A Commission decision not to open formal investigation procedure in State aid matter is subject to intense judicial review by the General Court

Judgment
T-89/09
17.03.2015
PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Request for annulmentPollmeier Massivholz GmbH & Co. KG

V

European Commission
General Court1st Ch.M. E. Buttigieg/State aid
KeywordsPublic measures concerning the establishment of a sawmill in the Land of Hesse – No opening of the formal investigation procedure – Serious difficulties – Calculation of the aid component of State guarantees – Commission Notice on State aid in the form of guarantees – Failing undertaking – Sale of public land – Rights of defence – Duty to state reasons.
Significant points1) In the case at hand, the lack of examination by the Commission of the lawfulness of using the rate of 0.5% of the guaranteed amount for determining the aid component of the contested guarantees in light of the 2000 Notice on State aid in the form of guarantees constitutes an indication of serious difficulties as regards whether or not the contested guarantees could be qualified as de minimis The presence of such difficulties should have led the Commission to open the formal investigation procedure.It is apparent from the case-law that the notion of serious difficulties, the presence of which obliges the Commission to open the formal investigation procedure, is an objective one. Whether or not such difficulties exist requires investigation of both the circumstances under which the contested measure was adopted and its content, comparing the grounds of the decision with the information available to the Commission when it took a decision on the compatibility of the disputed aid with the common market. It follows that judicial review by the General Court of the existence of serious difficulties will, by nature, go beyond consideration of whether or not there has been a manifest error of assessment (see judgment of 10 July 2012, Smurfit Kappa Group/Commission, T‑304/08, Rec, EU:T:2012:351, paragraph 80 and the case-law).

2) It is also apparent from the case‑law that if the examination carried out by the Commission during the preliminary examination procedure is insufficient or incomplete, this constitutes evidence of the existence of serious difficulties (see judgment of 10 February 2009, Deutsche Post and DHL International v Commission, T-388/03, Rec, EU:T:2009:30, paragraph 95 and the case‑law cited).

3) Concerning the nature of the review to be conducted by the General Court, it should be highlighted, on the one hand, that the Court must, in principle and having regard both to the specific features of the case before them and to the technical or complex nature of the Commission’s assessments, carry out a comprehensive review as to whether a measure falls within the scope of Article 107(1) TFEU and, on the other hand, that the judicial review by the Court on the existence of serious difficulties will, by nature, go beyond consideration of whether or not there has been a manifest error of assessment.

[Our own translation – no official translation currently available]
NoteworthyAny decision of the EU Commission not to initiate the formal procedure in a State aid investigation is subject to judicial review. Following an in-depth and detailed analysis of the decision of the EU Commission at hand, the General Court has reached the conclusion that the EU Commission failed to apply the relevant legal framework, that is to say the 2000 Commission Notice on State aid in the form of guarantees, when assessing whether the measure concerned constituted State aid within the meaning of Article 107(1) TFEU.

This judgment confirms that the scrutiny of the General Court in State aid matters is intense. It also echoes the previous judgment of the General Court of 7th November 2012 regarding the public hospitals in Brussels (Iris), in the case T-137/10. In that case, the General Court quashed the decision of the EU Commission not to initiate the formal investigation procedure against Belgium in spite of a substantial number of indicators suggesting that the public hospitals in Brussels were overcompensated for the services of general economic interest conducted or even questioning the very existence and scope of the services of general economic interest they would have been entrusted with.

Public procurement – Directives 89/665/EEC and 2004/18/EC – conflicts of interests – connection between the successful tenderer and the contracting authority’s experts

Judgment

C-538/13

12.03.2015

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Reference for a preliminary ruling

eVigilo Ltd

v

Priešgaisrinės apsaugos ir gelbėjimo departamentas prie Vidaus reikalų ministerijos

CJEU

 5th Ch.

 E. Juhász

N. Jääskinen

Public procurement

Keywords

 Public procurement — Directives 89/665/EEC and 2004/18/EC — Conflicts of interests — Connection between the successful tenderer and the contracting authority’s experts — Obligation to take that connection into account — Burden of proving bias on the part of an expert — Such bias having no effect on the final result of the evaluation — Time-limit for instituting proceedings — Challenging the abstract award criteria –Those criteria clarified after the exhaustive reasons for the award of the contract had been communicated — Degree of the tenders’ conformity with the technical specifications as an evaluation criterion

Significant points

  1. The third subparagraph of Article 1(1) of Council Directive 89/665/EEC of 21 December 1989 on the coordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts, as amended by Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007, and Articles 2, 44(1) and 53(1)(a) of Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts, must be interpreted as not precluding a finding that the evaluation of the tenders is unlawful solely on the grounds that the tenderer has had significant connections with experts appointed by the contracting authority who evaluated the tenders. The contracting authority is, at all events, required to determine the existence of possible conflicts of interests and to take appropriate measures in order to prevent and detect conflicts of interests and remedy them. In the context of the examination of an action for annulment of an award decision on the ground that the experts were biased, the unsuccessful tenderer may not be required to provide tangible proof of the experts’ bias.
  2. Thus, if the unsuccessful tenderer presents objective evidence calling into question the impartiality of one of the contracting authority’s experts, it is for that contracting authority to examine all the relevant circumstances having led to the adoption of the decision relating to the award of the contract in order to prevent and detect conflicts of interests and remedy them, including, where appropriate, requesting the parties to provide certain information and evidence. Evidence such as the claims in the main proceedings relating to the connections between the experts appointed by the contracting authority and the specialists of the undertakings awarded the contract, in particular, the fact that those persons work together in the same university, belong to the same research group or have relationships of employer and employee within that university, if proved to be true, constitutes such objective evidence as must lead to a thorough examination by the contracting authority or, as the case may be, by the administrative or judicial control authorities.
  3. It is, in principle, a matter of national law to determine whether, and if so to what extent, the competent administrative and judicial control authorities must take account of the fact that possible bias on the part of experts has had an effect on the decision to award the contract.
  4.  The third subparagraph of Article 1(1) of Directive 89/665, as amended by Directive 2007/66, and Articles 2, 44(1) and 53(1)(a) of Directive 2004/18, must be interpreted as requiring a right to bring an action relating to the lawfulness of the tender procedure to be open, after the expiry of the period prescribed by national law, to reasonably well-informed and normally diligent tenderers who could understand the tender conditions only when the contracting authority, after evaluating the tenders, provided exhaustive information relating to the reasons for its decision. Such a right to bring an action may be exercised until the expiry of the period for bringing proceedings against the decision to award the contract.
  5. Articles 2 and 53(1)(a) of Directive 2004/18 must be interpreted as allowing, in principle, a contracting authority to use, as an evaluation criterion of tenders submitted by the tenderers for a public contract, the degree to which they are consistent with the requirements in the tender documentation.
  6. According to Article 53(1)(a) of Directive 2004/18, the tender most economically advantageous from the point of view of the contracting authority is to be assessed according to various criteria linked to the subject-matter of the public contract in question, for example, quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, cost-effectiveness, after-sales service and technical assistance, delivery date and delivery period or period of completion.
  7. According to the case-law, as follows from the use of the phrase ‘for example’, that list is non-exhaustive (see judgment in Commission v Netherlands, C‑368/10, EU:C:2012:284, paragraph 84).Thus, the contracting authority has the power to establish other award criteria, in so far as they are connected with the purpose of the contract and respect the principles set out in Article 2 of Directive 2004/18.
  8. It is all the more important that the contracting authority must enjoy such freedom since the most economically advantageous tender is to be assessed ‘from the point of view of the contracting authority’.

 

Noteworthy

  1. In this judgment, the Court of Justice has provided useful guidance on how to assess the existence of bias in a public procurement procedure and on the evaluation of tenders submitted in such a procedure.
  2. This being said, the reasoning of the CJEU could have been more linear and accurate on the first issue (existence of bias consisting in a conflict of interests) by establishing first what is required from the contracting authority under the directives and second what national law may provide for in order to comply with EU Law in this respect. Instead of that, the judgment has melted the two issues (see paragraphs 34 to 46, where the CJEU starts with the interpretation of the EU Directives, switches to national law, comes back to the EU Directives and ends with national law) which makes its reading uncomfortable and its understanding not that clear.

Continue reading Public procurement – Directives 89/665/EEC and 2004/18/EC – conflicts of interests – connection between the successful tenderer and the contracting authority’s experts

Financial Services – Directive 2003/6/EC – Concept of “inside information”

Judgment

C-628/13

11.03.2015

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Reference for a preliminary ruling

Jean-Bernard LafontaVAutorité des marchés financiers

CJEU

2nd Ch.

J.L. da Cruz Vilaça

M. Wathelet

EU Banking and Financial Law – Directive 2003/6/EC (MAD) – Directive 2003/124/EC – Inside information

Keywords

Financial services — Directive 2003/6/EC — Concept of ‘inside information’ — Information ‘of a precise nature’ — Directive 2003/124/EC — Potential effect in a particular direction on the prices of financial instruments

Significant points

  1. With the view of preventing insider dealing, the Market abuse directive (Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation requires issuers of financial instruments to inform the public of inside information which directly concerns them, that is to say, of any information of a precise nature which is likely to have a significant effect on the prices of the financial instruments concerned.

On a proper construction of point (1) of Article 1 of Directive 2003/6/EC and Article 1(1) of Commission Directive 2003/124/EC of 22 December 2003 implementing Directive 2003/6/EC, in order for information to be regarded as being of a precise nature for the purposes of those provisions, it need not be possible to infer from that information, with a sufficient degree of probability, that, once it is made public, its potential effect on the prices of the financial instruments concerned will be in a particular direction.

  1. The definition of ‘inside information’ comprises four essential elements: (i) the information must be of a precise nature; (ii) the information must not have been made public; (iii) it must relate, directly or indirectly, to one or more financial instruments or their issuers; and (iv) it must be information which, if it were made public, would be likely to have a significant effect on the prices of those financial instruments or on the price of related derivative financial instruments.
  2. If the terms used in Article 1(1) of Directive 2003/124 are given their plain and ordinary meaning, it must be held that, for the first condition of an information of a precise nature to be satisfied, it is enough that the information be sufficiently exact or specific to constitute a basis on which to assess whether the set of circumstances or the event in question is likely to have a significant effect on the price of the financial instruments to which it relates. Consequently, the only information excluded from the concept of ‘inside information’ by virtue of that provision is information that is vague or general, from which it is impossible to draw a conclusion as regards its possible effect on the prices of the financial instruments concerned.
  3. That interpretation is borne out both by the general scheme of Article 1 of Directive 2003/124 and by the purpose of Directive 2003/6.
  4. It should be pointed out that, in common with Article 1(1) of Directive 2003/124, Article 1(2) of that directive which relates to the fourth condition does not require that the information make it possible to determine the direction of change in the prices of the financial instruments concerned. A particular item of information can be used by a reasonable investor as one of the grounds for his investment decision and, accordingly, satisfy the condition laid down in Article 1(2) of that directive, even though it does not make it possible to determine the movement in a given direction of the prices of the financial instruments concerned.
  5. As regards the purpose of Directive 2003/6, it should be observed that to confine the scope of point (1) of Article 1 of Directive 2003/6 and Article 1(1) of Directive 2003/124 solely to information which makes it possible to anticipate the direction of a change in the prices of those instruments risks undermining the objectives pursued by the Directive to protect the integrity of the EU financial markets and to enhance investor confidence in those markets by placing investors on an equal footing and protecting them against the improper use of insider information
  6. The increased complexity of the financial markets makes it particularly difficult to evaluate accurately the direction of a change in the prices of those instruments, as was stated in recital 1 to Directive 2003/124, which refers to several factors likely to affect those prices in a given situation. In those circumstances — which can lead to widely differing assessments, depending on the investor — if it were accepted that information is to be regarded as precise only if it makes it possible to anticipate the direction of a change in the prices of the instruments concerned, it would follow that the holder of that information could use an uncertainty in that regard as a pretext for refraining from making certain information public and thus profit from that information to the detriment of the other actors on the market.
  7. It should also be noted in that context that the travaux préparatoires for the Level II Directive 2003/124 disclose that a reference to the possibility of drawing a conclusion as regards the ‘direction’ of the effect of the information on the price of the financial instruments concerned, made in the version, subject to public consultation, of technical advice CESR/02-089d issued in December 2002 by the Committee of European Securities Regulators (CESR), for the European Commission and entitled ‘CESR’s Advice on Level 2 Implementing Measures for the proposed Market Abuse Directive’, was later deleted precisely in order to avoid such a reference being used as a pretext for not making information public.

Noteworthy

  1. In order to prevent insider dealing, any information which is neither vague nor general, relates to one or more financial instruments or their issuers and is likely to have a significant effect on the price of these financial instruments, must be made public even if the holder of the information does not know precisely how it will influence the price of the financial instruments.
  2. With this judgment, the EUCJ has retained quite a broad notion of inside information in the context of the duty of the issuer concerned to publish such information. It will be interesting to see whether the EUCJ will adopt a similar approach when faced with circumstances alleged to constitute insider dealing, notably in light of the Spector case law. In this respect, as the EUCJ is unlikely to develop two distinct interpretations of the same expression of inside information, it could opt for a rather stringent notion of use of inside information to avoid giving too extensive a scope to insider dealing.

Competition – Concentrations – Decision declaring that the concentration is incompatible with the internal market

Judgment

T-175/12

09.03.2015

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Application for annulment

Deutsche Börse AG

v

European Commission

 General Court

 3rd Ch.

S. Papasavvas

 /

Competition – Merger

Keywords

 Competition — Concentrations — Financial instruments sector — European derivatives market — Decision declaring that the concentration is incompatible with the internal market — Assessment of the effects of the transaction on competition — Efficiency gains — Commitments

Significant points

 [From the press release (no public version of the judgment being available as yet)]

 

The General Court considers, first, that none of the arguments put forward by Deutsche Börse can call into question the Commission’s conclusions on the definition of the relevant market. According to the General Court, the Commission did not make errors of law or assessment in considering that exchange-traded derivatives (ETDs) and over-the-counter derivatives (OTC derivatives) belonged to separate markets.

Secondly, the General Court rejects Deutsche Börse’s arguments relating to the efficiency gains which the merger could have brought and to the commitments made by the companies for the purpose of counteracting the significant restrictions of effective competition.

Noteworthy

 As no public version of the judgment is currently available whilst the parties are consulted on possible redactions to the decision on confidentiality grounds, we are unable to provide substantive commentary on the General Court’s findings.

 However, we note already that the confirmation of the Commission’s 2012 decision is significant in defending the Commission’s long-standing policy regarding competition in securities trading. Indeed, the Commission published a communication in 2004 highlighting the risk of foreclosure on these markets stemming from market consolidation and in 2006 published an issues paper which showed skepticism towards the efficiencies that could arise from the vertical integration of operators providing the trading, clearing and settlement of securities trading (see on these points, PARTSCH Ph.-E., Droit bancaire et financier européen, Larcier 2009, p. 689, paragraph 1090).

Economic and monetary policy – Eurosystem Oversight Policy Framework – Oversight of payment and securities settlement systems

Judgment

T-496/11

04.03.2015

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Appeal

United Kingdom

v

European Central Bank

General Court

4th Ch.

M. Prek

/

Economic and monetary policy

Keywords

Economic and monetary policy — ECB — Action for annulment — Eurosystem Oversight Policy Framework — Challengeable act — Admissibility — Oversight of payment and securities settlement systems — Application to central counterparty clearing systems of a requirement to be located in a Member State party to the Eurosystem — Competence of the ECB

Significant points

I. Admissibility

  1. The argument put forward by the ECB, according to which the Policy Framework does not fall within one of the categories of binding acts which the ECB may adopt, should be rejected as irrelevant. That argument is directly at odds with the settled case-law that an action for annulment is available in the case of all measures adopted by the institutions, whatever their nature or form, which are intended to have legal effects (see, to this effect, judgments of 31 March 1971 in Commission v Council, 22/70, ECR, EU:C:1971:32, paragraph 39, and of 17 July 2008 in Athinaïki Techniki v Commission, C‑521/06 P, ECR, EU:C:2008:422, paragraphs 43 and 45). That case-law is intended specifically to prevent the form or designation given to an act by its author from resulting in its escaping assessment of its legality in an action for annulment, even though it in fact has legal effects.
  2. It is to be inferred from the analysis of the Policy Framework’s wording and context, of its substance and of the intention of its author that it has legal effects and accordingly constitutes an act against which an action for annulment may be brought under Article 263 TFEU.
  3. Notably, the statement of location policy in the Policy Framework is particularly specific, rendering it readily applicable. Thus, far from displaying the nature of a mere hypothetical statement, the Policy Framework is in fact intended to impose compliance with a location requirement for CCPs [central counterparties] whose activity exceeds the thresholds that it sets and therefore, in the absence of indications to the contrary in the text of the Policy Framework, constitutes the ECB’s definitive position.
  4. Whilst under Protocol No 15 to the FEU Treaty certain provisions of the FEU Treaty and the Statute [of the European System of Central Banks and of the ECB] do not apply in relation to the United Kingdom, the latter may still bring an action seeking review by the EU judicature of whether the ECB has exceeded its powers.

II. Substance

  1. Article 127(1) TFEU, Article 127(2) TFEU, fourth indent and Article 22 of the Statute have a complementary relationship. The power to adopt regulations pursuant to Article 22 of the Statute is one of the means available to the ECB for performing the task, entrusted to the Eurosystem by Article 127(2) TFEU, of promoting the smooth operation of payment systems. That task itself serves the primary objective set out in Article 127(1) TFEU to maintain price stability.
  2. It necessarily follows that the term ‘clearing systems’ in Article 22 of the Statute must be read in conjunction with the ‘payment systems’ to which reference is made in the same article and the smooth operation of which constitutes one of the Eurosystem’s tasks.
  3. A ‘payment system’ within the meaning of Article 127(2) TFEU falls within the field of the transfer of funds. Therefore, whilst such a definition may include the ‘cash’ leg of clearing operations, that is not true of the ‘securities’ leg of the clearing operations of a CCP, since while such securities may be regarded as being the subject-matter of a transaction giving rise to the transfer of funds, they do not, however, in themselves constitute payments.
  4. A similar conclusion is also required in respect of the term ‘clearing and payment systems’ that is used in Article 22 of the Statute.
  5. This term must be interpreted in the light of the task, conferred on the Eurosystem by the fourth indent of Article 127(2) TFEU, of promoting the ‘smooth operation of payment systems’. It necessarily follows that the ability which the ECB is granted by Article 22 of the Statute to adopt regulations ‘to ensure efficient and sound clearing and payment systems’ cannot be understood as according it such a power in respect of all clearing systems, including those relating to transactions in securities.
  6. That option granted to the ECB by Article 22 of the Statute must rather be regarded as limited to payment clearing systems alone. In this regard, it should be noted that a clearing stage may be included in payment systems, such as net settlement payment systems as opposed to a gross settlement payment system.
  7. Consequently, in the absence of an explicit reference to the clearing of securities in Article 22 of the Statute, it must be concluded that the choice of the term ‘clearing and payment system’ is intended to make it clear that the ECB has competence to adopt regulations to ensure efficiency and safety of payment systems, including those with a clearing stage, rather than granting it an autonomous regulatory competence in respect of all clearing systems.
  8. It is necessary to reject the ECB’s line of argument to the effect, in essence, that the carrying out of the task consisting in promotion of the sound operation of payment systems pursuant to the fourth indent of Article 127(2) TFEU means that it necessarily has the power to regulate the activity of securities clearing infrastructures, in the light of the effect that their default could have on payment systems.
  9. It is true that the Court of Justice has acknowledged that powers not expressly provided for by the provisions of the Treaties may be used if they are necessary to achieve the objectives set by the Treaties. Thus, when an article of the Treaty confers a specific task on an institution, it must be accepted, if that provision is not to be rendered wholly ineffective, that it confers on that institution necessarily and per se the powers which are indispensable in order to carry out that.
  10. Nevertheless, the existence of an implicit regulatory power, which constitutes a derogation from the principle of conferral laid down by Article 13(2) TEU, must be appraised strictly. It is only exceptionally that such implicit powers are recognised by case-law and, in order to be so recognised, they must be necessary to ensure the practical effect of the provisions of the Treaty or the basic regulation at issue.
  11. Nevertheless, the existence of those links cannot be sufficient to justify accepting that the ECB has implicit powers to regulate securities clearing systems, since the FEU Treaty envisages the possibility of such powers being conferred explicitly upon the ECB.
  12. Indeed, it must be pointed out that Article 129(3) TFEU provides for a simplified amendment mechanism — derogating from the mechanism in Article 48 TEU — in respect of certain provisions of the Statute, including Article 22. It enables the European Parliament and the Council, acting in accordance with the ordinary legislative procedure, and on a recommendation from the ECB or a proposal from the Commission, to amend those provisions.
  13. In this respect, it is clear that the creation of a requirement to be located within the euro area that is applicable to CCPs providing clearing services for euro-denominated securities beyond certain thresholds goes beyond mere oversight of the infrastructures of securities clearing systems, and partakes regulation of their activity.

Noteworthy

  1. Like the acts of any EU institution or body, the acts of the ECB with legal effects on third parties are subject to judicial review, irrespective of its form. Although foreseeable, that statement by the General Court is of particuliar importance for the ECB, given its strong emphasis on moral persuasion and acts of allegedly soft law. Following this judgment, it cannot be ruled out that more acts of the ECB will be challenged before the European Courts in the future.
  2. In the European Legal Order, the ECB is neither a legislator nor a regulator but an institution assigned with operational responsibilities of monetary policy and, since 4 November 2014, of prudential supervision. To fulfill these responsibilities, the ECB is equipped with limited and specific powers to adopt binding acts of general scope, such as orientations, guidelines, instructions and even regulations.
  3. Even though the reasoning of the General Court underlying its conclusion according to which the ECB is deprived of any power to adopt regulations in connection with the system of clearing and settlement of securities is not fully convincing, it results clearly from the judgment of the General Court that the ECB enjoys regulatory powers only for the proper fulfillment of its main tasks.
  4. Such an approach by the General Court is noteworthy and this case law is also of relevance for the ECB’s missions of prudential supervision. The way the ECB perceives its legislative powers and contemplates exercising them may be excessive and successfully challenged before the EU Courts.
  5. By denying the ECB the power to regulate the activity of the system of clearing and settlement, the General Court managed to avoid addressing the issue as to whether requiring the location of some activities to be within the Euro area, the ECB infringed the freedoms of circulation (freedom to provide services and freedom of establishment).
  6. In my opinion, since the ECB is in charge of policies within only a part of the EU, there is an objective risk that, in the fulfillment of its mission, it does not sufficiently take into account the legitimate interests of the EU Member States which are not part of the Eurozone and of their economic operators. Thus, it is not excluded at all that one day the ECB will be considered as having infringed freedoms of circulation, that is to say by restricting these freedoms in an unjustified or disproportionate manner.