OPINION OF ADVOCATE GENERAL

GEELHOED

delivered on 28 September 2006 ([1](#Footnote1))

**Case C-295/05**

**Asociación Nacional de Empresas Forestales (Asemfo)**

**v**

**Transformación Agraria SA**

**and**

**Administración del Estado**

(Reference for a preliminary ruling from the Tribunal Supremo, Sala de lo Contencioso-Administrativo (Spain))

(Interpretation of Article 86(1) EC and Directives 93/36/EEC, 93/37/EEC, 97/53/EC, 2001/78/EC and 2004/18/EC concerning the
coordination of procedures for the award of public supply, works and service contracts – Compatibility of national rules granting a public undertaking a legal regime which allows it to perform public works contracts
outside the established procedures for the award of public contracts)


I –  **Introduction**

1.     This case concerns the compatibility with Community law, and in particular with the Community directives governing the award
of public contracts ([2](#Footnote2)) and with Articles 12 EC, 43 EC, 46 EC and 86(1) EC, of a national statutory regime for a public undertaking constituted under
private law which, under that statutory regime, is an ‘instrument’ or executive service of the public authorities, but which
may also carry out work for public bodies other than those to which it is subject as an executive service, as well as for
private undertakings and organisations. In addition, this legal person may be asked by the competent public authorities to
provide services other than those included in its statutory remit.

2.     The questions have arisen in connection with a complaint by the Asociación Nacional de Empresas Forestales (‘Asemfo’) against
Empresa de Transformación Agraria SA (‘Tragsa’), in which Asemfo accused Tragsa of infringing Spanish competition law by failing
to comply with the public procurement procedures laid down in Spanish legislation, which constituted an abuse of its dominant
position in the market for forestry works, services and projects. In considering Asemfo’s appeal against the decision of the
Sala de lo Contencioso-Administrativo (Chamber for Contentious Administrative Proceedings) of the Audiencia Nacional (National
High Court), the Spanish Tribunal Supremo (Supreme Court) eventually decided that it needed to refer questions to the Court
of Justice for a preliminary ruling.

II –  **Legal framework**

A –    *National legislation*

3.     In order to have a clear understanding of the practical and legal implications of the questions referred to the Court, a more
than usually detailed summary is needed of the extensive and complicated national legislation applicable to Tragsa.

4.     Tragsa was set up on 24 May 1977 ([3](#Footnote3)) under Royal Decree 379/1977 of 21 January 1977, which authorised its constitution as a public undertaking. Its legal personality
is regulated partly by the general rules that apply to companies governed by private law, and partly by the general rules
of law that apply for public undertakings. Its company objects were originally laid down in Article 2 of Royal Decree 379/1977,
but were subsequently extended by Royal Decrees 424/1984 of 8 February 1984 and 1422/1985 of 17 July 1985. Today, its principal
activities involve the execution of various types of works, installations and studies, the provision of services and the preparation
of plans and projects in the field of agriculture and forestry, the protection and improvement of the physical environment,
fish farming, fishing and nature conservation.

5.     It is to be inferred from Article 88 of Spanish Law 66/1997 of 30 December 1997 concerning fiscal, administrative and social
measures that Tragsa is a public company, as defined in Article 6(1)(a) of the General Budget Law, providing essential services
in the field of rural development and environmental protection. It is ‘an instrument and technical service of the Administration’
which is required to carry out, either itself or using its subsidiaries, any work entrusted to it by the General Administration
of the State, the Autonomous Communities or the public bodies subject to them.

6.     Ultimately, the legal regime for Tragsa is set out in Royal Decree 371/1999 of 5 May 1999 laying down the regime governing
the ‘Land Transformation Company PLC’ (Tragsa).

7.     Tragsa is required to carry out the works and activities entrusted to it by the Administration. That requirement specifically
includes the work it is given as an executive organisation and technical service of the Administration in the areas covered
by its company objects (Article 3(2) of Royal Decree 371/1999). In addition, Tragsa is required to give priority to urgent
and exceptional work arising from natural disasters and similar events (Article 3(3) of the decree). It cannot refuse the
work entrusted to it or negotiate the deadline for completion, and must execute the works assigned in accordance with the
instructions it is given (Article 5(3) of the decree).

8.     The royal decree classifies Tragsa’s relations with the central and decentralised public administrations as instrumental rather
than contractual, and they are therefore, for all purposes, internal, dependent and (for Tragsa) subordinate (Article 3(6)
of the decree).

9.     Under the financial system to which Tragsa is subject, its work is paid according to a system of tariffs laid down in Article
4 of Royal Decree 371/1999. The tariffs are decided by a joint ministerial committee partly on the basis of information supplied
by Tragsa on its costs.

10.   Tragsa can call on the help of private undertakings in its activities (Article 6 of Royal Decree 371/1999). There are a number
of restrictions on such cooperation with private contractors: the work may involve only the processing or manufacturing of
movable property, the amounts for which such contracts may be concluded are limited, and the principles of prior public tender
(publication and competition) must be observed in the selection of private partners.

11.   It should also be pointed out here that Tragsa can also operate as an undertaking company, even vis-à-vis the Administration,
without having to retain its capacity as an ‘executive organisation and technical service of the Administration’. In such
cases, its activities are governed, pursuant to Article 1 of Royal Decree 371/1999, by the rules which generally apply to
commercial undertakings.

12.   The administrative context in which Tragsa operates changed significantly in the 1980s as a result of the entry into force
of the Spanish Constitution of 1978, when responsibility for agriculture and environmental protection was transferred from
the General State Administration to the Autonomous Communities or regions (‘the Autonomous Communities’). The transfer of
administrative powers also necessarily involved the transfer of the resources and instruments needed to enable those powers
to be fully exercised. For that reason Tragsa was placed at the disposal of the Autonomous Communities to enable them to exercise
their powers even before the EC Treaty came into force for Spain.

13.   The transfer of public powers with respect to Tragsa from the General State Administration to the Autonomous Communities took
the form of public law agreements which each of the Communities concluded with Tragsa, laying down the rules governing the
use of Tragsa as an ‘instrument’ of the Autonomous Community concerned. Most of the Autonomous Communities concluded such
agreements with Tragsa, although only four became shareholders in it as a company.

14.   Under the Spanish laws and regulations in force, however, an Autonomous Community does not need to become a shareholder in
Tragsa in order to use its services: Tragsa operates as an ‘instrument’ of the Autonomous Communities, so that as a rule it
makes no difference whether or not they are shareholders. That is borne out by Law 66/1997, which provides that the regions
may, but need not, be shareholders in Tragsa.

15.   In order to assess the questions referred to the Court, it is also useful to reproduce a number of other sections of the Spanish
legislation on public procurement, which determine the legal framework in which Tragsa operated, and still operates, on the
basis of its legal status as a public undertaking.

Article 60 of the Law on Public Procurement, as confirmed by Royal Decree 923/1965 of 8 April 1965, provides as follows:

‘Only those works which are carried out in the following circumstances may be executed directly by the Administration:

1. Where the Administration has available plant, stocks, facilities or technical or industrial services suitable for the execution
of the planned works, in which case use should usually be made of those resources.’

Article 153 of Law 13/1995 of 18 May 1995 on Public Procurement provides as follows:

‘1. The Administration may carry out works using its own services and its own human or material resources, or in cooperation
with private undertakings, in the latter case on condition that the financial interest of the works in question is less than
ESP 681 655 208, excluding VAT, where one of the following circumstances occurs:

(a)      where the Administration has available plant, stocks, facilities or technical or industrial services suitable for the execution
of the planned works, in which case use should usually be made of those resources.’

Article 152 of the revised text of the Law on Public Procurement, confirmed by Royal Decree 2/2000 of 16 June 2000, reads:

‘1. The Administration may carry out works using its own services and its own staff or material resources, or in cooperation
with private undertakings, provided, in the latter case, that the amount of the works in question is lower than EUR 5 923 624,
the equivalent of 5 000 000 special drawing rights, where one of the following situations obtains:

(a)      where the Administration has at its disposal factories, stocks, workshops or technical or industrial services suitable for
the execution of the project works, use should usually be made of that method of execution.’

Article 194 of the Law on Public Procurement provides that:

‘1. The Administration may manufacture movable property using its own services and its own human or material resources, or
in cooperation with private contractors, provided, in the latter case, that the amount of the works in question is lower than
the maximum amounts laid down in Article 177(2), where one of the following situations obtains:

(a)      where the Administration has available factories, stocks, workshops or technical or industrial services suitable for the execution
of the planned works, use should usually be made of that method of execution.’

16.   As the referring court explains, the legislation cited in the previous point summarises the various conditions on which the
Administration itself is allowed to execute works directly, including the condition that it must have its own resources, as
is the case with Tragsa in its activities. That condition is not linked to any other more detailed requirement or circumstance,
such as reasons of urgency or public interest, for instance. Those are covered by a separate provision: ‘in the case of the
execution of works considered urgent according to the provisions of this Law’. ([4](#Footnote4)) Therefore, the Administration need only have its own services, like Tragsa and its subsidiaries, to be able to entrust to
them all types of work or works without any other requirement, the only restriction being the quantitative limit that applies
if Tragsa involves private parties in the execution of the services. It would then be a possibility, but not an obligation,
for the Administration concerned.

17.   Finally, I would point out that Tragsa is itself a contracting authority. That is clear from Article 88(7) of Law 66/1997,
as amended by Law 53/2002.

B –    *Further details of Tragsa’s structure and activities*

18.   In its written observations, the Commission provided a number of details about Tragsa’s structure and activities which shed
light on the legal and administrative framework described above, and which may be relevant in assessing and answering the
questions referred to the Court.

19.   At present, the vast majority of the shares in Tragsa – more than 99% – are held directly or indirectly by the Spanish State.
Four Autonomous Communities have an almost symbolic share, which combined accounts for less than 1% of Tragsa’s share capital.

20.   Tragsa’s activities have become considerably diversified over time. Apart from the more conventional activities such as designing
and constructing infrastructure and other works needed to modernise agricultural production and livestock farming, technologies
promoting efficient water use and activities protecting the physical and natural environment as well as the historical and
cultural heritage of the countryside have become increasingly important. There are also activities promoting forestry, the
protection of fish stocks and fish farming.

21.   Tragsa is financed by the payments it receives for its work. In the 2004 financial year, its turnover was EUR 674 million,
and its profits after deduction of corporation tax were EUR 22.24 million.

22.   More than half the turnover of Tragsa and its subsidiaries ([5](#Footnote5)) comes from work for the Autonomous Communities. That is logical, because the Autonomous Communities exercise most of the
public powers in the areas in which this undertaking operates. Around 30% of turnover comes from the Spanish State Administration,
around 5% from other public bodies, including local authorities, and 2 to 3.5% from private undertakings.

23.   The Commission asserts that it cannot tell from the figures available what proportion of the total turnover comes from Tragsa’s
activities in its capacity as an ‘instrument and technical service’ of the Administration.

24.   In order to analyse the questions raised by the Tribunal Supremo more closely, I feel it useful at this stage to make the
following points on the basis of the above observations:

In its capacity as an executive organisation for – primarily – the Autonomous Communities, Tragsa, as a legal entity, is almost
entirely owned by the Spanish State, which holds more than 99% of its share capital;

As a constitutionally independent executive organisation, Tragsa is entirely subject, when providing services for the General
State Administration and the Autonomous Communities, to the orders and instructions given by those administrations in the
exercise of their public powers: it is required to accept the work entrusted to it and to carry it out in accordance with
the specifications and time periods given and at the tariffs laid down by regulation;

Under the Spanish legislation on public procurement, it is entirely possible for Tragsa to receive contracts from the General
State Administration and the Autonomous Communities which have no connection with the exercise of public powers, duties and
responsibilities, but which are entrusted to it solely because it is available as a technical service, and which are also
carried out by private operators under normal market conditions; ([6](#Footnote6))

The system of statutory and administrative rules under which Tragsa operates expressly and tacitly allows scope for activities
other than those which it carries out as an executive organisation of the General State Administration and the Autonomous
Communities. However, the extent of that scope cannot be accurately deduced from the information available, since Tragsa carries
out some of its activities through its subsidiaries.

III –  **Facts, procedure and the questions referred**

25.   On 23 February 1996 Asemfo lodged a complaint with the Spanish Competition Authority, accusing Tragsa of abusing its dominant
position in the Spanish forestry (works, services and projects) market because its public clients did not comply with the
award procedures laid down in Ley 13/1995 de Contratos de las Administraciones Públicas (Law 13/1995 on Public Procurement)
of 18 May 1995, cited in point 15 above.

According to Asemfo, the constitution governing Tragsa’s operations meant that it could carry out a wide range of works at
the direct request of the central or decentralised authorities, without a prior invitation to tender. As a result, competition
on the market for services and works in the areas of agriculture and forestry in Spain was eliminated.

26.   In a decision of 16 October 1997, the Competition Authority dismissed the complaint. It ruled that in that particular case
Tragsa operated as an ‘instrument’ or executive service of the Administration, without any independent decision‐making powers,
and was required to carry out the works entrusted to it itself. It was therefore a question of relations between contracting
authority and contractor within the State Administration itself, and Tragsa’s operations had nothing to do with the market
or the competition law applicable to private and public undertakings.

27.   Asemfo lodged an appeal against that decision before the Tribunal de Defensa de Competencia (Competition Court). By judgment
of 30 March 1998, that court dismissed the appeal on the same grounds as the Competition Authority. It emphasised that the
activities which Tragsa carried out for the relevant authorities were to be seen as works carried out by those authorities
themselves. Only when Tragsa acted independently as a public undertaking could there be any question of a breach of competition
law.

28.   Asemfo then appealed to the Sala de lo Contencioso-Administrativo of the Audiencia Nacional, which confirmed the Competition
Court’s decision in a judgment of 26 September 2001.

29.   Asemfo finally appealed to the Tribunal Supremo, arguing that Tragsa, in its capacity as a public undertaking, could not be
regarded as an ‘instrument’ or executive service of the Administration, to which the Community rules on public procurement
did not apply, and that the legal regime applicable to Tragsa, as laid down in Article 88 of Law 66/1997 in particular, was
not compatible with Community law.

30.   The Tribunal Supremo had a number of doubts about the compatibility of Tragsa’s legal regime with Community law.

31.   It therefore felt it desirable to refer the following questions to the Court of Justice for a preliminary ruling:

‘(1)      Does Article 86(1) EC permit a Member State of the European Union to grant *ex lege* to a public undertaking a legal status which allows it to execute public works without being subject to the general rules
on the award of public contracts by tender, where there are no special circumstances of urgency or public interest, both below
and above the financial threshold laid down by the European Directives in this regard?

(2)      Is such a legal regime compatible with the provisions of Council Directives 93/36/EEC and 93/37/EEC of 14 June 1993, European
Parliament and Council Directive 97/52/EC of 13 October 1997 and Commission Directive 2001/78[/EC] amending the three previous
directives – legislation recently recast by European Parliament and Council Directive 2004/18/EC of 31 March 2004?

(3)      Are the statements contained in the judgment of the Court of Justice of the European [Communities] of 8 May 2003 in Case C‐349/97
*Spain* v *Commission* applicable in any event to Tragsa and its subsidiaries, in the light of the rest of the case-law of the Court regarding public
procurement and in view of the fact that the Administration entrusts to Tragsa a large number of works which are not subject
to the rules governing free competition, and that this situation might cause considerable distortion of the relevant market?’

A –    *Procedure before the Court*

32.   Asemfo, Tragsa, the Spanish Government, the Lithuanian Government and the Commission have submitted written observations.
At the hearing on 15 June 2006, Tragsa, the Spanish Government and the Commission provided further information in support
of their positions.

IV –  **Assessment**

A –    *Preliminary remarks*

33.   Tragsa, the Spanish Government and the Commission have all to some extent challenged the admissibility of the questions referred
to the Court for a preliminary ruling.

34.   In my view, given the complexity of the factual and legal situation in Spain, it is not possible to examine the doubts raised
concerning the relevance of the questions referred and whether they are necessary to the resolution of the dispute in the
main proceedings until the substance of the questions has been addressed in the light of the Court’s existing case-law.

35.   For that reason, I shall not examine the admissibility of the questions referred until the end of this Opinion.

36.   In all the written observations and also at the hearing, detailed consideration was given to the Court’s judgments concerning
the applicability of Community law to the award of public contracts for supplies and for the execution of works, ([7](#Footnote7)) and in the award of concessions by administrations, ([8](#Footnote8)) in cases where the public authority which is a contracting authority exercises over the contracting entity concerned a control
which is similar to that which it exercises over its own departments and that entity carries out the essential part of its
activities with the controlling public authority or authorities. ([9](#Footnote9))

37.   As the Commission rightly pointed out at the hearing, those judgments were delivered in cases where the contracting authorities
awarded contracts for pecuniary interest for the supply of goods and/or services to entities over which they exercised more
or less extensive control and which carried out most or a significant part of their activities with those authorities.

38.   However, the factual and legal situation underlying the questions referred in this case differs in two respects from that
of the judgment cited in footnote 7 above:

The Spanish State Administration and the Autonomous Communities are Tragsa’s contracting authorities in a strictly hierarchical
sense, in that Tragsa cannot refuse the work entrusted to it by the relevant authorities, is wholly bound by the instructions
and specifications of those authorities and receives payment for its work which is calculated and determined by regulation.
In short, even though its legal personality is governed partly by private and partly by public law, Tragsa has to be characterised
as an executive service of the Spanish State Administration and the Autonomous Communities. The contractual element between
the contracting authority and the contractor, which always existed in the cases in which the Court delivered the judgments
cited above, is entirely absent here; ([10](#Footnote10))

Although Tragsa currently carries out the essential part of its activities with the Autonomous Communities, the assumption
that it is controlled by these territorial entities is problematic, to say the least. Its status under public law is, as is
clear from the above summary,([11](#Footnote11)) entirely or almost entirely determined by Spain’s State legislature, while only 4 of the 17 Autonomous Communities have shares
in Tragsa on a symbolic scale, together accounting for less than 1% of the total share capital. It may be inferred from this
that, as an executive organisation, Tragsa is indeed at the service of the Autonomous Communities, but not necessarily that
it is controlled by them.

39.   These differences suggest that the questions referred cannot automatically be answered on the basis of the Court judgments
cited, although they may, of course, provide significant guidance for interpreting the relevant rules of law by analogy.

40.   Below I shall look first in broad terms at the possible questions of Community law that might arise in a legal and organisational
context such as that in the main proceedings.

41.   I shall then examine, as far as possible using the Court’s judgments cited above in footnotes 7 and 8, how the questions referred
might be answered.

42.   I will consider separately the relevance of Article 86(1) EC in the context of those questions.

43.   Finally, I will briefly examine the question of admissibility.

B –    *The legal and organisational context*

44.   As I said earlier in point 38 above, Tragsa must be characterised as an ‘instrument’ or executive service of Spain’s State
Administration and, perhaps, of the Autonomous Communities, and must, both as a result of its legal status and because of
its ownership – with over 99% of Tragsa’s shares owned directly or indirectly by the Spanish State Administration – be regarded
as an entity entirely under the control of the Spanish State Administration.

45.   The vast majority of its activities, as is clear from its statutory remit, concern work associated with structural improvements
in Spanish agriculture and forestry, as well as fishing and fish farming. Over time, these activities have come to include
environmental protection and work on maintaining the natural and cultural heritage of the countryside.

46.   In addition to these ‘regular’ activities, Tragsa is also on standby to be called into action in exceptional circumstances,
such as in the event of floods or other similar natural disasters. Tragsa is also sometimes involved in implementing certain
sections of the common agricultural policy, as is clear from the Court’s judgment in *Spain* v *Commission*. ([12](#Footnote12))

47.   The vast majority of those activities must be regarded as practical work carried out as part of the exercise of public responsibility
for agricultural structural development in the broad sense, and for the quality of the rural environment.

48.   The nature of those activities and the public objectives pursued mean that they can be carried out both by the Administration’s
own services, by entities that are to some extent independent but under public control, and by private entities contracted
by the authorities responsible.

49.   In principle, the Member States are free to decide how they organise the performance of activities for which they are publicly
responsible, although the Court in the judgments cited earlier ruled that authorities may award public contracts and concessions
to their own ‘instruments’ without a prior competitive tendering procedure only on strict conditions.

50.   As is clear from paragraph 48 of the judgment in *Stadt Halle and RPL Lochau*, the Court considers that in cases where a public authority which is a contracting authority has the possibility of performing
the tasks conferred on it by using its own administrative, technical and other resources, without being obliged to call on
outside entities not forming part of its own departments, the Community rules in the field of public procurement do not apply.
In such cases, there can be no question of a contract for pecuniary interest concluded with an entity which is legally distinct
from the contracting authority.

51.   Such a situation appears also to occur in the relationship between the Spanish State Administration and Tragsa. Whether that
is also the case in the relationship between the Autonomous Communities and Tragsa, which the Spanish Government and Tragsa
appear to take for granted, is one of the questions requiring further analysis at the very least. Can Tragsa automatically
be regarded as the Autonomous Communities’ ‘own’ technical or administrative resource, given that they cannot exercise any
powers of control over that ‘resource’ under national legislation, nor can they derive such powers from their ownership of
shares in it? ([13](#Footnote13))

52.   Whatever the answer to that question may be, the issue of compatibility with primary Community law, and in particular Articles
12 EC, 43 EC and 49 EC, must be assessed. That is, in my opinion, the implication of the recent judgments in *Coname* and *Parking Brixen*. ([14](#Footnote14))

53.   However, before I deal with the question whether the Spanish Autonomous Communities, as Tragsa’s principals, exercise actual
control over that entity, I must first examine what relevance the answer to that question might have in the light of Articles
12 EC, 43 EC, 49 EC and, if appropriate, 86 EC.

54.   It is apparent from what I said in point 47 above that the vast majority of the actual activities which Tragsa carries out
for the Spanish State Administration do not include activities for the exercise of the Spanish State’s official authority.
The fact that those activities serve objectives of public policy and public responsibility does not in principle distinguish
them from activities carried out by private undertakings contracted by the Administration, such as infrastructure construction
works.

55.   It follows from this that the first sentence of Article 45 EC in conjunction with Article 55 EC is not applicable. ([15](#Footnote15)) In so far as secondary Community law on public contracts does not apply to them, therefore, the compatibility of Tragsa’s
operations with Articles 43 EC, 49 EC and, if appropriate, 86 EC must be assessed. ([16](#Footnote16))

56.   Now, does the fact that the Spanish Autonomous Communities can in the broad sense ‘entrust’ a considerable proportion of their
agricultural structural improvement works to an executive organisation of the Spanish State Administration have actual or
potential consequences for freedom of establishment and the free movement of services within the Community? ([17](#Footnote17))

57.   The answer to that question clearly appears to be affirmative, since the result of this arrangement is that a large proportion
of the activities in question, which might also be allocated to private operators, are thereby reserved for Tragsa as the
State Administration’s executive organisation. The market for possible private candidates from elsewhere in the Community
is then correspondingly restricted.

58.   The fact that the services at issue here are entrusted by one authority (the Autonomous Community) to an executive service
(Tragsa) of another authority (the Spanish State Administration), and that not a single element of a contract for pecuniary
interest is involved, does not alter the fact that this administrative arrangement has the same effect in economic terms as
an arrangement in which one authority entrusts services under contracts for pecuniary interest to an entity which is under
the control of another authority.

59.   In both arrangements, contracts for the supply of goods, services and public works are removed from competition, with real
and potential consequences for the free movement of goods and services and freedom of establishment in the Community market.
They should therefore be judged as far as possible by the same measure.

60.   The same applies in respect of the requirement that the contracting authority must control the entity or service to which
it entrusts works, whether or not by means of a contract for pecuniary interest.

61.   In their written and oral statements, Tragsa and the Spanish Government have emphasised above all that Tragsa is an ‘instrument’
serving the Spanish State Administration and the Autonomous Communities. That does not alter the fact that Tragsa is more
than just an executive service for the Spanish State and the Autonomous Communities. It also acts as a contractor for local
authorities, other public bodies and private parties. In that capacity, it competes with other economic operators in order
to win contracts.

62.   The proportion of its total turnover accounted for by those contracts varies. Paragraph 34 of the Commission’s written observations
suggests that it fluctuates between 7 and 8.5%. Paragraph 96 of Tragsa’s written observations quotes slightly different figures
from the Commission’s in that the data for two subsidiaries are given separately. In any event, the figures given by the Commission
and Tragsa are roughly of the same order of magnitude.

63.   Whether it can automatically be concluded from these figures that Tragsa carries out the essential part of its activities
with the public authority that controls it – which is the view taken by the Spanish Government and Tragsa itself – is doubtful.

64.   First of all, it cannot be concluded from quantitative data for a small number of years that the proportion of the work carried
out on a competitive basis for other public bodies and private parties rather than for the Spanish State Administration and
the Autonomous Communities will remain less than 10% of the total turnover. In the legal and administrative regime by which
Tragsa is governed, there is, at any rate, no provision limiting the extent of such work.

65.   Secondly, there is of course still the question of which authority controls Tragsa. If it were solely the Spanish State Administration,
from contracts with which Tragsa generates around 30% of its turnover, it would be difficult to argue that it carries out
the essential part of its activities with its controlling authority.

66.   However, there is a further complication that is legally relevant, to do with the hybrid nature of Tragsa’s legal personality.

67.   If a legal entity carries out the essential part of its activities as the ‘own’ executive service of one or more public authorities
and a smaller proportion of its activities on a competitive basis for other public authorities and private clients, the question
arises in what capacity it supplies the latter services.

68.   Must Tragsa be regarded for the smaller proportion as a legal entity which may be governed by a special constitution, but
which competes on the same footing as other private candidates to win contracts from ‘other’ public authorities and private
parties?

69.   Or does Tragsa not rather remain an executive service of the public authorities with which it carries out the essential part
of its activities, making its remaining capacity available on the market and thereby absorbing more of the remaining work
on the market in the field of agricultural infrastructure and nature conservation?

70.   This question is particularly important in that Tragsa’s statutory constitution does not appear to require a clear distinction
to be drawn for legal and accounting purposes between the two capacities in which it can operate, or at least it does not
contain any unambiguous safeguards against possible distortions of competition that could arise on the remaining market as
a result of Tragsa’s hybrid nature.

71.   Thus a situation could arise where private candidates for the type of contracts that Tragsa carries out, which are already
excluded from the arrangement in which Tragsa works for the Spanish State Administration and the Autonomous Communities, also
miss out on the remaining sub-markets (carrying out work for other public authorities and private parties) because Tragsa
starts from an advantageous competitive position as a result of being, if not the only, then at least a privileged candidate
on the sizeable closed market for contracts from the State Administration and the Autonomous Communities.

72.   The second *Teckal* criterion, that the entity, concession-holder or independent executive service concerned must carry out the essential part
of its activities with its controlling public authority, is therefore not in itself sufficient to prevent real or potential
obstacles to the free movement of goods and services and freedom of establishment, or to avoid possible distortion of competition.
I shall come back to this later.

73.   Finally, a further question arises concerning the provisions of Articles 152 and 194 of the revised text of the Law on Public
Procurement. ([18](#Footnote18))

74.   Under those provisions, the Administration may carry out works or produce goods using its own services and its own staff or
material resources. If the Administration has appropriate staff and material resources for the purpose, it is as a rule required
to do so. If this method of execution is chosen, private undertakings may also be involved without a prior award procedure
if the cost of the works in question is lower than a maximum of EUR 5 923 624.

75.   Those provisions do not make it a condition that the works in question must be executed or the goods in question produced
within the framework of the statutory remit of the executing organisations and services involved.

76.   It is naturally for the competent national court to interpret and apply this national legislation. That does not alter the
fact, however, that the texts in question appear to create powers and obligations for the administrative authorities in Spain
which may conflict with Community law. ([19](#Footnote19))

77.   The provisions of the Spanish legislation in question appear to mean that the various administrative authorities in Spain
are freely able, or even in principle required, ([20](#Footnote20)) to use the capacity of their executive services to carry out works or to provide services for purposes other than the statutory
duties of those executive services.

78.   Where the execution, provision or production of the works, services or goods in question entails costs lower than the statutory
maximum, the relevant services may also have recourse to private companies.

79.   Without there being any need to interpret the relevant national legislation more closely, it may be concluded that it allows
scope for national sub-markets for public contracts to be extensively protected or even shut off. The extent to which this
may occur depends on the capacity which the relevant executive services have available. By increasing their capacity and improving
their equipment and staffing, it is very easy to bring sizeable sub-markets for public contracts into the exclusive domain
of the executive services of the authorities concerned.

80.   The fact that private companies can also be involved in the execution of such contracts without a prior award procedure, provided
that the costs associated with those contracts do not exceed a certain maximum, increases that risk still further.

81.   The fact that Tragsa is prohibited under Article 88(5) of Law 66/1997 from tendering for public contracts from the Spanish
State Administration and the Autonomous Communities does not alter the risks presented by the application of Articles 152
and 194 of the Law on Public Procurement, since the purpose of those provisions is precisely to ensure that public contracts
are generally not awarded publicly if they can be executed by departments of the Administration.

82.   To summarise, the Spanish legislation in question here, in encouraging the Administration not to place public contracts through
public award procedures even when that is not justified by the public interest, raises serious doubts as to its compatibility
with the Community directives on public procurement. In addition, it accords a privileged position to the Administration’s
own executive services, which may be considered for public contracts that have no connection whatsoever with any legal or
statutory duties. Even though they are de jure instruments of the Administration, they are placed de facto in the position
of privileged market operators. The question is very much whether such an arrangement is consistent with the principle laid
down in Article 86(1) EC, which prohibits such forms of unequal treatment. ([21](#Footnote21))

83.   Finally, with more direct reference to the legal and factual situation underlying the questions referred, the issue also arises
whether the very possibility that Tragsa may, under Article 152 of the Spanish Law on Public Procurement, be entrusted to
carry out works and supply services outside its own remit has implications for whether this public undertaking is still able
to satisfy the second *Teckal* criterion, which is that it should carry out the essential part of its activities with the public authority that controls
it.

C –    *Answers to the questions*

Questions 1 and 2

84.   As I observed earlier in points 38 and 44 of this Opinion, the legal and factual situation in the main proceedings is not
one in which a contracting public authority awards a contract for pecuniary interest to an independent entity over which the
contracting authority exercises a control ‘which is similar to that which it exercises over its own departments’. In the present
case, Tragsa, even though it has a separate legal personality, must be regarded as a ‘service’ of the contracting authority.
That follows unequivocally from the relevant Spanish legislation.

85.   In *Stadt Halle and RPL Lochau*,([22](#Footnote22)) the Court specifically ruled that a public authority which is a contracting authority has the possibility of performing the
tasks conferred on it in the public interest by using its own administrative, technical and other resources, without being
obliged to call on outside entities not forming part of its own departments. In such a case, there can be no question of a
contract for pecuniary interest concluded with an entity legally distinct from the contracting authority. There is therefore
no need to apply the Community rules in the field of public procurement.

86.   In my view, it is apparent from the statutory regime that applies for Tragsa that it must be regarded as an ‘instrument’ or
executive service of the Spanish State Administration, in any event. In so far as Tragsa carries out, as part of its statutory
remit, contracts awarded to it by the Spanish State Administration, the Community rules in the field of public procurement
do not apply to it.

87.   I infer from the Court’s judgments in *Coname*([23](#Footnote23)) and *Parking Brixen*([24](#Footnote24)) that where the relationship between a contracting public authority and an executive service or entity is not governed by
the Community rules on public procurement the general provisions of the Treaty, and in particular the provisions on fundamental
freedom of movement and competition, remain applicable.

88.   Although the Community rules on public procurement do not apply where a public entity performs the tasks conferred on it in
the public interest by using its own administrative, technical and other services, without calling on outside entities, if
the entity in question exercises a control over those services which is similar to that which it exercises over its other
internal departments, and if the services in question also carry out the essential part of their activities with the public
entity that controls them. But those two criteria – known as the *Teckal* criteria – constitute, however, an exception. They must therefore be interpreted strictly and the burden of proving the existence
of exceptional circumstances justifying the derogation lies on the person seeking to rely on those circumstances. ([25](#Footnote25))

89.   It is apparent from these somewhat paraphrased considerations in *Parking Brixen* that it must also be examined whether the *Teckal* criteria can be invoked in respect of Tragsa. That is a matter for the national court, which will have to investigate the
legal and factual situation in which Tragsa operates. The Court can provide it with the necessary information which might
help it to resolve the dispute in the main proceedings.

90.   On second viewing, there is no doubt that the relationship between the Spanish State Administration and the Autonomous Communities
on the one hand and Tragsa on the other satisfies the first *Teckal* criterion:

All of the shares in Tragsa are owned directly or indirectly by the Spanish State and the Autonomous Communities, albeit that
only four regions hold shares on a symbolic scale;

Furthermore, the legal framework within which Tragsa operates as an executive service of the Spanish State Administration
and the Autonomous Communities for the purpose of agricultural structural policy in the broad sense appears to indicate conclusively
that it is operating in that capacity as an ‘instrument’ of the public authorities concerned. I refer here in particular to
my description of the legal framework in points 4 to 9 of this Opinion.

91.   In its more recent judgments, the Court has defined the first *Teckal* criterion in greater detail, so that in exercising a control ‘similar to that which it exercises over its own departments’
it must be a case of ‘a power of decisive influence over both strategic objectives and significant decisions of that company’. ([26](#Footnote26))

92.   This more detailed criterion applies not just to the relationship between one public authority and its ‘own’ executive service,
but also where different public authorities, whether or not acting together, have a joint executive service. ([27](#Footnote27))

93.   It is not unusual for a number of public authorities to establish, for the execution of certain public tasks such as sewage
treatment, a partnership which is responsible for managing a joint executive service. Where that joint executive service is
constituted in the form of a separate company, the authorities concerned can exercise their ‘decisive influence over both
strategic objectives and significant decisions of that company’ as shareholders and through representation on the company’s
board of directors. ([28](#Footnote28))

94.   Where the executive organisation is constituted as an ‘instrument’ of the public authorities in the partnership, then by analogy
with the requirements applied to control over a ‘shared’ independent entity for the execution of public tasks, the control
they exercise must be such as to ensure that all the public authorities involved have ‘influence over both strategic objectives
and significant decisions’ of that entity.

95.   In fact, while they cannot influence the strategy and management of their own joint service, nor can the public authorities
involved be called to account for their responsibility for that service’s actions either. The same also applies to their responsibility
for proper compliance with Community law.

96.   The Commission is also right when it argues that arrangements in which a number of public authorities use an executive service
that is constituted, in terms of power of influence over it, as the ‘instrument’ of just one of them are open to abuse. They
can mean that public authorities call on – or are invited to call on – an existing executive service of another public authority
to execute works and supply services for which they would otherwise have held a public award procedure. As I described in
points 57 to 59 above, this can result in substantial sub-markets being removed from the operation of primary and secondary
Community law on public procurement.

97.   That leads me to conclude, provisionally, that in cases where an executive service acts as an ‘instrument’ for various public
authorities, the statutory regime that applies to it must ensure that all the contracting public authorities have effective
influence over its strategic objectives and significant decisions. It must also specify for the exercise of precisely which
public responsibilities the public authorities in question can award contracts to the joint executive service as an ‘instrument’.

This is in order to restrict as far as possible the risk of abuse described in the previous point. ([29](#Footnote29))

98.   From the description of Tragsa’s statutory regime in points 4 to 9 above, it appears to be governed entirely or almost entirely
by the laws and regulations of the Spanish State Administration. The tariffs for the work which Tragsa carries out for the
State Administration and the Autonomous Communities are also laid down by and come under the responsibility of the State Administration.
The Autonomous Communities do not appear to have any direct influence. It is true, as Tragsa and the Spanish Government have
stressed, that the Autonomous Communities can bring their influence to bear through their contracts, but such control over
the design and execution of individual works and projects – which is inherent in any contract which a public authority awards
to one of its own services or to an external entity – is not the control intended by the Court when it refers to ‘decisive
influence over both the strategic objectives and significant decisions’ of, in this case, the Autonomous Communities’ ‘own’
executive service.

99.   I would also point out, for the sake of completeness, that the lack of influence which the Autonomous Communities have on
and under Tragsa’s statutory regime is by no means compensated for by the influence that they might bring to bear as shareholders
in the company, given that only a small minority of the Autonomous Communities have a merely symbolic shareholding in Tragsa.

100. The fact that the statutory regime which governs Tragsa’s operations does not give a clear, restrictive definition of the
areas in which the Autonomous Communities can give Tragsa work – the general legislation on award procedures in Spain discussed
in points 73 to 83 above is relevant here – is a further indication that Tragsa cannot be regarded as a joint executive service
for the execution of restrictively defined works and services in the public interest. I have already described earlier the
risks of abuse which such an open arrangement entails.

101. I therefore reach the conclusion that, operating under a statutory regime such as that in force, Tragsa cannot be regarded
as an ‘instrument’ of the Autonomous Communities because they cannot exercise any control over Tragsa’s strategic and other
significant decisions.

102. Since Tragsa cannot be regarded as an instrument of the Autonomous Communities, the obvious implication is that it is wrong
that the contracts given to Tragsa by the Autonomous Communities should not be subject to a public award procedure.

103. The situation is, in principle, different for the tasks entrusted to Tragsa by the Spanish State Administration, of which
it can indeed be regarded as an instrument.

104. It is apparent from the analysis of the legal framework within which Tragsa operates in points 61 to 65 of this Opinion that
that legal framework does not fulfil the requirements of the second *Teckal* criterion either.

105. The Court ruled in *Carbotermo and Consorzio Alisei*([30](#Footnote30)) that the requirement that the local authority must exercise over the person in question a control similar to that which it
exercises over its own departments and that person must carry out the essential part of its activities with the controlling
authority or authorities is aimed precisely at preventing distortions of competition.

106. Only where the person controlled carries out the essential part of its activities with the controlling authority or authorities
alone can it be justified that that undertaking is not subject to the restrictions of the directives on public procurement,
since they are in place to preserve a state of competition which, in that case, no longer has any raison d’être.

107. That implies that the person concerned can be viewed as carrying out the essential part of its activities with the controlling
authority within the meaning of *Teckal* only if that undertaking’s activities are devoted principally to that authority and any other activities are only of marginal
significance.

108. I have established in points 61 to 65 above that Tragsa’s activities with public authorities other than the Spanish State
Administration and the Autonomous Communities and with private companies have accounted for between 7 and 8.5% of its total
turnover in the last three years, and that the legal regime governing it does not place any restrictions on the scale of those
activities.

109. Furthermore, if my argument that the Autonomous Communities cannot be regarded as controlling authorities in respect of Tragsa
is followed, it must then be concluded that the requirement that the essential part of the activities must be carried out
with the controlling authority is not satisfied, given that the activities with the Autonomous Communities account for more
than 50% of Tragsa’s total turnover.

110. The condition that the essential part of the activities must be carried out with the controlling authority is a necessary
requirement in order to prevent distortion of competition on the Community market, as the Court recently emphasised in *Carbotermo and Consorzio Alisei.*([31](#Footnote31)) However, that condition is not sufficient.

111. Even if Tragsa did carry out the vast majority of its activities with the authority or authorities which control it, it would
still be possible for it seriously to distort competition on sub-markets with its remaining activities. As I have already
pointed out in points 66 to 72 above, as long as those activities are not kept completely separate in the organisation of
this executive service, both for financial and accounting purposes and in terms of personnel and material resources, from
the activities which it carries out as an executive service of one or more public authorities, it is in a position to use
the advantages that it derives from its public status in competition with other operators in other sub-markets that are still
open.

112. It is Tragsa’s hybrid nature as part internal executive service working for its controlling authority or the public authorities,
and part entity competing for work from other public bodies such as local authorities and from private parties and companies,
that makes a more detailed assessment of compatibility with Article 86(1) EC necessary.

113. In accordance with that provision, in the case of public undertakings Member States are neither to enact nor to maintain in
force any measure contrary to the rules contained in the Treaty, in particular to those rules provided for in Article 12 EC
and Articles 81 EC to 89 EC.

114. Now, if an internal executive service of a public authority seeks work on open sub-markets without adequate and transparent
measures being taken to prevent any financial material advantages which that service derives from the fact that it carries
out the essential part of its activities as an executive organisation of a public authority from being exploited in the competition
on those open sub-markets, then the specific requirements of Article 86(1) EC are not satisfied.

115. That failure to take measures is contrary to Articles 43 EC and 49 EC in particular, since executive services of public authorities
which also operate on open national markets can make it more difficult for potential candidates from other Member States to
access those markets. ([32](#Footnote32))

116. The risks which arise, in the light of the prohibition of State aid, from the absence of transparent financial or accounting
relations between the State or other public authorities, on the one hand, and public undertakings and companies, on the other,
have in the past led the Commission to introduce rules on the basis of Article 86(3) EC. ([33](#Footnote33))

In the legal and factual situation that lies at the heart of the main proceedings, those risks are at least just as great.
The absence of any specific safeguards in the legal regime that applies to Tragsa against open or covert forms of cross-financing
between its activities as an executive service of the Administration and as an operator on open sub-markets therefore conflicts
with Article 86(1) EC in conjunction with Articles 87 EC and 88 EC.

117. In points 78 to 83 above, I have examined in detail the risks which the application of provisions such as Articles 152 and
194 of the Spanish Law on Public Procurement may present for the sound operation of Community law on public procurement and
for the fundamental freedoms of movement and the state of competition on the Community market.

118. Those risks lie in the fact that, if executive services as ‘instruments’ or independent entities which are fully controlled
by the contracting authorities can also obtain, outside the scope of the competences or field of work laid down in their legal,
administrative or private law constitutional regime, contracts from the administrations responsible for them for the provision
of services, execution of works or production of goods, simply because they are available, the useful effect of the Community
directives on public procurement may be seriously undermined or, where those directives are not applicable, serious obstacles
may arise to the movement of goods and services between States and to freedom of establishment, and competition between those
executive services or publicly controlled entities and private undertakings on the relevant markets may be seriously distorted.
There is only one exception: where compelling public interest requirements provide justification for awarding work directly
to an own executive organisation even if that work lies outside its legal or constitutional remit. Examples here would include
natural disasters and similar exceptional circumstances, which may require the immediate involvement of all the resources
which an administration has available.

119. It is precisely those consequences which the Court sought to prevent with the second *Teckal* criterion. If that criterion is to be effective, it must be interpreted in such a way that it also prohibits the award to
‘own’ executive services or publicly controlled entities of public contracts which lie outside their legal, administrative
or constitutional remit.

120. Furthermore, the referring court has, in my view rightly, questioned the compatibility of provisions such as those of Articles
152 and 194 of the current Spanish Law on Public Procurement with Community competition law.

121. Such provisions clearly create a privileged position for own executive services or publicly controlled entities – acting as
market operators outside their legal, administrative or constitutional remit – in the award of public contracts, and thus
conflict with the provisions of Article 86(1) EC.

Question 3

122. The purpose of the Tribunal Supremo’s third question is obviously to determine whether the Court’s judgment in *Spain* v *Commission*([34](#Footnote34)) has implications for the assessment of Tragsa’s legal position in the award of public contracts.

123. In that judgment, the Court concluded that an organisation such as Tragsa, which, despite its financial and accounting autonomy,
is entirely subject to Spanish State control, must be regarded as one of the national administration’s own official departments
within the meaning of the first subparagraph of Article 3(5) of Council Regulation (EEC) No 154/75 of 21 January 1975 on the
establishment of a register of olive cultivation in the Member States producing olive oil (OJ 1975 L 19, p. 1).

124. As the Commission has rightly observed, that judgment of the Court concerns Tragsa’s activities on behalf of the Spanish State
in establishing a register of olive cultivation.

125. In answer to the Spanish Government’s assertion that for the establishment of that register Tragsa, as an independent entity,
had been given a private contract because of the requirements of confidentiality which such an activity had to satisfy, the
Court ruled that Tragsa had to be regarded as an own executive organisation forming part of the Administration, to which the
case-law developed in *Teckal*([35](#Footnote35)) and *ARGE*([36](#Footnote36)) applied in principle. The Court took the view that this was confirmed by Article 88(4) of Law 66/1997, ([37](#Footnote37)) in which it is established that Tragsa is required, as an instrument and technical service of the Administration, to carry
out, either itself or using its subsidiaries, to the exclusion of third parties, any work entrusted to it by the General Administration
of the State, the Autonomous Communities and the public bodies subject to them. ([38](#Footnote38))

126. I would point out here that the judgment in *Spain* v *Commission* primarily concerned whether the Kingdom of Spain was allowed to entrust to Tragsa the establishment of the olive cultivation
register without a public award procedure.

127. The Court was not required on that occasion to consider questions such as those referred in the present case. For that reason,
that judgment cannot be interpreted as meaning that Tragsa, as an executive service in the field of agricultural structural
policy in the broad sense, must be regarded as an instrument of the General Spanish State Administration. That is consistent
with my finding in point 103 of this Opinion.

D –    *Admissibility*

128. In the analysis of the Tribunal Supremo’s first two questions, it emerged that both the legal regime under which Tragsa operates
as an ‘instrument’ for, among others, the Autonomous Communities, the authority which that entity has to carry out work for
public authorities other than the State Administration and the Autonomous Communities and for private parties and companies,
and the rules contained in Articles 152 and 194 of the current Spanish Law may be criticised as being incompatible with the
criteria which the Court formulated in paragraph 50 of the judgment in *Teckal*.

129. That incompatibility has legal implications concerning the applicability of Community directives on public procurement, the
supply of services and the execution of works. It may also lead to conflict with Articles 43 EC, 49 EC and 86 EC.

130. The criticism spelled out above is also implied in the form of doubts in the order for reference.

131. The Tribunal Supremo makes its doubts particularly clear in paragraph ‘Four’ of the order for reference.

132. I am sure that the Court’s answers to the questions referred will, in the light of the doubts expressed, provide the referring
court with useful guidance for its decision in the main proceedings.

133. The arguments put forward by Tragsa and the Spanish Government that the legal questions raised by the referring court in its
order for reference are ‘new’, not relevant in an appeals procedure and therefore hypothetical and inadmissible are not at
all convincing, in my view.

134. Firstly, the Court is usually extremely cautious in assessing the purpose and usefulness of the questions referred to it by
the national courts in order to reach a decision in the main proceedings. Only where the questions are manifestly hypothetical
in nature does the Court deem them inadmissible. ([39](#Footnote39))

135. From the description of the proceedings before various administrative and judicial authorities in Spain, it appears that the
legal regime under which Tragsa operates has always been held to be compatible with the principles of national competition
law. The fact that the Tribunal Supremo has also chosen to take account of the principles of Community law on public procurement
and competition law is a step which does not in itself in any way render the resulting questions hypothetical.

136. Whether the Tribunal Supremo was authorised under Spanish law to take that step in the proceedings before it is a question
which the Tribunal itself, as the highest national court in the present case, must and can answer. ([40](#Footnote40))

137. Nor can I agree with the Commission’s view that the factual and legal information provided in the order for reference is too
concise. As has been made clear earlier, it provides sufficient information for a detailed analysis of the questions referred.

138. I have therefore come to the conclusion that the Tribunal Supremo’s questions are admissible.

V –  **Conclusion**

139. On the basis of the foregoing findings, I propose that the Court give the following answers to the questions referred by the
Tribunal Supremo:

–       The Community directives on public contracts for the provision of goods and services and the execution of works do not, in
principle, apply to a legal person governed by private law, such as Empresa de Transformación Agraria SA (Tragsa), which under
its legal regime must be regarded as an ‘instrument’ of the administration which is required to carry out the work it is given
by the relevant public authorities without contracts for pecuniary interest.

–       The national rules of law on the subject must ensure that the relevant national authorities control the entity concerned,
in the sense that they have a decisive influence over both its strategic objectives and its significant decisions, and ensure
that the entity at the same time carries out the essential part of its activities with the public authorities which control
it, so that any other activity is marginal.

–       The requirement that the relevant public authorities must be able to have a decisive influence over both the entity’s strategic
objectives and its significant decisions is not satisfied where the public authorities which use the entity as an executive
service do not have a direct influence on the content of the legal regime that applies to it, or on the tariffs it may charge
for its activities, and further as shareholders in the entity cannot exercise any decisive influence on its decisions.

–       The requirement that the entity must carry out the essential part of its activities with the authorities that control it is
not satisfied where the legal regime does not restrict the scale of the other activities so that they remain marginal.

–       It follows from Article 86(1) EC that an entity which, for the essential part of its activities, acts as an executive service
of the relevant public authorities must separate the activities which it carries out for other public authorities and for
private persons in a transparent manner, both in terms of organisation and for financial and accounting purposes, from its
activities as an instrument of the relevant public authorities.

–       It follows from the same provision of the EC Treaty that national administrations may not entrust to a legal person operating
as their own executive service contracts for the supply of goods and services or the execution of works, where those contracts
have no connection with their public responsibilities or where the performance of those contracts falls outside the statutory
remit of the legal person in question. The only exception is where there is objective justification for such work, such as
in the case of natural disasters or similar exceptional circumstances.

–       The national court must examine whether those conditions are satisfied in the legal and factual situation in the main proceedings.

---

[1](#Footref1) – Original language: Dutch.

---

[2](#Footref2) – In Question 2 the referring court merely refers to Council Directive 93/36/EEC of 14 June 1993 coordinating procedures
for the award of public supply contracts (OJ 1993 L 199, p. 1) and Council Directive 93/37/EEC of 14 June 1993 concerning
the coordination of procedures for the award of public works contracts (OJ 1993 L 199, p. 54), as subsequently amended and
now incorporated in Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination
of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 2004 L 134,
p. 114). However, the description of Tragsa’s activities in the relevant Spanish legislation and regulations suggests that
those activities may also include the provision of services and the supply of water. The possibility therefore remains that
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 93/38/EEC of 14 June 1993 coordinating the procurement procedures of entities
operating in the water, energy, transport and telecommunications sectors (OJ 1993 L 199, p. 84), now replaced by Directive
2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities
operating in the water, energy, transport and postal services sectors (OJ 2004 L 134, p. 1), may apply to the facts in the
main proceedings. For the sake of brevity, I shall always refer in this Opinion to the ‘public procurement directives’ in
general.

---

[3](#Footref3)
–
In its written observations the Commission points out in footnote 3 that an earlier law of 1973 on land reform and
development specifically provided for the setting-up of a land-reform undertaking as an instrument for State action in the
field of land development. The setting-up of Tragsa stems from the desire to give the Instituto Nacional de Reforma y Desarrollo
Agrario (National Institute for Agricultural Reform and Development, IRYDA) legal personality, as is clear from the preamble
to Royal Decree 379/1977, which explains that the aim is to carry out ‘... through an undertaking vested with legal personality
in the field of private law the works currently entrusted to the Parque de Maquinaria of the Institute, works which cannot
be given to private undertakings because they require specialisation, because of the space and time entailed, because it is
necessary to complete work schedules which cannot be delayed or because the works are almost or wholly unprofitable in cases
in which the Government, because of hurricanes or similar disasters, orders the Institute to take urgent action to help the
victims ...’.

---

[4](#Footref4)
–
Article 152(1)(d) of the revised text of 2000, which is currently in force.

---

[5](#Footref5) – The Commission also states that Tragsa has a small number of foreign subsidiaries. At the hearing, however, Tragsa said
that those undertakings had already either been wound up, or else had entirely or largely ceased operating.

---

[6](#Footref6) –      Tragsa and the Spanish Government have pointed out that Tragsa is not permitted by law to take part in public tenders for
the General State Administration and the Autonomous Communities. Tragsa may only tender in public tendering procedures organised
by public authorities other than the General State Administration and the Autonomous Communities.

---

[7](#Footref7) – In particular, Case C-107/98 *Teckal* [1999] ECR I-8121; Case C-26/03 *Stadt Halle**and RPL Lochau* [2005] ECR I-1; Case C-29/04 *Commission* v *Austria* [2005] ECR I-9705; and Case C‐340/04 *Carbotermo**and Consorzio Alisei* [2006] ECR I-4137.

---

[8](#Footref8) – Relevant judgments here include Case C-231/03 *Coname* [2005] ECR I-7287; Case C-458/03 *Parking Brixen* [2005] ECR I-8612; and Case C-410/04 *ANAV* [2006] ECR I-3303.

---

[9](#Footref9) – In paragraph 48 of the judgment in *Stadt Halle and RPL Lochau* (cited in footnote 7), the Court expressly confirms that there is no need to apply the Community rules in the field of public
procurement to works entrusted by a public authority to its own administrative, technical and other resources.

---

[10](#Footref10) –      See previous footnote.

---

[11](#Footref11) –      See, in particular, points 4 to 9 and 13 of this Opinion.

---

[12](#Footref12) – Case C-349/97 [2003] ECR I-3851.

---

[13](#Footref13) – At the hearing, the Commission discussed this point in great detail, including in the light of the Court’s recent judgments
in *Parking Brixen* (cited in footnote 8) and *Carbotermo and Consorzio Alisei* (cited in footnote 7).

---

[14](#Footref14) – Although those cases concerned the award of concessions by public authorities, which is not regulated in secondary Community
law, the principle established in those judgments that if a legal relationship is not governed by secondary Community law
its compatibility with primary Community law can always be assessed is also applicable in the present case.

---

[15](#Footref15) – The Court has always strictly interpreted this derogation as being restricted to activities and interests connected with
the exercise of official authority. See Case 2/74 *Reyners* [1974] ECR 631, confirmed on several occasions since then, including in Case C-283/99 *Commission* v *Italy* [2001] ECR I-4363, paragraph 20.

---

[16](#Footref16) – See on this point the judgments in *Coname*, *Parking Brixen* and *ANAV* (all cited in footnote 8).

---

[17](#Footref17) – From the earlier overview of the relevant Spanish legislation, particularly in point 13, it might be inferred that the
use of Tragsa by the Autonomous Communities as their ‘own’ executive organisation is optional. If that were true, then the
classification of Tragsa as an ‘instrument’ of the Autonomous Communities becomes even more problematic, since the freedom
of choice to use an executive organisation of another public entity rather than holding a public award procedure conflicts
with the provisions of Community law on public procurement. It is for the national court to determine whether they have that
freedom of choice.

---

[18](#Footref18) – Cited in point 15 of this Opinion.

---

[19](#Footref19) – On pages 12 and 13 of its order for reference, the Tribunal Supremo is clear about its own doubts here: ‘Problems of compatibility
with the general principles of Community law also seem to be raised by the eventuality that the Administration, by participating
directly and by making use of the legal authorisation provided in the abovementioned provisions of the successive laws governing
public procurement, may take on, through a public company which is given the legal status of an “instrument” of the Administration
itself, so many contracts as to alter the relevant market significantly.’

---

[20](#Footref20) – It appears from the wording of Articles 152 and 194 of the Spanish Law on Public Procurement that the national legislature
at least assumes that contracting authorities will make use of the remaining capacity of their executive services: ‘... in which
case use should usually be made of that method of execution’. A more detailed interpretation of this is naturally a matter
for the referring court.

---

[21](#Footref21) – See points 117 to 121 below for a more detailed discussion of this.

---

[22](#Footref22) – Cited in footnote 7, paragraph 48.

---

[23](#Footref23) – Cited in footnote 8, paragraph 16.

---

[24](#Footref24) – Cited in footnote 8, paragraphs 61 and 62.

---

[25](#Footref25) – See, among others, *Stadt Halle and RPL Lochau* (cited in footnote 7), paragraph 46, and *Parking Brixen* (cited in footnote 8), paragraphs 63 and 65.

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[26](#Footref26) – See *Parking Brixen* (cited in footnote 8), paragraph 65, and *Carbotermo and Consorzio Alisei* (cited in footnote 7), paragraph 36.

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[27](#Footref27) – In the judgment in *Coname* (cited in footnote 8), there was such a joint entity shared by public authorities (Padania), as there was also in the judgment
in *Carbotermo and Consorzio Alisei* (cited in footnote 7). The fact that both quantitative and qualitative requirements must be applied is clear both from *Coname* (ibid.), where a shareholding of 0.97% was not deemed sufficient to provide objective justification, and from *Carbotermo and Consorzio Alisei*, where the control which the controlling public authorities exercised over the board of directors of a company was not deemed
sufficient to have ‘decisive influence over both strategic objectives and significant decisions of that company’.

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[28](#Footref28) – The existence of a decisive influence over Tragsa cannot be inferred from the public law agreements which the Autonomous
Communities have concluded with Tragsa, referred to in point 13 of this Opinion, the text of which was attached by the Commission
as an annex to its written observations. However, it is ultimately for the national court to decide on an interpretation here.

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[29](#Footref29) –      The need for a precise and restrictive description of the tasks and powers of a joint executive organisation is also relevant
for the second *Teckal* criterion. See points 112 to 116 and 117 to 121 below.

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[30](#Footref30) – Cited in footnote 7, paragraphs 58 to 63.

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[31](#Footref31) – Cited in footnote 7.

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[32](#Footref32) – In *Coname* (cited in footnote 8), the Court stated, albeit in a slightly different context, that the absence of the necessary transparency
can constitute an obstacle to the free movement of services and freedom of establishment.

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[33](#Footref33) – See Commission Directive 80/723/EEC of 25 June 1980 on the transparency of financial relations between Member States and
public undertakings (OJ 1980 L 195, p. 35), subsequently supplemented and amended on several occasions.

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[34](#Footref34) – Cited in footnote 12.

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[35](#Footref35) – Cited in footnote 7.

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[36](#Footref36) – Case C-94/99 [2000] ECR I-11037, paragraph 40.

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[37](#Footref37) – The content of this is summarised in point 5 above.

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[38](#Footref38) – *Spain* v *Commission* (cited in footnote 12), paragraphs 204 to 206.

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[39](#Footref39) – See, among others, Case 244/80 *Foglia* [1981] ECR 3045, paragraph 18; Case C-314/96 *Djabali* [1998] ECR I-1149, paragraph 18; and Case C-167/01 *Inspire Art* [2003] ECR I-10155, paragraphs 44 and 45.

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[40](#Footref40) – Only where, in examining the facts on which the main proceedings are based and the relevant national law, the Court’s ruling
on the questions referred manifestly cannot help to resolve the dispute can the questions referred be held to be inadmissible.
See, among others, Case C-132/81 *Vlaeminck* [1982] ECR 2953, paragraphs 13 and 14, and, more recently, Case C-314/01 *Siemens and ARGE Telecom* [2004] ECR I-2549, paragraph 37.