Austria: Austria Fails To Implement New Procurement Directives In Time

On 18 April 2016 the two-year transition period for implementing the new Directives on public procurement law 2014/23/EU, 2014/24/EU, and 2014/25/EU ("Directives") lapsed. While the majority of Member States (such as Germany, the UK, Italy, Hungary, Romania and Bulgaria) have at least partially implemented the Directives, Austria hasn't even passed draft legislation to transpose a single of the above Directives yet.

However, even if Austria has obviously failed to transpose the Directives within the time stipulated by the EU, the Directives are (at least in significant parts) already applicable in Austria and individuals can – either directly or indirectly – rely on the majority of the provisions provided therein.

Direct application of the Directives and the duty to interpret the Austrian Procurement Act in conformity with the Directives.

According to ECJ jurisprudence, individuals may enforce certain provisions of a Directive that give rise to rights or obligations, before the national courts, in case the member state fails to transpose the directive in due time, or where the implementation is in some way defective. In order to have "direct effect" the provision at hand must be sufficiently precise and clear, unconditional, and may not leave Member States any leeway in implementing the respective provision and thus obliges the Member State to transpose the specific provision. However, as a general rule Directives, or their provisions, cannot take direct effect in relation to two party situations where both parties are individuals (horizontal effect). Moreover, if the conditions mentioned above are fulfilled, individuals may only rely on certain provisions of a directive where an individual seeks to invoke his rights against the State on which the obligation to achieve the desired results has been imposed (vertical effect).

Even where such a direct effect cannot apply, because the party against whom one or more provisions of the Directives are sought to be enforced is a private entity ("horizontal effect"), or otherwise fails to meet the conditions which would give the directive direct effect (such as sufficient clarity, conditionality, etc), national courts in Austria are required to interpret the Austrian public procurement act ("BVergG") in line with the unimplemented public sector directive (2014/24/EU), utilities directive (2014/25/EU), and concessions directive (2014/23/EU). The duty to ensure that the interpretation is in conformity with EU law is limited only in cases where an interpretation contra legem would be necessary.

As the Austrian public procurement act ("BVergG") does not provide any regulations in relation to substantial rules of the Directive (eg contract modifications, horizontal in-house structures, etc), or even contradicts certain provisions thereof, individuals may enforce the Directive either by claiming their direct applicability or by demanding EU consistent interpretation of those provisions of the BVergG which conflict with the Directives, or do not consider them sufficiently.

Consequences

Considering the aforementioned, inter alia the following rules of the new Directives will have to be applied in Austria via the direct application or interpretation in conformity with the Directives or, and will "overrule" the respective rules in the BVergG

  • Compulsory tender process for (Austrian) service concessions

    Service concessions exceeding certain thresholds have to be tendered in line with the EU procurement rules. The provision of Art 11 BVergG, excluding service concessions from the majority of the rules and obligations stipulated in the BVergG, will have to be interpreted in line with the new directive on concessions, or may even be disapplied. Most important tender procedures subjecting service concessions can – in contrast to the previous situation - be appealed and challenged before the review authorities.
  • Right to exclude bidder for "poor" past contract performance and other new exclusion grounds

    While Art 68 BVergG is likely to comply with the mandatory exclusion grounds provided in Directives, and already covers some of the discretionary exclusion grounds, it is, inter alia, not familiar with the exclusion ground of "poor" contract performance. Art 57 (4) of the Directive entitles contracting authorities to exclude bidders that have shown significant deficiencies in the performance of a previous public contract. An interpretation of Art 68 (1) 5 BVergG in conformity with EU requirements will therefore most likely lead to the result that contracting authorities are entitled to apply that exclusion ground, even before the Directives have been transposed in Austria, under the exclusion ground of grave professional misconduct. Further contracting authorities can most probably rely on all other exclusion grounds specified in the Directive, if those exclusion grounds are defined in the tender documents
  • Application of innovation partnership and facilitated access to the negotiated procedure.

    Austrian courts already ruled that the BVergG must be interpreted in the light of art 26 (4) of the Directive by applying the "effet utile" principle, and therefore the conditions justifying the negotiated procedure with prior publications seem fully applicable in Austria. Given this ruling it seems arguable that other procedural rules in the Austrian procurement law also need to be interpreted in line with the new and extended rules for the negotiated procedure and the competitive dialogue. The same arguably applies to the innovation partnership (Art 31), since member States are required to make these procedural rules and these procedures available to their contracting authorities.
  • European Single Procurement Document and turnover restriction

    As of 18 April, contracting authorities generally have to accept the European Single Procurement Document (as issued by the European Commission under http://eur-lex.europa.eu/legal-content/DE/TXT/?uri=CELEX%3A32016R0007 ) when it comes to providing evidence for the exclusion and selection criteria in replacement of certificates issued by the contracting authority. In this context it also has to be considered that the annual turnover may not exceed (as a rule) twice the value of the contract. Hence, tender documents that do not comply with that requirement can be challenged by aggrieved bidders.
  • Application of rules on modifications of existing contracts (Art 72)

    While the BVergG does not contain any provision in relation to contract modifications, Art 72 of the new public sector directive provides (as well as the respective provisions in the public utilities directive and in the concession directive) for certain abilities to change excising contracts (such as a transfer of the contract to a successor following insolvency or in the event of "low value" modifications). In the light of ECJ case law, and due to the duty of consistent EU-conformed interpretation, contracting authorities might be allowed to rely on Art 72, even if the BVergG does not provide for the modifications / extensions of existing contracts, yet.
  • Reliance on new in-house opportunities

    The (existing) rules on In-house exemption in Austria are also required to be applied differently. According to the existing wording of the BVergG, an in-house relationship requires the contracting authority exercising control over the legal person concerned (which is similar to that which it exercises over its own departments), to ensure that the activities of the controlled entity are carried out in essence for the controlling entity. Through EU-conformed interpretation (see Art 12 of the public sector Directive), of this provision also provides for the possibility to award a contract in an In-house situation from a daughter company to the mother company ("bottom op"), or directly between two sister companies. Due to the obligations to interpret national law in line with the Directives, Austrian contracting authorities can already rely on the horizontal in-house privilege (public cooperation) even if the respective transposition into national law has not taken place so far.

Conclusion

Due to the failure of Austria to transpose the new Directive in due time, the majority of the new Directives will arguably be applicable in Austria – either via direct effect or EU-conformed interpretation of the respective provision of the BVergG. However, in light of the necessary conditions and requirements, in order to directly or indirectly apply the Directives (see above) a case- by- case assessment and expert advice subjecting each provision of the Directive and the respective provision of the BVergG to scrutiny, is vital in order to find the best way through the labyrinth of national and European provisions.

This article was edited by and first appeared on www.internationallawoffice.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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