Is it a lease …? Is this a public works contract…? New developments on an old issue


In the case of Commission against Austria,[1] the European Court of Justice (the “CJEC“) recently issued an important judgment on the interaction between leases and public works contracts. This detailed decision will provide some clarity to parties faced with the thorny question of whether a” mixed “contract will be subject to the rules of the contract. EU in public procurement.

Background The rule that Community public procurement law does not apply to contracts for the sale or rental of land has existed for several years. In Ireland, this position is set out in Regulation 10 of the European Union (award of public authority contracts) Regulations 2016 (the “Regulations 2016“).

A public works contract is defined in Regulation 2 (1) of the 2016 Regulation as, in addition to the execution / design and execution of certain prescribed works / activities, a public contract having as its object “the completion, by any means whatsoever, of a work corresponding to the requirements specified by a contracting authority exercising a decisive influence on the nature or design of the work“. When work is to be carried out on the premises of a contracting authority, it is clear that EU public procurement rules apply.

However, the situation is less clear in cases where a contract relates partly to the rental or acquisition of land and partly to work on that land. Such “mixed contracts” can take several forms.

EU case law The CJEC has had the opportunity to examine this issue on several occasions over the years, often in preliminary rulings under Article 267 TFEU. It is clear that the qualification of a contract as a “lease” or “works contract” is not decisive – the question ultimately falls under EU law.[2] The decisive factor is the main object or main object of the contract, which in turn is determined by analyzing whether the contracting authority had a “decisive influence” on the design of the works.[3]

Often, the analysis was based on a factual analysis of the contract in question. A few case law examples have illustrated the question.

The 1994 judgment in Hotelera Management[4] focused on two agreements made by municipal authorities in the Canary Islands concerning certain activities in a hotel owned by one of the authorities. The agreements were published in the relevant Official Gazette of the Canary Islands, but not in the Official Journal of the European Communities in accordance with the then applicable public procurement directives. Activities included a concession for the installation and operation of a gaming establishment; the operation of a hotel business; and the performance of works including “renovation, transformation and restoration“works so that the hotel in question can maintain its five-star status. The court ruled that the main object of the contracts was the installation and opening of the casino and the operation of a hotel business. Above all, the successful tenderer would be required to invest a significant sum to carry out the fitting-out work and would not be remunerated for it. In addition, the tender documents did not contain any description of the work to be carried out. work being “simply accessory to the main object“agreements, contracts did not fall within the then applicable definition of a public works contract.

In Auroux,[5] the Court of Justice ruled that the “primary objective“to determine whether it was appropriate to classify a contract as a public works contract. In this case, the French municipality of Roanne had hired a semi-public company, SEDL, for the construction of a leisure center, without spending through a public procurement procedure. an urban planning project under which SEDL would acquire land and manage the entire project. The land in question would ultimately be sold to third parties at the end of the project, or failing that, would automatically pass to the city of Roanne. argued that the contract with SEDL was not a public works contract, as its scope went beyond what is envisaged in this definition, but rather extended to the management of a town-planning project. had to be sold to third parties, they could not correspond to the requirements of the contracting authority. In rejecting these arguments, the ECJ again invoked the fact that the main object of the contract was s l execution of the works. noted that Roanne had specific requirements, namely the construction of the leisure center as a whole. Consequently, the court rejected the French government‘s argument that the works did not meet the requirements of the contracting authority and therefore did not fall within the definition of a public works contract.

In 2014, the CJEU re-examined the issue in the case of Pizzarotti.[6] This case concerned a mixed contract for the construction of a court complex in the city of Bari, Italy. Italian Consiglio di Stato requested a preliminary ruling, asking whether a contract containing a commitment to lease buildings not yet built was a public works contract although it included elements resembling a lease. In that judgment, the court referred to the framework of requirements established by the Bari Court of Appeal; the reserve of the public authorities to verify, prior to the acceptance of a work, its conformity with this framework; and “the different technical and technological characteristics of the planned works“. In the court’s opinion, this placed the contracting authority, the Municipality of Bari, “able to have a decisive influence on the design of the structure to be constructed“. Accordingly, and in accordance with Helmut muller (cited above), the main object of the contract was the execution of works corresponding to the requirements of the authority.

Recent case law – Commission against Austria In 2012, Stadt Wien-Wiener Wohnen (“Wiener Wohnen“), a public body linked to the city of Vienna, entered into a contract, referred to as a lease, with a private entity, Vectigal Immobilien GmbH & Co KG (“Vectical“), for the rental / construction of an office building that was not yet built. The building, which consisted of two wings (A and B), was located on land owned by this private entity. contract in question, which was not announced in accordance with EU public procurement rules, Wiener Wohnen opted for the construction of a bridge between the two wings and the construction of three new floors in the B wing .

Following a complaint from a third party, the European Commission opened an investigation into the alleged non-compliance with a tendering procedure in 2016. Several exchanges of correspondence between the parties ensued. parties to the Commission, unhappy that Austria had failed to remedy the alleged infringement, initiated proceedings in July 2019.

In essence, the Commission alleged that Wiener Wohnen had an influence on the planning of the works relating to the premises which went beyond the usual requirements of tenants of a new building. Therefore, the Commission argued that the contract between Wiener Wohnen and Vectigal was a public works contract. The Commission not only claimed that Wiener Wohnen had chosen the options described above, but also argued that it had chosen most of the technical solutions in the final design. For example, Wiener Wohnen is said to have specified the details of the type of piping system ultimately chosen during design and construction. In addition, the Commission asserted that the authority supervised the execution of the works “the same way a developer would“.

In response, Austria claimed that at the time of conclusion of the contract the planning for the building was fully completed. In particular, Austria argued that the bridges were actually part of the building from the start and that the additional floors would have been built regardless of the option chosen. The Member State replied that the negotiations focused mainly on the amount of rent and operating costs, ie typical elements of a rental contract.

The court ruled in favor of Austria. Among others, the following points were noted:

  • The characteristics of the building were already determined when a site survey was carried out on behalf of Wiener Wohnen.
  • Regarding the additional floors of wing B, the lease provided for an option for the lease of these soils and not for their construction. In any case, this construction was already envisaged when a feasibility study was undertaken on behalf of Wiener Wohnen in 2012. Therefore, this construction did not meet the requirements of Wiener Wohnen
  • In response to the Commission’s argument that Wiener Wohnen had supervised the construction, the court observed that such supervision was “nothing abnormal for a tenant“. The court is convinced that this monitoring was carried out in order to ensure that the move could take place on the scheduled date, and did not amount to exerting a decisive influence on the project.
  • As regards the establishment of the specifications, the Court once again observed that tenants generally clearly express their wishes for buildings to be constructed or for which updating work must be carried out. In the court’s opinion, that does not make a lease a public works contract. The court noted that certain specifications requested by Wiener Wohnen were, in fact, a legal obligation.

Based on these factors (and others), the tribunal dismissed the Commission’s action.

Comment This case is yet another development in an ancient and interesting region. Although based on its own facts, it contains a very detailed analysis of the precise factors that can determine whether a mixed contract falls under EU public procurement rules. Read in conjunction with other case law on this issue (including the cases cited above), it demonstrates that the analysis of the application of public procurement rules to a “mixed” contract will be factual and highlights the need to seek advice in each case.