61998C0399

1. In the present case the Court is asked to rule on the substantive scope of Community law governing public works contracts in the context of national planning legislation.

2. Where public and private interests overlap in relation to a development project, questions necessarily arise where procedures under national legislation leave private operators the responsibility of providing basic facilities, and even public facilities for purely leisure purposes, associated with their project.

3. Such is the nature of the issue raised in the proceedings pending before the Italian court, which has submitted questions necessitating examination of the conditions governing the application of Council Directive 93/37/EEC of 14 June 1993 concerning the coordination of procedures for granting public works contracts.

I - Legal background

A - Community legislation

4. Article 1(a), (b) and (c) provide:

(a) "public works contracts" are contracts for pecuniary interest concluded in writing between a contractor and a contracting authority as defined in (b), which have as their object either the execution, or both the execution and design, of works related to one of the activities referred to in Annex II or a work defined in (c) below, or the execution, by whatever means, of a work corresponding to the requirements specified by the contracting authority;

(b) "contracting authorities" shall be the State, regional or local authorities, bodies governed by public law, associations formed by one or several of such authorities or bodies governed by public law;

...

(c) a "work" means the outcome of building or civil engineering, works taken as a whole that is sufficient of itself to fulfil an economic and technical function.

5. The activities listed in Annex II referred to in Article 1(a) are the activities of building and civil engineering corresponding to Class 50 of the general industrial classification of economic activities within the European Communities nomenclature (NACE).

6. Under Article 2 of the Directive:

1. Member States shall take the necessary measures to ensure that the contracting authorities comply or ensure compliance with this Directive where they subsidise directly by more than 50% a works contract awarded by an entity other than themselves.

2. Paragraph 1 shall concern only contracts covered by Class 50, Group 502, of the general industrial classification of economic activities within the European Communities (NACE) nomenclature and contracts relating to building work for hospitals, facilities intended for sports, recreation and leisure, school and university buildings and buildings used for administrative purposes.

7. Articles 4 and 5 indicate the categories of contracts to which the Directive does not apply, such as contracts governed by Directive 90/531/EEC, works contracts declared secret or accompanied by special security measures or contracts governed by different procedural rules and awarded in pursuance of specific international agreements.

8. Article 6 sets the threshold for the application of the Directive at ECU 5 000 000 net of VAT.

9. Article 7(2) and (3) describe the circumstances in which the contracting authorities may use negotiated procedures which means, according to the definition given in Article 1(g), those national procedures whereby contracting authorities consult contractors of their choice and negotiate the terms of the contract with one or more of them.

10. According to Article 7(4), in all cases other than those mentioned in Article 7(2) and (3), the contracting authorities are to award their public works contracts by the open procedure or by the restricted procedure

B - Italian Legislation

Legislation on town planning and community facilities

11. According to applicable national legislation, building activity is subject to public authority control. Pursuant to Article 1 of Law No 10/77 of 28 January 1977, any activity involving the urban development of municipal land and building works on such land entails liability to contribute to the related costs and the execution of such works is conditional upon a permit being granted by the mayor.

12. Pursuant to Article 3 of the same Law, the granting of the permit entails payment of a contribution commensurate with the costs of development and the cost of construction.

13. The infrastructure contribution is paid to the municipality when the permit is granted. However, pursuant to Article 11(1) of Law No. 10/77, by way of total or partial set-off against the amount payable, the permit holder may undertake to carry out direct execution of the infrastructure works, observing the procedures and safeguards laid down by the municipality.

14. As regards specifically the coordinated execution of a complex of works in accordance with a development plan the situation in the main proceedings Article 28(5) of Law No 1150/42 on urban development makes the requisite municipal permission subject to conclusion of an agreement, to be registered by or on behalf of the owner, which provides as follows:

(1) ... the land required for secondary infrastructure works shall be transferred free of charge, subject to the provisions of subparagraph (2) below;

(2) the owner shall undertake to bear the costs of the primary infrastructure works; the owner shall also undertake to meet part of the cost of the secondary infrastructure works involved in the development project or of the works necessary to link the area to the various public utilities; the amount payable shall be commensurate with the nature and extent of the project works;

(3) the works referred to in subparagraph (3) above must be completed within ten years.

Article 28 (7) of Planning Law No 1150/42 also sets a time-limit of ten years for the execution of infrastructure works for which the owner is to be responsible.

15. By virtue of Article 4 of Law No 847/64 of 29 September 1964, health and cultural facilities constitute secondary infrastructure works.

16. Article 8 of Lombard Regional Law No 60 of 5 December 1977 provides for development works to be carried out by private persons by way of set-off against infrastructure contributions payable for an ordinary building permit. Applicants for a permission may request that they be authorised to carry out directly one or more primary or secondary development works, the permit being issued by the mayor where such direct execution is deemed conducive to the public interest.

17. The execution of infrastructure works provided for in a development plan, on the other hand, is governed by Article 12 of the abovementioned Regional Law, as amended by Article 3 of Regional Law No 31 of 30 July 1986. According to that article the agreement which must be concluded before a building permit can be issued for the operations provided for in the project plans must provide for carrying out by or on behalf of the owners of all the primary infrastructure works and a portion of the secondary infrastructure works or those necessary to link the area to the public services. Where execution of the works involves charges lower than those separately laid down for primary and secondary infrastructures, the difference must be paid. In any event it is open to the municipality to require, in lieu of the direct execution of the works, payment of a sum commensurate with the actual cost of the infrastructure works relating to the project and with the area and characteristics of the buildings, and in any event in an amount not lower than the charges laid down in the municipal resolution referred to in Article 3.

18. The regional legislation also gives a list of secondary infrastructure works, which includes cultural facilities.

Legislation on administrative procedure

19. The national court notes that the procedures in question in the case before it are not remote from certain forms of what is known in Italy as consensual administration. In other words, the public administration abandons or moderates its authoritative and unilateral stance and negotiates directly with the private operator to agree on the terms of administrative measures affecting the latter.

20. General Law No 241 of 7 August 1990 on procedure lays down new rules governing administrative procedure and the right of access to administrative documents.

21. Article 11 of that Law provides that the administration may conclude, without prejudice to the rights of third parties and in pursuit of the public interest, agreements with interested parties in order to determine the discretionary terms of the final measure or, in cases for which the law so provides, to replace the latter.

II - Facts and procedure before the national court

22. By Resolution No 82/96 of 12 September 1996, the municipal council of Milan approved a programme of works, comprising three separate parts, known as the Scala 2001 Project.

23. Essentially, those parts related to the execution of the following works:

- restoration of and alterations to the historical building of Teatro alla Scala;

- alterations to municipal buildings in a building complex, and

- construction, in the so-called Bicocca area, of a new theatre, with about 2,300 seats, having an area of around 25,000 m2 (plus 2,000 m2 parking) intended to accommodate, in the initial stage, the activities of the historic headquarters of the Piazza Scala for the period needed to carry out the restoration works and alterations. Subsequently, that facility would accommodate all activities relating to the performance of dramatic works and other cultural events.

24. In the Bicocca area a planning project was devised, catering for a large number of buildings with a view to developing the former industrial zone. Società Pirelli (Pirelli) acted, together with other private operators, as the owner-developer. That private initiative, which was a long-term commitment and had passed all the stages of the administrative procedure, was in the process of being carried out when the events leading to the case in the main proceedings occurred.

25. Among the town-planning measures envisaged in relation to the site, the municipality of Milan had already made provision for the construction of a general-purpose multi-communal structure. The theatre was to be part of that structure.

26. By Resolution No 82/96, the municipal council of Milan then gave a number of commitments concerning the execution of works, time-limits and financing for the Scala 2001 project approving a specific agreement between the municipality of Milan, on the one hand, and, on the other, Pirelli, Ente Autonomo Teatro alla Scala and Milano Centrale Servizi SpA, as agent for the promoters of Progetto Bicocca (Bicocca Project). That agreement, signed on 18 October 1996, incorporated the following terms concerning the Bicocca section of Scala 2001:

- MCS, as agent for the promoters of the development project, was to construct the new theatre (and the parking area) as secondary infrastructure works in the Bicocca area and on the land provided for that purpose, given free of charge by the promoters to the municipality of Milan. Construction of the theatre was in partial payment of the infrastructure contribution payable under national and regional legislation. The commitment undertaken was limited to the construction of the outer shell of the building. According to MCS, the municipality of Milan was responsible for completing the interior of the building and was obliged to organise a public tendering procedure for that purpose, and

- MCS was to hand over the building before the end of 1998.

27. The Ordine degli Architetti delle Province di Milano e Lodi (Order of Architects of the Provinces of Milan and Lodi) and the architect Piero de Amicis, in his own right, brought an action for the annulment of Resolution No 82/96 before the Tribunale Amministrativo Regionale per la Lombardia (Italy).

28. Following the adoption of new guidelines by the incoming municipal administration at the beginning of 1998, the municipal council of Milan adopted Resolution No 6/98 of 16 and 17 February 1998 whereby it:

- approved the preliminary plan for the construction of the theatre;

- confirmed that the work would be constructed in part directly by the developers in implementation of the contractual obligations relating to the development plan; it was also noted that the cost of the work in question amounted to ITL 25 billion, and

- amended the time-limits written into the agreement for the completion of certain measures. The completion date for the new theatre thus became 31 December 2000.

29. The Consiglio Nazionale degli Architetti (National Council of Architects) and the architect Leopoldo Freyrie, in his own right, brought proceedings for the annulment of Resolution No 6/98 before the Tribunale Amministrativo Regionale per la Lombardia.

30. In those two actions for annulment, the plaintiffs contend that the contested resolutions are invalid under both Italian town-planning and public contract law and under Community law. As regards the latter aspect, they maintain that the theatre works are in the nature of public works and therefore the municipal council should have complied with Community tendering procedures rather than granting a contract directly, thereby harming the interests represented by the OAML and those of the plaintiff architects.

III - Questions referred to the Court for a preliminary ruling

31. In its order for reference, the Tribunale Amministrativo Regionale per la Lombardia states that the municipality of Milan correctly applied Italian (national and regional) legislation in respect of town planning. On the other hand, with regard to Community law, the national court raises certain doubts as to whether direct execution of infrastructure works by way of set-off against the contribution payable constitutes a public works contract as defined by Community law.

32. Accordingly, it decided to refer to the Court the following questions for a preliminary ruling:

1. Is national and regional legislation which allows a builder (who holds a building permit or approved development plan) to carry out infrastructure works directly, by way of total or partial set-off against the contribution payable (Article 11 of Law No 10/77, Articles 28 and 31 of Law No 1150 of 17 August 1942, Articles 8 and 12 of Law No 60 of the Lombardy Region of 5 December 1977), contrary to Directive 93/37/EEC, having regard to the strict tendering principles imposed on Member States by Community law in respect of all public works of a value of [EUR] 5 million or more?

2. Notwithstanding the principles concerning tendering referred to above, may agreements between the administrative authorities and a private person (generally permitted by Article 11 of Law No 241 of 7 August 1990) be regarded as compatible with Community law in areas where the procedure is that the administrative authorities choose a party with whom a contract for services is to be concluded, in cases where such services exceed the threshold laid down by the relevant directives?

IV - Admissibility of the first question

33. The municipality of Milan and the FTS doubt whether there is any connection between the first question and the subject-matter of the main proceedings.

34. They maintain that the national court limited the admissibility of the actions before it to aspects of the case concerned with the allocation of work relating to the design of the theatre, thereby excluding those aspects concerned with the execution of the works. That decision is based on the status of the plaintiffs, who are not contractors but architects, and their professional bodies.

Accordingly, the first question for a preliminary ruling, which is limited to interpreting the Directive, cannot help to resolve a dispute relating to the provision of services.

35. The municipality of Milan and the FTS further maintain that the work relating to the design of the theatre was simply provided free of charge to the municipal administration by Pirelli and MCS. Its cost cannot therefore be included in the cost of the works to be offset against the infrastructure contribution.

By arguing thus, the parties to the main proceedings appear to allege that since that part of the project at issue involved no payment, it falls outside the scope of the Directive, which is based on the assumption that the project in question should involve a pecuniary interest.

36. According to settled case-law of this Court, in the context of cooperation between the Court and the national courts enshrined in Article 177 of the EC Treaty (now Article 234 EC), it is for the national courts alone, before which the proceedings are pending and which must assume responsibility for the judgment to be given, to determine, having regard to the particular features of each case, both the need for a preliminary ruling to enable them to give a judgment and the relevance of the questions which they refer to the Court. Accordingly, since the questions referred relate to the interpretation of Community law, the Court is, in principle, required to give a ruling.

37. A request from a national court for a preliminary ruling may be rejected only if it is quite obvious that the interpretation of Community law sought by that court bears no relation to the actual nature of the case or the subject-matter of the main action.

38. In the present case, it cannot be accepted that a dispute relating to the method of appointing an economic operator responsible for the construction of a theatre bears no relation to Community law on public works contracts since the project was undertaken at the request of a municipality and the building works in question are considered as community facilities under national legislation.

39. Furthermore, in the order for reference, the national court does not endorse the assertion that the admissibility of the actions is limited to aspects of the case concerned with the design of the theatre and not the works themselves. Such an assertion is actually demolished by the fact that the application is declared admissible by the court without mention of any such restriction. Furthermore, pursuant to Article 1(a) of the Directive, public works contracts include contracts which have as their object both the execution and the design of works.

40. Finally, as regards the fact that the design work was provided free of charge, the argument put forward is a matter of substance and does not affect admissibility. Accordingly, there is no reason for concluding on that basis that the question raised has no bearing on the main proceedings.

41. The first question must therefore be declared admissible.

V - The questions submitted for a preliminary ruling

42. By both its questions, the national court seeks a ruling on whether various provisions of Italian town planning law are compatible with Community law.

43. According to settled case-law, although the Court has no jurisdiction under Article 177 of the Treaty to apply a rule of Community law to a particular case and thus to judge a provision of national law by reference to such a rule it may, in the framework of the judicial cooperation provided for by that article and on the basis of the material presented to it, provide a national court with an interpretation of Community law which may be useful to it in assessing the effects of that provision.

44. Accordingly, an interpretation of the Directive should be provided so as to enable the national court to rule on the propriety of rules which allow an operator to participate in the construction of public facilities without any tendering procedure being conducted.

45. It will be noted that the second question seeks to ascertain whether agreements between the administration and private persons may be regarded as compatible with Community law where the public administration chooses a party with whom a contract for services is to be concluded and the costs of such services exceeds the threshold laid down by the relevant directives.

46. If, as in the present case, the question asked may be construed as requesting an interpretation of Community law, but does not identify the provisions of Community law which are in issue, it is incumbent on the Court to extract from all the information provided by the national court the elements of Community law requiring an interpretation, having regard to the subject-matter of the dispute.

47. By this question, the national court seeks a ruling under Community law concerning a principle of Italian law which it refers to as consensual administration, that is to say where the Public Administration abandons or moderates its authoritative and unilateral stance and negotiates directly with the private operator to agree on the terms of administrative measures affecting the latter.

48. The Italian court has focused upon the situation where the services to which those agreements may apply exceed the threshold laid down by the relevant directives. It therefore appears that, in the absence of any more detailed information on the rule of Community law in question, the question is concerned only with the interpretation of Community law on public contracts.

49. The national court also notes that the present case may of course come within the framework of broader national legislation, intended to favour negotiated procedures, citing in that context Article 11 of Law No 241/90.

50. However, it does not provide any details on the specific nature of that law, such as how it might apply to the circumstances of the main proceedings, as compared with the town-planning legislation referred to in the first question.

Under those circumstances, it appears that an interpretation of the Community provisions relating to public contracts can provide the national court with the detailed reply it requires to assess the standing of both laws. Accordingly, there is no reason to make a distinction between the two questions referred to the Court for a preliminary ruling.

51. Consequently, it must be concluded that the national court is asking, in essence, whether the Directive precludes national legislation which provides that, when implementation of a development plan requires construction works in order to provide community facilities, the holder of the building permit is to be responsible for carrying out those works, at his expense, in return for exemption from payment of the amount due to the municipality in respect of the building permit, unless the municipality decides to collect the contribution instead of opting for direct execution of the works, without requiring any tendering procedure for the award of public works contracts provided for by the same directive.

52. Before examining the Directive, I shall consider for a moment the infrastructure works with which the main proceedings are concerned.

A - The legal nature of the theatre under national and Community law

53. According to the order for reference, under Italian law the theatre constitutes secondary infrastructure works.

Under national law, cultural facilities, to which category of infrastructure works this building belongs, are classified as secondary infrastructure works, there being 'no limitation to the local district in any purposive or functional sense. According to the national court, the deliberate omission of any such limitation clearly indicates that the legislature specifically wished, in respect of such works, to disregard the strict referential planning context.

54. The fact that a national cultural institution is considered an essential facility within a development project may appear somewhat surprising.

The lack of any legal distinction between a national theatre and infrastructure works linking the area to public services - classified under Italian law as primary infrastructure works - or facilities classified as secondary infrastructure works, such as kindergartens or green areas, means that the theatre is treated as an essential feature of the development under construction.

55. Accordingly, a theatre whose activities extend far beyond the locality in which it is situated is subject, by virtue of that legal status, to town-planning provisions which create specific obligations linked to the needs and amenities of that locality. For example, under Italian law, private developers have an obligation to meet any expenditure justified by the nature of the infrastructure which, in the present case, amounts to a particularly large sum.

56. It is not my task to evaluate the legal provision in question. That is a matter reserved exclusively to the legislature and its concept of what town planning involves.

57. However, the Court is responsible for ensuring that such an approach to town planning does not risk undermining the interests which the Community legislation on public contracts is designed to protect.

58. According to the national court, the construction of the theatre constitutes public works as defined in the Directive. Despite that, the legal status attributed by national law to this type of facility has specific implications which appear to derogate from the system established by the Directive. The developer is obliged to carry out the construction works or arrange to have them carried out, unless the municipality decides to collect the infrastructure contribution instead of opting for direct execution of the works. Moreover, the municipality can refuse direct execution and insist on payment only on grounds of public interest justified by the need to ensure proper and effective implementation of the development plan.

59. It might be feared that a burgeoning of similar laws in the Member States could render the Community rules on public contracts ineffectual. Member States might be tempted to include in their town-planning legislation whole categories of public works in order to remove them from the scope of Community law on public contracts which is considered both restrictive and costly in terms of time and money.

60. The importance of the debate concerning national legislation of this kind should not therefore be underestimated.

61. To determine whether public tendering procedures provided for by the Directive should be applied in circumstances such as those of the main proceedings, it is necessary to define the substantive scope of the Directive in the light of its objectives.

B - The definition of public works contracts

62. The definition of public works contracts, for the purposes of the Directive, is given in Article 1(a).

63. The six conditions laid down by that provision are as follows: contracts must be for pecuniary interest, concluded in writing between a contractor and a contracting authority which have as their object certain types of works.

64. It has been noted that the construction of the theatre is regarded as constituting public works or, at least, that the building is a work within the meaning of the Directive. The fact that the agreement is in writing is not contested. Finally, a municipality is a contracting authority as defined in Article 1(b) of the Directive since regional authorities are treated as such.

65. On the other hand, I take the view that legal relations such as those entered into by the City of Milan and the other defendants in the main proceedings, under the conditions laid down by national law, are not contractual in nature. Moreover, the condition relating to the status of contractor which the Directive requires the party dealing with the contracting authority to have is not necessarily met by legislation such as that in question. Finally, in my opinion, relationships of the type existing between the municipality and the developer are not for pecuniary interest as required by the Directive.

66. Those three conditions will be dealt with in turn.

The condition relating to the contractual nature of the legal relationship

67. A contract between the parties was indeed signed, but its content is limited to the arrangements for implementation of the project, such as the allocation of work as between the MCS, for the construction of the outer shell of the building, and the City of Milan, for the internal work, or the date of completion of the building.

68. However, there is something missing from the agreement which, in my opinion, is an essential element of a contractual relationship: the power to choose the contractor. According to the national court, a party called on to carry out development works is simply identified by law, in this case by Article 12 of Regional Law No 60 of 1977. The effect of that provision is that the works must be carried out by the owner of the land.

69. That non-contractual method of determining who is to be the subject to the obligation to carry out the infrastructure works is confirmed by its legal standing under national law. The FTS cites a judgment of the Corte Suprema Di Cassazione which states that the obligation on the owner to meet the cost of primary infrastructure works and a portion of the secondary infrastructure works ... constitutes ... an obligation in rem. It follows that those works should be carried out by owners as soon as the building permit is issued. Owners may well be persons other than those who concluded the agreement by virtue of the fact that they have acquired part of the land which is to be divided into various lots or groups of lots.

70. The fact that there is no possibility of choosing the operator who is to carry out the infrastructure works considerably reduces, in my opinion, any risk of discrimination on the part of the contracting authority if it intends to favour national or local operators.

71. Let us consider for a moment the main purpose of the Directive: its precise aim is to eliminate discriminatory practices in the field of public contracts. It is clear that the wording of Article 1(a) reflects very accurately, as far as the requirement of a contractual relationship is concerned, the purpose assigned to it by the Community legislature.

72. The Directive seeks to avoid the risk of any preference being given to national tenderers or applicants whenever a contract is awarded by the contracting authorities.

73. The expression of a national preference constitutes an obstacle to freedom of establishment and freedom to provide services, principles upon which the Directive is founded, and to the development of effective competition. There is no denying that, if an advantage is given to national operators over their competitors in other Member States, the latter will be dissuaded from establishing themselves in that territory or even from going there regularly to carry on business.

74. If a contracting authority is free to appoint a contractor to carry out public works, in return for payment, there is a real risk, often observed in the practices employed by public authorities of Member States, that those authorities may choose their contractors on the basis of criteria other than purely economic criteria.

75. Favouritism towards national operators runs counter to considerations concerned with the quality of work and price levels which ought to apply to the choice of undertakings. Such a situation adversely affects the interests both of excluded competitors, who suffer loss through being excluded, and of taxpayers, since the public authorities use of tax revenue has not been dictated by strictly economic considerations.

76. That is why Community rules on public contracts, and in particular the Directive, provide for contracts to be awarded by means of competitive tendering procedures.

77. That is also why the Directive requires, as one of the conditions determining its applicability, the establishment of a contractual relationship. Indeed, the procedural formalities of Community law on public contracts are justified only if the contracting authorities enjoy a degree of latitude in appointing economic operators. Otherwise, those constraints would be deprived of their justification, namely the risk that freedom of freedom of movement and freedom of competition might be undermined. It should not be forgotten that the freedom to choose is also the freedom to discriminate.

78. There is no freedom of choice here. It could re-emerge if the developer who, as will be seen, is not necessarily a contractor, were dictated to by the contracting authority, particularly as regards deciding who is to carry out the works. It is clear that any constraint imposed by the public authority in that respect would constitute an evasion of the law - if not of national law, at least of Community law - and should be reclassified as a contract between the contracting authority and the contractor.

79. In any event, the municipal administration has no freedom to intervene in the present case regarding either the choice of contractor or relations with that contractor during the performance of the contract, as almost all the parties recognise.

80. Under the national legislation at issue, the municipality may opt for payment of the infrastructure contribution or replace that obligation by direct execution of the works.

81. It is necessary to make certain that the reintroduction of an element of choice in the appointment of the contractor would not entail the risk of the contracting authority resorting once more to discriminatory practices.

82. That question would arise, of course, only if the municipality should decide to exercise its right to collect the infrastructure contribution rather than having the works carried out by way of set-off.

83. It is obvious that in those circumstances the procedures laid down by the Directive ought to apply since the contracting authority has decided to approach other contractors. But in doing so, it is exercising a choice, at least in the negative sense, by refusing the developer the right to execute the works himself.

84. I do not believe those fears are justified. First, it is not the case either that the developer is always a contractor or, if he were, that he would automatically wish to be granted the right to carry out the works. In either case, that right might well be regarded as involving an excessive burden and, from a personal point of view, one that was unjustified particularly since, if the developer himself undertakes to execute works and the resulting costs are less than envisaged, he is obliged to pay the difference to the municipality. Accordingly, execution of the works may constitute an obligation without any prospect of financial concessions in return for direct execution. Second, if the developer who is thus excluded wishes to carry out the works, he may still, if the Directive is properly applied, respond to the invitation to tender.

85. Accordingly, the condition relating to the contractual nature of the legal relationship cannot be regarded as satisfied.

The condition relating to the involvement of a contractor

86. The fact that the developer is not always a contractor is the second reason for rejecting the idea that national legislation which requires, without exception, direct execution of development works by way of set-off contravenes the Directive.

87. Such a condition presupposes a contract between a contracting authority and a contractor.

88. However, the national legislation at issue does not require that the developer be a contractor. Consequently, if the developer is not able to carry out the works himself, he must appoint a contractor to do so. It is with that contractor that he will enter into a contractual relationship, thus becoming the promoter, and not with the contracting authority. If, as already noted, the municipality is not involved in the relationship between the developer and the contractor, its potential influence is considerably reduced.

89. Such an arrangement cannot be considered to constitute a public contract, first because no contractor has a relationship with the municipality and, second, because the contracting authority has no involvement in the construction work assigned by the developer to the contractor.

90. The grounds for applying the Directive are once again absent. The dividing line between public contracts and relations of a strictly private nature has been crossed. The developer, a private operator responsible for paying for the works by way of set-off against the infrastructure contribution, is again adjusting to a purely economic reality which prompts him to make a choice that takes account of his own interests. The controlling of expenditure by a contracting authority which could easily come to believe itself to be free from any budgetary constraints gives way to the vigilance exercised by a private operator naturally concerned to limit his expenditure. Accordingly, effective competition is almost automatically guaranteed since, out of concern to save money, the private operator, who is free to choose any contractor and whose debt is limited to the amount he will have to pay to the latter, will endeavour to choose the best service at the best price.

The condition relating to the pecuniary nature of the legal relationship

91. It remains for me to set out the reasons why I consider that the relationship between the developer and the municipality, for the purpose of carrying out the works at issue, is devoid of any pecuniary interest as defined in Article 1(a) of the Directive.

92. The national court, on the other hand, considers that where the holder of a building permit undertakes infrastructure works, he is not providing anything free of charge. Rather, he is discharging a debt of the same value that arises in favour of the municipality as a result of his plan to carry out works which will give rise to the need for that infrastructure.

93. We have seen that the aim of the Directive is to eliminate discriminatory practices on the part of contracting authorities. However, there is a question as to whether freedom of movement and competition are still jeopardised where there is no pecuniary interest in carrying out the work.

94. Economic operators are motivated by the prospect of obtaining some economic benefit from contracts. Discrimination in awarding contracts is unacceptable because awards of contracts entail payment to the contractors who are selected. It would be difficult, where no finance was provided for a contract by the contracting authority, to imagine any kind of favouritism which could benefit the operator chosen. If anything done free of charge or financed by the party carrying out the work offends against the principle of competition, that is because it is damaging to that party's interests and not because it gives him any advantage over his competitors.

Under those circumstances, where there is discrimination in awarding to a contractor a contract for the performance of which he is not paid, there is no justification for following the procedures laid down by the Directive. It is sufficient, if it is assumed that circumstances might arise in which relations are of a contractual rather than a legal nature, for the economic operator to refuse to award the contract in order to eliminate the competitive disadvantage.

95. In that respect, what are the features of the national legislation at issue?

96. According to the documents before the Court, it appears that there are two possibilities.

97. Either the developer carries out the works or arranges for them to be carried out in lieu of payment of the infrastructure contribution, or else he pays the contribution to the municipality at its request and the latter then proceeds with the work in compliance with the rules on public works contracts. As we have seen, the latter case constitutes an exception to the principle of direct execution by way of set-off.

98. The national court considers that developers do not provide anything free of charge. That is correct in so far as works carried out by way of set-off discharge their obligation to pay the infrastructure contribution. Their action is then economic in nature on account of the existence of a payment. Even if the latter is made in kind rather than in money, the debt is discharged.

99. However, when the economic relationship - or rather the fiscal relationship in view of the nature of the contribution in lieu of which the works are executed - is examined more closely, it is clear that the risk of discrimination usually associated with the public financing of private activities is not present in this case.

100. Indeed, the economic nature of the relationship between the developer and the municipality under the national legislation at issue is not the same as the pecuniary nature of the contract required by the Directive, which merely constitutes, in my opinion, a threat to the interests protected by that instrument.

101. In contrast to the position most frequently encountered when public contracts are awarded, it does not appear that the public authority provides any finance for direct execution of the works by way of set-off. For his part, the developer, who receives no payment, bears the costs. When the work is finally completed the assets of the municipality will have been increased by the value of the building, without its having incurred any expense, whilst the developers assets will have been reduced to the same extent, without his receiving any consideration other than the waiving of the infrastructure contribution.

102. Accordingly, only the relationship between the developer and the contractor is of a pecuniary nature, whilst that between the developer and the municipality is not. In fact, the contractual relationship which most closely resembles the one envisaged in the Directive is that between the developer and the contractor.

103. Consequently, the relationship between the municipality and the developer cannot be classified as a legal relationship for pecuniary interest within the meaning of the Directive. By not playing any part in financing the works, in the case of direct execution by way of set-off, the municipality cannot be regarded as favouring the operator to whom it awards a contract in a case where the Directive is not applied.

104. The argument that the Directive should be applied by virtue of Article 2 must be rejected for the same reasons.

105. It should be noted that that provision requires Member States to take the necessary measures to ensure that the contracting authorities comply or ensure compliance with the Directive where they subsidise directly by more than 50% a works contract awarded by an entity other than themselves.

106. That provision is intended to prevent practices aimed at evading the rules applicable to public contracts. Certain contracting authorities might be tempted to entrust to private bodies responsibility for carrying out works relating to public contracts. Since the latter are not themselves contracting authorities, it would be easy for them to find a way around the legal constraints to the detriment of interests protected by the Directive. On the other hand, that risk is diminished if public subsidies account for less than 50% of the contract since a private operator providing most of the finance for the project will be encouraged to be more discerning in the management of his own funds.

107. In the present case, Article 2 of the Directive cannot be interpreted as being applicable to works entrusted by the developer to a contractor if they are not financed by the municipality.

Conclusion

108. In view of the foregoing considerations, I propose that the Court reply as follows to the questions submitted by the Tribunale Amministrativo Regionale per la Lombardia:

Article 1(a) of Council Directive 93/37/EEC of 14 June 1993 concerning the coordination of procedures for the award of public works contracts does not preclude national legislation which provides that, when the implementation of a development plan calls for construction works to provide community facilities, it is incumbent on the holder of the building permit to carry out those works, at his expense, in return for exemption from the requirement to pay the contribution due to the municipality in respect of the building permit, unless the municipality decides to collect the infrastructure contribution in lieu of direct execution of the works, without requiring observance of the procedures for the award of public works contracts provided for by that directive.