The ECJ has ruled that the so-called "voluntary ex ante transparency notice" under certain circumstances does not preclude review authorities from declaring a contract ineffective if it was awarded without prior publication of a contract notice. Moreover, the ECJ ruled that review authorities must declare a contract ineffective if the contracting authority could not legitimately hold that that the conditions for directly awarding the contract were in fact satisfied (ECJ 11.09.2014, Case C—19/13 Fastweb SpA).

Legal background

The (illegal) direct awarding of (public) contracts is regarded as the most serious breach of Community law in the field of public procurement on the part of a contracting authority or contracting entity. In order to combat the illegal direct awarding of contracts, the Remedies Directives (EC 89/665) as amended by Directive 2007/66/ΕC ("Remedies Directive") stipulates in principle a duty of the Member States to consider an (illegally) directly awarded contract ineffective. According to Article 2d(1) of the Remedies Directive, the Member States shall ensure that such a contract is considered ineffective by a review body that is independent of the contracting authority or that the contract’s ineffectiveness is the result of a decision of such a review body in certain circumstances outlined in that provision, cf., including direct illegal award.

However, contracting entities can avoid the sanction of ineffectiveness by following the procedure outlined in Article 2d(4) of the Remedies Directive. Under that provision, the general rule (of ineffectiveness) does not apply if the contracting authority: (i) considers that the awarding of a contract without prior publication of a contract notice in the Official Journal is permissible, and (ii) has published in the Official Journal a voluntary ex ante transparency notice announcing that it intends to conclude the contract, and (iii) the contract has not been concluded before the expiry of at least 10 calendar days with effect from the day following the date of the publication of the notice.

Facts of the case

In 2003, the Ministero dell’Interno ("Ministero") entered into an agreement with Telecom Italia for the management and development of telecommunications services. As that agreement was due to expire on 31st December 2011, the Ministero considered it possible to use the negotiated procedure without prior publication of a contract notice by arguing that for technical reasons and in order to protect certain exclusive rights, Telecom Italia was the only economic operator in a position to perform the contract at issue. Subsequently the Ministero published a voluntary ex ante transparency notice, announcing its intention of awarding an electronic communications contract to Telecom Italia by applying the negotiated procedure without prior publication notice.

After the expiry of the 10 days standstill period and the signing of the respective framework agreement, Fastweb brought an action before the Regional Administrative court for the annulment of the awarding of the contract, and sought a declaration that the contract was ineffective. The Court (and subsequently the appeals court) upheld the annulment of the contract’s awarding on the grounds that the Ministero had failed to demonstrate that the conditions for using a negotiated procedure without prior publication of a notice had been satisfied.

The appeals court approached the ECJ asking whether, in the event that a public contract was awarded without prior publication of a contract notice but the conditions laid down in Directive 2004/18 for use of that procedure had not been satisfied, the contract is not to be declared ineffective if the contracting authority had published in the Official Journal a notice to ensure ex ante transparency and, before concluding the contract, had allowed the 10-day minimum standstill period to elapse from the day following the date on which that notice was published.

Key findings of the ECJ

Based on the opinion of the Advocate General (GA Bot 10.04.2014, Case C-19/13), the ECJ ruled the following:

  1. Where a public contract has been awarded without prior publication of a contract notice in the Official Journal, but doing so was not permissible under Directive 2004/18, the contract may not be declared ineffective if the three conditions laid down in Article 2d(4) of Directive 89/665 are satisfied.
  2. When verifying whether those conditions have been fulfilled, review bodies must carry out an effective review verifying whether the contracting authority
  1. considers that the awarding of a contract without prior publication of a contract notice is permissible,
  2. has published a notice as described in Article 3a of this Directive expressing its intention to conclude the contract, and
  3. has not concluded the contract before the expiry of a period of at least 10 calendar days with effect from the day following the date of the publication of this notice.

 

  1. The review body is under a duty to determine whether the contracting authority acted diligently and whether it could legitimately hold that the conditions laid down in the Directive 2004/18 were in fact satisfied. In that regard, the review body must take into consideration the circumstances and the reasons mentioned in the notice under Article 3a(c) of Directive 89/665. That notice must clearly and unequivocally state the reasons that caused the contracting authority to consider it legitimate to award the contract without prior publication of a contract notice, so that interested persons are able to decide with full knowledge of the relevant facts whether they consider it appropriate to bring an action before the review body and so the review body is able to undertake an effective review.
  2. If the review body finds that the conditions laid down in Article 2d(4) of Directive 89/665 are not satisfied, it must declare that the contract is ineffective, in accordance with the rule laid down in Article 2d(1)(a) of that directive.

Conclusion

The protection of the volentery ex ante transparency notice against ineffectiveness is not absolute.

The judgment can be interpreted to the effect, that in situations where the contracting authority knew or ought to have known that directly awarding the contract was not permissible, the review authority must declare the contract as ineffective, even if a voluntary ex ante transparency notice was published. Hence, contracting authorities are well advised to carefully and with due diligence examine whether the direct awarding of a contract may be considered as permissible prior to publishing an ex ante transparency notice and directly awarding the contract. The respective voluntary ex ante notice shall clearly and unequivocally describe the reasons that caused the contracting authority to consider it legitimate to award the contract without prior publication of a contract notice.

Through this ruling, the ECJ has further clearly outlined that the publication of a voluntary ex-ante transparency notice may not be "abused" with the aim of circumventing the obligation to tender under procurement law. The ex-ante transparency notice only provides protection against ineffectiveness of a directly awarded contract in case the contracting authority considered that approach permissible after diligently examining the legitimacy. In all other cases, the contract might be declared null and void despite the publishing of an ex ante notice in advance.