Decision n. 455186, 16th December 2022, Council of State, Société Grasse Vacances, classified A, France
Article(s) in Directive 2014/24/EU: Art. 73
Topic: Termination and quantum of indemnity
Member State: FR
Court/rev. board: Council of State
1. IMPLEMENTATION / RELEVANT NATIONAL LEGISLATION
Art. 73 of Directive 2014/24/EU was implemented by Art. L. 2195-1 to L. 2195-6 of the Code de la commande publique (CCP).
2. FACTS
On February 9th, 1966, the City of Grasse concluded a long lease for a period of sixty years with the company SNC Grasse-vacances with the obligation to build and operate a holiday village. SNC Grasse-vacances informed the City of its intention to reach an agreement to terminate this contract. Through a deliberation of 20 September 2016, the City of Grasse Council authorised its mayor to terminate this lease early in return for the payment, as compensation, of the sum of 1,700,000 euros to SNC Grasse-vacances. In a judgment dated July 5th, 2019, the tribunal administratif of Nice, seized by third parties to the contract, annulled this decision, a judgment confirmed on June 7th, 2021 by the cour administrative d’appel of Marseille. SNC Grasse-vacances appealed against this decision before the Conseil d’Etat.
3. JUDGMENT
According to the case law CCI Nîmes, Uzès, Bagnols, Le Vigan (CE, May 4th, 2011, no. 334280), the extent and terms of the compensation of the co-contractor, in case of termination of an administrative contract, could be determined by the stipulations of the contract, as long as it does not result, to the detriment of a public person, into a manifest disproportion between the compensation thus fixed and the amount of the damage emerging, for the co-contractor, from the expenses it has incurred and the gain it has been deprived of.
The judge’s control was therefore limited to that of a ‘manifest disproportion’, which is quite logical in view of the origin of the prohibition of gifts – which prevents public persons from being ordered to pay a sum which it is established that they do not owe (CE, Sect., March 19th, 1971, n°79962, Mergui).
It is known that this Mergui logic is sometimes pushed to the extreme in practice, and it is feared that the judgment under review will reinforce this trend. Indeed, the Conseil d’Etat now considers that “the parties to a contract concluded by a public entity may determine the scope and terms of the rights to compensation of the co-contractor in the event of amicable termination of the contract, provided that this does not result to the detriment of the public entity, the allocation to the contracting party of compensation exceeding the amount of the loss he has suffered as a result of the gain of which he has been deprived and of the expenses he has normally incurred and which have not been covered because of the termination of the contract”. The focus therefore shifts from the review of manifest disproportionality to the review of the excess of the amount of the loss.
This narrowing is not justified by the Conseil d’Etat, but it is interesting to note that it is justified by the rapporteur public in the light of the case law of the Conseil constitutionnel, which considers that the principle of equality before the public burdens and the requirement of good use of public funds would not be ensured “if compensation was awarded to private persons in excess of the amount of their loss” (Cons. const.., Decision no. 2010-624 DC of January 20th, 2011; Decision no. 2015-715 DC of August 5th, 2015; Decision no. 2016-736 DC of August 4th, 2016; Decision no. 2019-781 DC of May 16th, 2019).
Moreover, it is to be feared that this tightening will have an impact, in practice, on the notion of “reciprocal concessions” in the context of transactions, as mentioned by the public rapporteur: even if the latter considers that this tightening of the control over termination indemnities does not call into question the existing case law in this area (CE, December 9th, 2016, no. 391840, Société Foncière Europe), it indicates that it will still be necessary to verify that the reciprocal concessions are not “excessive” and no longer “manifestly disproportionate”, while specifying that they will always be assessed “globally” and not by head of loss. In this case, on the assessment of the concrete effect, the case is referred back to the cour administrative d’appel of Marseille and we will have to wait for its judgment to appreciate the scope of the tightening.
The judgment is also interesting in other respects. The judge implicitly recognised his jurisdiction, even though the lease dated from 1966 and was therefore didn’t have an administrative nature by law. The appeal concerned the deliberation of the municipal council approving the decision to terminate an occupation agreement for a property in the private domain of the municipality, and the administrative judge had jurisdiction insofar as it was challenged by a third party. This is therefore an extension of the Commune de Valbonne case law (CE, March 2019 7th, no. 417629), where the appeal against the deliberation approving the decision to terminate an occupation of the private domain falls under the jurisdiction of the administrative judge.
However, as the contract is not an administrative contract, the Conseil d’Etat did not have to decide whether this type of appeal for excess of power should be transformed into an appeal for full jurisdiction, as was done for the appeal of a third party against a decision refusing to grant its request to terminate the performance of an administrative contract (CE, Sect., June 30th, 2017, SMPAT, n° 398445); in other words, whether the TV6 case law should be revisited (CE, Ass., February 2nd, 1987, Société TV6, no. 81131). The rapporteur public stated, in order to conclude that the contract was private, that “the clauses of the lease, even if they provide that the establishment of the holiday village will contribute ‘to the development of local tourism’, do not seem to us to really impose public service obligations on the lessee”, which is in line with the rather strict interpretation of the clauses that implies a regime that is exorbitant to common law, illustrated elsewhere (CE, July 20th, 2022, n°759616).
