Case C-385/02

Commission of the European Communities

v

Italian Republic

(Failure of a Member State to fulfil obligations – Directive 93/37/EEC – Public works contracts – Negotiated procedure without prior publication of a contract notice)

Summary of the Judgment

1.        Approximation of laws – Procedures for the award of public works contracts – Directive 93/37 – Derogations from common rules – Strict interpretation – Existence of exceptional circumstances – Burden of proof

(Council Directive 93/37, Art. 7(3))

2.        Approximation of laws – Procedures for the award of public works contracts – Directive 93/37 – Derogations from common rules – Repetition of similar work awarded to the undertaking to which the original contract was awarded – Duration

(Council Directive 93/37, Art. 7(3)(e))

3.        Actions for failure to fulfil obligations – Objective character – Excusable error – Not permissible

(Art. 226 EC)

1.        Article 7(3) of Directive 93/37 concerning the procedures for the award of public works contracts which authorise derogations from the rules intended to ensure the effectiveness of the rights conferred by the Treaty in relation to public works contracts must be interpreted strictly and the burden of proving circumstances justifying a derogation lies on the person seeking to rely on those circumstances.

Having regard to the wording of Article 7(3)(b) of the directive, which provides that the contracting authorities may award their public works contracts by negotiated procedure without prior publication of a contract notice ‘when, for technical or artistic reasons or for reasons connected with the protection of exclusive rights, the works may only be carried out by a particular contractor’, a Member State must prove that technical reasons make it necessary to award the relevant contracts to the contractor who was entrusted with the original contract.

It is true that the aim of ensuring the continuity of works under complex projects which relate to the flood safety of an area is a technical reason which must be recognised as being important. However, merely to state that a package of works is complex and difficult is not sufficient to establish that it can only be entrusted to one contractor, particularly where the works are subdivided into lots which will be carried out over many years.

(see paras 19-21)

2.        Article 7(3)(e) of Directive 93/37 concerning the procedures for the award of public works contracts authorises the use of the negotiated procedure without prior publication of a contract notice for new works consisting in the repetition of similar works entrusted to the undertaking to which an earlier contract was awarded only ‘during the three years following the conclusion of the original contract’.

In the light of a comparison of the language versions of that provision, the expression ‘conclusion of the original contract’ must be understood as meaning the time when the original contract was entered into and not as that of the completion of the works to which the contract relates.

That interpretation is confirmed by the objective of the provision in question and its place in the scheme of Directive 93/37.

First, as it is a derogating provision which falls to be strictly interpreted, the interpretation which restricts the period during which the derogation applies must be preferred rather than that which extends it. That objective is met by the interpretation which takes the starting point as being the date on which the original contract is entered into rather than the, necessarily later, date on which the works which are its subject-matter are completed.

Secondly, legal certainty, which is desirable where procedures for the award of public procurement contracts are involved, requires that the date on which the period in question begins can be defined in a certain and objective manner. While the date on which a contract is entered into is certain, numerous dates may be treated as representing the completion of the works and thus give rise to a corresponding level of uncertainty. Moreover, while the date on which the contract is entered into is clearly established at the outset, the date of completion of the works, whatever definition is adopted, may be altered by accidental or voluntary factors for so long as the contract is being carried out.

(see paras 33-34, 36-38)

3.        Proceedings against a Member State for failure to fulfil obligations afford a means of determining the exact nature of the obligations of the Member States, particularly where there are differences of interpretation, and are based on the objective finding that a Member State has failed to fulfil its obligations under the Treaty or secondary legislation. Accordingly, the concept of excusable error cannot be relied on by a Member State to justify a failure to comply with the obligations imposed on it under a directive.

(see para. 40)




JUDGMENT OF THE COURT (Second Chamber)
14 September 2004(1)


(Failure of a Member State to fulfil its obligations – Directive 93/37/EEC – Public works contracts – Negotiated procedure without prior publication of a contract notice)

In Case C-385/02,ACTION under Article 226 EC for failure to fulfil obligations, brought before the Court on 28 October 2002,

Commission of the European Communities, represented by K. Wiedner and R. Amorosi, acting as Agents, with an address for service in Luxembourg,

applicant,

v

Italian Republic, represented by M. Fiorilli, acting as Agent, with an address for service in Luxembourg,

defendant,



THE COURT (Second Chamber),,



composed of: C.W.A. Timmermans, President of the Chamber, J.-P. Puissochet, J.N. Cunha Rodrigues (Rapporteur), R. Schintgen and N. Colneric, Judges,

Advocate General: J. Kokott,
Registrar: M. Múgica Arzamendi, Principal Administrator,

having regard to the written procedure and further to the hearing on 10 March 2004,after considering the observations submitted by the parties,

after hearing the Opinion of the Advocate General at the sitting on 29 April 2004,

gives the following



Judgment



1
By its application the Commission of the European Communities has brought an action for a declaration that, as the Magistrato per il Po di Parma, a local agency of the Ministry of Public Works (now the Ministry for Infrastructure and Transport) awarded contracts for the completion of the construction of an overflow basin to hold flood waters of the Parma watercourse in the Marano area (in the Parma commune) as well as for works relating to the development and completion of an overflow basin for the Enza watercourse and to the retention of flood waters of the Terdoppio watercourse south‑west of Cerano by the negotiated procedure without prior publication of a contract notice, when the conditions necessary in that regard were not satisfied, the Italian Republic has failed to fulfil its obligations under Council Directive 93/37/EEC of 14 June 1993 concerning the coordination of procedures for the award of public works contracts (OJ 1993 L 199, p. 54) (hereinafter ‘the Directive’) and in particular Article 7(3) thereof.


Legal framework

2
Article 7(3)(b), (c) and (e) of the Directive provides:

‘The contracting authorities may award their public works contracts by negotiated procedure without prior publication of a contract notice, in the following cases:

(b)
when, for technical or artistic reasons or for reasons connected with the protection of exclusive rights, the works may only be carried out by a particular contractor;

(c)
in so far as is strictly necessary when, for reasons of extreme urgency brought about by events unforeseen by the contracting authorities in question, the time-limit laid down for the open, restricted or negotiated procedures referred to in paragraph 2 cannot be kept. The circumstances invoked to justify extreme urgency must not in any event be attributable to the contracting authorities;

(e)
for new works consisting of the repetition of similar works entrusted to the undertaking to which the same contracting authorities awarded an earlier contact, provided that such works conform to a basic project for which a first contract was awarded according to the procedures referred to in paragraph 4.

As soon as the first project is put up for tender, notice must be given that this procedure might be adopted and the total estimated cost of subsequent works shall be taken into consideration by the contracting authorities when they apply the provisions of Article 6. This procedure may only be adopted during the three years following the conclusion of the original contract.’

3
Article 7(4) of the Directive states:

‘In all other cases, the contracting authorities shall award their public works contracts by the open procedure or by the restricted procedure.’


Facts

4
By Decrees Nos 11414 and 11416 of 9 October 1997 and No 11678 of 15 October 1997, the Magistrato per il Po di Parma approved contracts relating to the following works:

the completion of the construction of an overflow basin to hold the flood waters of the Parma watercourse in the Marano area (in the Parma commune);

the development and completion of an overflow basin for the Enza watercourse, and

the retention of flood waters of the Terdoppio watercourse south-west of Cerano.

5
The value of those works amounted to approximately ITL 37 000 million, ITL 21 000 million and ITL 19 500 million respectively.

6
The original contracts for the works mentioned were awarded on the following dates:

22 December 1988, in the case of the Parma watercourse,

26 October 1982, in the case of the Enza watercourse, and

20 May 1988, in the case of the Terdoppio watercourse.


Pre-litigation procedure

7
By letter of 27 September 2000, the Commission requested the Italian authorities to provide information as to the procedure followed in awarding the contracts referred to in paragraph 4 of this judgment (hereinafter ‘the relevant contracts’).

8
By letters of 19 October 2000 and 26 March 2001, the Italian authorities replied, stating that the procedure followed by them complied with the requirements of Article 7(3)(e) of the Directive, as the works in question consisted in the repetition of works similar to those already entrusted by the Magistrato per il Po di Parma to the undertakings to which the original contracts had been awarded and conformed to a basic project for which an earlier contract was awarded according to the procedures referred to in Article 7(4) of the Directive. Furthermore, the right of the awarding authority to adopt the negotiated procedure was specified in the notices for the original contracts and the total estimated cost of the execution of each of the works had been taken into consideration by the Magistrato per il Po di Parma when applying the Community provisions. Lastly, the negotiated procedure was adopted during the three years following the conclusion of the original contract.

9
By letter of 23 April 2001, the Commission gave the Italian Republic formal notice to submit its observations.

10
The Italian authorities replied by letters of 8 June and 17 December 2001, maintaining inter alia that the three years following the conclusion of the original contract referred to in Article 7(3)(e) of the Directive run from the date on which the works under the original contract are handed over, as that date represents the end of the contract.

11
As it was not satisfied with that reply, the Commission issued a reasoned opinion on 21 December 2001, calling on the Italian Republic to take the measures necessary to comply with it within two months of its notification. As the Italian Republic did not reply to that opinion, the Commission brought the present action.


Forms of order sought

12
The Commission claims that the Court should:

declare that, as the Magistrato per il Po di Parma awarded contracts for the completion of the construction of an overflow basin to hold flood waters of the Parma watercourse in the Marano area (in the Parma commune) as well as for works relating to the development and completion of an overflow basin for the Enza watercourse and to the retention of flood waters of the Terdoppio watercourse south‑west of Cerano by the negotiated procedure without prior publication of a contract notice, the Italian Republic has failed to fulfil its obligations under the Directive and in particular Article 7(3) thereof;

order the Italian Republic to pay the costs.

13
The Italian Republic claims that, leaving aside the interpretation of Article 7(3) of the Directive for competition purposes, and interpreting it on the basis of its wording in the majority of the language versions, it should be held that the Italian Government made an excusable error due to the Italian version of the provision.


The infringement

14
It is not disputed that the relevant contracts are subject to the Directive and were concluded under the negotiated procedure without prior publication of a contract notice. That procedure is permitted only in the cases which are exhaustively listed in Article 7(3) of the Directive. In its defence, the Italian Government sets out three pleas in law seeking to show that the relevant contracts are covered by one of those cases.

15
The Italian Government argues, first, that between 1981 and 1990 the Magistrato per il Po di Parma initiated procedures for the implementation of flood safety measures for the territories and zones affected by the flood waters of the River Po and its tributaries through contracts for the development of the overall project and the carrying out of the works in lots as and when funding became available. The contracts relating to the development of the project and to the first lot of the works were awarded following a procedure which complied with Community law. The relevant contract notices contained a provision allowing the contracting authority to award the carrying out of the subsequent lots of the work to the same undertaking.

16
In the light of the complexity and the difficult nature of the works, the Public Works Authority stated in a technical opinion that those works were to be carried out by a single, qualified, contractor and that, if they were carried out in lots, it would be necessary to ensure their continuity. That technical opinion was reflected in the provision contained in the contract notice, as well as in the contracts for the development of the project and for the first lot of works. The adoption of the negotiated procedure without prior publication of a contract notice for the award of the relevant contracts represented the implementation of a contractual obligation.

17
According to the Italian Government, the awarding authority wished to address technical requirements relating to completion of the works by a single contractor. Completion by individual lots often causes problems arising from the fact that the work is not carried out in the same way and hence difficulties in establishing the respective liability for the damages due in respect of destruction or deterioration of the works.

18
That first defence plea must be understood as being based on Article 7(3)(b) of the Directive, inasmuch as that provision authorises the use of the negotiated procedure without prior publication of a contract notice for works which, for technical reasons, may only be carried out by a particular contractor.

19
The provisions of Article 7(3) of the Directive, which authorise derogations from the rules intended to ensure the effectiveness of the rights conferred by the EC Treaty in relation to public works contracts, must be interpreted strictly and the burden of proving the existence of exceptional circumstances justifying a derogation lies on the person seeking to rely on those circumstances (see, to that effect, Case C‑57/94 Commission v Italy [1995] ECR I-1249, paragraph 23, and Case C‑318/94 Commission v Germany [1996] ECR I-1949, paragraph 13).

20
Accordingly, the Italian authorities must prove that technical reasons made it necessary to award the relevant contracts to the contractor who was entrusted with the original contract (see, to that effect, Commission v Italy, paragraph 24).

21
It is true that the aim of ensuring the continuity of works under complex projects which relate to the flood safety of an area is a technical reason which must be recognised as being important. However, merely to state that a package of works is complex and difficult is not sufficient to establish that it can only be entrusted to one contractor, particularly where the works are subdivided into lots which will be carried out over many years.

22
In the present case, the Italian Government has confined itself to referring in general terms to the contents of an opinion of the Public Works Authority, without providing the detailed explanations on which the need to use a single contractor could be based.

23
With respect to the Italian Government’s argument that the use of the negotiated procedure without prior publication of a contract notice for the award of the relevant contracts represents the implementation of a contractual obligation, even assuming it to be relevant, it must be held that that Government has failed to establish that such an obligation exists. On the contrary, according to the information provided to the Court, the Magistrato per il Po di Parma was not obliged to award subsequent lots to the contractors undertaking the original lots of work, but merely had the option of doing so.

24
It follows that the defence plea based on Article 7(3)(b) of the Directive is not well founded and must be rejected.

25
Secondly, according to the Italian Government, the works required to be completed urgently in this case, in order to avoid the increased risk of flooding which would occur if they were not finished.

26
That second defence plea must be understood as being based on Article 7(3)(c) of the Directive, which authorises the use of the negotiated procedure without prior publication of a contract notice where, for reasons of extreme urgency brought about by events unforeseen by the contracting authorities, the periods laid down for the normal procedures cannot be adhered to. The second sentence of that provision states that the circumstances invoked to justify extreme urgency cannot in any event be attributable to the contracting authorities.

27
In the present case, the original contracts relating to the flood protection works had been awarded in the 1980s. Furthermore, it had been anticipated from the start that the works would be carried out in lots as and when funding became available.

28
Those matters do not establish any extreme urgency. On the contrary, they arise out of the arrangements put into place by the contracting authority.

29
It follows that the second defence plea, based on Article 7(3)(c) of the Directive, is not well founded and must be rejected.

30
Thirdly, the Italian Government relies on Article 7(3)(e) of the Directive, which authorises, subject to certain conditions, adoption of the negotiated procedure without prior publication of a contract notice for new works consisting in the repetition of similar works entrusted to the undertaking to which the same contracting authorities awarded an earlier contract.

31
The last sentence of that provision states that that possibility is only open during the three years following the conclusion of the original contract. The Italian Government argues that that period runs from the completion of the works under the original contract and not from the time when that contract was awarded.

32
In the alternative, the Italian Government asks the Court to find that it made an excusable error due to the Italian version of Article 7(3) of the Directive.

33
In that respect, it must be pointed out that Article 7(3)(e) of the Directive authorises the use of the negotiated procedure without prior publication of a contract notice for new works consisting in the repetition of similar works entrusted to the undertaking to which an earlier contract was awarded. The last sentence of that provision states however that the procedure may only be adopted ‘during the three years following the conclusion of the original contract’.

34
In the light of a comparison of the language versions of that provision, the expression ‘conclusion of the original contract’ must be understood as meaning the time when the original contract was entered into and not as referring to the completion of the works to which the contract relates.

35
In particular, the Danish version ‘indgaaelsen af den orprindelige kontrakt’, the English version ‘the conclusion of the original contract’, the Spanish version ‘formalización del contrato inicial’ and the Portuguese version ‘celebração do contrato inicial’ refer unambiguously to the contract and cannot be understood as meaning the works which are its subject-matter.

36
That interpretation is confirmed by the objective of the provision in question and its place in the scheme of the Directive.

37
First, as it is a derogating provision which falls to be strictly interpreted, the interpretation which restricts the period during which the derogation applies must be preferred rather than that which extends it. That objective is met by the interpretation which takes the starting point as being the date on which the original contract is entered into rather than the, necessarily later, date on which the works which are its subject-matter are completed.

38
Secondly, legal certainty, which is desirable where procedures for the award of public procurement contracts are involved, requires that the date on which the period in question begins can be defined in a certain and objective manner. While the date on which a contract is entered into is certain, numerous dates may be treated as representing the completion of the works and thus give rise to a corresponding level of uncertainty. Moreover, while the date on which the contract is entered into is clearly established at the outset, the date of completion of the works, whatever definition is adopted, may be altered by accidental or voluntary factors for so long as the contract is being carried out.

39
It follows that in the present case the period of three years laid down in the final sentence of Article 7(3)(e) of the Directive ran from the date on which the original contracts were entered into in 1982 and 1988. As the relevant contracts were awarded in 1997, the derogation laid down by the provision concerned accordingly did not apply.

40
With respect to the Italian Government’s request that it be given the benefit of having made an excusable error, it must be pointed out that proceedings against a Member State for failure to fulfil obligations afford a means of determining the exact nature of the obligations of the Member States, particularly where there are differences of interpretation, and are based on the objective finding that a Member State has failed to fulfil its obligations under the Treaty or secondary legislation (see, to that effect, Case C-83/99 Commission v Spain [2001] ECR I-445, paragraph 23). Accordingly, the concept of excusable error cannot be relied on by a Member State to justify a failure to comply with the obligations imposed on it under a directive.

41
It follows from that that the third defence plea, based on Article 7(3)(a) of the Directive, must be rejected as unfounded.

42
Having regard to all the above considerations, it must be held that as the Magistrato per il Po di Parma awarded contracts for the completion of the construction of an overflow basin to retain flood waters of the Parma watercourse in the Marano area (in the Parma commune) as well as for works relating to the development and completion of an overflow basin for the Enza watercourse and to the retention of flood waters of the Terdoppio watercourse south‑west of Cerano by the negotiated procedure without prior publication of a contract notice, when the conditions necessary in that regard were not satisfied, the Italian Republic has failed to fulfil its obligations under the Directive.


Costs

43
Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Italian Republic has been unsuccessful, the latter must be ordered to pay the costs.

On those grounds, the Court (Second Chamber) hereby:

1.
Declares that, as the Magistrato per il Po di Parma, a local agency of the Ministry of Public Works (now the Ministry for Infrastructure and Transport) awarded contracts for the completion of the construction of an overflow basin to retain flood waters of the Parma watercourse in the Marano area (in the Parma commune) as well as for works relating to the development and completion of an overflow basin for the Enza watercourse and to the retention of flood waters of the Terdoppio watercourse south‑west of Cerano by the negotiated procedure without prior publication of a contract notice, when the conditions necessary in that regard were not satisfied, the Italian Republic has failed to fulfil its obligations under Council Directive 93/37/EEC of 14 June 1993 concerning the coordination of procedures for the award of public works contracts;

2.
Orders the Italian Republic to pay the costs.

Signatures.


1
Language of the case: Italian.