03-25-2010

ECJ: More Latitude for Land Sales




Municipalities can breathe a sigh of relief. They no longer have to announce their land sales throughout Europe. The European Court of Justice (ECJ) today limited the strict legal precedent of Düsseldorf Higher Regional Court. This means that towns and communi-ties may once more seek investors for shopping cen-ters, medical centers and commercial areas without a tendering procedure.

The ECJ considered a general obligation to issue an invita-tion to tender for land sales to be going too far. The court considers the public procurement law only to be applicable if the investor enters into an enforceable obligation with regard to a construction service and the service directly benefits the ordering party. Pure urban management inter-ests do not result in an obligation to issue an invitation to tender.

This means that a municipality may again seek investors for its real estate without an invitation to tender. It may agree framework conditions, e.g. on the type of use, on the latest completion date, or on the facade, as long as these obliga-tions are not enforceable and do not benefit it economically. It may reserve the right to withdraw if the investor does not complete the construction or does not complete it on time.

Dr. Ute Jasper, Partner at law firm Heuking Kühn Lüer Wojtek in Düsseldorf, provided legal support to numer-ous investor competitions for municipalities. She considers the judgment to be positive: "The municipalities are re-leased from formal contract award requirements." The judgment, however, does not offer a release from all obliga-tions. "The municipalities do not have to issue an invitation to tender, but informal, transparent competitions have al-ways been and will continue to be necessary under Euro-pean and budgetary laws."

Background Information

Since summer 2007, Düsseldorf Higher Regional Court has repeatedly decided that it is mandatory for an invitation to tender to be issued for real estate sales by public bodies with a construction obligation on the part of the investor. It was stated that the municipalities were not allowed to pur-sue their own procurement needs. Planning or urban man-agement requirements were sufficient.

Cities and municipalities were horrified. They saw the for-mal obligation to issue an invitation to tender as a hin-drance to the implementation of their urban management objectives and projects. For this reason, in 2009, German legislators excluded public bodies from the obligation to issue an invitation to tender by law. The law mainly corre-sponds to the decision of the European Court.

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