1. 

Under Italian public procurement rules, a candidate may be excluded from a (new) procurement procedure where significant deficiencies in its performance of a previous contract awarded to it led to the termination of that (first) contract.

2. 

Those rules would seem to indicate, ( 2 ) however, that, in assessing the reliability of candidates for the new procurement procedure, the contracting authority cannot take those deficiencies into account as grounds for exclusion if the economic operator that committed them has challenged the termination of the (first) contract through the courts.

3. 

The referring court needs to clarify whether this consequence of a legal challenge is consistent with the principles underlying Directive 2014/24/EU, ( 3 ) specifically, Article 57.

4.

Recital 101 is as follows:

‘Contracting authorities should further be given the possibility to exclude economic operators which have proven unreliable, for instance because of violations of environmental or social obligations, including rules on accessibility for disabled persons or other forms of grave professional misconduct, such as violations of competition rules or of intellectual property rights. It should be clarified that grave professional misconduct can render an economic operator’s integrity questionable and thus render the economic operator unsuitable to receive the award of a public contract irrespective of whether the economic operator would otherwise have the technical and economical capacity to perform the contract.

Bearing in mind that the contracting authority will be responsible for the consequences of its possible erroneous decision, contracting authorities should also remain free to consider that there has been grave professional misconduct, where, before a final and binding decision on the presence of mandatory exclusion grounds has been rendered, they can demonstrate by any appropriate means that the economic operator has violated its obligations, including obligations relating to the payment of taxes or social security contributions, unless otherwise provided by national law. They should also be able to exclude candidates or tenderers whose performance in previous public contracts has shown major deficiencies with regard to substantive requirements, for instance failure to deliver or perform, significant shortcomings of the product or service delivered, making it unusable for the intended purpose, or misbehaviour that casts serious doubts as to the reliability of the economic operator. National law should provide for a maximum duration for such exclusions.

In applying facultative grounds for exclusion, contracting authorities should pay particular attention to the principle of proportionality. Minor irregularities should only in exceptional circumstances lead to the exclusion of an economic operator. However repeated cases of minor irregularities can give rise to doubts about the reliability of an economic operator which might justify its exclusion.’

5.

Article 57 (‘Exclusion grounds’), provides as follows:

‘…

4.   Contracting authorities may exclude or may be required by Member States to exclude from participation in a procurement procedure any economic operator in any of the following situations:

…

…

…

5.   Contracting authorities shall at any time during the procedure exclude an economic operator where it turns out that the economic operator is, in view of acts committed or omitted either before or during the procedure, in one of the situations referred to in paragraphs 1 and 2.

At any time during the procedure, contracting authorities may exclude or may be required by Member States to exclude an economic operator where it turns out that the economic operator is, in view of acts committed or omitted either before or during the procedure, in one of the situations referred to in paragraph 4.

6.   Any economic operator that is in one of the situations referred to in paragraphs 1 and 4 may provide evidence to the effect that measures taken by the economic operator are sufficient to demonstrate its reliability despite the existence of a relevant ground for exclusion. If such evidence is considered as sufficient, the economic operator concerned shall not be excluded from the procurement procedure.

For this purpose, the economic operator shall prove that it has paid or undertaken to pay compensation in respect of any damage caused by the criminal offence or misconduct, clarified the facts and circumstances in a comprehensive manner by actively collaborating with the investigating authorities and taken concrete technical, organisational and personnel measures that are appropriate to prevent further criminal offences or misconduct.

The measures taken by the economic operators shall be evaluated taking into account the gravity and particular circumstances of the criminal offence or misconduct. Where the measures are considered to be insufficient, the economic operator shall receive a statement of the reasons for that decision.

…

7.   By law, regulation or administrative provision and having regard to Union law, Member States shall specify the implementing conditions for this Article. They shall, in particular, determine the maximum period of exclusion if no measures as specified in paragraph 6 are taken by the economic operator to demonstrate its reliability. Where the period of exclusion has not been set by final judgment, that period shall not exceed five years from the date of the conviction by final judgment in the cases referred to in paragraph 1 and three years from the date of the relevant event in the cases referred to in paragraph 4.’

6.

Article 80(5)(c) provides as follows:

‘The contracting authority shall exclude from the procurement procedure any economic operator … which … can be demonstrated by appropriate means to have committed grave professional misconduct that renders its integrity or reliability questionable. Such misconduct includes significant deficiencies in the performance of a previous contract or concession contract which has led to its early termination, provided that the said termination has not been challenged through legal proceedings or that it has been confirmed on the conclusion of legal proceedings, or which has led to an award for damages or to other sanctions; attempts to exercise undue influence on the contracting authority’s decision-making process or to obtain confidential information for its own benefit; and provision, including through negligence, of false or misleading information that may influence decisions on exclusion, selection or award of contracts, or failure to provide information required for the proper conduct of the selection process.’

7.

In the 2016/2017 academic year, Sirio Srl took part in a procurement procedure launched by the Municipality of Naples to provide the school meals service, for which it was awarded the contract.

8.

While it was performing the contract there was a case of food poisoning, caused by the presence of coliform bacteria in the food that was supplied, which affected children and members of staff.

9.

In view of this occurrence, on 29 June 2017 the Municipality of Naples: (a) ordered the suspension of the service and awarded the service to Meca, which had come second in the procurement procedure; and (b) terminated the contract with Sirio and enforced the guarantee.

10.

Sirio challenged the termination of the contract in the civil courts (Tribunale di Napoli (District Court, Naples), Italy)), in proceedings in which a decision is pending.

11.

In 2017/18, the Municipality of Naples opened a new procurement procedure for the school meals service, divided into 10 lots, for which Sirio submitted a tender.

12.

Under Article 80(5)(c) of the PPC, in a decision of 1 August 2017, the contracting authority allowed Sirio’s tender for lot No 7, without making any assessment of the seriousness of the breach of the previous contract.

13.

Meca also took part in the tender process for the school meals service for 2017/2018 and is challenging the admission of Sirio in proceedings before the referring court. In its opinion, the contracting authority should have assessed Sirio’s reliability, following the outbreak of food poisoning, instead of simply noting that Sirio had lodged a legal action against the termination of the previous contract.

14.

The referring court considers that, in cases such as the present one, under a strict application of Italian law the contracting authority cannot assess the tenderer’s reliability. In its opinion, the national legislature has opted to suspend evaluation by the administrative body and has made that evaluation entirely a matter for the courts, whose focus, moreover, is on whether the termination of the contract was correct, rather than on the reliability of the economic operator.

15.

In the view of the referring court, the seriousness of the breach does not depend on an objective factor, but on a subjective decision by the economic operator which, when its contract is terminated early, opts to challenge the termination in the civil courts. The fact that a tenderer is automatically admitted to the new tender process as a result of taking legal action acts as an incentive to ignore professional misconduct and therefore as a disincentive to undertakings to take appropriate remedial action (as envisaged in recital 102 of Directive 2014/24) to prevent any reoccurrence of the breaches that led to the termination of the previous contract.

16.

In these circumstances, the Tribunale Amministrativo Regionale della Campania (Regional Administrative Court, Campania, Italy) refers the following question to the Court of Justice:

‘Do the EU principles of protection of legitimate expectations and of legal certainty, laid down in the Treaty on the Functioning of the European Union (TFEU), and the principles deriving therefrom, such as those of equal treatment, non-discrimination, proportionality and effectiveness, referred to in Directive 2014/24 and the provisions of Article 57(4)(c) and (g) of that directive, preclude the application of a national provision, such as that contained in Article 80(5)(c) of Legislative Decree No 50/2016, according to which challenging before the courts significant deficiencies identified in the performance of a previous procurement contract, which resulted in the early termination of that contract, excludes any assessment by the contracting authority as to the reliability of the tenderer, until a final ruling has been issued in the civil proceedings, when the undertaking concerned has not demonstrated that it has adopted any “self-cleaning” measures in order to remedy the breaches and avoid any repetition of them?’

17.

The order for reference was received at the Court on 22 January 2018.

18.

Written observations have been submitted by Sirio, the Municipality of Naples, the Governments of Italy and Hungary, and the Commission. Only the Commission and the Government of Italy attended the hearing held on 13 December 2018.

19.

In Sirio’s view, the decision challenged by Meca, that is, the decision of 1 August 2017 which allowed Sirio to take part in the procurement procedure, did not prevent that procedure from going ahead, culminating, on 7 November 2017, with the award of the (new) contract to Sirio for the 2017/2018 school year.

20.

As this latter administrative decision has not been challenged, Sirio maintains that the preliminary ruling proceedings have no purpose since, whatever their outcome, the award of the second contract is final and will be unaffected by the judgment.

21.

I do not believe, however, that this circumstance is sufficient in order to rule that the reference for a preliminary ruling has become inadmissible. In my opinion, the challenge to the decision of 1 August 2017 remains unresolved, and a decision on it is not dependent on Meca’s acceptance of the decision of 7 November 2017 on the award of the tender.

22.

Specifically, if the decision of 1 August 2017 were eventually to be ruled null and void, this could have the effect of also invalidating the award of 7 November 2017 or alternatively, if that were not possible, it could provide the basis for an award for damages to Meca under domestic law, in line with Article 2(1)(c) of Directive 89/665/EEC. ( 5 )

23.

In my view, therefore, there has been no supervening loss of the object of the preliminary ruling proceedings.

24.

The referring court takes as a starting point that, under ‘the interpretation provided by domestic case-law’, Article 80(5)(c) of the PPC imposes ‘an inescapable legal obligation’ ( 6 ) to allow a tenderer to take part in a procurement procedure where the tenderer has had a previous contract terminated early due to significant deficiencies in performance of that contract ( 7 ) and it has challenged that termination through the courts.

25.

The national legislation that now applies is different from the previous legislation (Legislative Decree No 163/2006). ( 8 ) Under the previous legislation, the contracting authority had the power, ‘on the basis of any evidence’, to demonstrate grave professional misconduct that would justify the exclusion of the tenderer. By contrast, the new regulations, contained in the PPC, combine points (c) and (g) of Article 57(4) of Directive 2014/24 to produce the outcome described above.

26.

Article 80(5)(c) of the PPC includes a general description of grave professional misconduct as grounds for exclusion and then goes on to specify that ‘such misconduct includes significant deficiencies in the performance of a previous contract or concession contract which has led to its early termination’. However, these deficiencies only enable the tenderer in question to be excluded if the decision ‘has not been challenged through legal proceedings or … has been confirmed on the conclusion of legal proceedings’.

27.

However, as the Italian Government explained at the hearing, after the question was referred there seems to have been a change in the doctrine of the Consiglio di Stato (Council of State, Italy), ( 9 ) which has caused the Italian Government to change the main thrust of its observations.

28.

The Italian Government’s reading of that opinion ( 10 ) is that even if the early termination of the previous contract, terminated because of the significant deficiencies attributed to a candidate who was bidding for a new contract, were sub judice, the contracting authority has discretion to evaluate the existence of those deficiencies as grounds for excluding the tenderer, without waiting for the civil courts to give judgment.

29.

Clearly, the Court of Justice cannot become involved in that debate over the interpretation of the provision of national law, which is solely a matter for the referring court. Therefore:

30.

In order to reply to the questions raised by the referring court, I will first consider the interpretation adopted by that court of the domestic legislation. Therefore, in the words of the question referred, I will assume that, under the national provision, ‘challenging before the courts significant deficiencies identified in the performance of a previous procurement contract, which resulted in the early termination of that contract, excludes any assessment by the contracting authority as to the reliability of the tenderer, until a final ruling has been issued in the civil proceedings’.

31.

In introducing the list of optional grounds for exclusion, Directive 2004/18/EC ( 11 ) places the emphasis on the tenderer (‘any … operator may be excluded from participation in a contract’), whereas Directive 2014/24 focuses on the contracting authority (‘contracting authorities may exclude … an economic operator’).

32.

After these introductory phrases, both directives set out a series of optional grounds for exclusion before going on to allow Member States a degree of discretion ( 12 ) where they opt to include these grounds in their national legislation. The directives do not differ significantly on this point either:

33.

In commenting on that discretion over the optional grounds for exclusion provided for in Directive 2004/18, the Court of Justice had held that:

34.

This degree of discretion provided the basis for the argument put forward by Sirio, the Municipality of Naples, the Government of Italy (in its written observations, but not at the hearing) and the Government of Hungary: if an optional ground for exclusion need not be included in domestic law then, a fortiori, national legislation may restrict the effect of that ground, making it conditional on satisfying certain requirements (such as, for example, stipulating that where the early termination of a previous contract due to breach on the part of the successful tenderer has been challenged through the courts, the termination must have been confirmed in a final judgment).

35.

However, their argument fails to take sufficient account of the fact that Member States’ power in this regard is not absolute. ( 16 ) Once a Member State has decided to include one of the optional grounds for exclusion provided for in Directive 2014/24, ( 17 ) the essential characteristics of that ground, as established in the directive, must be respected.

36.

Indeed, in stipulating that Member States are to have ‘regard to Union law’ when specifying ‘the implementing conditions for this Article’, Article 57(7) of Directive 2014/24 prevents Member States, in their national law, from distorting the optional grounds for exclusion included in that provision or ignoring the objectives and guiding principles that underpin each of those grounds, within the uniform framework provided by Directive 2014/24.

37.

As I shall argue below, the provision of Italian law which is at the centre of the order for reference does not respect the essential characteristics of the optional ground for exclusion provided for in Article 57(4)(g) of Directive 2014/24.

38.

Under Article 57(4) of Directive 2014/24, practices by an economic operator that may provide grounds for excluding it from a procurement procedure include both ‘grave professional misconduct, which renders its integrity questionable’ (point (c)) and ‘significant … deficiencies in the performance of a substantive requirement under a prior public contract … which led to early termination of that prior contract’ (point (g)).

39.

It can be inferred from recital 101 of Directive 2014/24 that the professional misconduct in point (c) is predominantly extra-contractual, in other words, irregular conduct that generally takes place outside the scope of the contractual relationship. This is the case with conduct concerning breach of environmental or social obligations, violations of competition rules or intellectual or industrial property rights, or breach of tax or social security obligations. By contrast, the behaviour described in point (g) typically involves a contractual breach.

40.

It is true, however, that some breaches of contract may simultaneously involve a form of grave professional misconduct, that is to say, professional misconduct committed in the context of a previous administrative contract that was sufficiently serious to constitute grounds for terminating the contractual relationship.

41.

Viewed from this perspective, the connection between the two points would be that of a lex generalis (point (c)) as compared with a lex specialis (point (g)), which would allow us to examine the objectives and reasons for the general provision in order to discern the principles to be applied in interpreting the rule in point (g). ( 18 )

42.

Both grounds for exclusion are founded on an essential element in the relationship between the successful tenderer and the contracting authority, namely the former’s reliability, which is the basis for the confidence placed in it by the latter. Although Directive 2004/18 does not expressly refer to this element, it has been established by the case-law of the Court of Justice. ( 19 )

43.

Directive 2014/24 already includes reliability as a key component in the relationship, precisely when it addresses grave professional misconduct. According to the first paragraph of recital 101, contracting authorities may exclude ‘economic operators which have proven unreliable’. The second paragraph of the same recital refers to performance in previous contracts ‘that casts serious doubts as to the reliability of the economic operator’.

44.

The importance ascribed to the reliability of the economic operator appears in some paragraphs ((6) and (7)) of Article 57 of Directive 2014/24, where the economic operator is permitted to take steps to demonstrate that it is reliable despite the existence of a ground for exclusion. The reliability element thus pervades the grounds for exclusion concerning the candidate’s subjective circumstances.

45.

Article 57 of Directive 2014/24 is constructed such that the contracting authority must be free to assess that component (the candidate’s reliability) without necessarily being bound by assessments made by other public bodies. It is for the contracting authorities, and them alone, to assess the extent of the misconduct involved in a substantive breach of contract that is so serious as to justify termination of a previous contract due to loss of confidence. ( 20 )

46.

The condition included in the Italian legislation adds an additional element that does not comply with Article 57(4) of Directive 2014/24 and is not consistent with the rest of that article. Moreover, it may give rise to discrimination against other tenderers who have committed serious misconduct. While it may have been inspired by a particular view of the right to judicial protection, ( 21 ) ultimately, the domestic provision under discussion amounts to a reward for serious breach of contract, enabling the perpetrator, de facto, to avoid the subsequent consequences of that breach simply by lodging a legal challenge.

47.

I will briefly address those two aspects of the Italian provision.

48.

As the Commission rightly notes, Article 57(4)(g) of Directive 2014/24 does not mention the need to wait for a final judgment before assessing the significant or persistent deficiencies in the behaviour of the winner of the previous contract.

49.

In similar cases, with reference to the EU law in force at the time, the Court of Justice had held that:

50.

The Court of Justice therefore rejected the notion that the assessment of a ground for exclusion relating to professional misconduct was dependent on the existence of a prior judgment (unless the EU legislation itself included such a requirement). That was its interpretation of Article 45(2) of Directive 2004/18.

51.

This doctrine can be extrapolated to the present case in order to demonstrate that Article 80(5)(c) of the PPC fails to comply with it: if a previous contract is terminated, the tenderer need only challenge that early termination in order for the contracting authority to be unable to apply the tenderer’s breach of contract against it in a subsequent procurement exercise.

52.

Thus, a serious breach on the part of the successful tenderer, which led a contracting authority to terminate a bilateral contract (which is permissible where one of the parties fails to satisfy its obligations), has no consequences for subsequent procedures if the tenderer challenges the early termination of the contractual relationship through the courts.

53.

By ascribing this automatic effect to a legal challenge, the domestic provision deprives the contracting authority of the power to make a full assessment of the candidate’s reliability, because it will be unable to take into account, as a relevant factor, the early termination of the previous contract on grounds of significant deficiencies.

54.

The restriction imposed on the contracting authority where the previous breach of contract is sub judice deprives the contracting authority of the ability to exclude a tenderer ‘at any time during the procedure … where it turns out that the economic operator is, in view of acts committed or omitted either before or during the procedure, in one of the situations referred to in paragraph 4’, as laid down in Article 57(5) of Directive 2014/24.

55.

The national provision therefore improperly imposes a condition on the scope of the actions of the contracting authority, which is expressly protected by Article 57 of Directive 2014/24 and by the case-law interpreting similar provisions in Directive 2004/18, thereby preventing it from verifying the existence of a ground for exclusion until judgment is given in a civil action taken over the early termination of the contract.

56.

Likewise, Article 80(5)(c) of the PPC prevents the contracting authority from assessing whether the tenderer has adopted sufficient measures to demonstrate its reliability, despite the existence of a relevant ground for exclusion (Article 57(6) of Directive 2014/24).

57.

The domestic provision under discussion may lead to discrimination against tenderers which have committed grave professional misconduct other than breach of contract and which have challenged the assessment of that misconduct before the courts. In their case, the contracting authority will not be constrained by Article 80(5)(c) of the PPC and will therefore be free to reach a reasoned decision that they lack the necessary reliability.

58.

There is no justification for this difference in the treatment of tenderers which all fall within similar optional grounds for exclusion. The difference between them (the fact that the challenge remains sub judice) depends solely on the fact that the contractor which is in breach has lodged an action against the early termination of its previous contract, thus defeating the normal powers of assessment enjoyed by the contracting authority.

59.

The situation is particularly sensitive if there is a cross-border element to the contract, since it ‘is likely to concern the economic operators from other Member States who are less familiar with the terms and detailed rules of application of the relevant national legislation’. ( 24 )

60.

As the filing of a civil action is entirely dependent on the wishes of the contractor, the seriousness of its breach would not be decided on the basis of an objective element but would instead be determined by an extrinsic, subjective factor (the mere decision to file an action). However, this would not be sufficient in the case of other tenderers that had committed professional misconduct, particularly tenderers established in other Member States.

61.

In the light of the reasoning set out above, I suggest that the Court of Justice should state in response to the question referred by the Tribunale Amministrativo Regionale della Campania (Regional Administrative Court, Campania, Italy) for a preliminary ruling that:

Article 57(4)(c) and (g) of Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC precludes national legislation under which a mere challenge through the courts to the early termination of a previous public contract on grounds of significant deficiencies in performance prevents the contracting authority from assessing that behaviour and the subsequent reliability of the tenderer as grounds for exclusion in a new procurement procedure until a judgment in the court proceedings has become final.