In NF` (C‑28/23), the Court of Justice ruled that a subsidy agreement awarding a multi-million subsidy for the construction of a stadium, followed years later by the State's promise to purchase the stadium, was a public procurement contract for works.
Public procurement rules require competitive tendering. Following national legislation, a contract concluded in breach of public procurement rules is null and void from the outset (ex tunc). In this case, the Slovak State had chosen its contractor without a competitive procedure and raised the nullity of the contract in the context of a dispute.
With this decision of 17 October 2024, the Court of Justice reminds economic actors that vigilance is required whenever an authority ultimately obtains an infrastructure or real estate asset. This is so although the parties used several separate contracts with different subject matters.
The Slovak government wished to build a national stadium and granted a subsidy to the company NF` without any competition. The parties first concluded a subsidy agreement by which a Slovak authority granted NF` a subsidy of 27.200.000 EUR for the construction of a stadium. The stadium had to meet certain Union of European Football Associations (UEFA) standards on stadium infrastructure. The company committed to financing 60% of the construction costs.
Three years later, the parties concluded a promise to purchase. This second contract provided NF` with the option to sell the stadium to the State and detailed technical specifications for building the stadium.
The European Commission subsequently declared the subsidy to be State aid compatible with the internal market.
In a dispute between the parties, the Slovak State argued that the contract was null and void. The question arose as to whether the subsidy agreement and the promise to purchase formed, together, a public works contract in the meaning of the Public Procurement Directives.
The Court's assessment
The Court recalls that a public contract is a written contract for pecuniary interest, concluded between economic operators and a contracting authority. To be a public contract for works, the contract must concern the performance of works which respond to the contracting authority's specified needs.
For the Court, the subsidy agreement and the promise to purchase have a material and temporal connection and must therefore be considered together. The main question pondered by the Court is whether that contract had been concluded for pecuniary interest.
A contract concluded 'for pecuniary interest" is a contract by which each party undertakes to provide a benefit in return for another. A public contract is synallagmatic – it creates obligations for each party, the performance of which is legally enforceable.
The Court first notes that the mere absence of an obligation to sell is not sufficient to devoid a contract of its synallagmatic nature. Based on its previous case law (in particular, on Case C 537/19, Commission v. Austria and Case C 451/0, Helmut Müller), the Court indicated that, in the context of public works contracts, a contracting authority receives a benefit consisting in the performance of the works it wants to obtain. The works must present an economic interest for the contracting authority.
The Court found that in the present case:
- The parties had reciprocal obligations, such as the State's obligation to grant the subsidy and the contractor's obligation to build the stadium.
- The sale of the stadium to a third party was subject to the State's approval, which created a right of pre-emption with an intrinsic economic value.
- The contractor's option to sell the stadium to the State was equivalent to a guarantee against the commercial risk in case the stadium was economically nonviable.
Considering the above, the Court found that the contract had been concluded for pecuniary interest.
The Court subsequently determined that works were the subject matter of the contract because NF` had to perform works in accordance with the requirements specified by the contracting authority.
The requirement that the stadium meets UEFA criteria could translate the State's decisive influence on the architectural structure of the stadium if these requirements concerned, for example, the size of the field or the stadium's capacity. The subsidy agreement and the promise to purchase were therefore a public works contract.
Finally, the Court added two important observations.
Firstly, the fact that the EU Commission had declared that the subsidy constituted State aid compatible with the internal market had no bearing on the contract's qualification as a public contract. Since the dispute was unrelated to State aid, the Commission's assessment in this context was not binding on the national courts.
Secondly, the subsidy agreement and the European Commission's decision on State aid obliged NF` to apply public procurement rules when building the stadium. The Court took the opportunity to clarify that a contracting authority may not pass on its public procurement obligations to a contractor.
Conclusion
A set of contracts, even concluded years apart from each other, can constitute a public works contract requiring an award through a competitive tendering procedure.
The judgment implies that the economic viability of the stadium mattered to the Contractor, who had to finance 60% of the stadium. It is therefore noteworthy that the Court did not examine whether the contract was a works concession falling under the Concessions Directive (Directive 2014/23/EU) rather than a public works contract. Indeed, works concessions are characterised by the concessionaire's right to exploit the works and their assumption of the operating risk. In any event, the Court of Justice's decision shows an evolution towards more and more real estate transactions involving public authorities falling within the scope of the Public Procurement Directives or the Concession Directive.
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