Public procurement in Greece by entities operating in the energy sector is regulated, mainly, by Law 4412/2016 on ‘Public works, supplies and services contracts – Transposition of Directives 2014/24/EU and 2014/25/EU’ (OJ 147/A’/08.08.2016). Public tenders are conducted via the National System of Electronic Public Procurement (ESIDIS) and the award of public contracts must comply with the general principles of the Treaty on the Functioning of the European Union, namely equal treatment, non-discrimination, mutual recognition, proportionality and transparency.
The current legislative and regulatory framework on public procurement sets out, inter alia, specific restrictions, conditions and thresholds for entities operating in the energy sector. In principle, the provisions of the law apply to entities incorporating a public element, including contracting authorities, public undertakings or entities operating on the basis of ‘special or exclusive rights granted by a competent authority of a Member State’. Entities that fall within the scope of the applicable law need to engage in activities of a certain nature, including ‘(a) the provision or operation of fixed networks intended to provide a service to the public in connection with the production, transport or distribution of gas or heat; and (b) the supply of gas or heat to such networks’, and operate within specific predetermined thresholds, namely ‘(a) EUR 431.000 for supply and service contracts as well as for design contests; (b) EUR 5.382.000 for works contracts; (c) EUR 1.000.000 for service contracts for social and other specific services’.
The main challenges in the implementation of the applicable framework first arose when the public procurement sector -quite recently- stopped being dominated by merely public entities or entities clearly falling within the scope of the law and gradually switched to accommodating private or recently privatized entities. Although the classification of an entity as public or private can be easily made based on objective criteria, such as lack of State ownership and/or control of management, the scope of the law requires further assessment, namely whether an entity may still fall under the category of contracting entities according to article 224 para. 1(b) of Law 4412/2016 as an entity which ‘operates on the basis of special or exclusive rights granted by a competent authority of a Member State’.
The Greek Council of State has ruled in its Decision 1076/2019 that transfer of special or exclusive rights to an entity shall affect the exercise of the activity in question only to the extent that the ability of other entities to carry out the same activity, under comparable conditions, is significantly affected to the point of being excluded, with the consequence that competition is not functioning. On the other hand, the entity pursuing that activity is not considered to be a contracting entity where those special or exclusive rights have been transferred to it by means of a procedure in which sufficient publicity has been ensured and the grant of those rights has been based on objective criteria. That is because the grant of special or exclusive rights following an open and non-discriminatory tendering procedure in which all the operators concerned took part, without exclusion and discrimination, has the effect of ensuring that the relevant market is open to effective and undistorted competition. Hence, the grant of special or exclusive rights by means of a procedure open to genuine competition precludes the subsequent award of contracts by the concessionaire on the basis of criteria which are not of a purely business and economic nature and, therefore, such contracts do not constitute public contracts to which the rules of EU law apply.
Once it is clear that an entity does not fall within any of the aforementioned categories and, therefore, can be considered to be a private entity, the key matter is to what extent such entity is free to apply its own rules and procedures related to procurement or it should abide by the generally applicable European and national law principles.
An initial and rational approach would advocate that, in such cases, private autonomy and the general principle of freedom of contracts would prevail. However, setting a predetermined regulatory framework for procurement should be driven by the rules of good corporate governance, taking also into account that said entities are required to publish online their respective rules and regulations and, what is more, carry out a regulated economic activity related to a public utility.
In light of the above, it is highly recommended that private entities adjust their internal procurement regulations so that they apply complementary to the applicable rules for public procurement, by widely adopting the spirit, the principles and even the wording of the respective legislation.
Originally published in CEE Legal Matters