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National Appeal Chamber delimits in-house procurement

03.01.2018

Katarzyna Kuźma and Wojciech Hartung from the public procurement team in DZP's Infrastructure & Energy Practice have successfully represented FBSerwis Karpatia spółka z o.o. before the National Appeal Chamber (NAC) in a dispute over a procedure to collect and manage municipal waste in Ryglice Municipality, which Tarnów City Municipality intended to contract by way of in-house procurement to its own municipal company.

The basis for the Tarnów City Municipality's decision to award the contract in-house to its own company was an inter-municipality agreement concluded pursuant to the Act on Municipal Government. It provided for Tarnów City Municipality to take over the task of organising collection and management of municipal waste in Ryglice Municipality and to this end to conduct a procedure pursuant to the Public Procurement Law in exchange for covering implementation costs and an additional administrative charge.

The NAC accepted the arguments put forward by FBSerwis Karpatia spółka z o.o. and the acceding AVR sp. z o.o., according to which, for the possibility of using the exception provided for in-house procurement, this type of agreement should meet the conditions laid down in case law of the Court of Justice of the European Union replicated in Directive 2014/24/EU and the Public Procurement Law for so-called public-public cooperation.

Otherwise, the award of an in-house contract by a municipality to which a given task is not assigned should be deemed an action aimed at circumventing the law and therefore invalid.

The NAC also confirmed that the municipality is an entrepreneur as defined in the Competition and Consumer Protection Act and its conduct on the public services market, including the waste collection and management market, should be seen in the context of abuse of a dominant position. The above said actions of Tarnów City Municipality are, in the Chamber's view, a manifestation of abuse of a dominant position.

The NAC judgment is the first in which the Chamber took into account a wider aspect of in-house transactions, including their impact on the situation of private entrepreneurs and the co-dependence of provisions regulating the situation of local government units in the context of EU law.

The judgment is not yet final and non-revisable so it is possible that Tarnów City Municipality or its municipal company, MPGK sp. z o.o., will file an appeal to the regional court.