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Control Over In-House Providing Organisations

EC public procurement legislation regulates a decision by a public authority to address the market in order to procure works, supply or services establishing contractual relations with economic operators. By contrast, this regulatory regime does not apply to an alternative decision of the public authority to self-produce. To this extent, the exception of in-house providing, first set out by the European Court of Justice (ECJ) in the Teckal case, expresses the external boundaries of the EC internal market and at the same time provides a definition of what might be public organisation, inherently not subject to EC competition rules. The in-house providing exception is based on two requirements: the public authority must exercise control over the in-house provider which is similar to that which it exercises over its own departments and, at the same time the in-house provider must carry out the essential part of its activities with the controlling public authority or authorities. These requirements have been the subject of a broad analysis in a number of papers published in the Public Procurement Law Review by Kurt Weltzien in 2005, by Fotini Avarkioti in 2007 and by Toni Kaarresalo in 2008. This article focuses solely on the interpretation of the similar control requirement in the ECJ case law and the opinions of the Advocates General, drawing out the factual aspects of these decisions which the aforementioned analyses fail to examine. The central argument of this article is that the factual background of the ECJ decisions provides the basis of an interpretation of the similar control requirement different from those proposed in the above-mentioned analyses, and one that affords a more consistent account of this line of cases. This article begins with a brief analysis of a recent decision of the ECJ, which sheds light on the elements needed to recognise an in-house relation in the case of a plurality of controlling public authorities, each of them holding a minimal share of the in-house provider’s capital. In section 3 the authors will provide a general legal framework for the in-house providing exception, hypothesising that the ECJ definition of in-house providing set out the distinction between EC internal market and its competition rules on one hand and public organisation as a matter of Member States’ sovereignty and public authorities’ autonomy on the other hand. In section 4 the authors suggest that a strict interpretation of the similar control requirement leads to the denial of the entrepreneurial autonomy of the in-house provider which, because of its organisational relationship with the parent public authority, may not enjoy the economic freedoms typical of any other economic operators in the market. Sections 5 and 6 highlight the differences between the situation of an in-house provider wholly owned or controlled by a single public authority or a plurality of public authorities and the situation where a third party not involved in the relevant organisational in-house relationship may influence the decisions of the in-house provider. A different interpretation of ECJ case law from those proposed in the above-mentioned analyses is suggested, which underlines the fact that the mere holding of shares in the in-house provider capital does not necessarily prevent an in-house providing relation, particularly if those shares were awarded by means of a call for tender. Finally, sections 7 and 8 point out that the different forms of association and co-operation among contracting authorities provided for by national legislative regimes cannot suffice in themselves to establish an in-house relationship. The "similar control" requirement can be met only if appropriate legal tools are set out when the in-house providing relationship is established in order to submit the in-house provider decision-making to the parent authority’s will.