Opinion of the Advocate General — ECLI:EU:C:2018:781
Date: 2018-09-27
Language of the case: Italian
Subject matter: Right of establishment;Approximation of laws;Freedom to provide services
Procedure: Reference for a preliminary ruling
Origin: Italy

summary, that the withdrawal clauses are clear, that they are proportionate given the aim sought and that they do not automatically operate to exclude the Stanley companies from the procurement process. The Portuguese Government did not submit specific observations on the third question. 70. I shall first consider Article 30(2)(h) and (k) of the model contract by reference to the principle of transparency (which implies also consideration of the principle of non-discrimination) before turning to the requirements of Articles 49 and 56 TFEU. Finally, I shall examine the res judicata issue, focusing in particular on Article 30(2)(h) of the model contract. 71. The order for reference notes that the TAR Lazio considered the withdrawal clauses to be sufficiently transparent. In that regard, the standard to be applied is to view the clauses from the perspective of a reasonably well-informed and normally diligent tenderer exercising ordinary care. (48) In Costa and Cifone, the Court provided guidance as to what satisfied the requirements of transparency in this context. Thus, wording allowing for the withdrawal of a concession for ‘offences referred to in Law No 55 of 19 March 1990’ was deemed to be acceptable because it related to specific and identified offences found in that law (which were also consistent with the overall aim of combatting criminality). Conversely, however, wording which allowed for withdrawal for ‘any other offence liable to breach the relationship of trust with the [contracting authority]’ was not acceptable because such wording did not ‘enable any potential tenderer to assess with certainty the likelihood that such penalties will be applied to it’. (49) 72. It is for the referring court, if necessary, to reassess the transparency of both withdrawal clauses in light of the case-law to which I have just referred. 73. For my part, I do not consider that a reasonably well-informed and normally diligent tenderer exercising ordinary care would have much difficulty in understanding the scope and application of Article 30(2)(k) of the model contract. So far as Article 30(2)(h) is concerned, the circumstances in which the ADM may withdraw the concession under that clause of the model contract are described succinctly but clearly. A cumulative set of conditions requires to be fulfilled before the ADM decides whether or not to proceed with the withdrawal process. Wthdrawal is not automatic, but it is clear that withdrawal may occur once those conditions are united. The fact that the clause gives the ADM discretion whether to withdraw the concession does not deprive the clause of its clarity. Moreover, it is clear that a third party distinct from the ADM (namely the public prosecutor, as was common ground at the hearing) assesses whether there is sufficient material to warrant indictment for a suspected criminal offence. The combination of those elements seems to me adequate to comply with the principle of transparency. 74. Turning, next, to the assessment under Articles 49 and 56 TFEU, this Court has held that subjecting an economic activity such as the provision of management services for the Lotto to the requirement to bid for, and win, a contract and to clauses allowing for potential withdrawal of that concession thereafter constitutes an obstacle to the freedoms guaranteed in Articles 49 and 56 TFEU. (50) The clauses on withdrawal therefore require to be justified by reference to an overriding public interest aim and to satisfy the proportionality test. I have already discussed what is required of the Italian authorities in terms of the overriding public interest aim to be achieved. (51) The referring court will have to satisfy itself whether the contested clauses are appropriate and necessary to achieve that aim and do not go beyond what is necessary to do so. Here, I merely note that the grounds in Article 30(2)(h) of the model contract, for example, are expressly linked to criminal activity and that one of the stated public interest aims is preventing criminal activity in the management of the Lotto. 75. I turn finally to the argument in relation to res judicata. Does the fact that Article 30(2)(h) and Article 30(2)(k) of the model contract are not restricted to offences that are res judicata mean that they are automatically to be considered disproportionate? (52) 76. It is helpful to recall at this juncture that an assumption on which the third question is based is that the Stanley companies would have to abandon an existing, lawful and commercially successful model of operation in order not to fall foul of the clauses in Article 30(2)(h) and/or (k) of the model contract. 77. In Costa and Cifone, the clauses at issue were framed in terms of withdrawal of the concession but in practice had the effect of excluding certain operators from participating in the tender process altogether (because withdrawal would effectively be triggered on the day the license was awarded). The Court held that ‘… exclusion from the market through withdrawal of the licence should in principle be regarded as proportionate to the objective of combating criminality only if it is based on a judgment which has the force of res judicata and concerns a sufficiently serious offence. Legislation which provides for operators to be excluded, even temporarily, from the market can be regarded as proportionate only if it provides for an effective legal remedy and compensation for any loss suffered in the event that such exclusion subsequently proves to be unjustified’. (53) 78. It is not obvious from the material before the Court that the contested clauses in the present case did have the effect of excluding the Stanley companies automatically from the tendering process. The referring court will therefore first need to examine carefully the nature of any pending proceedings against the Stanley companies and determine whether they were indeed such as to trigger the withdrawal clause immediately, had those companies tendered for and been awarded the contract. If they were not, the Court’s dicta in Costa and Cifone are in any event not directly pertinent. 79. If the Stanley companies were excluded, however, is it permissible to include a withdrawal clause in a model contract for an exclusive lottery concession that may be triggered at the discretion of the contracting authority at the point where the concessionaire, its servants or agents have been indicted, but not yet tried for, a serious criminal offence (a fortiori, where the conviction has not yet acquired the force of res judicata)? 80. It seems to me that we have here a classic example of the need to strike the correct balance between two competing interests. On the one hand is the public interest in preventing criminal activity within the lottery system (as claimed by the Italian Government). On the other hand is the private commercial interest of the sole concessionaire, coupled with the presumption that a party charged with a criminal offence is innocent until proven guilty. (54) 81. So far as that public interest is concerned, the existence of a judgment that has the force of res judicata implies the (perhaps extended) process of (first) a full criminal trial and then (potentially) a full sequence of appeals. It may take a long time before the conviction becomes res judicata. From the perspective of the public interest, there are clearly grave disadvantages in having to wait until that point before the sole concession to run the national lottery can be withdrawn. Meanwhile, the management of a valuable and vulnerable service will have remained in the hands of the concessionaire. That is clearly an undesirable outcome if — ultimately — it turns out that the concessionaire, its servants or agents are indeed guilty of a criminal offence which (to cite Article 30(2)(h) of the model contract), ‘because of its nature, seriousness, method of commission and connection with the activity for which the concession was awarded, [the awarding authority] considers such as to preclude the concessionaire possessing the requisite reliability, professionalism and moral quality’. 82. If, however, the withdrawal clause is permitted to be triggered at a point where there is (in effect) only a suspicion that a serious offence has been committed (albeit a suspicion endorsed by a third party public authority in the shape of the public prosecutor), that may tilt the balance too far towards the public interest to the detriment of the private interest. On the basis of a prima facie case that has not yet been tested in a criminal trial conducted under normal guarantees, the operator’s right to conduct its business and its right to be presumed innocent until found guilty are both at risk of being undermined. 83. Here, I note that the EU legal order in other public procurement procedures envisages the possibility of exclusion from a tendering procedure by reference not only to the commission of serious criminal offences but also to instances where the operator is ‘guilty of a grave professional misconduct which renders his integrity questionable’ (emphasis added). (55) Thus, in interpreting the equivalent exclusion provision under Directive 2004/18, (56) for example, the Court has held that ‘a judicial decision, even though it is not yet final may, depending on the subject of the decision, provide the contracting authority with the appropriate means by which to substantiate the existence of grave professional misconduct, its decision being, in any event, open to judicial review’. (57) 84. I therefore suggest that the appropriate place to strike the balance between the public and private interests is at the point where there has already been a ‘judicial decision’ substantiating the suspicion of criminality or grave professional misconduct. Thus, in the present case, that would — for example — permit exclusion once there was a first instance conviction in a relevant court relating to a criminal offence that caused the ADM to doubt that the operator had the ‘requisite reliability, professionalism and moral quality’ relevant to the Lotto services concession contract. It would also be necessary for there to be legal remedies available to the excluded concessionaire allowing it (i) to seek to suspend the ADM’s decision withdrawing the concession pending the appeal of the judicial decision in question and (ii) to seek damages against the contracting authority were that judicial decision subsequently to be overturned on appeal. (58) For both types of remedy, the necessary mechanisms would need to be established as a matter of law, rather than as a matter of contract. (59) 85. So far as the present proceedings are concerned, whether the two impugned withdrawal clauses did — or did not — dissuade the Stanley companies from tendering and what remedies and guarantees are available to an excluded concessionaire under national law are both issues that are, quintessentially, for the national court to verify and I do not explore them further here. 86. I therefore propose to answer the third question as follows: Articles 49 and 56 TFEU and the principles of non-discrimination, proportionality and transparency do not preclude the inclusion, in a model contract for the exclusive concession to manage a national lottery, of clauses that provide for the concession to be withdrawn if (a) the concessionaire, its servants or agents are charged with certain criminal offences or (b) the concessionaire infringes national administrative law rules on the prevention of irregular, unlawful or covert gambling, and where those clauses act to exclude a potential operator, provided that – the clauses in question are sufficiently precise, predictable and clear for their scope and application to be understood by a reasonably well-informed and normally diligent tenderer exercising ordinary care; and – the relevant criminal or administrative law offences referred to in the clauses have been confirmed by a judicial decision; and – the operator concerned has a legal right to challenge such a judicial decision (including the right to seek interim relief) and a legal right to seek damages should that judicial decision subsequently be overturned on appeal. Conclusion 87. Accordingly, I propose that the Court of Justice should reply as follows to the questions referred for a preliminary ruling by the Consiglio di Stato (Council of State, Italy): (1) A decision by the relevant national authorities to apply a concession model for the management of a gaming activity such as the Lotto constitutes a restriction of the enjoyment of the freedoms guaranteed by Articles 49 and 56 TFEU. It is for the referring court to determine, having regard to the objective characteristics of the exclusive concession model put out to tender, the extent of any such restriction. It will then be for the national authorities to adduce sufficient evidence of (i) the overriding public interest aim it seeks to achieve through that choice of model and (ii) the proportionality of that model vis-à-vis that aim. (2) EU law does not preclude the inclusion of a high contract value in the call for tenders for a public procurement tender if the objectivity of that figure is established both on its own merits and by reference to the other rights and obligations set out in the call for tenders. It is for the national court to determine whether that is the case. (3) Articles 49 and 56 TFEU and the principles of non-discrimination, proportionality and transparency do not preclude the inclusion, in a model contract for the exclusive concession to manage a national lottery, of clauses that provide for the concession to be withdrawn if (a) the concessionaire, its servants or agents are charged with certain criminal offences or (b) the concessionaire infringes national administrative law rules on the prevention of irregular, unlawful or covert gambling, and where those clauses act to exclude a potential operator, provided that – the clauses in question are sufficiently precise, predictable and clear for their scope and application to be understood by a reasonably well-informed and normally diligent tenderer exercising ordinary care; and – the relevant criminal or administrative law offences referred to in the clauses have been confirmed by a judicial decision; and – the operator concerned has a legal right to challenge such a judicial decision (including the right to seek interim relief) and a legal right to seek damages should that judicial decision subsequently be overturned on appeal. 1 Original language: English. 2 Adam Smith, Wealth of Nations, 1776, Book 1, Chapter X, Part 1. 3 Directive of the European Parliament and of the Council of 26 February 2014 (OJ 2014 L 94, p. 1) (‘the directive’). 4 The ‘CPV’ is the ‘Common Procurement Vocabulary’ which establishes ‘a single classification system applicable to public procurement to standardise the references used by contracting authorities and entities to describe the subject of their contracts’ (recital 1 of Commission Regulation (EC) No 213/2008 of 28 November 2007 amending Regulation (EC) No 2195/2002 of the European Parliament and of the Council on the Common Procurement Vocabulary (CPV) and Directives 2004/17/EC and 2004/18/EC of the European Parliament and of the Council on public procurement procedures (OJ 2008 L 74, p. 1)). Code 92351100-7 specifically relates to lottery operating services. 5 As I understand it, the game of Lotto essentially consists of a player guessing five numbers correctly on one or more of 11 ‘wheels’. The Lotto is a fixed-odds based game meaning that the amount that can be won is known in advance. Three draws a week are conducted. Purchases of lottery tickets can be made online and in person. 6 The concession notice was published in the Official Journal of the European Union on 17 December 2015 (2015/S 244-443689). It was subsequently published in the GURI, Special Series, No 150 on 21 December 2015. I shall refer to that concession notice as ‘the call for tenders’. 7 Judgment of 28 January 2016, C‑375/14, EU:C:2016:60. The case concerned the award by the Italian authorities of up to 2 000 licences for the collection of bets — ‘exclusively in a physical network’ — on sporting events, including horse racing, and non-sporting events. The requirement that the network be returned free of charge to the authorities upon withdrawal of the concession was one of the issues considered by the Court. See further point 62 below and its accompanying footnote. 8 Judgment of 8 September 2010, WinnerWetten, C‑409/06, EU:C:2010:503, paragraph 36 and the case-law cited. 9 See order of 3 July 2014, Talasca, C‑19/14, EU:C:2014:2049, paragraph 23 and the case-law cited. 10 Compare and contrast the scenario described in order of 20 July 2016, Stanleybet Malta and Stoppani, C‑141/16, not published, EU:C:2016:596, relied on by Lottoitalia. 11 Judgment of 13 February 2014, TSN and YTN, C‑512/11 and C‑513/11, EU:C:2014:73, paragraph 32 and the case-law cited. See further points 56 and 68 below. 12 See, inter alia and by analogy, judgment of 10 March 2011, Privater Rettungsdienst und Krankentransport Stadler, C‑274/09, EU:C:2011:130, paragraphs 24 to 26 and the case-law cited. See, in that latter regard, the findings of the TAR Lazio cited at point 18 above and points 50 and 53 below. 13 See, inter alia, judgment of 3 June 2010, Sporting Exchange, C‑203/08, EU:C:2010:307, paragraph 39 and the case-law cited. The passage cites in the original ‘Article 49 EC’, the precursor to Article 56 TFEU. 14 See, by analogy, judgment of 16 April 2015, Enterprise Focused Solutions, C‑278/14, EU:C:2015:228, paragraph 20. 15 See, inter alia, judgment of 16 February 2012, Costa and Cifone, C‑72/10 and C‑77/10, EU:C:2012:80, paragraphs 73 to 74 and the case-law cited. 16 Article 54 of the directive. The 17 April 2014 date must be understood in light of the overall provisions of the directive which include continuing obligations regarding, inter alia, modifications to, and termination of, service concession contracts. Thus, if such a contract were awarded at some point after 17 April 2014 but were then modified or terminated after the date of application of the directive, the relevant public authority would require to follow the rules in Article 43 (modification) or Article 44 (termination). 17 I have taken the dates for the tendering process from the information on the national file. My own research indicates that Directive 2014/23 was transposed in Italy by two measures published on 19 April 2016 and 5 May 2017 respectively. 18 Judgment of 10 July 2014, Impresa Pizzarotti, C‑213/13, EU:C:2014:2067, paragraph 31 and the case-law cited. 19 Directive 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). The earlier legislation was set out in 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 93/37/EEC of 14 June 1993 concerning the coordination of procedures for the award of public works contracts (OJ 1993 L 199, p. 54) respectively. 20 Articles 82 and 83 of Directive 2004/18. 21 See further, judgment of 10 July 2014, Impresa Pizzarotti, C‑213/13, EU:C:2014:2067, paragraphs 32 and 33. 22 See the Commission’s proposal for a directive on the award of concession contracts COM(2011) 897 final, p. 2. 23 Article 10(9) provides that ‘for the purpose of this paragraph, the notion of exclusive right does not cover exclusive rights as referred to in Article 7(2)’. Article 7(2) refers to ‘contracting entities’ which have been granted special or exclusive rights. I do not understand such rights to be at issue in these proceedings. 24 I am emboldened in this conclusion by the material scope of application of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market (OJ 2006 L 376, p. 36). Article 2(2)(h) of that directive provides that it ‘shall not apply to … gambling activities which involve wagering a stake with pecuniary value in games of chance, including lotteries …’ The reason for that exclusion is provided in recital 25: ‘Gambling activities, including lottery and betting transactions, should be excluded from the scope of this Directive in view of the specific nature of these activities, which entail implementation by Member States of policies relating to public policy and consumer protection’. 25 See point 7 above. 26 Judgment of 10 January 2006, IATA and ELFAA, C‑344/04, EU:C:2006:10, paragraph 76. 27 See, inter alia, and by analogy, judgment of 15 September 2011, Dickinger and Ömer, C‑347/09, EU:C:2011:582, paragraph 41 and the case-law cited. 28 See, inter alia, and by analogy, judgment of 22 January 2015, Stanley International Betting and Stanleybet Malta, C‑463/13, EU:C:2015:25, paragraph 46 and the case-law cited. See also below at point 74. 29 For example, if an operator has taken an executive decision never to pursue exclusive contracts with authorities (for whatever reason internal to it), that should not be taken into account when assessing the overall dissuasiveness or attraction of the model chosen by the given authorities. 30 Judgment of 8 September 2010, Stoß and Others, C‑316/07, C‑358/07 to C‑360/07, C‑409/07 and C‑410/07, EU:C:2010:504, paragraph 56 and the case-law cited. 31 The ADM itself appears to link the two, requiring tenderers to have previous experience ‘from activities involving games management or games sales’ and ‘in relation to games of the kind played through games terminals’ (see points 5.3 and 5.4 of the tender specifications), in other words, not only previous experience with regard to ‘management activities’. 32 See, inter alia, judgments of 24 January 2013, Stanleybet and Others, C‑186/11 and C‑209/11, EU:C:2013:33, paragraph 22 and the case-law cited, and of 19 July 2012, Garkalns, C‑470/11, EU:C:2012:505, paragraph 35 and the case-law cited. 33 Judgment of 15 September 2011, Dickinger and Ömer, C‑347/09, EU:C:2011:582, paragraph 54 and the case-law cited. 34 See, inter alia, judgments of 15 September 2011, Dickinger and Ömer, C‑347/09, EU:C:2011:582, paragraph 63 and the case-law cited; of 6 March 2007, Placanica and Others, C‑338/04, C‑359/04 and C‑360/04, EU:C:2007:133, paragraph 46 and the case-law cited; and of 30 June 2011, Zeturf, C‑212/08, EU:C:2011:437, paragraphs 45 and 46. 35 See, inter alia, judgments of 30 June 2011, Zeturf, C‑212/08, EU:C:2011:437, paragraph 52 and the case-law cited, and of 15 September 2011, Dickinger and Ömer, C‑347/09, EU:C:2011:582, paragraph 55. 36 Judgment of 30 June 2011, Zeturf, C‑212/08, EU:C:2011:437, paragraph 48. 37 Judgment of 24 January 2013, Stanleybet and Others, C‑186/11 and C‑209/11, EU:C:2013:33, paragraph 26 and the case-law cited. My reference to ‘referring court’ includes the TAR Lazio for the purposes of fact-finding, should that duty ultimately fall to the latter court. 38 See, in that regard, point 18 above. 39 Judgment of 8 September 2009, Liga Portuguesa de Futebol Profissional and Bwin International, C‑42/07, EU:C:2009:519, paragraph 57 and the case-law cited. 40 Judgment of 30 April 2014, Pfleger and Others, C‑390/12, EU:C:2014:281, paragraphs 49 and 50 and the case-law cited. 41 See, inter alia, judgments of 8 September 2010, Stoß and Others, C‑316/07, C‑358/07 to C‑360/07, C‑409/07 and C‑410/07, EU:C:2010:504, paragraphs 81 and 83, and of 8 September 2009, Liga Portuguesa de Futebol Profissional and Bwin International, C‑42/07, EU:C:2009:519, paragraph 65. 42 Judgment of 24 January 2013, Stanleybet and Others, C‑186/11 and C‑209/11, EU:C:2013:33, paragraph 45 and the case-law cited. 43 See, inter alia and by analogy, judgment of 10 January 2006, IATA and ELFAA, C‑344/04, EU:C:2006:10, paragraph 95 and the case-law cited. 44 Judgment of 24 January 2013, Stanleybet and Others, C‑186/11 and C‑209/11, EU:C:2013:33, paragraph 45 and the case-law cited. 45 In Laezza (judgment of 28 January 2016, C‑375/14, EU:C:2016:60), the Court held a similarly worded clause to be unlawful because the aim it sought to achieve could be achieved by less restrictive measures including by the contracting authority paying the market price for the assets. It may be that Article 22.1 of the model contract (see point 15 above) does not raise the same concerns given factual distinctions such as the difference in length of contract at issue (40 months there as against 9 years here) and the fact that some of the assets for the management of the Lotto will be inherited by the winning bidder (as confirmed by the Italian Government at the hearing). That said, the order for reference is silent as to how the TAR Lazio reached its finding that Laezza could not be relied upon by the Stanley companies and the Court is not expressly requested to rule on its application — that is a matter for the referring court. 46 See point 43 et seq. above. 47 Judgment of 16 February 2012, C‑72/10 and C‑77/10, EU:C:2012:80, paragraph 81. 48 Judgment of 12 March 2015, eVigilo, C‑538/13, EU:C:2015:166, paragraphs 54 and 55 and the case-law cited. 49 Judgment of 16 February 2012, C‑72/10 and C‑77/10, EU:C:2012:80, paragraphs 78 and 79. 50 Judgment of 16 February 2012, Costa and Cifone, C‑72/10 and C‑77/10, EU:C:2012:80, paragraph 70. See also point 40 above. 51 See point 43 et seq. above. 52 Judgment of 16 February 2012, Costa and Cifone, C‑72/10 and C‑77/10, EU:C:2012:80, paragraph 81. ‘Res judicata’ is to be taken as referring to a judicial decision which has become definitive after all rights of appeal have been exhausted or which, after expiry of the time limits provided for in that appeal, can no longer be called into question: see judgment of 10 July 2014, Impresa Pizzarotti, C‑213/13, EU:C:2014:2067, paragraph 58. 53 The Commission at the hearing highlighted this distinction. See judgment of 16 February 2012, Costa and Cifone, C‑72/10 and C‑77/10, EU:C:2012:80, paragraphs 68 and 81. 54 That presumption is established in, inter alia, Article 48 of the Charter of Fundamental Rights of the European Union (OJ 2010 C 83, p. 391) and applies beyond criminal law proceedings to include competition law proceedings conducted by the Commission (see judgment of 8 July 1999, Hüls v Commission, C‑199/92, EU:C:1999:358, paragraph 150 and the case-law cited) and the imposition of sanctions by the EU authorities, such as the freezing of assets for alleged terrorist related activities (see judgment of 7 December 2010, Fahas v Council, T‑49/07 EU:T:2010:499, paragraphs 63 and 64). Advocate General Campos Sánchez-Bordona also sees its application in public procurement procedures analogous to the proceedings at issue in this case: see point 38 and footnote 8 of his Opinion in Connexxion Taxi Services, C‑171/15, EU:C:2016:506. 55 See, inter alia, Article 38(7)(c) of Directive 2014/23. 56 Article 45(2)(d) of Directive 2004/18 provides that ‘any economic operator may be excluded from participation in a contract where that economic operator … has been guilty of grave professional misconduct proven by any means which the contracting authorities can demonstrate’. 57 Judgment of 20 December 2017, Impresa di Costruzioni Ing. E. Mantovani and Guerrato, C‑178/16, EU:C:2017:1000, paragraph 47. To be clear, the Court was there considering a case in which there had been a conviction, but one which had not yet become definitive. 58 Thus, for example, national law would have to ensure that the damages claim was not able to be defeated by the contracting authority merely pointing to the existence of a clause akin to Article 30(2)(h) in the concession contract. Where, as events turned out, the indictment that had triggered that clause had failed, national law would have to consider the clause as having been invoked wrongfully, so that the damages claim would lie (subject to proving other components of a damages claim, such as causation and quantum of damages). Where the original judicial decision had been overturned on procedural rather than substantive grounds, the excluded operator might not always automatically be entitled to compensation, but might (depending on the circumstances) have additionally to impugn the substance of that decision. 59 Those requirements are consistent with the Court’s finding at paragraph 81 of Costa and Cifone (judgment of 16 February 2012, C‑72/10 and C‑77/10, EU:C:2012:80) that ‘legislation which provides for operators to be excluded, even temporarily, from the market can be regarded as proportionate only if it provides for an effective legal remedy and compensation for any loss suffered in the event that such exclusion subsequently proves to be unjustified’.