I. INTRODUCTION
A Member State and its emanations need to comply with EU economic law.Footnote 1 Undertakings developing economic activities in the internal market are also subjected to EU economic law. Despite the growing scope for private enforcement of EU economic law, on the whole, the entities entrusted with monitoring and enforcing those rules are also of a public nature, ie either public bodies or emanations of the State. Consequently, even if individuals are ultimately involved in each of those acts, EU economic law is primarily addressed to, complied with or infringed, monitored by and enforced against public and corporate entities, or legal persons of a collective nature.Footnote 2 In this setting, given the difficulties in, if not impossibility of, determining whose individual intention is determinative of the institutional or corporate behaviour under assessment, a construction of EU economic law around objective prohibitions contributes to legal certainty and effectiveness of enforcement.Footnote 3 Conversely, the introduction of intentional or subjective elements – ie aspects of a prohibition that focus on the actual or presumed intentionality behind the infringement – poses complex questions of assessment of such intent in relation to the public administration and corporate entities.
Furthermore, it is also unclear whether these elements aim to be used to stress the traditional punitive (criminal) law principle of mens rea – with the necessary adaptation to corporate liability –Footnote 4 or if they are used rather as threshold-concepts or flexibility clauses within EU economic law prohibitions, thus aimed at modulating evidentiary requirements and to create scope for proportionality assessments whereby the subjective requirement is mainly aimed at the creation of some leeway within the prohibition,Footnote 5 but not so much oriented at the establishment of a requirement to assess the actual ‘corporate’ state of mind. The latter use of subjective elements would equate to the creation of a dual route to a de minimis exception to prevent the enforcement of EU economic law against the public administration and corporate entities by allowing them to avoid liability for substantive (ie not de minimis) infringements on the basis of their subjective position. This would be difficult to reconcile with either the explicit existence of de minimis exceptions for specific types of behaviour (of private entities),Footnote 6 or the margin of tolerance already created in terms of public (State) liability, which only arises in instances of a sufficiently serious breach of EU law (by the public administration).Footnote 7 In other words, using subjective elements as proportionality devices would allow addressees of EU economic law prohibitions two bites of the cherry, as they could defend their behaviour both on the grounds that it did not generate sufficiently serious or appreciable (detrimental) effects, or that it was not intended (or both). These difficulties derived from the inclusion of subjective clauses in EU economic law provisions can seriously threaten legal certainty and diminish their effectiveness and thus deserve some careful consideration.
As has been rightly pointed out, ‘important decisions within the spheres of economic and social law are taken by governments, companies or other collective or non-natural decision-makers. To speak of the “intent” of such bodies is to run the risk of anthropomorphism’; and, consequently, ‘it is more common to understand economic and social EU law in terms of effects’.Footnote 8 In the end, ‘[d]eterminations of collective intention are always constructions … the very notion of collective intention requires some degree of extrapolation from the facts’.Footnote 9 Therefore, the inclusion of subjective elements in EU economic law prohibitions necessarily requires a circumstantial analysis and an effects-based approach to the assessment of the behaviour of any collective entity,Footnote 10 and in particular the public administration.Footnote 11 In other words, subjective or intentional elements need to be ‘objectified’, so that EU economic law can be enforced to an adequate standard of legal certainty. This is the point of departure of this paper, in which I reflect on the role of subjective or intentional elements in EU economic law prohibitions, particularly in relation to rules addressed to the public administration. From a normative perspective, it stresses how, on the whole, it is desirable to suppress the need for an assessment of subjective intent and to proceed with an objectified enforcement of such prohibitions. In order to do so, and from a positive perspective, the paper explores the existing case law of the Court of Justice of the European Union (primarily the Court of Justice (Court), but also the General Court (GC)) in several areas of EU economic law to assess to what extent it is possible to rely on an ‘objectified’ analysis of intentional elements in their core prohibitions and, in particular, to rely on an objective assessment of the effects and the circumstances surrounding breaches of EU economic law by the public administration.
It is submitted that this discussion is interesting for a number of reasons. Other than the implications for the design of EU economic law in a manner that increases its enforceability, the analysis of the treatment of subjective intent of the public administration by the Court may reveal interesting trends. The Court has not given a general ruling on the meaning of intent applicable for the whole of EU law and its approach has been piecemeal, dependent on the specific area of EU law where the interpretation of subjective elements was required. It has been stressed that ‘taking the criminal law perspective as a starting point could lead to decisions that are not in accordance with the goals of both administrative and tax laws’,Footnote 12 thus justifying a different approach depending on the specific area of law under consideration. This comes to support the thesis advanced in this paper as far as an ‘objectified’ assessment of intent in EU economic law applicable to the public administration deviates from the canon of interpretation of intent under criminal law. It is submitted that assessing the behaviour of the public administration diverges from the assessment of private corporate entities due to, at least, two influential elements. First, the duty for the public administration to act in strict compliance with the law as part of the right/duty of good administration recognised in Article 41 of the Charter of Fundamental Rights of the European Union (Charter)Footnote 13 and its implications in terms of legal compliance by public authorities, particularly in cases where EU law allows them to exercise discretion (for further discussion see Part V below). Second, the existence of varying forms of a presumption of legality of the acts of the public administration in the legal order of several Member States.Footnote 14
It is further submitted that assessing the behaviour of the public administration also deviates from any analysis of legislative or Parliamentary intention, at least in one basic functional aspect. The analysis of Parliamentary intention in some EU domestic systems (such as the UK)Footnote 15 is aimed at clarifying the scope of the rules that the courts must apply;Footnote 16 or, in some settings, to determine whether specific legal situations fall within the scope of Parliamentary discretion in terms of the State’s margin of appreciation of complex issues.Footnote 17 Parliamentary intention is, ultimately, a requirement linked to its supremacy and a legal device to reign in judicial activism.Footnote 18 The assessment of the intention of the public administration does not serve the same purpose. The public administration is not meant to operate on the basis of subjective assessments, but rather of objective policy directions. Where it has discretion, the public administration must exercise it in an objective manner or, in other words, it has the duty to act in accordance with the general principle of objectivity.Footnote 19
In any case, even if these distinctions between the assessment of the behaviour of the public administration from, on the one hand, that of legislative branches of the State and, on the other hand, private entities were not persuasive, it is also clear that intent has not featured in a prominent manner in the case law of the Court applicable to either. Indeed, the Court has been reluctant to engage in subjective assessments and has pushed for their objectification in litigation that concerned disputes between the EU Institutions and Member States,Footnote 20 or which required an assessment of the purpose of certain interventions by Member States that could have triggered issues concerning their intention, lato sensu.Footnote 21 In these cases, the Court has avoided engaging in any subjective assessment and has resorted to an objective appraisal of the circumstances surrounding the behaviour giving rise to the dispute. In litigation between undertakings, the Court has also retreated from the need to assess subjective elements in many important areas, such as trade mark law.Footnote 22 Therefore, the general approach has indeed been to understand economic and social EU law in terms of effects. It is submitted that this general approach by the Court has been fundamentally oriented towards ensuring the effectiveness of EU law through a narrow interpretation of prohibition clauses and general arguments based on subjective intention that could erode it, which may have resulted in more consistency than one could expect from the Court.Footnote 23
On that note focused on the effet utile of EU economic law, it is worth stressing that the establishment and assessment of subjective elements has been particularly controversial in the shaping of the doctrine of abuse of EU law,Footnote 24 where the Court has progressively abandoned strict analyses of direct ‘intention’ and moved towards ‘objectified’, contextual assessments of the behaviour of undertakings and corporate entitiesFootnote 25 – ie towards the use of presumptions and objective criteria to assess the potentially abusive intention of legal persons.Footnote 26 This interpretive strategy contributes to promote legal certainty and effectiveness in the enforcement of EU economic law. However, it also raises the broader issue of the relevance and role of such subjective elements, as well as the practical viability of their continued inclusion in EU economic law prohibitions. Given that the Court objectifies the assessment of such intentional elements in cases of alleged abuse of EU law, can such ‘objectification’ of the prohibition also be carried on to the analysis of ‘regular’ infringement allegations where no such abusive element is present? Is the introduction of the subjective element superfluous and it should simply be disregarded; or is it aimed at playing a moderating or attenuating role in the enforcement of the core prohibitions where such ‘objectified’ assessment of intention is required? What are the practical implications of the tension between, on the one hand, the inclusion of subjective elements by the EU legislator in EU economic law prohibitions and, on the other hand, their objectification by the Court in their interpretation and application?
These issues are particularly relevant when it comes to the enforcement of EU economic law against the State and its emanations because the assessment of intent of such entities is even more complex than in relation to undertakings or corporate agents for the reasons set out above. This triggers the need to explore in detail how to assess subjective elements in core prohibitions of EU economic law applicable to the public sector, or which require direct intervention by a public administration.Footnote 27 In line with previous considerations and the development of the doctrine of abuse of EU law by private legal entities, it is submitted that a plausible thesis is that such assessment also needs to be ‘objectified’ and that the intention of the State and its emanations needs to be assessed by a mix of presumptions and recourse to objective criteria that allow for a contextual analysis of the behaviour deemed to breach EU law.
Building on this normative position, this paper looks at public procurement and State aid rules as two examples of areas of EU economic law subjected to interpretative and enforcement difficulties due to the introduction, sometimes veiled, of subjective elements in their main prohibitions (Parts II and III). I then establish parallels with other areas of EU economic law, such as antitrust, non-discrimination law or the rules governing the imposition of financial sanctions for infringements of the common agricultural policy, and seek benchmarks to support the main thesis that such intentional elements need to be ‘objectified’, so that EU economic law can be enforced against the public administration to an adequate standard of legal certainty (Part IV). The paper draws on the case law of the Court to support such ‘objectification’ of intentional elements in EU economic law, and highlight how the Court has been engaging in such an interpretative strategy for quite a long time. I then go on to explore the interplay between such an approach and more general protections against behaviour of a public administration in breach of EU law: ie the right to good administration in Article 41 Charter, and the doctrine of State liability for infringement of EU law (Part V). The paper concludes with the normative recommendation that the main prohibitions of EU economic law should be free from subjective elements focused on the intention of the public administration (Part VI).
II. ASSESSMENT OF INTENT UNDER EU PUBLIC PROCUREMENT RULES
Public procurement is an area where EU law has developed an increasingly prescriptive regulatory framework that imposes significant restrictions on Member States’ discretion to organise their activities as public purchasers.Footnote 28 The Court has unambiguously declared that procurement ‘legislation contains fundamental rules of EU law … intended to ensure the application of the principles of equal treatment of tenderers and of transparency in order to open up undistorted competition in all the Member States’,Footnote 29 and repeatedly stressed that the purpose of the procurement directives ‘is to develop effective competition in the field of public contracts’.Footnote 30 This has led to a significant body of case law that sketches the obligations that Member States have to comply with in the process leading to the award of a public contract, particularly in order to avoid distortions of competition based on discrimination and favouritism or, more generally, on the use of public procurement as a regulatory tool.Footnote 31 Those obligations are not limited by the specific regime developed in the subsequent generations of public procurement Directives, but extend beyond their scope of application and impose direct duties that derive from the general principles of EU law.Footnote 32 In that regard, the case law of the Court clearly shows how competition considerations limit Member States’ discretion in the award of public contracts, and it is plagued with examples of Member States’ circumvention of such pro-competitive requirements.Footnote 33 In the existing case law, the Court has not given any relevant weight to the intention of the contracting authorities (see further discussion in Part II.A below).
Recently, though, Article 18(1) of Directive 2014/24 has consolidated the principle of competition amongst the general principles of the EU public procurement system.Footnote 34 This provision offers direct normative support to restrict Member States’ contracting authorities’ discretion in the award of public contracts if the exercise of such discretion has a negative impact on competition, either for the specific contract or, more generally, in the market.Footnote 35 However, the drafting of the principle of competition in Article 18(1) of Directive 2014/24 has introduced a subjective element in the analysis by determining that ‘[t]he design of the procurement shall not be made with the intention … of artificially narrowing competition’. This was not the original drafting of the principle in the 2011 proposal by the European Commission,Footnote 36 which aimed to consolidate the principle in the following terms: ‘The design of the procurement shall not be made with the objective … of artificially narrowing competition’.Footnote 37 Unfortunately, even after a review of the travaux preparatoires, the reasons behind this change in the drafting of the principle of competition remain a mystery.Footnote 38 The Council altered the Commission’s proposal without offering any explanations,Footnote 39 which results in a clear need to engage in an interpretive exercise that goes beyond a contained construction of the principle within the limits of the Directive itself.
The literal wording of Article 18(1) of Directive 2014/24 thus creates the difficulty of assessing the intention of the contracting authority – which, by definition, is a legal entity that either forms part of the public sector of a Member State, including its emanations (ie bodies governed by public law), or is an entity that receives more than 50% of the funding for the specific procurement from the public sector.Footnote 40 Indeed, Article 18(1) provides a formulation of the principle of competition in which the subjective or intentional element of any restriction of competition is emphasized. This intentional element is common to different language versions of the Directive,Footnote 41 so it cannot be justified as a deficiency in translation or an error in the wording of the provision. The recitals of the Directive do not provide any clarification either and, ultimately, this provision can open the door to complex problems of identification and attribution of intentional elements in the field of public procurement, which are exactly the sort of difficulties mentioned above (see Part I). In order to overcome such interpretative difficulties, it is worth ascertaining to what extent it is possible to rely on an ‘objectification’ of the analysis of intentional elements in the existing case law of the Court in the area of EU public procurement.
A. ‘Objectified’ assessment of intent in public procurement case law
Before the adoption of Directive 2014/24, there had been other sorts of prohibitions in the public procurement setting that included an ‘intentional element’, such as the traditional prohibition of calculating the value of the contract in a way that makes it remain below the value thresholds that trigger the application of the EU public procurement Directives and, ultimately, allows the contracting authority to avoid them. Under the applicable rules, it is clear that ‘[t]he choice of the method used to calculate the estimated value of a procurement shall not be made with the intention of excluding it from the scope of this Directive’ and, in particular, that a ‘procurement shall not be subdivided with the effect of preventing it from falling within the scope of this Directive, unless justified by objective reasons’.Footnote 42
In that regard, it is important to stress that the Court departed from the literal wording of that provision – which requires an intentional element identical to that of Article 18(1) of Directive 2014/24 – and clearly adopted an objective assessment based on the effects and consequences of the contracting authorities’ decisions concerning the estimation of the value of contracts that should have been tendered under the applicable EU rules. In a consistent line of case law, the Court stressed that the analysis needs to be based on objective elements that create indicia of the intentional artificial split of the contract, such as ‘the simultaneous issuance of invitations to tender … similarities between contract notices, the initiation of contracts within a single geographical area and the existence of a single contracting authority’ all of which ‘provide additional evidence militating in favour of the view that, in actual fact, the separate works contracts relate to a single work’.Footnote 43 Indeed, the intentional element has been excluded where, on the basis of such analysis, there were objective reasons that justified the decision adopted by the contracting authority.Footnote 44 Moreover, the prohibition of artificially splitting the contract with the intention of circumventing the application of the EU procurement rules has been applied directly to determine the incompatibility of legal rules that objectively diminished the applicability of the relevant directives, without engaging in any sort of subjective assessment (which would have been impossible).Footnote 45 Therefore, it seems plain to conclude that, in the assessment of an identical (apparent) subjective element of intention, the Court has ‘objectified’ the test applicable to determine the existence of an eventual infringement of the EU public procurement directives.
It is true that the Court has not gone as far as simply presuming the existence of the intention to avoid the applicability of the EU procurement rules in all cases. As aptly put by Advocate General Trstenjak,
Although the Court is decidedly strict in its examination of that prohibition, such intention to circumvent cannot be presumed without more. Each individual case in which a contract was split for the purposes of an award must be examined according to its context and specificities and, in that regard, particular attention must be given to whether there are good reasons pointing in favour of or, on the contrary, against the split ...Footnote 46
However, the need to carry out a case by case analysis does not detract from the fact that the Court has excluded any consideration of the subjective intention of the contracting authority or any of its members. This was made exceedingly clear in a recent Judgment, whereby the General Court (GC) stressed that
a finding that a contract has been split in breach of European Union procurement legislation does not require proof of a subjective intention to circumvent the application of the provisions contained therein … it is irrelevant whether the infringement is the result of intention or negligence on the part of the Member State responsible, or of technical difficulties encountered by it … the Court considered that for the purpose of finding [an infringement] it was not necessary … to show beforehand that the Member State concerned intended to circumvent the obligations … by splitting the contract.Footnote 47
Overall, thus, when it comes to the assessment of the seemingly subjective element included in the anti-circumvention provisions in the successive generations of procurement Directives, the existing case law of the Court clearly established that the analysis solely needs to be conducted on the basis of objective evidence and arguments regarding two aspects: firstly, whether objectively the conduct of the contracting authority created the effect proscribed by the rule and, secondly, whether there were objective good reasons for such behaviour (ie an alternative explanation to the then presumed intention to circumvent). It could not be more objective and, clearly, no further proof of a subjective intention to circumvent the application of the EU public procurement rules is required.
The same line of reasoning can be found in cases dealing more generally with infringements of specific obligations concerning the choice of particular procurement procedures. Generally, contracting authorities have shown a clear tendency towards abusing the grounds that authorise resorting to non-competitive procedures and, in particular, negotiated procedures without prior publication of contract noticesFootnote 48 – which allow them to proceed to a direct award of the contract, with the exclusion of any competition therefor. Given the gravity of such violation of the EU public procurement rules, if they entered into a direct award in violation of the limited grounds that authorised such non-competitive procedure, the contract would be declared ineffective under the applicable remedies Directive.Footnote 49
One way of avoiding the ineffectiveness of those contracts would be for contracting authorities to publish voluntary transparency notices disclosing the reasons why they considered that such direct award was lawful. This possibility has also proven controversial and contracting authorities have been accused of using it strategically, with the intention of avoiding the ineffectiveness of contracts that they knew (or ought to have known) that they were directly awarding in contravention of the applicable rules. This gave rise to a recent case before the Court, where Advocate General Bot proposed a stringent test whereby the protection derived from the publication of the voluntary transparency notice would only be declined if ‘the contracting authority has deliberately and intentionally infringed the rules on advertising and competitive procedure’.Footnote 50 This would have, once more, created a problematic test based on subjective elements privy to the contracting authority. However, the Court rejected the test proposed by AG Bot and ruled that
the review body is under a duty to determine whether, when the contracting authority took the decision to award a contract by means of a negotiated procedure without prior publication of a contract notice, it acted diligently and whether it could legitimately hold that the conditions laid down in [the Directive] were in fact satisfied.Footnote 51
Consequently, it seems clear that the interpretation of the conditions for the exception to the ineffectiveness to apply need to be restrictive and ultimately rely on objective tests, without any consideration being paid to the (presumed) intention of the contracting authority.Footnote 52
Finally, it is worth stressing that the intention of the contracting authority that enters into an illegal direct award has also been considered irrelevant even where the direct award is the supervening result of the privatisation of the public entity with which the agreement was initially concluded.Footnote 53 In that case, the Court ruled that
by means of an artificial construction comprising several distinct stages, namely the establishment of [the company], the conclusion of the … contract with that company and the transfer of 49% of its shares to [a private investor], a public service contract was awarded to a semi-public company 49% of the shares in which were held by a private undertaking … the award of that contract must be examined taking into account all those stages as well as their purpose and not on the basis of their strictly chronological order … To examine … the award of the public contract at issue only from the standpoint of the date on which it took place, without taking account of the effects of the transfer within a very short period of 49% of the shares … would prejudice the effectiveness of [the public procurement] Directive.Footnote 54
Once more, this supports an interpretation of the existing case law as providing strong support to ‘objectifying’ the analysis of subjective elements in public procurement rules, which would ultimately result in an objective assessment of the decision adopted by the contracting authority.Footnote 55
B. An ‘objectified’ interpretation of Article 18(1) of Directive 2014/24
The case law of the Court regarding the anti-circumvention provisions in the successive generations of procurement Directives (see Part II.A above) provides strong support for an ‘objectified’ interpretation of Article 18(1) of Directive 2014/24. Regardless of its literal wording, it is submitted that the only avenue to approach the interpretation and enforcement of Article 18(1) of Directive 2014/24 in a possibilistic and pragmatic manner is to derive the element of intention to restrict or distort competition (ie to artificially narrow it) from a reasonable objective assessment of the concurring circumstances, so that intention is inferred or derived from the effects or consequences of the way in which the procurement procedure is designed and carried out by the contracting authority. In the end, the context in which the distortions or restrictions of competition take place will be a determinant for their existence and little else identifiable can give meaning to the (implicit) intention of the contracting authority to artificially narrow down competition.
Such ‘objectification’ of the principle of competition consolidated in Article 18(1) of Directive 2014/24 should be carried out by establishing a rebuttable presumption of restrictive intent in cases where the tendering procedure has been designed in a manner that is in fact restrictive of competition. The disproval of this rebuttable presumption would require the contracting authority or entity to justify the existence of objective, legitimate and proportionate reasons for the adoption of the criteria restrictive of competitionFootnote 56 – ie to provide a plausible justification on objective grounds for the imposition of restrictive conditions of competition in tendering the contract, so as to exclude the plain and simple explanation that it was otherwise simply intended to restrict competition therewith.Footnote 57 In other words, if it could be justified that a ‘reasonable and disinterested contracting entity’ (meaning free from any intent to restrict competition) would have taken the same decision on the design of the tender in a form restrictive of competition, the presumption of restrictive intent would not be applicable and, ultimately, the tender would be compliant with Article 18(1) of Directive 2014/24. Obviously, this test requires some further development and the Court will most likely have the opportunity to address these issues in the future. However, it is submitted that the discussion above shows that the Court has engaged in such interpretative strategy for quite a long time in the field of EU public procurement. As discussed below, very similar developments can be identified in the area of State aid.
III. ASSESSMENT OF INTENT UNDER EU STATE AID RULES
State aid is prohibited by Article 107(1) of the Treaty on the Functioning of the European Union (TFEU) where a set of objective conditions are met.Footnote 58 The enforcement of this prohibition has never taken into account the subjective intention of the Member State,Footnote 59 and it is commonplace that the prohibition is enforced in an objective manner.Footnote 60 The Court has repeatedly clarified that Art 107(1) TFEU ‘does not distinguish between the measures of State intervention concerned by reference to their causes or aims but defines them in relation to their effects’;Footnote 61 or, even more clearly, that ‘Article 107(1) TFEU defines measures of State intervention in relation to their effects’.Footnote 62 However, in a recent case involving a complex or two-part State aid measure, the issue of the actual intention of the Member State engaged in the alleged infringement of Article 107(1) TFEU was raised in a way that can shed some light on our discussion.
In the case at hand, and in a simplified manner, Magyar Olaj- és Gázipari Nyrt (MOL) and the Hungarian State entered into an authorisation agreement in 2005 whereby the mining rights assigned to MOL were extended and the mining fees payable in consideration of those rights were determined on a non-revisable basis for the period 2005–2020. Later, a 2008 legal reform significantly increased the mining fees that would have been payable for the exploitation of those same fields. However, in view of the 2005 agreement, MOL was exempted from topping up the mining fees it was liable to pay. Competitors of MOL and potential new entrants were subject to the revised higher fees. Unsurprisingly, the European Commission took the view that, given the way the 2005 agreement and the provisions of the 2008 amendment had been designed, they should be regarded as part of the same measure and it concluded that their combined effect conferred an unfair advantage to MOL. According to the Commission, even if the 2005 agreement was concluded in accordance with the Mining Act then in force and even if it was up to the Member State to set the mining fees, the cumulative effects produced by both measures were not necessarily compatible with the State aid rules of the TFEU – even if, taken in isolation, neither the 2005 agreement nor the 2008 amendment was contrary to these rules.
The Commission considered that the measure fulfilled the criteria enshrined in Article 107(1) TFEU and should be considered as State aid, and that there was nothing to indicate that it could be compatible with the internal market. The Hungarian authorities challenged the Commission’s position before the GC arguing that the measure did not constitute State aid because the 2005 agreement conferred MOL no advantage and was not selective. Addressing this point of law, the GC embarked upon an analysis whereby the intention of the Hungarian authorities would have been determinative of the outcome of the case. In view of the GC,
for the purposes of Article 107(1) TFEU, a single aid measure may consist of combined elements on condition that, having regard to their chronology, their purpose and the circumstances of the undertaking at the time of their intervention, they are so closely linked to each other that they are inseparable from one another (see, to that effect, Joined Cases C-399/10 P and C-401/10 P Bouygues and Bouygues Télécom v Commission and Others and Commission v France and Others [2013] ECR I-0000, paragraphs 103 and 104). In that context, a combination of elements such as that relied upon by the Commission in the contested decision may be categorised as State aid where the State acts in such a way as to protect one or more operators already present on the market, by concluding with them an agreement granting them fee rates guaranteed for the entire duration thereof, whilst having the intention at that time of subsequently exercising its regulatory power, by increasing the fee rate so that other market operators are placed at a disadvantage, be they operators already present on the market on the date on which the agreement was concluded or new operators.Footnote 63
Once more, this would have created the need to assess a subjective element in the granting of State aid. The Commission strongly criticised this Judgment of the GC and challenged it on the basis that it disregarded the settled case-law of the Court to the effect that ‘Article 107(1) TFEU defines State interventions on the basis of their effects, and independently of the techniques used by the Member States to implement their interventions’.Footnote 64 As commented elsewhere, in my view, if Article 107(1) TFEU is meant to avoid distortions of competition in the internal market, when confronted with sequential, two-part or complex aid measures, the fact that they all formed part of a ‘master plan’ from the outset or are the ‘random or supervening’ result of discrete interventions should be irrelevant. Otherwise, the burden of proving ‘distortive intent’ by the granting Member State from the outset may simply have made it impossible to pursue these cases.Footnote 65
On appeal, the Court disagreed with the GC – or, more correctly, reinterpreted the reasoning of the GC – and stressed the irrelevance of the intention of the Member State. According to the Court,
the General Court merely applied the case-law laid down by the Court of Justice in the judgment in Bouygues and Bouygues Télécom v Commission and Others and Commission v France and Others (C-399/10 P and C-401/10 P, EU:C:2013:175), to which the General Court also expressly referred in paragraph 67 … and according to which, since State interventions take various forms and have to be assessed in relation to their effects, it cannot be excluded that several consecutive measures of State intervention must, for the purposes of Article 107(1) TFEU, be regarded as a single intervention. That could be the case, in particular when consecutive interventions, having regard to their chronology, their purpose and the circumstances of the undertaking at the time of those interventions, are so closely related to each other that they are inseparable from one another.Footnote 66
Even if it could have been clearer,Footnote 67 with this sort of reinterpretation, the Court dispelled the possible creation of a subjective test in the assessment of State aid measures and, once more, provided support to the general thesis advanced in this paper whereby subjective elements in core prohibitions of EU economic law applicable to the public sector, or which require direct intervention by a public administration, need to either be excluded; or, where existing, their assessment needs to be ‘objectified’, so that the intention of the State and its emanations is assessed by a mix of presumptions and objective criteria that allow for a contextual analysis of the behaviour deemed to breach EU law. This is not solely consistent with the case law of the Court in relation to public procurement (see Part II.A above) and State aid (see Part III above), but also comparable with the solutions given in other areas of EU economic law, which can serve as useful benchmarks, as discussed in the following section.
IV. BENCHMARKS IN OTHER AREAS OF EU ECONOMIC LAW
A. Coordination with the enforcement of EU antitrust rules
Beyond the support in the case law of the Court, the reasons for the ‘objectification’ of the assessment of subjective elements in core prohibitions of EU economic law applicable to the public sector, or which require direct intervention by a public administration, are multiple. Bearing in mind the need for consistency in different sets of rules concerned with the protection of undistorted competition in the market – as required by Article 3(3) of Treaty on European Union (TEU), Article 3(1)(b) TFEU and Protocol (27) TFEU – a rather compelling reason for such ‘objectification’ can be derived from systemic considerations and, ultimately, from the need for coordination with some ‘functional neighbours’. In particular, such coordination should take into account the objective character of the restrictions of competition derived from the TFEU and its interpretation by the Court. Indeed, the prohibitions in Articles 101 and 102 TFEU apply almost in absolute abstraction from any volitional element of the offending parties;Footnote 68 that is, undertakings infringing competition law can be sanctioned without them having ‘an intention actually to violate’ the applicable rules.Footnote 69 This applies both to coordinated behaviour prohibited by Article 101 TFEU,Footnote 70 and to unilateral behaviour prohibited by Article 102 TFEU – which enforcement has moved from early cases (eg on predatory pricing) where there were references to the value of intention of the dominant undertaking,Footnote 71 towards a more effects-based approach to its enforcement that is detached from the existence of any (predatory) intention.Footnote 72 Arguments regarding a lack of subjective intention whereby the parties claim that they did not intend to restrict competition are not a valid defence and, ultimately, ‘the parties’ subjective intent cannot be relied upon to exculpate otherwise unlawful behaviour’.Footnote 73 Indeed, the GC has repeatedly upheld that
for an infringement of the competition rules to be regarded as having been committed intentionally, it is not necessary for an undertaking to have been aware that it was infringing those rules; it is sufficient that it could not have been unaware that its conduct was aimed at restricting competition.Footnote 74
Hence, a competitive restriction in the market (almost) automatically results in a violation of those prohibitive norms, irrespective of the actual intention with which market players have conducted the practice restrictive of competition.Footnote 75 It is remarkable that undertakings cannot escape the imposition of a fine even where the infringement has resulted from their erring as to the lawfulness of their conduct on account of the terms of legal advice given by a lawyer,Footnote 76 which further erodes the existence of any meaningful subjective assessment at the stage of establishing an infringement of the EU antitrust prohibitions.Footnote 77 The only exception will come where there was clearly no negligence in the oversight of the development of a market activity with potential competition-restricting effects,Footnote 78 and where the undertakings, upon discovery of any infringement, take positive steps to publicly distance themselves from its content or report it to the administrative authorities.Footnote 79
Overall, it is quite clear that the case law concerning the enforcement of antitrust prohibitions gives almost no weight whatsoever to the assessment of subjective elements and relies on objective prohibitions and the assessment of objective circumstances surrounding their infringement. Thus, from a systematic perspective, it is submitted that this string of case law provides further support to the ‘objectification’ of subjective analysis when it comes to the behaviour of public authorities and its effects, particularly in view of the duty of the public administration to act legally (discussed below in Part V).
B. Coordination with the ‘objectification’ of other EU economic law core prohibitions
A similar reasoning derives from the case law in other areas of EU economic law, such as non-discrimination law (see Part IV.B.1), or the rules applicable to financial sanctions derived from infringements of the common agricultural policy (see Part IV.B.2).
1. EU non-discrimination law
Indeed, in order to prove cases of direct discrimination, it is common ‘to view direct discrimination as an objective question focusing on the effects of the perpetrator’s actions’.Footnote 80 This was the approach adopted by the Court in a seminal case on direct sex discrimination where a pregnant woman claimed protection against direct sex discrimination when she was not employed due to her pregnancy and despite being the best candidate. The Court agreed and stressed that ‘only women can be refused employment on grounds of pregnancy and such a refusal therefore constitutes direct discrimination on grounds of sex’.Footnote 81 The employer argued in its defence that it had no intention to discriminate against women because, in fact, all applicants for the job were women and, thus, the person eventually employed was a woman as well. The Court dismissed the argument on the basis that ‘whether the refusal to employ a woman constitutes direct or indirect discrimination depends on the reason for that refusal. If that reason is to be found in the fact that the person concerned is pregnant, then the decision is directly linked to the sex of the candidate’.Footnote 82 Hence, it is clear that the Court assesses direct discrimination on the basis of the effects of the conduct and not intention.Footnote 83
Similarly, in the area of indirect discrimination, the Court was quick to abandon the requirement of intent initially created by its own case law in order to find breaches of EU economic law. Given the difficulty of proving a discriminatory intention in those cases – which, by their very nature, are concerned with non-immediate consequences or even voluntary actions – the Court clarified that the relevant test to find an infringement of EU non-discrimination law is whether the ‘practice may be explained by objectively justified factors unrelated to any discrimination’.Footnote 84
2. EU common agricultural policy and financial sanctions resulting from its breach
Along the same lines, in areas of EU law that carry direct financial sanctions, such as the regulation of infringements of the common agricultural policy, the Court has also been willing to rely on objective factors to assess the intentionality of specific breaches.Footnote 85 Such intentional element is relevant because it carries out a reduction in the EU funding received that would not be imposed in case of unintentional (ie non-negligent) breaches. In a recent case, after reducing the level of intention to a knowledge-based test whereby the subjective element of the prohibition is present if the infringer ‘accept[s] the possibility that non-compliance may result’ from its acts;Footnote 86 the Court accepted that the proof of that subjective element could be satisfied on the basis of objective indicia, amongst which it included the fact that the contravened requirement was ‘a long-established, settled policy’. In such circumstances, the Court stressed that ‘where a Member State introduces a provision which … establishes as such a criterion [to determine that non-compliance was intentional] the existence of a long-established, settled policy and which gives a high probative value to that criterion, that State must nevertheless make it possible for the beneficiary of aid to adduce evidence of the lack of intent in his conduct’.Footnote 87 This comes to result in a rebuttable presumption of intent,Footnote 88 which is in line with the proposal outlined regarding the test applicable to the public administration (see Part II above).
3. Overall preliminary assessment
As seen in this sub-section, even in areas of EU economic law of a stronger social nature and with a weaker link to the functioning of the internal market, or with a closer connection to criminal law, the Court has been willing to erode the relevance of subjective assessments; or, in other words, to simply substitute them with objective analyses of the context in which the practices deemed to infringe EU law take place and the objective good reasons or factors than can justify them, or that can support a finding of the existence (presumption) of intent. This provides further support for the thesis advanced in this paper that the assessment of subjective elements in core EU economic law prohibitions needs to be ‘objectified’. It is submitted that this is particularly clear if the interplay of such assessment with the right to good administration is considered in further detail.
V. INTERPLAY WITH GENERAL PROTECTIONS AGAINST BEHAVIOUR OF A PUBLIC ADMINISTRATION IN BREACH OF EU LAW
The discussion above has shown how, overall, there is strong support in the case law of the Court for a minimisation of the relevance of subjective elements in core EU economic law prohibitions and a subsequent ‘objectification’ of the assessment of the intention of the State and its emanations – for simplicity, the public administration – when it engages in activity deemed to breach EU law. This section assesses the fit or contradiction of this approach with more general protections against behaviour of a public administration in breach of EU law. The compatibility or otherwise of such an approach is first assessed in relation to the right to good administration in Article 41 Charter; and then in relation to the doctrine of State liability for infringement of EU law. These assessments are intended to shed some light on the consistency or incompatibility of the standards of liability applicable to the assessment of the behaviour of a public administration under EU economic law; or, reversely, to support a corollary to the thesis advanced in this paper: ie that an ‘objectified’ assessment of subjective elements in core EU economic law prohibitions applicable to the public administration does not distort the general system of liability derived from EU law.
A. Interplay with the right to good administration
It is submitted that the ‘objectified’ analysis of subjective elements in core prohibitions of EU economic law is consistent with the right to good administration in Article 41 Charter and its implied requirement for the public administration to act legally;Footnote 89 or, more clearly, to comply with EU law, or to ‘act under and within the law’.Footnote 90 The same requirement derives from the principle of sincere cooperation in Article 4(3)II TEU, whereby the Member States shall take any appropriate measure, general or particular, to ensure fulfilment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the Union; which covers compliance with both primary and secondary EU law.Footnote 91
Under Article 41 Charter, which is engaged when EU law is (or should have been) applied,Footnote 92 the public administration has an obligation to give reasons for its decisions. Importantly, such an obligation to give reasons ‘is not motivated by the care for democracy and political accountability, but it is rather aimed at ensuring that the Court can exercise its power to review the legality of the measure’.Footnote 93 This has been quite clearly and consistently stressed by the Court and the GC:
the statement of reasons required by … Article 41 of the Charter of Fundamental Rights must be appropriate to the measure at issue and to the context in which it was adopted. It must disclose in a clear and unequivocal fashion the reasoning followed by the institution which adopted the measure in question in such a way as to enable the persons concerned to ascertain the reasons for the measure and to enable the competent court to exercise its power of review of the lawfulness thereof. The requirements to be satisfied by the statement of reasons depend on the circumstances of each case.Footnote 94
It is worth stressing that this is the functional understanding of the duty to provide reasons resulting from the right to good administration. Even if in the Charter the underpinning ‘principles of administrative law are not put in terms of objective legality in the public interest, but in the language of subjective public rights’,Footnote 95 the obligation of the public administration to act in compliance with EU law clearly stands unaltered,Footnote 96 is actionable as an individual right, and the reasons given by the public administration to justify compliance with EU law are subject to judicial review in order to determine whether the public administration acted legally in the first place.Footnote 97
When this duty to act legally and to allow for a judicial review of administrative acts through the provision of sufficient reasons is taken into consideration, the existence of subjective elements in core prohibitions of EU economic law applicable to the public administration becomes a clear legal aberration, unless the objective assessment proposed herewith is kept and the public administration is not given discretion to engage in illegal behaviour. Indeed, if the public administration is bound to comply with EU law as a result of the duty of sincere cooperation in Article 4(3)II TEU and the specific requirements of the right to good administration in Article 41 Charter, there is no scope for it to validly deviate from such duty to act legally; ie there is no scope to create discretion to engage in illegal behaviour, whatever the reasons. The standard of assessment of the activity of the public administration needs to be objective and, in that setting, only two outcomes are possible: either the public administration complied with EU law, or it did not and it is irrelevant to engage in an assessment of whether, in case of non-compliance, it did so voluntarily or negligently.
In almost all cases, the public administration knows or ought to have known that it was infringing EU law; this should trigger liability and remedies (see discussion on State liability in Part V.B below). In the remaining minority of cases, where there was no negligence whatsoever by the public administration, the only way to justify an infringement of EU law would be to demonstrate that it acted diligently and relied on objectively good reasons to take the course of action that resulted in a breach of EU law, which brings consistency with the standard applicable to private undertakings and corporate actors under eg antitrust and non-discrimination law (see Part IV above). It is also compatible with the tests developed by the Court in the areas of public procurement (Part II.A) and State aid law (Part III), as well as the assessment for the purposes of State liability (Part V.B). This is, thus, a sound systemic approach to the assessment of subjective elements in core prohibitions of EU economic law. Conversely, any approach that deviated from such objective analysis of the conditions in which a specific decision was adopted and the reasons provided thereof, would potentially breach the right to good administration in Article 41 Charter. It would do so by creating excessive space for illegal, or at least non-fully compliant, behaviour by the public administration in contravention of EU law.
Moreover, the objective reasons given by the public administration in justification of any acts that deviate from the expected legally-compliant standard will need to be subjected to a strict proportionality assessment, particularly if the specific regulatory regime being infringed includes corrective mechanisms,Footnote 98 or has built-in provisions that address the concerns or justifications provided by the public administration.Footnote 99 In other words, a public administration will not be able to rely on otherwise good objective reasons for its non-compliant behaviour if such considerations should have been channelled differently, or were generally constrained by the policy options implicit in the enactment of the rule of EU economic law at stake. This will prevent the public administration from engaging in policy-related justifications that imply a second bite of the cherry where such trade-off or balancing exercise is already contained in the rule from which it deviated; eg the public administration will not be able to provide a justification based on social considerations if the specific regulatory scheme has already incorporated a policy decision on the weight that can be given to those considerations.Footnote 100 More simply, the public administration will not be able to provide any objective reasons for its behaviour, but it will have to provide adequate, reasonable and acceptable reasons for there to be no consequences derived from the (unwanted) breach of EU economic law. As discussed below, it is submitted that this is fundamentally aligned with the doctrine of State liability.
B. Interplay with the doctrine of State liability for infringement of EU law
As is well known, under the doctrine of State liability for breach of EU law,Footnote 101 one of the key conditions to grant compensation for damages caused by the illegal behaviour of a Member State or any of its emanations requires a justification that the breach of EU law is ‘sufficiently serious’.Footnote 102 This was first enounced in Brasserie du Pêcheur/Factortame III,Footnote 103 and has since been progressively refined in the case law of the Court. The test was initially designed in the following terms:
finding that a breach of [Union] law is sufficiently serious is whether the Member State … concerned manifestly and gravely disregarded the limits on its discretion. The factors which the competent court may take into consideration include the clarity and precision of the rule breached, the measure of discretion left by that rule to the national … authorities, whether the infringement and the damage caused was intentional or involuntary, whether any error of law was excusable or inexcusable, the fact that the position taken by a [Union] institution may have contributed towards the omission, and the adoption or retention of national measures or practices contrary to [Union] law.Footnote 104
In subsequent case law, the Court has stressed that the
condition requiring a sufficiently serious breach … implies manifest and grave disregard by the Member State for the limits set on its discretion, the factors to be taken into consideration in this connection being, inter alia, the degree of clarity and precision of the rule infringed and the measure of discretion left by that rule to the national authorities.Footnote 105 [Additionally,] where at the time when it committed the infringement, the Member State in question … had only considerably reduced, or even no, discretion, the mere infringement of [Union] law may be sufficient to establish the existence of a sufficiently serious breach.Footnote 106 [Consequently,] the Member State’s discretion, which is broadly dependent on the degree of clarity and precision of the rule infringed, constitutes an important criterion in determining whether there has been a sufficiently serious breach of [Union] law.Footnote 107
At first reading, the inclusion of a subjective element (‘whether the infringement … was intentional or involuntary’) amongst the conditions that can be taken into consideration to determine whether an infringement of EU law is ‘sufficiently serious’ seems to create a clash with the ‘objectified’ assessment advocated for in this paper. However, a closer look at the case law of the Court and its evolution shows that this element has not been given significant weight in the application of the State liability doctrine.Footnote 108 Given that State liability ‘cannot be made conditional upon fault (intentional or negligent) on the part of the organ of the State responsible for the breach, going beyond that of a sufficiently serious breach of [Union] law’,Footnote 109 there has been no relevant assessment of subjective elements in the behaviour of the public administration at the point of engaging State liability.Footnote 110 The assessment of the sufficient seriousness of the breach of EU law by the Member State has been objectified and redirected towards an analysis of its respect to the limits of whatever levels of discretion it enjoyed under the relevant provisions. Where there is no discretion, the assessment of intention becomes totally irrelevant. Indeed, where the Court had the necessary information to be able to apply the test and determine whether the facts must be held to constitute a sufficiently serious breach of Union law in a case where competent national institutions had no substantive choice, the Court did not assess whether the infringement was intentional or involuntary and simply relied on the objective situation created by the public administration concerned.Footnote 111 Where there is very limited discretion, the Court does not engage in any subjective assessment either and applies a test of strict liability.Footnote 112 Where there is broader discretion, the analysis revolves around the clarity and precision of the rule infringed, and the Court tends to restrict its analysis to an objective assessment of whether the interpretation followed by the Member State was reasonable or excusable, but it does not delve into subjective assessments.Footnote 113
Moreover, the recent case law of the Court on liability derived from judicial breaches of EU law can provide some additional support to the claim that, generally, the test applicable under the second condition of the State liability doctrine does not give any significant weight to the subjective element requiring a determination of whether the infringement was intentional or involuntary; or, in other words, that the assessment needs to be reconfigured as an objective test. In that regard, even if it has shown some deference towards infringements of EU law by national courts, as compared to infringements by the executive or the legislator,Footnote 114 the Court still has rejected the limitation of State liability to cases of intentional fault and serious misconduct on the part of the court, and stressed that
although it remains possible for national law to define the criteria relating to the nature or degree of the infringement which must be met before State liability can be incurred for an infringement of [Union] law attributable to a national court adjudicating at last instance, under no circumstances may such criteria impose requirements stricter than that of a manifest infringement of the applicable law.Footnote 115
In view of all the above, it seems clear that the subjective element that can, in principle, be taken into consideration under the second condition for State liability not only has not played any significant role so far, but it cannot do so in the future because Member States cannot impose fault-based requirements stricter than a test of manifest infringement of the applicable law.Footnote 116 It is submitted that this erodes, if it does not complete eliminate, any inconsistency with the ‘objectified’ assessment of subjective elements in EU economic law prohibitions advocated for in this paper.
VI. CONCLUSION
In this paper I have focused on the difficulties that the assessment of the intention of the State and its emanations – for simplicity, the public administration – could create for the enforcement of EU economic law. To avoid those problems, I have submitted the thesis that the analysis of the subjective elements included in core prohibitions of EU economic law applicable to the public sector, or which require direct intervention by a public administration, needs to be ‘objectified’ and that the intention of the public administration needs to be assessed by a mix of presumptions and recourse to objective criteria that allow for a contextual analysis of the behaviour deemed to breach EU law.
In order to support this thesis, the paper has analysed the existing case law of the Court in the fields of public procurement and State aid as two areas of EU economic law subjected to interpretative and enforcement difficulties due to the introduction, sometimes veiled, of subjective elements in their main prohibitions. The analysis has shown how the Court has created a significant body of case law whereby the analysis of the intention of the public administration deemed to have breached EU public procurement or State aid rules is disregarded. The assessment rather concentrates on the factual context in which behaviour that created the effects proscribed by EU economic law took place, and whether it could be justified on the basis of objective good reasons or, at least, the public administration acted diligently and could legitimately hold that its behaviour was in compliance with the applicable rules. Generally, then, in these areas of EU economic law where the rules are addressed to the State and its emanations, the analysis of subjective elements is clearly ‘objectified’ by the Court.
The paper has also shown how this approach is in line with the benchmarks derived from other areas of EU economic law where the provisions are mainly directed to undertakings; ie private or public legal entities engaged in economic activity. In a similar fashion, in the areas of antitrust, non-discrimination law and the common agricultural policy, the Court has eroded or completely suppressed any assessment of the intent of the infringers of EU law, and substituted them with an assessment of the concurrence of any objective reasons that could justify their behaviour in a way that rationally explains the infringement and justifies it. In the case of antitrust rules, the Court has given particular weight to the fact that infringing undertakings generally know or ought to have known that their behaviour was bound to create the effects prohibited by Articles 101 and 102 TFEU. The paper has stressed that the same approach is clearly applicable to the public administration in view of its duty to act legally.
Indeed, the paper has emphasised that the public administration is bound to comply with EU law as a result of the duty of sincere cooperation in Article 4(3)II TEU and the specific requirements of the right to good administration in Article 41 Charter; so that there is no scope for it to validly deviate from such duty to act legally. Moreover, the duty to provide reasons that derives from the right to good administration is aimed at allowing a judicial review of the acts of the public administration where subjective elements play no role. The justifications or good reasons provided by the public administration are subjected to an objective analysis and a strict proportionality test, which are also compatible with the thesis advanced here. Such compatibility has also been tested with the State liability doctrine. The paper has shown how, despite the old formulation of the criteria that can be taken into account to determine whether an infringement of EU law by a public administration is sufficiently serious and, consequently, gives rise to a claim in damages, the evolution of the case law of the Court excludes the possibility of imposing fault-based requirements stricter than a test of manifest infringement of the applicable law. It has been submitted that this erodes, if it does not completely eliminate, any inconsistency with the ‘objectified’ assessment of subjective elements in EU economic law prohibitions advocated for in this paper.
In view of the discussion above, it seems clear that the introduction of subjective elements in core prohibitions of EU economic law applicable to the public administration is ineffectual and does not alter the analysis that derives from otherwise objective tests. The Court has repeatedly set aside, ignored or eroded the subjective elements created by the EU legislator or by older case law. In the end, the practical leitmotif of such interpretive strategy is that it is very difficult, if not completely impossible, to identify whose individual intention is determinative of the institutional behaviour under assessment. Designing, interpreting and enforcing rules addressed to legal entities in terms of the ‘intent’ of such bodies is legally impractical and creates legal uncertainty and risks of diminished effectiveness of EU economic law.
An understanding of these rules in terms of effects and an objective assessment of the circumstances in which they are produced, and the reasons therefor, is a superior regulatory device; and quite a natural one, as the organic evolution of the case law of the Court shows. Thus, from a normative point of view, it is preferable to advocate a construction of EU economic law around objective prohibitions. That would avoid the need to carry out complex analytical assessments in order to pin down the intent of the public administration – and, likewise, of private and public undertakings and non-natural persons – as well as convoluted reasoning aimed at overcoming the divide between the analysis of the observable (objective) circumstances in which breaches of EU law take place, and the second-guessing of the ultimate (subjective) reasons that triggered them. The thesis advocated in this paper – that the intention of the State and its emanations needs to be assessed in an objectified manner by a mix of presumptions and recourse to objective criteria that allow for a contextual analysis of the behaviour deemed to breach EU law – avoids both the need to engage in window dressing exercises through convoluted reasoning, and the risk of chasing ghosts at the risk of exonerating the public administration from liability when its intent to infringe EU economic law cannot be pinned down in the (possibly non-existent) paper trail leading to the infringement.
