Even before the judgement on the preliminary ruling of case C-348/22 Comune di Ginosa, Portugal was confronted with the need to adjust its national legal regime regulating “beach concessions” on public land (under a regime equivalent to the French domaine public) with the Promoimpresa decision (Joined Cases C-458/14 and C-67/16). After that ruling, the European Commission raised a number of questions of conformity of national law with European Union law in the context of an EU Pilot, which is a mechanism for informal dialogue between the Commission and the Member State concerned on issues relating to potential non-compliance with EU law that can be used before launching a formal infringement procedure. The Commission launched the EU PILOT 9995/2021,  on the rules contained in Decree-Law 226-A/2007, of 31 May. This Decree  establishes the regime for the use of water resources, implementing the principle of the need for a use permit, provided for in the Portuguese Water Law.

Under the Portuguese regime, the installation and operation of beach equipment and support is subject to a concession regime. This concession is awarded through a pre-contractual public tender procedure under the rules applicable to the conclusion of public works contracts or contracts for the supply and acquisition of goods and services, depending on whether the concession involves works or not. However, the procedure can also be initiated by a private party, in which case the regime for awarding licences applies, although even in these cases the competent authority can opt for the public tender procedure. In any event, the procedure includes rules designed to guarantee transparency and competition, in line with European Union law.

The issues raised by the Commission relate specifically to the fact that the private party who initiated the procedure has a right of preference (direito de preferência) in tender procedures for the renewal of these concessions, meaning that this person or entity has a legal right to be awarded the concession provided that she accepts to be subjected to the conditions of the tender selected by the competent authority within the framework of the public tender procedure. A right of preference is also granted to the previous holder of the concession if she expresses an interest in continued use, within one year before the expiry of the title, and submits to the conditions of the tender selected. The Commission also raised compliance issues regarding a “right to extend the period of validity” of the previous concession until the final decision of the tender procedure.

The Commission raised the question of whether these measures comply with Article 12 of the Services Directive (2006/123/CE) and the freedom of establishment enshrined in Article 49 of the TFEU, as interpreted by the Court of Justice in the Promoimpresa ruling (Joined Cases 458/14 and C-67/16). According to the Commission, a preferential right in favour of incumbents would discourage undertakings located in other Member States from providing beach services in Portugal. Although the EU PILOT in question refers specifically to the legal framework applicable to beach concessions, the regime is applicable to all maritime and water related concessions covered by this Decree-Law.

Promoimpresa Case

The Promoimpresa ruling (Joined Cases 458/14 and C-67/16) concerns the interpretation of Article 12 of the Services Directive and Articles 49, 56, and 106 of the TFEU, in the context of the rejection of an application for renewal of a concession to exploit an area of the public domain of Lake Garda, for the purposes of a kiosk, terrace, baths, pier and pontoon. Regarding the scope of the concession in the Services Directive, the ruling, transcribing recitals 39 and 57 of the Directive, as well as the definition of the authorisation regime in Article 4(6), concluded that the title in question should be considered an authorisation.

With regard to the application of Article 12 of the Services Directive, the Court referred to the national court for verification of the fulfilment of the scarcity requirement while determining that the concession concerns natural resources, within the meaning of Article 12 of the Service Directive. At the same time, it dismissed the application of Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014, as it does not concern service concessions.

The Portuguese defence in Promoimpresa cases

In response to the questions presented by the Commission, Portugal argued that the Promoimpresa case was not entirely applicable because the Portuguese regime was not solely based on the need to manage scarce recourses but also on the nature of beaches as publicly owned lands (domaine public). These public lands are, on the one hand, assigned to a public purpose and, on the other hand, excluded from legal trade. The concession for the simultaneous installation and operation of equipment and beach facilities did not merely authorise the exercise of an activity, it simultaneously assigned the use of a portion of the public lands for the benefit of the holder, withholding it from the enjoyment of the entire community. This allowed the planning of the uses of public lands in order to strike the necessary balance between private uses and the general principle of the common use and enjoyment of water resources in the domaine public. Furthermore, the general interest considerations provided for in Article 12(3) of the Services Directive should be taken into account when defining the rules of the selection procedures for potential and reserve candidates.

On the other hand, with regard to the possible violation of Article 49 of the TFEU, Portugal held that the existence of a cross-border interest did not apply generally and automatically to all “beach concessions”. In any case, Portugal argued that the right of preference did not rule out competitive procedures for the award of a new concession, because it only gave the private party in question a legal right to be awarded the concession provided that she accepts to fulfil the conditions of the tender selected by the competent authority within the framework of the public tender procedure.

Regarding the possibility of extending the period of validity of the utilisation permit until the final decision of the tender procedure, up to a maximum of two years, Portugal considered that there was no violation of the provisions of Article 12 of the Services Directive because the national law did not confer a right on the former concessionaire. The legal rule gives the administration an option, that needs to be justified with exceptional circumstances, and only if a competitive procedure for a new concession is underway. This does not fall under the Services Directive prohibition on automatic renewals, because it is a precarious and transitory extension. Although in both cases the previous holder retains the concession for a certain period of time, they are substantially different situations, since in the case of automatic renewal there will be no procedure preventing new operators from accessing the activity. Portuguese national law does not confer an advantage, but rather enshrines a safeguard clause that allows the administration to pursue other public interests, on a temporary basis – such as, for example, there being no concessionaire, with the services included therein not being provided, particularly during the holiday season. In this case, Portugal concluded that the possibility of an exceptional and provisional extension of the previous concession pending a pre-contractual procedure, did not violate the provisions of Article 12 of the Services Directive.

The infringement procedure and its aftermath

The Commission did not fully accept the justifications presented by Portugal and decided to open an infringement procedure against Portugal (INFR(2022)2020) in April 2022 for not having correctly implemented rules regarding tendering procedures for the award of “beach concessions” – more specifically the right of preference of holders of existing ‘beach concessions’ in tender procedures for the renewal of these concessions. The opening of this infringement procedure by the Commission was in line with the case-law of the Court of Justice on this matter, which gave rise to the Comune di Ginosa case (C-348/22).

This meant that the Commission accepted the arguments presented by Portugal in relation to the “right to extend the period of validity” of the concession, because it was not referred in the infringement procedure. The question of the prohibition on automatic renewal of an authorisation granted for a given activity which was addressed by the Court of Justice in the Comune di Ginosa case (C-348/22) is, then, not applicable here – because the extension is not automatic.

As the Portuguese law already provides for the need of a selection procedure to potential candidates which provides guarantees of impartiality and transparency, the case-law of the Court in this matter – specifically the competence to determine whether the condition relating to the scarcity of natural resources laid down in Article 12(1) of the Services Directive was satisfied – is not applicable in the Portuguese legal order. The question in this case was compliance of the right of preference attributed by Portuguese law with Article 12(2) of the Services Directive and the prohibition to confer any advantage on the provider whose authorisation has expired.

In January 2023, the Commission issued a reasoned opinion on the same matter. This led Portugal to amend its legislation, repealing the provisions establishing the right of preference, with immediate effects through the Decree Law 87/2023, 10 of October. This meant that Portugal accepted that the right of preference established an automatic effect of the will of the current holder of the concession, which was an undue advantage that was contrary to the Services Directive. On this basis, the Commission decided to close the infringement procedure in November 2023.

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Posted by Dr Rui Lanceiro, University of Lisbon School of Law