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Brussels, 27 June 2007

Public procurement: Commission refers Germany to Court of Justice over the procurement of group pension services by municipal authorities and undertakings in Germany

The European Commission has decided to refer Germany to the European Court of Justice over the practice of local authorities and municipal enterprises to award contracts for group pension services without conducting competitive tendering procedures required by EU public procurement law. Under a collective agreement for payment conversion for local civil servants, the pension services in question are reserved to three specific groups of service providers, excluding a large number of insurance companies from the market. The respect of the autonomy of social partners calls for a specific treatment under Community law of collective agreements aimed at improving employment and working conditions. The Commission considers however that, under the specific circumstances of the present case, local authorities and municipal enterprises cannot rely on the collective agreement to justify the failure to apply Internal Market rules on the award of public contracts.

Under German statutory law, employees are entitled to demand that their employer contributes up to a certain percentage of their claims to salary toward a supplementary old-age pension by way of salary conversion (Gesetz zur Verbesserung der betrieblichen Altersversorgung, Statute on the enhancement of occupational old-age pensions, § 1a). The employer may choose to provide the resulting pension benefits either directly by setting up a company occupational pension scheme or indirectly through the intermediary of outside bodies such as life insurance companies, provident funds (Unterstützungskassen) or pension funds (Pensionskassen). In the latter case, the employer does not pay any benefits, but makes provision for them by concluding a group pension services contract with a service provider. However, the employer remains liable for insurance benefits and may be obliged under certain circumstances to complement or substitute the benefits paid by the pension service provider.

A collective agreement concluded in 2003 between the Association of Municipal Employers (Vereinigung kommunaler Arbeitgeberverbände, VKA) and the trade union ver.di – Vereinigte Dienstleistungsgewerkschaft e.V. states that salary conversion has to be provided by the municipal employers through the intermediary of public supplementary pension providers (öffentliche Zusatzversorgungseinrichtungen), members of the Sparkassen-Finanzgruppe (group of savings banks) or municipal insurance companies (Kommunalversicherer). This collective agreement has led to the general practice of German municipalities and municipal enterprises to award pension service contracts directly and without transparent contract award providers to service providers belonging to the groups mentioned in the agreement.

However, municipalities and municipal enterprises are public contracting authorities. They are obliged to award their contracts through competitive procedures complying with the EU law rules on public procurement. In the view of the Commission, this applies also to contracts for pension services concluded by municipal employers in favour of their employees under the statutory framework for salary conversion. Under the specific circumstances of the present case, municipal employers cannot invoke the limitation of service providers contained in the collective agreement to justify the direct award of pension contracts to individual service providers. They are obliged to award the pension services in compliance with the Internal Market rules on public procurement ensuring all service providers fair and equal access to the market.

The latest information on infringement proceedings concerning all Member States can be found at:

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