Brussels, 21/01/2005 (Agence Europe) - 'The award of a public service contract to an undertaking with partly private capital, regardless of the percentage of the holding, does not constitute an in-house operation exempted from the Community public procurement rules' according to the ruling issued on 11 January by the European Court of Justice in Case C-23/03, Stadt Halle and RPL Recyclingpark Lochau. The ruling was immediately slammed by the Council of European Municipalities and Regions (CEMR) 'as an unbalanced prioritisation of the market over local democracy and self-government'. CEMR Secretary General Jeremy Smith said the Court of Justice had: 'produced a thin and rather ideological ruling which totally ignores any aspect other than the supremacy of private sector competition. CEMR believes in competition, but also believes that elected local governments must have a degree of choice over how best to deliver purely local public services for their citizens. It is a nonsense to conclude - as the Court has done - that just because there is a minority private holding in the company, a local government cannot exercise the same kind of control as its does over its own departments.'
In the case, the question raised was whether the local government - the German town of Halle - could lawfully assign the task of disposing of its waste to a company it had established, in which it held a dominant 75% interest, without a public tendering process. EU public procurement rules require a tendering process whenever public contracts exceed specified financial limits, explains the CEMR in a press release. However, there is no legal obligation to tender services which are directly managed by the local authority itself, Moreover, earlier Court of Justice jurisprudence (the Teckal case) has clarified that the European tendering requirements do not apply to a local government assigning a task to a company it has set up, provided that it controls the company in a manner similar to the control it exercises over its own departments; and the company carries out the majority of its work for the local government in question. In the Halle case, the Court of Justice held that the city had acted in breach of EU law by not tendering the service, claiming that 'the presence of any private share-holding in a public company means that the EU competition rules must apply, however small that private holding.' In the view of the CEMR, the Court's decision 'totally ignores how modern local government works, i.e. often with other stakeholders playing an important role in decision-making. Yet, ultimately, it is the issue of control that should count - and here the local authority obviously had full control. The Court's decision puts at risk the viability of publicly controlled companies across Europe.'