Title

A recent EU ruling means the sale of land for redevelopment does not come under procurement laws. Helen Randall, considers the implication. A new European ruling affects whether town centre development agreements, regeneration projects, planning and infrastructure agreements have to be advertised and competitively tendered under public procurement rules. The decision, by the European Court of Justice in Helmut Müller helps resolve some – but not all – of the uncertainties which had arisen as a result of an earlier case, Jean Auroux v Roanne. The Roanne case had controversially caused some local authorities to stall or even abandon development schemes during the depth of the recession because it was felt they were caught by EU public procurement rules, and so had to be tendered above and beyond having competitive bids for the land values. There was even uncertainty that local authorities might have to tender all their Section 106 (planning) and highway agreements. And that uncertainty about application of the procurement rules caused difficulties for local authorities wanting to redevelop mid-town shopping centres. Typically, a shopping centre is on a long lease to a property investor. That makes it impractical to put the development agreement out to public tender, unless the investor is involved or the authority is brave enough to use compulsory purchase powers. Cynics might say the European Commission has an incentive to instil uncertainty as to whether agreements are caught by the procurement rules because the uncertainty means authorities will err on the side of caution and tender everything under European rules. This risk-averse approach is exacerbated by implementation of the Remedies Directive into UK law, which now means that, if a contract is not properly procured, a court can declare the contract is ineffective and the parties lose their investment. Any authority which has been on the receiving end of a challenge will attest as to how politically embarrassing, time-consuming and expensive it is – the commission can impose fines of up to €11m and aggrieved bidders' damages claims can run into millions – £92m was claimed by Sita in its challenge against Greater Manchester Waste Authority. So, it is better to try and avoid a challenge if one can, especially in these recessionary and litigious times. Helmut Müller was a property developer who challenged Wildeshausen Council and the German Federal Estates Institute because he had lost a tender to redevelop some barracks in Wildeshausen. The challenge went all the way up to the European Court in Brussels. The Federal Institute owned the barracks and sold them, following an auction to another developer, GSSI, which had put in a higher bid and whose redevelopment plans had been preferred by Wildeshausen Council as local planning authority. This situation was not unlike many property development schemes we see in the UK, where the local authority owns the freehold of land to be developed and may or may not also be the local planning authority and highway authority too. Mr Müller and the European Commission argued that the Federal Institute and Wildeshausen Council together were procuring a public works contract from the developer and, as a result, they had infringed European law by not tendering the transaction in accordance with European procurement rules. The basis of their argument was that the link between the sale and the council's urban development requirements meant the deal fell within the legal definition of a public works contract, and the procurement rules require those to be advertised in the Official Journal of the EU and competitively tendered. They even argued a local planning authority's requirements set out in a development plan should be caught by the procurement rules. The European Court's judgement is mainly helpful for local authorities. It clarified that contracts for the sale and purchase of land do not fall within the procurement rules. It also said that, unless a local authority draws up a list of specific requirements for the buildings, then exercise of its planning powers alone by drawing up a development plan or making a planning decision does not count as a public works contract. However, there were some warnings that if a local authority did specify its requirements for buildings, taken measures to define the work, or even had a decisive influence on the design, then that scheme might well have to be put through EU tendering procedures. The ECJ also said it would be unlawful for a public authority to give away a works concession, that was a works contract with a third party revenue stream – such as a leisure centre, toll road or rights to receive rents – for an unlimited period. The impact of this Müller ruling, therefore, is that while some development agreements will remain caught by the procurement rules, most normal planning and highway agreements will not unless they go above and beyond the implementation of pure planning policy. The message is, ‘Watch this space'. However, as it is still uncertain how some current infringement proceedings brought by the commission against the UK Government and involving similar issues in respect of a regeneration scheme in Osbaldwick, Yorkshire, might be resolved. Helen Randall is head of public sector commercial, Trowers & Hamlins LLP

Title

WHITEHALL

European judgement will clarify procurement rules

SUBSCRIBE TO CONTINUE READING