Report for the Hearing delivered in Joined Cases 27 to 29/86

I — Legal background

1. Community law

Directive 71/305/EEC of 26 July 1971, in conjunction with Directive 71/304/EEC, lays down provisions directed to the attainment of freedom of establishment and freedom to provide services in respect of public works contracts awarded in Member States on behalf of the State, or regional or local authorities or other legal persons governed by public law, including provisions not only for the abolition of restrictions but also for the coordination of national procedures for the award of public works contracts.

The questions raised in these cases relate to the interpretation of the provisions of Directive 71/305 dealing with the requirements which undertakings must satisfy in order to take part in tendering procedures, which are contained in Title IV entitled ‘Common rules on participation’.

The relevant provisions of Directive 71/305 are as follows:

Article 23 enumerates the criteria relating to contractors which may lead to their exclusion from participation in a contract and, in respect of some of those cases, the evidence which contractors may submit in order to establish that those criteria do not apply to them.

Article 25 defines the references establishing a contractor's financial and economic standing as follows:

‘Proof of the contractor's financial and economic standing may, as a general rule, be furnished by one or more of the following references: (a) appropriate statements from bankers; (b) the presentation of the firm's balance sheets or extracts from the balance sheets, where publication of the balance sheet is required under company law in the country in which the contractor is established; (c) a statement of the firm's overall turnover and the turnover on construction works for the three previous financial years. The authorities awarding contracts shall specify in the notice or in the invitation to tender which reference or references they have chosen and what references other than those mentioned under (a), (b) or (c) are to be produced. If, for any valid reason, the contractor is unable to supply the references requested by the authorities awarding contracts, he may prove his economic and financial standing by any other document which the authorities awarding contracts consider appropriate.’

Under the terms of Article 26,

‘Proof of the contractor's technical knowledge or ability may be furnished by: ... (b) a list of the works carried out over the past five years, accompanied by certificates of satisfactory execution for the most important works ... (d) a statement of the firm's average annual manpower and the number of managerial staff for the last three years ... ’.

Article 28 lays down the procedures for the establishment and administration by Member States of official lists of recognized contractors and provides that the registration of a contractor in such a list constitutes a presumption of suitability for the authorities of other Member States awarding contracts. Paragraphs (2) and (3) provide:

‘2. Contractors registered in these lists may, for each contract, submit to the authority awarding contracts a certificate of registration issued by the competent authority. This certificate shall state the references which enabled them to be registered in the list and the classification given in this list’.

‘3. Certified registration in such lists by the competent bodies shall, for the authorities of other Member States awarding contracts, constitute a presumption of suitability for works corresponding to the contractor's classification only as regards Articles 23 (a) to (d) and (g), 24, 25 (b) and (c) and 26 (b) and (d) and not as regards Articles 25 (a) and 26 (a), (c) and (e). Information which can be deduced from registration in official lists may not be questioned ... ’.

2. National law

The relevant legislation in Case 27/86 comprises essentially the Decree-Law of 3 February 1947 laying down conditions for the recognition of contractors {Moniteur belge of 12. 2. 1947), Article 1 of which lays down the conditions which must be met by contractors in order to be authorized to carry out public works. In addition to the general conditions contained in that article, paragraph (B) requires a prior special recognition:

‘if at the time of the award of the contract or in the course of its performance the total value of all the works carried out by the contractor at one time, whether public or for the public interest or private, exceeds a maximum to be laid down by Royal Decree’.

The Royal Decree of 31 January 1978 laying down measures for the implementation of the Decree-Law of 3 February 1947 (Moniteur belge of 25. 2. 1978) lays down those amounts; it specifies that the relevant amount for recognized contractors in Class 8 is BFR 1200 million.

Article 9 of the Royal Decree provides that; although ‘this provision shall not confer rights upon such contractors’, recognized contractors must request an exemption if, at the time when they tender for public works or in the event of their being awarded a contract, the total value of the public and private works which they have or will have to carry out at one time exceeds or will exceed by more than 10% the amount laid down for the class in which they are recognized.

In Cases 28 and 29/86 the relevant provision is also to be found in the Decree-Law of 3 February 1947, Article 1 of which was supplemented by paragraph (C) which is worded as follows:

‘Registration in the official list of contractors recognized by a Member State of the European Community shall be equivalent to recognition as provided for in (B) in respect of any works which recognition entitles the contractor to carry out in the country where he is established.’

The abovementioned Royal Decree of 31 January 1978 lays down the maximum value of contracts which may be awarded to recognized contractors in each class, namely BFR 75 million in Class 6 and BFR 150 million in Class 7. There is no limit to the value of contracts which may be awarded to contractors in Class 8.

The Ministerial Decree of 7 February 1978 {Moniteur belge of 25. 2. 1978), which lays down the criteria to be taken into account in examining requests for recognition by contractors, lays down certain conditions for recognition including a requirement of equity capital of BFR 15 million in Class 6 and BFR 30 million in Class 7, average annual manpower over the previous three years of 50 in Class 6 and 100 in Class 7, and a managerial staff of two in Class 6 and 4 in Class 7.

II — Facts and procedure

1. Background to the disputes

Case 27/86

On 13 January 1978, the Association intercommunale pour les autoroutes des Ardennes put out an invitation to tender for a contract for works on the Ardennes motorway by Special Contract Document No Z 78/C.77, which provided that tenderers should be recognized in Class 8.

When the tenders were opened it transpired that Constructions et entreprises industrielles SA (hereinafter referred to as ‘CEI’) was the lowest tenderer.

The three best-placed tenderers were requested to state the total value of their work in hand at the time of the award of the contract. In its reply, CEI admitted that the work in progress on its order book exceeded BFR 1200 million. On 22 September 1978, the board of the Association intercommunale pour les autoroutes des Ardennes, the awarding authority, decided to award the contract to a contractor who had submitted the highest tender but whose works to be carried out at one time had a value not exceeding the limits laid down in the Royal Decree of 31 January 1978.

By an application lodged on 15 November 1978, CEI, the plaintiff in the main proceedings, brought an action against that decision before the Conseil d'Etat; it submitted inter alia that the awarding authority had infringed Directive 71/305/EEC by rejecting its tender on the ground that the total value of its works in progress exceeded the limits laid down in the Royal Decree of 31 January 1978 although Articles 25 and 26 of the directive laid down no criteria for the selection of contractors other than their financial, standing and technical ability and those criteria did not include the requirement of recognition where their works in progress exceeded a set amount.

Cases 28 and 29/86

Of the two public works contracts at issue, the first was put out to tender by the Régie des bâtiments under Special Contract Document No K 90/78-H 87, which called for tenderers in Category D, Class 6, and the second by the Ministry of Defence under Special Contract Document No 8/M/A/034/1978, which called for tenderers in Category D, Class 7.

In both procedures Ing. A. Bellini & Co. SpA, the plaintiff in the main proceedings (hereinafter referred to as ‘Bellini’), whose registered office is in Bergamo (Italy), was classed as the lowest tenderer when the prices were compared but its tender was rejected on the ground that Bellini did not satisfy the criteria laid down by the Belgian legislation for recognition in the classes required by the contract documents.

Bellini had submitted with one of its tenders a copy of its certificate of recognition by the Italian Ministry of Construction in Category 2, Class 8, which entitled it, under Italian legislation, to bid for contracts up to a maximum of LIT 4000 million, that is, about BFR 142 million at the mid-price exchange rate at the time; that amount corresponded to Class 7 under the Belgian legislation.

One of the grounds relied upon by the awarding authorities in rejecting Bellini's tenders was that it had insufficient capital. It appeared from the preparatory documents preceding the decisions on the tenders, which were cited in the references for a preliminary ruling submitted by the Conseil d'Etat, that the awarding authority took the view that Bellini's proven capital was insufficient under Belgian legislation for recognition in Class 6 or 7 as required by the contract documents for the contracts in question. According to those documents, Bellini's equity capital totalled BFR 2625000 when inclusion in Classes 6 and 7 under the Belgian legislation required own funds of BFR 15 million and BFR 30 million respectively.

Another ground relied upon by the awarding authorities in rejecting Bellini's tenders was that it had insufficient manpower. Bellini had established that it was duly paying social security contributions to the Istituto Nazionale della Previdenza Sociale in respect of one manager and 28 other staff, whereas the Belgian legislation required average manpower for the three previous years of 50 workers and 2 managerial staff for Class 6 and 100 workers and four managerial staff for Class 7.

By applications dated 13 March and 9 July 1979, Bellini instituted proceedings before the Conseil d'Etat for the annulment of the two tendering decisions.

Bellini submitted inter alia that the awarding authorities had infringed Article 3 (c) and Article 7 of the EEC Treaty and Articles 25 and 28 (3) of Directive 71/305/EEC by questioning its economic and financial standing as attested by its registration in the official list of contractors recognized in Italy when its registration in that list established a presumption of economic and financial standing and it was not possible to question the information to be deduced from such registration, in particular that referred to in Article 25 (b) and (c) and Article 26 (b) and (d) of Directive 71/305. Its treatment at the hands of the awarding authorities therefore constituted discrimination against it on grounds of nationality and was contrary to the freedom of movement for legal persons within the Community.

2. The questions referred to the Court for a preliminary ruling

By orders dated 15 January 1986, the Third Chamber of the Administrative Appeal Section of the Conseil d'Etat, taking the view that the resolution of the three disputes before it depended on the interpretation of Directive 71/305/EEC, stayed the proceedings and referred the following questions to the Court for a preliminary ruling under Article 177 of the EEC Treaty:

A — In Case 27/86

‘(1) Are the references enabling a contractor's financial and economic standing to be determined exhaustively enumerated in Article 25 of Directive 71/305/EEC? (2) If not, can the value of the works which may be carried out at one time be regarded as a reference enabling a contractor's financial and economic standing to be determined within the meaning of Article 25 of the directive?’

In the grounds of the order for the reference, the Conseil d'Etat states that, on the one hand, the purpose of the test of the total value of works which may be carried out at one time by a tenderer for public works is to avoid any monopoly, permit a rational allocation of work and prevent unbridled competition or speculation on the part of contractors resulting in their incurring commitments beyond their means, and, on the other hand, Directive 71/305 is intended to ensure equality between tenderers for public works and to that end it lays down objective selection criteria in order to remove the assessment of the suitability of contractors from the sole discretion of the administration.

B — The question submitted in Cases 28 and 29/86 is as follows:

‘Does Directive 71/305/EEC of 26 July 1971 concerning the coordination of procedures for the award of public works contracts, and in particular Article 25 and Article 26 (d) thereof, permit a Belgian awarding authority to reject a tender submitted by an Italian contractor on the grounds that the undertaking has not shown that it possesses the minimum amount of own funds required by Belgian legislation and that it does not have in its employ on average the minimum number of workers and managerial staff required by that legislation, when the contractor is recognized in Italy in a class equivalent to that required in Belgium by virtue of the value of the contract to be awarded?’

3. Procedure

The orders making the reference were lodged at the Court Registry on 3 February 1986.

By an order of 19 March 1986, pursuant to Article 43 of the Rules of Procedure, the Court ordered that the three cases be joined for the purpose of the written and oral procedure and the judgment because of the close connection between them.

Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted as follows:

In Case 27/86, by the Association intercommunale pour les autoroutes des Ardennes, whose successor in title is the Fonds des routes, the defendant in the main proceedings, represented by the Minister for Public Works, who is represented by Pierre Lambert, of the Brussels Bar, and by Constructions et enterprises industrielles SA (CEI), the plaintiff in the main proceedings, represented by R. Libiez, J. Putzeys and X. Leurquin, of the Brussels Bar;

In Case 28/86, by the Régie des bâtiments, the defendant in the main proceedings, represented by the Minister for Public Works, who is represented by Pierre Lambert, of the Brussels Bar, and by the Confédération nationale de la construction, an intervener in the main proceedings, represented by Léon Goffin and Jean-Louis Lodomez, of the Brussels Bar;

In Case 29/86, by the Belgian State, the defendant in the main proceedings, represented by the Minister for Defence, who is represented by Jean-Paul Pierard, Deputy Legal Adviser, acting as Agent;

In Cases 28 and 29/86, by SpA Ing. A. Bellini & Co., the plaintiff in the main proceedings, represented by J. Putzeys and X. Leurquin, of the Brussels Bar;

In all three cases, by the Commission of the European Communities, represented by Maurice Guerrin, its Legal Adviser, acting as Agent, by the Kingdom of Spain, represented by Luis Javier Casanova Fernandez, acting as Agent, and by the Italian Government, represented by Ivo M. Braguglia, Avvocato dello Stato, acting as Agent.

By a decision of 19 November 1986, pursuant to Article 95 (1) and (2) of the Rules of Procedure, the Court assigned the joined cases to the Sixth Chamber.

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.

HI — Summary of the written observations submitted to the Court

1. Question 1 in Case 27/86

The parlies to the main proceedings, the Kingdom of Spain, the Italian Government and the Commission are all of the view that the references enabling a contractor's financial and economic standing to be determined are not exhaustively enumerated in Article 25 of Directive 71/305.

In support of that contention, they state in essence that the expression ‘as a general rule’ in the first paragraph of Article 25 of the directive and the words in the second paragraph to ‘references other than those mentioned under (a), (b) or (c)’ make it clear beyond doubt that the enumeration of references in Article 25 is not exhaustive. They also note that the third paragraph of that article refers to ‘any other document which the authorities awarding contracts consider appropriate’ as evidence of a contractor's economic standing. That indeed was the criterion adopted by the Court of Justice in its judgment of 10 February 1982 in Case 76/81 Transporoute et Travaux v Minister for Public Works [1982] ECR 417).

The answer proposed by the Commission contains a qualification:

‘(1) The references enabling a contractor's financial and economic standing to be determined are exhaustively enumerated in Article 25 of Directive 71/305/EEC in so far as the awarding authority may not refuse to accept one of those references when it is submitted by a contractor. Nevertheless, awarding authorities may require references other than those mentioned in Article 25 (a), (b) and (c) provided that they make this clear in the notice of tender or the invitation to tender.’

2. Question 2 in Case 27/86

The Fonds des routes, the defendant in the main proceedings, the Kingdom of Spain and the Commission take the view that the question submitted by the Conseil d'Etat must be answered in the affirmative.

The Fonds des routes argues in support of its contention that the limit on the value of the works which may be carried out by a contractor at one time is in the interests of public policy and was mentioned in the general programme for the abolition of restrictions on freedom to provide services drawn up by the Council on 18 December 1961 (Official Journal, English Special Edition, Second Series, IX, p. 3).

The Kingdom of Spain states that the limitation in question constitutes an objective criterion which does not permit discrimination. It adds that Spanish legislation lays down a set of limits on the total value of works which may be carried out at one time similar to that, laid down by the Belgian legislation.

The Commission takes the view that the consideration of the total value of the works which a contractor has or will have to carry out at one time and the requirement of an exception where certain amounts are exceeded comes within the discretion conferred on awarding authorities by the second paragraph of Article 25 to require additional references other than those enumerated in subparagraphs (a), (b) or (c), although that discretion must not be exercised in an arbitrary or discriminatory manner.

SA Constructions et entreprises industrielles (CEI), the plaintiff in the main proceedings, and the Italian Government, suggest a negative answer.

CEI's observations are based on a general interpretation of Articles 25 and 26 of the directive. In its view, those two articles reflect a common rule for the qualitative selection of tenderers for public works contracts which is implicit in the directive to the effect that awarding authorities are obliged to allow tenderers not excluded under Article 23 to establish their individual financial, economic and technical suitability.

Only references covering each individual contractor's financial, economic and technical situation can constitute proof of his suitability.

The requirement in the Belgian legislation that the value of the works to be carried out by the contractor at one time either when the contract is awarded or in the course of its performance should not exceed a certain ceiling is incompatible both with the common rule entitling each contractor to establish his suitability for the contract in question and with the scheme of the references provided for by Articles 25 and 26.

The imposition of such a ceiling creates an irrebuttable presumption of financial and economic unsuitability which precludes contractors from establishing their suitability. It constitutes a general and abstract disqualification rule which is unlawful because it is not one of those exhaustively enumerated in Article 23.

Moreover, it is quite clear that that ceiling constitutes a substantive rule which bears no similarity to the forms of evidence envisaged by Article 25.

CEI goes on to examine whether the fact that the Belgian legislation provides for the possibility of requesting an individual exemption from the ceiling on the value of works which may be carried out at one time is to be seen as a way of enabling contractors to prove their suitability. It argues that that is not the case because a Belgian awarding authority is not required to examine a request for an exemption. Furthermore, the Ministerial Decree of 7 February 1978, by stipulating that the tenderer must have submitted a request for recognition in the relevant class in order to be eligible for an exemption, lays down a condition which cannot be fulfilled by CEI which is already recognized in a higher class.

Finally, CEI argues that, in its examination of tenders, the awarding authority may in any event only require the references exhaustively enumerated in the notice or the invitation to tender, and this in its view rules out the application in this instance of the ceiling on the value of works which may be carried out at one time.

In conclusion, CEI proposes that Question 2 be answered as follows:

‘The value of works which may be carried out at one time cannot be regarded as a reference enabling a contractor's financial and economic standing to be determined within the meaning of Article 25 of Directive 71/305/EEC because: (1) It does not constitute a reference with regard to financial and economic standing which is required of a contractor in the form of a document like all the other references mentioned in Article 25 of Directive 71/305/EEC; instead it creates a general and abstract rule disqualifying any contractor exceeding a particular ceiling on the value of the works which may be carried out at one time; (2) It does not constitute a reference within the meaning of Article 25 since it is not based on the actual financial and economic circumstances of the undertaking itself; (3) It does not constitute a reference since it was not mentioned in the notice or the invitation to tender; (4) It does not constitute a reference since it leaves it entirely to the discretion of the awarding authority to decide whether to go on to examine the contractor's financial and economic standing or whether to eliminate him on that ground alone; (5) It does not constitute a reference since it creates an obstacle precluding a contractor recognized in Class 8 from either obtaining an exemption from that requirement or establishing by means of another document that he has the financial and economic standing to be awarded the contract in question.’

The Italian Government infers from the object of the ceiling on the value of the works which may be carried out at one time, as defined by the Conseil d'Etat — namely to avoid any monopoly and to permit a rational allocation of work — that that criterion cannot be regarded as a reference to establish the financial and economic standing of tenderers within the meaning of Article 25 of Directive 71/305. It states that if that criterion does not fall within the exceptions provided for in the second paragraph of Article 25 of the directive, that automatically makes it ‘a means of proof which does not come within the closed category of those authorized by the directive’ (judgment in Transporoute, cited above, at paragraph 10 of the decision).

3. The question submitted in Cases 28 and 29/86

The Régie des bâtiments, the defendant in the main proceedings in Case 28/86, the Confédération nationale de la construction, an intervener in the main proceedings in Case 28/86, the Belgian State, the defendant in the main proceedings in Case 29/86, the Kingdom of Spain and the Commission propose an affirmative answer on the basis of the following arguments.

According to Article 20 of Directive 71/305, awarding authorities are required to check the suitability of tenderers in accordance with the criteria of financial and economic standing and technical ability laid down in Articles 25 to 28. The directive also provides for the way in which tenderers are to prove both their financial and economic standing and their technical ability. Yet since the directive does not fix the standard to be reached in regard to each of those criteria it is for the Member States to lay down the threshold above which they will regard each tenderer's financial and economic standing and technical ability as appropriate for the contract under tender.

The presumption of suitability created by Article 28 of the directive entails that a certificate of registration in a list of contractors recognized in a Member State replaces, for the purposes of the awarding authority in another Member State, both the presentation of the firm's balance sheet and the statement of its turnover (Article 25 (b) and (c)) and the statement of its manpower (Article 26 (d)). However, the fact that this is a mere presumption of suitability means that it is rebuttable. The proof provided by registration in an official list relates only to the objective factors on which that registration is based. Each Member State is free to lay down more or less restrictive conditions with regard to suitability to carry out works of a particular value.

In those observations it is also pointed out that Article 28 (2) of the directive provides that the certificate of registration must state the references which enabled the contractor to be registered and the classification given in that list, which, it is contended, can serve no other purpose than to enable the awarding authority to check whether the presumption of suitability created by the certificate is rebutted by the statutory requirements of the Member State awarding the contract.

Lastly, the automatic assumption that registration in a list of contractors recognized in one Member State is equivalent to such registration in another State is contrary to the letter and the spirit of the Community rules and would constitute discrimination against contractors registered in countries where the conditions for recognition are stricter than those laid down by other countries' legislation.

Bellini and the Italian Government take the view that the question submitted by the Conseil d'Etat must be answered in the negative.

Relying on arguments similar to those put forward by CEI in Case 27/86, Bellini bases its observations on an interpretation of Articles 25 and 26 of Directive 71/305. In its view those articles lay down a common rule for the qualitative selection of tenderers for public works, the effect of which is to enable contractors to prove in each individual case their financial and economic standing and technical ability on the basis of references reflecting the objective financial, economic and technical situation of each contractor taken individually.

The rule contained in the Belgian legislation on recognition, requiring certain minimum own funds and a certain minimum staff, which is applicable to all contracts and all contractors without taking account of their individual financial, economic and technical situation, is a general and abstract rule and therefore incompatible with the common qualitative selection rule contained in Articles 25 and 26 of the directive, which enables contractors to prove their suitability for each contract.

Moreover, those requirements in fact constitute general and abstract grounds for the exclusion of a contractor and are therefore also incompatible with Article 23 of the directive, which exhaustively enumerates the circumstances in which exclusion is justified.

Bellini further takes the view that the application of those requirements to contractors recognized in another Member State would be contrary to the scheme laid down by Article 28 (3) of the directive for the examination by an awarding authority of the financial and economic standing and technical ability of such contractors. It considers that the conditions as to own funds, manpower and numbers of managerial staff are matters covered by Article 25 (b) and Article 26 (d) of Directive 71/305/EEC in regard to which a contractor must be presumed financially, economically and technically suitable by virtue of Article 28 (3).

The Italian Government cites the judgment in Transporoute, cited above, in which the Court held that Article 28 (3) entitles contractors registered in an official list in a Member State to use such registration, within the limits laid down in that provision, as an alternative means of satisfying an awarding authority in another Member State that they meet the qualitative criteria listed in Articles 23 to 26 of the directive. The presumption of suitability which applies, under Article 28 (3), to a contractor registered in an official list already includes all the aspects of his financial standing and technical ability of which evidence is required by the legislation of the Member State awarding the contract by means of the requirement of minimum capital and manpower. The Italian Government therefore states that registration in an official list replaces the references provided for by Article 25 (b) and (c) (balance sheet, statement of turnover) which serve to establish a contractor's financial and economic standing and thereby precludes another Member State from requiring evidence of a certain minimum capital. The same argument holds true for the minimum manpower and managerial staff requirements.

G. C. Rodriguez Iglesias

Judge-Rapporteur

1 Language of the Case: French.