Report for the Hearing in Case C-71/92

I — Facts and procedure

In Spain the transposition into national law of Council Directive 71/305/EEC of 26 July 1971 concerning the coordination of procedures for the award of public works contracts (hereinafter Directive 71/305) and Council Directive 77/62/EEC of 21 December 1976 coordinating procedures for the award of public supply contracts (hereinafter Directive 77/62) was effected by Royal Legislative Decree 931/1986 of 2 May 1986 amending the Law on State contracts (Ley de Contratos dcl Estado, hereinafter the LCE) to bring it into line with the directives of the European Economic Community (BOE No 114 of 13 May 1986, p. 16920) and by Royal Decree 2528/1986 of 28 November 1986, amending the General Regulation on the award of State contracts (Reglamento General de Contratación del Estado, hereinafter the RGCE) to bring it into line with the Royal Legislative Decree 931/1986 of 2 May 1986 and the directives of the European Economic Community (BOE No 297 of 12 December 1986, p. 40546).

An examination of the measures adopted for the transposition into Spanish law of Directives 71/305 and 77/62, carried out by the Commission's officers together with the Spanish authorities from 1987, related not only to the aforementioned instruments but also to other national provisions capable of affecting the system of public procurement in Spain, such as the amended text of the local regulations (Royal Legislative Decree 781/1986 of 18 April 1986, BOE Nos 96 and 97 of 22 and 23 April 1986), the Law of 24 November 1939 on the organization and protection of national industry (Jefatura del Estado, BOE of 15 December 1939, hereinafter the Law of 24 November 1939) and Royal Decree 946/1978, of 14 April 1978 on a procedure for evaluating and monitoring pharmaceutical services (BOE No 108 of 8 May 1978, hereinafter Royal Decree 946/1978).

By letter of 19 December 1990, the Commission, in pursuance of Article 169 of the EEC Treaty, gave the Spanish Government formal notice to submit within two months its observations on various aspects of the said Spanish legislation which it deemed to be contrary, as the case may be, to Articles 30 or 59 of the EEC Treaty and/or Directive 71/305 or 77/62.

The Commission regarded as unsatisfactory the observations submitted by the Spanish Government in answer to that formal notice and to its reasoned opinion of 23 September 1991, in which it had asked the government to take the measures necessary to comply with that opinion within two months of receiving it, and accordingly brought this action before the Court of Justice by application lodged at the Court Registry on 6 March 1992.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry. It did however invite the parties to reply in writing to certain questions, which they did within the time allowed.

II — Forms of order sought by the parties

The Commission, the applicant, claims that the Court should:

The Kingdom of Spam, the defendant, contends that the Court should:

III — Submissions and arguments of the parties

A — The LCE, the RGCE and the amended text of the local regulations

(a) The scope of the rules

(i) 1. Article 2, point 3, of the LCE, repeated in Article 2, point 3, of the RGCE, provides:

2. In the first place the Commission observes that it requested the Spanish authorities to provide it with references to the rules referred to in Article 2, point 3, of the LCE and to inform it of the scope of each of the concepts referred to therein (trade ... governed by legal provisions and products which were intervenidos, estancados or prohibidos). The Spanish authorities did not comply with that request but merely reported certain examples of contracts excluded under that provision (such as those concerning drugs, postage stamps, stamped paper, tobacco, electricity and gas), and the Commission accordingly concluded that the general nature of the exclusion in question gave rise to legal uncertainty affecting all persons subject to the Community legal system. It refers in this context to the case-law of the Court on the subject of the transposition of directives into domestic law, according to which the Member States are to implement directives in a way which fully meets the requirements, sought by the directives, of clarity and certainty in legal situations (see in particular the judgment in Case 102/79 Commission v Belgium [1980] ECR 1473 at paragraph 11), which implies that national measures of transposition are to be worded unequivocally so as to give the persons concerned a clear and precise understanding of their rights and obligations (sec in particular the judgment in Case C-119/89 Commission v Spain [1991] ECR I-641 at paragraph 10). Unequivocal wording of the provisions transposing directives is all the more necessary when provisions allowing certain exclusions from the scope of a directive arc at issue, as here. Under the case-law of the Court any provision involving an exclusion must avoid a legally ambiguous situation arising from its general nature (see the judgment in Case 247/85 Commission v Belgium [1987] ECR 3029 at paragraphs 16 and 41) and must logically meet precisely the scope of criteria and conditions laid down by the directive itself as regards the circumstances in which the derogation may be granted (see in particular the judgments in Case 252/85 Commission v France [1988] ECR 2243 at paragraph 11 and in Case C-339/87 Commission v Netherlands [1990] ECR I-851 at paragraph 15).

3. The Spanish Government contends that Article 2, point 3, of the LCE constitutes a reference provision which cannot be applied in isolation without a legislative addition giving il a real content and which is thus void and has no practical effect until another separate Law is added to it. The Spanish Government therefore denies that that provision can constitute an clement of legal uncertainty. On the contrary, its purpose is to contribute to legal certainty by aiming at an objective limitation of cases of exclusion from the LCE and by requiring that such exclusions shall be formally cast in the form of a Law. It in no way authorizes Spanish authorities awarding contracts to exclude on their own authority a given category of products from the field of application of the LCE but requires, for that to be done, the existence of a provision having the formal status of a Law and providing in mandatory terms that trade in such products is to be mediatizado, intervenido, estancado or prohibido. Moreover since that reference provision is couched in general terms, it is possible to assess its validity only in the abstract, and not in terms of the specific applications of the provision in the relevant special provisions.

(ii) 1. Article 2, point 8, of the LCE, repeated in Article 2, point 8, of the RGCE, excludes from its field of application:

2. According to the Commission, that provision constitutes another general exclusion, which applies this time unambiguously to both Directive 77/62 and Directive 71/305 and which is therefore contrary to both directives. The Commission states, on the one hand, that during the pre-litigation procedure the Spanish authorities specified neither the laws nor the types of public contracts covered by that provision and, on the other hand, that all the exclusions exhaustively laid down by the directives were excluded by an express provision of the LCE or the RGCE. The Spanish rules therefore left the door open to other exclusions not envisaged by the directives and thus created legal uncertainty, as has, moreover, been confirmed in practice.

3. According to the Spanish Government that is also a reference provision which should be considered in the light of its own wording rather than of the use, good or bad, which is made of it by the special provisions pertaining thereto. By requiring that the exclusion of certain contracts from the field of application of the LCE should be effected by a Law, and expressly, that provision, contrary to the Commission's contention, helps to guarantee legal protection for traders and to strengthen legal certainty.

(iii) 1. Article 29 bis, paragraph 1, points 1 and 3, of the LCE, repeated in Article 93 ter of the RGCE, exempts from the obligation to publish in the Official Journal of the European Communities, laid down in Article 12 of Directive 71/305, contracts, of whatever amount, concerning:

2. The Commission states, on the one hand, that Directive 71/305 contains no exclusion of the type envisaged in Article 29 bis, paragraph 1, of the LCE. It is true that the exclusion of certain contracts from the field of application of Directive 71/305 is consistent with the provision that measures concerning the coordination of procedures may not necessarily be applied, as indicated in the seventh recital to that directive, but, as appears from the same recital, the directive expressly limits such cases, so that no exclusion not mentioned in the operative part may be accepted. Moreover, Directive 71/305 does not envisage the possibility of considering certain contracts as public works contracts for the purpose of imposing on them all the obligations arising from the directive except that relating to publication of the invitation to tender in the Official Journal of the European Communities, which is fundamental for the transparency of procedures for the award of contracts at Community level.

3. The Spanish Government contends, in the first place, that the fact that, since the expiry of the transitional period, Article 2 of Directive 71/304/EEC has no longer had any effect but a purely interpretative value does not mean that, if reference is made to it by a provision giving it full effect, such as Article 1(a) of Directive 71/305, it cannot resume its legislative force within the framework of that directive.

(b) The provisions relating to privately negotiated contracts

1. Article 37, paragraph 1, of the ĹCE provides that privately negotiated contracts are justified only:

2. The Commission takes the view that Article 9 of Directive 71/305 and Article 6 of Directive 77/62 list exhaustively the circumstances in which privately negotiated contracts may be awarded. It refers in that respect to the judgment of the Court in Case 199/85 Commission v Italy [1987] ECR 1039 at paragraph 14, from which it may be seen that the provisions of those two articles must be interpreted strictly as derogations from a fundamental right conferred by the Treaty. Neither the two grounds contained in point 1 nor those contained in points 7 and 8 of Article 37, paragraph 1, of the LCE and in the corresponding provisions relating to supply contracts in the RGCE and the amended local regulations appear in the directives in question.

3. The Spanish Government states that the new Law which is being prepared envisages the substitution of point 1 of Article 37, paragraph 1, and Article 87, paragraph 4, of the LCE by a form of words almost identical to that of Directives 71/305 and 77/62. It adds, however, that in a case such as this, in which an abstract provision is at issue, it is not appropriate to apply, as it stands, the case-law resulting from the aforesaid Case 199/85 Commission v Italy, in which specific conduct was at issue. In the case of a provision of law which is difficult to amend it is necessary to exhaust the reasonable possibilities of interpreting it in accordance with the provision of Community law with which it is being compared and to declare it incompatible with that provision only when it is impossible or unduly complicated to interpret it in accordance therewith. Point 1 does not allow the awarding authority any discretion and its terms are very similar to those of Article 6(1 )(b) of Directive 77/62 and to those of the analogous provisions of Article 9(b) of Directive 71/305.

(c) The rules for participation and the criteria for qualitative selection

(i) 1. Article 24, paragraph 1, point 1, of the RGCE requires foreign undertakings, for the award of public works or supply contracts with the administrative authorities to:

2. The Commission claims, in the first place, that there is no requirement in Articles 23 to 27 of Directive 71/305 or Articles 20 to 24 of Directive 77/62 that such evidence be produced and that there is therefore no justification for excluding an undertaking which docs not comply with such a requirement from participation in a tendering procedure. It takes the view in particular that as regards good standing, proof of legal personality and the capacity of undertakings to enter into contracts and to assume obligations, the list of documents which the authorities awarding contracts may require from tenderers on the basis of the articles in question is complete and more than sufficient and is therefore exhaustive. Should proof of enrolment in the professional or trade register of the country of origin, envisaged in Article 24 of Directive 71/305 and Article 21 of Directive 77/62, not suffice to prove that the undertaking in question has the capacity to enter into contracts and to assume obligations or has a duly constituted legal personality, the authorities awarding contracts have sufficient means to verify the point by demanding documents permitting the undertakings to prove that they are not in any of the situations justifying their exclusion under Article 23 of Directive 71/305 or Article 20 of Directive 77/62. The Commission refers in this context to the considerations put forward by the Court in its judgment in Case 76/81 Transporoute [1982] ECR 417. Finally it points out that Article 24 of Directive 71/305, which refers only to six national professional or trade registers, has been supplemented by the Acts of Accession of 1972, 1979 and 1985 and that Article 21 of Directive 77/62, which still refers only to the registers of nine Member States, may easily be applied by analogy as regards the other three Member States.

3. The Spanish Government contends that the requirement set out in Article 24, paragraph 1, point 1, of the RGCE is nothing other than a requirement as to legal personality and that in terms of time and of the logical order of succession of the conditions for the award of contracts, it comes before the requirement of economic, financial and technical capacity to which the directives refer. It cannot therefore be contrary thereto unless Community tenderers are to be exempted from the condition of legal personality and unless it is to be permissible for contracts to be awarded to undertakings which, being incapable of assuming rights and obligations, have no liability. The same considerations apply to Article 25, paragraph 1, of the RGCE, which merely lays down ways of providing evidence of legal personality.

(ii) 1. Article 284, Paragraph 5, of the RGCE, which concerns contractors and is applied by extension to suppliers by virtue of Article 109 of the LCE, provides that:

2. According to the Commission Directive 71/305 does not envisage any requirement for tenderers from other Member States who wish to prove their qualifications by means other than classification in Spain to produce such a negative certificate and the requirement must therefore be regarded as contrary thereto. Contractors from other Member States may either submit the certificate of classification or provide the authorities awarding contracts with other evidence. If such contractors opt for that procedure the authorities awarding contracts cannot require other conditions or additional certificates and must restrict themselves to the checks on suitability laid down by the directive.

3. The Spanish Government states, on the one hand, that that provision is solely and exclusively applicable in relation to public works contracts and not to public supply contracts, for which no system of classification is laid down. It contends, on the other hand, that its purpose is to avoid fraudulent practices with regard to the classification system, whereby a foreign undertaking of Community origin may evade the effects of a suspension or cancellation of a prior classification by the convenient expedient offered by the possibility of establishing qualifications by means other than classification. It is not difficult to comply with the formality required for that purpose and it cannot be regarded as disproportionate or not objectively required.

(iii) 1. Article 287, paragraph 2, of the RGCE, concerning classification of works contractors provides:

2. The Commission takes the view that that condition for classification is contrary to Directive 71/305 and is discriminatory with regard to contractors from other Member States. On the one hand Article 28(4) of Directive 71/305 does not allow proofs and declarations to be required other than those provided for in Articles 23 to 26, which contain none of the requirements imposed by the RGCE. It is true that Article 26(c) and (d), to which the Spanish Government refers, allow the means available to undertakings for the execution of the works to be taken into consideration, but entirely irrespective of the territory in which they are located. On the other hand, even if they are applied without distinction, the requirements imposed by the RGCE constitute above all an obstacle for undertakings which are not established in Spain and are thus contrary to Article 59 of the Treaty, since national undertakings automatically have personal, material and financial means permanently available to them on the national territory.

3. According to the Spanish Government, Article 287, paragraph 2 of the RGCE is a provision with no specific effect, since it does not specify in what the preference to which it refers is to consist. If, nevertheless, it had some slight effect, it would not be difficult to justify it by Article 26(c) and (d) of Directive 71/305 which allows account to be taken of the equipment and manpower available for carrying out the contract, since the presence of such means on the territory in which the contract is to be performed involves a greater availability, no matter how small.

(iv) 1. Article 312, paragraph 2, of the RGCE provides that certificates or documents of a similar type issued by the Member States of the European Economic Community to their contractors, in conjunction with the first, second, third, fourth, fifth, ninth and tenth subparagraphs of Article 23 and the second and third subparagraphs of Article 287 bis of the RGCE, constitute, for the various authorities awarding contracts, a presumption of suitability.

2. According to the Commission, it may be seen from a comparison of that provision with the first subparagraph of Article 28(3) of Directive 71/305 that Article 312, paragraph 2, of the RGCE does not take account, as regards the probative effect in Spain of certificates of classification issued by another Member State, of the provisions of Article 26(b) and (d) of Directive 71/305, which are repeated in Article 287 ter of the RGCE.

3. The Spanish Government states that that omission is a mere clerical error due to the rapidity and complexity of the transposition procedure and that it will be corrected at the time of the forthcoming revision of the LCE.

(v) 1. Article 320, paragraph 3, point 5, of the RGCE provides that

2. The Commission claims, on the one hand, that that provision is contrary to Article 23(l)(e) of Directive 77/62, which does, it is true, permit the requirement that a quality certificate be produced, but not that it should be drawn up by a body of the awarding authority's Member State. The Commission states, on the other hand, that the provision in question constitutes a measure having an effect equivalent to a quantitative restriction within the meaning of Article 30 of the Treaty, and that there is no justification for the obligation to produce a national certificate for supplies.

3. According to the Spanish Government, that is a mere clerical error which might be remedied if the provision in question is not interpreted literally. In any event a solution to the problem is to be sought by an amendment of the relevant article of the LCE so that, by virtue of the order of precedence of provisions of law, there will be an automatic derogation from that provision.

(vi) 1. Article 341 of the RGCE allows the government, in accordance with the fourth of the LCE's final provisions, to exempt undertakings which have obtained a given classification from the Ministry of Finance from providing provisional security in the case of tenders for works contracts. That possibility was provided by Royal Decree 1883/1979 of 1 June 1979, which authorizes authorities awarding contracts to include in the tender specifications a clause providing exemption from the obligation to provide provisional security, and by an order of 23 October 1979 including the same exemption in the tender specifications of the Ministry of Public Works and Town Planning and its independent bodies.

2. The Commission maintains that the opportunity to tender without being classified is a right of the contractor and that the exercise of that right cannot be obstructed on the basis of the reasons given by the Spanish authorities such as, for example, the fact that classified contractors are, in a way, known to the administrative authorities. The exemption from providing provisional security granted to contractors who have obtained classification constitutes a financial incentive to be classified and deprives of any practical effect a contractor's right to tender without being classified. It is consequently contrary to Directive 71/305 and to Article 59 of the Treaty.

3. According to the Spanish Government, the formality of classification, which it is mandatory to follow for public contracts of a value exceeding PTA 20 million, and the provisional security, which is intended to ensure the proper completion of contracts, are two types of guarantee which are perfectly in line with Article 16(i) of Directive 71/305, which requires authorities awarding contracts to include in notices of open procedures information about deposits and any other guarantees, whatever their form, which may be required by the authorities awarding contracts. Non-Spanish undertakings from a Member State of the Community may provide both types of security in conditions identical to those applicable to Spanish undertakings; they may, in the same way as Spanish undertakings, be relieved of the obligation to provide provisional security. In the event of nonperformance of the contract the authority awarding contracts may either suspend the classification or regard the provisional security as forfeit. Such effective sanctions would not exist on the supposition, which the Commission apparently has in mind, that non-Spanish undertakings from a Member State of the Community, which have established their economic, financial or technical qualifications by a means other than classification, were also exempted from the obligation to provide provisional security.

(d) Certain rules in the technical field

1. Article 244, paragraph 2, of the RGCE reads as follows:

2. The Commission stresses in the first place that Article 244, paragraph 2, of the RGCE did not transpose the order of preference laid down in Article 7(1) of Directive 77/62. The fact that Article 7 has in the meantime been amended by Directive 88/295/EEC of 22 March 1988 cannot in any case justify the failure to transpose Directive 77/62 within the period prescribed, namely by 1 January 1986. In any event, Directive 88/295/EEC ought itself to have been transposed into Spanish law by 1 March 1992 at the latest, that is, before these proceedings were brought.

3. The Spanish Government points out first of all the scale and complexity of the task facing the Spanish authorities at the time of the transposition of Directives 71/305 and 77/62 into Spanish law. It next states that those two directives were substantially amended by Directives 89/440/EEC and 88/295/EEC. It notes in particular that extra time was allowed for the Kingdom of Spain to transpose Directive 88/295/EEC pursuant to the second subparagraph of Article 20 thereof. Regard being had to those circumstances, to require the adaptation of Spanish legislation to the provisions of Directive 77/62 or the early transposition of those of Directive 88/295/EEC at the very time when that transposition was being studied and effected would not be in accordance with Article 5 of the Treaty, which requires that the fulfilment by the Member States of their obligations arising out of the Treaty be facilitated as far as possible.

B — The Law of 24 November 1939

1. Article 10 of the Law of 24 November 1939 was worded as follows:

2. The Commission states first that the Law of 24 November 1939 is still being mentioned in general terms in certain notices of invitation to tender. Moreover the reference to national preference still appears in Article 17 of the general administrative specifications for the award of State works contracts (Royal Decree 3854/1970 of 31 December 1970).

3. The Spanish Government points out that there is a draft Law derogating from the Law of 24 November 1939 by means of an ad hoc provision with the appropriate precedence, in the form of a derogation from a Law on industry. Meanwhile the Law of 24 November 1939 is being applied less and less, as its validity has been challenged in the courts on numerous occasions.

C — Royal Decree 946/1978

1. Article 11 of Royal Decree 946/1978 provides as follows:

2. The Commission takes the view that medicinal products, as constituent parts of tenders relating to public supply contracts, must have free movement between the Member States, and any measure having an effect equivalent to a quantitative restriction is prohibited with the exception of those justified on grounds listed in Article 36 of the Treaty or for some overriding necessity. The Spanish origin of the raw material of medicinal products, the Spanish nationality or the establishment in Spain of the laboratories carrying out research on or manufacturing the raw material and the fact that the laboratories use a Spanish raw material arc criteria for the selection of public supply tenders which would make it impossible to import into Spain medicinal products or raw materials from other Member States, except in very rare cases. Article 11 of Royal Decree 946/1978 is therefore incompatible with Article 30 of the Treaty.

3. The Spanish Government states that a provision repealing Article 11 of Royal Decree 946/1978 appears in the draft Royal Decree laying down the rules for the selection of medicinal products for financing by the national health system, a draft coming within the first phase of the timetable laid down for the transposition of the directives on medicinal products for human use.

IV — Answers to questions put by the Court

1. In reply to two questions put by the Court, the Commission confirmed that it did not regard Article 284, paragraph 5, and Article 287, paragraph 2, of the RGCE, which are in its view contrary to Directive 71/305 and Article 59 of the Treaty, as being also contrary to the provisions of Directive 77/62, since their application by extension to public supply contracts, envisaged in Article 109 of the LCE and Article 320 of the RGCE respectively, have not taken effect.

2. In reply to a question from the Court, the Spanish Government indicated that the delay in the drafting and adoption of the draft Law reforming Spanish legislation on State contracts is due to the scale and complexity of the draft itself. On the one hand it is not a matter of a specific amendment or a mere partial incorporation of precise Community rules into the system of the old Law, but of a comprehensive reform embodying a fresh spirit and envisaging solutions to new problems which have become apparent since the Law which is to be amended came into force. On the other hand it is necessary to identify the principles which must make up the essential common denominator applicable to all public authorities, since the legislature is required under the constitution to prepare the basic legislation governing public authority contracts.

1 Language of the case: Spanish.