Muller bites
The European Commission has taken action against the Netherlands over a land development project in the municipality of Ede. The case highlights how public procurement for schemes of this type is fraught with difficulty, Deborah Ramshaw and Neil Walker.
The Müller judgement clarified the impact of the procurement rules on development agreements. The European Court of Justice in that case clarified the distinction between public contracts and the exercise of planning powers by a public authority. The European Commission has now taken action against the Netherlands in respect of land development in the municipality of Ede and appears to be relying on the Court’s judgement in Müller to substantiate its action.
Ede development project
The Commission has issued a reasoned opinion against the Netherlands in respect of alleged breaches of public procurement rules. If the Dutch authorities do not inform the Commission within two months of measures taken to comply with the rules, the Commission may refer the matter to the Court of Justice.
By way of press release on 30 September 2010, the Commission details the nature of its complaint against the Netherlands. The Dutch municipality of Ede awarded several contracts for the land development project “Het Nieuwe Landgoed” to one developer, without having carried out a European tender procedure. The developer was to develop a centre for commercial and social use, including a sports hall, as well as approximately 1,168 parking spaces and 648 houses, including 60 for social housing. The total value of the contracts was worth approximately €140m.
The Commission considers that the contracts concerned are public works contracts and a public works concession and as such should have been awarded following a European tendering process. The Commission is therefore of the opinion that in the absence of such a tendering process, the Netherlands has failed to fulfil its obligations under EU public procurement rules.
Application of the Muller judgement
In the Commission’s view the main purpose of the contracts was not the sale of land, but the execution of works, which falls under the EU public procurement regime. As the developer was to develop specific sites, it was the authority which took the decisions on the buildings to be constructed. The initiative for the project was also taken by the public authority (rather than a developer-led project) and the Commission notes that the authority’s “influence on the project went far beyond the mere exercise of the municipality’s urban-planning powers”. This is direct reference to the Müller judgement.
The Commission notes that the developer is carrying out the project at his own risk and does not receive a direct payment from the authority (apart from some specific elements, see below), however the authority has given the developer a right of exploitation within the meaning of the public procurement rules because the developer is granted a “tailor-made building license that gives him the right to construct and exploit the work foreseen in the contract”. It is presumably this element that the Commission views as a concession contract; other parts of the work – the sports hall and a number of parking places – are to be paid for directly by the authority.
The Commission is also of the opinion that the authority “obtained a clear and direct economic benefit by means of this contract within the meaning of the jurisprudence of the Court of Justice in a similar case” [Müller].
Conclusion
This further action by the Commission in respect of land development projects indicates that the Commission is still keen to enforce public procurement rules within a development context. In this action the Commission is relying on the decision in Müller since this appears to be an authority led project where the authority has gone beyond the exercise of its statutory planning powers. Authorities will still need to seek legal advice whenever they are contemplating any development project in their area.
The Commission was keen to point out the high value of this development project and the fact that the opportunity was not opened up to companies in other member states. The Commission also stated that “by awarding contracts in this way, the municipality does not obtain best value for taxpayers’ money”. This seems strange given it appears only a minor element of the overall works were to be paid for by public money. However, we do not know if land was being provided at an under-value or otherwise.
The infraction proceedings illustrate again that entering into contracts for land development projects can be fraught with difficulty so far as public procurement is concerned.
Deborah Ramsden is head of procurement and Neil Walker is a director at Dickinson Dees. Deborah can be contacted on 0191 279 9836 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it.. Neil can be contacted on 0191 279 9364 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it..
