CELEX: 61993CC0360
Language: en
Date: 1995-11-23 00:00:00
Title: Opinion of Mr Advocate General Tesauro delivered on 23 November 1995. # European Parliament v Council of the European Union. # Common commercial policy - Services - Government procurement. # Case C-360/93.

OPINION OF ADVOCATE GENERALTESAURO delivered on 23 November 1995  (1)
         Case C-360/93 European ParliamentvCouncil of the European Union
            ((Common commercial policy – Services))
            
      
         
      1.  By this action, the European Parliament is seeking the annulment of Council Decision 93/323/EEC concerning the conclusion
      of an Agreement in the form of a Memorandum of Understanding between the European Economic Community and the United States
      of America on government procurement  
      
         			(2)
         		 and Council Decision 93/324/EEC concerning the extension of the benefit of the provisions of Directive 90/531/EEC in respect
      of the United States of America,  
      
         			(3)
         		 both of 10 May 1993.The Parliament argues that Article 113 of the EC Treaty alone cannot constitute an appropriate legal basis for the measures
      in question, which in essence generally extended to US undertakings the benefit of the Community rules governing public procurement,
      in particular as regards the provision of services.  The Parliament takes the view that the two decisions should also have
      been based on the last sentence of Article 57(2), Article 66 and Article 100a, that is to say, they should have been adopted
      using the cooperation procedure.
      
      2.  The matter therefore turns essentially on whether the common commercial policy includes international trade in services. 
      The Court's Opinions 1/94 on the WTO Agreement  
      
         			(4)
         		 and 2/92 on Community participation in the Third Revised Decision of the OECD on national treatment  
      
         			(5)
         		 have clarified to a large extent how the concept employed in Article 113 is to be understood, what its scope should be and
      whether, and to what extent, trade in services is covered.  In deciding the case before the Court, it will therefore be necessary
      to apply the principles set forth in that case-law.
      
      3.  For the sake of a proper understanding of the arguments put forward in support of the positions taken up by the parties, it
      will be necessary briefly to call to mind the purpose and content of the decisions contested by the Parliament.As part of the progressive establishment of the internal market, the Council adopted on 17 September 1990 Directive 90/531/EEC
      on the procurement procedure of entities operating in the water, energy, transport and telecommunications sectors  
      
         			(6)
         		 (
      the exclusive sectors directive).  That directive, as we know, is intended to eliminate restrictions on the free movement of goods and on freedom to provide
      services in respect of supply contracts awarded in the sectors in question, which, owing to their specific economic features
      and the special legal regime applying to them in many Member States, had remained outside the scope of preceding liberalization
      measures.Pursuant to the principle of Community preference, Article 29(2) of that directive provides that any tender made for the award
      of a supply contract may be rejected where the proportion of the products originating in third countries exceeds 50% of the
      total value of the products constituting the tender and Article 29(3) that, in any event, where two or more tenders are equivalent,
      preference is to be given to the tender of Community origin.  Those rules, however, are not applicable to products originating
      in countries with which the Community has concluded agreements ensuring comparable and effective access for Community undertakings
      to procurement markets in those countries (Article 29(1)).Next Article 29(5) and (6) provide that: 
      5.  For the purposes, in this Article, of determining the proportion referred to in paragraph 2 of products originating in third
      countries, those third countries to which the benefit of the provisions of this Directive has been extended by a Council Decision
      in accordance with paragraph 1 shall not be taken into account.
      
      6.  The Commission shall submit an annual report to the Council (for the first time in the second half of 1991) on progress made
      in multilateral or bilateral negotiations regarding access for Community undertakings to the markets of third countries in
      the fields covered by this Directive, on any result which such negotiations may have achieved, and on the implementation in
      practice of all the agreements which have been concluded.The Council, acting by a qualified majority on a proposal from the Commission, may amend the provisions of this Article in
      the light of such developments.
      
      
      4.  Pursuant to the GATT and the commitment given under Article 29 of Directive 90/531/EEC to ensure effective access for Community
      undertakings to the procurement markets of third countries, the Community concluded an agreement with the United States in
      1993 in the form of a Memorandum of Understanding, approved by Council Decision 93/323/EEC, which is challenged in these proceedings.
       Under Article 1 of that agreement, it is to apply to contracts for goods, works and other services, which are awarded by
      administrative authorities and other entities governed by public law in the two Contracting Parties, including supplies and
      works relating to the sector of the production, transportation and distribution of electricity.Article 2(1) commits the Council to affording to suppliers, contractors and service-providers the award procedures of Directives
      77/62/EEC,  
      
         			(7)
         		 92/50/EEC  
      
         			(8)
         		 and 71/305/EEC  
      
         			(9)
         		 as regards procedures for the award of public contracts whose value exceeds the thresholds indicated in that provision. 
      The United States assumed a similar commitment consisting of applying to European undertakings the provisions of the Buy America
      Act (Article 2(2)).  Article 2(3) excepts derogations from measures liberalizing procurement procedures which were specified
      by each party at the time when the Multilateral Agreement on Government Procurement of 1979 was concluded in the context of
      the GATT.  
      
         			(10)
         		Under Article 3(1), the Community undertakes to extend to US products and undertakings its own legislation on the award of
      contracts in the sectors covered by Directive 90/531/EEC, with the exclusion of telecommunications ─ which Article 5 defers
      for a subsequent specific agreement ─, as well as the machinery provided for in order to secure the effective application
      of that legislation, that is to say, the remedies laid down to that effect by Directive 92/13/EEC.  
      
         			(11)
         		  A substantively similar obligation is laid down for the United States (Article 3(2)).Next, the Community and the United States undertake to carry out a joint study of the economic importance of the public procurement
      procedures for goods and services covered by the liberalization measures with a view to defining their respective positions
      in the GATT negotiations on the revision of the 1979 Multilateral Agreement to which I have already adverted (Article 4).Lastly, Article 7(1) lays down a separate date for the entry into force of the provisions of the Agreement which relate to
      the procurement of services.
      
      5.  It is also worth mentioning that, under Article 7(3), the Agreement is to terminate on 30 May 1995 or upon the entry into
      force of the new Code on Government Procurement  which is being negotiated under the auspices of the GATT.  Since, as we know,
      the Multilateral Agreement on Government Procurement annexed to the Agreement establishing the World Trade Organization  
      
         			(12)
         		 will enter into force on 1 January 1996 (Article XXIV), the Community and the United States concluded in May this year a
      new agreement extending the validity of the previous Memorandum until that date.Council Decision 95/215/EC approving that agreement  
      
         			(13)
         		 is based on the last sentence of Article 57(2) and Articles 66, 100a and 113, precisely the provisions on which, in the Parliament's
      view, the decisions challenged in these proceedings should have been based.  It is worth setting forth in this connection
      the third and fourth recitals in the preamble to Decision 95/215/EC: Whereas part of the commitments in the Agreement negotiated by the European Community with the United States on government
      procurement fall within the exclusive jurisdiction of the Community under Article 113 of the Treaty;Whereas, moreover, some of the other commitments affect Community rules adopted on the basis of Articles 57(2), 66 and 100a
      of the Treaty.
      
      6.  As for the other decision challenged, Decision 93/324/EEC, it sets out to extend the benefit of the provisions of Directive
      90/531/EEC to tenders comprising products originating in the United States made for the award of a supply contract in the
      electric power sector (Article 1) on the ground that, following the agreement concluded with that country, comparable and
      effective access to government procurement procedures is thus ensured for Community undertakings.  In particular, this results
      in the principle of Community preference laid down by Article 29 of Directive 90/531/EEC being inapplicable to US products.
       
      
         			(14)
         		
      7.  I would first state that it is undisputed that in this case the two conditions are satisfied in order for the Parliament to
      be entitled to bring an action for annulment before the Court: the action should seek only to safeguard its prerogatives and
      should be founded only on submissions alleging their infringement. 
      
         			(15)
         		
      8.  Having said that, I do not consider that the submissions put forward by the parties, in particular as regards Decision 93/324/EEC,
      in arguing or disputing that the extension of the benefits of Directive 90/531/EEC to traders in third countries constitute
      an amendment of that directive are of any great use for the purposes of resolving the dispute which gave rise to this case.In that regard, the Parliament stresses the fact that Decision 93/324/EEC was not adopted in accordance with the  
       ad hoc  procedure laid down by Article 29(6) of the directive for the amendment of Article 29 alone, so as to take account of progress
      made in negotiations designed to secure access for Community undertakings to public procurement markets in third countries.
       In its view, this shows that the agreement concluded with the United States committed the Community to amending the exclusive
      sectors directive in its entirety, and such an amendment could have been carried out only pursuant to the same legal bases
      as the instrument to be amended.  In addition, it argues that its claim that the aim of Decision 93/324/EEC was not only to
      render the principle of Community preference inapplicable to US products is borne out by the fact that Article 1 of the decision
      refers to all the benefits of Directive 90/531/EEC.
      
      9.  For its part, the Council contends that a distinction must be made between amending a Community measure and extending its
      benefits to subjects other than those initially contemplated.  Where, as in the case of Decision 93/324/EEC, the latter hypothesis
      applies, the measure extending the scope of application of particular rules, in particular to traders in third countries,
      is normally a separate measure with aims and content different from those of the measure whose benefits it extends.  It may
      therefore quite well have a different legal basis.The Council acknowledges that the application of that distinction is fraught with considerable difficulties in this case in
      so far as the provisions of the exclusive sectors directive refer both to possible amendment, for which a derived legal basis
      is laid down (in Article 29(6)), and to the possible extension of its benefits, for which, since no derived legal basis is
      laid down, any measures can be based only on the relevant provisions of the Treaty (Article 29(1) and (5)).  Having said this,
      it considers that the answer to the question as to whether Decision 93/324/EEC  
      amends or  
      extends has no bearing on its validity.  Since its aim is essentially to render inapplicable to US products the principle of Community
      preference laid down by Article 29 of Directive 90/531/EEC, in the event that the decision is considered to be an amendment
      of the directive, it should be based on the derived legal basis of Article 29(6), whereas if it is construed as extending
      its benefits, it should be based on Article 113.  In both cases, the adoption procedure would be the same: the Council would
      act by a qualified majority on a proposal from the Commission.
      
      10.  I do not consider that the solution to the dispute turns on accepting one or the other of the two opposing arguments, which,
      in truth, seem instead to create a species of smokescreen camouflaging the real issue raised by the Parliament's action. 
      The derived legal basis laid down by Article 29(6) was not utilized in order to adopt Decision 93/324/EEC and could not have
      been so utilized, since it is intended to serve as the basis only for amendments of Article 29 itself: that is manifestly
      not the aim of the contested decision.  Furthermore, a decision by which the Council, acting under Article 29(5), extends
      the benefits of the exclusive sectors directive to a third country following the conclusion of an agreement which, within
      the meaning of Article 29(1), ensures in the country concerned comparable and effective access for Community undertakings
      to public procurement markets, constitutes a separate measure having to be adopted on the basis of the relevant provisions
      of the Treaty.
      
      11.  In the final analysis, the real issue is whether the two decisions could be validly based on Article 113 alone or whether
      the Community competence should be based (also) on other provisions of the Treaty.In fact, the very conflict between the different institutions with regard to extending the sphere of application of Article
      113 explains the singular game on the part of the parties which characterizes this dispute, which previously emerged in the
      request for an opinion on the WTO Agreement, to which I have already referred.  As we know, the Parliament and the Council,
      respectively the applicant and the defendant in these proceedings, share the view that it is not possible to bring all international
      economic relations under the common commercial policy.  Whilst that policy should certainly be construed in a broad perspective,
      Article 113, on this view, cannot constitute the legal basis for the conclusion of international agreements on, for instance,
      the free movement of services, at least in so far as the services in question are not connected with the supply of goods.Consequently, the Council seeks to show that recourse to Article 113 alone is justified in this case inasmuch as the main
      aim of the Memorandum of Understanding concluded with the United States is to render the principle of Community preference
      laid down in Article 29(2) and (3) inapplicable to tenders comprising US products.  In its view, that is the only provision
      of the exclusive sectors directive underlying the conflict with the US authorities which was sought to be settled.  In contrast,
      the provisions on trade in services contained in that directive are merely ancillary, whilst the reference to all the Community
      directives on public procurement is designed solely to specify the policy framework within which the Agreement is located.
      
      12.  As for the Commission, which has intervened in the proceedings in support of the form of order sought by the Council, it argues
      that Article 113 is the correct legal basis for the contested decisions, but starts from opposing premises.  It argues that
      the evolution of international trade and the present close connection between trade in goods and trade in services makes it
      necessary to include services within the ambit of the common commercial policy in order not to impair the Community's ability
      to act vis-à-vis its trading partners.  Since therefore the provisions of the agreement with the United States on the liberalization
      of access to procurement procedures for services are autonomous in nature, the Commission concludes that its interpretation
      of Article 113 is consistent with the Court's case-law, which tends to confer a dynamic content on the concept of the common
      commercial policy.
      
      13.  This explains why the Parliament ─ albeit to a large degree using in support of its position the same arguments as the Commission,
      in particular in order to confirm the correctness of its interpretation of the content of the contested measures ─ asks, pursuant
      to the third paragraph of Article 37 of the Statute of the Court, that the Commission's intervention should be declared inadmissible
      in so far as it is based on grounds differing from those asserted by the Council.  This also explains why the Parliament has
      not taken a view on the Commission's arguments, considering them unrelated to the object of the application, and merely refers
      to the inconvenient  
      conjunction in that it signed, at the time when the contested decisions were adopted, a joint declaration with the Council, which was
      annexed to the minutes of the session.  In that declaration, the two institutions agreed, first, that the parts of the memorandum
      concluded with the United States relating to services and public works were ancillary and, secondly, that recourse to Article
      113 was without prejudice to their respective positions as to the possibility of utilizing that provision in future as the
      legal basis for the conclusion of agreements on trade in services.
      
      14.  The objection of inadmissibility raised by the Parliament should be rejected.  Whilst there is no doubt that the arguments
      put forward by the Commission to the effect that the contested decisions were lawfully adopted on the basis of Article 113
      alone are different to or actually at odds with the defendant's, it cannot be denied that the form of order sought by the
      Commission in its statement in intervention are  
      limited to supporting the submissions of one of the parties, as is required by Article 37 of the Statute of the Court.  It does not seem to me to be relevant to refer in this connection
      to the precedent of Case C-155/91  
       Commission  v  
       Council :  
      
         			(16)
         		 in that case, the Parliament's intervention was declared inadmissible only in so far as it sought an  
       alternative  form of order with respect to the claims of the applicant which it was supporting.  This is clearly not the case.
      
      15.  Turning to the merits, in the first place I consider it to be hard to argue that Article 113 constitutes the correct legal
      basis for the agreement in question in as much as its  
      main aim is claimed to be to render inapplicable the principle of Community preference to US products comprising a tender in a public
      procurement procedure.  In this connection, it is worth recalling that, as the Court has held on several occasions,  
      
         			(17)
         		 the choice of the legal basis for a measure may not depend simply on an institution's conviction as to the objective pursued
      but must be based on objective factors which are amenable to judicial review.  The aim and content of the measure are particularly
      relevant in this connection.
      
      16.  The preamble to the Memorandum of Understanding concluded between the Community and the United States  
      
         			(18)
         		 makes it clear that it aims, in the light of the commitments already entered into by the parties in the context of the abovementioned
      GATT Multilateral Agreement on Government Procurement and of the further progress made in the negotiations, to anticipate,
      bilaterally and on a reciprocal basis, further steps on the road towards achieving the objective of eliminating every form
      of discrimination between domestic and foreign products and suppliers.To that end, Article 1 opens the Contracting Parties' public procurement markets in a way which is no longer limited to the
      mere acquisition of products and any services ancillary to their supply, as was laid down by the 1979 Agreement ─ which for
      that very reason was concluded on the basis of Article 113 only, without this having given risen to particular difficulties.
       In contrast, the commitment to ensuring the other party's undertakings access to public contracts on the same terms as one's
      own undertakings ─ subject to the derogations mentioned at the beginning of these observations ─ is also extended to the performance
      of public works and the supply of services.
      
      17.  As a result of the reference made by Article 2(1) to the provisions of the directives on public works and services and as
      the annexes to the Memorandum make clear,  
      
         			(19)
         		 the measures for the liberalization of procurement relate to the performance and design of buildings and civil engineering
      works, computer, accounting and advertising services, a number of financial services and so on, where their value exceeds
      the thresholds laid down.Consequently, the provisions on services have a measure of independence within the context of the agreement and it is impossible
      to assert the (purely economic and, moreover, unproven) argument, so as to reduce the scope of the commitments undertaken
      by the Community, that, in view of the nature of the activities covered by the liberalization measures, it would be difficult
      to imagine US undertakings making tenders in response to an invitation to tender or a tender notice unless they were established
      in the Community.  If they were, freedom to provide services would be already guaranteed to them by the Community directives,
      which apply irrespective of the origin of the capital of companies incorporated under the law of one of the Member States.
      
      18.  Since it is therefore clear that the agreement at issue is also aimed at the provision of services ─ where, of course, the
      provision is based on a public contract ─ it follows that it could not properly have been concluded on the basis of Article 113
      alone; for the same reasons, neither was Decision 93/324/EEC, which, following that agreement, extends to US undertakings
      the benefit of the exclusive sectors directive, entitled to have been based on that legal basis alone.Lastly, what the Court stated in Opinion 1/94 should be called to mind: only cross-frontier services may be brought within
      the concept of the common commercial policy.  Whilst the situation in which the service is rendered by a supplier in one country
      to a consumer residing in another is not unlike trade in goods, the same cannot be said of other modes of supply of services.
       In particular, the provision of services by a service-provider from one country by virtue of his having a commercial presence
      on the territory of another country or through the presence of natural persons is different.  
      
         			(20)
         		Moreover, it was also explained in Opinion 1/94 that  
       it is clear from Article 3 of the Treaty, which distinguishes between  
      a common commercial policy in paragraph (b) and  
      measures concerning the entry and movement of persons in paragraph (d), that the treatment of nationals of non-member countries on crossing the external frontiers of Member States
      cannot be regarded as falling within the common commercial policy.  More generally, the existence in the Treaty of specific
      chapters on the free movement of natural and legal persons shows that those matters do not fall within the common commercial
      policy.
         			(21)
         		
      19.  It is clear that the modes of provision of services to which the agreement concluded between the Community and the United
      States on procurement refers (I would merely mention the case of the performance of civil engineering works) certainly cannot
      be classed as cross-frontier provision of services.  It follows that the Parliament's application must be upheld.
      
      20.  The Council has requested that, in the event that the Court should decide to annul the contested decisions, it should conserve
      the effects which they have already had, by applying the principles laid down in the judgment in the  
      right of residence case.  
      
         			(22)
         		In that case, the possibility afforded by Article 174 of the Treaty to limit the effects of a judgment declaring a regulation
      void was extended to the case of the annulment of a directive.  In that regard, the Court essentially considered that, since
      Article 174 is an expression of the more general principle of legal certainty, it must be able to be applied beyond the cases
      which it expressly contemplates.It seems to me that reasons of legal certainty justify accepting the Council's request.  In view of the fact that certain
      undertakings may already have exercised the rights conferred on them pursuant to the contested agreement and the decisions
      implementing it, that the agreement expired in any event on 30 May 1995 and that the Parliament has not opposed the Council's
      request, I consider that the effects produced to date by the two decisions should not be called in question.
       
      21.  In the light of the foregoing observations, I therefore propose that the Court should:
      
      
      ─
         annul Council Decision 93/323/EEC of 10 May 1993 concerning the conclusion of an Agreement in the form of a Memorandum of
         Understanding between the European Economic Community and the United States of America on government procurement and Council
         Decision 93/324/EEC of 10 May 1993 concerning the extension of the benefit of the provisions of Directive 90/531/EEC in respect
         of the United States of America; 
      
      
      
      ─
         preserve the effects of the decisions in question; 
      
      
      
      ─
         order the Council to pay the costs, saving those of the Commission, which should bear its own costs. 
      
      
      
       1 –
         
            Original language: Italian.
      
      2 –
         
         OJ 1993 L 125, p. 1.
      
      3 –
         
         OJ 1993 L 125, p. 54.
      
      4 –
         
         [1994] ECR I-5267.
      
      5 –
         
         [1995] ECR I-521.
      
      6 –
         
         OJ 1990 L 297, p. 1.
      
      7 –
         
         Council Directive 77/62/EEC of 21 December 1976 coordinating procedures for the award of public supply contracts (OJ 1977
            L 13, p. 1).  This directive has been replaced, after the agreement was concluded, by Council Directive 93/36/EEC of 14 June
            1993 (OJ 1993 L 199, p. 1), which recast, without effecting any amendments, the whole of the provisions of Directive 77/62/EEC.
         
      
      8 –
         
         Council Directive 92/50/EEC of 18 June 1992 relating to the coordination of procedures for the award of public service contracts
            (OJ 1992 L 209, p. 1)
         
      
      9 –
         
         Council Directive 71/305/EEC of 26 July 1971 concerning the coordination of procedures for the award of public works contracts
            (OJ, English Special Edition 1971(II), p. 682).  As part of the general reorganization of this area, this directive has been
            replaced by Council Directive 93/37/EEC of 14 June 1993 (OJ 1993 L 199, p. 54).
         
      
      10 –
         
         This is the GATT  
            Code on public procurement.  The text of the Agreement, which entered into force on 1 January 1981 is set out in OJ 1980 L 71,
            p. 44.  The list of services to which the EEC will not apply the provisions of the GATT Code is set out in Annex 5 to the
            Memorandum of Understanding.
         
      
      11 –
         
         Council Directive 92/13/EEC of 25 February 1992 coordinating the laws, regulations and administrative provisions relating
            to the application of Community rules on the procurement procedures of entities operating in the water, energy, transport
            and telecommunications sectors (OJ 1992 L 76, p. 14).
         
      
      12 –
         
         OJ 1994 L 336, p. 273.
      
      13 –
         
         Council Decision 95/215/EC of 29 May 1995 concerning the conclusion of an Agreement in the form of exchange of letters between
            the European Community and the United States of America on government procurement (OJ 1995 L 134, p. 25).
         
      
      14 –
         
         See the preamble to the decision.
      
      15 –
         
         Case C-70/88  
             Parliament  v  
             Council  (the Chernobyl case) [1990] ECR I-2041, paragraph 27.  Those conditions are now expressly enshrined in the third paragraph
            of Article 173(3) as amended by the Maastricht Treaty, which entered into force after the present action was brought.
         
      
      16 –
         
         Case C-155/91  
             Commission  v  
             Council  (case of the directive on waste) [1993] ECR I-939, paragraphs 22, 23 and 24.  In that case, the Parliament, in addition to
            supporting the Commission's application for the annulment of a directive on the ground that it was based on the wrong legal
            basis, also argued that an article of the directive in question was incompatible with the Treaty and sought its annulment,
            even though that question had not been raised in the Commission's application.
         
      
      17 –
         
         See, in particular, Case C-300/89  
             Commission  v  
             Council  (the titanium dioxide case) [1991] ECR I-2867, paragraph 10.  For a recent case reaffirming this principle, see also Case
            C-187/93  
             Parliament  v  
             Council  [1994] ECR I-2857, paragraph 17.
         
      
      18 –
         
         The first, second and sixth recitals in the preamble state as follows: 
      
      19 –
         
         See in particular Annexes 5 and 6.
      
      20 –
         
         Opinion 1/94, cited above, in particular paragraphs 36 to 47.
      
      21 –
         
         Ibid., paragraph 46.
      
      22 –
         
         Case C-295/90  
             Parliament  v  
             Council  [1992] ECR I-4193, paragraphs 22 to 27.