Court of Appeal rejects company’s challenge of contract between Education Minister and Bus Éireann

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The applicant, School Transport Scheme Ltd. sought to challenge contract between the Minister for Education and Skills and Bus Éireann for the supply of the school transport service in 2011-2012, arguing that it was entitled under EU procurement rules to tender for that contract.

The matter was initially resolved adversely to the applicant in 2012, and the appeal raised a number of fundamental issues regarding the operation of the procurement rules in the context of the scheme to provide school transport. These were:

First, was there a contract in writing between the Minister and Bus Éireann within the meaning of Article 1 of the Public Procurement Directive 2004/18/EC (“the 2004 Directive”)?

Second, if there was a contract, was it for “pecuniary interest”?

Third, was the contract really a unilateral administrative measure solely creating obligations for Bus Éireann within the meaning of the case-law of the Court of Justice?

Fourth, was any such contract one of the indefinite duration which ante-dated the operation of the EU’s public procurement regime?

Mr Justice Gerard Hogan first provided some details regarding the establishment and operation of the scheme, noting that while the scheme has evolved, it remains fundamentally the same.

While the scheme was originally entrusted to Coras Impair Éireann, it was now administered by Bus Éireann as the subsidiary company. Bus Éireann is reimbursed on a cost recovery basis.

In the initial judgment, McGovern J. concluded that the contract did not satisfy the requirements needed to bring the contract within the meaning of Article 1(2)(a) of the Public Contracts Directive, which defines public contracts as:

“….contracts for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities and having as their object the execution of works, the supply of products or the provision of services within the meaning of the Directive.”

It was found that the scheme was not a contract for pecuniary interest, nor an ordinary commercial contract, rather it was an administrative arrangement.

Citing case law from the European Court of Justice, including Asociación Profesional de Empresas de Reparto y Manipulado de Correspondencia v. Administración General del Estado (Case C-220/06) E.C.R. I-12175, he concluded that none of the normal features of a commercial relationship existed between the parties.

On appeal, what was disputed was the requirements that the contract be one for:

(i) pecuniary interest;

(ii) that it was “concluded in writing” and

(iii) that it is a contract of indefinite duration.

In relation the first element, McGovern J had concluded that the fact that the arrangements were for payment on a cost recovery basis and did not provide for any element of profit, it was not for pecuniary interest.

However, in light of the Court of Justice in Case C-159/11 Azienda Sanitaria Locale di Lecce, it was found that this could no longer be considered correct, as the Court of Justice had found that “pecuniary interest could be interpreted broadly, and could include receiving cost-covering remuneration.

In relation to the third element, it was noted that the Court of Justice’s judgment in Case C-454/06 Pressetext Nachrichtenagentur GmbH E.C.R. I-4401 demonstrated a contract of indefinite duration which ante-dates the coming into force of the procurement regime and in respect of which there have been no material changes is not itself a contract which comes within the scope of the 2004 Directive.

Applying the analysis of that case to the present one, Justice Hogan found that the contract was of indefinite duration which fell within the exception. There was, accordingly, no necessity to have the contract advertised or otherwise submitted to the public procurement regime as such a contract falls outside the scope of the 2004 Directive.

While the applicant’s claim would fail on this alone, the judge considered the second element, whether the contract was “concluded in writing”.

Citing the similar case of Commission v. Ireland E.C.R. I-11353, it was noted that there was no formal contract between the Minister on the one hand and CIE or, more latterly, Bus Éireann, on the other.

It was further noted that the Court of Justice considered that an arrangement between two statutory bodies for the provision of public services was not a “public contract” for the purposes of the public procurement regime, even though one of those bodies made a substantial financial contribution to the other body in respect of those services.

The judge considered this dispositive on the question of whether there was a public contract. He found that “There was here at most an administrative arrangement between two statutory bodies providing for some of form of financial contribution.”

“Since, however, the entire claim of the appellant was contingent on showing that there had been a concluded contract in writing within the meaning of Article 1(2)(a) of the 2004 Directive, it follows that in the light of the conclusion that there was no such contract, this constitutes another independent reason as to why the appeal brought by STS must fail.”

He therefore concluded that:

“First, in light of the decision of the Court of Justice in Case C-159/11 Azienda Sanitaria Locale di Lecce (which was delivered some months after the judgment of McGovern J. in the present case), it is clear that if there was a contract, the fact that the payment was based on a cost recovery basis did not mean that it was not a contract for pecuniary interest within the meaning of Article 1(2)(a) of the 2004 Directive.

Second, even if there was a contract, it was a contract of indefinite duration coming within the scope of the Pressetext exemption. While it is true that the Scheme has evolved and changed in the last fifty years or so since its initial inception, STS have not identified any material change within the six month period immediately prior to the commencement of the present proceedings in October 2011. This is in itself a reason why the present appeal must fail as such contracts of indefinite duration fall outside the scope of the 2004 Directive.

Third, quite independently of this conclusion, in the light of the reasoning of the Court of Justice in Commission v. Ireland, it is clear that the scheme is an administrative arrangement between the Minister and CIÉ/Bus Éireann. Specifically, there is no concluded contract in writing between the parties for the purposes of Article 1(2)(a) of the 2004 Directive. This finding is in itself also fatal to the STS’s claim that there was such a contract and that it should have been put out to public tender.”