High on the agenda of public procurement are land deals, and as may be expected, greater scrutiny attaches to the correct application of the public procurement rules when it comes to land transactions.
In a key judgment delivered by the Court of Justice of the European Union on March 25, the legal position on sale and development agreements and EU procurement rules were further clarified.
The Helmut Müller case concerned the sale and development of 24 hectares of former army barracks land in Germany. Its owner, the Bundesanstalt - the German federal agency responsible for managing public property - published its intention to sell this land. In this sale notice, the Bundesanstalt alerted participants to the requirement of the local council's prior approval of the development project and of the use of the land.
Following the submission of bids and plans for use of the land by two companies, Helmut Müller GmbH and GSSI, the local council declared its preference for GSSI's proposals and subsequently sold the land to GSSI. Helmut Müller challenged the sale on the basis that the public procurement rules were not followed. On appeal the German Court referred the case to the CJEU for a preliminary ruling as to whether the public procurement rules were applicable to cases of property purchases and their development.
Prior to the decision of the CJEU, the Advocate General expressed his opinion on the matter and claimed that, in general, land sales are not covered by the procurement rules although land deals fall under such rules where a direct link exists between the public body and the work to be carried out. He argued that that link can arise either if the public body acquires the completed works or gains a direct economic advantage from the works.
His comments on the need for a direct link between the works and the public body were eventually taken up by the Court of Justice. In fact, in its ruling the CJEU held that in order for the public procurement rules to apply, the public authority must obtain immediate economic benefit. This economic benefit ensues in a variety of scenarios, for instance where the public authority will acquire ownership or use of the works or contributes at least some of the cost.
However, the public procurement rules will not be applicable where the public authority is only exercising its regulatory powers. Therefore, just because a public authority sets the scope for a development or a regeneration scheme does not automatically trigger the public procurement rules.
On a different note, the European Court also ruled that a public works concession may not be awarded for an indefinite period or where the concessionaire is, or will become, the owner of the land.
The CJEU's ruling in the Helmut Muller case makes clear that not all land development agreements with public authorities will fall within the EU procurement rules. As such, the new ruling will be welcomed by public authorities and developers alike since the procurement process could prove to be a time consuming exercise to adhere to them in all cases.
While the ECJ gave a useful steer on the applicability of procurement rules in this judgment, there is still scope for differing interpretations.
Dr Grech is an associate with Guido de Marco & Associates and heads its European law division.