Brussels, 3 June 2010
Public procurement: Commission requests Germany to comply with Court judgment on the construction of trade fair halls in Cologne and to ensure fair access to waste disposal contracts in Hamm
The European Commission has acted to ensure that EU rules on public procurement – the spending of public money by public authorities – are respected in Germany. The Commission has formally requested Germany to comply with judgement from 2009 (Case C-536/07). The Court ruled that Germany had failed to fulfil obligations under the Public Procurement Directives by directly awarding a contract for the construction and renting of trade fair halls between the City of Cologne and a private investment company without organising a competitive tendering procedure. The Commission considers that the German authorities have not taken the necessary measures to comply with the judgment of the Court which obliges them to put an end to the contract concluded in breach of EU law. The Commission has also referred Germany to the Court of Justice over the direct award of waste water disposal services in the city of Hamm.
What is the aim of the EU rule in question?
Public procurement is about how public authorities spend public money. It covers purchases of everything from coffee to computer systems, waste water plants, ship building or consulting services. Total public procurement in the EU is estimated at about 17% of the Union’s GDP. The open and transparent tendering procedures required under EU public procurement rules mean more competition, stronger safeguards against corruption, and better service and value for money for taxpayers.
How is Germany not respecting these rules and why are citizens and business suffering as a result?
Cologne – trade fair halls
The 2009 Court judgment concerned a contractual arrangement for the construction of four new halls for the Cologne trade fair: A private investment company was to build the halls according to detailed specifications set by the City of Cologne. The city would then rent the buildings for a fixed period of 30 years, paying a total rent of 600 million Euros. The Court confirmed the position taken by the Commission that this arrangement has to be regarded as a public works contract. By awarding the contract without a competitive tendering procedure, the German authorities infringed their obligations under the Public Procurement Directives.
Under Article 260 of the Treaty on the Functioning of the European Union, Member States are obliged to take the necessary measures to comply with the judgments of the Court. In the Commission’s view, the German authorities are obliged to end the contract between the city and the investment company as soon as possible.
The Commission has formally requested Germany to comply with the Court judgment. The request takes the form of a "letter of formal notice" under Article 260 of the Treaty on the Functioning of the European Union. If the German authorities do not comply within two months, the Commission may refer the case to the Court and ask the Court to impose a lump sum or penalty payment on Germany.
Hamm – waste disposal contracts
In 2003, the city of Hamm awarded waste water disposal services to the Lippeverband, a public-private economic operator. In 2008, the Lippeverband received an annual payment of more than €18 million from the city for the provision of these services - a considerable profit margin of over €1 million in that year, accounting for a third of its overall profits. However, despite the profit for Lippeverband, the waste water fees for the citizens of the city of Hamm were not reduced between 2008 and 2009.
In the Commission's point of view, the City of Hamm should have awarded the contract following a public tender procedure in line with EU public procurement rules. EU public procurement rules are in place to ensure fair competition for public contracts on a European scale, thereby creating business opportunities for European companies and ensuring best value for public money. This would have alleviated the unjustified restriction of competition in the waste water sector and could potentially lead to a reduction of waste water fees for the citizens of Hamm.
Therefore, the Commission asked Germany in April 2009 to comply with EU law (IP/09/574). As no satisfactory reply was provided, the Commission now decided to refer this case to the Court of Justice.
About infringement procedures
The European Commission has powers to take legal action – known as infringement procedures – against a Member State that is not respecting its obligations under EU rules. These procedures consist of three steps. The first is that the Member State receives a letter of formal notice and has two months to respond. In case further compliance with EU legislation is needed, the Commission sends a reasoned opinion. Again the Member State has two months to reply. If there is no satisfactory reply, the Commission can refer the matter to the European Court of Justice in Luxembourg. It can also request that the Court impose a fine on the country concerned if it does not comply with the Court's ruling.
Latest information on infringement proceedings concerning all Member States: