Background
Uddevalla Skolskjuts AB awarded a school-transport contract without prior publication to its sister company, Uddevalla Omnibus AB. Both companies were controlled by Uddevalla Municipality. Swedish public-procurement legislation exempts certain horizontal in-house contracts from its scope when specified control, activity, and ownership conditions are met.
The Swedish Competition Authority sought a procurement penalty, arguing that the award was an unlawful direct procurement. Although the Swedish statute required the contracting entity, Uddevalla Skolskjuts, to perform more than 80 percent of its activities for the controlling authority or related controlled entities, the Authority contended that Article 12 of Directive 2014/24/EU also required the contracting party, Uddevalla Omnibus, to satisfy that activity test. The Administrative Court imposed the penalty, but the Administrative Court of Appeal reversed, holding that the directive was not sufficiently precise on who had to satisfy the test to be invoked directly as the basis for the penalty.
The Competition Authority appealed and requested a preliminary ruling from the Court of Justice of the European Union on the interpretation and direct effect of Article 12.2 of Directive 2014/24/EU.
The Court’s Holding
The Supreme Administrative Court dismissed the appeal. It held that the Swedish statutory exemption required Uddevalla Skolskjuts, as the contracting authority, to meet the activity test and could not be interpreted as also imposing that requirement on Uddevalla Omnibus. Because Uddevalla Skolskjuts had proceeded in accordance with the statutory exemption, the procurement fell outside the Swedish procurement statute. The national penalty provision applied only when a contract was concluded without complying with publication requirements contained in that statute; it did not authorize a penalty for violating a requirement found solely in an EU directive.
EU law supplied no independent basis for imposing the penalty. Directive 2014/24/EU contains no procurement-penalty provisions, while Article 2e of Directive 89/665/EEC permits alternative sanctions for certain violations of standstill rules but does not require such a monetary sanction for an unlawful direct award. Sweden had gone beyond the directive’s requirements by making procurement penalties available for contracts concluded without prior publication.
Accordingly, no penalty could be imposed regardless of whether Directive 2014/24/EU required Uddevalla Omnibus to satisfy the activity test or whether the relevant provisions had direct effect. Because those questions were unnecessary to decide the case, the Court also denied the request for a preliminary ruling from the Court of Justice.
Key Takeaways
- A Swedish procurement penalty cannot be imposed for breach of a requirement found only in an EU directive when the national penalty provision covers only violations of duties contained in Swedish legislation.
- EU procurement law did not independently require a monetary penalty for the alleged unlawful direct award at issue.
- The Court left unresolved whether Article 12 of Directive 2014/24/EU requires the counterparty in a horizontal in-house procurement to satisfy the activity test and whether that provision has direct effect.
Why It Matters
The judgment limits the use of EU-law primacy and direct effect as independent grounds for punitive procurement sanctions. Even if national implementation may be narrower than an EU directive, an authority cannot obtain a monetary penalty unless national or EU law supplies a legal basis for that particular sanction.
The decision also leaves an important question about the activity test for horizontal in-house contracts unanswered. Future disputes may still address whether EU law requires both controlled entities, rather than only the contracting authority, to meet the test.