Why defining a contracting authority is not always as straightforward as it seems

In a presently unreported decision on 20 January 2012 the High Court considered as a preliminary issue whether Eurostar International Limited (EIL) fell within the definition of a 'contracting authority' for the purposes of the Public Contract Regulations (PCR). The case was argued by procurement heavy-weights Michael Bowsher QC and Sarah Hannaford QC and was the subject of a detailed judgment. Although it focused largely on the Utilities Contract Regulations 2006 the judge gave detailed consideration to the definition of 'contracting authority' for the purposes of the PCR in particular what the definition of 'a body governed by public law' should be.

It is worth noting that under the Regulations as enacted in the PCR but not under the Directive a 'contracting authority' can only be a body within the UK. Directive 17 on the other hand applies the definition to a body within any Member State. EIL is a joint venture between SNCF (wholly owned by the French government) 55% LCR (wholly owned by the Secretary of State for Transport) 40% and SNCB (wholly owned by the Belgian government) 5%. It is currently the sole provider of rail services through the Channel Tunnel and over the years has received a substantial amount of State Aid.

The case was brought by Alstom Transport which argued that EIL was a body 'governed by public law'. It was a body 'governed by public law' because:

  • It has a legal personality; and
  • It is established for the specific purpose of meeting needs in the general interest not having an industrial or commercial character; and
  • It is subject to management supervision by other bodies subject to public law.

The first limb of the definition was uncontroversial.

The second limb has two parts. The court was satisfied that EIL did meet needs in the general public interest. The ECJ threshold on this is not high so in previous cases the building of an office block in the town centre was considered to be 'meeting needs in the general interest'. The question therefore was whether the activities were of an industrial or commercial nature. The European jurisprudence on this places a good deal of weight on the extent of competition. The more competition there is the more likely the needs would have an industrial or commercial character. Alstom pointed to the fact that EIL was the sole operator through the Channel Tunnel and also to the fact that it had received a very considerable amount of State Aid.

EIL argued that taken overall while it was currently the only operator through the tunnel not only were there other options for crossing the Channel but also the market had been de-regulated and that from 2013 Deutsche Bahn would be running a service through the tunnel. Indeed the services EIL were seeking related to the future and to the prospect of that competition.

The judge agreed that it was right to take all the context into account and the future in which competition would increase and on that basis he found that EIL's activities were of an industrial/commercial character. Accordingly on that ground the submission that it fell within the definition of 'contracting authority' failed.

Notwithstanding this the judge also went on to consider whether EIL was subject to management supervision by other bodies subject to public law. It was undoubtedly true that all 3 of the joint venture partners-SNCF SNCB and LCR were owned or controlled by the governments of Member States. Under the terms of the Directive this would be sufficient to show management supervision by other bodies subject to public law. The judge however took the view that the UK government had quite specifically implemented the Directive in the way that it had in the PCR so that only UK bodies could be considered contracting authorities. Once SNCF was taken out of the equation then it was not possible to argue that EIL was subject to management supervision by other bodies subject to public law.

This case is interesting because the initial reaction is to assume that EIL would not be caught by the PCR. Once you delve deeper into the structure and set up then it was certainly arguable that perhaps it should be and although the judge in this case eventually agreed that the EIL was not a 'contracting authority' it demonstrates that it is always worthwhile to delve a little bit deeper into the structure and activities of a 'contracting authority' if you consider that a challenge may be appropriate.

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