OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 1 March 2005 ( )

Case C-458/03

Parking Brixen GmbH

(Reference for a preliminary ruling from the Verwaltungsgericht, Autonome Sektion für die Provinz Bozen, Italy)

(Public procurement – Directive 92/50/EEC – Distinction between public service contracts and concession contracts – Distinction between awards to third parties and ‘in-house operations’ – Management of a pay car park by a subsidiary of the contracting authority)

I – Introduction

1. One of the key questions in public procurement law is the distinction between award transactions which are subject to a compulsory call for tenders and those which are not. Particularly topical in this connection is the differentiation between the award of contracts to third parties and internal procurement operations, also referred to as ‘in-house operations’.

2. In-house operations stricto sensu are transactions in which a body governed by public law awards a contract to one of its departments which does not have its own legal personality. Largo sensu, however, in-house operations may also include certain situations in which contracting authorities conclude contracts with companies controlled by them which do have their own legal personality. Whereas in-house operations stricto sensu are by definition irrelevant for the purposes of procurement law, since they involve transactions wholly internal to the administration, ( ) in-house operations largo sensu (sometimes called ‘quasi-in-house operations’ ( )) frequently raise the difficult question whether or not there is a requirement to put them out to tender. That is the issue with which the Court is concerned once again ( ) in this case.

3. The Municipality of Brixen awarded the management of two public pay car parks to its subsidiary Stadtwerke Brixen AG without first carrying out an award procedure. The private company Parking Brixen GmbH challenged that award. An Italian court, the Verwaltungsgericht, Autonome Sektion für die Provinz Bozen (Administrative Court, Autonomous Division for the Province of Bolzano) (hereinafter also called ‘the referring court’), has referred to the Court for a preliminary ruling two questions which relate essentially to the distinction between public service concessions and public service contracts, and the distinction between external awards subject to a compulsory call for tenders and in-house operations not subject to a compulsory call for tenders.

II – Relevant legislation

A – Community law

4. The Community legislation relevant to this case comprises Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts ( ) (hereinafter ‘Directive 92/50’) and Articles 43 EC, 49 EC and 86(1) EC.

5. Article 1(a) and (b) of Directive 92/50 reads as follows:

‘For the purposes of this Directive:

(a) ‘public service contracts’ shall mean contracts for pecuniary interest concluded in writing between a service provider and a contracting authority, ...;

(b) ‘contracting authorities’ shall mean the State, regional or local authorities, bodies governed by public law, associations formed by one or more of such authorities or bodies governed by public law;

...’.

6. Article 43 EC establishes the freedom of establishment and Article 49 EC the freedom to provide services. Under the first paragraph of Article 48 EC and Article 55 EC, companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Community are, for the purposes of those freedoms, to be treated in the same way as natural persons who are nationals of Member States.

7. Finally, Article 86(1) and (2) EC provides as follows:

‘1. In the case of public undertakings and undertakings to which Member States grant special or exclusive rights, Member States shall neither enact nor maintain in force any measure contrary to the rules contained in this Treaty, in particular to those rules provided for in Article 12 and Articles 81 to 89.

2. Undertakings entrusted with the operation of services of general economic interest or having the character of a revenue-producing monopoly shall be subject to the rules contained in this Treaty, in particular to the rules on competition, in so far as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them. The development of trade must not be affected to such an extent as would be contrary to the interests of the Community.’

B – National law

8. In Italy, Article 115(1) of Decreto Legislativo ( ) No 267 of the President of the Republic of 18 August 2000 (hereinafter, ‘Decree-Law 267/2000’) ( ) allows municipalities and other local authorities to convert their dedicated undertakings (also known as ‘special undertakings’), by means of a unilateral legal transaction, into public limited companies. In those circumstances, the companies in question retain the rights and obligations obtaining prior to the conversion and take over the assets and liabilities of the original special undertakings. Under that provision, the local authority concerned may continue to be the sole shareholder in such a company, albeit for no more than two years following the conversion.

9. Article 88(6) of the consolidated text of the provisions concerning local government of the Autonomous Region of Trentino-South Tyrol (hereinafter, ‘the provisions concerning local government’) provides:

‘Municipalities shall by regulations establish the procedures and selection criteria for the forms of organisation set forth hereunder for the management of public services of economic and commercial importance:

(a) Formation of special undertakings;

(b) Formation of, or participation in, public or private limited companies, under predominantly public local influence;

(c) Entrusting the management of public services to third parties, in which case suitable procedures for their being put out to competition must be laid down. ...’. ( )

10. Also, Article 88(18) of the provisions concerning local government provides that local authorities with holdings in companies formed under Article 6 may – subject to certain conditions defined in greater detail in paragraph 18 – entrust such companies with the management of other public services which are compatible with the objectives of the company.

III – Facts

Facts and main proceedings

11. In 2001 and 2002, the Municipality of Brixen, situated in the Italian Autonomous Region of Trentino-South Tyrol, transferred the management of two public car parks to Stadtwerke Brixen AG, in each case without a prior award procedure. Both car parks belong to the municipal public swimming baths, the construction and management of which had already been transferred to Stadtwerke Brixen in 2000. As became clear at the hearing, however, those car parks are not used exclusively by patrons of the swimming baths.

12. According to the information supplied by the referring court, those car parks are situated on two different plots of land bearing numbers 491/6 and 491/11.

13. With respect to plot 491/11, in December 2001, the municipality granted ( ) Stadtwerke Brixen AG an overground and underground building right for the construction of a car park. Pending completion of the planned underground car park, provision was made for a temporary overground car park. To that end, the land in question (which had previously been a football field) was temporarily surfaced and converted into a car park with approximately 200 spaces.

14. In order to provide additional parking, management of the neighbouring overground car park on plot 491/6 was also transferred to Stadtwerke Brixen AG in November 2002 for a period of nine months. ( ) That car park, which likewise comprised some 200 spaces, had previously been administered directly by the Municipality of Brixen for 10 years.

15. Under an agreement concluded with the Municipality of Brixen on 19 December 2002, Stadtwerke Brixen AG is permitted to charge patrons a fee for using the latter car park, situated on plot 491/6. In return, it undertook to pay the municipality annual compensation in the amount of EUR 151 700, which is to increase proportionately if the parking fee is raised. ( ) In addition, Stadtwerke Brixen AG continued to employ the car park operating staff formerly employed by the Municipality of Brixen, undertook to ensure the routine and non-routine upkeep of the site and assumed full liability in this regard. Stadtwerke Brixen AG also stated that it was willing to carry on the cycle hire service which the Municipality of Brixen had previously operated from the car park and to allow the weekly market to continue to be held there.

16. According to the information supplied by the referring court, no such agreement was concluded, however, with respect to use of the overground car park on plot 491/11.

17. The award of the car park management contract to Stadtwerke Brixen AG is challenged by Parking Brixen GmbH, which already operates a multi-storey car park at another location in Brixen and is itself interested in managing the two car parks at issue here. On 17 January 2003, it brought a ‘Rekurs’ (appeal) before the referring court and seeks the annulment of the legal transactions by which the award was effected.

Additional information on Stadtwerke Brixen AG and the former dedicated undertaking

18. Stadtwerke Brixen AG is the legal successor to Stadtwerke Brixen, formerly a dedicated undertaking (also called a ‘special undertaking’) of the Municipality of Brixen. As a dedicated undertaking, it had had legal personality and commercial independence since 1 January 1999 and was converted by the municipality into a public limited company, Stadtwerke Brixen AG, under Article 115 of Legislative Decree 267/2000 in October 2001. ( )

19. The tasks of Stadtwerke Brixen AG are set out in Article 4 of its statutes. Under that article, it is permitted to operate in numerous areas falling under the heading of services of general economic interest in the broadest sense of that term, in particular water supply and sewage disposal, heating and power supply, highway construction, refuse disposal, transport of passengers and goods, as well as information technology and telecommunications, in each case at local, national and international level. Its tasks also include the management of car parks and garages, together with the activities associated with them.

20. The only shareholder in Stadtwerke Brixen AG at the time of the transfer of the two car parks, and thereafter, was the Municipality of Brixen. Article 5(2) of the statutes of Stadtwerke Brixen AG provides that participation by the Municipality of Brixen in the company’s authorised share capital must not under any circumstances be less than the absolute majority of the ordinary share capital.

21. Under Article 17 of its statutes, Stadtwerke Brixen AG is to be administered by an Administrative Board consisting of between three and six members to be appointed by the shareholders’ meeting, the Municipality of Brixen being able in any event to appoint the majority of the members of the Administrative Board. ( ) Under Article 18 of the statutes, the Administrative Board has the power to ensure the routine administration of the company, although that power is subject to a number of limitations including, in some circumstances, the carrying out of legal transactions up to a value of no more than EUR 5 000 000 per transaction. Furthermore, Article 24 of the statutes provides for a Supervisory Board consisting of three ordinary members and two alternate members, of which the Municipality is to appoint at least two ordinary members and one alternate member.

22. The former special undertaking Stadtwerke Brixen had tasks materially similar to those of the present Stadtwerke Brixen AG, although confined to the municipality’s area of responsibility and to cooperation with other undertakings in matters extending beyond the boundaries of the municipality. Its tasks already included the management of single- and multi-storey car parks but not, for example, information technology and telecommunications. Stadtwerke’s Supervisory Board was appointed by the Municipal Council and was subject in relation to its activities to the directives laid down by the Municipal Council.

IV – Reference for a preliminary ruling and procedure before the Court

23. By order of 23 July 2003, the referring court stayed the proceedings before it and referred two questions to the Court for a preliminary ruling. By those questions, the introduction to which also refers to Articles 43 et seq. EC, 49 et seq. EC and 86 EC, it seeks to ascertain whether:

1) the award of the management of the public pay car parks in question constitutes a public service contract within the meaning of Directive 92/50/EEC or a public service concession to which the competition rules of the EC, in particular the obligation to ensure equal treatment and transparency, must be applied;

2) if that award does constitute a service concession relating to the management of a local public service, the award of the management of public pay car parks which, under Article 44(6)(b) of Regional Law No 1 of 4 January 1993, as amended by Article 10 of Regional Law No 10 of 23 January 1998, and under Article 88(6)(a) and (b) of the provisions concerning local government, can be effected without a public call for tenders, is compatible with Community law, in particular with the principles of freedom to provide services and freedom of competition, the prohibition of discrimination, and the resultant obligations to ensure equal treatment, transparency and proportionality, where a company limited by shares is involved which was set up pursuant to Article 115 of Legislative Decree No 267/2000 by the conversion of a special undertaking of a municipality, whose share capital at the time of the award was held 100% by the municipality itself but whose administrative board enjoys all extensive powers of routine administration up to a value of EUR 5 000 000 per transaction.

24. By letter of 16 December 2004, the Court Registry drew the attention of the interested parties to the judgment in Stadt Halle ( ) due to be delivered on 11 January 2005 in order to give them an opportunity to make observations on that judgment at the hearing in this case on 13 January 2005.

25. In the proceedings before the Court, written and oral observations were submitted by Parking Brixen AG, Stadtwerke Brixen AG, the Municipality of Brixen, the Italian Government, the Austrian Government and the Commission. The Netherlands Government also presented oral argument at the hearing.

V – Legal assessment

26. This reference for a preliminary ruling is aimed essentially at ascertaining what, if any, rules Community law lays down in respect of transactions between contracting authorities and their subsidiaries. That is the subject-matter of the referring court’s second question. Before looking at this, however, we must, in the context of the first question referred, consider where in Community law such rules, if they do exist, are to be found in the first place – in Directive 92/50 or in general legal principles contained in the EC Treaty. To that end, it is necessary to distinguish between public service contracts and service concessions.

A – The first question: distinction between a public service contract and a service concession

27. By its first question, the referring court essentially wishes to ascertain whether a situation where a contracting authority assigns the management of a public car park to a contractor which may charge a fee for the use of the car park and, in return, undertakes to pay annual compensation to the municipality constitutes a public service contract within the meaning of Directive 92/50 or a service concession.

28. The distinction I referred to at the outset between awards to third parties which are subject to a compulsory call for tenders and in-house operations ( ) which are not subject to a compulsory call for tenders has no bearing at this stage on the answer to this question. It is sufficient for now to examine whether the mere subject-matter of a transaction such as that in this case between the Municipality of Brixen and Stadtwerke Brixen AG is capable of falling within the scope of Directive 92/50 in the first place. That question would have to be answered in the affirmative if the transaction constituted a public service contract but in the negative if it were a service concession since, according to the Court’s case-law, which was initially developed in relation to the ‘Utilities Directive’ (93/38) ( ) and then transposed to the sphere of Directive 92/50, service concessions are not contracts for pecuniary interest concluded in writing within the meaning of those two directives, ( ) not even where they relate to the spheres of activity listed in the annexes to the relevant directive. Moreover, this is also confirmed by a converse interpretation of the prospectively applicable Directive 2004/18, in which express reference is made for the first time to service concessions. ( )

29. Unlike a public service contract, a service concession is characterised by the fact that, in consideration for the service in question, the service provider obtains from the contracting authority the right to exploit for payment its own service. ( )

30. As the Commission, the Austrian Government and the Italian Government rightly submit, in the case of a service concession, the contractor bears the risks associated with the service and receives his consideration – at least in part – from the user of the service, for example through the payment of a fee. ( ) There is therefore a triangular relationship between the contracting authority, the service provider and the service user. A public service contract, on the other hand, leads only to a bilateral legal relationship in which payment for the service provided is made by the contracting authority itself, which, moreover, also bears the risk connected with the procurement.

31. In this case, according to the facts set out above, the consideration which the Municipality of Brixen grants to Stadtwerke Brixen AG for managing the car park on plot 491/6 consists exclusively in permitting Stadwerke Brixen AG to charge patrons of the car park a user fee. From an economic point of view, Stadtwerke Brixen AG is thus able to reap the benefits of the service which it provides, that is to say the management and maintenance of the car park. At the same time, however, it also bears the economic risk connected with managing the car park, since it must use the revenue from the user fees to finance not only the running costs but also the upkeep of the parking surfaces and the annual compensation payable to the municipality. All of this indicates that the transaction in question is not a service contract but a service concession.

32. Whether the same is also true of the car park on plot 491/11 cannot be conclusively determined on the basis of the information available. However, application of the criteria laid down by Community law to the facts of the main proceedings is in any event a matter not for the Court of Justice but for the referring court. ( ) That court will have to ascertain, in particular, whether the consideration which the Municipality of Brixen grants to Stadtwerke Brixen AG for managing the car park consists in the permission to charge patrons of the car park a user fee.

33. In conclusion, I in any event concur with Parking Brixen GmbH, the Austrian and Italian Governments and the Commission ( ) that a situation where a contracting authority assigns the management of a public car park to an undertaking which may charge a fee for the use of the car park and, in return, undertakes to pay annual compensation to the contracting authority does not constitute a public service contract within the meaning of Directive 92/50 but a service concession not falling within the scope of that directive.

B – The second question: rules of Community law governing the award of service concessions to subsidiaries of contracting authorities

34. By its second question, the referring court essentially wishes to ascertain the conditions under which a contracting authority may award to one of its subsidiaries, without first conducting an award procedure, a service concession such as the authority to manage public pay car parks at issue in the main proceedings.

1. Prohibition of discrimination under Community law and the obligation of transparency even outside the scope of the procurement directives

35. Contrary to the view taken by the Netherlands Government, it is already settled case-law that contracting authorities are subject, even outside the prevailing scope of the procurement directives, ( ) to the requirements of Community law arising from the fundamental rules of the EC Treaty, in particular the fundamental freedoms ( ) and the prohibition of discrimination contained in them. ( )

36. The prohibition of discrimination carries with it an obligation of transparency. Only if the award of a contract or a concession is carried out transparently can it be established at all whether, in a particular case, the principle of non-discrimination was observed or whether the decision to accept or reject a particular applicant was arbitrary. ( )

37. All of this does not mean of course that the procedure applied must be the same in every detail as that provided for in the procurement directives. However, as the Court held in the judgment in Telaustria and Telefonadress, the obligation of transparency imposed on the contracting authority means that it must:

‘for the benefit of any potential tenderer, [ensure] a degree of advertising sufficient to enable the services market to be opened up to competition and the impartiality of procurement procedures to be reviewed.’ ( )

38. I would mention merely in passing that, in this connection, Stadtwerke Brixen AG raises the objection that the provisions of Article 43 et seq. EC are not at all applicable to this case because the situation in the main proceedings has no cross-border connection. All the parties to the main proceedings are established in Italy.

39. It must be pointed out in this regard that it is true that the fundamental freedoms are not in fact applicable to purely internal situations. ( ) However, as the Commission, Parking Brixen GmbH and the Austrian Government have rightly submitted, in public procurement law, any failure to fulfil the obligation of transparency has an impact not only on domestic undertakings such as Parking Brixen GmbH but on all potential candidates, including any tenderers from other Member States. ( ) Consequently, any lack of publicity always simultaneously affects the fundamental freedoms of potential candidates from other Member States as well.

2. Possible exception for operations with a contracting authority’s own subsidiaries: the rule in Teckal

40. It remains to be considered, however, whether a contracting authority may exceptionally be exempt from the rules of Community law described above in cases where it commissions services from entities which it itself controls.

41. If the intention of the contracting authority in so doing is to use an organisationally independent public undertaking, in particular one of its subsidiaries, the answer appears initially to be readily apparent. In accordance with the principle of the equal treatment of public and private undertakings, as defined in particular in Article 86(1) EC, public undertakings must not, subject to the exceptions contained in Article 86(2) EC, be treated any more favourably than private competitors. A contracting authority cannot therefore simply entrust the provision of services to an undertaking which it itself controls without first giving any consideration to other possible tenderers or conducting a transparent selection procedure in order to do so.

42. On the other hand, the public body is of course at liberty to perform the tasks conferred on it by using exclusively its own resources, that is to say by performing them in-house, without calling on legally independent – public or private – undertakings at all. In those circumstances, moreover, it is not subject to the requirements of procurement law ( ) or of Article 86 EC.

43. As I said at the outset, the distinction between in-house operations and external procurement transactions not infrequently creates difficulties in individual cases. In its judgment in Teckal, ( ) the Court – in connection with Directive 93/36 – established a precedent in this regard. It can be inferred from that judgment that procurement law becomes applicable, in principle, upon the conclusion of an agreement between two separate persons, ( ) in other words upon the coming into being of a contract.

44. However, the question whether or not procurement law is applicable depends not only on purely formal criteria but also on a process of evaluation. For, even where both parties to a legal transaction, from a formal point of view, each have their own legal personality, the transaction carried out between them may none the less exceptionally be treated in the same way as an in-house operation, in so far as two cumulative criteria developed by the Court in its case-law are fulfilled: ( )

– the contracting authority ( ) must exercise over the contractor ( ) a control similar to that which it exercises over its own departments (first Teckal criterion);

– the other contractor must carry out the essential part of its activities for ( ) the controlling contracting authority or authorities (second Teckal criterion).

45. The Court has since applied that rule not only to Directive 93/36 but also to Directives 92/50 and 93/37. ( ) ( )

46. The Teckal criteria can also be transposed to circumstances such as those of this case, which do not fall within the scope of any of the public procurement directives. ( ) If the procurement directives, which lay down detailed requirements relating to the procedure for awarding contracts, themselves permit exceptions for in-house operations, such exceptions must with all the more reason also be permissible in cases where the procedural requirements are less detailed to begin with, relating only to general conditions arising from the prohibition on discrimination and the obligation of transparency. The absurd consequence if that were not the case would be that, in circumstances falling outside the scope of the directives, contracting authorities would be subject to stricter requirements than in circumstances falling within the scope of the directives, that is to say that they would in that event have an obligation without exception to ensure transparency and publicity.

47. Moreover, it must be taken into account that the procurement directives are for their part intended only to implement the fundamental rules of the EC Treaty as they arise in particular from the fundamental freedoms. ( ) Derogations from the directives are therefore ultimately derogations from those principles. This too supports the proposition that the rule in Teckal should be transposed to cases in which the prohibition on discrimination and the obligation of transparency derive directly from the fundamental freedoms without first having been given expression in the procurement directives.

48. Whether, however, the two Teckal criteria are capable of being fulfilled in a particular case such as this, with the result that the contracting authority may, as the Municipality of Brixen, Stadtwerke Brixen AG and the Italian Government claim, be exempt from the rules of Community law, depends on an assessment of all the circumstances of the case in question.

a) First Teckal criterion: control similar to that which it exercises over its own departments

49. In accordance with the first Teckal criterion, treatment as an in-house operation is subject to the condition that the contracting authority must exercise over its contractor a control similar to that which it exercises over its own departments.

50. The Commission doubts whether this can be said to be the case in relation to an undertaking such as Stadtwerke Brixen AG, for two reasons: first, Stadtwerke Brixen AG may in future be required by law to open up its capital to participation by third parties; and, secondly, its managerial bodies can for the most part run the company’s day-to-day business independently. The second point was also made by Parking Brixen GmbH and the Austrian Government.

i) Possibility of a control similar to that which it exercises over its own departments excluded by private participation

51. The starting point for an examination of this issue should be the recent judgment in Stadt Halle. In that judgment, the Court clarified the first Teckal criterion as meaning that any participation by private undertakings, even as minority shareholders, excludes the possibility of a control similar to that which it exercises over its own departments.( )

52. That clarification shows that, through the criterion of a control similar to that which it exercises over its own departments, the Court has established in its case-law a more stringent standard than is customary in competition law, for example. Thus, the fact that the contracting authority has a majority holding in the capital of its subsidiary, the fact that it exercises the majority of the voting rights and the fact that it appoints the majority of the members of the subsidiary’s managerial bodies may – together with any agreements between the members – combine to support the conclusion as to the existence of control within the meaning of competition law ( ) and make the subsidiary a public undertaking within the meaning of Article 86(1) EC; ( ) such considerations are not sufficient, however, to support the assumption of a – more extensive – control similar to that which it exercises over its own departments.

53. The mere presence of a private third party, even if only in the form of a minority holding without rights of veto, makes it impossible for the contracting authority to exercise a control similar to that which it exercises over its own departments. The reason for this is that the presence of a private third party always presupposes a minimum degree of consideration on the part of the public body for the private party’s economic interests – for only then will a private third party make its know-how or financial might available to the public body in the first place. Thus, where a private third party – following the completion of a public call for tenders, where there has been one – acquires a holding in an undertaking, the consideration for the private party’s economic interests may prevent the public body from fully pursuing its public interests, however legitimate such consideration may be from a purely legal point of view. It is essentially this combination of public and private interests which distinguishes semi-public undertakings as they are known from mere departments of the administration. ( )

54. Since a public body cannot therefore control semi-public undertakings in the same way as it can its own departments, all legal transactions which contracting authorities enter into with their semi-public subsidiaries are subject to the rules of public procurement law, in particular the prohibition on discrimination and the obligation of transparency.

ii) Future opening-up of the company’s capital to participation by third parties

55. At the time of the transfer of the two car parks, and thereafter, Stadtwerke Brixen AG was not a semi-public undertaking but a wholly-owned subsidiary of the Municipality of Brixen. However, the municipality was required, within a maximum of two years following the conversion of the former dedicated undertaking, to surrender its status as sole shareholder to that of mere majority shareholder. ( )

56. The principle of legal certainty requires that the obligation to conduct an award procedure must always be assessed ex ante, that is to say in the context of the time when the legal transaction was carried out. For, both from the point of view of the contracting authority and its contractor and from the point of view of competitors not taken into consideration, the question whether or not it was necessary to carry out an award procedure must be determinable at the time when the contract was actually concluded. Subsequent events can be taken into account, at most, if their occurrence was already foreseeable with certainty at the time of the award.

57. The loss of the municipality’s 100% holding in its subsidiary would have been foreseeable with certainty in any event if the acquisition of a holding in the company by a specific third party had already been imminent.

58. Taking that argument further, however, the Commission submits that, in a case such as this, the loss of the municipality’s 100% holding was sufficiently foreseeable by virtue of the law then in force alone, and should therefore have been taken into consideration at the time when the car parks were transferred.

59. However, a provision of law such as Article 115 of Legislative Decree 267/2000 supports the inference only – and at most ( ) – of an obligation to sell shares within a specified period. Whether and when such shares will actually be sold and transferred to a third party depends on many other circumstances about the materialisation of which the mere existence of such a statutory obligation says nothing at that stage. More specifically, it is by no means inconceivable that no candidate will be prepared to acquire a holding in the undertaking concerned on the terms offered, as is elegantly illustrated by the circumstances of this case in particular. According to the information supplied by the Municipality of Brixen and Stadtwerke Brixen AG at the hearing, no third party has to date acquired a holding in Stadtwerke Brixen AG.

60. The interests of the parties concerned are likewise not the same at that stage as they would be in a semi-public undertaking. For, so long as there is only an obligation to open up the capital of the subsidiary subsequently, but no particular third party has yet emerged, the contracting authority still has no reason, when awarding contracts or concessions to its subsidiaries, to take into consideration the interests of such a private investor.

61. The Commission voices the concern that a third party may, during the (potentially long ( )) term of a concession which has been awarded, acquire a holding in the public limited company and then, by virtue of its holding, share in the revenue from the concession. However, the danger associated with this possibility, that the subsequent private investor will be treated more favourably than other private undertakings, ( ) does not have to be addressed at the time when the concession itself is awarded to the municipal subsidiary; it is sufficient for suitable precautions to be taken at the time when the third party is selected, that is to say before the shareholding is transferred to it. For, in the context of the participation by a private third party in a public undertaking, the fundamental freedoms ( ) require compliance with the prohibition against discrimination and the obligation of transparency, in particular the assurance of an appropriate degree of publicity. ( )

62. For the foregoing reasons, the statutory obligation to open up a company’s capital to participation by third parties within a certain period, in itself, does not at that stage make it impossible for the contracting authority to exercise over that company a control similar to that which it exercises over its own departments.

iii) Power of the managerial bodies of a public limited company to run the day-to-day business independently

63. On the other hand, doubts as to the existence of a control similar to that which a contracting authority exercises over its own departments may, irrespective of the shareholdings, follow generally from the fact that an undertaking such as Stadtwerke Brixen AG is a public limited company the managerial bodies of which are to a large extent permitted to run the day-to-day business independently. ( ) These doubts have been expressed not only by Parking Brixen GmbH, the Austrian Government and the Commission, but also by the referring court.

64. In this connection, a distinction should be drawn between the public undertaking’s external relations with other market operators and its internal relations with the municipality.

65. The fact that the managerial bodies of a public undertaking have extensive powers in their external relations still does not by any means make it impossible for the municipality to exercise over that undertaking a control similar to that which it exercises over its own departments. In fact, such powers in external relations are usually necessary in order to guarantee the undertaking’s ability to pursue its activities, to ensure the smooth running of the day-to-day business and, not least, to protect the interests of third parties. ( ) Even in the public sector itself, it is by no means unusual for individual officials, such as the mayor of a municipality, the head (‘Landrat’) of a district authority or the heads of national authorities, to have relatively far-reaching powers to represent the organisation in question externally.

66. Of greater significance for the question of control at issue here, therefore, are the internal relations between a municipality and an undertaking such as Stadtwerke Brixen AG. In this regard, the referring court expresses the view that Stadtwerke Brixen AG has appreciably greater autonomy than its legal predecessor, the dedicated undertaking Stadtwerke Brixen. For, while the dedicated undertaking was under the direct control and influence of the municipal council, the only means by which the municipality can influence the public limited company are those provided by company law. The Commission and Parking Brixen GmbH advance similar arguments.

67. The control which a public body exercises over its own departments is usually characterised in law by rights to give instructions and supervisory powers. Within a single authority, for example, the authority’s management usually has the right to give instructions to the departments under its responsibility. In relation to subordinate authorities, it also has a right to give instructions, or at least the possibility, under its supervisory powers, of reviewing and correcting the decisions they take.

68. In relation to the managerial bodies of public undertakings, at least where these are organised in the form of a public or private limited company, such powers of instruction or supervision should be the exception. Accordingly, any requirement that the public shareholder should have the same possibilities in law in relation to its contractor as it has in relation to its own departments would make it almost impossible for the first Teckal criterion to be fulfilled in respect of capital companies incorporated under private law. In that event, contracting authorities would always, even as the sole shareholder, be required to comply with the procurement rules before concluding contracts with subsidiaries of theirs organised as public or private limited companies, and would have to assign the performance of their tasks to private third parties if these had submitted better tenders. In those circumstances, the mere transfer of tasks to such companies, including in such sensitive areas as water supply, would ultimately amount to the compulsory commencement of the privatisation of those tasks.

69. It may well be that, in certain cases, the conversion of dedicated undertakings into public or private limited companies is actually intended as the first step towards privatisation of the tasks in question. However, this is not necessarily so. It may equally conceivably be nothing more than an internal reorganisational measure aimed, for example, at securing a more efficient – because more cost-effective – provision of services and more flexible working arrangements for employees, there not necessarily being any desire on the part of the public body in question to outsource the performance of its tasks at the same time. Moreover, because of the accounting rules applicable to them, the choice of public or private limited company as the form of organisation for the undertaking may lead to a welcome increase in transparency. ( )

70. If, on the other hand, the procurement rules were also applied to transactions between contracting authorities and their wholly-owned subsidiaries, the private-law form of organisation of a public or private limited company could no longer be used purely for the purposes of internal reorganisation. In those circumstances, the public body in question would essentially be left with a choice between privatising its tasks ( ) or having them performed in-house by departments of the administration or by dedicated undertakings which form part of the administrative hierarchy and have no real independence to speak of. In some cases, public bodies might even take the retrograde step of converting existing subsidiaries back into dedicated undertakings.

71. However, such extensive interference in the organisational sovereignty of Member States and, in particular, in the self-government of many municipalities ( ) is – even from the point of view of the market-opening function of procurement law – entirely unnecessary. After all, the purpose of procurement law is to ensure that contractors are selected in a transparent and non-discriminatory manner in all cases where a public body has decided to use third parties to perform certain tasks. However, the spirit and purpose of procurement law is not also to bring about, ‘through the back door’, the privatisation of those public tasks which the public body would like to continue to perform by using its own resources. ( ) This would require specific liberalisation measures on the part of the legislature. ( )

72. In any event, through its use of the phrase ‘control similar to that which’, ( ) the judgment in Teckal indicates that the possibilities open to an authority for exerting influence over its own departments and over public undertakings do not have to be identical. What matters in deciding whether an undertaking is akin to an administrative department or to other market operators is not whether, from a formal point of view, the public body has the same possibilities in law as it does in relation to its own departments, for example the right to give instructions in a particular case. What matters is rather whether, in practice, the contracting authority is able to attain its public-interest objectives in full at all times. It is only where an undertaking has been made independent (autonomous) ( ) to such an extent that the contracting authority is no longer able to pursue its interests in full within the undertaking that the contracting authority can no longer be said to exercise a control similar to that which it exercises over its own departments.

73. This focus on the interests involved is particularly apparent in the judgment in Stadt Halle, ( ) where regard is had exclusively to the pursuit of objectives in the public interest as the decisive criterion in interpreting the first Teckal criterion. According to the judgment in Stadt Halle, the need to pursue those public interests dictates what possibilities for exerting influence on its departments the public body actually requires. ( )

74. Now, as for what those possibilities for exerting influence actually are, my comments in point 53 of this Opinion apply mutatis mutandis: if a private third party has a holding, even a minority holding, in an undertaking, the consideration given to the economic interests of that undertaking may prevent the public body from fully pursuing its public-interest objectives, however legitimate such consideration may be from a purely legal point of view. If, on the other hand, the contracting authority is the only shareholder in its subsidiary, its interests and those of the subsidiary can normally be deemed to be essentially the same, even if the subsidiary is organised as a private or public limited company. More specifically, the sole shareholder has a 100% economic share in the profits made and is alone able to decide how they are to be used.

75. Where consideration for the economic interests of private third parties is unnecessary because the public body holds all the shares, the pursuit of public interests within the company is made sufficiently possible, even without a formal power of instruction, by the means available under company law, and in particular by the presence on the company’s managerial boards of representatives nominated (appointed) exclusively by the public body. It seems highly unlikely that these boards, which, moreover, are usually characterised by having close personal links with the public body, will, in the day-to-day running of the business, deviate from the philosophy of the local authority which nominated them to such an extent as to be capable of frustrating the pursuit of objectives in the public interest. What is more, if they did, the representatives in question would be bound to fear that they might in future be removed from the board or at least not be re-appointed.

76. In any event, the mere fact that a company such as Stadtwerke Brixen AG is a public limited company the managerial bodies of which have extensive powers in the day-to-day running of the business is not capable of supporting the conclusion that that company is autonomous of its public shareholder and that the latter no longer exercises over it a control similar to that which it exercises over its own departments.

b) Second Teckal criterion: the contractor must carry out the essential part of its activities for its public shareholder or shareholders

77. In accordance with the second Teckal criterion, treatment as an in-house operation is also subject to the condition that the contractor used by the contracting authority must carry out the essential part of its activities for the controlling contracting authority.

78. In the order for reference, the referring court cites only the provisions of Stadtwerke Brixen’s statutes, according to which the company’s material field of business comprises an extensive list of activities which can essentially be classified as services of general economic interest, capable of being carried out at local, national and international level. ( )

79. However, such provisions have little indicative value. On the one hand, they are not infrequently framed in particularly broad terms which are intended to cover not necessarily only the activities in which the company is engaged at present but also any others which it may carry out in future. On the other hand, even restrictions on a public limited company’s field of activity which are laid down in the statutes cannot be relied on as against third parties; ( ) – by means of the statutes, the company’s shareholders set out only for internal purposes the framework within which its activities may be carried on.

80. Thus, if account were taken only of the – usually relatively extensive – fields of activity in which a public or private limited company is permitted to operate from a purely legal point of view (that is by law or under the company’s statutes), it would be practically impossible for such undertakings to fulfil the second Tickal criterion. In those circumstances, contracting authorities would always be required to comply with the procurement rules before concluding contracts with their subsidiaries, in so far as those subsidiaries are organised as public or private limited companies. This would make the choice of public or private limited company as a form of organisation appreciably less attractive. ( ) Such extensive interference in the organisational sovereignty of the Member States and, in particular, the self-government of many municipalities is not necessary for the purposes of the market-opening function of public procurement law.

81. It is sufficient to be guided by the actual activities of the undertaking concerned. ( ) For, whatever its form of organisation in law, the activities which an undertaking actually pursues are the best indicator of whether that undertaking operates in the same way as others on the market or is so closely connected to the public body that contracts between it and the contracting authority can be treated as in-house operations and therefore justify an exception to the procurement rules.

82. In this connection, it should be noted that an exception to the procurement rules is already possible under the second Teckal criterion where the undertaking concerned carries out the essential part of its activities for the controlling contracting authority or authorities. Any activity pursued for third parties is therefore innocuous provided that it is of only secondary importance.

83. In order to decide whether that is so, it is necessary, as I said at the outset, to carry out an assessment of all the circumstances of the case in question. If a transaction is to be regarded as an in-house operation, the contractor used by the contracting authority must carry out the essential part of its activities, both quantitatively and qualitatively, for the controlling contracting authority or authorities. ( ) An initial indicator in this regard may be the share of turnover which that undertaking derives from the contracts with its public shareholder. If an undertaking – such as Stadtwerke Brixen, for example – is active in several fields, account must also be taken of how many of those areas of business are ones in which the undertaking carries out the essential part of its activities for public shareholders and how important each of those areas of business is to the undertaking. ( )

84. The geographical range of activity of undertakings such as Stadtwerke Brixen AG also requires close examination. The mere fact that a municipal public undertaking does or can perform activities beyond the boundaries of a municipality does not necessarily mean that it does not carry out the essential part of its activities for that municipality. The examination should concentrate rather on determining what value in quantitative and qualitative terms any such activity outside the municipal boundaries has in relation to the activities it performs for its public shareholder or shareholders.

85. The mere fact that the field of activity defined in the statutes of a public limited company such as Stadtwerke Brixen AG is extensive in material terms, and, in geographical terms, also allows activities to be pursued beyond the boundaries of the municipality, does not in any event mean that such a public limited company does not in fact carry out the essential part of its activities for the controlling municipality.

c) Interim conclusion

86. In summary, therefore, it is appropriate to find that:

The fact that a municipality awards the management of a public pay car park to a public limited company in which it is the sole shareholder without first carrying out an award procedure does not infringe Articles 43 EC, 49 EC and 86 EC, in so far as the municipality exercises over the public limited company a control similar to that which it exercises over its own departments and the public limited company carries out the essential part of its activities for the municipality.

The exercise by a contracting authority of a control similar to that which it exercises over its own departments is not automatically precluded because the municipality has a statutory obligation to open up the capital of the public limited company to participation by third parties within a certain period in the future, or because the managerial bodies of the public limited company have extensive powers in the day-to-day running of the business.

The pursuit by a contractor of the essential part of its activities for the municipality is not automatically precluded because the field of activity in which the public limited company is permitted to operate under its statutes is extensive in material and geographical terms; it is the activities which the company actually carries on which are the decisive criterion.

VI – Conclusion

87. In the light of the foregoing, I propose that the Court should answer as follows the questions referred for a preliminary ruling by the Verwaltungsgericht, Autonome Sektion für die Provinz Bozen:

(1) A situation where a contracting authority assigns the management of a public car park to an undertaking which may charge a fee for the use of the car park and, in return, undertakes to pay annual compensation to the contracting authority does not constitute a public service contract within the meaning of Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts, but a service concession not falling within the scope of that directive;

(2) The fact that a municipality awards the management of a public pay car park to a public limited company in which it is the sole shareholder without first carrying out an award procedure does not infringe Articles 43 EC, 49 EC and 86 EC, in so far as the municipality exercises over the public limited company a control similar to that which it exercises over its own departments and the public limited company carries out the essential part of its activities for the municipality.

The exercise by a contracting authority of a control similar to that which it exercises over its own departments is not automatically precluded because the municipality has a statutory obligation to open up the capital of the public limited company to participation by third parties within a certain period in the future, or because the managerial bodies of the public limited company have extensive powers in the day-to-day running of the business.

The pursuit by a contractor of the essential part of its activities for the municipality is not automatically precluded because the field of activity in which the public limited company is permitted to operate under its statutes is extensive in material and geographical terms; it is the activities which the company actually carries on which are the decisive criterion.