In this case, upon a reference from the Italian Tribunale amministrativo regionale per la Puglia (Regional Administrative Court for Puglia), the Court of Justice of the European Union (“CJEU” or “Court“) was invited to rule on, among other things, the validity of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market (“Directive 2006/123“), as well as on the interpretation of Article 12 of that directive. The latter, as a part of Chapter III of Directive 2006/123 concerning authorisations, states that where the number of authorisations is limited due to the scarcity of available natural resources or technical capacity, any selection procedure must comply with the principles of impartiality and transparency; requires that any authorisation be granted for a limited period of time and prohibits that its extension be automatic. This note focuses on the last topic, i.e. the prohibition on automatic renewal of an authorisation granted for a given activity.
The request has been made in proceedings between the Autorità Garante della Concorrenza e del Mercato (Italian Competition and Markets Authority) (“AGCM“) and the Municipality of Ginosa concerning the latter’s decision to extend, on its territory, all the concessions for the occupation of State-owned maritime property until 31 December 2033. This has been challenged by the AGCM seeking annulment of the decision at issue and of all the declarations or certificates of extension issued subsequently. In those circumstances, the Regional Administrative Court for Puglia stayed the proceedings and referred nine questions to the Court for a preliminary ruling.
In the first turn, the Court dealt with the issue whether Directive 2016/123 applies only to concessions for the occupation of State-owned maritime property which are of certain cross-border interest. Although, there is some debate at hand (see C. Barnard, The Substantive Law of the EU. The Four Freedoms, Oxford 2022, p. 453), the Court has already had opportunity to hold, on several occasions, that, in accordance with a literal, historical, contextual and teleological interpretation of Directive 2006/123, the provisions of Chapter III thereof, including Article 12, must be interpreted as meaning that they do not apply only to concessions for the occupation of State-owned maritime property which are of certain cross-border interest but also to a situation where all the relevant elements are confined to a single Member State (paragraph 40).
Moving on to the prohibition on automatic renewal of an authorisation, the referring court asked, in essence, whether Article 12(2) of Directive 2006/123 must be interpreted as meaning that the said is laid down unconditionally and sufficiently precisely to be regarded as having direct effect. In response, the CJEU held that a provision has direct effect in so far as it prohibits, in unequivocal terms, the Member States from providing for automatic and general extensions of such concessions, without the Member States having any degree of latitude or possibility of attaching any conditions to that prohibition and without requiring the adoption of an act of the European Union or of the Member States. This was not surprising at all given the exact wording of Article 12(2) of Directive 2006/123 that reads as follows: “authorisation […] may not be open to automatic renewal”. Also, the Court has already confirmed that automatic renewal of concessions is “expressly” excluded by Article 12(2) of Directive 2006/123 (see, to that effect, judgment of 14 July 2016, Promoimpresa and Others, C‑458/14 and C‑67/15, EU:C:2016:558, paragraph 50). Consequently, the CJEU pointed out in the judgment commented on that Article 12(2) of Directive 2016/123 imposes on Member States, in unconditional and sufficiently precise terms, an obligation to apply an impartial and transparent selection procedure to potential candidates and prohibits them from automatically renewing an authorisation granted for a given activity.
It should be noted that in a broader perspective the prohibition on automatic renewal of an authorisation ensures that the activity involving a limited number of operators because of the scarcity of resources remains open to competition and, therefore, potentially accessible to new service providers (see, to that effect, opinion of Advocate General Szpunar of 25 February 2016, Promoimpresa and Others, C‑458/14 and C‑67/15, EU:C:2016:122, paragraph 79). This is in line not only with the general purpose of Directive 2006/123, suffice to mention recital 62 thereof, requiring that the duration of the authorisation granted does not restrict or limit free competition beyond what is necessary in order to enable the provider to recoup the cost of investment and to make a fair return on the capital invested, but also with other EU law secondary acts. Even if concessions for the occupation of State-owned maritime property are excluded from the scope of application of Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts (“Directive 2014/23“) (see recital 15), in this context it is worth mentioning that under Directive 2014/23 the duration of concessions shall be limited and that the contracting authorities (entities) shall estimate the duration on the basis of the works or services requested. Although this provision does not expressly refer to automatic renewal of concessions, one may argue that it indirectly opposes such a solution. Also, recital 52 of Directive 2014/23 states that the duration of a concession should be limited in order to avoid market foreclosure and restriction of competition and adds that concessions of a very long duration are likely to result in the foreclosure of the market, and may thereby hinder the free movement of services and the freedom of establishment. Automatic renewal clearly goes against duration limit and may lead to market foreclosure and restriction of competition. In any case, the extension of the duration of the concession through automatic renewal would probably constitute a substantial modification whose introduction at EU level is connected with various restrictions. The Court has already held that these restrictions, “by analogy with public contracts”, have applied to, among other things, service concessions falling at the time beyond the scope of EU procurement directives (see judgment of 13 April 2010, Wall, C-91/08, EU:C:2010:182, para 37; see also P. Bogdanowicz, Contract Modifications in EU Procurement Law, Cheltenham 2021). One could argue that similar approach could be applied to concessions for the occupation of State-owned maritime property.
In the view of the Court, the fact that the prohibition in question applies only in cases where the number of authorisations available for a given activity is limited due to the scarcity of available natural resources, which must be determined by reference to a factual situation that is assessed by the competent authority, subject to review by a national court, cannot call into question the direct effect of Article 12(2) of Directive 2006/123. As is widely known, the direct effect of EU law assumes that the relevant provisions are precise, clear and unconditional and that they must not call for additional measures, either national or European. Even if the Court focused on the premises of precise and unconditional nature of Article 12(2), there are no doubts that the remaining conditions were also met. This is because Article 12(2) only limits the scope of its application, being the scarcity of available natural resources but this limitation does not touch the nature of the prohibition as such.
Similarly uncontroversial was the response by the CJEU that the assessment of the direct effect of the prohibition provided for in Article 12(2) of Directive 2006/123 and the obligation to disapply conflicting national provisions lies not only with the national courts but also with the administrative authorities, including municipal authorities. As the Court recalled, it follows from its settled case-law that municipal authorities are under the same obligation as a national court to apply the unconditional and sufficiently precise provisions of a directive and to refrain from applying provisions of national law which are inconsistent with them (see, to that effect, judgment of 22 June 1989, Costanzo, 103/88, EU:C:1989:256, paragraphs 29 to 33).
To sum up, it would be difficult to consider that the ruling commented on, insofar as it related to the prohibition on automatic renewal of an authorisation granted for a given activity, was groundbreaking. Rather, given the content of Article 12(2) of Directive 2006/123, the Court’s responses were what one should have expected. The significance of the ruling should therefore be seen in the clarification of the issues around the interpretation of Article 12(2) and the strong affirmation of the importance of the principle of fair competition in the context of the duration of concessions.
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Posted by Piotr Bogdanowicz (Professor at the University of Warsaw)
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Suggested citation: Piotr Bogdanowicz, “Case C-348/22, Autorità Garante della Concorrenza e del Mercato (Commune de Ginosa). The Court clarifies the prohibition on automatic renewal of an authorisation granted for a given activity”, REALaw.blog, available at realaw.blog/?p=3057
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