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Judgement in Pizzarotti case sows doubt for property deals
Trowers Public Insight

Judgement in Pizzarotti case sows doubt for property deals

The debate as to when property deals in the public sector should be classified  as a "public works contracts" meaning they have to be put out to tender under EU rules and procured has arisen yet again as a result of Advocate General Nils Wahl's opinion in the case of Impresa Pizzarotti v Comune di Bari C-213/13 which was issued on 15 May.

The Opinion has not yet been issued in English. The case concerns the entry by the Municipality of Bari in Italy into a conditional contract for the rental of judicial offices once they had been built which were funded and specified by another contracting authority, the Italian Ministry of Justice-not wholly dissimilar therefore to some innovative Public Private Partnership transactions in the UK.

Whether and when property deals become subject to the EU public procurement advertisement and tendering rules has been a vexed question for many years: the La Scala and Gestion Hotelera cases looked at the issues as to whether you could delegate procurement compliance and how to determine  the main object of a contract; then there was LB Brent v O'Malley which seemed to indicate that development agreements were exempt from procurement law; that view was overturned by the landmark ruling in Jean Auroux v Roanne where a French local authority's town centre leisure redevelopment scheme was held to be a public works contract.The Roanne case understandably caused ripples across the property development industry resulting in lobbying by the British Property Federation and the issue of  well-meaning but non-definitive OGC Guidance; then we had further case decisions both in the CJEU, Helmut Müller which confirmed that the exercise of a simple urban planning function does not constitute a works contract and then domestically, Quidnet and the Midlands Co-Op cases which considered  (amongst other matters) that the test as to whether a deal was exempt from the procurement rules or constituted a public works contract was whether the contract in question involved a legally binding obligation to fulfil.

Most recently there has been a minor adjustment to the definition of a "public works contract" in the newly adopted Classic Public Procurement Directive which valiantly attempts to clarify the position by referring to whether the contracting authority has had a decisive influence on the type or the design of the works.

This case looks at the issue of conditional agreements for rental of property "off plan" in circumstances where the contracting party, Bari was being funded by another party, the Italian Ministry of Justice and there had been post tender cuts to the value of the project. The Advocate General suggests such contracts may constitute public works contracts-in this case it seems the Ministry of Justice  had quite a bit of influence on the characteristics of the works which were set out in  numerous technical specifications.

The Piazzarotti case is now being referred up to the European Court of Justice for determination-so watch this space!

We are currently advising a number of contracting authorities and infrastructure and development companies and devising legally safe solutions to  similar issues and we strongly support the need for certainty to incentivise investment and achieve economic growth.

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