CELEX: 62006CJ0444
Failure of a Member State to fulfil obligations
Directive 89/665/EEC
Public supply and works contracts
Review procedures for the award of public contracts

By its application, the Commission of the European Communities asks the Court of Justice to declare that, by failing to provide
for a mandatory period for the contracting authority to notify the decision on the award of a contract to all the tenderers,
by failing to provide for a mandatory waiting period between the award of the contract and its conclusion and by allowing
an annulled contract to continue to have legal effects, the Kingdom of Spain failed to fulfil its obligations under Article 2(1)(a)
and (b) of Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative
provisions relating to the application of review procedures to the award of public supply and public works contracts (OJ 1989 L 395,
p. 33), as amended by Council Directive 92/50/EEC of 18 June 1992 (OJ 1992 L 209, p. 1, ‘the review directive’).

Legal context

Community legislation
Article 1 of the review directive is worded as follows:
‘The Member States shall take the measures necessary to ensure that, as regards contract award procedures falling within the
scope of Directives 71/305/EEC, 77/62/EEC and 92/50/EEC, decisions taken by the contracting authorities may be reviewed effectively
and, in particular, as rapidly as possible in accordance with the conditions set out in the following Articles and, in particular,
Article 2(7) on the grounds that such decisions have infringed Community law in the field of public procurement or national
rules implementing that law.
…
3.      The Member States shall ensure that the review procedures are available, under detailed rules which the Member States may
establish, at least to any person having or having had an interest in obtaining a particular public supply or public works
contract and who has been or risks being harmed by an alleged infringement. In particular, the Member States may require that
the person seeking the review must have previously notified the contracting authority of the alleged infringement and of his
intention to seek review.’
Article 2(1) of that directive states:
‘The Member States shall ensure that the measures taken concerning the review procedures specified in Article 1 include provision
for the powers to:
(a)      take, at the earliest opportunity and by way of interlocutory procedures, interim measures with the aim of correcting the
alleged infringement or preventing further damage to the interests concerned, including measures to suspend or to ensure the
suspension of the procedure for the award of a public contract or the implementation of any decision taken by the contracting
authority;
(b)      either set aside or ensure the setting aside of decisions taken unlawfully, including the removal of discriminatory technical,
economic or financial specifications in the invitation to tender, the contract documents or in any other document relating
to the contract award procedure;
(c)      award damages to persons harmed by an infringement.’
Article 2(6) of the review directive states:
‘The effects of the exercise of the powers referred to in paragraph 1 on a contract concluded subsequent to its award shall
be determined by national law.
Furthermore, except where a decision must be set aside prior to the award of damages, a Member State may provide that, after
the conclusion of a contract following its award, the powers of the body responsible for the review procedures shall be limited
to awarding damages to any person harmed by an infringement.’

National legislation
Law on public procurement
Article 41(1) of the Law on public procurement (Ley de Contratos de las Administraciones Públicas), approved by Royal Legislative
Decree 2/2000 (Real Decreto Legislativo 2/2000) of 16 June 2000 (BOE No 148 of 21 June 2000, p. 21775), as amended by Law
No 62/2003 on Fiscal, Administrative and Social Measures (ley 62/2003, de medidas fiscales, administrativas y del orden social)
of 30 December 2003 (BOE No 313 of 31 December 2003, p. 46874, ‘the Law on public procurement’), provides that the contractor
must demonstrate the provision of a definitive guarantee within a period of 15 days from notification to him of the award
of the contract.
Article 53 of the Law on public procurement states:
‘Contracts shall be formed by award of the competent contracting authority, irrespective of the procedure or form of award
used.’
Article 54 of that law states:
‘1.      Public contracts shall be finalised by an administrative document within a period of 30 days from the day following the notification
of the award …’
2.      Subject to the exceptions provided for by this Law, their finalisation shall be conditional upon the provision by the undertaking
of the guarantees provided for in this law for the protection of the public interest.
3.      Where, for reasons for which the contractor is responsible, the contract cannot be finalised within the period laid down,
the authority may decide to terminate that contract, subject to the contractor being heard and, where the latter lodges an
objection, to a report from the Council of State or an equivalent advisory body in the autonomous region concerned. In such
circumstances, the provisional guarantee shall be forfeited and the loss sustained shall be made good.
Where the public authority is responsible for the failure to finalise [the public contract], the contractor shall receive
damages for the harm caused by the delay, regardless of whether he is entitled to claim the annulment of the public contract
pursuant to Article 111(d).
4.      The contract cannot be performed until it has been finalised, save in the cases provided for in Articles 71 and 72.’
According to Article 60a of the Law on public procurement, the persons interested in participating in a call for tenders and,
in any event, the tenderers, may request the adoption of interim measures with the aim of correcting the alleged infringement
of the applicable law or preventing further damage to the interests concerned, including measures to suspend or to ensure
the suspension of the procedure for the award of a public contract.
According to Article 65(1) of the Law on public procurement, once definitive, an administrative declaration to the effect
that the acts preparatory to the contract or the award of the contract are invalid is to give rise, in all cases, to the invalidity
of the contract itself, which is accordingly to be set aside.
According to Article 65(3) of that law, if the administrative declaration of invalidity of a contract seriously disrupts public
services, provision may be made for the effects of the contract to continue on the same conditions, until urgent measures
have been taken to avoid any harm.
It follows from Article 93(1) of the Law on public procurement that, once the contracting authority has awarded a public contract,
regardless of the procedure followed, the award is to be notified to the participants in the call for tenders and, after the
finalisation of the contract, is communicated to the competent authority responsible for keeping the public register of contracts
referred to in Article 118 of that law for the purposes provided for in Article 58 thereof.
Pursuant to Article 93(5) of that law, the contracting authority is to communicate to any unsuccessful candidate or tenderer
who so requests, within a period of 15 days of receipt of that request, the reasons for the rejection of its candidature or
its offer, as well as the features of the successful contractor’s offer which were decisive in the decision to award the contract
to the latter.
Article 83(4) of the implementing rules for the Law on public procurement (Reglamento general de la Ley de Contratos de las
Administraciones Públicas), approved by Royal Decree 1098/2001 (Real Decreto 1098/2001) of 12 October 2001 (BOE No 257, of
26 October 2001, p. 39252) provides that the result of the assessment of the tenders submitted is to be notified, indicating
the successful bids, the unsuccessful bids and the reasons for rejection.
Law No 30/1992
Law No 30/1992 on the rules governing the public authorities and the common administrative procedure (ley 30/1992 de Regimen
Jurídico de las Administraciones Públicas y del Procedimiento Administrativo común) of 26 November 1992 (BOE No 285 of 27 November 1992,
p. 40300), as amended by Law No 4/1999 of 13 January 1999, (‘Law on the common administrative procedure’), provides in Article
58:
‘1.      Decisions and administrative acts affecting their rights and interests shall be notified to the persons concerned, in accordance
with the rules provided for in the following article.
2.      All notification shall be made in the 10 days following the date on which the act was adopted. It shall contain the full text
of the decision and shall state whether or not it is a final administrative decision. It shall give details of the possibilities
of review and the body before which any review must be applied for, without prejudice to fact that the persons concerned may
bring, where appropriate, any other action which they consider necessary.’
According to Article 107(1) of that law, review may be sought of decisions and administrative acts which decide, directly
or indirectly, the substance of the case, make it impossible to continue the procedure or to put up a defence, or cause irreparable
harm to legitimate rights or interests.
Article 111 of that law sets out the interim measures which may be applied for in the context of administrative review proceedings,
in particular the suspension of the contested acts.

Background to the dispute and the pre‑litigation procedure
By letter of 30 November 2001, the Commission requested the Kingdom of Spain to submit its observations on the compatibility
of the Law on public procurement with the review directive in the light of the impact of Case C‑81/98
Alcatel Austria and Others
[1999] ECR I‑7671.
Since it did not consider the responses given by the Kingdom of Spain, by letter of 27 February 2002, to be satisfactory,
the Commission gave it formal notice on 16 October 2002. On 7 July 2004, the Commission, having considered the observations
submitted in response to that formal notice by the Kingdom of Spain, issued a reasoned opinion inviting that Member State
to take the measures necessary to comply with the opinion within a period of two months from the date of its receipt.
In those circumstances, having found that the legislation at issue had not been amended by the end of that period, the Commission
decided to bring the present action.

The action
The Commission claims that the Spanish legislation infringes Article 2(1)(a) and (b) of the review directive and puts forward
three pleas in law, the first two of which should be dealt with together.

The first and second pleas
By those pleas, the Commission claims that the national legislation at issue does not comply with the review directive in
that certain provisions of that legislation in combination prevent unsuccessful tenderers from effectively instituting review
proceedings against a decision to award a contract before the conclusion as such of the contract resulting from it.
Arguments of the parties
According to the Commission, the breach of obligations is established, regardless of the scope of the concept of ‘finalisation’
of a contract which appears in the Spanish legislation, that is to say, whether such finalisation is considered to be equivalent
to the conclusion as such of the contract or merely to constitute an administrative formality, in which case the conclusion
takes place at the same time as the award of the contract.
As regards the first view, that is to say that the finalisation of the contract – which, in the Commission’s submission, is
the moment when the contract fulfils all the legal requirements and when its performance can begin – is equivalent to its
conclusion within the meaning of the review directive, the Commission claims that the obligations imposed by that directive
have not been fulfilled in that the unsuccessful tenderers do not have the necessary guarantees in order to challenge an unlawful
decision to award a contract before the finalisation of the contract resulting from it.
According to the Commission, in the absence of an obligation to notify the decision to all the persons concerned at the same
time and a waiting period during which the contract cannot be finalised, thereby denying the unsuccessful tenderers the possibility
of a reasonable period in which to instigate, before the conclusion of the contract, appropriate review proceedings, the Spanish
legislation does not comply with the requirements of the review directive.
As regards the second view, according to which the conclusion of the contract takes place at the same time as the award of
the contract, finalisation being a mere administrative formality, the Commission claims that the legal problem identified
in the assessment of the first view is actually more serious, in that there is no act of awarding the contract in question
capable of giving rise to review proceedings independent of the act of concluding the contract relating to that tendering
procedure.
Since no review proceedings are possible against the act of awarding at a stage earlier than the conclusion of the contract
where any infringement of the applicable law may still be corrected and where the tenderer who brings the review proceedings
may still hope to become the contractor, the Spanish legislation does not provide complete legal protection before the conclusion
of the contract, contrary to the requirements of Article 2(1) of the review directive.
At the outset, the Kingdom of Spain defines the scope which should be given, respectively, to the act of awarding the contract
and the finalisation of the contract which follows it.
That Member State contends that the act of awarding the contract leads, by itself, to the conclusion of the contract awarded,
and that contract is treated as existing from the adoption of that act. The act is subject to the formal requirement of notification,
which has to be carried out before the contract can produce its effects in respect of the persons concerned.
It states that the finalisation of the contract, a mere administrative formality, is of only secondary importance to the act
of awarding the contract. That finalisation is, however, a necessary condition for the performance of the contract concerned.
According to the Kingdom of Spain, the question whether the Law on public procurement complies with the review directive must
be assessed with regard to the review proceedings which can be brought, first, prior to the act of awarding the contract and,
second, against that act of awarding the contract itself. That is, moreover, the conclusion of the judgment in
Alcatel Austria and Others
, which draws a distinction between the stage prior to the conclusion of the contract, in other words the stage before the
award of the contract, to which Article 2(1) of the directive applies, and the stage subsequent to its conclusion, in other
words the stage which follows the act of awarding the contract, to which the second subparagraph of Article 2(6) of the directive
applies.
Spanish law is consistent, according to the Kingdom of Spain, with that distinction. Concerning, first, the measures which
precede the award of the contract, the Kingdom of Spain states that a number of review proceedings are possible. Concerning,
second, that award itself, it states that the administrative decision prior to that award is notified to all the participants
in the tendering procedure in the 10 days following its adoption and that that decision, like any administrative act, may
be the subject of review proceedings, pursuant to the law governing the common administrative procedure. That Member State
further adds that the suspension of the contested act may be ordered as an interim measure.
Lastly, the Kingdom of Spain contends that the definitive conclusion of an act, and thus of a contract, does not preclude
the possibility of bringing revocation proceedings against that act itself.
Findings of the Court
It should, at the outset, be stated that, in examining this action, it is necessary to take into consideration the explanations
of the law provided by the Kingdom of Spain which are not disputed by the Commission. Those explanations are based on the
interpretations in the case‑law of the national courts as to the effects which follow from the act of awarding the contract
and the finalisation of the contract respectively, since those legal concepts are matters of national law.
Thus, the arguments put forward by the Commission in support of the first and second pleas must be analysed in the light of
the finding that, according to the law of the Member State in question, first, the act of awarding the contract leads automatically
to the formation of the contract to which it relates and, accordingly, determines, of itself, the rights and duties of the
parties and, second, the finalisation of that contract is a formality required exclusively so that the contract awarded can
be performed, and cannot alter the contract or add to it.
According to recitals (1) and (2) in the preamble to the review directive, it seeks to reinforce existing arrangements, at
both national and Community levels, for ensuring the effective application of Community directives on the award of public
contracts, in particular at the stage where infringements can still be rectified.
In that regard, Article 1(1) of the review directive requires Member States to put in place review procedures which are effective
and as rapid as possible against the decisions taken by the contracting authorities which infringe Community law in the field
of public procurement or national rules implementing that law.
It follows from the case‑law of the Court that the combined provisions of Article 2(1)(a) and (b) and the second subparagraph
of Article 2(6) of the directive are to be interpreted as meaning that the Member States are required to ensure that the contracting
authority’s decision prior to the conclusion of the contract as to the bidder in a tender procedure with which it will conclude
the contract is in all cases open to review in a procedure whereby an applicant may have that decision set aside if the relevant
conditions are met, notwithstanding the possibility, once the contract has been concluded, of obtaining an award of damages
(see
Alcatel Austria and Others
, paragraph 43).
Moreover, the complete legal protection which must accordingly be ensured before the conclusion of the contract pursuant to
Article 2(1) of the review directive presupposes, in particular, the duty to inform the tenderers of the award decision before
the conclusion of the contract so that they may have a real possibility of initiating review proceedings.
That same protection requires provision to be made for the unsuccessful tenderer to examine in sufficient time the question
of whether the decision to award is valid. In the light of the need to guarantee the effectiveness of the review directive,
it follows that a reasonable period must pass between the moment when the award decision is communicated to the unsuccessful
tenderers and the conclusion of the contract in order to allow them, inter alia, to bring an application for interim measures
until the conclusion of the contract.
In this case, it must be pointed out that, first, it is not disputed that the Spanish legislation authorises review proceedings
against acts of contracting authorities prior to the award of the public contract. Further, in accordance with Article 107(1)
of the Law on the common administrative procedure, the persons concerned are able to initiate review proceedings against the
procedural acts where they decide, directly or indirectly, the substance of the case, make it impossible to continue the procedure
or to put up a defence, or cause irremediable harm to legitimate rights or interests. In the context of those review proceedings,
interim measures can be taken, in particular the suspension of the contested acts.
Second, the act of awarding the contract is notified to all the tenderers, in accordance with Articles 58(1) and (2) of the
Law on the common administrative procedure and Article 93(1) of the Law on public procurement. That notification must be made
according to the rules of general law applicable to administrative acts, namely within the 10 days following the adoption
of that act awarding the contract, and must give details of the possibilities of review.
However, inasmuch as the act of awarding the contract leads
de jure
to the conclusion of the contract, it follows that the decision of the contracting authority, by which it chooses the contractor
from amongst the tenderers cannot be the subject of specific review proceedings prior to the conclusion as such of that contract.
Third, it must be pointed out that the finalisation of the contract may be concurrent with the award of the contract concerned,
or follow it within a very short period. The finalisation as, moreover, the Kingdom of Spain acknowledges, is not subject
to any minimum period and may occur from the moment that the contractor demonstrates the provision of a definitive guarantee,
since the legislation only requires that it be provided at the latest within 15 days of notification of the award of the contract.
Therefore, the performance of the contract may commence before the award has been the subject of all the notifications required.
It follows that, in certain cases, no effective review proceedings can be brought against the act of awarding the contract
before the performance as such of the contract although the objective of the review directive is to ensure that unlawful decisions
taken by the contracting authorities may be reviewed effectively and as rapidly as possible (see, to that effect, Case C‑470/99
Universale-Bau and Others
[2002] ECR I-11617, paragraph 74).
Fourth, the fact that there is the option of bringing proceedings for the annulment of the contract itself is not such as
to compensate for the impossibility of challenging the mere act of awarding the contract concerned, before the contract is
concluded.
Consequently, the legislation at issue does not allow unsuccessful tenderers to bring review proceedings in accordance with
the requirements of the review directive against the decision to award a public contract resulting from it.
The first two pleas are, accordingly, well founded.

The third plea
Arguments of the parties
According to the Commission, the review directive is infringed by the exception which seeks to protect public services provided
for in Article 65(3) of the Law on public procurement, according to which, if the administrative declaration of invalidity
of a contract seriously disrupts public services, provision may be made for the effects of that contract to continue, on the
same conditions, until urgent measures have been taken to avoid any harm.
The Commission claims that those provisions confer on the contracting authority too wide a discretion in respect of the implementation
of the administrative decision annulling the award of a contract and, accordingly, the contract resulting from it.
It also claims that the provisions at issue may, in a not insignificant number of cases, render ineffective the review proceedings
of the unsuccessful tenderers leading to the annulment of the unlawful decisions of the contracting authorities, which is
contrary to the Member States’ duty to ensure that the review procedures provided for pursuant to Article 1 of the review
directive make it possible to annul or to have annulled the unlawful decisions taken by those authorities. The effectiveness
of that directive would thus be compromised, inasmuch as the invalidity or the annulment of those decisions would be deprived
of any effect.
The Kingdom of Spain contends for its part that the contested provisions envisage proceedings only by way of exception against
contracts which are declared invalid for reasons of public interest, subject to review by the courts.
According to that Member State, the Commission has not established that proceedings against the continuation of contracts
annulled in this way constitute a normal situation as regards the application of the legislation at issue.
Findings of the Court
In this case, it is not disputed that the preservation of the effects of a contract subject to an administrative declaration
of invalidity such as that provided for in the contested national legislation can only occur in the case of a serious disruption
to public services.
Consequently, as is clear from the wording of Article 65(3) of the Law on public procurement, such preservation is only intended
to apply in exceptional cases and pending the adoption of urgent measures. In addition, that preservation applies, as the
Kingdom of Spain has stated without being contradicted by the Commission, subject to review by the courts.
Thus, it appears that the aim of the provision is not to prevent the enforcement of the declaration of invalidity of a specific
contract, but to avoid, where the public interest is at stake, excessive and potentially prejudicial consequences of the immediate
enforcement of the declaration, pending the adoption of urgent measures, in order to ensure the continuity of public services.
In those circumstances, the Commission has not demonstrated that the contested legislation undermines the requirements of
the review directive.
Consequently, the third plea must be dismissed as unfounded.
Having regard to the foregoing, it must be declared that, by failing to lay down a mandatory period for the contracting authority
to notify the decision on the award of the contract to all the tenderers and by failing to provide for a mandatory waiting
period between the award of the contract and its conclusion, the Kingdom of Spain has failed to fulfil its obligations under
Article 2(1)(a) and (b) of the review directive.

Costs
Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs, if they have been
applied for in the successful party’s pleadings. Under Article 69(3) of those Rules, where each of the parties succeeds on
some and fails on other heads, or where the circumstances are exceptional, the Court may order that the costs be shared or
that the parties bear their own costs.
In this dispute account is to be taken of the fact that the Court has not upheld the Commission’s action for a declaration
of failure to fulfil obligations in its entirety.
The Kingdom of Spain must therefore be ordered to pay two thirds of all the costs. The Commission is ordered to pay the other
third.
On those grounds, the Court (Second Chamber) hereby:
1.
By failing to lay down a mandatory period for the contracting authority to notify the decision on the award of the contract
to all the tenderers and by failing to provide for a mandatory waiting period between the award of the contract and its conclusion,
the Kingdom of Spain has failed to fulfil its obligations under Article 2(1)(a) and (b) of Council Directive 89/665/EEC of
21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of
review procedures to the award of public supply and public works contracts (OJ 1989 L 395, p. 33), as amended by Council Directive 92/50/EEC
of 18 June 1992;
2.
Dismisses the action as to the remainder;
3.
Orders the Kingdom of Spain to pay two thirds of all the costs. The Commission of the European Communities is ordered to pay
the other third.
[Signatures]
*
Language of the case: Spanish.