13/12/2018

The Court of Justice of the European Union (CJEU) recently published its judgment in C-0606/17 IBA Molecular Italy Srl v Azienda ULSS No 3, Regione Veneto, Ministero della Salute, Ospedale dell’Angelo di Mestre.

While the facts of this case are very complicated in light of the complexities of the Italian health system, the key point to note from this judgment is the following: when considering whether this contract was a “contract for pecuniary interest” for the purposes of EU procurement and the definition of “public contracts” the CJEU looked at the whole nexus of the contractual arrangement; related grant arrangements were taken into account[1]. Contracting authorities should, we suggest, take particular care when structuring complex funding and supply arrangements and bear in mind the need to look at the arrangements as a whole when deciding whether or not the EU procurement rules apply.

This case related to an arrangement whereby a contract for the supply of a radiopharmaceutical product to a number of regional hospitals was directly awarded by a local health authority to an ecclesiastical hospital, without a procurement process being undertaken. The health authority had sought to rely on the public-public co-operation exemption from procurement on the basis that the arrangement was between two contracting authorities but the CJEU held that the ecclesiastical hospital was not a contracting authority for the purposes of the EU procurement rules. It was also argued that the arrangements were not a public contract as the supply would be free of charge to regional public hospitals, with only the transport costs being paid by the hospitals.  Another relevant fact was that the regional government had also granted the ecclesiastical hospital funding of €700k to assist with the production of the product. 

IBA Molecular challenged both the grant from the regional government and the agreement which was drawn up by the health authority to govern the supply relationship between the ecclesiastical hospital and the regional hospitals.  It argued that this set of arrangements, viewed together, amounted to a supply contract that should have been subject to public procurement.

The CJEU ruled that, despite the fact that the grant provided by the regional government did not cover all of the costs of supply, this arrangement taken as a whole did constitute a “contract for pecuniary interest” to which the EU procurement rules apply. The fact that the grant funding was being provided specifically for the purpose of enabling the hospital to fulfil its obligations to the health authority meant that the arrangement was for pecuniary interest.

 

Authors

Fran Mussellwhite and Michelle Cathcart


[1] The case was considered in the context of the 2004 Directive, but the same principles around a “public contract” having to amount to a “contract for pecuniary interest” in order for the procurement rules to apply are the same under the 2014 Directive (2014/24/EU) and the  Public Contracts Regulations 2015 (as amended).