A recent European ruling has further clarified when development
agreements may be subject to an OJEU process. An earlier case
(Roanne) said that development agreements with a total value over
the EU tendering threshold should be tendered via OJEU where the
contracting authority has significant control over the development.
In Helmut Muller GmbH v Bundesanstalt fur Immobilienaufgaben
("Helmut Muller") the ECJ ruled that a land sale where
there was no binding agreement to carry out works would not be a
public works contract under the EU procurement rules.
Bundesanstalt, a German federal agency, had announced that it
intended to sell land in Wildeshausen, Germany. Helmut Muller
(property developers) offered to buy the land, subject to the
condition that urban planning permission was granted. Bundesanstalt
rejected the offer and later requested offers for the land without
urban planning permission. Helmut Muller made a fresh offer. After
consulting with the Wildeshausen local authority, Bundesanshalt
accepted a higher offer from another company, GSSI, declaring its
preference for GSSI's proposals on urban development grounds.
The agreement for sale contained no reference to the future use of
the land.
Helmut Muller challenged the sale, arguing that it was a public works contract covered by the EU procurement rules, because of the intention to carry out works on the land. Helmut Muller appealed the initial ruling, claiming that GSSI was about to obtain a public works contract from the Wildeshausen local authority, possibly in the form of a works concession. The court referred a number of questions to the ECJ, and the ECJ made a number of rulings:
- the ECJ distinguished between a pure land transaction which would not be subject to the EU procurement rules and purchasing land on which works are to be carried out (where, potentially, there will be a 'public works contract' subject to the rules);
- if works are to be classified as a 'public works contract' to which the EU procurement rules will apply, there must be a binding obligation on the contractor to carry out those works;
- the use of urban planning powers in relation to land that has been sold by a planning authority does not of itself bring such arrangements within the EU procurement rules;
- crucially, the ECJ did not rule out the possibility that a sale of land and a consequent contract for works can be considered as a single procurement, but felt that the potential works in this case were too remote for the two to be considered together. The main factors in this case were that the sale of the land was separated from the exercise of the planning powers of Bundesanstalt, and the purchaser was under no contractual obligation to develop the land;
- in the circumstances described, there was no public works concession contract. The ECJ felt that there cannot be a public works concession where the contractor already owns the land (and so as a result already has the right to exploit it).
While this case does not confirm that land transactions will never be subject to the EU procurement rules, it does help to clarify when a sale of land might become a development that would have to be procured following an EU compliant process.
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.
