European Commission challenges France on procurement

By Ruth McNaught, Solicitor, Harper Macleod LLP

Readers will be aware that the procurement risk profile for contracting authorities continues to intensify as a result of current economic conditions, which have made the market more competitive and resulted in closer scrutiny of procurement practices and procedures, coupled with the enhanced remedies available to suppliers wishing to challenge the outcome of a procurement exercise.

This increased risk profile means that it is vital that contracting authorities have regard to the procurement regulations and fundamental EU principles when awarding contracts. Interestingly, national law makers must have equal regard to these regulations and principles and must avoid limiting competition by statutorily reserving the award of contracts to a particular economic operator.

On 14 March 2011, the European Commission called on France to amend its legislation so as to repeal a provision reserving certain contracts for the supply of geographical information for the Institut Géographique National (IGN). Under French law, State services or bodies must purchase their large-scale reference geographical information services from the IGN, with no possibility of awarding a contract for such services to another supplier. The European Commission took the view that this requirement is at odds with the public procurement rules and that France should therefore ensure that contracts for these services are competitively tendered, as the services in question could be provided, in most cases, by other economic operators. The European Commission has sent France a “reasoned opinion”, advising that if France does not comply with its obligations under EU public procurement law within two months, the Commission may refer the matter to the European Court of Justice (ECJ).

EU law gives the Commission the power to take legal action against a Member State that is not respecting its obligations under EU law.

In terms of the Commission’s infringement procedures, if a Member State fails to ensure compliance with EU law, the Commission may then decide to refer that Member State to the ECJ. However, in over 90% of infringement cases, Member States comply with their obligations under EU law before they are referred to the ECJ. If the ECJ rules against a Member State, that Member State must then take the necessary measures to comply with the judgment.

If, despite the ruling, a Member State still fails to act, the Commission may open a further infringement case, with only one written warning before referring the Member State back to the ECJ. If the Commission does refer a Member State back to the ECJ, it may propose that the ECJ imposes financial penalties on the Member State concerned based on the duration and severity of the infringement and the size of the Member State. Such financial penalties may include both a lump sum depending on the time elapsed since the original ECJ ruling and a daily penalty payment for each day after a second ECJ ruling until the infringement is remedied.

Observers will watch this case with interest and we will keep readers updated on any developments.