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Editorial

In-House Providing

“In-house providing” is the result of the dispensation of public tender procedures for public administrations, and allows the administrations themselves to provide goods, services and works internally, rather than acquiring them from the market. This model was created under EU case-law, specifically with the Teckal Judgement dated 18 November 1999, Case C-107/1998 between Teckal S.r.l and the Municipality of Viano, which defined two necessary parameters for in-house contract award procedures.

“In-house providing” is the result of the dispensation of public tender procedures for public administrations, and allows the administrations themselves to provide goods, services and works internally, rather than acquiring them from the market. This model was created under EU case-law, specifically with the Teckal Judgement dated 18 November 1999, Case C-107/1998 between Teckal S.r.l and the Municipality of Viano, which defined two necessary parameters for in-house contract award procedures.

1. The first – “similar control” – requires the local authority to exercise “over the person concerned a control which is similar to that which it exercises over its own departments”.

2. The second requires that the essential part of the activities have been entrusted to the controlled entity by the controlling local authority or authorities.

The 2014 Directives on ordinary (2014/24/EU) and special (2014/25/EU) sector public contracts (as well as Directive 2014/23/EU on awarding concession contracts) regulated in-house providing for the first time, referring in part to European case-law and in part to elements that were newly introduced into the Directive. The three identical texts respond to issues that arose after the Teckal Judgement was published.

Article 12 of Directive 2014/24/EU focuses on the two aforementioned requirements, defining sub 1. as the quality of having “a decisive influence over both strategic objectives and significant decisions of the controlled legal person”. It also introduces a modification, fixing a minimum percentage for parameter sub 2.: more than 80% of the activity being carried out must be made up of tasks entrusted to the controlled legal person by the controlling contracting authority. This figure is calculated by taking into consideration the average total turnover or a suitable alternative method such as costs incurred for services, supplies and works, for the three years preceding the contract award.

The most important of the new elements is contained within a third parameter. The article reaffirms the traditional exclusion of direct private capital participation in the controlled legal person. However, this aspect is diluted by an exception that permits “non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties.” As these “do not exert a decisive influence on the controlled legal person” (Art. 12, Directive 2014/24/EU), this automatically implies the necessary absence of “similar control”.

The Directives also take other forms of in-house providing into consideration. These offer an alternative to first-hand “similar control”.

The first is a “cascading” form in which the controlling contracting authority exercises “similar control” not directly on the legal person but over a third party which then exerts this form of control over the legal person. This means both the controlling authority and the controlled entity can enter into a contract even if the relationship between the two is not direct.

The second – joint control – had already existed under European Court of Justice case-law (for example Section III, 13 November 2008, Case C-324-07 “Coditel Brabant SA”) and has now been included in writing in the Directives. It is a form of in-house providing where multiple contracting authorities exert control over the legal person in question. The same requirements regarding the activities and private capital participation apply to joint control, with the addition of the following:

- the controlled legal person’s decision-making bodies shall be composed of representatives of all participating contracting authorities, thus allowing individual representatives to represent several or all of the participating contracting authorities;

- those contracting authorities shall be able to jointly exert “similar control”;

- the controlled legal person shall not pursue any interests that conflict with those of the controlling contracting authorities.

Under Italian case-law (Regional Administrative Court, Abruzzo, L’Aquila, section I, 10 July 2014 Judgement no. 596; Supreme Administrative Court, Section V, 8 March 2011 Judgements no. 1447, 24 September 2010 no. 7092, and 26 August 2009 no. 5082), each participant is not required to be able to exert control as an individual entity; however, neither shall the public entity with a majority role command full control. In addition to this, under EU Court of Justice case-law (Section III, 29 November 2012, Case C-182/11 and C-183/11 “Econord”) participants must not have a merely symbolic role but one that allows them to actively participate in the management of the legal person, even if they only constitute a minority. Furthermore, when “similar control” is effected it must involve both the capital and the governing bodies of the controlled entity.

In Italy, these Directives have not yet been adopted: when examining matters that involve in-house providing, the Supreme Administrative Court gives different interpretations according to the relevance of said Directives.

Given the very detailed nature of the regulation, the Supreme Administrative Court in its advisory capacity (Section II, 30 January 2015 Opinion no. 258) considers the provisions of said regulation to be immediately binding, as if they were “self-executing”. In its judicial capacity (Section VI, 26 May 2015 Judgement no. 2660), it instead overrules this immediate “self-executing” applicability, placing emphasis on the fact that the deadline for transposing the EU Directive into Italian law has still not passed. It is therefore the National Judge who is required to give an interpretation that does not conflict with the Directives’ objective.

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