The Court of Justice of the European Union (CJEU) has issued a judgment providing guidance on when bodies will satisfy the definition of a "body governed by public law", and so be covered by public procurement law.

In conjoined cases concerning the Italian Football Federation (FIGC) (C-155/19 and C-156/19) the CJEU found that sport governing bodies such as the FIGC might be capable of satisfying the definition, but it depends on the extent to which they are subject to control by public authorities. The judgement provides useful guidance for other ostensibly private bodies on whether they have to comply with public procurement rules.

The EU Public Procurement Directive (implemented in Scotland by the Public Contracts (Scotland) Regulations 2015 (PCSRs)) applies to all 'contracting authorities'. As well as the obvious central and local government bodies, this term also covers other 'bodies governed by public law'. That does not exist as a discrete concept in Scots law, so whether a body qualifies is determined by Regulation 2(1) of the PCSRs, adopting the test set out in the Directive. That test states that the term covers a body that possesses all of the following three characteristics:

  1. it has legal personality;
  2. it has been established for the specific purpose of meeting needs in the general interest which do not have an industrial or commercial character; and
  3. it is financed for the most part, or controlled, by the State, regional or local authorities, or any other body governed by public law.

This test means that some ostensibly private bodies, such as certain state-owned companies and registered social landlords, are covered by public procurement rules.

The case

In a preliminary reference from the Italian courts, the CJEU was asked whether the FIGC was a body governed by public law and therefore subject the public procurement rules. In its judgment, the CJEU expanded on how the test should operate in practice.

The first part of the test was straightforward: the FIGC has legal personality.

On the second part, the CJEU found that the FIGC was a body established for the specific purpose of meeting needs in the general interest, in this case because the governance of a sport is an activity pursued in the public interest. The CJEU noted that several of the tasks FIGC undertook in pursuit of this interest (i.e. its governance activities) were not of an industrial or commercial character. It was therefore immaterial that FIGC also carried out commercial activities in addition to its role as governing body of Italian football.

As to the third requirement, the CJEU had to consider whether the FIGC was in fact controlled by the Italian Olympic Committee, the Comitato Olimpico Nazionale Italiane (CONI), which is itself a body governed by public law. Under Italian law, CONI has overall responsibility for discipline, regulation and management of sports activities, including ensuring the proper organisation of competitions according to overarching rules, such as those concerning anti-doping measures.

The CJEU considered that although CONI had a supervisory responsibility for the FIGC as regards its compliance with those overarching rules applicable to all sports, it did not have any responsibility for, or powers over, the day to day organisation and practice of individual sporting disciplines. That lack of control over FIGC's ordinary business meant that CONI could not be prima face regarded as controlling FIGC. However, the CJEU stated that this presumption could be rebutted if it was proven that the powers conferred on CONI allowed it to influence the FIGC's decisions with regard to public contracts.

The CJEU stressed that whether any given entity has that kind of relationship with a governing body must be decided on a case by case basis, but the information provided to the CJEU suggested that CONI did not have the ability to influence FIGC's management of its internal affairs. Its power extended only to ensuring that FIGC was run according to broad principles that all sporting federations were required to follow.

The key question is whether the private entity is answerable for its spending decisions

This case is not binding on UK courts post-Brexit, but CJEU cases on the Public Procurement Directive will still be of significant assistance to Scottish courts when interpreting the PCSRs (and to rUK courts in respect of the equivalent rUK regulations). The CJEU's assessment of the relationship between the FIGC and CONI may therefore be significant for other private entities that carry out "public interest" tasks.

What this judgment clarifies is that mere oversight by a public body will not be enough to satisfy the requirement for "control" in assessing whether an entity is governed by public law. The key question is whether the entity has autonomy in terms of how it carries on the general interest tasks entrusted to it, and in particular whether it is answerable for the way it spends money and buys in goods, services and works from the private sector.

Private entities are likely to be caught if they carry on general interest tasks and are funded by the state, have publicly appointed board members or are otherwise subject to management supervision, audit or direction by public authorities. However, entities that are only required to comply with general public interest principles should not be caught and so should not have to comply with public procurement rules.

Private entities entrusted to perform tasks in the public interest must ensure that they properly understand the rules that apply to them, and in particular whether these rules will control how they procure goods and services.

For more information on public procurement, please contact Jamie Dunne or your usual Brodies contact.

Contributor

Jamie Dunne

Senior Associate