Commission of the European Communities v Kingdom of Spain. (Approximation of laws) [1994] EUECJ C-328/92 (3 May 1994)

Judgment 1 By application lodged at the Court Registry on 30 July 1992, the Commission of the European Communities brought an action under Article 169 of the EEC Treaty for a declaration that, by requiring in the basic legislation concerning social security that the administrative authority award public contracts for the supply of pharmaceutical products and specialities to social security institutions by way of a single-tender procedure, and by awarding directly nearly all of those supply contracts without publishing a contract notice in the Official Journal of the European Communities, the Kingdom of Spain has failed to fulfil its obligations under Council Directive 77/62/EEC of 21 December 1976 coordinating procedures for the award of public supply contracts (Official Journal 1977 L 13, p. 1). 2 In Spain the award of public contracts is governed by the Ley de Contratos del Estado (Law on State Contracts, hereinafter "the LCE") and the Reglamento General de Contratación del Estado (General Regulations concerning State Contracts, hereinafter "the RGCE"), as amended, in order to bring them into line with EEC directives, by the Real Decreto Legislativo No 931/86 of 2 May 1986 (BOE No 114 of 13 May 1986, p. 16920) and the Real Decreto No 2528/86 of 28 November 1986 (BOE No 297 of 12 December 1986, p. 40546) respectively. Pursuant to the first final clause of those two decrees, the provisions of the LCE and the RGCE also apply to public contracts awarded by social security bodies. 3 Article 2(3) and (8) of the LCE provide as follows: "Notwithstanding the provisions of the previous article, this Law shall not apply to the following contracts and legal acts of the administration: ... 3. transactions which the administration effects with private individuals with respect to goods or rights, dealings in which are regulated (' mediatizado' ) by law, or controlled products (' intervenidos' ) which are the subject of a monopoly (' estancados' ) or prohibited (' prohibidos' ); ... 8. contracts expressly excluded by a Law." 4 The purchase of pharmaceutical products and specialities by hospitals within the social security system is governed by Article 107 of the Ley General de la Seguridad Social (General Law on Social Security, hereinafter "the LGSS"), as laid down by Decree No 2065/74 of 30 May 1974 approving the consolidated version of that law (BOE No 174 of 20 July 1974, p. 1482). That provision, entitled "Purchase and distribution of pharmaceutical products and specialities" provides as follows: "... (2) The social security authority shall purchase directly from the centres of production those pharmaceutical products which are to be used in its institutions, whether open or closed, and for that purpose shall select, according to rigorous scientific criteria, the pharmaceutical products necessary for the care provided in those institutions ... (3) In all cases, the distribution of pharmaceutical products intended for use outside the institutions referred to in the previous paragraph shall be carried out through legally established pharmacies, which shall be obliged to carry out such distribution ... (4) The social security authority shall agree with the laboratories and pharmacies, acting through their legal, trade union and trade representatives, the prices and other economic terms governing the purchase of pharmaceutical products and specialities referred to in the previous two paragraphs ...". 5 On 5 June 1986, on the basis of Article 107(4) of the LGSS, the State administrative authority entered into an Agreement with Farmaindustria, the national association of pharmaceutical companies, relating to the prices and other terms governing the direct purchase of pharmaceutical specialities intended for use in open or closed social security institutions, and the indirect purchase of such products intended for use outside those institutions (hereinafter "the Agreement"). 6 The Commission, which became aware of the Agreement and its legislative basis following a reference to the Court for a preliminary ruling, considered that the scheme for awarding public supply contracts for pharmaceutical products, in the form established by the agreement and the legislation, was contrary to both Directive 77/62 and Article 30 of the Treaty. Since the proceedings for a preliminary ruling were not completed, owing to the withdrawal of the plaintiff in the main proceedings, the Commission initiated against the Kingdom of Spain the procedure provided for in Article 169 of the Treaty, giving formal notice on 6 July 1990 and then, on 18 March 1991, delivering a reasoned opinion to the Spanish Government inviting it to take the necessary measures to comply with that opinion within one month of its receipt. That period was then extended until 18 June 1991. 7 Since the Spanish Government contended in its reply of 17 June 1991 that the Agreement had come to an end on 31 December 1990, the Commission concluded that Directive 77/62 had not been complied with in Spain at least until that date, and, by agreement with the Spanish authorities, decided to monitor the situation from that date and at the same time to carry out an inquiry regarding the situation in that particular sector in the other Member States. Since the inquiries showed, according to the Commission, that during the 1991 financial year and the first few months of 1992 the competent Spanish authorities had not, unlike the authorities of several other Member States, published notices concerning public supply contracts of pharmaceutical products and specialities in the Official Journal of the European Communities (with some exceptions, as in the case of vaccines), the Commission brought this action. 8 First of all it is apparent from the form of order sought in the application, as set out in paragraph 1 of this judgment, that the Commission' s action does not relate either to Article 30 of the Treaty or to the Agreement between the administrative authority and Farmaindustria as such. As the Commission states in its application, its action concerns the statutory procedure for purchasing pharmaceutical products and specialities, as laid down by Article 2 of the LCE in conjunction with Article 107 of the LGSS and as applied by hospitals within the social security system, irrespective of the form and the legal nature of the contract used by the administrative authority for that purpose, and thus irrespective of whether the single-tender procedure for the award of contracts was used during the period for which the Agreement was in force or thereafter. 9 Furthermore, it is not disputed that while the Agreement was in force, and after 1 January 1991 as well, nearly all public contracts for the supply of pharmaceutical products and specialities to social security institutions have been awarded by the single-tender procedure, or that some of those contracts were for an estimated value (net of VAT) of ECU 200 000, which Article 5(1)(a) of Directive 77/62 lays down as a condition for its application. 10 Since Article 107 of the LGSS governs the purchase of pharmaceutical products and specialities by hospitals within the social security system, the relevant provisions of the LCE, and consequently those of Directive 77/62 which the LCE transposes into national law, are, under Article 2(3) of the LCE, inapplicable to supply contracts concluded for that purpose by the competent social security bodies. 11 The Spanish Government does not accept that Directive 77/62 is wholly and unconditionally applicable to supplies of pharmaceutical products and specialities to social security institutions. It contends that the medicinal products market is highly regulated by Community law itself and that the Spanish legislation ultimately complies with the restrictions resulting therefrom. It refers in particular to Council Directive 89/105/EEC of 21 December 1988 relating to the transparency of measures regulating the pricing of medicinal products for human use and their inclusion in the scope of national health insurance systems (Official Journal 1989 L 40, p. 8), the object of which, according to the fifth recital in the preamble thereto, is "to obtain an overall view of national pricing arrangements" and which, according to the Spanish Government, does not affect the relevant national laws. 12 It is sufficient to point out that, in paragraph 10 of its judgment in Case C-71/92 Commission v Spain [1993] ECR I-5923 , the Court observed that the only permissible exceptions to the application of Directive 77/62 are those which are expressly and exhaustively mentioned in it. 13 However, Article 2(2) and Article 3 of Directive 77/62, which list the public supply contracts to which that directive does not apply, do not refer to contracts relating to pharmaceutical products and specialities. Moreover, as the Court held in that same judgment (paragraph 11), none of the exceptions authorized by the directive is defined by reference to the type of product in question or the legal rules applicable to it. 14 The Spanish Government also contends that recourse to the single-tender procedure for the award of public contracts for the supply of pharmaceutical products and specialities is justified by Article 6(1)(b) and (d) of Directive 77/62, which provide that the contracting authorities may award their supply contracts without applying the open or restricted procedures referred to in Article 4(1) and (2) and thus without publishing a notice of the contract in the Official Journal of the European Communities, "when ... for reasons connected with protection of exclusive rights, the goods supplied may be manufactured or delivered only by a particular supplier", and "in so far as is strictly necessary when, for reasons of extreme urgency brought about by events unforeseeable by the contracting authorities, the time limit laid down in the procedures covered by Article 4(1) and (2) cannot be kept". 15 In that regard, Article 6 of Directive 77/62, which authorizes derogations from rules intended to ensure the effectiveness of rights conferred by the Treaty in the public supply contracts sector, must be interpreted strictly (see the judgment in Commission v Spain, cited above, paragraph 36). 16 Furthermore, the burden of proving the actual existence of exceptional circumstances justifying a derogation lies on the person seeking to rely on those circumstances (see, with regard to public works contracts, the judgment in Case 199/85 Commission v Italy [1987] ECR 1039, paragraph 14). 17 If Article 6(1)(b) is to apply, it is not sufficient for the pharmaceutical products and specialities in question to be protected by exclusive rights; they must also be capable of being manufactured or delivered only by a particular supplier. Since that requirement is satisfied only with respect to those products and specialities for which there is no competition in the market, Article 6(1)(b) cannot in any way justify general and indiscriminate recourse to the single-tender procedure for all supplies of all pharmaceutical products and specialities. 18 The position is the same with regard to Article 6(1)(d). Admittedly, having regard to the freedom of doctors to prescribe pharmaceutical products, to which the Spanish Government refers, an urgent need for a particular pharmaceutical speciality may well arise in a hospital pharmacy; however, that freedom to prescribe pharmaceutical products cannot justify a priori systematic recourse to the single-tender procedure for all supplies of pharmaceutical products and specialities to hospitals. Moreover, even if the requirement of urgency were considered to have been satisfied in a particular case, Article 6(1)(d) would not necessarily apply. The Court has consistently held that, in order to rely on the derogation provided by that provision, all the conditions it lays down must be satisfied cumulatively (see, with respect to the corresponding provision applicable to public works contracts, the judgment in Case C-24/91 Commission v Spain [1992] ECR I-1989 , paragraph 13). 19 It follows from all the foregoing considerations that the Commission' s action is well founded and that a declaration that the Kingdom of Spain has failed to fulfil its obligations must be made in the terms sought in the application. Costs 20 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the Kingdom of Spain has been unsuccessful in its submissions, it must be ordered to pay the costs. On those grounds, THE COURT hereby: 1. Declares that, by requiring in the basic legislation concerning social security that the administrative authority award public contracts for the supply of pharmaceutical products and specialities to social security institutions by way of a single-tender procedure, and by awarding directly nearly all of those supply contracts without publishing a contract notice in the Official Journal of the European Communities, the Kingdom of Spain has failed to fulfil its obligations under Council Directive 77/62/EEC of 21 December 1986 coordinating procedures for the award of public supply contracts; 2. Orders the Kingdom of Spain to pay the costs. © European Communities, 2001 All rights reserved BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII