Why EU Member States consider subcontracting so irritating and threatening – the new case referral Vitali SpA v Autostrade per l’Italia SpA (Case C-63/18)

Will this difference make a change in Vitali?

In its referral, the Italian Court envisages that by capping only to 30% the maximum which an economic operator can subcontract, a figure set in abstracto (inspired from Wrocław case), makes the access to markets more difficult, in particular for SME’s and thus, impede the exercise of the freedom of establishment and freedom to provide services (inspired from Borta case), irrespective of whether the capacity of any subcontractor can be verified and without mentioning the essential nature of the tasks in question (inspired from Siemens case). Consequently, the referring court “wonders whether the national legislation at issue in the main proceedings does not go beyond what is necessary to attain the objectives pursued by it” (Wrocław + Borta proportionality test).

Turning to the formulation of the question in Borta we can observe that the referring Court in its question asked strictly for the interpretation of some articles on subcontracting from the Directive 2004/17, and no word of the fundamental principles. Nevertheless, the ECJ engaged ex officio in giving an interpretation of the rule on subcontracting restriction at issue in that case based on the fundamental principles. On the other hand, in Vitali, the referring Court calls the ECJ to interpret the 30% subcontracting restrictions in the light of articles 49 and 56 of the TFEU, art. 71 of the Directive 2014/24 on subcontracting and the principle of proportionality. Probably this was done on purpose in the light of the Borta case reasoning which evaluated the subcontracting restriction in the light of exactly these standards and because the Directive 2014/24 in general and its art. 71, in particular, does not contain any guidance on quantitative restrictions on subcontracting.

Are the concerns of the referring Court justified?

From these statements, it is evident that the Italian Court is aware of the Siemens, WrocławBorta cases and that in no way the ECJ will derail from this sensible but straightforward approach.

Why bother then?

It is easier to fight a domestic legal battle, especially when it concerns a law provision contrary to the Treaty on the FEU, when you attach a judgment of the ECJ backing your views.

What should the ECJ (NOT) do?

The ECJ must retain the case as an opportunity to elaborate and clarify the subsequent issues:

1. In which way exactly does the subcontracting restriction ‘is liable to prohibit, impede or render less attractive the participation of economic operators established in the other Member States’. The explanation that this prevents tenderers either from subcontracting to third parties or acting as subcontractors for a significant part of the works seems too simplistic;
2. Elaborate on the temporal restrictions of subcontracting within the submission of tenders period and at the performance of the contract stage;
3. Elaborate more on when the restriction of subcontracting is justified .

What is wrong in the Directive 24/2014 regarding subcontracting?

The Directive 24/2014 does not say that subcontracting is generally allowed. However, from a practical point of view it should have. Probably, this kind of referrals would not overload the ECJ backlog.

Did someone read art. 71? My first 20 readings of this article made me very confused. Questions to be answered: 71.2 Why disclosure of subcontractors rule has the ‘may’ word in it? – is this compliant with transparency principle? I am (not) sure. What does 71.5 trying to say?

Further, what is to my vantage point of view misleading is art. 63. It stipulates that when the bidder relies on third parties for backing such criteria as ‘educational and professional qualifications’ or the ‘relevant professional experience’ it means that that third party will perform directly the works or services for which these capacities are required [63.1.1], and the contracting authority shall verify if that third party ‘fulfils the relevant selection criteria and whether there are grounds for exclusion’ [art. 63.1.2]. This direct performance by a third party represents a mandatory subcontracting scenario in case the tenderer needs reliance with regards to ‘educational and professional qualifications’ or the ‘relevant professional experience’. Thus, another legal regime is applicable, art. 71 – subcontracting. The Directive should have made this clarification.

Besides, art. 63.2 is a perfect example of the exception to the rule that subcontracting is generally allowed. This norm restricts subcontracting emphasising that ‘certain critical tasks be performed directly by the tenderer itself’ (Swm Costruzioni case). This provision geographically should not be in the article on reliance but on subcontracting.

Some future proposal on the content of the article on subcontracting

So, the article on subcontracting should look like this. First, the rule that subcontracting is allowed and exception cases where direct performance is compulsory, like in art. 63.2 or when the contracting authority is unable to scrutinise the subcontractor. Further, the general obligation to disclose subcontractors at the bidding stage or the percentage of the subject-matter of the tender the tenderer intends to subcontract if the subcontractors are unknown at this stage. Afterwards, the obligation to disclose subcontractors to the contracting authority after the signing of the public contract and the inability of the subcontractor to start his performance before qualification and exclusion clearance. To what extent subcontractors of the main subcontractors are allowed, the so-called supply-chain control. That the main tenderer is liable before the contracting authority for the public project, and exceptions to this. The obligation of the subcontractor to abide by (nobody knows how to implement) horizontal policies in public procurement. The (super-mega) invention on direct payment. And lastly, I would add the possibility to exclude a subcontracting arrangement if it turns out that it restricts competition by object or effect.