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Public sector collaboration and back office services

On 29 January 2020 an Advocate General (AG) at the European Court of Justice (ECJ) gave an important opinion on the scope of the public sector…

On 29 January 2020 an Advocate General (AG) at the European Court of Justice (ECJ) gave an important opinion on the scope of the public sector collaboration exemption under the EU Procurement Directive (the Directive) on which the Public Contracts Regulations 2015 (PCR) are based, in a case which concerned a transfer of software for managing interventions by a public fire service in Germany.

This exemption concerns Regulation 12(7) of the PCR, which sets out when joint working or shared services arrangements between public bodies are not subject to the application of the procurement rules. It is sometimes referred to as ‘Hamburg Waste’ as the Directive codifies the Hamburg Waste ruling which came before it. 

This case brings up the status of ECJ rulings given that we have now left the EU.

What is the status of AG opinions, and why is this opinion important?

The ECJ is not obliged to follow an opinion delivered by the AG. However, even though the opinion does not bind the court, it has an impact on the decision in many cases, and in fact, in most cases the ECJ follows it. According to the AG, this is the first case to come before the ECJ concerning the scope of this exemption.

So what’s the issue?

An essential requirement for the exemption to apply is that the cooperation must relate to public services that the relevant bodies are required to perform as part of their public functions. Recital 33 of the Directive provides some context and states that such cooperation might cover ‘all types of activities related to the performance of services and responsibilities assigned to or assumed by the participating authorities’. There has been some debate about the extent to which the exemption can or should apply to back office services, as this isn’t provided for expressly in the legislation.

What does the AG’s opinion say?

The AG stated that an exempt cooperation does not necessarily have to relate to the actual public services that have to be provided by the participating bodies. A cooperation which relates to activities in support of those services would still be covered where the ancillary activity was of such fundamental importance to the public service that the service could not be performed without it. Ancillary activity is essentially back office services, in this case ICT.

But how do rulings of the ECJ affect the UK courts?

As noted above, the AG’s opinion is not a ruling of the ECJ, even though it is likely to be followed. The court’s ruling will come after we have left the EU, so is it still relevant?

Section 6 of the European Union (Withdrawal) Act 2018 provides that UK court and tribunals are not bound by any principles laid down or any decisions made by the ECJ after exit day on 31st January 2020.  However, they may have regard to anything done on or after exit day by the ECJ so far as it is relevant to any matter before them.  So if a case in the UK concerned the application of Regulation 12(7) to back-office services such as ICT then this ruling will be likely to be followed.

There are some qualifications to this. The first is that the Supreme Court is not bound by any EU case law, even that which existed on exit day. In addition, under Section 26 of the European Union (Withdrawal Agreement) Act 2020 regulations from a Minister of the Crown can designate that any court or tribunal is similarly not bound by any EU case law. 

Conclusions

If followed by the ECJ this will be important confirmation of the width of the availability of the public sector collaboration exemption particularly as regards support functions, which are key to the delivery of public services.

Even though it will come after we have left the EU, the UK courts are likely to have regard to it so far as it is relevant to any matter before them. We don’t see any reason why this ruling will not be followed as it is supportive of public sector collaboration. 

We need to see more joint working between public bodies and Regulation 12(7) can facilitate this without having to worry about the application of the public procurement rules. This need could well be heightened in co-ordinating a response to COVID-19. Procurement Policy Note 01/20: Responding to COVID-19 (PPN), which was issued by the Cabinet Office on 18th March, does not cover Regulation 12, which has its own specific requirements, but expressly refers to it as a further option under the PCR to consider. In the case of Regulation 12(7) these requirements also include the participating bodies having common objectives, and not realising profit through the arrangements. In addition, there has be a genuine collaboration with both parties contributing something other than payment.

It is also important to note that whilst the exemption is most often used by bodies with the same or very similar statutory duties e.g. local authorities, the public services that are required to be performed/public functions do not have to be the same. This allows different parts of the public sector to utilise the exemption e.g. a police body and a local authority, and this is obviously where the collaborated services are most likely to be back-office e.g. vehicle maintenance. It is also possible for the authorities to involve the private sector in the delivery of the arrangements as long as the procurement rules are followed in their appointment, as was the case in the Hamburg Waste case itself, and this is where the emergency procedures as outlined in the PPN should be considered.

For further information please contact Vincent King by email at Vincent.king@weightmans.com or by telephone on +44 (0)113 213 4159

 

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