Report for the Hearing delivered in Case 199/85

I — Relevant legal provisions and outline of the facts

1. Council Directive 71/305 of 26 July 1971 concerning the coordination of procedures for the award of public works contracts (Official Journal, English Special Edition 1971 (II), p. 682), which was implemented in Italy by Law No 584 of 8 August 1977, coordinated the procedures for the award of public works contracts in Member States on behalf of the State, or regional or local authorities or other legal persons governed by public law, on the basis of the following principles: prohibition of technical specifications that have a discriminatory effect, adequate advertising of contracts and the fixing of objective criteria for participation. The directive, which applies to public works contracts whose value is not less than 1 million ECU, provides, in Title III, Article 12 et seq., for adequate advertising of invitations to tender giving all interested contractors in the Community the chance to know of the invitation to tender and to participate in the procedure. Article 12 requires notices of invitation to tender to be sent to the Office for Official Publications of the European Communities, which will publish it in the Official Journal not later than nine days after the date of dispatch. Article 15 provides for an accelerated procedure where the period within which the Publications Office must publish the notice is reduced from nine to five days and the periods within which requests to participate and tenders must be received are reduced to 12 and 10 days respectively. Article 9 of the directive provides for a number of exceptions to its provisions on advertising. In particular it provides for exemption: and

‘(b) when, for technical or artistic reasons or for reasons connected with the protection of exclusive rights, the works may only be carried out by a particular contractor;’

‘(d) in so far as is strictly necessary when, for reasons of extreme urgency brought by events unforeseen by the authorities awarding contracts, the time-limit laid down in other procedures cannot be kept.’

2. By a resolution of 5 November 1979 the Municipal Council of Milan approved and brought into force Decision No 025I-0561 of 18 July 1979 adopted by the Board of the Azienda Municipale Nettezza Urbana di Milano [Municipal Refuse Disposal Corporation of Milan, hereinafter referred to as ‘the Milan Refuse Disposal Corporation'] by which that body awarded by private contract a contract for the construction of a plant for the recycling of solid urban waste to a consortium of three Italian undertakings for a sum of LIT 27000 million. The award of the contract by private contract excluded publication of the contract notice in the Official Journal of the European Communities required by Directive 71/305 and prevented other European undertakings which might have been interested in the contract from participating.

3. During 1980 and 1981 the staff of the Commission repeatedly drew the Italian authorities’ attention to the fact that the procedure for the award of the contract followed by them appeared to be incompatible with the directive's requirements. The Italian authorities contended in essence that the special characteristics of the plant to be constructed necessitated works which would be best carried out by the consortium composed of the successful tenderers which would give a higher rate of salvage than that achieved by existing plants in Europe at the time. Moreover, the construction of that type of plant involved the use of exclusive rights belonging to those undertakings. The Municipality of Milan also stated that the requirement for the application of the exception contained in Article 9 (d) of the directive, namely that there must be ‘reasons of extreme urgency brought about by events unforeseen by the authorities awarding contracts’, was satisfied in this case and that it had done no more than was strictly necessary.

4. Considering the information and particulars given to it to be unsatisfactory, the Commission, by a letter dated 1 August 1983, commenced the procedure provided for in Article 169 of the EEC Treaty and requested the Italian authorities to submit their observations within two months.

5. By a letter dated 10 November 1983 the Permanent Representation of Italy at the European Communities forwarded to the Commission a communication dated 11 October 1983 from the Mayor of Milan containing the observations requested by the Commission. In that letter the Mayor disputed the Commission's observations and maintained that the exceptions contained in Article 9 (b) and (d) of Directive 71/305 were applicable in this case. With regard to Article 9 (b), the Mayor of Milan emphasized that the advisory technical committee appointed by the Milan Refuse Disposal Corporation had reached the conclusion not only that the plant proposed by the three Italian undertakings was superior to any to be found in Europe but also that the construction of that type of plant involved the use of exclusive rights belonging to those undertakings. With regard to Article 9 (d) the Mayor relied on the following three factors as justifying the application of the exception: (i) The accident at Seveso, and therefore the urgent need to replace an additional incinerator, which, although planned at one stage, could no longer be built because of the refusal of the Lombardy regional authorities as a result of the discovery that the incinerator emitted dioxin, is an unforeseeable event; (ii) The problem of disposing of solid urban waste after the closure of certain refuse dumps, the closing down of one of the two incinerators and the limited operation of the other is of extreme urgency; (iii) The proposed works are limited to what is strictly necessary and consist of the replacement of the two existing incinerators and of the projected incinerators by a new recycling plant.

6. The Commission was not satisfied with those observations and, on 13 March 1984, delivered a reasoned opinion under Article 169 of the EEC Treaty requesting the Italian Republic to adopt the measures necessary to comply with the opinion within 30 days of its notification. In that reasoned opinion it stated as follows:

‘By necessary measures is meant above all a written undertaking by the Municipality of Milan that it will comply with all the provisions of Directive 71/305/EEC in future’.

7. In response to the reasoned opinion, the Italian authorities submitted a letter in which the Minister for the Interior instructed the Prefect of Milan to enjoin the Municipality of Milan strictly to ensure that the directive was complied with in full in future together with the following written declaration by the Mayor of Milan dated 19 April 1984:

‘... although convinced that the Municipal Administration acted, as on every other occasion, in a lawful manner in authorizing the award by private contract of a contract for the construction of the said plant for the recycling of solid urban waste,

I hereby declare,

as requested in the aforementioned opinion, that the Municipality of Milan will ensure that, in the future, too, its administrative action is in conformity with the provisions of primary and secondary legislation, including all the provisions of Directive 71/305/EEC, by according them full respect, in both form and substance’.

8. The Commission considered the declaration by the Mayor of Milan to be unsatisfactory. It contended that it was patently ambiguous and gave no effective guarantee for the future and stated that, according to its information, the Municipality of Milan had made another award in respect of the same type of contract and had failed once again to comply with the provisions of Directive 71/305.

9. By an application lodged at the Court Registry on 28 June 1985 pursuant to the second paragraph of Article 169 of the EEC Treaty the Commission brought this action.

10. The written procedure followed the normal course.

11. In its reply the Commission sets out a number of new facts which came to its knowledge after the Italian Government had submitted its defence. In the first place, the construction of the recycling plant decided upon in 1979 was never commenced. In 1984 the Municipality of Milan decided to have the plant in question constructed at Muggiano and the Milan Refuse Disposal Corporation applied to the European Investment Bank for finance. The Commission was asked to give its opinion on that application; it was then that it discovered what it believed to be a further infringement, although in fact the same plant was involved. The Commission also learnt that proceedings were pending before the Tribunale Amministrativo [Administrative Tribunal], Lombardy, concerning the award in 1979 by private contract of a contract for the construction of the recycling plant which is the subject of this case. It states that it is possible that those proceedings could give rise to a reference to the Court of Justice for a preliminary ruling. The Italian Republic did not dispute those new facts.

12. 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 nevertheless requested the Italian Government to reply in writing to certain questions set out in Part IV below.

II — Conclusions of the parties

The Commission claims that the Court should reject all other conclusions and

(1) Declare that by deciding to award by private contract a contract for the construction of a plant for the recycling of solid urban waste and thus failing to publish a contract notice in the Official Journal of the European Communities, the Italian Republic, and in particular the Municipality of Milan, has failed to fulfil its obligations under Directive 71/305/EEC concerning the coordination of procedures for the award of public works contracts; and (2) Order the Italian Republic to pay the costs.

The Italian Republic contends that the Court should:

Declare the application inadmissible.

III — Submissions and arguments of the parties

A — Admissibility of the application

1. The Italian Government, in its defence, raises an objection of inadmissibility against the Commission's application on the ground that the Italian administrative authorities have complied with that which was required of them by the reasoned opinion. In its reasoned opinion the Commission requested the Italian Republic to adopt the measures necessary to comply with the opinion within 30 days. As soon as it received the opinion the Italian Government took action to ensure compliance with it within the period prescribed by the Commission. Pursuant to the Minister for the Interior's request, the Mayor of Milan adopted the declaration of 19 April 1984 in which he gave a strict undertaking that the Municipality of Milan would ensure that its administrative action complied with the provisions of the directive in question. The Italian Government disputes the Commission's arguments that (a) the patent ambiguity of the Mayor's declaration gives no effective guarantee for the future; and (b) that assessment was confirmed by the fact that subsequent to or at the same time as the adoption of the aforementioned declaration the Municipality of Milan made another award in respect of the same type of contract and once again failed to comply with the provisions of the directive. (a) With regard to the ambiguity of the Mayor's declaration, the Italian Government considers that it is not possible to conclude from its wording that it contains a contradiction such as to negate the assurance given for the future. In using the words which appear in the preamble to the declaration ‘although convinced that the Municipal Administration acted... in a lawful manner’, the Mayor of Milan was not contending that the complaint contained in the reasoned opinion was unfounded and that the Municipal Administration's action, viewed objectively, was unlawful, but was merely expressing his subjective view without any intention to contradict the view taken in the reasoned opinion. According to the Italian Government, the Italian conjunction ‘pur’, with which the phrase begins, is intended to signify clearly and unequivocally that the Municipality's willingness to accept the conclusion contained in the reasoned opinion prevails over its own conviction. In addition, the reasoned opinion did not request formal acknowledgement of the infringement of the provisions of the directive in question but merely a declaration offering certain guarantees concerning compliance therewith in the future. (b) With regard to the Commission's second argument concerning an alleged further infringement committed by the Municipality of Milan in awarding another contract, the Italian Government considers in the first place, in its defence, that the Commission cannot rely in support of its case on a further allegation which the Court would have to consider without recourse to the procedure provided for in Article 169 of the EEC Treaty and secondly, in its rejoinder, that it is clear that the alleged further infringement never took place.

2. The Commission does not share the Italian Government's view on either of those two points. (a) With regard to the ambiguity of the Mayor of Milan's declaration, the Commission begins by justifying the wording of the undertaking it required from the Italian Government in its reasoned opinion: the requirement of an undertaking that the provisions of the directive would be complied with in the future was based on the assumption that at the time the reasoned opinion was drawn up the construction of the recycling plant should have been completed in view of the fact that the award of the contract by private contract had been justified four years previously on the ground of extreme urgency and ori the assumption that it was not possible to block or annul the Municipality's decision. Consequently, it was not possible to envisage any measures other than a solemn undertaking with regard to the future. According to the Commission, the undertaking which it requested from the Italian Government presupposed an acknowledgement, or at least an implicit acknowledgement, of the failure to comply with the directive. However, such an acknowledgement is totally absent from the Mayor of Milan's declaration which, on the contrary, is subject to a clear qualification: in the declaration it is stated in substance that the Municipality would comply in the future, too, with the provisions of Community law relating to public works contracts, as it had done in the past, which means that it would continue to act in the same way, in breach of the provisions of the directive. The Commission maintains that, in order to comply with the reasoned opinion, the Municipality of Milan should not only have given an undertaking for the future but also have admitted that it had acted wrongly in the past. (b) With regard to the alleged later infringement of the directive in the award of a contract in respect of a new plant, the Commission accepts that the information which came to its notice as a result of a request for finance submitted to the European Investment Bank concerned the same plant as that for which a contract was awarded in 1979. The Commission points out that responsibility for the inaccuracy of its allegation regarding the further infringement lies partially with the Italian Republic since it failed to reply to inquiries made by the Commission concerning that alleged infringement and since it failed to include in its defence any objection to the Commission's statement regarding the alleged second infringement. The Commission considers that those new facts should not affect the normal course of these proceedings.

B — Submissions and arguments of the parties concerning the substance of the action

1. The Commission maintains that the Italian Government cannot rely on the derogations provided for in Article 9 (b) and (d) of Directive 71/305. (a) Article 9 (b) The Commission does not accept the arguments submitted by the Italian Government to the effect that the special characteristics of the plant to be constructed necessitated works which, at the time the contract was awarded, could be entrusted only to the consortium composed of the successful tenderers. According to the Municipality of Milan, only that consortium had the special knowledge and exclusive rights needed to build a plant of the type required. The Commission considers that at the time the contract was awarded other undertakings in the Community were in a position to construct the plant in question, that the Municipality of Milan has never provided details of the exclusive rights held by the successful tenderers by virtue of which they alone were in a position to construct the plant, and finally that the Municipality of Milan has not proved, as is required of any public authority seeking to rely on the derogation contained in Article 9 (b) of Directive 71/305, that at the relevant time the successful tenderers were the only contractors capable of carrying out the works in question. (b) Article 9 (d) The Commission takes the view that in this case the conditions for the application of the derogation contained in this provision — ‘extreme urgency brought by events unforeseen by the authorities’ — have not been satisfied. It considers that the statements of the Municipality of Milan, in particular that it had for many years been considering the construction of urban waste disposal plants, invalidate the claim of ‘extreme urgency’. In addition, neither the events which occurred at Seveso nor the refusal of the Lombardy regional authorities to sanction the construction of an incinerator constituted ‘events unforeseen by the authorities’ since they did not substantially change the Municipality's objectives except with regard to the type of plant and its characteristics. The events which are relied upon by the Municipality and which are described as ‘unforeseen’ had, on the contrary, been foreseen and known for more than a year. In its reply the Commission also contends that the fact that the construction works have not been commenced several years after the award of the contract is incontestable proof that urgency cannot seriously be relied upon.

2. The Italian Government, in its defence, considers that it is neither necessary nor appropriate to submit observations concerning the substance of the action, even as alternative submissions to the preliminary question of admissibility. The reasons which led the Municipality of Milan to consider that it had made lawful use of the possibilities provided for by Directive 71/305 have been broadly explained during the administrative stage of the procedure.

IV — Replies to the questions put to the Italian Government

The Court requested the Italian Government to inform it of the reasons why the project for which a contract was awarded in 1979 had not been realized subsequently and, as regards the plant intended to be constructed at Muggiano, to inform it whether it corresponded to the 1979 project, whether its construction was entrusted to the same undertakings as those to whom the 1979 project was awarded and which stage the construction of that plant had reached.

By a letter dated 18 August 1986 the Italian Government replied that the delay in realizing the 1979 project was due to the entry into force in December 1982 of new Italian rules concerning waste disposal giving effect to EEC directives in the matter, which necessitated substantial changes in the proposed plant for which a contract had originally been awarded.

As regards the plant intended to be constructed at Muggiano, the Italian Government confirms that it is the same plant as that for which a contract was awarded in 1979 and that the same undertakings are to carry out its construction. As regards the state of the works at Muggiano, so far only the works preliminary to the actual construction of the plant have been carried out.

G. C. Rodríguez Iglesias

Judge-Rapporteur

1 Language of the Case: Italian.