European Business Law, the fourth volume in our series, shows how the European authorities simultaneously abolish all restrictions on access to and exercise of economic activities and support the growth of domestic markets, through the harmonization the internal legislation or the enactment of genuinely unified regulations.

European Business Law

Contracts likely to be described as public contracts must be concluded with an “economic operator”. According to Article 2(1(10)) of Directive No 2014/24, economic operator means any natural or legal person or public entity or group of such persons and/or entities, including any temporary association of undertakings, which offers the execution of works and/or a work, the supply of products or the  …

Economic operator

Contracts likely to be described as public contracts must be concluded with an “economic operator”. According to Article 2(1(10)) of Directive No 2014/24, economic operator means any natural or legal person or public entity or group of such persons and/or entities, including any temporary association of undertakings, which offers the execution of works and/or a work, the supply of products or the provision of services on the market. Any entity whatever its form  which engages in an economic activity, regardless of its profit-making character , is an economic operator. According to the Court of Justice, any person or entity which believes that it is capable of carrying out a contract, regardless of whether it is governed by private law or public law, and whether it is active as a matter of course on the market or only on an occasional basis, or whether or not it is subsidized by public funds  is eligible to submit a tender or put itself forward as a candidate to a tender offer. It may even be a contracting authority, where it is formally distinct from the State or the local authority and independent of them with regard to decision-making . 

According to the so-called “in house” contract theory, where the operator is only one of the departments of the State or of a local authority, or where the operator, who is formally independent of the latter but subject to their influence regarding decision-making, the parties to the contract are exempted from the obligation of competitive tendering. However, it must be established that the contracting authority exercises over the person in question a control which is similar to that which it exercises over its own departments and that this person carries out the essential part of his activity with the local authority or authorities which control it . The exemption in favor of “in house” contracts has often been successfully relied upon to justify the absence of competitive tendering for services provided as part of inter-municipal cooperation . Directive No 2014/24 expressly enshrines the case law in the matter: it excludes from its scope of application public contracts between public sector undertakings where the contracting authority exercises over the legal person concerned a control which is similar to that which it exercises over its own departments, more than 80 % of the activities of the controlled legal person are carried out in the performance of tasks entrusted to it by the controlling contracting authority or by other legal persons controlled by it and  there is no direct private capital participation in the controlled legal person with the exception of non-controlling and non-blocking forms of private capital participation (Art. 12) .

Under the directive, a contracting authority exercises a similar control where it has a decisive influence over the strategic objectives and significant decisions of the controlled legal person. The requirement of similar control suggests that the operator's capital is not held, even as a minority holding, by private persons . In effect, the relationship between a public authority and its own departments is governed by considerations and requirements proper to the pursuit of objectives in the public interest, while any private capital investment in an undertaking follows considerations proper to private interests and pursues objectives of a different kind . This is why the award of a public contract to a semi-public company without a call for tenders is regarded as likely to interfere with the objective of free and undistorted competition and the principle of equal treatment of the interested persons, in that it would offer a private person with a capital holding in that undertaking an advantage over its competitors . In order to prevent operators from circumventing the law, the Court of Justice refuses to recognize the applicability of the exception to a contract awarded to a public person whose capital was opened up to a private-law company just after the awarding . However, the mere fact that private persons may hold interest in the capital of the contracting company is not sufficient to set aside the benefit of derogation, if such partners were absent on the date the contract was concluded and failing evidence that the opening up of the entity concerned to private funds was already contemplated when the contract was awarded . The requirement of control is not met where the operator's administrative board possesses broad management powers that give it a large degree of independence in relation to its shareholders . On the other hand, control is recognized where the operator's capital is held up to 99% by the State and up to 1% by autonomous communities  or where through its representatives in the bodies established under the contracting undertaking's statutes, the contracting authority exercises decisive influence over both the strategic objectives and significant decisions of the contracting undertaking  or where each of those authorities not only holds capital but also plays a role in the managing bodies of an entity with responsibility for carrying out their public service mission . Where the operator is controlled jointly by several contracting authorities, the condition is assessed as a whole and not for each authority . 

2) Activity essentially exercised with the contracting authority

According to the case law prior to the 2014 Directive, in order to benefit from the derogation benefiting “in house” contracts, the operator must carry out the essential part of its activity with the contracting authority . The directive clearly defines what constitutes the essential part of the activity by fixing the threshold at 80%.  

Carrying out activities of a marginal kind in favor of private operators is not sufficient to consider that the contracting company is market oriented, which would render precarious all control by the authorities who are shareholders of that company . The condition must be assessed in view of all the activities which that operator carries out on the basis of an award made by the contracting authority, regardless of who - the contracting authority or the users of the service - pays for those activities and the territory on which the activities are carried out . 

Case C-389/92 Ballast Nedam Groep v Belgische Staat [1994] ECR I-1289, LawLex200900000636JBJ: the exclusion of a holding company from participation in a procedure cannot be only due to the fact that it will not carry out the work itself; C-264/03 Commission v France [2005] ECR I-8831, LawLex200900001043JBJ: delegating project contracting for the provision of certain services cannot be reserved to exhaustively listed categories of legal persons under the responsibility of the Member State concerned; C-220/06 Asociación Profesional de Empresas de Reparto y Manipulado de Correspondencia [2007] ECR I-12175, LawLex200900001245JBJ: the possibility to tender offers cannot be reserved to capital companies; See, however, C-57/01 Makedoniko Metro and Michaniki [2003] ECR I-1091, LawLex200900001059JBJ: a regulation prohibiting any change in the composition of a group of contractors taking part in a procedure for the award of a public works contract which occurs after submission of tenders is compatible with the directive.

Case C-119/06 Commission v Italy [2007] ECR I-168*, Summ.pub.: awarding of healthcare transport services to non-profit-making associations.

Case C-29/04 Commission v Austria [2005] ECR I-9705, LawLex200900001412JBJ.

Case C-371/05 Commission v Italy [2008] ECR I-110*, Summ.pub.; C-573/07 Sea [2009] ECR I-8127, LawLex201100000288JBJ.

Case C-458/03 Parking Brixen [2005] ECR I-8585, LawLex200900000905JBJ; See also C-340/04 Carbotermo and Consorzio Alisei [2006] ECR I-4137, LawLex200900000397JBJ.

Case C-295/05 Asociación Nacional de Empresas Forestales [2007] ECR I-2999, LawLex200900001426JBJ.

Case C-573/07 Sea [2009] ECR I-8127, LawLex201100000288JBJ.

Case C-182/11 Econord SpA [2012] LawLex201200002450JBJ.

Case C-295/05 Asociación Nacional de Empresas Forestales [2007] ECR I-2999, LawLex200900001426JBJ; C-573/07 Sea [2009] ECR I-8127, LawLex201100000288JBJ.

Case C-220/06 Asociación Profesional de Empresas de Reparto y Manipulado de Correspondencia [2007] ECR I-12175, LawLex200900001245JBJ: a public contract relating to postal services does not fulfill the 'in house' criterion where the provider does not carry out the essential part of its activities with the contracting authority but with an unspecified number of customers.

Case C-340/04 Carbotermo and Consorzio Alisei [2006] ECR I-4137, LawLex200900000397JBJ.

Case C-305/08 CoNISMa [2009] ECR I-12129, LawLex201100000480JBJ.

Case C-107/98 Teckal [1999] ECR I-8121, LawLex200700001786JBJ.

Case C-107/98 Teckal [1999] ECR I-8121, LawLex200700001786JBJ; C-337/05 Commission v Italy [2008] ECR I-2173, LawLex200900000381JBJ; C-323/07 Termoraggi [2008] ECR I-57*, Summ.pub. (not available in English).

Case C-324/07 Coditel Brabant [2008] ECR I-8457, LawLex200900002275JBJ.

The exemption is also granted where the contracting authority exercises jointly with other contracting authorities a control over the legal person concerned which is similar to that which they exercise over their own departments. Joint control requires that three conditions be met: i) the decision-making bodies of the controlled legal person are composed of representatives of all participating contracting authorities. Individual representatives may represent several or all of the participating contracting authorities; ii) those contracting authorities are able to jointly exert decisive influence over the strategic objectives and significant decisions of the controlled legal person; and iii) the controlled legal person does not pursue any interests which are contrary to those of the controlling contracting authorities.

The only type of capital participation allowed is where it is non-controlling and non-blocking participation.

Case C-26/03 Stadt Halle and RPL Lochau [2005] ECR I-1, LawLex200900001005JBJ.

Case C-337/05 Commission v Italy [2008] ECR I-2173, LawLex200900000381JBJ; Case C-196/08 Acoset [2009] ECR I-9913, LawLex201100000486JBJ.

European Business Law

289. Economic operator

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289. Economic operator

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Les décisions de justice citées dans ce paragraphe :

Les notions juridiques connexes

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