62010CC0348_EN
Opinion of the Advocate-General
Opinion of the Advocate-General
Table of contents
I –  Legal context
A – EU law
B – National law
II –  Facts
III –  The questions referred for a preliminary ruling
IV –  Procedure before the Court of Justice
V –  Submissions
VI –  Evaluation
A – The first question: the service contract/concession dilemma
B – The second question: direct effect of Directive 92/13, as amended by Directive 2007/66
C – The third question: the potential retroactive effect of Directive 92/13
VII –  Conclusion
1. This request for a preliminary ruling may provide an opportunity for the Court of Justice to develop its thinking on the criteria for distinguishing between a public service contract and a service concession under European Union (EU) law and also to define the circumstances in which a directive which has not been transposed within the period prescribed should be regarded as having direct effect. It may also illustrate, once again, the need for judicial cooperation between the European Union and the Member States in applying EU law.
I – Legal context
A – EU law
2. 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 (2) (‘Directive 2004/18’) and 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 (3) (‘Directive 2004/17’) recast the legislation on public procurement in force at the time, (4) seeking to set out the coordinating measures introduced by the Community legislature in a logical manner in the interests of clarity. To that effect, and in relation to the definitions of the categories and concepts used, Article 1(2) of Directive 2004/17 (5) provides as follows:
‘… the following definitions shall apply:
(a) “Supply, works and service contracts” are contracts for pecuniary interest concluded in writing between one or more of the contracting entities referred to in Article 2(2), and one or more contractors, suppliers, or service providers.
…
(d) “Service contracts” are contracts other than works or supply contracts having as their object the provision of services referred to in Annex XVII.’
3. Article 1(3)(b) of Directive 2004/17 provides that a ‘service concession’ is a contract of the same type as a service contract except for the fact that the consideration for the provision of services consists either solely in the right to exploit the service or in that right together with payment.
4. By virtue of Article 2(2)(a), Directive 2004/17 applies ‘to contracting entities which … are contracting authorities or public undertakings and pursue one of the activities referred to in Articles 3 to 7’.
5. Likewise, Article 5(1) of Directive 2004/17 provides that the directive applies ‘to activities relating to the provision or operation of networks providing a service to the public in the field of transport by railway, automated systems, tramway, trolley bus, bus or cable’.
6. Council Directive 92/13/EEC of 25 February 1992 coordinating the laws, regulations and administrative provisions relating to the application of Community rules on the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors (6) (‘Directive 92/13’), as amended by Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007, (7) aims to ensure the effective application of both Directive 2004/17 and Directive 2004/18, and, to that end, Article 2d(1)(b) thereof provides as follows:
‘Member States shall ensure that a contract is considered ineffective by a review body independent of the contracting entity or that its ineffectiveness is the result of a decision of such a review body in any of the following cases:
…
(b) in case of an infringement of Article 1(5), Article 2(3) or Article 2a(2) of this Directive, if this infringement has deprived the tenderer applying for review of the possibility to pursue pre-contractual remedies where such an infringement is combined with an infringement of Directive 2004/17/EC, if that infringement has affected the chances of the tenderer applying for a review to obtain the contract’.
7. By virtue of Article 2f(1)(b) of Directive 92/13, as amended by Directive 2007/66:
‘Member States may provide that the application for review in accordance with Article 2d(1) must be made:
…
(b) and in any case before the expiry of a period of at least six months with effect from the day following the date of the conclusion of the contract.’
B – National law
8. The following provisions of national law are relevant. First is the likums ‘Par pašvaldībām’ (Law on municipalities), (8) Article 15 of which provides that the organisation of public transport services falls within the autonomous powers of municipalities.
9. Second, under Article 1(7) of the Publiskās un privātās partnerības likums (Law on collaboration between the public and private sectors), (9) a service concession contract is a contract under which, at the request of a public partner, the private partner provides the services listed in Annex 2 to the Publisko iepirkumu likums (Law on public contracts; ‘LPC’) and the consideration, or an essential component of the consideration, for the provision of those services, is that it obtains the right to operate them whilst at the same time bearing the risks associated with the operation of the services or else a substantial proportion of those risks.
10. Under Article 1(8) of that law, the right to operate the services means the right to receive payment from the end-users of the services or to obtain consideration from the public partner, the amount of which depends on the demand for such services from end-users, or even to obtain both a payment from the end-users of the services and consideration from the public partner.
11. Under Article 1(9), the risk associated with operating the services means the financial risks, where the income of the private partner depends either on the demand for such services from end-users (demand risk) or else on whether the services offered to the end-users meet the requirements laid down in the concession contract (availability risk) or even on both the demand risk and the availability risk.
12. Also relevant in the context of these proceedings is the second paragraph of Article 8 of the Sabiedriskā transporta pakalpojumu likums (Law on public transport services; ‘LPTS’), (10) which provides that, unless otherwise provided in the Law, the mandating authority will organise public transport services in accordance with the LPC or with the Law governing the award of concessions.
13. The first paragraph of Article 10 of the LPTS provides that the carrier will be compensated for losses and expenses associated with the provision of public transport services, in accordance with Articles 11 and 12 of that law; furthermore, the third paragraph of that article provides that payment for the services will also constitute losses within the meaning of the Law if the mandating authority has organised the public transport service in accordance with the LPC.
14. Under the first paragraph of Article 11 of the LPTS, the carrier is to be compensated for losses associated with the provision of public transport services:
‘…
(1 1 ) out of the funds provided for that purpose in the State budget, in the case of routes which belong to a regional transport network providing local services;
(1 2 ) out of local budgets, in the case of routes which belong to a regional transport network providing local services, in relation to the part of the public transport services covered by the concession which exceeds the limit of the funds provided for in the State budget in order to secure the provision of those services …’.
15. Under the first paragraph of Article 12 of the LPTS, if the State lays down minimum quality requirements for public transport services, which a profit-making carrier would not have to comply with, and where compliance gives rise to additional costs, the carrier is entitled to receive compensation from the State for all such costs. Furthermore, the second paragraph of that article provides that compensation will be provided, by means of the payment referred to in the first paragraph, to carriers who provide public transport services in the context of a public transport service concession if the minimum quality requirements were laid down after the commencement of the provision of public transport services.
16. Finally, Article 2 of Ministru Kabineta noteikum No 1226, Sabiedriskā transporta pakalpojumu sniegšanā radušos zaudējumu un izdevumu kompensēšanas un sabiedriskā transporta pakalpojuma tarifa noteikšanas kārtība (Decree of the Council of Ministers No 1226 concerning compensation for expenditure and losses incurred in providing public transport services and concerning the establishment of public transport service tariffs; ‘Decree No 1226’), (11) issued on the basis of the LPTS, provides that the carrier will be compensated for the following losses, associated with performance of the public transport service contract:
(1) essential costs associated with performance of the public transport service contract which exceeded the income obtained;
(2) costs incurred through application of the tariffs laid down by the mandating authority;
(3) costs arising in the event that the mandating authority applies a reduction of the transport price for certain categories of passenger.
17. Article 3 of Decree No 1226 provides that the carrier is entitled to seek compensation for costs incurred in fulfilling the minimum quality requirements laid down by the mandating authority or by legislation after commencement of the provision of public transport services, if compliance therewith involves costs in excess of those linked to the quality requirements previously laid down.
18. Under Article 39 of Decree No 1226, the mandating authority will determine the actual losses having regard to the total income obtained through performance of the public transport service contract, excluding justified costs that are attributable to the provision of public transport services. Within the meaning of that provision, ‘income’ means income from the sale of tickets, including season tickets, and similar income obtained through performance of the public transport service contract.
19. The mandating authority will determine the amount of compensation which is to be paid by aggregating the volume of losses set in accordance with Article 39 of Decree No 1226 with the total profits obtained. The latter figure will be determined by multiplying the income by a profit percentage, calculated by adding 2.5% to the average Euro Interbank Offered Rate (Euribor) for the 12 months of the reference year (Article 40).
20. The amount of the compensation for losses must not exceed the volume of actual losses that has been calculated, if the carrier has applied the tariffs laid down by the mandating authority (transport price) (Article 49).
21. If the right to provide public transport services is awarded in accordance with the LPC, the amount of the compensation will be determined on the basis of the difference between the price of the public transport service laid down in the contract and the income actually obtained (Article 50).
22. Under Article 57 of Decree No 1226, if the public transport service contract is terminated:
(1) the carrier shall repay the mandating authority the funds overpaid if, during the provision of the public transport service, the volume of compensation for losses exceeds the actual amount calculated for the compensation and the mandating authority shall use those funds to compensate the losses of other carriers;
(2) the mandating authority shall pay compensation for losses if during the provision of public transport services the amount of compensation for losses has fallen short of the amount calculated as the actual amount of compensation due.
II – Facts
23. The order for reference in relation to this request for a preliminary ruling shows that on 17 June 2009 the Ludzas rajona padome (Ludza District Council) published an invitation to tender for public bus services in the city of Ludza and on regional routes in the district of Ludza. The appellants in the main proceedings submitted a tender on 6 August 2009.
24. By a decision of 31 August 2009, the award was made to the undertaking Ludzas autotransporta uzņēmums SIA (‘Ludzas ATU SIA’) and on 2 September 2009 the Ludzas novada dome (Ludza Municipal Council) (12) resolved to conclude a concession contract with this undertaking.
25. The applicants contested this decision before the courts on 16 September 2009 and also applied for the implementation of the decision to be suspended. The interim suspension was granted by a decision of the Administratīvā rajona tiesa (Administrative Court of First Instance) of 16 October 2009, which was confirmed, on appeal, by the Administratīvā apgabaltiesa (Regional Administrative Court) in a decision of 14 December 2009.
26. Notwithstanding this, by 9 October 2009 the Ludza District Council and Ludzas ATU SIA had in fact entered into a concession contract and the applicants therefore applied to the Administrative Court of First Instance on 26 November 2009 seeking a declaration that the contract was void.
27. By a decision of 3 December 2009, the Administrative Court of First Instance dismissed the claim for a declaration that the contract was void on the basis that, being governed by civil law, it did not fall within the jurisdiction of the administrative courts.
28. This decision was reversed by the Regional Administrative Court in a decision of 11 May 2010, which nevertheless dismissed the applicants’ appeal on the substantive issue, maintaining that they ‘had no subjective right to seek a decision annulling the contract’, as stated in the order for reference of this application for a preliminary ruling.
29. The applicants lodged an appeal before the Latvian Supreme Court, arguing that Directive 2007/66 grants them a subjective right to seek annulment of the contract. They concede that at the time the contract was concluded the period for transposing the directive had not expired, but contend that this could not deprive them of a right which derives from the very purpose of the directive.
III – The questions referred for a preliminary ruling
30. It is against this background that the Latvian Supreme Court has referred the following three questions to the Court of Justice for a preliminary ruling:
‘(1) Must Article 1(3)(b) of Directive 2004/17/EC be interpreted as meaning that it is necessary to treat as a public service concession a contract under which the successful tenderer is granted the right to provide public bus services, in cases where part of the consideration consists in the right to operate the public transport services but where, at the same time, the contracting authority compensates the service provider for losses arising as a result of the provision of services, and in addition the public law provisions governing the provision of the service and the contractual provisions limit the risk associated with operation of the service?
(2) If the first question is answered in the negative, has Article 2[d](1)(b) of Directive 92/13/EEC, as amended by Directive 2007/66/EC, been directly applicable in Latvia since 21 December 2009?
(3) If the second question is answered in the affirmative, must Article 2[d](1)(b) of Directive 92/13/EEC be interpreted as being applicable to public contracts entered into before the end of the period prescribed for domestic law to be brought into conformity with Directive 2007/66/EC?’
31. It is worth mentioning at this point that, according to the order for reference, the referring court’s primary doubt concerns the classification of the contract for the provision of public transport services as a ‘service concession’, within the meaning of Article 1(3)(b) of Directive 2004/17, where the following circumstances pertain:
(1) part of the consideration consists in the right to operate the public transport service (the service provider receives the consideration via payments from third persons, the transport users);
(2) the contracting authority, in accordance with the legislation of the Member State, compensates the service provider when it incurs losses as a result of providing services;
(3) the risk of operating the public transport services is limited by the legislation governing the way those services are provided and by the terms of the contract.
32. Regarding the second question, the Latvian Supreme Court raises the issue of whether, taking into account the fact that during the period between 21 December 2009 and 14 June 2010 Latvia had not fulfilled its obligations under Directive 2007/66, Article 2d(1)(b) of Directive 92/13 should be interpreted as meaning that it also applies to the contracts referred to in Directive 2004/17 which were entered into before the expiry of the period for bringing domestic law into conformity with Directive 2007/66. In this respect, it notes that, under Article 2f(1)(b) of Directive 92/13, a person is entitled to challenge the contract within a period of six months following the date of its signature. Therefore, in the case at issue in the main proceedings, taking into account the date on which the contract was concluded (9 October 2009), the applicants were also vested with that right on 21 December 2009 (once the period for transposing the directive into national law had expired).
33. In short, the Latvian Supreme Court considers that there is doubt as to the interpretation of Article 1(3)(b) of Directive 2004/17 and of Article 2d(1)(b) of Directive 92/13, and that this plays a critical role in the decision to be reached regarding the applicants’ right to apply to the courts for annulment of the contract.
IV – Procedure before the Court of Justice
34. The order for reference was lodged at the Court on 9 July 2010.
35. Submissions have been made by Norma-A and Dekom, by the Austrian and Latvian Governments and by the European Commission.
36. At the hearing on 18 May 2011, the legal representatives of Norma-A and Dekom, the Latgales plānošanas reģions (Latgale planning region), (13) the Latvian Government and the Commission presented their oral submissions.
V – Submissions
37. Regarding the classification of the contract at issue in the main proceedings, Norma-A and Dekom, the Austrian Government and the Commission maintain, essentially, that it is a service contract within the meaning of Directive 2004/17, whilst the Latvian Government argues that it is a concession. While the former consider that the level of risk assumed by the service provider is not sufficient to justify the conclusion that the characteristics of a concession are present, the Latvian Government and the Latgales plānošanas reģions conclude that the financial risk at stake is considerable and, in any event, sufficient to enable it to be regarded as a service concession.
38. In relation to the second and third questions, the Commission, the Austrian and Latvian Governments and the Latgales plānošanas reģions maintain that Directive 2007/66 is not applicable to contracts concluded prior to expiry of the period prescribed for transposing it, with the Austrian Government arguing that it does not have the requisite unconditionality and precision to have direct effect, although this point is, in its view, entirely hypothetical since the proceedings in the present case were already under way before the transposition period expired and there is nothing to suggest that the directive contemplates a retroactive effect which would require the contracts entered into prior to such expiry to be declared void. The Latvian Government also maintains that any other solution would run counter to the principle of legal certainty. The Commission, in its joint reply to the two final questions, considers that the conditions traditionally required for the directive in question to have direct effect are met, although it is inapplicable to contracts entered into prior to the expiry of the transposition period.
39. Finally, Norma-A and Dekom argue that under Article 2f(1)(b) of Directive 2007/66, a party is entitled to seek the annulment of a contract in the courts for a period of six months from the date of the conclusion of the contract. Since in the present case that period had not expired on the date when the directive should have been transposed, Article 2d would be applicable even if the contract had been concluded earlier. In their view, in the same way that Member States must refrain from adopting measures which might compromise the result laid down in the directive, they are also required to interpret national law in accordance with the directive. In a situation such as that in the present case, the subjective right to a review of this nature by an independent body stems from the result sought by the directive.
VI – Evaluation
A – The first question: the service contract/concession dilemma
40. The classification of the legal transaction at issue in the main proceedings is a matter for the referring court alone and it can look to the Court only to give an interpretation of EU law which may be of use in deciding the case before it (Case C‑458/03 Parking Brixen [2005] ECR I‑8585, paragraph 32, amongst others).
41. For these purposes, the question of whether we are dealing with a ‘service concession’ or a ‘public service contract’ must be considered in the light of EU law alone (see Case C‑382/05 Commission
v Italy [2007] ECR I‑6657, paragraph 31, and Case C‑196/08 Acoset [2009] ECR I‑9913, paragraph 38).
42. It follows from subparagraph (a) in conjunction with subparagraph (d) of Article 1(2) of Directive 2004/17 that service contracts are contracts for pecuniary interest concluded in writing between one or more of the contracting entities referred to in Article 2(2), and one or more contractors, suppliers, or service providers, having as their object the provision of services referred to in Annex XVII to that directive, which include, as far as is relevant here, land transport services.
43. Under Article 1(3)(b) of that directive, a ‘service concession’ is a contract of the same type as a service contract except for the fact that the consideration for the provision of services consists ‘either solely in the right to exploit the service or in that right together with payment’.
44. The difference between the two legal transactions is essentially in the consideration for the provision of services in each case (Case C‑274/09 Privater Rettungsdienst und Krankentransport Stadler
[2011] ECR I‑1335, paragraph 24).
45. The directive does not specify of what the consideration for a service provided pursuant to a contract must be. In so far as it states that where such consideration consists of the right to exploit the service the transaction in question is a service concession, the Court of Justice has concluded that, broadly speaking, the fundamental difference between the two legal transactions lies in whether the remuneration for the service provided comes directly from the contracting entity or is borne by third parties ( Eurawasser, paragraph 51). Ultimately, however, this difference comes down to the question of assumption of the risk associated with the uncertain outcome of a legal transaction which was entered into by each of the parties in their own interests.
46. The fact that the remuneration for the service comes from third parties has been the decisive feature for classifying a legal transaction as a service concession in that it presupposes that the risk associated with the operation of the service is assumed by the service provider. As Advocate General Mazák pointed out in his Opinion in the Privater Rettungsdienst und Krankentransport Stadler
case, (14) even remuneration of an indirect nature has sufficed, in itself, for the Court of Justice to hold that the legal transaction under consideration was a service concession. (15)
47. Even so, in my view, the really decisive factor is the assumption of risk. This may be inferred from the fact that the direct payment by the contracting entity of the remuneration for the service does not necessarily mean in every case that the transaction in question is a service contract. This is because, as Advocate General Mazák noted in his previously cited Opinion (at points 28 and 29), the Court of Justice has established ‘subsidiary criteria’ which, in cases of direct remuneration, can lead to the conclusion that the service provider has assumed the risk of operating the service, and it is this assumption which ultimately causes the legal transaction to be classified as a concession, in spite of the direct remuneration. (16)
48. In short, as risk is an inherent part of the economic operation of a service ( Eurawasser, paragraph 66), the Court of Justice considers that where the service provider assumes it, the contract with the contracting entity can be taken to satisfy the definition of a service concession.
49. According to the case-law, the risk of the economic operation of the service must be understood as the risk of exposure to the vagaries of the market ( Eurawasser, paragraphs 66 and 67, and Privater Rettungsdienst und Krankentransport Stadler, paragraph 37), which ‘may consist in the risk of competition from other operators, the risk that supply of the services will not match demand, the risk that those liable will be unable to pay for the services provided, the risk that the costs of operating the services will not fully be met by revenue or for example also the risk of liability for harm or damage resulting from an inadequacy of the service’ ( Privater Rettungsdienst und Krankentransport Stadler, paragraph 37, citing Contse and Others, paragraph 22, and Hans & Christophorus Oymanns, paragraph 74).
50. On the other hand, risks linked to bad management or errors of judgement by the economic operator are not, however, decisive in classifying a contract as a public service contract or a service concession, since those are risks which are inherent in any contract ( Privater Rettungsdienst und Krankentransport Stadler, paragraph 38). Risks relating to variables which may or may not materialise, depending exclusively on the economic operator in question are therefore irrelevant for these purposes.
51. For the contract to be regarded as a concession, it is not necessary that the risk assumed by the service provider be ‘considerable in absolute terms’, only that it be at least a ‘significant share’ of the risk which the contracting entity would anyway be assuming if it were to provide the service in question itself. (17)
52. Effectively, the Court of Justice has stated that in circumstances where the detailed rules of public law governing the economic and financial operation of the service reduce the financial risk to a minimum, it should remain open to contracting entities to ensure the provision of the service by means of a concession if they consider this to be the best contractual form for ensuring the public service. It would therefore be ridiculous to expect conditions to be created which involved greater financial risk than those existing in the sector by virtue of the applicable legislation for the sole purpose of having sufficient volume of transferable risk to enable the public contract to be classified as a service concession ( Eurawasser, paragraphs 72 to 76). On the contrary, the decisive factor is that there should be a significant transfer of the risk inherent in the operation of the service, whatever that risk may be in absolute terms, that is, when considered alone.
53. That said, the first question referred by Latvian Supreme Court relates to a contract ‘where part of the consideration consists in the right to operate the public transport services’, while, at the same time, the contracting authority ‘compensates the service provider for losses arising as a result of the provision of services’ and, furthermore, ‘the public law provisions governing the provision of the service and the contractual provisions limit the risk associated with operation of the service’.
54. As stated by the referring court, the service provider receives the consideration for the services by means of payment by third parties, the transport users. From that point of view, therefore, it would be a classic case of a service concession under Article 1(2)(a) and (d) of Directive 2004/17.
55. However, the risk inherent in the economic operation of the service is limited by the domestic rules governing the provision of the service, in this case the LPTS; in other words, it is not typical of the risk associated with the provision of a service in an entirely free market. Furthermore, even within the scope of the reduced risk resulting from the detailed public law rules governing the economic and financial operation of the service, the contracting authority compensates the service provider for certain losses.
56. As I have already mentioned, the relevant risk is that resulting from the detailed rules governing the provision of the service (see points 51 and 52). It is important that this specific risk is assumed to a significant extent by the service provider, since, as pointed out in footnote 17, the level of risk assumed is ultimately a more decisive criterion than the type of consideration for the service when it comes to classifying the legal transaction as a service contract or service concession.
57. The referring court has already pointed out that, in this case, the operating risk of the service is not borne by the service provider. In fact, it states that the latter does not even assume a substantial part of it (paragraph 13 of the order for reference).
58. Effectively, the regulatory provisions and the terms of the contract, taken together, indicate that the service provider can be sure of receiving compensation for the following losses associated with the provision of the service: (a) costs which are essential for the performance of the contract which exceed the income obtained; (b) costs incurred through application of the tariffs laid down by the mandating authority; (c) costs arising in the event that the mandating authority applies a reduction of the price of transport for certain categories of passenger; (d) costs incurred in fulfilling the minimum quality requirements laid down after the commencement of the provision of the service, if compliance therewith involves costs in excess of those linked to the quality requirements previously laid down.
59. On the other hand, the figure for compensation for these losses must be aggregated with the figure for profits, which is determined by multiplying income by a profit percentage, calculated by adding 2.5% to the average Euro Interbank Offered Rate for the 12 months of the reference year.
60. In other words, there is provision for compensation for both losses associated with providing the service by way of operating expenses and loss of profits.
61. This information, which was provided by the Latvian Supreme Court, is, in principle, sufficient to allow the referring court to conclude that the legal transaction at issue in the main proceedings is a service contract. In my view, it is clear from the legislative provisions and contractual terms which define the context and content of the legal transaction under consideration that there is enough evidence to conclude that it can quite correctly be regarded as a true service contract.
62. Nevertheless, both the Latvian Government and the Latgales plānošanas reģions put forward a number of reasons why the risk should not be regarded as having been assumed by the contracting authority and hence why it should not be regarded as a contract: essentially these are the high level of demand risk, the reduction in State budget allocations intended to cover any potential losses, the expenditure incurred by way of unrecoverable investments, the extension or reduction of routes and journeys.
63. It should be reiterated at this point that it is not for the Court of Justice to evaluate the various evidence submitted at the hearing by the Latvian Government and the Latgales plānošanas reģions, and still less to look into the debate regarding the magnitude and scope of the presumably considerable differences between the business forecasts discussed at the time of the award and those actually implemented as a result of a less favourable or benign economic situation.
64. Nevertheless, as I have already noted at point 39, since ultimately the referring court has the jurisdiction to classify the transaction, I am bound to make it absolutely clear that it is the Latvian Supreme Court which must determine to what extent the considerations put forward by the Latvian Government and the Latgales plānošanas reģions can invalidate the natural conclusion to which a reading of the applicable legislation and the contract terms would, nevertheless, lead. This is all the more so because the Latvian Supreme Court, in its first question states, first, that the contracting authority compensates the service provider for losses arising as a result of the provision of services and, then, that the applicable domestic legislation and the contractual provisions ‘limit’ the operating risk. The task of deciding whether this holds true to the extent that the relevant risk for the purposes of classifying the legal transaction in question is assumed by one or other of the parties can only fall to the referring court, as it alone is in a position to assess fully and completely the circumstances and variables of the case.
65. In conclusion, although it is for the national court to classify the legal transaction under discussion and the role of the Court of Justice is merely to provide the national court with an interpretation which may be of use in this task, the relevant legislative and contractual provisions lead me to conclude that this transaction bears the characteristics of a service contract. Notwithstanding this, in the light of what has been said about the referring court’s competence, it is that court which must determine, having examined the considerations put forward by the parties to the main proceedings, whether or not this conclusion is the most applicable or appropriate under EU law.
B – The second question: direct effect of Directive 92/13, as amended by Directive 2007/66
66. Working on the assumption that this is a service contract, Directive 92/13 would be applicable by virtue of its substantive scope. The next question is therefore whether Article 2d(1)(b) of Directive 92/13, as amended by Directive 2007/66, had direct effect in Latvia from 20 December 2009, when the period for transposing the latter directive expired, and, if so, whether by virtue of Article 2f(1)(b) of Directive 92/13, that provision was also applicable to contracts entered into before the expiry of the transposition period.
67. These two questions correspond to the second and third questions referred by the Latvian Supreme Court. In my view, and contrary to the approach taken by the Austrian Government, the third question can only be answered once the second question has been decided, since in order to determine whether Article 2f(1)(b) of Directive 92/13 permits Article 2d(1)(b) to apply retrospectively, it is first necessary to determine whether the latter was applicable at all from 21 December 2009. Only once it has been determined whether Directive 92/13 had direct effect from that date can we start to analyse whether the provision which supposedly gives Article 2d(1)(b) of the directive some retroactive effect also had direct effect.
68. It is common ground between the parties that the Republic of Latvia did not ‘bring into force the laws, regulations and administrative provisions necessary to comply with … Directive [2007/66] by 20 December 2009’, as required by Article 3(1) of Directive 2007/66. This measure was incorporated into domestic law only with effect from 15 June 2010, and the first question to be decided is therefore whether, during the period from 21 December 2009 to 14 June 2010, Article 2d(1)(b) of Directive 92/13, requiring Member States to ensure that in cases where the suspensory effect of applications for review of decisions awarding a service contract has not been respected, ‘a contract is considered ineffective by a review body independent of the contracting entity or that its ineffectiveness is the result of a decision of such a review body’ had direct effect in Latvia despite not having been transposed.
69. Expiry of the period prescribed for transposing the directive, or failure to transpose it correctly, is only one of the conditions required by the case-law for an untransposed directive to be considered to have potential direct effect (see, inter alia, Case 102/79 Commission v Belgium
[1980] ECR 1473, paragraph 12). There is also, first, the requirement that it confer subjective rights which individuals are able to assert before the courts (Case 8/81 Becker [1982] ECR 3301, paragraph 25) and, second, the requirement that its provisions be unconditional and sufficiently precise (to this effect, see the recent Case C‑115/09 Bund für Umwelt und Naturschutz Deutschland, Landesverband Nordrhein-Westfalen
[2011] ECR I‑3673, paragraph 54). (18)
70. It is clear that in the case which gives rise to the question referred in these proceedings the first of these requirements is satisfied, and it is equally clear that the second is also met, since the requirement imposed on the Member States by Article 2d(1)(b) of Directive 92/13 must translate into the right of individuals to guaranteed effectiveness of any review which they might seek against decisions awarding public service contracts. As it is a requirement imposed on Member States for the purpose of improving ‘the effectiveness of review procedures concerning the award of contracts’, in the words of recital 34 in the preamble to Directive 2007/66, it is clear that it constitutes a means of safeguarding the right of citizens to an effective legal remedy in the field of public procurement.
71. The close connection between Article 2d(1)(b) of Directive 92/13 and the right to a legal remedy invites the question, already raised at the hearing, of whether, given that it concerns the effectiveness of a right vis-à-vis the Member States which is based on primary EU law, access to the review sought by the appellants in the main proceedings should really have been granted in any event. This would therefore be quite independent of the directive itself and, of course, of any domestic legislation transposing it. I think that this must, in principle, be correct, although the fact that the right to a review is typically in the nature of a right to receive a service of some kind means that, for it to be effectively exercised, legislative intervention is inevitable. This leads me to examine the extent to which such intervention has occurred in this case. (19)
72. Regarding what is effectively the third requirement for a directive which has not been transposed within the time-limit to have direct effect, namely that the rules contained in Article 2d(1)(b) of Directive 92/13 should be unconditional and adequate, I must agree with the Commission when it notes that the provision in question is substantially the same as the provisions of Article 2(1)(b) of Directive 89/665/EEC, (20) which were held in Case C‑15/04 Koppensteiner [2005] ECR I‑4855, paragraph 38, to be ‘unconditional and sufficiently clear to create rights for individuals’.
73. Article 2(1)(b) of Directive 89/665 effectively requires Member States to ensure that the measures taken concerning the review procedures relating to the award of public supply and public works contracts include provision for the powers to either set aside or ensure the setting-aside of decisions taken unlawfully. By virtue of Article 1(1) of that directive, decisions must be capable of being reviewed effectively and promptly in accordance with the conditions set out in the directive.
74. If these provisions of Directive 89/665 have been held to be ‘unconditional and sufficiently clear’, those contained in Article 2d(1)(b) of Directive 92/13 can be no less so, subject to the exception which I will go on to mention, since they lay down with perfect clarity the conditions under which an independent review body must consider the contract ineffective, namely, in so far as is relevant here: (a) first, that there is shown to have been an infringement of Article 1(5), Article 2(3) or Article 2a(2) of the directive, which require certain standstill periods to be observed during the course of the procurement procedures; (b) second, that the infringement has deprived the tenderer applying for review of the possibility to pursue pre-contractual remedies; (c) third, that the infringement of these provisions is combined with an infringement of Directive 2004/18; (d) finally, that the infringement has affected the chances of the tenderer applying for a review to obtain the contract.
75. In fact, there is one aspect in respect of which Directive 92/13 can, however, be accused of the lack of clarity indicated by the Austrian Government, since it does not state which ‘review body independent of the contracting authority’ must take the decision regarding the effectiveness of the contract. This aspect would therefore require the legislative intervention at the minimum level necessary to which I referred at point 70 when I indicated that the right of review, being in the nature of a right to receive a service of some kind, makes the involvement of domestic law unavoidable.
76. This does not, in my opinion, mean that Article 2d(1)(b) of Directive 92/13 cannot be regarded as having direct effect in Latvia from 21 December 2009. The reason for this is that, as the Austrian Government itself observes, the requirement to interpret national law in accordance with EU law, together with the duty effectively to protect the rights of citizens, should lead the referring court, in line with the solution provided in Case C‑54/96 Dorsch Consult [1997] ECR I‑4961, to investigate whether, under the applicable domestic jurisdictional rules, it is possible to identify a court which has jurisdiction to hear the reviews to which Directive 92/13 refers. This might be because under national law that court already has jurisdiction to oversee public procurement procedures, or due to the operation of certain general systems for attributing jurisdiction. (21)
C – The third question: the potential retroactive effect of Directive 92/13
77. Having reached the conclusion that Article 2d(1)(b) of Directive 92/13, as amended by Directive 2007/66, may be applicable in Latvia from the date of expiry of the transposition period, it remains to be established whether the period of six months following the date of the conclusion of the contract which Article 2f(1)(b) of Directive 92/13 lays down as the time-limit for seeking the review referred to in that provision is applicable in a case such that in the main proceedings. In other words, whether the possibility of review under Directive 92/13 extends to contracts entered into during the six months prior to the date on which the directive took direct effect. If so, it would apply to the present case, since the disputed contract was entered into on 9 October 2009.
78. My initial view is that, in the interests of improving the effectiveness of the directive, it can perhaps be argued that it should apply to all contracts entered into six months prior to the final date for transposition. Amongst other reasons, this is because it would avoid the risk of contracts being hurriedly signed in order to avoid the directive applying and would also avoid an extended period of time during which the legal situation is not conducive to the effective exercise by citizens of their right to a remedy. This approach would also be in the spirit of the rule laid down by the Court of Justice in Case C‑129/96 Inter-Environnement Wallonie [1997] ECR I‑7411, cited by Norma-A and Dekom, to the effect that, during the period until expiry of the time-limit for incorporation into domestic law, Member States are required to refrain from compromising the result sought by a directive.
79. Notwithstanding this, and aside from the fact it cannot be ignored that any retrospective application of the law is prejudicial to legal certainty, the structure and content of the directive make such a retroactive effect impossible, over and above the absence of any explicit reference in the directive to retroactivity.
80. Only contracts concluded within the legal framework laid down in Directive 92/13 are susceptible to review thereunder, since the grounds for contesting them must relate to the requirements imposed by the directive in respect of procurement procedures. Consequently, no contract entered into prior to the entry into force of the directive could have complied with the procedural requirements contained in it, and, in particular, with the standstill periods whose infringement is sanctioned in Article 2d(1)(b).
81. It would therefore be illogical retrospectively to allow a challenge which could only be brought on the grounds of failure to comply with requirements which did not exist at the time the contract subject to review was entered into.
VII – Conclusion
82. In the light of the above, I propose that the Court reply to the questions referred by the Latvian Supreme Court as follows:
(1) Article 1(3)(b) of 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 must be interpreted as meaning that, for the purposes of that directive, it is, in principle, necessary to treat as a public service contract a contract under which the successful tenderer obtains, as part of the consideration, the right to operate public transport services and where the contracting authority compensates the service provider for losses arising as a result of the provision of services and the public law provisions governing the provision of the service and the contractual provisions limit the risk associated with operation of the service. It is, in any event, for the referring court to determine the extent to which the circumstances of the case require a different classification in the light of European Union law.
(2) Article 2d(1)(b) of Directive 92/13/EEC of 25 February 1992 coordinating the laws, regulations and administrative provisions relating to the application of Community rules on the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors, as amended by Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007, may have had direct effect in Latvia since 21 December 2009, depending on whether or not there is a court which has jurisdiction to hear the reviews to which that directive refers, this being a matter to be determined by the referring court.
(3) Article 2d(1)(b) of Directive 92/13 must be interpreted as being inapplicable to public contracts entered into before the end of the period prescribed for domestic law to be brought into conformity with Directive 2007/66.
(1) .
(2)  – OJ 2004 L 134, p. 114.
(3)  – OJ 2004 L 134, p. 1.
(4)  – Directive 2004/18 brings together in a kind of unified code the sectoral regimes contained in Council Directive 93/36/EEC of 14 June 1993 coordinating procedures for the award of public supply contracts (OJ 1993 L 199, p. 1), 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) and 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), while Directive 2004/17 did likewise in relation to the provisions of 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).
(5)  – As is common knowledge, conceptual considerations relating to the categories defined in Directive 2004/17 can be applied, by extension, to Article 1(2) and (4) of Directive 2004/18 due to their similarity. In this regard, see, for example, Case C‑206/08 Eurawasser
[2009] ECR I‑8377, paragraph 43. On the development of the two directives, see Jan M. Hebly’s publications European Public Procurement: Legislative History of the ‘Utilities’ Directive 2004/17/EC, Wolters Kluwer, Alphen aan den Rijn, 2008, and European Public Procurement: Legislative History of the ‘Classic’ Directive 2004/18/EC, Wolters Kluwer, Alphen aan den Rijn, 2007.
(6)  – OJ 1992 L 76, p. 14.
(7)  – OJ 2007 L 335, p. 31.
(8)  – Latvijas Vēstnesis
(Latvian Official Journal) No 61 of 24 May 1994, p. 192.
(9)  – Latvijas Vēstnesis
No 107 of 9 July 2009, p. 4093, in force from 1 October 2009. Until 30 September 2009, the Koncesiju likums (Law on concessions) applied, defining a concession, under Article 1(2), as ‘the grant for a specified period of rights to provide services or exclusive rights to operate the facilities under concession by means of a written contract between the grantor of the concession and the concession holder’.
(10)  – Latvijas Vēstnesis
No 106 of 4 July 2007, p. 3682.
(11)  – Latvijas Vēstnesis
No 183 of 20 November 2009, p. 4169. This came into force on 21 November 2009, replacing Decree of the Council of Ministers No 672 of 2 October 2007 ( Latvijas Vēstnesis
No 175 of 31 October 2007, p. 3751).
(12)  – The body which, in the meantime, had taken over the functions of the Ludza District Council, although the two institutions appear to have coexisted for a period.
(13)  – The body replacing the Ludzas novada pašvaldība (Ludza Municipal Council) as defendant in the main proceedings.
(14)  – Point 25, footnote 14.
(15)  – For example, Case C‑410/04 ANAV
[2006] ECR I‑3303, paragraph 16, and Case C‑324/07 Coditel Brabant
[2008] ECR I‑8457, paragraph 24.
(16)  – Case C‑234/03 Contse and Others [2005] ECR I‑9315; Case C‑382/05 Commission v Italy [2007] ECR I‑6657; and Case C‑300/07 Hans & Christophorus Oymanns
[2009] ECR I‑4779. These criteria include the delegation of liability for harm suffered on account of a failure of the service at issue and the existence of a certain economic freedom to determine the conditions under which the service is exploited.
(17)  – Incidentally, in my view, this is where the fact that, by virtue of Article 1(3)(b) of Directive 2004/17, the consideration for a service concession can consist either solely in the right to exploit the service or in that right ‘together with payment’ becomes relevant. The existence of two combined elements in the consideration for a service which, in legal terms, can only be a contract or a concession, means that the specific weight to be given to each of them must be assessed. For this, in my view, the only possible criterion is the level of risk ultimately assumed by the service provider, and to determine that it is necessary to look at the extent to which the payment which accompanies the right to exploit implies a significant reduction in the risk inherent in the business activity.
(18)  – For the academic thinking on the subject, see, for example, Lenaerts, K. and van Nuffel, P., European Union Law, Third edition, Sweet & Maxwell, London, 2011 (22-080 et seq.).
(19)  – Although there is no need to address here the question of whether or not there is a right to a remedy, which, as part of the heritage of the European Union as a community based on law, would be fundamental to the whole Community legal order, it must nevertheless be recognised that Directive 92/13 in its original form already protected the right to challenge the decisions of contracting authorities and Directive 2007/66 therefore improved the effectiveness of already existing review procedures concerning the award of public contracts. Bringing about this improvement by introducing the sanction of declaring contracts ineffective in certain circumstances, thus going further than simply recognising the right to compensation, is another matter. It should be borne in mind that reparation for the infringement of a right in the form of compensation is a legitimate, albeit ‘secondary’, form of legal remedy. In this regard, see Erbguth, W., ‘Primär- und Sekundärrechtsschutz im öffentlichen Recht’, Veröffentlichungen der Vereinigung der Deutschen Staatsrechtslehrer, Vol. 61, Berlin, 2002, p. 221 et seq.
(20)  – Council directive of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts (OJ 1989 L 395, p. 33).
(21)  – In this respect it should be pointed out that, according to the submissions of Norma-A and Dekom (pp. 6 and 7 of the French version), there has existed in Latvia since 1 February 2004 an administrative court to which Article 184 of the Administrative Procedure Code gives jurisdiction to hear actions relating to the validity of public law contracts.