09-21-2009

ECJ: No Obligation to Formal Call for Tenders for Distribution of Drinking Water and Disposal of Sewage




The European Court of Justice, following the decision on waste disposal, also eases requirements for procurement procedures regarding the distribution of drinking water and the disposal of sewage.

The judgment of the ECJ of September 10, 2009 (C-206/08) distinguishes between service contracts subject to a formal public procurement procedure and service concessions not subject to such formal procedure. Most important criterion of a concession is the assumption of all or at least a significant share of the operating risk. The scope of this criterion, however, had previously been disputed, in particular for revenue from public dues and fees. In the water and sewage sectors, oftentimes, including in this case, compulsory connection to and use of the public networks are added.

The ECJ held, however, that the public service nature of the distribution of drinking water and the treatment of sewage is not incompatible with awarding a contract by means of concession. Even in such regulated areas, it must be possible for public undertakings to have services provided by concessions. The operating risk is considerably limited from the outset. However, it is sufficient for a concession that such limited risk is transferred to the concession holder in full or to a predominant extent.

"The procurement law puzzle in the field of services of public interest is slowly pieced together,“ Dr. Ute Jasper, Partner at the Düsseldorf office of law firm HEUKING KÜHN LÜER WOJTEK, is pleased to note. "Following inter-municipal cooperation, additional leeway has now been created for municipalities by means of concessions. The decision might also change the restrictive German case-law on waste paper disposal.“

The awarding of a concession, however, does not mean that contracting authorities would not have to comply with any statutory requirements at all, a fact to which Dr. Jasper expressly refers: "Concessions also have to be granted under competitive conditions. This has been made absolutely clear since the "Parking Brixen" decision in 2005.“

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