Commission of the European Communities v Italian Republic. (Freedom to provide services) [1992] EUECJ C-360/89 (3 June 1992)

Judgment 1 By application lodged at the Court Registry on 28 November 1989, the Commission of the European Communities brought an action under Article 169 of the EEC Treaty for a declaration that, by enacting Law No 80/87 (special provisions for accelerating the completion of public works), which contains provisions incompatible with Community rules on public works contracts, the Italian Republic has failed to fulfil its obligations under Article 59 of the EEC Treaty and Council Directive 71/305/EEC of 26 July 1971 concerning the coordination of procedures for the award of public works contracts (OJ, English Special Edition 1971 (II), p. 682). 2 Under Article 2(1) of Law No 80/87, written invitations to tender from the authority awarding contracts must stipulate that the successful tenderer is to entrust a minimum proportion of between 15 and 30% of the works to undertakings which have their registered offices in the region in which the works are to be carried out. 3 Article 3(3) of the same Law provides that where more than 15 undertakings are interested the authority or agency awarding contracts must invite at least 15 undertakings to tender and that, in the selection of the undertakings to be invited to tender, preference is to be given to temporary associations and consortia made up of undertakings which carry on their main activity in the region in which the works are to be carried out. 4 Reference is made to the Report for the Hearing for a fuller account of the facts, the procedure and the submissions and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court. 5 In the course of the procedure, the Commission withdrew its complaints other than those concerning Articles 2(1) and 3(3) of Law No 80/87. The alleged infringement of Article 59 of the Treaty 6 According to the Commission, Article 2(1) of Law No 80/87 infringes Article 59 of the Treaty in that it favours undertakings which have their registered offices in the region in question, to the detriment of undertakings established in other Member States. 7 It must be observed that Article 59 of the Treaty requires the abolition of all discrimination against providers of services established in a Member State other than that in which the service is to be provided. 8 The fact that Article 2(1) of Law No 80/87 reserves part of the works to sub-contractors having their registered offices in the region where the works are to be carried out constitutes discrimination against undertakings established in other Member States. 9 Whilst it is true, as the Italian Government contends, that that provision also excludes undertakings established in Italy which have their registered offices outside the region in question from that part of the works, the fact remains that all the sub-contractors which it favours are Italian undertakings. 10 As regards Article 3(3) of Law No 80/87, the Commission considers that the preference which it affords to temporary associations and consortia that include local undertakings constitutes a restriction on the freedom to provide services which is prohibited by Article 59 of the Treaty. 11 The Court has consistently held that Article 59 prohibits not only overt discrimination by reason of nationality but also all covert forms of discrimination which, by the application of other criteria of differentiation, lead in fact to the same result (see, in particular, Case C-3/88 Commission v Italy [1989] ECR 4035, paragraph 8). 12 Although Article 3(3) of Law No 80/87 applies, as the Italian Government contends, to all Italian and foreign companies without distinction, it essentially favours those established in Italy. As the Commission has rightly observed, such undertakings are much more likely to carry on their main activity in the region of Italy where the works are to be carried out than undertakings established in the other Member States. 13 The Italian Government also observes that the abovementioned provisions of Law No 80/87 are intended to offset the disadvantages encountered by small and medium-sized undertakings as a result of the system of overall awards of contract provided for in that Law, by virtue of which various works are awarded under a single contract. The grouping in a single contract of services which, if separated, would be of interest only to regional undertakings, has the effect of excluding the latter from a number of contracts of lesser importance. 14 It need merely be observed, in that connection, that such considerations are matters neither of public policy, public security or public health referred to in Articles 66 and 56 of the Treaty, taken together, nor reasons of overriding public interest which might justify the obstacles in question (Case C-353/89 Commission v Netherlands [1991] ECR I-4069 , paragraphs 17 and 18, and Case C-288/89 Collectieve Antennevoorziening Gouda v Commissariaat voor de Media [1991] ECR I-4007 ). 15 It follows from the foregoing considerations that the complaint of infringement of Article 59 of the Treaty must be upheld. The alleged infringement of Directive 71/305 16 The Commission considers that Article 3(3) of Law No 80/87 infringes the first paragraph of Article 22 of Directive 71/305 by adopting a selection criterion different from those provided for in Articles 23 to 26 of that directive. 17 It must be observed that, according to the first paragraph of Article 22 of Directive 71/305, in restricted procedures within the meaning of Article 5(2) ° the kind at issue in this case ° the authorities awarding contracts must select the candidates they are to invite to tender on the basis of the information given in accordance with Article 17(d) of the directive. 18 Article 17(d) refers to information relating to the personal position of the contractor and the minimum economic and technical standards which the authorities awarding contracts require of contractors for their selection; those requirements may not be other than those specified in Articles 25 and 26. 19 According to Article 3(3) of Law No 80/87 in selecting undertakings to be invited to tender, preference is to be accorded to temporary associations or consortia which include undertakings carrying on their main activity in the region where the works are to be carried out. 20 Such preference constitutes a criterion of selection which is not mentioned in Articles 23 to 26 and, in particular, does not relate to any of the economic and technical standards provided for in Articles 25 and 26. 21 Consequently, Article 3(3) of Law No 80/87 infringes the first paragraph of Article 22 of Directive 71/305 in so far as the selection criterion laid down therein relates to matters of fact which cannot form part of the information on the basis of which the authorities awarding contracts are to select, on the basis of the latter provision, the candidates that they will invite to tender. 22 It follows that the complaint of infringement of Directive 71/305 must also be upheld. 23 It must therefore be held that, by enacting Law No 80/87 of 17 February 1987 (Special provisions for accelerating the completion of public works, published in Gazzetta Ufficiale della Repubblica Italiana No 61 of 14 March 1987), the Italian Republic has failed to fulfil its obligations under Article 59 of the EEC Treaty and Council Directive 71/305/EEC of 26 July 1971 concerning the coordination of procedures for the award of public works contracts. Costs 24 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the Italian Republic has failed in its submissions, it must be ordered to pay the costs. On those grounds, THE COURT hereby: 1. Declares that, by enacting Law No 80/87 of 17 February 1987, the Italian Republic has failed to fulfil its obligations under Article 59 of the EEC Treaty and Council Directive 71/305/EEC of 26 July 1971 concerning the coordination of procedures for the award of public works contracts; 2. Orders the Italian Republic to pay the costs. © European Communities, 2001 All rights reserved BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII