OPINION OF ADVOCATE GENERAL

TRSTENJAK

delivered on 14 April 2010 1( )

Case C‑271/08

European Commission

v

Federal Republic of Germany

(Failure of a Member State to fulfil obligations – Article 226 EC – Public procurement – Award of service contracts for occupational pension schemes for local authority workers – Framework agreements – Directive 92/50/EEC – Directive 2004/18/EC – Preliminary selection made by collective agreement in favour of certain pension scheme providers – Autonomy in collective bargaining – Fundamental right to bargain collectively – Relationship between fundamental rights and fundamental freedoms)









Table of contents





I – Introduction

II – Legal framework

A – Community law

1. Directive 92/50

2. Directive 2004/18

B – National law

1. Gesetz zur Verbesserung der betrieblichen Altersversorgung (Law on the enhancement of occupational old-age pensions)

2. Tarifvertrag zur Entgeltumwandlung für Arbeitnehmer/-innen im kommunalen öffentlichen Dienst (Collective agreement on the conversion of earnings for local authority employees)

III – Facts

IV – Pre-litigation procedure

V – Procedure before the Court and forms of order sought by the parties

VI – Main arguments of the parties

VII – Legal appraisal

A – Applicability of Directives 92/50 and 2004/18 to collectively agreed framework agreements

1. Whether or not collective agreements are excluded from the scope of primary law competition rules and, if so, the applicability of such an exclusion to the fundamental freedoms

(a) No exclusion from primary law competition rules for collective agreements

(b) No general concordance between the scope of the primary law on competition and that of freedom of establishment and freedom to provide services

2. The limited horizontal effects of fundamental freedoms

3. Categorisation of the rights to bargain collectively and to autonomy in collective bargaining as fundamental social rights and their relationship to fundamental freedoms

4. Interim conclusion

B – Compatibility of the framework agreements at issue with Directives 92/50 and 2004/18

1. Categorisation of the cities as contracting authorities

2. Categorisation of the framework agreements as contracts for pecuniary interest within the scope of the procurement directives

(a) Observations on the duty to substantiate and the burden of proof

(b) Applicability of Directives 92/50 and 2004/18 to framework agreements

(c) Whether the framework agreements are for pecuniary interest

(d) Non-applicability of the exclusion for employment contracts

(e) Thresholds under Directives 92/50 and 2004/18

(i) Determination of the relevant thresholds

(ii) Absence of proof that the framework agreements exceed the relevant threshold

3. Interim conclusion

C – In the alternative: resolution of a conflict between the procurement directives and the fundamental rights to bargain collectively and to autonomy in collective bargaining

1. Resolution of conflicts between fundamental freedoms and fundamental rights: Viking Line and Laval un Partneri

2. Equal ranking for fundamental rights and fundamental freedoms and resolution of conflicts on the basis of the principle of proportionality

3. Resolution of the conflict between Directives 92/50 and 2004/18 and the fundamental rights to bargain collectively and to autonomy in collective bargaining

4. Interim conclusion

VIII – Summary

IX – Conclusion

I – Introduction

1. The present case is a Treaty infringement action under Article 226 EC whereby the Commission seeks a declaration from the Court of Justice that, by reason of the fact that numerous large cities have concluded directly with pension scheme providers nominated by collective agreement framework agreements for occupational pension schemes for their employees without a European call for tenders, the Federal Republic of Germany had until 31 January 2006 failed to fulfil its obligations under Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts ( ) and, since 1 February 2006, has failed to fulfil its obligations under 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. The present proceedings are characterised in particular by the Commission’s tactical decision not to focus, by way of example, on the contested contract awards of individual cities but to challenge, across the board, the award practice of all cities of a particular size. That procedural approach results necessarily in a particular emphasis attaching to evidential questions on the burden of proof and the Commission’s duty to substantiate.

3. The present proceedings raise also numerous legal questions. Without doubt, the most difficult is that concerning the relationship between the rights to bargain collectively and to autonomy in collective bargaining, on the one hand, and Directives 92/50 and 2004/18 which give effect to freedom of establishment and freedom to provide services, on the other. As the alleged infringement of the procurement directives can be traced back, ultimately, to criteria established in collective agreements with the cities concerned, it may be questioned, in fact, whether the interplay between obligations based on fundamental freedoms, on the one hand, and the rights to bargain collectively and to autonomy in collective bargaining, on the other, gives rise to a conflict, and, if so, what are the consequences.

4. As I will propose in this Opinion, the rights to bargain collectively and to autonomy in collective bargaining must be regarded as elements of the general principles of Community law and accordingly as fundamental social rights. If in formal terms there is a finding of non-compliance with the procurement directives, clarification will thus be needed on how the obligation to respect the procurement directives may be reconciled with the fundamental rights to bargain collectively and to autonomy in collective bargaining.

II – Legal framework

A – Community law

1. Directive 92/50

5. According to Article 1(a)(viii) of Directive 92/50, employment contracts do not constitute public service contracts.

6. According to Article 8 of Directive 92/50, contracts which have as their object services listed in Annex I A must be awarded in accordance with the provisions of Titles III to VI.

7. Title III of Directive 92/50 concerns the choice of award procedures and the rules governing design contests, Title IV contains common rules in the technical field, Title V common advertising rules and Title VI common rules on participation, criteria for qualitative selection and criteria for the award of contracts.

8. Annex I A to Directive 92/50 groups services within the meaning of Article 8 in 16 categories. The sixth category covers ‘financial services’, in particular ‘insurance services’ and ‘banking services and securities dealing’.

2. Directive 2004/18

9. By reason of Article 16(e) of Directive 2004/18, the directive does not apply to public service contracts which concern employment contracts.

10. According to Article 20 of Directive 2004/18, contracts which have as their object services listed in Annex II A must be awarded in accordance with Articles 23 to 55. Those articles contain rules on specifications and contract documents (Articles 23 to 27), on the different award procedures (Articles 28 to 34), on advertising and transparency (Articles 35 to 43) and on the conduct of the procedure (Articles 44 to 55).

11. Annex II A to Directive 2004/18 groups services in 16 categories. The sixth category covers ‘financial services’, in particular, ‘insurance services’ and ‘banking and investment services’.

B – National law

1. Gesetz zur Verbesserung der betrieblichen Altersversorgung (Law on the enhancement of occupational old-age pensions)

12. Paragraph 1 of the Gesetz zur Verbesserung der betrieblichen Altersversorgung of 19 December 1974 ( ) (‘BetrAVG’) is worded:

‘Employer’s guarantee concerning an occupational old-age pension

(1) If an employee is given by his employer a guarantee of old-age, invalidity or survivor’s pension benefits on grounds of his employment relationship (occupational old-age pension), the provisions of this Law shall apply. A scheme for occupational old-age pensions may be implemented directly by an employer or through the conduit of one of the pension providers mentioned in Paragraph 1b(2) to (4). An employer shall be responsible for ensuring the provision of the benefits he has guaranteed even where he does not implement the scheme directly.

(2) Occupational old-age pension schemes shall also be deemed to exist where:

…

3. future entitlement to earnings is converted into an inchoate right, of equal value, to pension benefits (conversion of earnings), or

…’

13. Paragraph 1a of the BetrAVG provides as follows:

‘Right to an occupational old-age pension funded through conversion of earnings

(1) An employee shall have the right to demand from his employer that the future earnings to which he is entitled, to a maximum of 4% of the relevant ceiling for the assessment of contributions to the statutory pension fund, are paid into an occupational old-age pension scheme on the basis of conversion of earnings. The scheme for the implementation of an employee’s right shall be determined by agreement. If an employer is willing to allow for implementation through the conduit of a pension fund (Paragraph 1b(3)), the occupational old-age pension scheme shall be implemented by that body; otherwise an employee shall have the right to demand that his employer concludes a life assurance contract in his favour (Paragraph 1b(2)). …’

14. Paragraph 17 of the BetrAVG provides:

‘Personal scope and derogation by way of collective agreement

…

(3) Derogations from the provisions of Paragraphs 1a, 2 to 5, 16, the first sentence of Paragraph 18a, and Paragraphs 27 and 28 may be effected by collective agreement.

…

(5) To the extent that entitlement to earnings is based on a collective agreement, conversion of earnings may be effected in respect of that entitlement only to the extent that a collective agreement provides for or permits such conversion.’

2. Tarifvertrag zur Entgeltumwandlung für Arbeitnehmer/-innen im kommunalen öffentlichen Dienst (Collective agreement on the conversion of earnings for local authority employees)

15. Paragraph 2 of the Tarifvertrag zur Entgeltumwandlung für Arbeitnehmer/-innen im kommunalen öffentlichen Dienst of 18 February 2003 (‘TV-EUmw/VKA’) is worded as follows:

‘Principle of conversion of earnings

As a supplement to the collectively agreed rules on occupational old-age pensions (ATV/ATV-K), the present collective agreement establishes principles governing the conversion of earnings components determined by collective agreement for the purposes of occupational old-age pensions.’

16. Paragraph 5 of the TV-EUmw/VKA provides:

‘Exercise of the right to conversion of earnings

(1) An employee wishing to exercise his right to conversion of earnings shall serve on his employer, in a timely manner, written notice to that effect. An employee shall be bound by the agreement with his employer on the conversion of earnings for a period of no less than one year.

…’

17. Paragraph 6 of the TV-EUmw/VKA provides:

‘Implementation methods

Subject to the second and third sentences of this paragraph, conversion of earnings within the framework of the implementation methods provided for by the Gesetz zur Verbesserung der betrieblichen Altersversorgung (Law on the enhancement of occupational old-age pensions) shall be implemented with public bodies offering supplementary pension schemes. In the case of occupational old-age pension provision referred to in the first sentence, an employer may also adopt implementation methods offered by the Sparkassen finance group or local authority insurance companies. Should the need arise, a collective agreement at district level may provide for derogations from the first and second sentences of this paragraph.’

III – Facts

18. In the framework of efforts by the Federal Republic of Germany to encourage the development of funded occupational old-age pensions for employees, the BetrAVG includes provision for the conversion of earnings. In substance, that principle of conversion of earnings means that, at an employee’s request, part of his future salary is used to fund an occupational old-age pension through the conversion of future entitlement to earnings into a right, of equal value, to pension benefits.

19. Although Paragraph 1a of the BetrAVG provides, in general, that employees have a right to an occupational old-age pension funded through the conversion of earnings within the limits provided by law, Paragraph 17(5) of the BetrAVG includes an extensive derogation from that principle. According to Paragraph 17(5), in relation to earnings which are based on a collective agreement, the conversion thereof may be effected only to the extent that a collective agreement provides for or permits such.

20. In that context, on 18 February 2003, the Vereinigung der kommunalen Arbeitgeberverbände (Federation of Local Authority Employer Associations; the ‘VKA’) and the service sector trade union ver.di – Vereinte Dienstleistungsgewerkschaft e.V. concluded the TV-EUmw/VKA, granting workers in municipal public sector employment a right to conversion of earnings. At the same time, the TV-EUmw/VKA established several features of that scheme for conversion of earnings which derogate from the provisions of the BetrAVG. The VKA concluded a collective agreement on the same terms with the civil service trade union dbb Tarifunion.

21. In contrast to the BetrAVG, the TV-EUmw/VKA expressly identifies the pension scheme providers with which occupational pension contributions may be accumulated by way of conversion of earnings. In that regard, Paragraph 6 of the TV-EUmw/VKA provides, in particular, that conversion of earnings must be implemented, as a rule, with public bodies offering supplementary pensions. However, notwithstanding that general determination, according to Paragraph 6 of the TV-EUmw/VKA, local authority employers may decide also to cooperate with the Sparkassen finance group or local authority insurance companies. In addition, Paragraph 6 of the TV-EUmw/VKA provides expressly for the possibility that collective agreements at district level may adopt derogating provisions.

22. Taking account of the preliminary selection adopted in the TV-EUmw/VKA in favour of certain pension scheme providers with which conversion of earnings must be implemented, in simple terms, that conversion of earnings is effected, as a rule, in two steps. In order to facilitate conversion of earnings for individual local authority workers, as a first step, local authority employers conclude framework agreements with one or more pension scheme providers nominated by collective agreement. Typically, those framework agreements include the conditions on which local authority workers may opt, as a second step, for conversion of earnings.

IV – Pre-litigation procedure

23. Having become aware of the TV-EUmw/VKA as a result of a complaint, by letter of 12 October 2005, the Commission informed the Federal Republic of Germany that, by reason of the acts of local authorities and local authority undertakings in awarding service contracts for the provision of occupational old-age pension schemes directly to the organisations and undertakings mentioned in Paragraph 6 of the TV-EUmw/VKA without a European call for tenders, it might have contravened Article 8 in conjunction with Titles III to VI of Directive 92/50 and the principles of freedom of establishment and freedom to provide services established in Articles 43 EC and 49 EC and, in particular, the prohibition on discrimination inherent in those principles. The Government of the Federal Republic of Germany was called upon, in accordance with Article 226 EC, to respond within a period of two months.

24. By its reply of 29 March 2006, the Federal Republic of Germany indicated that local authority bodies, in their capacity as employers, could not be regarded in functional terms, in the context of commitments made by collective agreement, as contracting authorities within the meaning of procurement law. In addition, the scheme for conversion of earnings and pension provision resulting from collective agreement and individual contracts of employment did not constitute a public contract. Moreover, the rules contested by the Commission were protected by the principle of the autonomy of collective bargaining.

25. By letter of 4 July 2006, the Commission delivered to the Federal Republic of Germany a reasoned opinion in accordance with the first paragraph of Article 226 EC. In order to take account of the amendment to Community law which had meanwhile been effected and, in particular, to take account of the fact that Directive 2004/18 had entered into force, the Commission supplemented its complaint by the allegation that on grounds of the contested conduct the Federal Republic of Germany had infringed, until 31 January 2006, the abovementioned provisions of Directive 92/50 and, since 1 February 2006, has infringed the corresponding provisions of Directive 2004/18. In addition, the Commission adhered to its view that the conduct contravened also the principles of freedom of establishment and freedom to provide services established in Articles 43 EC and 49 EC and, in particular, the prohibition on discrimination inherent in those principles.

26. In reply to the reasoned opinion, by letter of 15 November 2006, the Federal Republic of Germany reasserted its position. Moreover, it stressed that the implementing agreements concluded with pension providers could not be viewed in isolation. Instead, those agreements constituted part of employment law or, alternatively, were overlaid by such. However, in accordance with Article 16(e) of Directive 2004/18, employment contracts were excluded from the scope of that directive. In addition, the Federal Republic of Germany annexed a legal opinion written by Professor Koenig and Mr Pfromm in response to the Commission’s reasoned opinion in which those authors concluded that in the cases at issue here, having regard to the principle of autonomy in collective bargaining, there could be no obligation to invite tenders and that, in any event, neither the personal nor the material scope of the procurement directives was triggered. In that context, it was argued also that in individual cases the thresholds laid down in those directives were not satisfied.

27. In order to determine whether in the present case exclusion of the procurement rules was objectively justified and reasonable in order to attain the social policy objectives linked to the conversion of earnings, the Commission then sent to the Federal Republic of Germany a set of questions. As, in the Commission’s view, the reply of the Federal Republic of Germany of 1 March 2007 was unconvincing, it moved to commence proceedings.

V – Procedure before the Court and forms of order sought by the parties

28. In its application, which was received at the Registry of the Court on 24 June 2008, the Commission claims that the Court should:

– declare that by reason of the fact that local authorities and local authority undertakings with more than 1 218 employees awarded public service contracts concerning occupational pension schemes without a European call for tenders directly to the organisations and undertakings mentioned in Paragraph 6 of the TV-EUmw/VKA, the Federal Republic of Germany had, until 31 January 2006, infringed Article 8 in conjunction with Titles III to VI of Directive 92/50 and, since 1 February 2006, has infringed Article 20 in conjunction with Articles 23 to 55 of Directive 2004/18;

– order the Federal Republic of Germany to pay the costs.

29. In its defence received on 16 September 2008, the Federal Republic of Germany contends that the Court should:

– dismiss the action;

– order the Commission to pay the costs.

30. In its reply received on 27 October 2008, the Commission narrowed the scope of its action. In that regard, it contended, in particular, that the Court should declare that by reason of the fact that local authorities and local authority undertakings which had, in 2004 and 2005, more than 2 044 employees, in 2006 and 2007, more than 1 827 employees and, for awards since 2008, more than 1 783 employees, awarded public service contracts concerning occupational pension schemes without a European call for tenders directly to the organisations and undertakings mentioned in Paragraph 6 of the TV-EUmw/VKA, the Federal Republic of Germany had, until 31 January 2006, infringed Article 8 in conjunction with Titles III to VI of Directive 92/50 and, since 1 February 2006, has infringed Article 20 in conjunction with Articles 23 to 55 of Directive 2004/18.

31. In its rejoinder of 12 December 2008, the Federal Republic of Germany repeated its contention that the Court should dismiss the action.

32. By order of the President of the Court of 5 December 2008, the Kingdom of Denmark and the Kingdom of Sweden were granted leave to intervene in support of the forms of order sought by the Federal Republic of Germany. They submitted written observations on 14 and 15 April 2009 to which the Commission responded with observations received on 30 June 2009.

33. At the hearing on 12 January 2010, the representatives of the Commission, the Federal Republic of Germany, the Kingdom of Denmark and the Kingdom of Sweden presented their oral arguments.

VI – Main arguments of the parties

34. Essentially, the Commission contests the compatibility with Directives 92/50 and 2004/18 of the preliminary selection made in Paragraph 6 of the TV-EUmw/VKA in favour of certain pension scheme providers. In the Commission’s view, that provision of the collective agreement restricts local authority employers, in contravention of the directives, in their choice of pension scheme providers with which to implement conversion of earnings. Accordingly, to the extent that the relevant thresholds are satisfied, the award of an individual contract results necessarily in an infringement of those procurement directives.

35. In that regard, the Commission starts from the premiss that Directives 92/50 and 2004/18 apply to the framework agreements which local authority employers conclude with the selected pension scheme providers. More specifically, according to the Commission, those framework agreements must be categorised as public service contracts within the meaning of Directives 92/50 and 2004/18, whose value, in the case of numerous German cities, exceeds the relevant thresholds. Therefore, on awarding such public service contracts, the provisions of those directives must be observed.

36. In the Commission’s view, such assessment is not precluded by the fact that the preliminary selection in favour of certain pension scheme providers was established by collective agreement resulting from negotiations between the VKA and the trade unions. Community law, so it argues, does not accord any general privilege to the autonomy of collective bargaining. Moreover, the obligation to call for tenders does not depend on the characteristics of the individual employment relationships of local authority workers.

37. The German Government contests the Commission’s action primarily with the argument that Community procurement law does not apply to a case such as the present. In its view, what is decisive is the fact that the selection procedure challenged by the Commission was adopted by the social partners and, accordingly, must be evaluated in the light of the principle of autonomy in collective bargaining. From that standpoint, it follows that the preliminary selection by collective agreement in favour of certain pension scheme providers contested in the present case and the implementation of such in the individual framework agreements, in fact, falls outside the scope of the procurement directives. To that extent, the German Government favours a corresponding application of the principles established in Albany ( ) and Van der Woude. ( ) Moreover, application of the procurement directives places public sector employers and their employees at a considerable disadvantage in comparison with private sector employers and their employees as this deprives the former group of the possibility to select pension scheme providers by way of collective agreement.

38. In relation to the facts, the German Government emphasises in that connection how collective agreements constitute the basis for and shape the right to conversion of earnings for workers in municipal public sector employment. In that regard, it stresses in particular that under the first sentence of Paragraph 1a(1) of the BetrAVG employees have a statutory right to the conversion of such earnings as are not based on a collective agreement. In that connection, in implementing the conversion of earnings, following a request by an employee, the choice of the pension scheme provider is, in principle, a matter for the employer. However, in relation to earnings which are based on a collective agreement, under Paragraph 17(5) of the BetrAVG, conversion may be effected only if, and, to the extent that, collective agreement provides for or permits such conversion. As the TV-EUmw/VKA provides for such possibility, in the view of the German Government, the scheme for the conversion of earnings at issue here is based entirely on collective agreement.

39. Moreover, it points out that the parties to the collective agreement took advantage of the possibility provided for in Paragraph 17(3) of the BetrAVG to derogate from various provisions of that law. In those circumstances, the preliminary selection – challenged by the Commission – in favour of certain pension scheme providers with which conversion of earnings must be implemented constitutes a restriction on the freedom of choice available to employers under Paragraph 1a(1) of the BetrAVG. Thus, employers are deprived of their authority to select and this is replaced by a consensual solution arrived at by the social partners. In that regard, selection of the pension scheme providers, in itself, reflects employee concerns.

40. Even if, in principle, the procurement directives apply to a case such as the present, in the view of the German Government, the framework agreements challenged by the Commission necessarily fall outside the material scope of Directives 92/50 and 2004/18.

41. Having regard to the fact that on the basis of a collective agreement local authority employers have been deprived of the authority to select pension scheme providers, according to the German Government, it would run contrary to the system to categorise those employers as contracting authorities within the meaning of the procurement directives. Moreover, so it argues the framework agreements concluded by local authority employers with pension scheme providers do not of themselves establish insurance relationships; instead, they establish simply the conditions on which employees may establish individual insurance contracts with pension scheme providers. In addition, employers generally conclude several such framework agreements with different pension scheme providers. Moreover, in its view, those framework agreements are not for pecuniary interest, the exclusion established in Article 16(e) of Directive 2004/18 applies to the framework agreements and in calculating the value of the individual agreements the Commission relied on incorrect presumptions.

42. The Kingdom of Denmark and the Kingdom of Sweden support Germany’s contention that the action for failure to fulfil Treaty obligations should be dismissed.

43. The Kingdom of Denmark considers in particular the Danish system of occupational old-age pensions to be at risk if the Court were to conclude that agreements of a certain size concluded between public employers and trade unions concerning the investment of funds earmarked for the pensions of public sector employees must be subject to a compulsory call for tenders.

44. In their legal observations, both the Kingdom of Denmark and the Kingdom of Sweden stress the relevance of the abovementioned judgments in Albany and Van der Woude. In their view, even if, in principle, the procurement directives must be presumed to apply in situations such as those at issue here, account must be taken of the fact that the rules governing occupational old-age pensions derive directly from collective agreements. Moreover, all that has been agreed is which pension scheme provider should manage the pension savings. The funds, however, belong to employees alone and, as a result, no question arises of a contract for the provision of services to public sector employers. Moreover, Article 16(e) of Directive 2004/18 applies, according to which the directive does not apply to employment contracts.

VII – Legal appraisal

A – Applicability of Directives 92/50 and 2004/18 to collectively agreed framework agreements

45. The first question of principle which has to be answered in the present proceedings is whether the procurement directives may apply to collectively agreed framework agreements.

46. In that connection, there is considerable dispute on whether the framework agreements in question may fall within the primary law provisions on freedom of establishment and freedom to provide services.

47. As Directives 92/50 and 2004/18 were adopted on the basis of powers included in the title of the EC Treaty on freedom of establishment and freedom to provide services, if those fundamental freedoms are not applicable to the framework agreements in question, on an interpretation of the procurement directives in conformity with primary law, it follows that those framework agreements necessarily are excluded also from the scope of the procurement directives.

48. The pleas advanced to counter the application of the fundamental freedoms to the framework agreements in question can be summarised in three lines of argument.

49. The first line of argument starts from the presumption that collective agreements – and, correspondingly, also framework agreements established by collective agreement – are excluded from the scope of competition rules under primary law. That exception in the field of competition law – according to such argument – can be applied in relation to fundamental freedoms and, as a result, collectively agreed framework agreements are excluded from the scope of fundamental freedoms.

50. A second line of argument, which, although not advanced systematically by the German Government, can be recognised as the underlying motive in some of its arguments, starts from the principle that fundamental freedoms do not apply to horizontal relations. In that connection, it may be queried in particular whether, having regard to the participation of worker representatives in collectively agreed accords, application of fundamental freedoms to collectively agreed framework agreements conflicts with the principle that fundamental freedoms do not apply to horizontal relations.

51. A third line of argument, advanced in the alternative, starts from the categorisation of the principle of autonomy in collective bargaining as a fundamental social right and the relationship between fundamental rights and fundamental freedoms. In that context, the argument is advanced in particular that collectively agreed framework agreements enjoy fundamental rights protection and, as a result, the substance of those agreements can no longer be measured against fundamental freedoms.

52. I will consider those three lines of argument in the following section.

1. Whether or not collective agreements are excluded from the scope of primary law competition rules and, if so, the applicability of such an exclusion to the fundamental freedoms

53. This first line of argument presumes, in my view, incorrectly, that, in principle, collectively agreed rules do not fall within the scope of primary law competition rules and that the exclusions from the scope of competition rules under primary law apply without more to the fundamental freedoms. Thus, that line of argument cannot be accepted.

(a) No exclusion from primary law competition rules for collective agreements

54. In three landmark judgments delivered on the same day in Albany, ( )Brentjens’ ( ) and Drijvende Bokken, ( ) the Court ruled on the applicability of primary law competition rules to collective agreements and collectively agreed schemes.

55. Those cases concerned the compatibility of a national system of occupational pensions with the competition rules under primary law. The central question was whether the introduction of compulsory affiliation – at the request of employer and worker representatives in a given sector – to an occupational pension scheme for all undertakings in that sector could constitute an infringement of Article 10 EC in conjunction with Article 81 EC or an infringement of Article 86(1) EC in conjunction with Article 82 EC. In that connection, it was necessary to clarify whether, if at all, and, if so, under what conditions, a collective agreement between employers and workers in a given sector introducing a sectoral occupational pension scheme could fall within the scope of Article 81(1) EC.

56. In order to clarify the relationship between the competition rules of the EC Treaty and the collectively agreed scheme, the Court referred, first, to the objectives of a policy in the social sphere and social protection provided for in Article 2 EC and Article 3(1)(j) EC ( ) and, in that connection, stressed that both the right of association and collective bargaining have been given express consideration in primary law and in the agreement on social policy. ( )

57. The Court then stated that certain restrictions of competition are inherent in collective agreements between organisations representing employers and workers. However, the social policy objectives pursued by such agreements would be seriously undermined if management and labour were subject to Article 81(1) EC when seeking jointly to adopt measures to improve conditions of work and employment. ( ) As a consequence of those considerations, the Court concluded that, from an interpretation of the provisions of the Treaty as a whole which is both effective and consistent, it follows that agreements concluded in the context of collective negotiations between management and labour in pursuit of such objectives must, by virtue of their nature and purpose, be regarded as falling outside the scope of Article 81(1) EC. ( )

58. Accordingly, in those judgments, the Court held that collective agreements – and, thus, also collectively agreed schemes and decisions – are excluded from the scope of Article 81 EC on satisfying a dual condition; that is, the agreement must (1) have been concluded in the framework of collective negotiations ( ) and (2) with a view to improving conditions of work and employment. ( )

59. As the non-applicability of the competition rules in relation to collectively agreed accords does not follow automatically, but must be determined in an individual case, the Court did not recognise in those judgments any exclusion from the competition rules under primary law for collective agreements. Instead, having regard to the primary law consideration given to collective agreements in the field of employment law and, accordingly, in the framework of an interpretation taking account of the Treaty’s scheme, the Court held Article 81 EC to be subject to an inherent limitation in relation to collective agreements with a given purpose. ( )

60. Such assessment is not precluded by the fact that both in Albany, Brentjens’ and Drijvende Bokken and in the later case of Van der Woude ( ) the Court examined only cursorily whether the collective agreements were concluded with a view to improving conditions of work and employment. Naturally, to eliminate all suspicion of abuse of the freedom granted to the social partners in the area of competition law, a more rigorous analysis on the substance of the collectively agreed provisions in question would have been advisable in those cases, too. ( ) None the less, in the framework of an overall assessment of the scheme of those judgments, the conclusion remains that only collective agreements with a given purpose were excluded from the scope of Article 81(1) EC. ( )

61. Against that background, Advocate General Fennelly was correct, in my view, to observe in his Opinion in Van der Woude that, as an exclusion from the general field of application of Article 81 EC, the scope of the ‘Albany exclusion’ must be narrowly construed. Consequently, collective agreements which appreciably affect competition may always be challenged on the basis that the agreement does not pursue a genuine social objective because the restrictions resulting from it, or from its application, go beyond what is required by the pursuit of its objective. ( ) Naturally, that necessarily presupposes a substantive examination of the criterion of whether the collective agreements concerned or the individual provisions of such were, in fact, concluded with a view to improving conditions of work and employment.

62. In the light of the foregoing, I conclude that in Albany, Brentjens’ and Drijvende Bokken the Court did not establish a general exception from the competition rules under primary law for collective agreements. Instead, those judgments must be interpreted as determining that Article 81 EC is subject to an inherent primary law limitation in relation to collective agreements with a given purpose.

(b) No general concordance between the scope of the primary law on competition and that of freedom of establishment and freedom to provide services

63. In its argument, the Federal Republic of Germany presupposes that the limitations and exceptions established in competition law apply, as a rule, to the fundamental freedoms. Against that background, it contends in particular that the Court should apply to the present case per analogiam – and, accordingly, without any assessment taking account of the particular features of freedom of establishment and freedom to provide services – the reasoning and principles of Albany, Brentjens’ and Drijvende Bokken.

64. In my opinion, that view put forward by the German Government cannot be accepted.

65. Although both the rules within the field of freedom of establishment and freedom to provides services and the rules in the field of freedom of competition take account of the objective of completing the internal market, the fact that an agreement or activity is excluded from the scope of the competition rules does not necessarily mean that it is excluded also from the scope of the rules on freedom of movement. ( )

66. In consistent case-law, the Court has held that although an agreement or an activity may be included within the scope of the provisions on free movement at the same time it may fall outside the scope of the provisions on competition and vice versa. ( )

67. Therefore, according to the case-law of the Court, there is no mandatory concordance between the scope of the competition rules under primary law and that of the fundamental freedoms. The fact that collectively agreed rules aimed at improving the conditions of work and employment, in accordance with Albany, Brentjens’ and Drijvende Bokken, do not fall within the scope of Article 81 EC, thus, does not imply necessarily that such collectively agreed rules are excluded also from the scope of freedom of establishment and freedom to provide services.

68. Simply in the alternative, I wish to add that, even if the relationship between the principle of autonomy in collective bargaining and the fundamental freedoms must be structured similarly to the relationship between the principle of autonomy in collective bargaining and competition law as established by primary law, this would not imply that the requirements laid down in Albany, Brentjens’ and Drijvende Bokken could be applied without more to the present case. Instead, giving due regard to the recognition of the principle of autonomy in collective bargaining as a fundamental right, ( ) the criteria and reasoning set out in those judgments in relation to competition law would need to be evaluated. ( )

2. The limited horizontal effects of fundamental freedoms

69. Nor is the applicability of freedom to provide services and freedom of establishment in the field of collective bargaining precluded by the argument – conceivable in the present case – that fundamental freedoms do not apply to horizontal relations.

70. According to that line of argument, the framework agreements in question result, ultimately, from a collective agreement negotiated between public sector employers and worker representatives. Taking account of the fact that the principles of freedom to provide services and freedom of establishment do not apply to horizontal relations, the participation of workers in the conclusion of the collective agreements precludes, in principle, so it is argued, the application of provisions concerning those fundamental freedoms to collective agreements and implementing agreements subordinated thereto.

71. That line of argument must be countered, first, by stating that the TV-EUmw/VKA was concluded between the VKA and trade unions. Given the fact that local authority employers, that is, public bodies subject to the requirements of the fundamental freedoms participated in the conclusion of the collective agreement, one could describe the effects produced by the fundamental freedoms, here, as having, at the most, an indirectly horizontal character to the disadvantage of the trade unions also participating in the collective bargaining process.

72. In addition, in that connection, regard must be had to the settled case-law of the Court, according to which Articles 39 EC, 43 EC and 49 EC do not apply only to the actions of public authorities but extend also to rules of any other nature aimed at regulating in a collective manner gainful employment, self-employment and the provision of services. ( )

73. That inclusion of collective rules on employment within the scope of the fundamental freedoms is justified by the fact that working conditions in the different Member States are governed sometimes by provisions laid down by law or regulation and sometimes by collective agreements and other acts concluded or adopted by private persons. Exclusion of collective rules on employment from the scope of the fundamental freedoms would carry with it the risk that application of obligations based on one of the fundamental freedoms established under primary law would result in inequalities. ( )

74. In the light of those considerations, I conclude that no arguments can be derived from the principle by which fundamental freedoms do not apply to horizontal relations which preclude the application of provisions on freedom of establishment and freedom to provide services to collectively agreed framework agreements.

3. Categorisation of the rights to bargain collectively and to autonomy in collective bargaining as fundamental social rights and their relationship to fundamental freedoms

75. Nor am I persuaded by the argument that because the fundamental right to autonomy in collective bargaining serves as the basis for the specification of the conditions of employment of local authority workers in the TV-EUmw/VKA the substance of such collective agreement and its subordinate agreements falls outside the scope of freedom of establishment and freedom to provide services.

76. It is settled case-law that fundamental rights form an integral part of the general principles of law the observance of which the Court ensures. ( ) In determining those fundamental rights, the Court draws inspiration from the constitutional traditions common to the Member States and from the guidelines supplied by international instruments for the protection of fundamental rights on which the Member States have collaborated or to which they are signatories.

77. The right to bargain collectively is recognised both by various international instruments which the Member States have signed or cooperated in – such as the European Social Charter signed in Turin on 18 October 1961, ( ) to which, moreover, express reference is made in Article 136 EC – and by instruments developed by those Member States at Community level or in the context of the European Union, such as the Community Charter of the Fundamental Social Rights of Workers adopted at the meeting of the European Council held in Strasbourg on 9 December 1989, ( ) which is also referred to in Article 136 EC, and the Charter of Fundamental Rights of the European Union proclaimed in Nice on 7 December 2000. ( )

78. Against that background, it is beyond question that the right to bargain collectively and the autonomy, accorded to the parties to that process, inherent in that right must be recognised also in the Community legal order as fundamental rights which form an integral part of the general principles of Community law. ( )

79. Moreover, by the Treaty of Lisbon – not relevant, ratione temporis, in the present case – the primary law enshrinement of the right to bargain collectively was strengthened by the fact that Article 6 TEU declares the Charter of Fundamental Rights of the European Union to have binding legal force. By that general reference to the charter, the right to bargain collectively, described in Article 28 of that charter, is now expressly incorporated in primary law. ( )

80. However, the fact that the right to bargain collectively and of the parties to autonomy in that connection are recognised as fundamental rights does not permit the conclusion, without more, that the substance of the collective agreements, made in exercise of those fundamental rights, and the agreements subordinate thereto automatically fall outside the scope of the fundamental freedoms.

81. In the case of a conflict between a fundamental right and a fundamental freedom, both legal positions must be presumed to have equal status. That general equality in status implies, first, that, in the interests of fundamental rights, fundamental freedoms may be restricted. However, second, it implies also that the exercise of fundamental freedoms may justify a restriction on fundamental rights. ( )

82. Consequently, categorisation of the rights to bargain collectively and to autonomy in collective bargaining as fundamental rights does not result in the automatic or complete exclusion from the scope of the provisions on freedom of establishment and freedom to provide services either for the collective agreements concluded in the exercise of those rights or for the subordinate agreements concluded in the implementation thereof.

83. From that, it inexorably follows that the argument according to which both collective agreements, negotiated through the exercise of the fundamental right to bargain collectively and the fundamental right to autonomy in such a process, and subordinate agreements thereto, eo ipso, fall outside the scope of freedom of establishment and freedom to provide services and secondary law based thereupon is unpersuasive.

84. Instead, if a conflict between such fundamental freedoms and fundamental rights is established, it must be determined whether, having regard to all the circumstances of the case, fundamental freedoms may justify a restriction on the fundamental right to bargain collectively and the fundamental right to autonomy in that process or, conversely, whether those fundamental rights demand that the scope of those fundamental freedoms and the secondary law based thereupon must be limited.

4. Interim conclusion

85. In the light of my observations above, I conclude that, in principle, collectively agreed framework agreements fall within the scope of freedom of establishment and freedom to provide services. Thus, in principle, the framework agreements in question fall also within the scope of procurement directives based on those fundamental freedoms, naturally, subject always to the proviso that the conditions for applying such directives are satisfied.

86. If it is established that Directive 92/50 or Directive 2004/18 has been contravened as a result of a collectively agreed framework agreement, regard must be had, however, to the special status of the rights to bargain collectively and to autonomy in collective bargaining as fundamental social rights. In that regard, it must be determined in the circumstances of the individual case whether that non-observance of the procurement directives results from exercising the fundamental social rights to bargain collectively and to autonomy in collective bargaining, and, if so, whether restricting the exercise of such fundamental social rights as a result of obligations established by the procurement directives may be regarded as justified having regard to the fundamental freedoms.

87. In the light of those considerations, in the following analysis I will examine, first, whether the collectively agreed framework agreements at issue are compatible with Directives 92/50 and 2004/18. Thereafter, I will examine how a conflict between obligations resulting from the procurement directives and the freedom to exercise the fundamental right to bargain collectively and the fundamental right to autonomy in collective bargaining may be resolved.

B – Compatibility of the framework agreements at issue with Directives 92/50 and 2004/18

88. The Commission alleges an infringement of Directive 92/50 and of Directive 2004/18 said to result from the fact that numerous local authorities and local authority undertakings awarded service contracts concerning occupational pension schemes for their employees without a European call for tenders directly to the bodies and undertakings mentioned in Paragraph 6 of the TV-EUmw/VKA.

89. For the purposes of Directives 92/50 and 2004/18, public service contracts are contracts for pecuniary interest concluded in writing between a contracting authority and an economic operator and having as their principal object the provision of services.

90. In the present case, the parties disagree, in particular, on whether, in implementing the preliminary selection established by collective agreement, local authorities acted as contracting authorities within the meaning of the procurement directives. In addition, there is disagreement on whether the agreements concluded between local authorities and pension scheme providers may be classified as contracts for pecuniary interest which have as their object the provision of services and which exceed the relevant thresholds.

91. I will examine both of those main issues in the following analysis.

1. Categorisation of the cities as contracting authorities

92. The Federal Republic of Germany rejects the categorisation of the cities concerned as contracting authorities for the purposes of the procurement directives with the argument that in selecting pension scheme providers those cities merely implement the requirements of the collective agreement and, hence, do not take an ‘independent’ decision. In addition, so they argue, the element of procurement to the benefit of public authorities is absent because in terms of its legal consequences and economic effects the conversion of earnings must be classified as pertaining to the employee sphere.

93. By that argument, the Federal Republic of Germany calls, in essence, for a functional interpretation of the concept of a public authority with the objective – as a result of a restrictive interpretation of that element – of narrowing the scope of the procurement directives in cases such as the present. That argument cannot be accepted.

94. At the outset, it must be recalled that the Community rules on public procurement were adopted in pursuance of the establishment of the internal market, in which freedom of movement is ensured and restrictions on competition are eliminated. ( ) In that connection, the Court has identified that the widest possible opening-up to competition in all Member States for public procurement constitutes one of the primary objectives of the procurement directives. ( )

95. Although it is correct to assert that in consistent case-law the Court has held that the concept of a contracting authority must be interpreted not in formal but in functional terms, ( ) it must be stressed in that context that such case-law testifies to the efforts of the Court to break up closed national procurement markets and – in accordance with the objectives stated in the recitals in the preambles to the procurement directives – to open them to the common market. ( )

96. Accordingly, by its functional interpretation of the concept of a contracting authority, the objective pursued by the Court is to ensure the effective attainment of freedom of establishment and freedom to provide services in the field of public contracts. To that end, the Court has broadly interpreted the material scope of the procurement directives, and, in that regard, for the purposes of classifying a national body (in functional terms) as a contracting authority for the purposes of the procurement rules it is irrelevant whether under relevant national rules that characteristic is linked to certain institutional features. ( )

97. Consequently, case-law on the ‘functional’ notion of a contracting authority facilitates the general purpose of the procurement directives, that is, in coordinating the procedures for awarding public contracts, to eliminate barriers to the freedom to provide services and goods and, as a result, also to protect the interests of traders established in a Member State who wish to offer goods or services to contracting authorities established in another Member State. ( ) In so doing, both the risk of preference being given to national tenderers or applicants whenever a contract is awarded by the contracting authorities and the possibility that a body financed or controlled by the State, regional or local authorities or other bodies governed by public law may choose to be guided by considerations other than economic ones may be avoided. ( )

98. Although the functional interpretation of the concept of a contracting authority in those terms results, on the whole, in an extension of the material scope of the procurement directives, in exceptional cases it may result also in the non-applicability of those directives to contracts notwithstanding the fact that in formal terms these were awarded by a contracting authority and the remaining requirements for the application of the procurement directives also appear to be fulfilled.

99. A clear example of this is to be found in Mannesmann Anlagenbau Austria in which the Court held that a contract awarded by a contracting authority, which in principle falls within the scope of the procurement directives, ceases to be regarded as a public contract if it is established that, from the outset, the whole of the project at issue fell within the objects of an undertaking not subject to procurement law and the works contracts relating to that project were entered into by the contracting authority on behalf of that undertaking. ( )

100. The criterion for the non-applicability of the procurement rules applied in Mannesmann Anlagenbau Austria implies, therefore, that the award decision demonstrably must be taken by a private awarding body acting on its own behalf and on condition that it bears the entire cost. Given that in such a configuration, although in formal terms the contracting authority awards the contract, but neither took nor influenced the decisions on which that contract is based, that precludes the risk that in awarding the contract such contracting authority gives preference to national tenderers or applicants or is guided by considerations other than economic ones. ( )

101. In the light of the considerations above, I am unpersuaded by the argument advanced by the Federal Republic of Germany, namely that in their selection of pension scheme providers local authorities merely implement the requirements of the collective agreement and, accordingly, do not act as contracting authorities.

102. First, it must be observed that the collective agreement was concluded between the VKA and the trade unions. In that process, as the umbrella association for local authorities and local authority undertakings in Germany, the VKA represented the interests of local authority employers for collective bargaining and employment relations purposes. That implies necessarily that local authority employers participated, at least, indirectly, in establishing the negotiating positions for which, subsequently, in the framework of collective bargaining with the trade unions, the VKA sought to find acceptance and which contributed, ultimately, to the basis for the collectively bargained consensus. Against that background, local authority employers could influence, at least, indirectly, the preliminary selection in favour of certain pension scheme providers agreed in the TV-EUmw/VKA.

103. In the light of the fact that local authority employers could influence, at least, indirectly, the negotiations on the collective agreement and, thus, also the outcomes achieved in the TV-EUmw/VKA, their categorisation as contracting authorities for the purposes of the procurement directives cannot be questioned by pointing to the requirements and obligations established by the collective agreement.

104. Nor is the argument convincing that in the present case, from a functional point of view, local authorities may not be regarded as contracting authorities for the purposes of the procurement directives because in terms of its legal consequences and economic effects the conversion of earnings must be classified as pertaining to the employee sphere.

105. Even if it is correct that local authority employers make no contributions whatsoever to occupational pension savings accumulated through conversion of earnings, such finding would not of itself suffice to remove the contracts made between local authority employers and pension scheme providers from the scope of the procurement directives.

106. Admittedly, the risk of preference being given by contracting authorities to national firms and bidders may be diminished when conclusion of the contract by the contracting authority constitutes the outcome of negotiations between the public sector employer and one or more workers and only those workers bear the economic consequences of the conclusion of the contract. In such a case, workers have, as a rule, a particular interest in ensuring that the most economically advantageous outcome is achieved. Regardless of the question whether that factor alone eliminates the risk that the outcome of the negotiations gives preference to national firms, for the purposes of assessing the present case it suffices to observe that the negotiations on the collective agreement were conducted on the workers’ side by trade unions. Although those trade unions represent the workers and, thus, may act as a counterweight to the natural tendency of contracting authorities to favour national firms, ( ) trade unions do not bear in a personal sense the financial consequences of the conversion of earnings requested by local authority workers. Simply for that reason, the fact that trade unions participated in the negotiations resulting in the conclusion of the TV-EUmw/VKA is insufficient to place the selection decisions – predetermined by collective agreement – taken by contracting authorities outside the scope of the procurement directives.

107. In the light of those considerations, I conclude that the local authorities which in implementation of the TV-EUmw/VKA concluded contracts with one or more of the pension scheme providers mentioned therein acted as contracting authorities for the purposes of the procurement directives.

2. Categorisation of the framework agreements as contracts for pecuniary interest within the scope of the procurement directives





(a) Observations on the duty to substantiate and the burden of proof

108. By means of a multiplicity of arguments, the German Government contests the categorisation of the framework agreements concluded between local authorities and pension scheme providers as contracts for pecuniary interest within the scope of the procurement directives. In that regard, it stresses in particular that the framework agreements establish merely the conditions on which workers may subsequently conclude individual insurance contracts with pension scheme providers. In that connection, the German Government emphasises also that consideration is provided not by local authorities but by employees. In its view, in the absence of an economic exchange between pension scheme providers and local authorities the framework agreement is not for pecuniary interest. And even if there were to be pecuniary interest, the Commission has not adduced proof that the thresholds are satisfied. In addition, so it argues, the exception for employment contracts provided for in Article 16(e) of Directive 2004/18 extends to the framework agreements in question.

109. In the present proceedings, analysis and assessment of those arguments is considerably hampered by the fact that very little specific information on the actual framework agreements concluded by individual local authorities has been produced to the Court. Particularly problematic, in that respect, is the approach taken by the Commission in relation to evidential matters. In wording its action, the Commission limited itself to a generalised challenge, on the basis of statistical information, to the award practice of all German cities of a certain size.

110. None of the framework agreements concluded by those cities were attached to the application. Instead, the Commission limited its evidence to the production of some general information sheets, information to members and specimen application forms issued by various pension scheme providers.

111. Against that background, in the present proceedings it remains unresolved, inter alia, on what date each of the framework agreements at issue was concluded. Accordingly, it is uncertain whether those framework agreements must be assessed in the light of Directive 92/50 or, instead, in the light of Directive 2004/18. The determining factor is always the legal position at the time when the operations with procurement law relevance took place. ( ) As in the absence of detailed information on the conclusion of the framework agreements in question that time cannot be determined, in the present proceedings, a finding that the procurement rules have been infringed may be reached only where conduct would constitute an infringement both of Directive 92/50 and Directive 2004/18.

112. In that regard, according to settled case-law it falls to the Commission to prove, in fact, the alleged failure to fulfil Treaty obligations. It is the Commission’s responsibility to place before the Court the information needed to enable the Court to establish that the obligation has not been fulfilled. In so doing, the Commission may not rely on any presumptions. ( )

113. Against that background, it is for the Commission to produce sufficient evidence to discern an infringement. When that has been done, it is incumbent on the Member State to contest substantively and in detail the information produced and the consequences thereof. ( )

114. In the light of those considerations, in the following analysis, I will examine the Commission’s argument and the counterarguments advanced by the German Government.

(b) Applicability of Directives 92/50 and 2004/18 to framework agreements

115. Although not one single framework agreement at issue between a city and a pension scheme provider has been produced, the German Government and the Commission agree on the fact that such framework agreements have been concluded by German cities. However, the German Government argues that the conclusion of those agreements cannot be regarded as the award of public contracts because the contractual relationship relevant for the purposes of the procurement rules is established only in the framework of an individual employee’s participation in conversion of earnings.

116. By this argument, the German Government emphasises the two-step construction of the conversion of earnings procedure. That procedure is particularly characterised by the fact that, as a first step, local authority employers conclude framework agreements with one or more pension scheme providers selected in accordance with Paragraph 6 of the TV-EUmw/VKA. Such framework agreements typically include the conditions on which, as a second step, local authority employees may opt for conversion of earnings.

117. To the extent that the material and personal conditions for application are satisfied, both under Directive 92/50 and under Directive 2004/18 framework agreements constitute contracts which are subject to a compulsory call for tenders.

118. Directive 92/50 does not govern expressly the conclusion of framework agreements. However, it must be observed that in Commission v Greece ( ) the Court confirmed the applicability of Council Directive 77/62/EEC of 21 December 1976 coordinating procedures for the award of public supply contracts ( ) to framework agreements. In the light of that judgment, it must be presumed that, in principle, framework agreements fall also within the scope of Directive 92/50. Directive 2004/18 expressly provides for and governs the conclusion of framework agreements in Article 32.

119. Although framework agreements fall, in principle, within the scope of the procurement directives, both the Court in Commission v Greece ( ) and the legislature in formulating that principle in Directive 2004/18 focused primarily on framework agreements which include the terms for subsequent contracts between the contracting authority and the economic operators concerned. ( ) However, the present proceedings concern framework agreements establishing the terms for the subsequent conversion of earnings by employees of the contracting authorities.

120. Thus, it may be questioned whether Directives 92/50 and 2004/18 must be interpreted as meaning that they include also the framework agreements at issue, although in substance these establish terms for insurance contracts which may be entered into by local authority employees.

121. In my view, in the specific context of the present proceedings, that question must be answered in the affirmative.

122. The crucial element in that regard is the fact that the conversion of earnings procedure is structured such that the framework agreements establish not only the terms for any conversion of earnings by local authority employees but determine also the organisations with which local authority employees may implement conversion of earnings.

123. As I have already stated, the free movement of goods and services and the widest possible opening-up to competition in all Member States constitute the primary objectives of Community legislation on public procurement. ( ) In that connection, both the risk of preference being given to national tenderers or applicants whenever a contract is awarded by the contracting authorities and the possibility that a body financed or controlled by the State, regional or local authorities or other bodies governed by public law may choose to be guided by considerations other than economic ones may be avoided. ( )

124. In the light of those objectives, in analysing the framework agreements in question for procurement law purposes, the crucial factor is that in concluding a framework agreement a local authority employer determines with which pension scheme provider its employees may, as a second step, implement the conversion of earnings. Accordingly, the selection – relevant for procurement law purposes – of one or more economic operators is effected on the conclusion of the framework agreement between the local authority employer and the pension scheme provider concerned.

125. Against that background, I conclude that the risk of preference being given to national tenderers or applicants clearly arises on conclusion of the framework agreements at issue. Because local authority employees are bound by decisions of local authority employers taken in favour of a pension scheme provider, they are limited to electing whether to establish an insurance relationship on the basis of the framework agreement and may not determine with whom. That latter decision was taken by local authority employers on the conclusion of the framework agreement and, as a result, in the specific context of the present proceedings, those framework agreements, too, must be included within the scope of Directives 92/50 and 2004/18.

126. As a final argument contesting the applicability of Directive 2004/18 to the framework agreements at issue, the Federal Republic of Germany contends, in the alternative, that the limitation on the term of framework agreements subject to a compulsory call for tenders to a maximum of four years, provided for in Article 32(2) of that directive, is inappropriate for the creation of collective insurance schemes. However, that objection must be rejected as unfounded simply by reason of the fact that under that provision that maximum term of four years does not apply if such term is incompatible with the object of the framework agreement.

(c) Whether the framework agreements are for pecuniary interest

127. According to the German Government, conversion of earnings is funded, ultimately, by employees alone. Against that background, it argues that the framework agreements are not for pecuniary interest within the meaning of Directives 92/50 and 2004/18.

128. Regardless of how, in the context of occupational pensions funded by conversion of earnings, in practical terms, the transfer of contributions or premiums is effected, it is certain that by such scheme, ultimately, an employee’s future earnings are used for the purposes of his occupational pension. Thus, from an economic point of view, employees, and not contracting authorities, bear the costs of occupational pensions. ( ) Therefore, from the perspective of procurement law, a scheme of third-party funding must be presumed, in which not the contracting authority but the local authority employee concerned confers an economic benefit on the pension scheme provider and, in return, acquires to the same value entitlements to future pension.

129. In my view, the fact that the monetary benefit, ultimately, is conferred not by contracting authorities but by local authority employees does not conclusively preclude the categorisation of the framework agreements concluded by contracting authorities as being for pecuniary interest.

130. The purpose of requiring a pecuniary interest is to ensure that those arrangements which do not concern economic activities such as, for example, charitable provision are excluded from the scope of the procurement directives. ( ) If, on the other hand, it is clear that an arrangement has an inherent economic purpose, Community procurement law, in principle, applies.

131. In that connection, the Court has already clarified that for the purposes of categorisation as a public contract within the meaning of the procurement directives it is irrelevant whether the contracting authority uses public resources to pay the contractor. ( )

132. In addition, in Carbotermo and Consorzio Alisei, in identifying the conditions under which an in-house award falls outside the scope of Community procurement law, the Court emphasised that in determining whether an undertaking’s activities are devoted primarily to a contracting authority it is irrelevant who pays the undertaking in question, whether it be that authority or third parties. ( ) If, according to that line of case-law, payments by third parties can be relevant in determining the applicability of a derogation from procurement law, that must apply a fortiori in determining the applicability of procurement law itself. ( )

133. In the light of the above considerations, I conclude that the benefit conferred by local authority employees in the framework of the conversion of earnings suffices to classify the framework agreements concluded by contracting authorities with the pension scheme providers concerned as being for pecuniary interest within the meaning of the procurement directives. ( ) Consequently, it is unnecessary for contracting authorities to constitute, in economic terms, the ultimate supplier of the pecuniary consideration.

(d) Non-applicability of the exclusion for employment contracts

134. According to Article 1(a)(viii) of Directive 92/50, employment contracts do not constitute public service contracts. Article 16(e) of Directive 2004/18 provides, similarly, that that directive does not apply to public service contracts which concern employment contracts.

135. In the view of the German Government, those exclusions extend to the framework agreements in question. It contends that the framework agreements are based on employment relationships with the consequence that their object concerns to that extent employment contracts.

136. I am unpersuaded by that argument.

137. By Article 1(a)(viii) of Directive 92/50 and Article 16(e) of Directive 2004/18, the legislature has stated that provision of services may fall within Community procurement law only where this is effected on the basis of contracts. If, on the other hand, services are provided in fulfilment of an employment contract, these are not intended to be covered by procurement law. ( )

138. That explicit exclusion of employment contracts from the scope of the procurement directives can be explained by the fact that conclusion of an employment contract establishes a considerably more narrow legal relationship than the conclusion of a contract for the general provision of services. Against that background, employers should not be precluded by the procurement rules from taking account of subjective matters and impressions when taking hiring decisions. ( )

139. Although there is no single definition of the concept of a worker – nor, consequently, of an employment contract – in Community law, with that definition varying according to the area in which it is to be applied, ( ) in my view, the consistent case-law of the Court defining the concept of a worker for the purposes of Article 39 EC may serve as the basis for the definition of an employment contract for the purposes of Directives 92/50 and 2004/18. ( ) According to that case-law, a relationship governed by a contract of employment may be considered to exist only where a person undertakes, for a certain period of time, to perform services for and under the direction of another person in return for which he receives remuneration. ( )

140. Against that background, an agreement between an awarding body and a service provider may be categorised as an employment contract for the purposes of Directives 92/50 and 2004/18 only if the service provider undertakes, for a certain period of time, to perform services for and under the direction of an awarding body in return for which it receives remuneration.

141. It is beyond dispute that such a situation does not apply in the case of the framework agreements in question. Thus, in the present proceedings, it is immediately apparent that the exclusion for employment contracts established in Article 1(a)(viii) of Directive 92/50 and Article 16(e) of Directive 2004/18 does not apply.

(e) Thresholds under Directives 92/50 and 2004/18





(i) Determination of the relevant thresholds

142. Both Directive 92/50 and Directive 2004/18 apply only to public service contracts the estimated value of which net of value added tax (VAT) is in excess of certain thresholds established in those directives.

143. As those thresholds are regularly revised, first of all, it must be clarified which threshold was relevant in relation to the framework agreements in question. For those purposes, the threshold must be established which applied at the time of the contractual negotiations. ( )

144. The case-file does not include any information on the dates at which the individual local authority employers commenced negotiations with the relevant pension scheme providers or the dates on which framework agreements were concluded. Having regard to the fact that the TV-EUmw/VKA has been in force since 1 January 2003 and, thus, starting from the first half of 2003 negotiations could be held with a view to concluding framework agreements in accordance with that collective agreement, ( ) for the purposes of the present proceedings, all the thresholds which applied from 1 January 2003 to 4 September 2006 (the date on which the period for compliance with the reasoned opinion expired) must be considered relevant. These are:

(1) the threshold according to Article 7(1)(a) of Directive 92/50, as amended by European Parliament and Council Directive 97/52/EC of 13 October 1997 amending Directives 92/50/EEC, 93/36/EEC and 93/37/EEC concerning the coordination of procedures for the award of public service contracts, public supply contracts and public works contracts respectively: ( )the equivalent value in ecus of 200 000 SDR;

(2) the threshold according to Article 7(b) of Directive 2004/18: EUR 249 000;

(3) the threshold according to Article 7(b) of Directive 2004/18, as amended by Commission Regulation (EC) No 1874/2004 of 28 October 2004 amending Directives 2004/17/EC and 2004/18/EC of the European Parliament and of the Council in respect of their application thresholds for the procedures for the award of contracts: ( )EUR 236 000;

(4) the threshold according to Article 7(b) of Directive 2004/18, as amended by Commission Regulation (EC) No 2083/2005 of 19 December 2005 amending Directives 2004/17/EC and 2004/18/EC of the European Parliament and of the Council in respect of their application thresholds for the procedures for the award of contracts: ( )EUR 211 000.

145. In its application, the Commission attempted to circumvent the problem of determining the relevant thresholds by referring to the date on which the period of two months for compliance with the reasoned opinion expired. As the reasoned opinion was received by the Federal Republic of Germany on 4 July 2006, on the Commission’s argument, the threshold in force on 4 September 2006 of EUR 211 000 applied. ( )

146. That approach taken by the Commission is not supported by the procurement directives and ignores the essence of procurement law. Consequently, such approach cannot be followed. ( ) Instead, in determining the applicable threshold, in a case such as the present, reference must be had to the date of the contractual negotiations. ( )

147. As in the present case that date cannot be determined, in assessing whether the framework agreements in question satisfy the relevant thresholds, the highest threshold applicable in the period at issue must be presumed. That is EUR 249 000.

(ii) Absence of proof that the framework agreements exceed the relevant threshold

148. The framework agreements at issue are characterised by the fact that at the time of the negotiations leading to their conclusion it was impossible to ascertain how many local authority employees would opt, ultimately, for conversion of earnings and, in the event of such option, the conditions under which conversion would be effected. Against that background, the procurement directives provide that the value of such framework agreements must be determined on the basis of an estimate of the expected contract value at the date of the contractual negotiations. ( )

149. In relation to public service contracts without a fixed term or with a term greater than 48 months for which a total price is not indicated, Article 9(8)(b) of Directive 2004/18 provides, in addition, for a restriction on the period to be taken into account for the purposes of calculating the total price. According to that provision, in the case of such contracts total value is to be calculated by multiplying the monthly value by 48. Such a restriction, limiting the calculation period to four years, is included also in Article 7(5) of Directive 92/50 which may apply also to framework agreements. ( )

150. Even if, according to the procurement directives, in relation to a framework agreement for which a total price is not indicated, the total value to be taken into account must be determined, in principle, thus, on the basis of an ex ante estimate, in the present proceedings the Commission has based its calculations primarily on statistics concerning the participation of local authority employees in the conversion of earnings in 2006. Having regard to the fact that the Federal Republic of Germany has not put forward any real alternative to that ex post method of calculation, it must be presumed that the readiness of public service employees to take advantage of the option for conversion of earnings in 2006 corresponded to the estimates. Accordingly, the participation by public service employees in the conversion of earnings system in 2006 constitutes a legitimate starting point for determining whether or not the framework agreements in question satisfy the threshold.

151. According to consistent case-law, it is for the Commission to prove the allegation that the Treaty obligation has not been fulfilled. Having regard to the observations I made above, in the present infringement proceedings it is incumbent on the Commission, therefore, to prove that on the basis of the information available concerning the conversion of earnings in 2006 it may be presumed that the value of each of the framework agreements in question exceeded the threshold of EUR 249 000.

152. In my opinion, in the present case, the Commission has failed to adduce that proof.

153. In determining which local authority employers have concluded with pension scheme providers framework agreements exceeding the threshold relevant for procurement law purposes the Commission relies on a series of statistical data which it combines with a set of presumptions.

154. In its application, the Commission presumed that every large German city concluded for an unlimited term a framework agreement with a pension scheme provider. Moreover, according to research by TNS Infratest, ( ) attached as an annex to the application, it followed that in December 2006 2.3% of employees in the public service sector made use of the facility for the conversion of earnings and that in 2006 the monthly amount converted was approximately EUR 158 per month.

155. The Commission then used that statistical information as the basis on which to calculate, in accordance with Article 9(8) of Directive 2004/18, the value of each insurance contract entered into by a local authority employee within the scope of a framework agreement concluded by his employer as follows: EUR 158 x 48 months = EUR 7 584. According to the Commission, it follows from that calculation that every framework agreement which results in the conclusion of 28 or more individual insurance contracts has a value of EUR 212 352 or greater and, accordingly, exceeds the threshold – considered by the Commission as decisive – of EUR 211 000.

156. In order to determine in which cities no less than 28 local authority employees had applied or were likely to apply for conversion of earnings, the Commission combined the abovementioned rate of participation of local authority employees in the conversion of earnings procedure of 2.3% with a further academic study in this case on the relationship between the population figures for cities and municipalities and the number of local authority workers. ( ) The Commission derived from the latter study in particular the fact that in 2000/01 for every 1 000 inhabitants there were 17.8 local authority workers. According to the Commission, from that figure, for 2006, an employee figure of 16 local authority workers for every 1 000 inhabitants can be deduced. From that, in turn, according to its argument, it can be extrapolated for 2006/07 that every German city whose population exceeds 76 125 inhabitants concluded a framework agreement in excess of the threshold – considered by the Commission as decisive – of EUR 211 000.

157. To identify the cities which are alleged, in fact, to have infringed the procurement directives, the Commission produced a list of the largest cities in Germany together with their population figures and, in that regard, showed in its application that the 110 largest cities have populations in excess of 76 125 inhabitants and, consequently, concluded the framework agreements in question in contravention of procurement law.

158. After the Federal Republic of Germany in its defence – setting out detailed information in substantiation – rejected as incorrect the rate of participation of local authority employees in the conversion of earnings procedure of 2.3%, the mean conversion amount of EUR 158 per month, the employment figure of 16 local authority workers for every 1 000 inhabitants, the assumption that local authority employers conclude a framework agreement with only one pension scheme provider and the assumption that every large German city falls within the scope of the TV-EUmw/VKA, the Commission made minor revisions to its calculations.

159. On the basis of a legal opinion of 25 November 2005, ( ) in its reply, the Commission now stated the mean amount converted as EUR 106.77 per month and reduced the mean employment figure from 16 to 15 local authority workers for every 1 000 inhabitants. In addition, the Commission removed the city of Berlin from its calculations. However, it adhered to the estimated rate of participation of local authority employees in the conversion of earnings procedure of 2.3% and rejected as inconsequential the argument that individual local authority employers had concluded framework agreements with several pension scheme providers.

160. On the basis of those new parameters, according to the Commission, it can be extrapolated that German cities with a population in 2004/05 in excess of 136 267 inhabitants, in 2006/07 in excess of 121 800 inhabitants and in 2008/09 in excess of 118 867 inhabitants concluded framework agreements which exceeded the threshold applicable for the period concerned.

161. To identify the cities which are alleged, in fact, to have infringed the procurement directives, the Commission again referred to a list of the largest German cities, now excluding Berlin. Consequently, according to that argument, for 2004/05 the smallest city in population terms exceeding the threshold was Darmstadt with a population of 141 257 inhabitants. For 2006/07, it was Ingolstadt with a population of 122 167 inhabitants and for 2008/09 Bottrop with a population of 118 975 inhabitants.

162. In its rejoinder, the German Government in reply to that recalculation again stressed the fact that numerous employers concluded framework agreements with several pension scheme providers. Moreover, it argued that the mean employment figure advanced by the Commission of 15 local authority workers for every 1 000 inhabitants is not meaningful in the present proceedings as that employment figure includes also local authority civil servants who, in fact, fall outside the scope of the TV-EUmw/VKA. Only 85.6% of local authority workers constitute employees who can participate in the conversion of earnings and, as a result, so it argued, the statistically relevant mean employment figure is at the most 12.84 local authority workers for every 1 000 inhabitants. In addition, Germany again contested the estimated rate of participation of local authority employees in the conversion of earnings procedure of 2.3% and the estimated monthly amount converted of EUR 106.77 and submitted on the basis of the latest information that the mean proportion of local authority employees who took part in conversion of earnings in 2006 was 2.04% with a mean monthly contribution to conversion of earnings of EUR 89.92. ( )

163. On the basis of that information included in the rejoinder, following the method of calculation adopted by the Commission, it may be extrapolated that German cities with a population in excess of 217 610 may have concluded framework agreements with an estimated value in excess of EUR 249 000. Consequently, on the basis of a list of the largest German cities it may be concluded – in accordance with the argument pursued by the Commission – that in concluding framework agreements on the conversion of earnings 33 cities ( ) may have contravened Directives 92/50 and 2004/18.

164. That conclusion presupposes, however, that those 33 cities each concluded only one framework agreement with a pension scheme provider. However, precisely that assumption was contested by the German Government in the pre-litigation procedure and in the subsequent proceedings, too, it remains contested.

165. The resulting uncertainty is of particular significance in the present case. Neither Directive 92/50 nor Directive 2004/18 precludes contracting authorities from splitting their procurement requirements for services. Such splitting may be regarded as contrary to the directives only where this is effected with the intention of avoiding their application. ( ) Consequently, what is prohibited is an artificial split of a single contract. Although the Court is decidedly strict in its examination of that prohibition, ( ) such intention to circumvent cannot be presumed without more. Each individual case in which a contract was split for the purposes of an award must be examined according to its context and specificities and, in that regard, particular attention must be given to whether there are good reasons pointing in favour of or, on the contrary, against the split in question.

166. In that connection, it is evident from the case-file that in a set of questions of 30 January 2007 addressed to the German Government ( ) the Commission itself stated that, as a result of earlier answers given by the Federal Republic of Germany, it deduced that local authority employers concluded public contracts with different groups of insurers. Against that background, in its set of questions the Commission inquired, inter alia, whether between an employer and service provider, generally speaking, framework agreements covering all employees or, instead, individual contracts for each employee were concluded. In addition, it requested information on whether there were employers which had concluded contracts with several different service providers.

167. In its reply of 1 March 2007, the Federal Republic of Germany clarified that there are different approaches to the implementation of conversion of earnings; there are cases in which individual contracts are concluded in respect of each worker and also the conclusion of framework agreements between an employer and one or more provider. In that regard, according to the Federal Republic of Germany, an employer is not obliged by reason of the collective agreement to opt for one of the three implementation methods. It may offer its employees different implementation methods. In practice, according to the Federal Republic of Germany, it is not uncommon for employers to conclude framework contracts with several different providers. ( )

168. Notwithstanding that clear answer that the arrangements for the conversion of earnings by local authority employers can differ considerably, without further questioning, the Commission commenced proceedings. In the framework of the judicial proceedings, it has subsequently remained unresolved whether and, if so, which German cities have concluded framework agreements with several pension scheme providers. Also unresolved has remained the question whether, taking account of the specific circumstances applying to the case of each city and its employees, good substantive reasons pointed in favour of, or, on the contrary, against the conclusion of several framework agreements with different pension scheme providers.

169. In determining whether the Federal Republic of Germany is proven to have infringed the directives, ultimately, in the present proceedings, the decisive issue is which party is responsible for the uncertainty whether, and, if so, the grounds on which, the largest cities in Germany with the exception of Berlin concluded framework agreements with several pension scheme providers. If that uncertainty must be attributed to the defective adduction of evidence on the part of the Commission, it has failed to satisfy the burden of proof imposed on it and the action must be dismissed as insufficiently substantiated. However, if that uncertainty must be attributed to a failure to cooperate by the Federal Republic of Germany in the proper investigation of the facts, the action must be held to be sufficiently substantiated and, consequently, also well founded.

170. Having regard to the particular circumstances of the case, in my view, that uncertainty must be attributed to a defective adduction of evidence on the part of the Commission.

171. In that regard, I wish to stress that by its action the Commission originally sought a declaration that by reason of the fact that the 110 largest German cities have concluded directly with the bodies and undertakings mentioned in Paragraph 6 of the TV-EUmw/VKA framework agreements on conversion of earnings, the Federal Republic of Germany has failed to fulfil its obligations under Directives 92/50 and 2004/18. Already in the pre-litigation procedure the Federal Republic of Germany countered that argument by stating that it was common practice for cities and municipalities to conclude framework agreements with several pension scheme providers and that, therefore, it was necessary to differentiate in the calculation whether the thresholds were satisfied. However, the Commission ignored such statement and, without requesting the Federal Republic of Germany to provide further clarification, commenced proceedings.

172. Having regard to the complexity of the present proceedings raising a multiplicity of legal and factual questions, the Federal Republic of Germany cannot be criticised for the fact that neither in the pre-litigation procedure nor in the judicial proceedings has it provided of its own accord a summary of all the framework agreements concluded by Germany’s largest cities and explained the background thereto. Having regard to the multiplicity of unresolved legal and factual questions which characterise the present proceedings in which the Commission questioned the award practice of over 100 German cities throughout the Bundesländer, in the pre-litigation procedure the German Government was obliged, first, to highlight in general terms the factual omissions in the Commission’s account. In my view, the Commission should have taken those observations of the German Government as grounds for resolving the factual omissions by way of detailed questions. Instead, the Commission commenced proceedings prematurely and, as a result, in the judicial phase the German Government considered itself obliged, first, on a factual level to contradict in substance the statistical data of the Commission. Here, too, I cannot discern any grounds why the Federal Republic of Germany should be blamed for the fact that the Court has not been provided with any explanation whether, and, if so, on what grounds, the cities in question concluded framework agreements with several pension scheme providers.

173. In summary, it must be concluded, therefore, that the Commission has not adduced proof that the estimated value of the framework agreements at issue satisfies the relevant threshold for the application of Directives 92/50 and 2004/18. Against that background, the Commission’s action must be dismissed as insufficiently substantiated and, thus, unfounded.

3. Interim conclusion

174. In the light of my observations above, I conclude that the Commission has not adduced proof that by reason of the fact that local authorities and local authority undertakings awarded directly to the bodies and undertakings mentioned in Paragraph 6 of the TV-EUmw/VKA service contracts concerning occupational old-age pensions the Federal Republic of Germany has failed to fulfil its obligations under Directives 92/50 and 2004/18.

C – In the alternative: resolution of a conflict between the procurement directives and the fundamental rights to bargain collectively and to autonomy in collective bargaining

175. If, contrary to the view taken here, the Court concludes that the Commission has adduced proof that one or more local authority or local authority undertaking awarded directly to bodies and undertakings mentioned in Paragraph 6 of the TV-EUmw/VKA service contracts concerning occupational old-age pensions in contravention of Directive 92/50 or Directive 2004/18, it must be examined, in addition, whether, in the light of the fundamental rights to bargain collectively and to autonomy in collective bargaining, that incompatibility of the framework agreements concerned vis-à-vis the procurement directives must be regarded as contrary to Community law.

176. In that regard, it must be noted, first, that the preliminary selection made in the TV-EUmw/VKA in favour of certain pension scheme providers with which conversion of earnings must be implemented is of a restrictive nature. According to Paragraph 6 of that collective agreement, in principle, conversion of earnings may be implemented only with public bodies offering supplementary pensions, savings banks or local authority insurance companies. As a result of those requirements established by collective agreement, local authorities are restricted in their ultimate choice of a pension scheme provider such that they can no longer freely call for tenders for a framework agreement on the conversion of earnings without also infringing the collective agreement.

177. Thus, a conflict exists between the fundamental rights to bargain collectively and to autonomy in collective bargaining and Directives 92/50 and 2004/18. As those procurement directives give effect to freedom of establishment and to freedom to provide services, that conflict must be resolved first at a primary law level treating the conflict as one between the fundamental rights to bargain collectively and to autonomy in collective bargaining, on the one hand, and freedom of establishment and to provide services, on the other. Subsequently, that resolution achieved at a primary law level must implemented at the level of secondary law through an interpretation of the procurement directives in accordance with primary law.

178. Against that background, in the following section, first, I shall address the question of the criteria and yardsticks according to which a conflict between fundamental freedoms and fundamental rights must be resolved. On the basis of those criteria and yardsticks, I shall subsequently demonstrate how a conflict between freedom of establishment and freedom to provide services and the fundamental rights to bargain collectively and to autonomy in collective bargaining may be resolved in the present case. That examination allows finally for a determination whether or not the i