Public Procurement FAQs - Case Summary 3

The limits of cooperation: ECJ considers the scope of the “Hamburg” exemption to public procurements.

On 4 June 2020 the European Court of Justice handed down its ruling in Case C-429/19 Remondis GmbH v Abfallzweckverband Rhein-Mosel-Eifel on the scope of the Article 12 of Directive 2014/24 (Regulation 12 of the Public Contracts Regulations 2015) – the so-called “Hamburg” exemption.

This case – like the original 2006 Commission v Germany case which established the “Hamburg” exemption – concerns German district councils’ waste disposal obligations. This case also concerns the establishment of a “special purpose association” which was the focus of a challenge brought by Remondis in 2015 concerning the transfer of competencies, again concerning waste disposal (our case note here).

The exemption

Under Article/Regulation 12, a contract that is concluded exclusively between two or more contracting authorities falls outside the scope of the Directive (and therefore does not have to be procured) as long as:

1. the contract establishes or implements a cooperation between the participating contracting authorities with the aim of ensuring that public services they have to perform are provided with a view to achieving objectives they have in common;
2. the implementation of that cooperation is governed solely by considerations relating to the public interest; and
3. the participating contracting authorities perform on the open market less than 20% of the activities concerned by the cooperation. “Cooperation” is not defined in the Directive but the court noted that “genuine and effective” cooperation “is at the very heart of the exclusion.”

The facts of the case

In this case, three German district and town councils established a special purpose association to which they entrusted the performance of certain waste disposal services that they each had to perform. The association was itself a contracting authority. The tasks entrusted to the association included the placement of certain waste into landfill, but before that could be done the waste had to undergo specialist treatment. The association entrusted 80% of its waste disposal operations to the private sector, and 20% to another district council (Neuwied). Neuwied was itself a contracting authority which was also obliged to perform the same waste disposal services as the three councils, but which also operated its own specialist waste treatment plant.

It was the contract between the association and Neuwied that was the subject of the dispute. The contract permitted the association to use Neuwied’s plant for the treatment of some (20%) of the waste supplied to it by the three councils. The treated waste was then taken back by the association to be placed into landfill. The contract required the association to pay Neuwied a fee based on the quantity of waste it treated. The fee covered costs only, and contained no profit margin. The value of the contract was around €1m per year.

The judgment of the court

The court considered whether cooperation (within the meaning of Article/Regulation 12) exists where an authority which is responsible for performing a public task made up of several elements, commissions (for payment) one of those elements from another authority which is itself responsible for performing that element in its own region. The court’s answer was a clear “no”. The court noted that: “joint participation … is essential to ensure that the public services [the authorities] have to perform are provided and that that condition cannot be deemed to be satisfied where the sole contribution of certain contracting parties [in this case the association] goes no further than a simple reimbursement of costs.”

Conclusion

The case does not create any new law, but does contain (in paragraphs 22 to 39) a clear and helpful summary of the court’s view on the scope of the exemption. The court explains that: “a cooperation agreement presupposes that the public sector entities which intend to conclude such an agreement establish jointly their needs and the solutions to be adopted.”The court had no difficulty in concluding that the contract in this case was a contract for services in exchange for payment, which did not disclose any form of genuine and effective co-operation. An agreement under which Authority A commissions part of its public task from Authority B (which may also be obliged to perform that task) in exchange for a fee, is unlikely to amount to the sort of genuine and effective cooperation that is required in order to fall within the “Hamburg” exemption provided for by Article/Regulation 12.

For further information please contact Emily Heard or Trevor Watt.