Prepared by Guido Ajello, Claudio Costantino and Arianna Mariani
With the judgment of 23 November 2021, no. 218 (“Judgement”), published in the Official Gazette on 24 November 2021, the Constitutional Court declared the illegitimacy of Article 177, Legislative Decree no. 50 of 18 April 2016, (“Procurement Code”), governing the regime for the awarding of contracts by concessionaires of works, public services and supplies for violation of Articles 3, paragraph 1, and 41, paragraph 1, Constitution.
Specifically, the provision of Article 177, paragraph 1, Procurement Code, established that “public or private parties, holders of concessions for works, public services or supplies already in place on the date of entry into force of this Code, that were not awarded with the project financing formula, or by public tender procedures in accordance with European Union law, are obliged to award a share equal to eighty percent of contracts for works, services and supplies related to concessions for an amount equal to or greater than 150.000 Euro and relating to concessions by public procedure (…)” and, moreover, that the remaining twenty percent “can be realized by in-house companies pursuant to Article 5 for public parties, or by companies that are directly or indirectly controlled by or affiliated with private parties, or by operators chosen through a public procedure, including a simplified procedure. For holders of highway concessions, without prejudice to the other provisions of this paragraph, the share set forth in the first clause shall be equal to sixty percent”.
The above-mentioned provision, in paragraph 2, also specified that “The concessions referred to in paragraph 1 that are already in place shall comply with the above provisions within December 31, 2022. The concessions referred to in paragraph 1, third sentence, that are already in place shall comply with the said provisions within 31 December 2020”.
The complex application of the provision was already known to the Lawmaker that, for need of speed and simplification, with Decree Law no. 77 of 31 May 2021, converted with amendments, by Law no. 108 of 29 July 2021, (so-called “Simplification-bis”), provided the extension by one year, from 31 December 2021 to 31 December 2022, of the entry into force of the so-called “outsourcing” obligation (i.e., the obligation for holders of concessions awarded without competitive bidding procedures to outsource all the activities covered by the concession by means of contracts to third parties for 80% and the assignment of the remaining 20% to in-house companies, or however subsidiaries or associates).
Therefore, within the framework of the judgement promoted by a public service operator firstly before the Lazio Regional Administrative Court and, subsequently, on appeal, before the Council of State, against the National Anti-Corruption Authority’s Guidelines no. 11/2019, approved by Resolution no. 570 of 26 June 2019, concerning “Guidelines for verifying compliance with the limit set out in Art. 177, paragraph 1, of the Code by public or private entities holding concessions for works, public services or supplies already existing at the date the Code came into force, which have not been awarded using the project financing formula or public tender procedures in accordance with EU law”, the Council of State, accepting the request made by the appellant, issued an order to refer the matter to Constitutional Court in order to assess the constitutional legitimacy of Article 177, Procurement Code, with reference to Article 41, paragraph 1, Article 3, paragraph 2, and Article 97, paragraph 2, of the Constitution.
Specifically, the Supreme Administrative Court deemed the objection raised by the appellant regarding the constitutional illegitimacy of Article 177, Procurement Code, to be relevant and not manifestly groundless, in that, although aimed at fully implementing the principle of free competition (in an attempt to remedy the vulnus caused by the original awarding of concessions without public procedures), the outsourcing obligation in question would take the form of a sort of “total divestment” of concessions, resulting in an absolute impediment to the continuation of private economic activity.
That said, the Constitutional Court has first of all held that “the provision of the obligation for the holders of concessions already in existence, not assigned with the formula of project financing or with public procedures, to completely outsource the activity covered by the concession – by contracting out to third parties 80% of the contracts inherent in the concession itself and by assigning the remaining 20% to in-house companies or, in any event, subsidiaries or associates – constitutes an unreasonable and disproportionate measure with respect to the legitimate aim pursued, as such detrimental to the freedom of economic initiative, with the consequence of the constitutional illegitimacy of Art. 177, paragraph 1, of Legislative Decree no. 50 of 2016 and Art. 1, paragraph 1, letter iii), of Law no. 11 of 2016, for violation of Articles 3, first paragraph, and 41, first paragraph, of the Constitution”.
According to the Constitutional Court, the unreasonableness of the outsourcing obligation governed by Article 177, Procurement Code, is based on a number of factors, such as:
- the considerable extension of the object of the obligation, which is able to distort the concessionaire entrepreneur, who would thus assume the role of contracting authority in charge of outsourcing orders;
- the lack of differentiation or graduation of the obligation on the basis of relevant elements such as the size of the concession, the size and characteristics of the concessionaire, the time of assignment of the concession, its duration, its object and its economic value.
In the light of the above considerations, the Constitutional Court declared the constitutional illegitimacy of Article 1, paragraph 1, letter iii), Law no. 11 of 28 January 2016 (so-called Delegated Law for the implementation of Directives 2014/23/EU, 2014/24/EU and 2014/25/EU) and Article 177, paragraph 1, 2 and 3, Procurement Code, which had no basis in the above-mentioned European legislation.
In conclusion, the Judgement restores the concessionaire’s freedom to carry out autonomously the activities necessary for the pursuit of its business activity, without operating as a mere contracting authority, which – until yesterday – was obliged to outsource also typically internal activities, thus jeopardizing the continuity of the service precisely during the aforesaid outsourcing phase, which has now been abrogated by order of the Judge of Laws.
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