Opinion of Mr Advocate General Gulmann delivered on 24 February 1994. - Ballast Nedam Groep NV v Belgian State. - Reference for a preliminary ruling: Raad van State - Belgium. - Freedom to provide services - Public works contracts - Registration of contractors - Relevant entity. - Case C-389/92.



European Court reports 1994 Page I-01289



Opinion of the Advocate-General

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Mr President,

Members of the Court,

1. The Raad van State, Belgium, has requested the Court to interpret the Community' s directives concerning public works contracts for the purpose of deciding whether it is compatible with those directives to take into account, when examining an application for inclusion on the Belgian list of registered contractors submitted by the dominant legal person in a Netherlands group, only the qualifications of that company itself and not the qualifications of the other companies in the group.

Background to the question referred to the Court

2. The Netherlands company, Ballast Nedam Groep NV (hereinafter referred to as "BNG") was, until 1987, registered as a contractor under the Belgian legal provisions on the registration of contractors. The relevant provisions are laid down in a Decree-Law of 3 February 1947 (1) and in two implementing pieces of legislation, a Royal Decree of 9 August 1982 and a Ministerial Notice of 13 August 1982.

3. In 1989 the Ministry of Public Works decided not to renew BNG' s registration. The decision was taken on the basis of an adverse opinion of the Committee for the Registration of Contractors which was worded as follows:

"The Committee finds that ... the legal entity known as 'Ballast Nedam Groep N.V.' cannot be regarded as a works contractor for the purposes of the rules on registration. Your undertaking appears to be a holding company, whose major assets consist of shareholdings in subsidiaries (operating companies). It is apparent from the references submitted regarding works carried out that the latter were in fact executed by various subsidiaries. Furthermore, it is not apparent from the file that the legal person applying for registration employs workers itself."

4. Referring to that opinion, the Ministry decided that BNG "as an individual legal person, does not satisfy the legal criteria, as laid down in Article 2 of the Decree-Law of 3 February 1947 and Article 2 of the Ministerial Order of 13 August 1982, for the purposes of registration." The Ministry continued: "Nevertheless, it should be pointed out, to all intents and purposes, that since it is apparent from the examination of the file that works in respect of which references were provided were executed by legally independent subsidiaries, those subsidiaries are in a position to submit an application for registration, if they so wish."

5. BNG took the case to the Raad van State, requesting that the opinion of the Committee for the Registration of Contractors and the decision of the Ministry of Public Works be annulled. The Raad van State referred the following question to the Court.

"Do Directive 71/304/EEC of 26 July 1971 concerning the abolition of restrictions on freedom to provide services in respect of public works contracts and on the award of public works contracts to contractors acting through agencies or branches (2) and Directive 71/305/EEC of 26 July 1971 concerning the coordination of procedures for the award of public works contracts (3), in particular Articles 1, 6, 21, 23 and 26, permit, in the event of the Belgian rules on the registration of contractors being applied to the dominant legal person within a 'group' governed by Netherlands law, in connection with the assessment of the criteria relating inter alia to technical competence which a contractor must satisfy, account to be taken only of that dominant legal person as a legal entity and not of the 'companies within the group' each of which, having its own legal personality, belongs to that 'group' ?"

The Community rules concerning official lists of recognized contractors

6. In a number of Member States there are official lists of recognized contractors. Those lists enable a prior assessment to be made as to whether the contractors have the qualifications regarded as necessary with regard to carrying out a specific type of work of a particular scale. Contractors who wish to take part in a tendering procedure are thus enabled to establish their qualifications simply by submitting a certificate of enrolment in a particular category, .

7. Member States' official lists of recognized undertakings are dealt with in Article 28 of Directive 71/305/EEC concerning the coordination of procedures for the award of public works contracts.

8. Article 28(1) requires Member States who have official lists of recognized contractors to adapt them to the provisions of Articles 23 to 26 of the Directive.

9. Article 23 lists various situations involving insolvency and forms of misconduct which can justify a contractor being excluded from participation in a tendering procedure. Article 24 concerns enrolment in a Member State' s trade register. Article 25 lays down the way in which a contractor can furnish proof of its financial and economic standing.

Article 26 lays down the means by which a contractor can furnish proof of its technical knowledge or ability. It appears that submission is required of inter alia evidence of qualifications of the managerial staff (Article 26(a)), a list of the works carried out over the past five years and certificates of satisfactory execution thereof (Article 26(b)), a statement of the tools, plant and technical equipment available to the contractor for carrying out the work (Article 26(c)), a statement of the firm' s average annual manpower and the number of managerial staff for the last three years (Article 26(d)) and a statement of the technicians or technical divisions which the contractor can call upon for carrying out the work, whether or not they belong to the firm (Article 26(e)). (4)

10. It is apparent from the foregoing that the prescribed harmonization of the official lists is of limited scope since it only concerns references attesting to the contractors' economic and financial standing and their technical knowledge and ability but not the criteria for their classification.(5)

11. Article 28(3) lays down the extent to which a contractor registered in a list in one Member State is entitled , in relation to the authority awarding contracts in another Member State, to use that enrolment as an alternative means of proof that it satisfies the qualitative criteria of suitability in Articles 23 to 26 of the directive.(6)

12. It cannot be inferred from Article 28 that registration in the official list in the State where the public works contract is being awarded can be required of contractors established in other Member States. (7)

13. Conversely, Article 28(4) gives contractors a right to apply for registration in the official lists in other Member States. The provision states:

"For the registration of contractors of other Member States in such a list, no further proofs and statements may be required other than those requested of nationals and, in any event, only those provided for under Articles 23 to 26." (my emphasis).

Conclusion

14. The opinion of the Committee for the Registration of Contracts quoted above must be understood as a refusal to register BNG on the Belgian list of registered contractors because the company, as a holding company, does not itself fulfil the prescribed technical requirements. The opinion thus refers to the fact that the company' s major assets consist of shareholdings in subsidiaries and that the references submitted concerning works carried out relate to work which was not carried out by the company but by its subsidiaries and that no manpower is employed by the company. That gives rise to two remarks by way of introduction.

15. First, BNG and Commission expressed the view that BNG was refused registration on the Belgian list of approved contractors simply because the company is a holding company in a Netherlands group. On that basis BNG claims that the Belgian authority' s interpretation of the relevant legal rules lead to BNG' s exclusion for a reason that is not mentioned among the grounds for exclusion which are enumerated exhaustively in Article 23 of Directive 71/305/EEC.(8) BNG and the Commission' s view must, however, be rejected because it appears from the opinion quoted that BNG was not refused registration because it is a holding company in a Netherlands group, but because, as a holding company, it does not itself have the necessary technical qualifications. It is, moreover, expressly mentioned in the order for reference that the respondent in the main proceedings denies that BNG was refused registration in the list simply because the company is a holding company in a Netherlands group.

16. Secondly, as mentioned, it is apparent from the opinion cited that it was BNG' s inability, as an independent legal person, to produce evidence of its technical ability that was the reason for the refusal to register it on the list. That means that it is specifically Article 26 of Directive 71/305 which is relevant for the purposes of forming an opinion in this case. In the question referred to the Court a ruling is, however, required concerning "assessment of the criteria relating 'inter alia' to technical competence" (my emphasis). Since the issue is basically the same whether the contractor' s technical ability under Article 26 or its economic and financial standing under Article 25 is concerned, no difficulty will arise if the latter provision too is taken into account when replying to the question. With regard to Article 23, from which it follows that an applicant can be excluded from registration in an official list if he is insolvent or has been guilty of various forms of misconduct, it must be the case that the dominant legal person in a group at all events will not be able to obtain registration in an official list of approved contractors on the basis of the qualifications of a subsidiary which finds itself in one of the situations enumerated in that provision. A parent company must therefore, if necessary, produce proof to show that that is not the case.

17. Since Article 28 gives contractors a right to be registered in other Member States' official lists which may only be made conditional on the submission of the proof and declarations laid down in Articles 23 to 26, the reply to the question referred to the Court will depend on whether those provisions are to be interpreted to the effect that they permit a requirement that the proof in question must concern the applicant company as an independent legal entity.

18. As the Commission and BNG, who alone have submitted observations, maintain, grounds can be adduced for interpreting Articles 23 to 26 to the effect that, in examining whether a company has the qualifications required for registration in an official list in another Member State, the authorities have a duty to take account of whether the company, through the other companies in a given legal structure, actually has available to it the necessary qualifications.

19. The Commission and, to a certain extent BNG, maintain that:

(a) it follows from the directive that groups of contractors which do not have a specific legal form and legal persons who do not themselves intend or are not able themselves to carry out the work are entitled to take part in tendering procedures;

(b) such tenderers must therefore also be able to take part in other award or registration procedures which take place before a contract is awarded; and

(c) a fortiori that result must apply to companies which form part of a particular legal structure in accordance with the company law of a Member State and where, accordingly, it is possible beforehand to identify the companies who are to carry out the work as a whole or in part.

20. That groups of contractors are entitled to submit tenders is clear from Article 21 of the directive, which provides: "Tenders may be submitted by groups of contractors. These groups may not be required to assume a specific legal form in order to submit the tender; however, the group selected may be required to do so when it has been awarded the contract."

21. That legal persons who are not themselves able to carry out the work and who are therefore not necessarily contractors in the strict sense of the term but guarantee the undertakings which are to carry out the work can take part in the tendering procedure can be supported on various grounds.

22. First, it follows from the express wording of Article 26(e) that it cannot be required that technicians or technical divisions belong to the undertaking itself, since it is sufficient to produce a statement that "the contractor can call upon [them] for carrying out the work".

23. Secondly, the Commission maintains that the directive allows for the possibility of work being carried out by agents or branches. That view would appear to be supported by Article 1 of the directive, which defines a public works contract and in this connection refers to Directive 71/304. It is true that Article 1 of Directive 71/304 obliges the Member States to abolish restrictions on the performance of public works contracts in respect of natural persons and companies or firms which provide services or act through agencies or branches. Directive 71/305, however, refers solely to Article 2 of Directive 71/304 and it does so for the purpose of restricting the forms of activity which can be the object of a public works contract within the meaning of Directive 71/305. It is hard to conclude with sufficient certainty from that reference who, under the directive, is entitled to take part in tendering procedures.

24. As indicated by the Commission it would, however, appear that at all events under Directive 89/440 (9) which alters the wording of Article 1 in Directive 71/305, a construction can be deduced to the effect that the legal person to whom the contract is awarded does not necessarily have be the one who carries out the work. Public works contracts are defined here as contracts which have as their object either the execution, or both the execution and design, of works related to particular forms of activity "or the execution by whatever means of a work corresponding to the requirements specified by the contracting authority" (my emphasis). Since it appears from the eighth recital in Directive 89/440 that the directive aims to define more precisely what is meant by public works contracts and thus hardly to broaden the concept, it must be justified to take that definition into account in examining the present case, even though the directive was adopted after the time relevant to the main proceedings.

25. However, I do not consider that the provisions in Articles 1(c) (10) and 6 (11) of the directive provide any further aid to construction in support of the foregoing arguments, as BNG asserts.

26. It must be correct, as maintained by the Commission and to a certain extent by BNG, that on the basis of the foregoing it can be concluded that the criteria which result from Articles 23 to 26 of the directive must, in the circumstances, be interpreted as meaning that they can be fulfilled by groups of undertakings and legal persons who cannot themselves carry out the work in question. In other words a company must be able to produce evidence that it has the necessary economic, financial and technical qualifications by proving that it has the qualifications available, even though they are not integrated in the company as an independent legal entity.

27. It follows that the relevant authorities in a Member State are not entitled to refuse registration in the official list of recognized contractors solely on the ground that the applicant company cannot produce proof to the effect that, as an independent legal person it has the necessary qualifications. It must suffice, in order to obtain registration, that the applicant company can show that the relationship between the companies in a given legal structure is such that the company must be said actually to have available the required qualifications with the result that it will be in a position to ensure satisfactory execution of the works contract in question.

28. Such a result also seems to accord best with the purpose of the directive, which is to implement freedom of establishment and freedom to provide services in connection with public works contracts and thus seeks to ensure that unnecessary hindrances are not created.

29. It is hardly sufficient to reply to the question referred to the Court to the effect that a requirement can be inferred from the directive that in the assessment of an application for registration in an official list of recognized contractors a specific decision should be reached as to whether the applicant company, through the companies linked to it, actually has available the necessary qualifications. The court of reference formulated its question so that it concerns the assessment of an application submitted by the dominant company in a Netherlands group.

30. BNG has advanced a number of facts intended to establish that, as the dominant legal person in the particular structure which corresponds to the legal definition of a group in Netherlands company law, it does actually have available to it the qualifications of its subsidiaries in the group.

31. BNG has in particular explained that the company owns the entire capital of the other companies in the group and accordingly has a decisive influence on those companies, which inter alia is reflected in the fact that BNG can appoint and remove the managers of those companies and thereby determine the companies' policy. Under Article 3 of its statutes BNG also has as one of its objects to act as a contractor, an activity which also forms part of the objects of a number of companies in the group and which is the most important object for the group. BNG thus ensures the central control of the financing, managerial, building and other capital goods requirements of the group of companies. BNG has explained the way the group enters into works contracts as follows:

"The execution of contracting work - takes place - according to the factual circumstances, including the preferences of the authorities awarding contracts - sometimes through BNG itself and sometimes through one of the companies in the group amongst whose objects is the execution of contract work. The execution of such work takes place by means of a combination of management staff and capital goods in the group which is most suited to carry out work of the type in question. In the administration of the group, expenses and income on the contract are allotted, under guidelines prepared for the purpose by Ballast Nedam Group NV' s management for the entire group, to the company in the group which is regarded as having the works within its sphere of competence, as determined by the NV' s management, on the basis of the type of works involved and their location. When the works are executed by the NV itself or by group company X, but fall within the sphere of group company Y, the management of Company Y is internally responsible for its execution by an organization of the group' s manpower and capital goods which are available to that company or put at its disposal, and the expenses and income are allotted to that company.

In the above case the work is not, therefore, carried by the company in group Y under a sub-contracting agreement, but under guidelines laid down by the NV' s management in its capacity as the group' s main management.

The legal authority of such a decision is based upon the fact that Ballast Nedam Groep NV together with its group companies constitutes a 'group' recognized by Netherlands law and regulated in detail by legislation."

32. It seems to me indisputable that a parent company which, like BNG, has 100% ownership of its subsidiaries and has power to take decisions that imply, with sufficient certainty, that the subsidiaries' qualifications are available for the purpose of carrying out specific works satisfies a requirement that it should actually have available the qualifications of its subsidiaries.

33. The question arises whether it is possible for the Court to give a more abstract reply to the question referred to it, in other words to lay down general criteria governing when a company can be said to have available to a sufficient degree another company' s qualifications for the purpose of registration as a contractor.

34. The natural starting point would seem to be a company' s dominant influence in another company. It must be established when the dominance of the company in question is sufficient in the present connection, that is to say when it is sufficiently certain that its decisions for the purpose of carrying out works can be implemented in relation to the other company.

In that regard it is not possible simply to apply a pre-determined and generally accepted definition. No such definition is to be found either in Community law or in the law of the Member States. It is certain that the definition of dominant influence depends on the actual legal context in which it is to be applied.

35. It could perhaps be considered whether in the present connection there is sufficient dominance when the conditions laid down in Article 24a in the second Company Directive are satisfied (12), that is to say when a "public limited-liability company directly or indirectly holds a majority of the voting rights" in another company or can exercise decisive influence, which is the case when it "has the right to appoint or dismiss a majority of the members of the administrative organ, of the management organ or of the supervisory organ, and is at the same time a shareholder or member of the other company" or when it "is a shareholder or member of the other company and has sole control of a majority of the voting rights of its shareholders or members under an agreement concluded with other shareholders or members of that company."

36. The conditions in the Second Directive were drawn up for the purpose of laying down when a company must be regarded as acquiring its own shares. However, prima facie it would seem reasonable to assume that a company which has the majority of voting rights or otherwise in the ways specified in the directive has a decisive influence on a second company is also, to a sufficient degree, effectively in a position to have available that company' s qualifications.

37. I would, nevertheless, not wish to suggest that the Court apply those criteria in this case, not only because it cannot be excluded than there might be a sufficiently decisive influence by means other than those set out above, but also because there might be grounds for not regarding a company as actually having another company' s qualifications available to it even though it is dominant in the way stated. It cannot, for example, be excluded that in relation to the legislation of a Member State other shareholders or creditors of the subsidiary company might have to be taken into account with the result that the dominant company does not actually have available to it the resources necessary in the present connection, nor can it be excluded that there are rules applicable in national law which could prevent the dominant company from putting its decisions into effect with sufficient certainty and speed for the purpose of ensuring the availability of its subsidiary company' s qualifications. Not least because the Belgian Government has not submitted observations in the case, it is not possible to evaluate the extent to which the Belgian rules might be based on such factors.

38. I would accordingly suggest that the Court confine itself to ruling that in any event a legal person whose dominant influence is founded on the factors set out in paragraph 32 should be able to obtain registration in an official list of recognized contractors on the basis of the qualifications of its subsidiary companies.

39. With regard to the court of reference' s question whether it is incompatible with Directive 71/304 to refuse registration in an official list on the ground that the applicant does not, as an independent legal person, have the necessary qualifications, it is my view that that directive, the purpose of which was to liberalize freedom to provide services in respect of public works contracts, has lost its independent meaning in view of the direct applicability of Article 59 of the EEC Treaty. It would, therefore, if need be, be more correct to examine the issue on the basis of Article 59, which does not simply prohibit direct and indirect discrimination as is the case in Directive 71/304, but also other restrictions on freedom to provide services. Since a reply to the question referred to the court can be derived from Directive 71/305, I see no reason in this case to examine the application of the Treaty' s general prohibition of restrictions on freedom to provide services.

Conclusion

In the light of the foregoing considerations, I suggest that the Court should reply as follows to the question referred to it:

When an application for inclusion on a Member State' s list of registered contractors submitted by the dominant legal person in a group formed in accordance with the legislation of another Member State is being assessed, Articles 23 to 26 and 28 of Council Directive 71/305/EEC of 26 July 1971 concerning the coordination of procedures for the award of public works contracts preclude the taking into account only of the qualifications of the dominant legal person alone, where that legal person is in a position to establish that it actually has available to it the qualifications of the other companies in the group and that requirement should in any event be regarded as satisfied where the dominant company has 100% ownership of its subsidiaries and can take decisions that imply with sufficient certainty that the subsidiaries' qualifications are available for the purpose of carrying out specific works.

(*) Original language: Danish.

(1) - Article 1.A of the Decree-law lays down the general conditions which a contractor which is to carry out public works must fulfil. In Article 1.B it is specified that special prior registration is required for works exceeding a particular value laid down by Royal Decree. Article 2, setting up a committee which is to give opinions on applications for registration, states in the third paragraph that the committee is to take into account the applicant' s technical and economic standing, its performance ability in the form of plant and qualified manpower, the scale and importance of the work it has carried out previously, the quality of the work carried out and its business probity.

(2) - Official Journal, English Special Edition 1971(II), p. 678.

(3) - Official Journal, English Special Edition 1971(II), p. 682. The Directive was amended after the date in question in the main proceedings by Council Directive 89/440/EEC of 18 July 1989 (Official Journal 1989 L 210, p. 1) and now appears in a codified version in Council Directive 93/37/EEC of 14 June 1993, Official Journal 1993 L 199, p. 54.

(4) - The Court of Justice has stated that the directive' s enumeration of the proof that may be required to be submitted to show that the tenderer fulfils the conditions of probity and so forth and technical ability is exhaustive, but on the other hand there is nothing the prevent the authority awarding contracts from requesting references other than those mentioned in the directive for the purpose of assessing financial and economic standing: see the judgment in Case 76/81 Transporoute [1982] ECR 417, paragraphs 9 and 10, and the judgment in Joined Cases 27/86 to 29/86 Bellini [1987] ECR 3347, paragraph 10.

(5) - See the judgment in Joined Cases 27 to 29/86 Bellini [1987] ECR 3347, paragraphs 21-22.

(6) - See the judgment in Joined Cases 27 to 29/86 Bellini [1987] ECR 3347, at paragraphs 23-27, where the Court inter alia stated that registration in an official list can replace the references referred to in Articles 25 and 26 in so far as such registration is based upon equivalent information. Consequently, the authorities awarding contracts are required to accept that a contractor' s economic and financial standing and technical knowledge and ability are sufficient for works corresponding to his classification only in so far as that classification is based on equivalent criteria in regard to the capacities required.

(7) - See the judgments in Case 76/81 Transporoute [1982] ECR 417, paragraphs 12 and 13, and Case C-71/92 Commission v Spain [1993] ECR , paragraphs 45 and 56.

(8) - See footnote 4.

(9) - See footnote 3.

(10) - Article 1(c) defines a tenderer as a contractor who has submitted a tender and a candidate as one who has sought an invitation to take part in a restricted procedure. The provision does not, as BNG maintains, define the term contractor .

(11) - Article 6 enables a special procedure to be adopted in the case of the award of contracts relating to the design and construction of a public housing schemes whose size and complexity, and the estimated duration of the work involved, require that planning be based from the outset on close collaboration within a team comprising representatives of the authorities awarding contracts, experts and the contractor to be responsible for carrying out the works. It is not clear to me how BNG find that provision to be relevant to this particular case.

(12) - See the Council' s Second Directive 77/91/EEC of 13 December 1976 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent (OJ 1977 L 26, p. 1), as amended by Council Directive 92/101/EEC of 23 November 1992 (OJ 1992 L 347, p. 64).