delivered on 22 October 2020 ( 1 )

Case C‑537/19

European Commission


Republic of Austria

(Action for failure to fulfil obligations – Public procurement – Directive 2004/18/EC – Contract between a public body and a private undertaking for the lease of a building not yet constructed – Decisive influence exerted by the public body over the design of the building – Burden of proof and assessment of evidence)


The Commission claims that the Republic of Austria has failed to fulfil Directive 2004/18/EC ( 2 ) because, on 25 May 2012, a public body linked to the City of Vienna (Stadt Wien-Wiener Wohnen (‘Wiener Wohnen’)) concluded with a private undertaking, without complying with the provisions of that directive, a public works contract, classified as a lease by the signatories thereto, for the construction of an office building by the name of ‘Gate 2’ ( 3 ) on land owned by that undertaking.


The Commission relies on a number of factors which, in its view, show that Wiener Wohnen (whose nature as a contracting authority is not at issue) had a decisive influence over the design of the building and over the execution of the ‘Gate 2’ building project. It infers from that premiss that, although the parties concluded the contract as a property lease, it is in fact a public works contract the value of which exceeds the threshold laid down in Directive 2004/18.


The Republic of Austria rejects the Commission’s argument on the ground that, in its view, the applicable provision is Article 16(a) of Directive 2004/18, which exempts public contracts for the leasing of buildings from the obligation to comply with the award procedures laid down in that directive.

I. Legal framework

A. EU law. Directive 2004/18


According to Article 2 (‘Principles of awarding contracts’):

‘Contracting authorities shall treat economic operators equally and non-discriminatorily and shall act in a transparent way.’


Article 16 (‘Specific exclusions’) reads:

‘This Directive shall not apply to public service contracts for:


the acquisition or rental, by whatever financial means, of land, existing buildings or other immovable property or rights thereon; nevertheless, financial service contracts concluded at the same time as, before or after the contract of acquisition or rental, in whatever form, shall be subject to this Directive;



Article 28 (‘Use of open, restricted and negotiated procedures and of competitive dialogue’) provides:

‘In awarding their public contracts, contracting authorities shall apply the national procedures adjusted for the purposes of this Directive.


B. Austrian law


Paragraph 10(8) of the Bundesgesetz über die Vergabe von Aufträgen ( 4 ) reproduces Article 16(a) of Directive 2004/18.

II. Pre-litigation procedure


In its letter of formal notice of 25 July 2016, the Commission maintained that concluding the contract without previously advertising it infringed Articles 2, 28 and 35 of Directive 2004/18.


In its reply of 26 September 2016, the Republic of Austria recognised that the award of the contract fell within the scope of Directive 2004/18 and that it should have carried out a call for tenders in accordance with that directive. ( 5 )


In its supplementary comments of 27 February 2017, ( 6 ) the Republic of Austria, in an effort to reach an amicable settlement, tried to explain the circumstances in the present case and recognised once again its failure to fulfil its obligations. In successive sets of comments, ( 7 ) it emphasised that it would ensure compliance with public procurement law in future, in particular by means of a contract register.


On 18 May 2018, the Commission issued a reasoned opinion, after taking note of the recognition of the failure to fulfil obligations on the part of the Republic of Austria, which it called upon to take the appropriate measures it had not, as yet, satisfactorily adopted.


In a letter of 18 July 2018, the Republic of Austria changed its previous position and rejected the claim that it had failed to fulfil its obligations.

III. Procedure before the Court


On 12 July 2019, the Commission brought an action seeking a declaration from the Court that, ‘in so far as Stadt Wien-Wiener Wohnen directly awarded the contract of 25 May 2012 in respect of the office building on Guglgasse 2-4 in Vienna without any competitive tendering procedure and corresponding contract notice, the Republic of Austria has failed to fulfil its obligations under Articles 2, 28 and 35(2) of Directive 2004/18/EC’. It also sought an order requiring the defendant to pay the costs of the proceedings.


On 19 September 2019, the Republic of Austria opposed the action, contending that it should be dismissed and that the Commission should be ordered to pay the costs of the proceedings.


The reply and the rejoinder were lodged on 25 October 2019 and 16 January 2020 respectively.


The Court decided not to hold a hearing, but put to the Republic of Austria a number of questions to be answered in writing to which the latter replied on 8 July 2020. The Commission commented on that reply in its letter of 24 July 2020.

IV. Analysis

A. Preliminary clarifications


There are two quite distinct aspects to this action for failure to fulfil obligations:

that relating to the interpretation of the rules at issue, in essence Article 16(a) of Directive 2004/18, and the burden of proof; and

that concerning the facts and the classification of the contract (as a mere lease agreement or as a works contract, too?).


The Court’s role in this dispute goes beyond the mere interpretation of EU law and is more akin to that of a civil court called upon to determine, on the basis of the evidence adduced, how the facts came about and what type of contractual relationship was actually in place.


My analysis will look in the first place at the strictly legal aspects of the case. Paradoxically, it is these which have prompted least debate, perhaps because there is already case-law established by the Court which clarifies the meaning of the applicable rules.


In the second place, I shall consider the arguments and evidence presented and then give an opinion on the facts and the classification of the contract.

B. Strictly legal aspects

1.   Court’s case-law on Article 16(a) of Directive 2004/18


Under this provision, the Directive is not to apply to ‘public service contracts … for the acquisition or rental, by whatever financial means, of land, existing buildings or other immovable property or concerning rights thereon’.


The Court is not content simply to accept whatever classification the parties may give to their contractual relationship. Determining whether or not the contract in question, notwithstanding that the signatories thereto have called it a lease, falls within the category of a works contract subject to Directive 2004/18 is a task which must be carried out in accordance with that directive. ( 8 )


According to the Court, ‘the definition of “public works contract” … includes all operations in which a contract for pecuniary interest, irrespective of its formal classification, is concluded between a contracting authority and a contractor and has as its object the execution by the latter of a ‘work’ within the meaning of [Article 1(2)(b)] of the directive. The essential criterion in that respect is that the work should be executed in accordance with the requirements specified by the contracting authority; the means of that execution are immaterial’. ( 9 )


In the judgment in Impresa Pizzarotti, the Court went on to say that, ‘where a contract contains both elements relating to a public works contract and elements relating to another type of contract, it is necessary to refer to the main object of that contract in order to determine its legal classification and the EU rules applicable’. ( 10 )


In the judgment in Helmut Müller, the Court focused on the criterion of pecuniary interest and stated that the service received by the contracting authority under a public works contract, which must be of direct economic benefit to that authority, ‘consists in the realisation of works from which the contracting authority intends to benefit’. That economic benefit will exist where the contracting authority becomes owner of the works forming the subject of the contract, but ‘may also be held to exist where it is provided that the contracting authority is to hold a legal right over the use of the works which are the subject of the contract, in order that they can be made available to the public’. ( 11 )


That right of use may be created in a lease agreement, depending on its specific provisions. This was confirmed by recital 4 of Directive 2014/24/EU, ( 12 ) which, despite not being applicable ratio temporis to this case, contains the same exclusion of contracts for the leasing of buildings as Directive 2004/18. ( 13 )


The judgment in Impresa Pizzarotti was specifically concerned with the lease of an as yet unconstructed building (intended to house a judicial complex in Bari, Italy) which the Court, after analysing the content of the lease, classified as a public works contract subject to the relevant EU legislation.


The factors that led to that outcome include in particular the circumstance that the main object of the contract was ‘the execution of a work corresponding to the requirements expressed by the contracting authority … even if it contains an undertaking to let the work in question’ ( 14 ) and the circumstance that the contracting authority had ‘taken measures to define the characteristics of the work or, at the very least, has had a decisive influence on its design’. ( 15 )


In that case, the Court emphasised that the ‘main object of the contract is the creation of that complex, which the subsequent letting of the complex necessarily presupposes’, and that the execution of the planned work corresponded ‘to the requirements specified by the contracting authority’. ( 16 ) It inferred from this that the applicable law was the EU legislation on public works contracts.


I would also make the point that, on the basis of its wording, the exclusion contained in Article 16(a) of Directive 2004/18 applies to the leasing of ‘existing buildings’. It seems doubtful, then, that that exclusion would also apply to the leasing of non-existent buildings, that is to say buildings which have not yet been built, ( 17 ) although that was the interpretation accepted by the Court in the judgment in Impresa Pizzarotti.


In order to prevent that interpretation from giving rise to a disproportionate extension of that exclusion, ( 18 ) it must be ensured that the contracting authority does not conceal, under what appears to be a long-term lease agreement, a direct commission (not advertised and not subject to a regulated award procedure) to construct a building which meets its requirements and in the design and execution of which it plays a significant role.

2.   Proving the facts and assessing the evidence


The Court’s case-law on the distribution of the burden of proof in actions for failure to fulfil obligations may be summarised as follows:

In general, ‘it is incumbent upon the Commission to prove the allegation that the obligation has not been fulfilled. It is the Commission’s responsibility to place before the Court the information needed to enable the Court to establish that the obligation has not been fulfilled, and in so doing the Commission may not rely on any presumption’. ( 19 )

‘The Member States are nevertheless required, under [the principle of sincere cooperation], to facilitate the achievement of the Commission’s tasks … . In particular, account should be taken of the fact that, where it is a question of checking that the national provisions intended to ensure effective implementation of a directive are applied correctly in practice, the Commission, which does not have investigative powers of its own in the matter, is largely reliant on the information provided by any complainants and by the Member State concerned’. ( 20 )

‘It follows in particular that, where the Commission has adduced sufficient evidence of certain matters in the territory of the defendant Member State, it is incumbent on the latter to challenge in substance and in detail the information produced and the consequences flowing therefrom’. ( 21 )

C. Matters of fact and classification of the contract

1.   Arguments put forward by the Commission


The contract of 25 May 2012 that was concluded by Wiener Wohnen is not a ‘normal’ property lease, since that public body supervised the execution of the work in the same way as a developer would.


The contract is supported by two annexes ( 22 ) containing specifications agreed between the parties which go far beyond what is usually agreed in a lease agreement. ( 23 )


In 2012, Wiener Wohnen commissioned a service provider ( 24 ) to analyse the market for office buildings in Vienna. According to that analysis, out of ten potentially suitable sites, six fitted the brief and ‘Gate 2’ was the most suitable. It is recognised in that analysis that Wiener Wohnen had the ability to influence the planning of the project.


The Republic of Austria conceded that it is unlikely that the ‘Gate 2’ property would have been built if Wiener Wohnen had not concluded the contract at issue.


It was Wiener Wohnen who, in the guise of developer, commissioned SET Bauprojektierung GmbH, which specialises in the planning of construction projects, to supervise the implementation of the work.


In the reply, the Commission submits that:

The main object of the contract was the building of the property, as being a necessary condition of the lease. The weight of the obligation to build is apparent, for example, in the heavy penalty payable for late delivery (EUR 30000 a day, unlimited).

The property was built according to the specifications drawn up by Wiener Wohnen. The contract was concluded before the building had been fully planned or finally authorised. The building underwent major adjustments specifically in response to Wiener Wohnen’s requirements.

It was not a ‘standard property’ much like any other office building. Although some of the specifications in the ‘Supplement’ are standard, ( 25 ) it was Wiener Wohnen who chose most of the technical solutions and in this way determined the building’s final design. Although several of those specifications refer to ÖNORM ( 26 ) rules, these are no more than recommendations, binding only if so stipulated by the contract.

In terms of the number of them and their level of detail, the specifications contained in the ‘Supplement’ far exceed the usual requirements of a tenant. ( 27 )

In those circumstances, it is not surprising that a newspaper article entitled Eine Zentrale nach Maß (A made-to-measure head office) alluded to the possibility that Wiener Wohnen had circumvented the public procurement rules in the construction of the ‘Gate 2’ building. ( 28 )

The construction of the connecting bridge between the building’s A and B wings was provided for as an option in the ‘Description’ but came to be a firm requirement in the ‘Supplement’. Wiener Wohnen’s decision, three days before the contract was signed, was instrumental in the realisation of that bridge.

The Republic of Austria’s statement that the building of floors 6 to 8 of the B wing would have gone ahead in any event is not consistent with clause 1.9 of the contract. Construction of the bridge and of those floors was dictated exclusively by Wiener Wohnen.

The transfer of office space to Wiener Wohnen Haus – ‘Außenbetreuung GmbH’ is not surprising, since Wiener Wohnen could sublet to departments within the City of Vienna or to legal persons in which the latter has a majority shareholding.

The fact that the contract has a long term is an indication that the developer is trying to ensure that it will recover its investment in the building’s construction.

2.   Arguments put forward by the Republic of Austria


When explaining the context prior to the conclusion of the contract, the Republic of Austria states that Wiener Wohnen is the largest manager of municipal housing in Europe and, as such, is responsible for more than 500000 people in approximately 200000 municipal housing units.


As part of a strategic reorientation of the business, the decision was made to bring all of its facilities, which had previously been spread across the city of Vienna, onto a single site. The new head office was due to be ready by the time the new organisation came into being (in late 2014) and was to have space for at least 750 employees, and up to 1000 if the planned extension were built.


Since it was unable to buy or build a property tailored to its needs, ( 29 ) the only solution available to Wiener Wohnen was to rent a standard office building, be this an existing one or one for which the plans had already been drawn up.


In early 2012, in order to get an overview as to the availability on the Viennese market of office buildings that would meet its requirements, Wiener Wohnen commissioned Immovement to carry out a global analysis of that market.


The selection criteria included a number of minimum requirements: a floor area of more than 20 000m2; the option of using the ground floor for a customer service department; an adequate number of parking spaces (at least 300); and handover of the offices by the end of the third quarter of 2014.


Immovement’s analysis identified ten office properties, some of which had already been built or were in construction, while others were in planning but had not yet been built. Of those ten, six met Wiener Wohnen’s requirements, ‘Gate 2’ being the most suitable.


At the time when that analysis was produced, planning of the ‘Gate 2’ property had already been completed. The plans were ready but the project had not yet been executed.


Apart from certain demands concerning the surface area and the number of parking spaces, the negotiations on the lease agreement related primarily to the amount of the rent and the operating costs.


The only aspects of the works in which Wiener Wohnen was able to intervene was how the premises were to be subdivided, what the offices were to be used for and what the basic amenities of the rented space would be. Such intervention was limited by the structure of the building and concerned only minor amenity details.


Both the ‘Description’ and the ‘Supplement’ contained only requirements which all modern office buildings must meet as mandatory standards.


According to the predominant legal literature and case-law in Austria at the time when the contract was concluded, the leasing of office properties the construction of which had not yet been completed but which had been fully planned qualified for the exclusion provided for in Paragraph 10, point 8, of the BVergG 2006 (which corresponds to Article 16(a) of Directive 2004/18).


According to that legal literature, the extent of the influence actually exerted over the design of the construction is decisive for the purposes of determining whether the contract in question is a lease agreement or a works contract. The question of whether completed plans are in place and planning permission has been granted before the commencement of rent negotiations plays a significant role in that context.


The ‘Gate 2’ property was planned as a general office building, with no particular groups of tenants or specific requirements in mind.


Wiener Wohnen was not the only tenant in the [‘Gate 2’] office building. ( 30 ) Furthermore, until recently, some floor space was sublet to Wohnen Haus & Außenbetreuung GmbH.


So far as its term is concerned, the contract is not open to ordinary termination, in general, until 1 October 2040, or, in the case of the optionally rented space in the B wing, until 1 April 2041. It could not therefore be unilaterally terminated by Wiener Wohnen — other than in cases of extraordinary termination — without the landlord’s consent.


The purpose of the task of supervising the execution of the work, entrusted to SET Bauproktierung GmbH, was to ensure compliance with the deadlines for handing over the building, and to identify any delays or defects in good time. This enabled Wiener Wohnen to take appropriate action, such as, for example, to extend certain lease agreements on properties it still occupied.


That supervision was exercised exclusively in relation to the spaces forming the subject of the lease agreement and did not extend to the other parts of the building, such as, for example, the technical heating plants, lift installations, building automation systems and communal or external areas.


The Republic of Austria defends its position by recourse to the following further arguments, some of which form part of its rejoinder:

Immovement’s analysis does not state that Wiener Wohnen’s stipulations went beyond the usual wishes of a tenant. It is normal that a tenant intending to commit to using a large office building for a long period of time should wish to know, before making that decision, to exactly what extent the landlord will permit any adjustments which the tenant may consider necessary.

The ‘Description’ was drawn up by the landlord and the ‘Supplement’ does not contain any conditions other than those usually laid down in the case of an office building. The latter document includes a summary of the latest regulatory requirements applicable to all office buildings and not just to the City of Vienna, ( 31 ) which would have had to be complied with in any event.

As regards the building permit, Wiener Wohnen, in its capacity as tenant, did not take part in the building permit application procedure, has no access to the planning permission file and is not able to produce any documents from that procedure.

It has been known since the outset that Wiener Wohnen was not the only tenant in the [‘Gate 2’] building. The fact that other persons have rented space in that building and continue to use it shows that the office space in question is available for rental, in accordance with standard models, by third parties directly on customary market terms, and not only, as the Commission submits, by those who sublet from Wiener Wohnen.

The term of the contract (25 years) reflects the reality of the property market. This is the only basis on which landlords are prepared to rent out large spaces at affordable prices.

For Wiener Wohnen, surrendering the right to terminate the contract was a minor issue, as the prospect of having to move 1000 employees yet again was unacceptable, given the cost of doing so and the non-existence of suitable alternative sites.

It is simplistic to assume, as the Commission does, that a contractual term of 20 years is sufficient to write off the costs of construction, inasmuch as it fails to take into account the fact that the landlord is also responsible for all maintenance and repair works, and has to bear the financing costs and cover the management costs, etc.

The Commission appears to disregard the fact that a complex removal plan usually entails not only the supervision which the developer exercises over the project but also the supervision exercised by the tenant.

3.   My assessment


In applying the Court’s case-law (in particular, that established in the judgment in Impresa Pizzarotti) to this case, we must determine, by analysing the arguments and evidence adduced, whether what we have here, in addition to the lease of an as yet unconstructed building, is also a public works contract which was in fact the main object of that contract.


In order to arrive at such a classification, it will fall to be established whether Wiener Wohnen exerted a ‘decisive influence’ over the plan for the works that was finally approved and over the subsequent execution of the building, and whether that property was built in response ‘to the requirements specified by the contracting authority’. ( 32 )

(a)   Decisive influence exerted by Wiener Wohnen over the final plan and over the subsequent execution of the building works


At the time when the contract was concluded (25 May 2012), the landowner had not started any construction work. Neither did it have a permit to erect the building. ( 33 )


To counter the assertion that the building was designed as a consequence of the conclusion of the contract, the Republic of Austria submits that Wiener Wohnen did not influence the building’s design and that the property had already been planned when the contract was signed.


If that were the case, one would logically have expected the Republic of Austria to produce the original architectural plan (and any building permit granted) setting out the specifications for the project and the date on which the plan was approved. That evidence, readily available to the defendant, would have shown that the full plan existed on 25 May 2012 and would have confirmed that what was built was consistent with that plan.


In the absence of such evidence, the objective factors which I shall set out below, and which are taken from the documents before the Court, steer me towards the view that that design was not final and that Wiener Wohnen’s wishes had a conclusive bearing on the eventual configuration of that design and on the construction of the building.


Even assuming it to be the case that, in May 2012, the landowner had an initial architectural plan, the fact remains that that plan underwent very significant modifications, on which Wiener Wohnen insisted as a condition of signing the contract or which, having been stipulated by Wiener Wohnen later, were captured in the construction of the building.


An examination of the ‘Description’ and ‘Supplement’ documents ( 34 ) (Annex 1.3 to the contract), taken together, shows that Wiener Wohnen not only imposed crucial conditions in relation to the design of the building but also had the power to decide (and did decide) what the final structure of that building would be.


Thus, clause 1.9 of the contract provided for an option for Wiener Wohnen to commission the construction of floors 6 and 8 of the B wing. That option was exercised on 25 October 2012. ( 35 )


The same was true of the bridge connecting the two wings of the building. Wiener Wohnen had the option to connect A and B wings by means of a bridge, so as to give the building the structure of a closed system.


Those two extensions are unquestionably an important architectural addition affecting the structure of the property and, under the terms of the contract, ( 36 ) would not have been built if Wiener Wohnen had not made provision for them. The wishes of that public body were thus instrumental, inasmuch as the building was built in the form and with the characteristics which it wanted.


Furthermore, a comparison of the graphics for the project (photographs of models and plans) that were contained in the ‘Description’ with what was actually built immediately shows significant differences. In that document, the building’s A and B wings were the same height and there was no connecting bridge: it was Wiener Wohnen that was able, at its discretion, to alter those structural specifications for the building.


Thus, Wiener Wohnen had the ability to exert an influence (and did exert an influence) so decisive as to amend the initial plan of works by imposing the architectural changes which it considered desirable.


The same conclusion is supported by a reading of the market study which Wiener Wohnen commissioned ( 37 ) and on the basis of which the site for the construction of the ‘Gate 2’ building was selected.


That document (produced, as I have said, by the Republic of Austria) is not official but it does reflect how the undertaking to which Wiener Wohnen had turned for the purposes of selecting the site [of its head office] viewed the position of its client, that view having been based, of course, on the instructions and information which the latter had passed to it.


The ‘Management Summary’ in that document contains the following statements:

‘The tenant [Wiener Wohnen] is still able to influence the planning of the project on the basis of the specifications required’.

‘This criterion [A10] is used to evaluate the potential for influencing fundamental planning issues. Influence in this context means not only ensuring that account is taken of the tenant’s wishes as regards interior fixtures and fittings but also adherence to some basic planning assumptions such as access routes and exterior and interior amenities, the structure of the building (configuration of spaces, length of the facade and so on), the structure of ground floor areas, the utility supply and disposal system and the design of the building’s technical systems’ (paragraph 5.2.10).

‘No definitive architectural solution has yet been established for the facade in this project … The building complex simply comprises two blocks (A and B) which can be joined by a bridge built for that purpose’.

‘The tenant’s requirements with respect to basic matters concerning access routes and amenities, building structure and design may be effectively incorporated and taken into account given the planning status of the project’.


The foregoing factors confirm that Wiener Wohnen’s contractual position is not consistent with the typical position of a mere tenant but, rather, with that of an actual project owner who imposes his own solutions on the plans for the building and their execution.


In the ‘Supplement’ drafted by Wiener Wohnen, that body introduces a number of specifications for the project which are so detailed and, in one case, so significant as to go beyond what would normally be agreed between a landlord and a tenant. Contrary to what the Republic of Austria has stated, those specifications are not confined to ones strictly compulsory under town planning rules.


It is true, as the Republic of Austria submits, that, in the case of large property development that has yet to be built, the (future) tenant may negotiate with the owner in order to have the building adapted to some extent to suit his own purposes. In this case, however, the conditions imposed were so extensive and Wiener Wohnen’s role so significant as to go beyond the customary scope of the landlord-tenant relationship.


The conviction that Wiener Wohnen acted as a project owner is reinforced by the fact that it appointed its own operatives to supervise the execution of the project, in parallel with the owner. This too is a role that does not normally fall to the tenant of a property which has yet to be built, since it is not usual for a tenant to supervise a project which is not his own.


The Republic of Austria offers an explanation in this regard which I do not find convincing. It states that the purpose of that supervision was to ensure compliance with the deadlines for the building’s handover. It was for this reason, it goes on to say, that it engaged an external undertaking (SET Bauprojektierung GmbH) to identify any delays in good time for Wiener Wohnen to be able to respond.


The Republic of Austria states in its defence that SET Bauprojektierung GmbH was indeed entrusted with the task of ensuring compliance with deadlines, but it was also responsible for supervising the quality of the installation of fixtures and fittings by carrying out spot checks. This supervision took the form of monitoring [observance of] the quality and quantity [criteria] laid down in the ‘Description’ of the building and reporting regularly to Wiener Wohnen. ( 38 )


Those functions go beyond a mere evaluation of compliance with the timetable for the works. What is more, in its own line of argument, the Republic of Austria, in emphasising the importance of the handover deadlines, mentions that the penalty for delay was EUR 30000 per day. This, then, is compensation of a level high enough to offset the costs of any temporary solutions, should the owner not hand over the property on time.

(b)   Construction of the building in response ‘to the requirements specified by the contracting authority’


The Commission had argued that, if that contract had not been signed, the building would not have been built. The Republic of Austria itself recognises that the conclusion of the contract was crucial to the construction of the property: ‘the fact that the property, the plans for which were complete and ready to be executed, had been let [was], ultimately, the trigger for its construction’. ( 39 )


That recognition is an indication that the contracting authority’s property requirements effectively took precedence over the execution of the works. It alone might not be sufficient to confirm the failure to fulfil obligations of which the Republic of Austria is accused. There is also the fact, however, that the structural and other elements of the building were specifically adjusted to meet those requirements, as I have already highlighted.


In Annex C5 to the reply, the Commission produces a document issued by an undertaking (IC Group) which the building’s new purchaser (WestInvest Gesellschaft für Investmentfonds mbH) had commissioned to produce a report. That document states that ‘the planning and construction of the ‘Gate 2’ office building, situated at Guglgasse 2-4, 1030 Vienna, are entirely consistent with the requirements of the sole tenant, Wiener Wohnen’. ( 40 )


The Republic of Austria confines itself, in the rejoinder, to diminishing the legal value of that document and to commenting that IC Group had no contractual relationship with Wiener Wohnen. This is an inadequate response given that the document in question shows that IC Group’s intervention ran from 15 January 2013 to 31 March 2015, and thus overlapped with Wiener Wohnen’s supervision of the project.


If IC Group was performing those same tasks, it was intimately acquainted with the project whose execution it was tasked with monitoring and was in a position to issue a reasoned opinion in that regard.


That said, it should be added that a public body such as Wiener Wohnen can, and indeed must (in order to serve the general interest that justifies its existence), have buildings that are suited to its needs. There is nothing unusual in this, and it is logical, for example, that, on the basis of those requirements, as reflected in the clauses of a set of tender specifications, it should opt for one of the properties putting themselves forward for selection.


What is open to criticism (and what, ultimately, the Commission criticises) is the fact that, in making that choice, Wiener Wohnen dispenses with the public tendering procedure which would enable it, with the benefit of all relevant guarantees and in the light of the bids submitted, to undertake a comparison of the tenders and select the one most favourable to the public interest. That is the very purpose of Directive 2004/18.

(c)   Other factors present

(1) Term of the contract


In the Commission’s view, the long term of the contract (which is not open to ordinary termination until 2040) ( 41 ) is a further indication that this is more than a lease. The sum of the rents accumulated over a period of time could be regarded as deferred payment for the building works themselves.


That argument, however, would have called for an economic study taking into account the project’s write-off period and the costs to the owner of maintaining the building during the minimum contract term. In the absence of such data, that argument cannot be endorsed.

(2) Use of the building


The fact that the ‘Gate 2’ building was intended to meet the requirements of Wiener Wohnen explains why that public body effectively occupied almost all of it, this being consistent with its intervention in the planning and construction of the property.


The Republic of Austria submits, as proof of the fact that it was not the only occupant of the property, that there were other tenants in some of its offices.


That argument, however, does not carry the force of conviction given that Wiener Wohnen, under powers expressly conferred on it by a clause in the contract, could transfer the use of its offices to departments within the City of Vienna or to legal persons in which the latter has a majority shareholding. ( 42 ) The only thing its argument demonstrates is that, taken as a whole, the building served to meet the public requirements of the City of Vienna, including those of its executive agencies or entities.


Its exclusive purpose as such is not detracted from by the presence in the property of a small office (158.45m2) rented out as an information centre to a union of municipal employees, or of other spaces (2 590.15m2) sublet to Wiener Wohnen Haus – & Außenbetreuung GmbH. ( 43 ) The space sublet to those organisations, which are linked to the principal tenant, represents only 9.1% of the property’s total floor space.

(3) Building permit


The two parties had exchanged argument and evidence in relation to what the Republic of Austria, in its defence, called a ‘basic authorisation’ (to build). ( 44 )


In response to the Commission’s insistence that a building permit had not been issued at the time when the contract was concluded, ( 45 ) the Republic of Austria did not put forward any robust argument, choosing instead to make some rather vague allegations that failed to clarify the point of fact raised.


In the reply, the Commission asked why the Republic of Austria had not produced the building permits, to which the Republic of Austria responded, in the rejoinder, by stating that Wiener Wohnen, in its capacity as tenant, was not a party to the procedure for granting building permits and was not able to access the [permit application] file or to produce documents from that procedure.


The Republic of Austria’s reply was, once again, unsatisfactory. Difficult as it is to accept that the town-planning authorities of the City of Vienna (to which Wiener Wohnen is ultimately answerable) would refuse to grant the Republic access, even retrospectively, to the town planning file, it is less believable still that that, faced with an action for failure to fulfil obligations before the Court of Justice, the Republic of Austria was unable to obtain (and produce) those documents.


It was for this reason that the Court, acting of its own motion, sent the Republic of Austria a question asking it to clarify these matters. As I have already said, ( 46 ) its reply demonstrates that, at the time when the contract was signed, a building permit had not even been applied for.

(4) Principle of patere legem quam ipse fecisti in relation to the Austrian Government’s position


The Republic of Austria’s reaction to the letter of formal notice from the Commission was to recognise the alleged failure to fulfil obligations. This was a plausible reaction, given the information which had been set out in that letter.


That same confession was maintained in subsequent letters from the Republic of Austria. ( 47 ) It is true that the Republic of Austria is entitled to retract its previous position at a later stage because it considers this to be erroneous. To be credible, however, such a change of course would need a more robust justification than that given in the defence and the rejoinder.


The argument that its initial recognition of the failure to fulfil obligations was intended to facilitate dialogue with the Commission is not very convincing. The pre-litigation stages of the action for failure to fulfil obligations allow for a consensual solution that is not necessarily conditional upon an initial admission of guilt.


The principle of sincere cooperation between the Member States and the Commission serves to ensure that the Member States facilitate the achievement of the Commission’s tasks. Conduct whereby, after unequivocally and repeatedly admitting the alleged infringement, a Member State later changes its position but does not adequately explain why, is not in keeping with that principle.

D. Summary


On the basis of an overall examination of the arguments of the parties and the evidence adduced, I am satisfied that the main object of the contract signed on 25 May 2012 by Vectigal Immobilien GmbH & Co KG and Wiener Wohnen was the construction of the ‘Gate 2’ building, in the planning and execution of which the public body intervened decisively in order to align it with its requirements.


In those circumstances, and in the light of the Court’s case-law interpreting Article 16(a) of Directive 2004/18, Wiener Wohnen’s actions should have been subject to the regulated procedure for the award of public works contracts, in accordance with Articles 2, 28 and 35(2) of that directive.

V. Conclusion


For the foregoing reasons, I suggest that the Court uphold the action brought by the Commission and:

Declare that the Republic of Austria has failed to fulfil its obligations under Articles 2, 28 and 35(2) of Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts, in so far as Stadt Wien-Wiener Wohnen made a direct award of the contract of 25 May 2012 relating to the office building located at Guglgasse 2-4, Vienna, without advertising it or subjecting it to a public tendering procedure.

Order the Republic of Austria to pay the costs.

( 1 ) Original language: Spanish.

( 2 ) Directive of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 2004 L 134, p. 114).

( 3 ) The Mietvertrag (lease agreement; ‘the contract’ or ‘the contract at issue’) was signed by Vectigal Immobilien GmbH & Co KG, as landowner and landlord, and Stadt Wien (City of Vienna), represented by Wiener Wohnen, as tenant. Ownership of the building was subsequently (on 29 September 2014) transferred to WestInvest Gesellschaft für Investementfonds mbH, which was subrogated to the legal status of the former owner.

( 4 ) Federal Law on Public Procurement (‘BVergG 2006’).

( 5 ) Annex A6 to the application. In particular, recognition of the infringement was highlighted in paragraphs 2, 3 and 6 of that document. Paragraph 3 stated that both the Republic of Austria and the contracting authority regretted the infringement.

( 6 ) Annex A7 to the application.

( 7 ) Letters of 5 May, 13 September and 25 October 2017 (Annexes A8, A9 and A10 to the application).

( 8 ) In the judgment of 29 October 2009, Commission v Germany (C‑536/07, EU:C:2009:664, paragraph 54), the Court held that ‘[the] legal classification [of the contract] falls under Community law and the classification given under national law is irrelevant for that purpose. Likewise, the classification of a contract given by the contracting parties is not decisive either’. The Court ruled to the same effect in the judgment of 10 July 2014, Impresa Pizzarotti (C‑213/13, EU:C:2014:2067; ‘the judgment in Impresa Pizzarotti’, paragraph 40): ‘the question whether a transaction constitutes a public works contract for the purposes of EU legislation is one of EU law. The classification of the proposed contract as a ‘lease’, highlighted by Pizzarotti and the Italian Government, is not decisive in that regard’.

( 9 ) Judgment of 29 October 2009, Commission v Germany (C‑536/07, EU:C:2009:664, paragraph 55).

( 10 ) Judgment in Impresa Pizzarotti, paragraph 41.

( 11 ) Judgment of 25 March 2010, Helmut Müller (C‑451/08, EU:C:2010:168, paragraphs 48 to 51).

( 12 ) Directive of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18 (OJ 2014 L 94, p. 65).

( 13 ) ‘The Union rules on public procurement are not intended to cover all forms of disbursement of public funds, but only those aimed at the acquisition of works, supplies or services for consideration by means of a public contract. It should be clarified that such acquisitions of works, supplies or services should be subject to this Directive whether they are implemented through purchase, leasing or other contractual forms. […] The notion of acquisition should be understood broadly in the sense of obtaining the benefits of the works, supplies or services in question, not necessarily requiring a transfer of ownership to the contracting authorities (no emphasis in the original).

( 14 ) Judgment in Impresa Pizzarotti, operative part.

( 15 ) Ibidem, paragraph 42 to 44, including the citation of paragraph 67 of the judgment of 25 March 2010, Helmut Müller (C‑451/08, EU:C:2010:168).

( 16 ) Ibidem, paragraphs 42 and 43, including a reference to the findings in the judgment of 29 October 2009, Commission v Austria (C‑536/07, EU:C:2009:664, paragraphs 55 and 56).

( 17 ) As was highlighted by Advocate General Wahl in his Opinion in Impresa Pizzarotti (C‑213/13, EU:C:2014:335, points 53 and 60). The Court did not endorse that proposition, however.

( 18 ) In paragraph 54 of its reply, the Commission cautions against such an extension: ‘The fact that Wiener Wohnen combined the two elements within a single contract shows the risks of an unlimited extension of the application of Article 16(a) of Directive 2004/18 to buildings which have yet to be constructed. The result of that practice would be that an excessive number of public works contracts, which are usually the most expensive, would benefit from an exclusion originally intended only for existing buildings and, as a result, might cost the taxpayer more’.

( 19 ) Judgment of 9 December 2010, Commission v Spain (C‑340/09, not published, EU:C:2010:758, paragraph 36).

( 20 ) Judgment of 18 October 2012, Commission v United Kingdom (C‑301/10, EU:C:2012:633, paragraph 71).

( 21 ) Ibidem, paragraph 72.

( 22 ) The annexes are entitled ‘Description of the building and its amenities’, of 16 May 2012 (the ‘Description’) and ‘Supplement to the description of the building and its amenities’, of 22 May 2012 (the ‘Supplement’). Also attached to the lease agreement were addenda of 25 October 2012 and of 16 and 17 September 2013.

( 23 ) The Commission cites by way of examples, in particular, a series of requirements relating to the facade, interior walls, floor construction and covering, ceilings, technical building systems, distribution points, floor heating, pumps, the toilet adjustment facility, waste water disposal, materials to be used for electronic devices, and general guidelines on electrical and fire protection systems.

( 24 ) Immovement, Inmobilien und Facility Management Consulting, GmbH (‘Immovement’).

( 25 ) They could be called ‘standard’ in the sense that each building includes, for example, a facade, interior walls, floors and sewage pipes.

( 26 ) https://www.austrian-standards.at/de/standardisierung/warum-standards/grundbegriffe/oenorm.

( 27 ) The Commission notes that a tenant would be interested, for example, in whether the piping works properly, not in the type of system chosen or whether, in the case of sealed systems, the drainage pipes are made of PE (polyethylene) or ABS (acrylonitrile-butadiene-styrene).

( 28 ) That article was published in the Austrian press on 22 September 2016 (Annex C3 to the application) and, as well as touching on the circumvention of the public procurement rules, stated that Wiener Wohnen was heavily involved in the planning and construction of the building.

( 29 ) As a body responsible for building social housing, Wiener Wohnen was in principle required to invest its economic resources in maintaining and improving the residential buildings it manages.

( 30 ) The Austrian Government points out that the Gewerkschaft der Gemeindebediensteten – Kunst, Medien, Sport, freie Berufe (Union of Municipal Employees – Art, Media, Sport and Liberal Professions), which does not operate under the authority of either Wiener Wohnen or the City of Vienna, used to and continues to rent space on the ground floor of the B wing and has its own information centre there.

( 31 ) The Republic of Austria is referring to the ‘schedule of conditions applicable to administrative buildings, drawn up by Department MA34’ (the department for managing construction and building in Vienna).

( 32 ) See points 21 to 31 of this Opinion, above.

( 33 ) In paragraph 8 of its written reply to the question from the Court, the Republic of Austria states that the application for a permit was lodged on 17 July 2012 and the permit was granted on 13 November 2012.

( 34 ) The cover of ‘the Supplement’ shows that Wiener Wohnen paid for that document to be produced.

( 35 ) First addendum to the contract (Annex A3 to the application).

( 36 ) Clauses 1.2 and 1.9.

( 37 ) Document produced by the Republic of Austria in response to the Commission’s reasoned opinion.

( 38 ) Defence, paragraph 27.

( 39 ) Ibidem, paragraph 46. This fact did not, in its view, mean that the building had been designed or constructed in accordance with the contracting authority’s requirements.

( 40 ) No emphasis in the original.

( 41 ) After various turns of events, the minimum term of 25 years was finally laid down in clause 2.4 of the second addendum to the lease agreement, of 17 September 2013 (Annex A4 to the application).

( 42 ) Clause 10.1.1 of the contract.

( 43 ) These figures are taken from the Republic of Austria’s written reply to the Court’s questions.

( 44 ) In paragraph 28 of the reply, the Republic of Austria concedes that the expression ‘basis authorisation’, which it uses in its defence, is not consistent with the authorisations provided for in the construction legislation of the Land Vienna. It goes on to say that a basic authorisation corresponds in fact to an initial building permit.

( 45 ) The Commission recalls that, in its defence (paragraph 41), the Republic of Austria had recognised that the existence of a building permit prior to the contract was one of the criteria for assessing whether the exclusion provided for in Article 16(a) of Directive 2004/18 was applicable (see point 50 of this Opinion).

( 46 ) See point 59 and footnote 23 of this Opinion.

( 47 ) See points 9 and 10 of this Opinion.