CJEC, February 10, 1982, No 76-81

THE COURT

1 By judgment of 11 march 1981 which was received at the court on 7 april 1981 the comite du contentieux du conseil d'etat (judicial committee of the state council) of the grand duchy of Luxembourg referred to the court for a preliminary ruling under article 177 of the eec treaty two questions concerning the interpretation of council directives 71-304 and 71-305 of 26 july 1971 concerning, respectively, the abolition of restrictions on freedom to provide services in respect of public works contracts and on the award of public works contracts to contractors acting through agencies or branches (official journal, english special edition 1971 (ii), p. 678), and the coordination of procedures for the award of public works contracts (idem, p. 682).

2 The questions arose in the course of a dispute the origin of which lay in a notice of invitation to tender issued by the administration des ponts et chaussees (bridges and highways authority) of the grand duchy of Luxembourg, in response to which sa. Transporoute et travaux (hereinafter referred to as'' transporoute''), a company incorporated under belgian law, had submitted the lowest tender.

3 The tender was rejected by the Minister of Public Works because transporoute was not in possession of the government establishment permit required by article 1 of the reglement grand-ducal (grand-ducal regulation) of 6 november 1974 (memorial (gazette) a, 1974, p. 1660 et seq.) And because the prices in transporoute's tender were considered by the Minister of Public Works to be abnormally low within the meaning of the fifth and sixth paragraphs of article 32 of that regulation. As a result, the Minister of Public Works of the grand duchy of Luxembourg awarded the contract to a consortium of Luxembourg contractors whose tender was considered to be economically the most advantageous.

4 Transporoute brought an action before the conseil d'etat for the annulment of the decision. In support of its application it contended inter alia that the reasons given for rejecting its tender amounted to an infringement of council directive 71-305, in particular articles 24 and 29 (5) thereof.

5 Considering that the dispute thus raised questions concerning the interpretation of community law, the conseil d'etat referred to the court for a preliminary ruling two questions concerning the interpretation of council directives 71-304 and 71-305.

First question

6 The first question asks whether it is contrary to the provisions of council directives 71-304 and 71-305, in particular those of article 24 of directive 71-305, for the authority awarding the contract to require as a condition for the award of a public works contract to a tenderer established in another member state that in addition to being properly enrolled in the professional or trade register of the country in which he is established the tenderer must be in possession of an establishment permit issued by the government of the member state in which the contract is awarded.

7 Directives 71-304 and 71-305 are designed to ensure freedom to provide services in the field of public works contracts. Thus the first of those directives imposes a general duty on member states to abolish restrictions on access to, participation in and the performance of public works contracts and the second directive provides for coordination of the procedures for the award of public works contracts.

8 In regard to such coordination chapter i of title iv of directive 71-305 is not limited to stating the criteria for selection on the basis of which contractors may be excluded from participation by the authority amending the contract. It also prescribes the manner in which contractors may furnish proof that they satisfy those criteria.

9 Thus article 27 states that the authority awarding contracts may invite the contractor to supplement the certificates and documents submitted only within the limits of articles 23 to 26 of the directive, according to which member states may request references other than those expressly mentioned in the directive only for the purpose of assessing the financial and economic standing of the contractors as provided for in article 25 of the directive.

10 Since the establishment permit in question is intended, as the Luxembourg government has acknowledged in its written observations, to establish not the financial and economic standing of undertakings but the qualifications and good standing of those in charge of them, and since the exception provided for in article 25 of directive 71-305 does not apply, the permit constitutes a means of proof which does not come within the closed category of those authorized by the directive.

11 The Luxembourg government submits, however, that the grant of an establishment permit is equivalent to registration of the contractor in question in a list of recognized contractors within the meaning of article 28 of directive 71-305 and therefore complies with the terms of that provision.

12 It should be pointed out, in reply to that argument, that even if the establishment permit may be equated with registration in an official list of recognized contractors within the meaning of article 28 of directive 71-305, there is nothing in that provision to justify the inference that registration in such a list in the state awarding the contract may be required of contractors established in other member states.

13 On the contrary, article 28 (3) entitles contractors registered in an official list in any member state whatever to use such registration, within the limits laid down in that provision, as an alternative means of proving before the authority of another member state awarding contracts that they satisfy the qualitative criteria listed in articles 23 to 26 of directive 71-305.

14 It should be noted that the result of that interpretation of directive 71-305 is in conformity with the scheme of the treaty provisions concerning the provision of services. To make the provision of services in one member state by a contractor established in another member state conditional upon the possession of an establishment permit in the first state would be to deprive article 59 of the treaty of all effectiveness, the purpose of that article being precisely to abolish restrictions on the freedom to provide services by persons who are not established in the state in which the service is to be provided.

15 Accordingly, the reply to the first question must be that council directive 71-305 must be interpreted as precluding a member state from requiring a tenderer established in another member state to furnish proof by any means, for example by an establishment permit, other than those prescribed in articles 23 to 26 of that directive, that he satisfies the criteria laid down in those provisions and relating to his good standing and qualifications.

Second question

16 The second question asks whether the provisions of article 29 (5) of directive 71-305 require the authority awarding the contract to request a tenderer whose tenders, in the authority's opinion, are obviously abnormally low in relation to the transaction, to furnish explanations for those prices before investigating their composition and deciding to whom it will award the contract, or whether in such circumstances they allow the authority awarding the contract to decide whether it is necessary to request such explanations.

17 Article 29 (5) of directive 71-305 provides that if a tender is obviously abnormally low the authority awarding the contract is to examine the details of the tender and, for that purpose, request the tenderer to furnish the necessary explanations. Contrary to the view expressed by the Luxembourg government, the fact that the provision expressly empowers the awarding authority to establish whether the explanations are acceptable does not under any circumstances authorize it to decide in advance, by rejecting the tender without even seeking an explanation from the tenderer, that no acceptable explanation could be given. The aim of the provision, which is to protect tenderers against arbitrariness on the part of the authority awarding contracts, could not be achieved if it were left to that authority to judge whether or not it was appropriate to seek explanations.

18 The reply to the second question must therefore be that when in the opinion of the authority awarding a public works contract a tenderer's offer is obviously abnormally low in relation to the transaction article 29 (5) of directive 71-305 requires the authority to seek from the tenderer, before coming to a decision as to the award of the contract, an explanation of his prices or to inform the tenderer which of his tenders appear to be abnormal, and to allow him a reasonable time within which to submit further details.

Costs

19 The costs incurred by the government of the kingdom of belgium, the government of the italian republic and the commission of the european communities, which have submitted observations to the court, are not recoverable. As the proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action before the national court, the decision as to costs is a matter for that court.

On those grounds,

The court

In answer to the questions referred to it by the comite du contentieux of the conseil d'etat of the grand duchy of Luxembourg by jugdment of 11 march 1981, hereby rules:

Council directive 71-305 must be interpreted as precluding a member state from requiring a tenderer in another member state to furnish proof by any means, for example by an establishment permit, other than those prescribed in articles 23 to 26 of that directive that he satisfies the criteria laid down in those provisions and relating to his good standing and qualifications.

When in the opinion of the authority awarding a public works contract a tenderer's offer is obviously abnormally low in relation to the transaction article 29 (5) of directive 71-305 requires the authority to seek from the tenderer, before coming to a decision as to the award of the contract, an explanation of his prices or to inform the tenderer which of his tenders appear to be abnormal, and to allow him a reasonable time within which to submit further details.