Decision n. 472476, 3rd April 2024, Société Victor Hugo 21, A, France
Article(s) in Directive 2014/24/EU: Art. 2, 1 (6) c); 3 (3)
Topic: Public works contract; Requirements specified by the contracting authority exercising a decisive influence on the type or design of the works; Administrative Law
Member State: FR
Court/rev. board: Council of State
1. IMPLEMENTATION / RELEVANT NATIONAL LEGISLATION
The articles 2, 1 (6) c) and 3 (3) of the Directive 2014/24/EU were implemented by the Code de la commande publique (CCP) with the article L. 1111-2. The wording of national legislation regarding the public works contract’s definition is similar to the wording of the Directive.
2. FACTS
A hospital center concluded a real estate lease with a property company. The contract provided for the lease of three buildings, one of which was to be developed and another built. The contract provided for deferred payment, consisting of rents and additional rents for ten years. Once the work had been completed, the hospital did not take possession of the premises and suspended the payment of rent before asking the court to annul the contract. The issue was therefore the validity of the contract and, more specifically, of the deferred payment clause. This involved determining the nature of the contract.
3. JUDGMENT
In principle, a property purchase or lease is excluded from the scope of the Public Procurement and Concessions Directives, given the non-substitutable nature of the building. However, it may happen that the contracting authority exerts a “decisive influence” on the design of the work, so that it then meets its needs (CJEU, 10th July 2014, Impresa Pizzarotti, C-213/13), leading to reclassification as a public contract. In this respect, the fact that the work is to be built and not constructed is not the criterion used by European case law. On the other hand, it does distinguish between exterior design and interior fittings: the influence is decisive when it relates to “the architectural structure [of the] building, such as its size, external walls and load-bearing walls“, but “applications concerning interior fittings can be regarded as demonstrating a decisive influence only if they stand out because of their specificity or scale” (CJEU, 22nd April, 2021, Commission v Republic of Austria, C-537-19, §53).
The interest of the judgment under review is twofold. On the one hand, the Conseil d’Etat adopts in extenso the wording of the Court of Justice’s last judgment. In fact, the connection is much more marked than with the Section ruling of 8th February 1991, Région Midi-Pyrénées (no. 57679), handed down on the subject of VEFA (sale in future state of completion), even though the case file of the ruling refers to it. In this latter ruling, the Conseil d’Etat reclassified a VEFA as a contract if “the object of the operation is the construction, on behalf of the local authority, of a building entirely destined to become its property and designed according to its own needs“. However, the criterion of ownership is no longer the order of the day, and the fact that the work is designed according to its own needs implies the characterization of a decisive influence under the conditions.
On the other hand, the Conseil d’Etat illustrates its new solution in the context of the interior fittings of an existing building and a decisive influence on the design of a building to be built to house medical services:
“Both the fitting-out of the existing building A and the construction and fitting-out of the new building C meet the needs expressed by the hospital center, aimed at grouping together its outpatient child psychiatry activities as well as the part-time therapeutic reception center and the day hospitals dedicated to the care of children under 12, and to the specific requirements it has set, firstly, for the new Building C to be located in the continuity of Building A, and secondly, for the numerous interior alterations to Buildings A and C required for the specific therapeutic activities to be carried out there.”
The other interesting aspect of the ruling is its finding of the existence of unlawful content in the contract, which, alongside a particularly serious defect, enables a party to apply for outright annulment of the contract in application of the Béziers I (CE, 28th December 2009, no. 304802) case law or allow for the public body to terminate it (CE, 10 July 2020, Société Comptoir Négoce équipements, n.° 430864).
In this respect, the case illustrates that the notion of unlawful content is broader than that of unlawful object, since the question at issue here was the unlawfulness of the price and, more specifically, the fact that the price was, by virtue of the form it took, id est a rent, contrary to the prohibition on deferred payment enshrined in the Code de la commande publique.
The Conseil d’Etat has long held that rent paid in exchange for the construction and provision (by sale or lease) of a work is contrary to the prohibition on deferred payment (CE, 8th February, 1999, Préfet des Bouches-du-Rhône c/ Commune de la Ciotat, no. 150931), condemning the practice of public works contracts before the legislator subsequently authorized them in various forms (public domain occupation, hospital emphyteutic lease, PPP contracts). But should a contract containing such an illegal clause be considered to have “illicit content“? The positive answer seems justified, even though this is not a rule of public order that the administrative judge can raise ex officio, insofar as the Béziers I decision refers indiscriminately to “an irregularity invoked by a party or raised ex officio by him“: since price is undoubtedly an essential element of a contract, in public law as in private law, there is therefore no reason to stop at the rather too restrictive definition of unlawful content given in the Cerba ruling:
“The content of a contract is unlawful only if the very purpose of the contract, as formulated by the contracting public entity in order to launch the contract award procedure, or as it results from the stipulations agreed between the parties, which must be regarded as defining it, is, in itself, contrary to the law, so that by committing himself for such a purpose the co-contractor of the public person necessarily disregards it” (CE, 9th November, 2018, Cerba et Caisse nationale d’assurance maladie, nos. 420654 et 420663).
As for whether the clause was indivisible, this was evident in the case of a financial clause.
Lastly, the Conseil d’Etat ruled that the fact that the Marseille Administrative Court of Appeal also relied on a purchase option clause was superfluous, since the question of future ownership is irrelevant to the reclassification as a public procurement contract, and that the contractual arrangement chosen was designed to avoid the rules on advertising and competitive bidding, since this does not automatically lead to the annulment of the contract in the context of a Béziers I appeal (CE, 12th January, 2011, Manoukian, no. 338551) and on the prohibition for public health establishments to use the partnership contract procedure, since it would then be difficult to speak of illicit content.
For both BEVA (rental in future state of completion) and VEFA, it is also important to ensure compliance with the “MOP” Act of 12th July, 1985, now codified in the French Code de la commande publique (CPP), which prohibits, in principle, the transfer to any third party of public project management for most public bodies and most public works: the scope of application of this law is not exactly the same as that of the works contract, and especially that of the prohibition on deferred payment (which only applies to BEFA and only concerns certain contracting authorities). There could therefore be situations where such an arrangement cannot be declared illegal based on the prohibition on deferred payment, as it would not apply, but would be contrary to the prohibition on transferring public project management.
Finally, it should be remembered that the French CCP, like Directive 2014/24, provides for the possibility of awarding contracts without advertising or competitive tendering to a single operator “for technical reasons“. The French transposition has added this clarification to article R. 2122-3 CCP:
“This is particularly the case when acquiring or leasing a minority, inseparable part of a building to be constructed, together with work to meet the buyer’s needs that cannot be carried out by an economic operator other than the one responsible for building the main part of the building to be constructed.”
Here again, we need to be careful, as the directives make no provision for such a derogation. In fact, the only way such a derogation could be possible is if it were included in the “mixed contract” hypothesis.
Link to the original decision: https://www.legifrance.gouv.fr/ceta/id/CETATEXT000049366437?init=true&page=1&query=&searchField=ALL&tab_selection=cetat
