Order;Summary — ECLI:EU:C:2020:87
Date: 2020-02-06
Language of the case: Italian
Court formation: Ninth Chamber
Subject matter: Right of establishment;Approximation of laws;Freedom to provide services
Procedure: Reference for a preliminary ruling
Origin: Italy

Summary C-89/19 — 1 
Case C-89/19 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged: 
5 February 2019 
Referring court:  
Consiglio di Stato (Italy) 
Date of the decision to refer: 
8 November 2018 
Appellant:  
Rieco SpA 
Respondents: 
Comune di Lanciano 
Ecolan SpA 
  
Subject-matter of the action in the main proceedings 
Appeal before the Consiglio di Stato (Council of State, Italy) against the judgment 
of the Tribunale amministrativo regionale per l’Abruzzo (Regional Administrative 
Court, Abruzzo, Italy; ‘the TAR Abruzzo’) by which it dismissed an action for 
annulment of the acts by which the Comune di Lanciano (Municipality of 
Lanciano, Italy) awarded a contract for the management of urban hygiene services 
to an in-house company under similar control, exercised jointly. 
Subject-matter and legal basis of the reference 
This reference for a preliminary ruling, made pursuant to Article 267 TFEU, 
concerns the interpretation of the principle of free administration by public 
authorities set out in Article 2 of Directive 2014/23/EU, and of Article 12(3) of 
Directive 2014/24/EU, as well as the possible infringement of those provisions by 
Italian legislation concerning the direct award of contracts to in-house companies. 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-89/19 
 
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Questions referred 
1. Does EU law (in particular the principle of free administration by public 
authorities and the principle that the different rules governing the award of 
service contracts and the management of services relevant to public 
authorities must be essentially equivalent) preclude a national law (such as 
that set out in Article 192(2) of the Italian Public Procurement Code, 
Legislative Decree No 50 of 2016), which places the in-house award of 
contracts on a subordinate level to award by means of public tender 
procedure and establishes it as an exception to the latter, by: (i) permitting 
contracts to be awarded in house only when there is clear evidence of failure 
in the relevant market, and (ii) requiring authorities intending to make an 
award by inter-organisational delegation to provide specific reasons with 
regard to the benefits for society at large accruing from that form of award? 
2. Does EU law (in particular Article 12(3) of Directive 2014/24/EU 
concerning the in-house award of contracts where similar control is 
exercised jointly with other authorities) preclude a provision of national law 
(such as that set out in Article 4(1) of the Consolidated Law concerning 
companies in which all or a majority of the share capital is in public 
ownership — Legislative Decree No 175 of 2016) which prevents a public 
authority from acquiring a shareholding (in any event one that can guarantee 
control or power of veto) in a body in which a number of other public 
authorities have shareholdings, where that authority intends in any event to 
acquire subsequently a position of joint control and therefore the possibility 
of making direct awards to that body in which a number of other public 
authorities have shareholdings? 
Provisions of EU law relied on 
Directive 2014/24/EU of the European Parliament and of the Council of 
26 February 2014 on public procurement and repealing Directive 2004/18/EC (OJ 
2014 L 94, p. 65; ‘Directive 2014/24/EU’). In particular:  
– Recital 5, according to which ‘nothing in this Directive obliges Member States 
to contract out or externalise the provision of services that they wish to provide 
themselves or to organise by means other than procurement within the meaning 
of this Directive’; 
– Article 12(3), which sets out the conditions that must be satisfied in order to 
award a public contract where similar control is exercised jointly with other 
public authorities. 
Directive 2014/23/EU of the European Parliament and of the Council of 
26 February 2014 on the award of concession contracts (OJ 2014 L 94, p. 1; 
‘Directive 2014/23/EU’). In particular, Article 2(1), which establishes the 
principle of free administration by public authorities. 
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Provisions of national law relied on 
Decreto legislativo 18 aprile, n. 50 — Codice dei contratti pubblici (Legislative 
Decree No 50 of 18 April establishing the Public Procurement Code; ‘the Public 
Procurement Code’). In particular: 
– Article 5, which transposes Article 12 of Directive 2014/24/EU and establishes 
the conditions to be fulfilled in order for in-house awards to be permitted under 
national law in the case of joint similar control; 
– Article 192(2), which provides as follows: ‘For the purpose of making an in-
house award of a contract for the supply of services that are available on the 
competitive market, the contracting authorities shall carry out a prior 
assessment of the financial merits of the offers of the in-house tenderers in the 
light of the subject matter and the value of the services, stating in the grounds 
for the decision of the award the reasons for not having recourse to the market, 
as well as the benefits for society at large of the form of management chosen, 
with reference also to the objectives of universality and social behaviour, 
efficiency, economy and quality of services, as well as optimal use of public 
resources.’ 
Decreto legislativo 19 agosto 2016, n. 175 — Testo unico in materia di società a 
partecipazione pubblica (Legislative Decree No 175 of 19 August 2016 
establishing the Consolidated Law concerning companies in which all or a 
majority of the share capital is in public ownership). In particular: 
– Article 4, entitled ‘Aims that may be pursued by means of the acquisition and 
management of public shareholdings’, which, in paragraph 1 thereof, provides 
as follows: ‘Public authorities may not, directly or indirectly, set up companies 
the object of which is to produce goods and provide services not strictly 
necessary for the pursuit of their own institutional objectives, or acquire or hold 
shareholdings, including minority shareholdings, in such companies’; and 
– Article 16, entitled ‘In-house companies’, which sets out the rules and 
conditions for awarding contracts directly to in-house companies. 
Succinct presentation of the facts and the main proceedings 
1 Rieco SpA (‘the appellant’) is a company operating in the urban waste disposal 
sector that is interested in acquiring, by means of a tender procedure, a contract 
for the management of the urban hygiene services in the Comune di Lanciano 
(Municipality of Lanciano, Italy). 
2 That municipality awarded a contract for those services to an in-house company 
without issuing a call for tenders. The company awarded that contract is Ecolan 
SpA, a wholly publicly-owned company, 21.69% of which is owned by the 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-89/19 
 
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Comune di Lanciano together with another 52 municipalities of the Provincia di 
Chieti (Chieti Province, Italy). 
3 The appellant brought an action before the TAR Abruzzo, seeking annulment of 
the decisions with which, in 2017, the Comune di Lanciano, a minority 
shareholder in Ecolan SpA, approved the amendment of the statute of that 
company and the related shareholder agreements, so as to make it possible to 
directly award the contract for the services in question. 
4 The TAR Abruzzo, by judgment No 33 of 2018, dismissed the action as 
unfounded. 
5 The appellant then appealed against that judgment before the Consiglio di Stato 
(Council of State; ‘the referring court’), contending that it was flawed and asking 
for it to be revised. 
The essential arguments of the parties to the main proceedings 
6 Among the grounds of appeal put forward by the appellant, those relevant to the 
present reference for a preliminary ruling are the following: 
(a) the third ground of appeal, to which the first question referred is connected, 
alleging failure by the first instance court to take account of the fact that the direct 
award of the contract was not preceded by an assessment of its financial merits, as 
required by the relevant national legislation, in particular, by Article 192(2) of the 
Public Procurement Code; 
(b) the sixth ground of appeal, to which the second question referred is 
connected, alleging failure by the first instance court to take account of the 
constraints imposed by national legislation on share capital ownership by public 
entities which do not exercise similar control over the in-house company. 
Succinct presentation of the reasons for the request for a preliminary ruling 
The first question referred for a preliminary ruling 
7 The referring court states that, prima facie, the decisions contested by the 
appellant do not seem to comply with the provisions of Article 192(2) of the 
Public Procurement Code, in so far as they do not state the reasons why the public 
authorities chose to make a direct in-house award and not to issue a call for 
tenders. 
8 However, the referring court is uncertain whether the strict conditions laid down 
in national legislation for in-house awards are compatible with the relevant 
provisions and principles of EU law. In that regard, the court notes that 
Article 192(2) of the Public Procurement Code makes the in-house award of 
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contracts for services that are available on the market subject to two conditions, 
which are not, by contrast, required for the other forms of award: 
(i)  the first condition concerns the obligation to state the reasons for not having 
‘recourse to the market’. In other words, it is possible directly to award a contract 
for the provision of services in house only when there is evidence of substantial 
‘market failure’ on the relevant market; 
(ii) the second condition imposes an obligation to indicate the ‘benefits for 
society at large’ of choosing to make a direct in-house award of a contract for 
services that are available on the market. 
9 The imposition of such conditions places in-house award, under Italian law, in a 
subordinate position vis-à-vis all other forms of award and establishes it as an 
exception, particularly vis-à-vis award by means of tender procedure. That 
restrictive approach is also confirmed by the case-law of the Corte costituzionale 
(Constitutional Court), which has established that the imposition, under national 
law, of limitations on the direct award of contracts that are more extensive than 
those imposed by EU law are lawful (see judgment No 325 of the Constitutional 
Court, Italy, of 17 November), and has held on numerous occasions that in-house 
award is an ‘exception to the general rule that contracts are to be awarded to third 
parties by means of a public procurement procedure’ (see, for example, judgment 
No 46 of 20 March 2013). 
10 The referring court considers it appropriate to ask whether the restrictive approach 
under the Italian legal order described above complies with the principles and 
provisions of EU law. In that regard, the referring court notes that under the EU 
legal system two principles coexist, but these apparently contradict each other: on 
the one hand is the principle (set out in Article 2 of Directive 2014/23/EU) that 
public authorities are free to decide as they see fit how to organise the provision of 
services relevant to them, and, on the other hand, is the principle of full 
competition in the public procurement and concessions markets. The second 
principle is ancillary to the first, since, as the referring court notes, public 
authorities are first required to choose whether to use their own resources (self-
performance) or to make use of external economic operators (outsourcing). Only 
in the event that outsourcing is chosen are the authorities required to respect the 
principle of full competition between market operators. 
11 In the light of such an analysis, the referring court notes that, in contrast to what 
occurs under the Italian legal system, in which self-performance of services is 
placed on a level subordinate to the outsourcing of services, the EU legal system 
places in-house award (one of the main forms of self-performance) on 
substantially the same level as award to third parties by means of a public 
procurement procedure. 
12 The difference between national legislation and the provisions and principles of 
EU law is all the more apparent in view of the fact that, under the EU legal 
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system, in-house award is not only considered to be on the same level as the 
award of contracts to third parties by means of a public procurement procedure, 
but is actually a logical first option prior to the decision by the public authorities 
to outsource services relevant to them. In fact, according to the provisions of EU 
law, public authorities may choose to outsource the provision of services only 
after having ruled out the possibility of using its own resources. That model 
responds to the basic economic principle that it is not appropriate to have recourse 
to others when one is capable of meeting one’s own needs. 
13 The model described above, under which the system of self-performance is fully 
equal to that of outsourcing (if not indeed the logical first option), is confirmed in 
the case-law of the Court of Justice, which has clarified that ‘a public authority 
has the possibility of performing the public interest tasks conferred on it by using 
its own resources, without being obliged to call on outside entities not forming 
part of its own departments, and [may] do so in cooperation with other public 
authorities’ (see judgment of 9 June 2009, Commission v Germany, C-480/06, 
EU:C:2009:357, paragraph 45). The European Commission has expressed itself in 
largely similar terms in the ‘Commission interpretative communication of 
5 February 2008 on the application of Community law on Public Procurement and 
Concessions to Institutionalised Public-Private Partnerships’ (OJ 2008 C 91, p. 4), 
in which it stated that ‘under Community law, public authorities are free to pursue 
economic activities themselves or to assign them to third parties, such as mixed 
capital entities founded in the context of a PPP. However, if public bodies decide 
to involve third parties in economic activities and if this involvement qualifies as a 
public contract or a concession, the Community provisions for public procurement 
and concessions must be complied with.’ Lastly, the equal status under the EU 
legal order of self-performance and outsourcing of services is confirmed in 
Article 2 of Directive 2014/23/EU and in recital 5 of Directive 2014/24/EU. 
The second question referred for a preliminary ruling 
14 The referring court notes, first of all, the particular company structure of Rieco 
SpA, which provides for the participation of two types of member (public 
authorities): ‘contracting’ members (which have similar control over the company 
and may therefore award contracts directly to the company) and ‘non-contracting’ 
members (which do not have similar control and may not, as a result, make direct 
awards). 
15 Although, on the one hand, that particular arrangement appears to be permissible 
in the light of EU law, in particular Article 12(3) of Directive 2014/24/EU, on the 
other hand it raises serious doubts as to whether national legislation, in particular 
Article 4(1) of the Consolidated Law concerning companies in which all or a 
majority of the share capital is in public ownership, is compatible with that 
provision of EU law. According to Article 4(1): ‘public authorities may not, 
directly or indirectly, set up companies the object of which is to produce goods 
and provide services not strictly necessary for the pursuit of their own institutional 
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objectives, or acquire or hold shareholdings, including minority shareholdings, in 
such companies’. 
16 The referring court notes that, in the present case, that provision seems to preclude 
the possibility of ‘non-contracting’ authorities subsequently acquiring similar 
control of Rieco SpA, since that would breach the criterion of ‘strict necessity’ 
laid down by the above-cited provision; necessity that must be current and not 
hypothetical or future. 
17 The question therefore arises whether that provision of national law is contrary to 
the abovementioned provisions of EU law, which allow the acquisition of similar 
control by ‘non-contracting’ authorities within an in-house company in which 
many other public authorities have shareholdings.