal, which overturned the judgment and ruled that health care insurers were not bodies governed by public law. Last year, the preliminary relief judge of the Court of The Hague found that, on grounds of reasonableness and fairness, healthcare administration offices must in any event comply with the procurement principles, given the special position that they represent in the market. The question whether they constitute bodies governed by public law is irrelevant in this respect. The European Court of Justice (“ECJ”) recently has given new impetus to the debate. It gave practical guidance to the Italian court to help it assess whether the Italian Football Association (Federazione Italiana Giuoco Calcio (FIGC)) qualifies as a body governed by public law. So plenty of food for thought. Leyla Bozkurt and Tess Heystee therefore wrote an article for the Nederland Tijdschrift voor Europees Recht (Dutch European Law Journal – “NTER”), in which they address the debate on the definition of a body governed by public law.
VSG, an Italian transport company, was invited by the Italian football association FIGC to participate in negotiations for transport services. The contract was awarded to a competitor, Consorzio. VSG argued before the Italian administrative court that FIGC, as a body governed by public law, should not have awarded the contract privately, but in compliance with the procurement rules. The court followed this argument and annulled the awarding of the contract to Consorzio.
FIGC and Consorzio argued on appeal that FIGC did not qualify as a body governed by public law and therefore did not fall within the scope of the procurement rules.
The appeal court decided to submit questions to the ECJ.
What is a body governed by public law?
In order to understand the rest of the case, it is important to first explain what constitutes a body governed by public law. Briefly stated, a body governed by public law is a body that bears great resemblance to a government institution. For this reason, a body governed by public law also has an obligation to issue a call for tenders. That follows from Article 1.1 of the Dutch Public Procurement Act, which provides that also a body governed by public law is a contracting authority. Specifically, a body governed by public law is an entity that:
- specifically aims to provide for needs of general interest, other than of an industrial or commercial nature; and
- has legal personality; and
- exhibits a high degree of government dependency by virtue of having
- public financing primarily; or
- governmental oversight of the management of the entity; or
- more than half of the members of the administrative, management or supervisory body are appointed by the government.
Requirements 1 to 3 are cumulative (meaning that all three of the requirements must be met); the criteria in 3(a) to (c) are alternative (meaning that it is sufficient that one of the three is met). Another principle is that the term “body governed by public law” must be given a functional interpretation, meaning that the body’s actual function is the most important factor, not its formal classification: the decisive factor is not what the body is (under national law), but rather what it does.
Over the years, the ECJ has formulated several points of reference that can be used to answer the question whether the various requirements are met.
In its judgment, the ECJ also gave the Italian court several guidelines to determine whether FIGC qualifies as a body governed by public law. The Italian court must assess, for instance, whether FIGC meets needs in the general interest and whether the authorities supervise or finance FIGC. The role played by CONI, the Italian Olympic Committee, is relevant in this regard. CONI is a public authority that has various tasks and powers, one of which is “monitoring” the Italian sports associations (including FIGC). The question is whether CONI’s supervision constitutes government control.
An obligation to issue a call for tenders for sports associations?
In response to the judgment in the case of FIGC, we ourselves had already written a blog about the possible classification of the KNVB, the Dutch Football Association, as a body governed by public law. We addressed that question in more detail in the NTER article, also consulting the KNVB’s articles of association and paying attention to the NOC*NSF, the KNVB’s umbrella organisation. Is it possible that, contrary to the conclusion in the blog, the KNVB is a body governed by public law after all? Moreover, 77 sports associations operate in the Netherlands: should they perhaps (also) be classified as bodies governed by public law?
Furthermore, we observe the trend referred to in the introduction above: a growing number of bodies are becoming aware of public procurement law and are therefore required to comply with public procurement rules. Also bodies that appear to be of a private-law nature may nevertheless be subject to procurement requirements. Lawyers who generally have little to do with public procurement law should bear in mind that not only traditional public authorities, such as municipalities, provinces, water boards and the central government, are subject to procurement requirements: a multitude of institutions from which one would not expect it at first sight may nevertheless have a procurement obligation.
Curious to read the entire article? You can find it here (in Dutch only).
More information on sustainable procurement or calls for tenders, either as a body subject to procurement rules or not, and information on tendering for contracts, can be found at innovatiepartnerschap.info