UK: Development Agreements - Are We Any Clearer On When They Are Subject To The EU Procurement Rules?

Last Updated: 18 August 2011
Article by Peter Ware

In 2007, a state of uncertainty was created over the precise circumstances in which development agreements are to be classified as 'public works contracts' for the purposes of EU public procurement law, and consequently subject to a competitive tendering requirement.

The general picture

The uncertainty arose after the case of Auroux v Comune de Roanne, heard in the Court of Justice of the European Union in early 2007. A name now on the lips of many a developer and local authority, Auroux disturbed a previously popular belief that contracts involving the development of land (for example in the context of urban regeneration) fell outside the scope of the EU procurement rules. A number of public development projects were placed on hold because of the ruling, so the effect was significant.

However, in the case of Helmut Muller in 2010, the court signalled something of a relaxation of the approach taken in Auroux, and clarified the position in a way which many welcomed. The case made it clear that the EU rules are likely to require the development agreement to be advertised where an authority:

  • specifies the development work to a significant degree
  • imposes enforceable obligations on developer to do the work
  • provides pecuniary interest for the developer in doing the work

However, in the Muller case, the court also made it clear that:

  • the mere sale by the authority of land (whether developed or not), and
  • the mere exercise by the authority of its urban planning powers, in the absence of the above ingredients, will not trigger the EU rules.

Pecuniary interest

Very importantly, the court in Muller considered the concept and meaning of 'pecuniary interest', identified in the third limb of the test above. What this amounts to is the authority receiving some kind of service (or development) in return for a consideration passing from the authority to the developer/contractor. This, in turn, means that by definition the authority has to receive a 'direct economic benefit' from the project, and that this can only arise where the authority:

  • will own the development
  • will have some kind of legal right in how the development will be used
  • will gain, economically, from the use of the development or will (conversely) bear the loss deriving from failure of the development, should it prove a failure.

Commission v Spain – the latest case

Commission v Spain was heard by the Court of Justice on 26 May 2011. In it, the European Commission took issue with the procedure adopted by the Spanish Government in relation to the award of what are called 'Integrated Action Programmes' (or IAPs) in the Valencia region of the country.

IAPs are programmes of work which cover the development of single or multiple parcels of urban land and which cover infrastructure and public realm works. They can be carried out in one of two ways - either by direct management by the local authority when the land in question is identified, or by the appointment by the local authority of a developer to manage the development following public consultation and a competitive process. The developer is paid either in cash or in kind (in the form of developed land from the relevant landowner). At the end of the programme the land may vest in the local authority, which is then responsible for the future management of the development.

The European Commission initially challenged Spain on the basis that a number of aspects of the procedures for the award of IAP programmes did not comply with procurement law. The court's decision on 26 May was preceded by an opinion from the Advocate General.

The decision and the Advocate General's opinion

Somewhat unusually, the Advocate General's opinion in this particular case is more informative in explaining the link between development agreements and procurement law than the decision of the court.

The court reached the same decision as the Advocate General – the Commission's complaint should not be upheld. However, the court came to that conclusion for evidential reasons (i.e. the Commission had failed to prove that the IAPs were contracts regulated by procurement law), rather than considering whether the IAPs amounted to public works contracts to which procurement law should apply.

We look to the Advocate General on the latter point, who made the following comments:

First (and tellingly) the Advocate General suggested that the commission should "not overstretch the meaning of certain criteria within the public procurement directives for the sake of fitting the present arrangement within the scope of the public procurement rules". But the thrust of the opinion was whether, under the arrangements, the local authority conferred a pecuniary interest on the developer.

The Advocate General was clear that pecuniary interest is not confined to cash – it could take some other form, for example land. However, it had to come from the authority itself; the concept pre-supposes a reciprocal arrangement whereby the authority pays a price to a developer, who is required to carry out the works.

In other words, there will be no pecuniary interest (of the type that has to exist if a development agreement is to be subject to the EU rules) unless the authority is put to some economic detriment; this, in turn, ordinarily can only happen in the context of a mutually binding agreement between authority and developer/contractor.

In the case of IAPs, it is the developer who is responsible for funding the development costs, with reimbursement by the landowner (even though the authority lays down the requirement for that to happen). As such, the development is not paid for by the authority even though the works in question are public ones and ordinarily this may be permissible.


The Advocate General took the view that the fulfilment of public works such as these via a private initiative - which might not otherwise have come about – should not be frustrated. Unfortunately, the court's judgment of 26 May did not specifically address all of the issues raised by the Advocate General, and so there are still issues around development agreements which will remain unresolved until cleared up judicially.

The Muller case by no means answers all of the questions around the application or otherwise of 'direct economic benefit', and when such benefit can be said to accrue, or not to accrue. It is fair to say that there is still considerable scope for uncertainty as to what that expression could capture, and whether the ingredients of an agreement for a pecuniary interest are in turn met in a given case.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.