EU procurement rules set out a legal framework for procuring public contracts above a certain value. Where they apply, contracts must be advertised in the Official Journal of the European Union and awarded in accordance with certain specified procedures.
Helmut Müller GmbH v Bundesanstalt für Immobilienaufgaben C-451/08 [2010] PLSCS 100 provides useful guidance on how the rules apply to property transactions. The reference to the European Court of Justice (ECJ) was triggered by the sale of land to a developer that, in the opinion of both the public body that owned the land and the municipal authority responsible for town planning, had presented the best plans for regenerating the site.
The contract for sale did not mention the future use of the land. However, the disappointed bidder claimed that the public procurement rules applied to the relationship between the municipal authority and the successful bidder as a result of the benefit that the successful bidder would derive from any increase in the value of the land following the grant of planning permission.
The ECJ reminded the parties that sales of land by public authorities do not constitute “public works contracts” because such a contract is a contract for he providing for work in which a public authority assumes the position of the buyer. Consequently, the sale of the land does not, of itself, constitute a public works contract for the purposes of the rules.
To qualify, work must be of direct economic benefit to the contracting authority. Economic benefit is clearly established where the authority will become the owner of the work. It may also exist where the authority will have legal rights over work, so that it can be made available for public use, or may be derived from the future use or transfer of the work where the authority contributes to the cost of the work or assumes liability for financial risks.
Importantly, however, the mere exercise of planning powers in the public interest does not fall within the ambit of the procurement rules, nor does it satisfy the condition that the work has been specified by the contracting authority. The authority must have defined the type of the work or, at the very least, have had a decisive influence on its design in order for it to have specified its requirements within the meaning of the rules.
It is also worth noting that the court refused to exclude the possibility of the rules applying to a two-phase award in the form of a sale of land, where another public authority intends to award a public works contract in respect of the land but has not yet formally decided to do so. However, on the facts of this case, the rules did not apply.
The decision provides welcome clarification of the law, but leaves a number of questions unanswered. In particular, the court interpreted “public works concessions” (which are subject to less restrictive tender processes) narrowly, ruling that contracting authorities cannot grant concessions in respect of land that they do not own. However, it did not address the difficulties that arise where a developer already owns the land in question.
Allyson Colby is a property law consultant
