ECJ Rules On Direct Contract Awards By Local Authorities

Rules for local authorities awarding contracts without a mandatory tender procedure have been laid down by the European Court of Justice.

A tender is not mandatory where the local authority exercises control over the company to whom it awards the contract which is similar to that exercised over its own departments.

The ECJ has now ruled that, where the local authority is a minority shareholder in the company, its control may only be regarded as similar to that exercised over its own departments when:

• the company's activity is limited to the local authority's territory and carried out essentially for its benefit, and
• the authority (through its representation on the company's statutory bodies) exercises a decisive influence on the company's strategic objectives and its significant decisions.