The notion of the contracting authority and the limits of the "in house" exception
This case gives the opportunity to clarify the concept of the contracting authority but also to recall the limits of the exception "in house"
Rule No 1: the notion of the contracting authority
A Lithuanian court has referred a preliminary question to the CJEU as to whether a commercial company, VRLD, a subsidiary of 100% of the Lithuanian State Railway Company, which is a contracting authority and achieves around 90% of its turnover with its parent company is itself a "public body" contracting authority within the meaning of point 9 of Article 1 of Directive 2004/18 / EC (1).
In the light of the circumstances of the case, the CJEU, in its judgment of 5 October 2017 (2), points out that the only question to be analyzed is whether or not the subsidiary constitutes an 'organization created to satisfy specifically needs of general interest of a non-industrial or commercial nature 'within the meaning of Article 1 (9) (2) (a) of Directive 2004/18 / EC.
In the present case, however, the order for reference points out that the subsidiary was created after the restructuring of the Lithuanian railways company and both the foundation of the subsidiary and its activity are still devoted to meeting the needs of the Lithuanian railways. its founder, namely needs of general interest. The activity of the subsidiary, in particular the production and maintenance of locomotives and cars and the supply of these products and services to the Lithuanian railways company, appears necessary for the latter to carry out its activity intended to to satisfy needs of general interest.
Consequently, a company which, on the one hand, is wholly owned by a contracting authority whose activity is to satisfy needs of general interest and which, on the other hand, carries out operations for that contracting authority as well as competitive market must be qualified as a "body governed by public law", provided that the activities of that company are necessary for that contracting authority to be able to carry on its activity and that, in order to satisfy needs in the general interest, the society is guided by non-economic considerations. In this respect, there is no impact on the fact that the value of the internal operations may in the future represent less than 90% 1, or a non-essential part of the overall turnover of the company.
Rule # 2: the limits of the "in house" exception
The so-called exception in house "Is justified by the consideration that a public authority, which is a contracting authority, has the opportunity to perform the tasks of public interest incumbent on it by its own administrative, technical and other means, without being obliged to external entities not belonging to its services, and that this exception may be extended to situations in which the contracting party is an entity legally distinct from the contracting authority, where the latter exercises a similar control over the successful tenderer it carries out its own services and that entity carries out most of its activity with the contracting authority or authorities that hold it [...]. In such cases, it may be considered that the contracting authority has recourse to its own resources.
The contracting authority concludes a contract not with another entity, but in fact with itself, given its link with the formally distinct entity. It is strictly speaking not an award of a contract, but simply an order or a mission, which the other "party" is not entitled to refuse, whatever the form that one or the other takes.
It is therefore logical, within the strict framework established by the Court's case-law, to exempt economic relations between a contracting authority and an entity subordinate to it to the formal procedures governing public contracts governed by the Directives, where that entity is acting in as a mere instrument in the service of the contracting authority and is subject to the same control as it exercises over its (other) services.
The commented judgment has the merit of recalling that when the subordinate entity needs to acquire goods, services or supplies to third parties, or even to carry out work, it is bound to respect the rules of advertising and publication. in competition. This solution is logical, but it deserves to be recalled by the Court to avoid easily circumventing the application of the regulations.