European Parliament v Council of the European Union. (Actions for annulment) [1996] EUECJ C-360/93 (7 March 1996)

Judgment 1 By application lodged at the Court Registry on 20 July 1993, the European Parliament brought an action under the first paragraph of Article 173 of the EEC Treaty for the annulment of Council Decision 93/323/EEC of 10 May 1993 concerning the conclusion of an Agreement in the form of a Memorandum of Understanding between the European Economic Community and the United States of America on government procurement (OJ 1993 L 125, p. 1, "Decision 93/323") and Council Decision 93/324/EEC of 10 May 1993 concerning the extension of the benefit of the provisions of Directive 90/531/EEC in respect of the United States of America (OJ 1993 L 125, p. 54, "Decision 93/324"). 2 Council Directive 90/531/EEC of 17 September 1990 on the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors (OJ 1990 L 297, p. 1, "Directive 90/531") was adopted on the basis of the last sentence of Article 57(2) and Articles 66, 100a and 113 of the EEC Treaty. 3 Article 29 of that directive reads as follows: "1. This Article shall apply to tenders comprising products originating in third countries with which the Community has not concluded, multilaterally or bilaterally, an agreement ensuring comparable and effective access for Community undertakings to the markets of those third countries. It shall be without prejudice to the obligations of the Community or its Member States in respect of third countries. 2. Any tender made for the award of a supply contract may be rejected where the proportion of the products originating in third countries, as determined in accordance with Council Regulation (EEC) No 802/68 of 27 June 1968 on the common definition of the concept of the origin of goods, as last amended by Regulation (EEC) No 3860/87, exceeds 50% of the total value of the products constituting the tender. For the purposes of this Article, software used in the equipment of telecommunication networks shall be considered as products. 3. Subject to paragraph 4, where two or more tenders are equivalent in the light of the award criteria defined in Article 27, preference shall be given to the tenders which may not be rejected pursuant to paragraph 2. The prices of tenders shall be considered equivalent for the purposes of this Article, if the price difference does not exceed 3%. 4. However, a tender shall not be preferred to another pursuant to paragraph 3 where its acceptance would oblige the contracting entity to acquire material having technical characteristics different from those of existing material, resulting in incompatibility or technical difficulties in operation and maintenance or disproportionate costs. 5. For the purposes, in this Article, of determining the proportion referred to in paragraph 2 of products originating in third countries, those third countries to which the benefit of the provisions of this Directive has been extended by a Council Decision in accordance with paragraph 1 shall not be taken into account. 6. The Commission shall submit an annual report to the Council (for the first time in the second half of 1991) on progress made in multilateral or bilateral negotiations regarding access for Community undertakings to the markets of third countries in the fields covered by this Directive, on any result which such negotiations may have achieved, and on the implementation in practice of all the agreements which have been concluded. The Council, acting by a qualified majority on a proposal from the Commission, may amend the provisions of this Article in the light of such developments." 4 On 10 May 1993 the Council adopted Decisions 93/323 and 93/324 on the basis of Article 113 of the Treaty. 5 By Decision 93/323 the Council approved on behalf of the Community the Agreement in the form of a Memorandum of Understanding between the European Economic Community and the United States of America on government procurement ("the Agreement"). 6 According to Article 1 of the Agreement, it applies to contracts for goods, works and other services awarded, as far as the Community is concerned, by the entities included in Annex 1 and to contracts for goods and works awarded, also as far as the Community is concerned, by the entities included in Annex 3 to the Agreement. 7 Article 2(1) of the Agreement provides that, in the award of public contracts whose value exceeds certain thresholds by entities included in Annex 1, the Community is to afford to suppliers, contractors and service-providers of the United States and to goods and services originating in the United States the award procedures of Council Directive 77/62/EEC of 21 December 1976 coordinating procedures for the award of public supply contracts (OJ 1977 L 13, p. 1), Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts (OJ 1992 L 209, p. 1) 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). 8 As far as supplies and works relating to the sector of the production, transportation and distribution of electricity are concerned, the first clause of Article 3(1) puts the Community under a duty to extend the benefits of Directive 90/531 to US products, suppliers and contractors in the award of contracts by entities included in Annex 3 and the second clause of that provision puts it under a duty to make available to them the benefits of Council Directive 92/13/EEC of 25 February 1992 coordinating the laws, regulations and administrative provisions relating to the application of Community rules on the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors (OJ 1992 L 76, p. 14). 9 Pursuant to those commitments, Article 1 of Decision 93/324 extends the benefit of the provisions of Directive 90/531 to tenders comprising products originating in the United States made for the award of a supply contract by contracting entities listed in Annex 3 to the Agreement. 10 The European Parliament bases its action on infringement of the Treaty and its essential procedural requirements in so far as Decisions 93/323 and 93/324 are based solely on Article 113 of the Treaty notwithstanding the existence of articles specific to the fields envisaged. As regards more particularly Decision 93/324, the Parliament maintains that it has the effect of amending Directive 90/531, which was adopted in cooperation with the Parliament on the basis of Articles 57, 66 and 100a, in addition to Article 113, which at present is the sole legal basis used for Decision 93/324. 11 The Council considers that Article 113 of the Treaty is the proper legal basis for the adoption of Decisions 93/323 and 93/324, since the commitments set out in Article 2(1) and the last clause of Article 3(1) of the Agreement are ancillary to the commitment contained in the first clause of Article 3(1), which is intended only to regulate the Community' s external trade within the meaning of Article 113. 12 As to whether Decisions 93/323 and 93/324 constitute an amendment of Directive 90/531, as the Parliament claims, or an extension of the benefit of that directive to a third country, as referred to in Article 29(5) of the directive, the directive has, in the Council' s contention, no bearing on the validity of those decisions. 13 Since their main aim is merely to set aside the Community preference referred to in Article 29(3) as regards certain tenders comprising goods from the United States, the procedure for adopting those decisions should be the same, whether they are construed as amending Article 29 of the directive or as an extension of the benefit of the directive. 14 The Council argues that, in the first case, the legal basis would be Article 29(6) of the directive and, in the second case, Article 113 of the Treaty. In either case it would be bound to act by a qualified majority on a proposal from the Commission, there being no provision for any involvement of the Parliament. 15 In those circumstances, any unlawfulness attaching to the choice which it made between those two legal bases would be a purely formal defect which could not make the decisions void. The Council refers in this connection to Case 165/87 Commission v Council [1988] ECR 5545, paragraph 19. 16 The Commission, intervening in support of the Council' s submissions, points out that it had proposed that Article 113 should be the legal basis for Decision 93/323 on the ground that, for the reasons set out in its statement in intervention, the commercial policy provided for in that provision covers trade in both goods and services. Admissibility 17 The Court points out in limine that, as it has consistently held (see, in particular, Case C-187/93 Parliament v Council [1994] ECR I-2857 , paragraph 14), an action for annulment brought by the Parliament against an act of the Council or the Commission is admissible provided that the action seeks only to safeguard its prerogatives and that it is founded only on submissions alleging their infringement. 18 In this case, the Parliament argues that Decisions 93/323 and 93/324 should have been adopted on the basis, not only of Article 113, but also of Article 57(2) and Articles 66 and 100a of the Treaty, which, before the Treaty on European Union entered into force, provided, unlike Article 113, for the procedure involving cooperation with it. In maintains that, by adopting those decisions on the basis of Article 113 alone, the Council infringed that prerogative. 19 It must therefore be held that the Parliament' s application is admissible. 20 The Parliament claims, pursuant to the third paragraph of Article 37 of the Statute of the Court, that the Commission' s application to intervene, for which it was given leave by order of the President of the Court of 8 November 1993, should be declared inadmissible in so far as it advocates an interpretation of Article 113 of the Treaty which is radically opposed to the Council' s. 21 That objection of inadmissibility must be rejected. 22 Even if it is true that the scope of the arguments put forward by the Commission in favour of the choice of Article 113 of the Treaty as the legal basis for Decision 93/323 differs considerably from the scope of those advanced by the Council in that regard, the form of order sought in the application to intervene nevertheless complies with the terms of the third paragraph of Article 37 of the Statue in that it is limited to supporting the Council' s submissions. Substance 23 The Court has consistently held that, in the context of the organization of the powers of the Community, the choice of the legal basis for a measure must be based on objective factors which are amenable to judicial review. Those factors include in particular the aim and content of the measures (see, in particular, Case C-187/93 Parliament v Council, cited above, paragraph 17). 24 As for the aim pursued, it appears in the first place from the preamble to the Agreement approved by Decision 93/323 that it seeks, in accordance with the commitments already entered into by the parties in the context of the GATT Multilateral Agreement on Government Procurement and in order to facilitate the achievement of a new multilateral agreement on this matter, the acceptance, bilaterally and on the basis of reciprocity, of certain obligations to open their procurement markets. 25 To that end, the Agreement provides that public contracts in the two Contracting Parties are no longer to be open only to the acquisition of products and any services ancillary to their supply, as was provided for by the GATT Multilateral Agreement on Government Procurement, approved by Council Decision 80/271/EEC of 10 December 1979 concerning the conclusion of the Multilateral Agreements resulting from the 1973 to 1979 trade negotiations (OJ 1980 L 71, p. 1), on the basis of Article 113 of the Treaty. 26 On the contrary, according to Article 1(1) of the Agreement, it applies to contracts for goods, works and other services awarded by entities included in Annexes 1 and 2 and to contracts for goods and works awarded by entities listed in Annexes 3 and 4 to the Agreement. According to the second subparagraph of Article 1(2) of the Agreement, the expression "other services" refers to contracts for which the principal object is the obtaining of one or more of the services included in Annexes 5 and 6, which include, among other things, maintenance and repair, transport, computer, advertising and accounting services. 27 It follows that the Agreement is also concerned, on an independent basis, with the provision of services. 28 As for Decision 93/324, according to the second and third recitals in its preamble, it aims to extend the benefit of the provisions of Directive 90/531 to the government procurement contracts covered by the Agreement. 29 Next, as the Court has held, in the present state of Community law, only services which are supplied across frontiers fall within the scope of Article 113 of the Treaty (Opinion 1/94 [1994] ECR I-5267, paragraph 53). 30 Since the types of service provision covered both by Decision 93/323, by which the Agreement was approved, and by Decision 93/324, by which the benefit of the provisions of Directive 90/531 was extended to the public procurement contracts covered by the Agreement, cannot be reduced to the sole hypothesis of a trans-frontier supply involving no movement of persons, but relate also to supplies made thanks to a commercial presence or the presence of natural persons on the territory of the other Contracting Party, it must be held that Decisions 93/323 and 93/324 should not have been based on Article 113 of the Treaty alone. 31 It follows that Decisions 93/323 and 93/324 must be annulled. Limitation of the effects of the annulment 32 The Council has asked the Court to limit the effects of a possible annulment of the decisions and the Parliament has not opposed this request. 33 In this connection, the Court observes that if Decisions 93/323 and 93/324 were simply annulled, this would be liable adversely to affect the exercise of the rights arising under them. 34 Account must also be taken of the fact that the Agreement expired on 30 May 1995. 35 In those circumstances, there are important reasons of legal certainty, comparable to those which arise where certain regulations are annulled, which warrant the Court' s exercising the power conferred upon it by Article 174(2) of the EEC Treaty where a regulation is annulled and indicating the effects of the decisions which must be conserved. 36 In the specific circumstances of this case, all the effects of the annulled decisions should be conserved. Costs 37 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the Council has been unsuccessful, it must be ordered to pay the costs. In accordance with the first subparagraph of Article 69(4) of those Rules, the Commission and the United Kingdom, which intervened in the proceedings, must be ordered to bear their own costs. On those grounds, THE COURT (Sixth Chamber) hereby: 1. Annuls Council Decision 93/323/EEC of 10 May 1993 concerning the conclusion of an Agreement in the form of a Memorandum of Understanding between the European Economic Community and the United States of America on government procurement and Council Decision 93/324/EEC of 10 May 1993 concerning the extension of the benefit of the provisions of Directive 90/531/EEC in respect of the United States of America; 2. Maintains in force the effects of the annulled decisions; 3. Orders the Council to pay the costs; 4. Orders the Commission and the United Kingdom to bear their own costs. © European Communities, 2001 All rights reserved BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII