European Union: Generali-Providencia Biztosító Zrt v Közbeszerzési Hatóság v Közbeszerzési Döntőbizottság Judgment, 18 December 2014

On 18 December 2014, the Court of Justice of the EU (CJEU) handed down a ruling on a reference from a Hungarian court asking whether an economic operator can be excluded from a public procurement procedure for a breach of national competition rules.

The relevant contract fell below the thresholds for the application of Directive 2004/18/EC (the Public Sector Directive) and therefore, the CJEU considered the compatibility of the national rules with the general principles in Articles 49 and 56 of the Treaty on the Functioning of the European Union (TFEU).

Background

Article 45 of Directive 2004/18/EC provides that a contracting authority must exclude any candidate from the procurement process where the authority is aware that the candidate has been convicted of any of a number of specified offences.

Hungarian national law on procurement provides that a contracting authority may provide in the contract notice that no person may take part in the procurement procedure which has been convicted of an infringement connected with its commercial or professional activity, established by a court having the force of res judicata (a definitive or final judicial decision) given not more than five years previously.

In this instance, in 2006, the Hungarian Competition Authority had found that certain agreements between Generali-Providencia Biztosító Zrt (Generali) and a number of vehicle dealerships infringed national competition law.

In 2011, the Hungarian national tax and customs authority published a contract notice for the provision of certain insurance services. The tender notice provided for exclusion from the tendering process on the grounds provided for under Hungarian procurement law. Generali submitted a tender but the tender was excluded as Generali was caught by the ground for exclusion. Generali appealed that decision and the Hungarian court referred questions to the CJEU.

Judgment

The CJEU found that the concept of "professional misconduct" in Article 45 of Directive 2004/18/EC covers all wrongful conduct which has an effect on the professional credibility of the economic operator. In those circumstances, the commission of an infringement of competition rules, in particular where that infringement was penalised by a fine, constituted a ground for exclusion under Article 45 of Directive 2004/18.

The CJEU also found that Recital 101 of the new Public Contracts Directive (Directive 2014/24/EU) provides that contracting authorities should be able to exclude economic operators for serious professional misconduct, such as infringement of competition rules, as such misconduct may bring the economic operator's integrity into question.

Therefore the CJEU held that Articles 49 and 56 of the TFEU did not preclude the application of national legislation that excluded the participation in a tendering procedure of an economic operator which had committed an infringement of competition law, established by a judicial decision having the force of res judicata, for which a fine had been imposed.

Comment        

This case turns largely on the general principles of Articles 49 and 56 TFEU. The freedom of establishment under Article 49 TFEU and the freedom to provide services under Article 56 TFEU allowed the application of national legislation excluding the participation in a tendering procedure of an economic operator which had committed an infringement of competition law, established by a judicial decision having the force of res judicata, for which a fine was imposed.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.