Background to the complaint

1. The complainant is a Member of the European Parliament. He complained to the European Commission that the Hungarian authorities had breached EU public procurement rules by awarding a contract for extensive work at a nuclear power plant (‘the Paks II project’) without publishing a call for tenders. The contract to build two new reactors and refurbish two existing ones at the plant near Paks, in Hungary, was awarded to a Russian company.

2. The Commission opened an ‘infringement procedure’ against Hungary^[1]. After receiving the Hungarian authorities’ observations, the Commission informed the complainant on 8 August 2016 of its intention to close the infringement procedure. It explained the reasons for doing so. On 17 November 2016, the Commission closed the infringement case.

3. In parallel with the infringement procedure, the Commission carried out a separate state aid investigation into the financing of the construction of those same reactors by the Hungarian authorities (‘the state aid case’)^[2].

4. On 31 January 2017, the complainant asked the Commission to reply to eight questions covering the legal arguments it had relied on to close the infringement procedure, as well as detailed technical issues.

5. On 5 May 2017, the Commission informed the complainant that, before replying to his questions, it would need to deal with the request for public access to documents that he had made in the meantime^[3].

6. The complainant sent two reminders to the Commission (on 21 September 2017 and 8 January 2018). In the second reminder, he pointed out that, although the Commission had replied (on 30 October 2017) to his request for public access to documents, it still had not replied to his questions.

7. In the absence of a reply from the Commission, and dissatisfied with the reasons given by the Commission for closing the infringement procedure against Hungary, the complainant turned to the Ombudsman on 15 March 2018.

The inquiry

8. The Ombudsman opened an inquiry into the Commission’s decision to close the infringement procedure against Hungary and its failure to reply to all the questions raised by the complainant in his letter of 31 January 2017.

9. The Ombudsman’s inquiry team asked the Commission twice to reply to the complainant’s questions. The Commission replied on 19 June and 10 August 2018. The Ombudsman also received the complainant’s comments on the Commission’s replies.

10. In the course of the inquiry, the Ombudsman became aware of the fact that the question whether the Hungarian authorities complied with EU public procurement rules in this case is currently before the General Court^[4].

Commission’s decision to close the infringement procedure

Arguments presented to the Ombudsman

11. The Commission explained that public authorities may award contracts without publishing a call for tenders when, for technical reasons, the contract can be carried out by one particular company only (‘technical exclusivity’)^[5]. In this case, the Hungarian authorities had argued that the Russian company was the only one that could provide the technology complying with all the technical specifications.

12. The Commission also noted that the technical specifications for this project were based on the applicable standards^[6] and took account of strict safety and operability concerns^[7]. It found that the Hungarian authorities had provided sufficient justifications to show that the provisions regarding ‘technical exclusivity’ for the core parts of the project were fulfilled. Therefore, the direct award of the contract for these parts to the Russian company complied with EU public procurement legislation.

13. The Commission also pointed out that the Hungarian authorities had committed to ensuring that it would subcontract other parts of the project, in accordance with EU public procurement rules and the principles of transparency, equal treatment, and non-discrimination. The Commission stated that it would closely monitor the Hungarian authorities’ compliance with this commitment. The Commission also took into account the fact that the Paks II project was important to secure Hungary’s energy supply. In addition, the Hungarian government had assured the Commission that the situation was exceptional and that it did not intend to award any other comparable projects directly. On this basis, the Commission did not consider it opportune to pursue the infringement procedure.

14. The complainant argued that the Commission based its decision to close his complaint on political considerations even though, in the course of the infringement procedure, it had expressed serious doubts about the project’s compatibility with EU law. In his view the Commission (a) did not assess whether the arguments put forward by the Hungarian authorities to justify the absence of a tender procedure were factually correct, and (b) never consulted any market operator, civil society organisation, or the complainant for that matter. Therefore, the Commission should re-open his infringement complaint and carry out a thorough assessment.

The Ombudsman's assessment

15. The Commission is responsible for overseeing the effective application, implementation and enforcement of EU law by the Member States. If a Member State fails to fulfil an obligation under the EU Treaties, the Commission, as guardian of the Treaties, can take measures (infringement proceedings) to bring this infringement to an end. In this role, the Commission acts based on certain policy priorities, having decided on a strategic approach to its enforcement actions. In this regard, the Commission enjoys a wide margin of discretion when deciding which cases to pursue and it has expressly stated that it considers that certain categories of cases can often be satisfactorily dealt with by other more appropriate mechanisms at national level. This applies in particular to individual cases where there is insufficient evidence of a general practice or of a systemic failure to comply with EU law. 

16. It is for the Court of Justice to judge whether a Member State has failed to meet its obligations under the Treaty.

17. The Ombudsman's inquiries and conclusions fully respect the Commission's discretionary power, recognised by the Treaties and the case-law of the Court of Justice. While the Ombudsman therefore cannot interfere in the exercise of the Commission’s discretion, she can, as a matter of good administration, seek to ensure that the Commission explains properly how and why it has exercised its discretion.

18. In this case, the Commission concluded that there was no infringement of EU public procurement rules. It explained why it had found the arguments provided by the Hungarian authorities sufficient to justify the direct award of the contract for the core parts of the project and why it had therefore concluded that the Hungarian authorities did not breach EU law. It also explained that, in light of the commitments undertaken by the Hungarian authorities, it did not consider it opportune to pursue the infringement procedure.

19. The Commission disclosed to the complainant more than 200 pages of documents showing how, after analysing the evidence available to it, it arrived at these conclusions. According to those documents, the Commission duly examined the arguments put forward by the Hungarian authorities explaining why only the Russian company could provide the required technology and execute the project in question^[8].

20. The complainant disagreed with the Commission’s conclusion that the Hungarian authorities complied with the applicable EU public procurement rules. Specifically, he contends that the Commission did not assess whether the arguments put forward by the Hungarian authorities to justify the absence of a tender procedure were factually correct.

21. As regards the standard of review that the Ombudsman applies to these cases (see above), the Ombudsman understands that the complainant argues that the Commission’s position is not reasonable and is not coherent.

22.  In this regard, the Ombudsman notes that the issue of whether the Hungarian authorities infringed the EU public procurement rules is pending before the General Court in the context of an action for annulment brought by Austria against the Commission’s decision in the state aid case^[9]. Should the Court agree with the arguments put forward by Austria, and find that the Hungarian authorities breached the EU public procurement rules, this finding could call into question the Commission’s reasons for closing the infringement procedure.

23. As such, and in accordance with the rules governing her work, the Ombudsman cannot examine the substance of this matter further^[10].

24. The complainant has also taken issue with the fact that the Commission did not consult market operators, civil society representatives or the complainant himself.

25. As regards the complainant, the Ombudsman notes that the Commission respected the procedure set out in its ‘Communication on the handling of relations with the complainant in respect of the application of Union law’^[11]. The Commission informed the complainant on 8 August 2016 of its intention to close the infringement procedure. It explained the reasons for doing so. On 17 November 2016, the Commission closed the infringement case.

26. Regarding market operators and civil society representatives, the Ombudsman notes that, while interested third parties have no rights, under the applicable rules, to be involved, heard or formally consulted within the context of an infringement procedure, the Commission nonetheless chose to examine submissions made by representatives of civil society.

27. In light of all the above, the Ombudsman terminates her inquiry into this aspect of the complaint.

Failure to reply to the complainant’s questions

Arguments presented to the Ombudsman

28. The complainant stated that the Commission failed to reply to his questions of 31 January 2017.

29. In its first reply to the complainant (19 June 2018), the Commission apologised for the delay in replying to him. It noted that his questions were closely related to his request for public access to documents, and that, therefore, the replies to his questions were to be found in the documents disclosed. In its second reply (10 August 2018), the Commission provided additional explanations by way of response to the complainant’s questions.

30. While the Commission gave him access to the documents he had requested, the complainant contends that the replies to his questions could not be found in these documents. The complainant was also dissatisfied with the time taken by the Commission to reply, and with the explanations provided in the Commission’s second reply. He stated that he had asked for a “coherent reply” including an interpretation of the data provided, and a “comprehensive legal justification of the decision” to close the infringement procedure.

The Ombudsman's assessment

31. The Ombudsman notes that, in its first reply to the complainant, the Commission simply referred to the documents that it had disclosed to him following his request for public access to documents. It is only in its second reply that the Commission provided additional explanations. The Ombudsman also notes that, in its second reply, the Commission did not reply specifically to each of the eight questions asked by the complainant, but grouped them by reference to their similarities, providing global replies and making references to the documents it had disclosed to him^[12].

32. Although the Commission is of the view that it has answered the complainant’s questions, the fact remains that, by not replying to each of the questions separately, the complainant was left with the impression that not all of his questions had been properly addressed^[13]. The Ombudsman will therefore ask the Commission to provide a clearer answer to the complainant, by replying separately to each of his questions and, where relevant, making specific reference to the supporting documents which it has already disclosed to him.

33. Regarding the time it took the Commission to reply to the complainant’s questions (one and a half year), the Ombudsman accepts as reasonable the Commission’s position that it needed to deal first with the complainant’s request for access to documents. However, she also notes that, once it had dealt with that request, it still failed to reply to his questions. The Commission did so only in the course of the Ombudsman’s inquiry, and only in its second reply.

34. The Ombudsman finds these shortcomings regrettable. However, she notes that the Commission already apologised for the delay in replying to the complainant.

Conclusions

Based on the inquiry, the Ombudsman closes this case with the following conclusions:

The Ombudsman terminates her inquiry into the Commission’s decision to close the infringement procedure against Hungary.

The Ombudsman has identified shortcomings in how the Commission dealt with the complainant’s questions of 31 January 2017. She notes that the Commission has apologised for the delay incurred.

The complainant and the Commission will be informed of this decision.

Suggestion

The Ombudsman suggests that the Commission provide a clearer answer to the complainant, by replying separately to each of his questions and, where relevant, making specific reference to the supporting documents which it has already disclosed to him.

 

Emily O'Reilly

European Ombudsman

Strasbourg, 15/04/2019

 

[1] For more details on infringement procedures in general, see the Commission’s website: https://ec.europa.eu/info/law/law-making-process/applying-eu-law/infringement-procedure_en. For more details on the infringement procedure against Hungary, see the Commission’s press release (point 4), available here: http://europa.eu/rapid/press-release_MEMO-15-6006_EN.htm

[2] In that context, the Commission examined to what extent a (possible) lack of compliance with EU public procurement rules could influence the assessment in the state aid case. In its decision of 6 March 2017 closing the state aid case, the Commission did not identify any additional distortive effect on competition and trade in the electricity market that would be created by possible non-compliance with the EU public procurement rules as regards the direct award of the construction works to the Russian company (see points 279-287 of the decision, available here: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32017D2112).

[3] The Ombudsman also inquired into how the Commission dealt with the complainant’s request for public access to documents (see the Ombudsman’s decision in cases 1227/2017/THH and 1715/2017/THH, available here: https://www.ombudsman.europa.eu/en/decision/en/108863).

[4] Case T‑101/18, Austria v Commission. Austria asked the Court to annul the Commission’s decision of 6 March 2017 in the state aid case. One of the pleas in law put forward by Austria is that the Commission’s decision should be annulled because the Hungarian authorities infringed EU public procurement rules. Details of the pleas were published in the Official Journal on 30 April 2018 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A62018TN0101).

[5] In line with Article 40(3)(c) of Directive 2004/17/EC coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors (https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A32004L0017). This Directive was repealed by Directive 2014/25 /EU with effect from 18 April 2016 (https://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX:32014L0025).

[6] The Commission referred to the standards laid down in the ‘European Utility Requirements’ (http://www.europeanutilityrequirements.org/Welcome.aspx) and the Nuclear Safety Code of Hungary.

[7] The Hungarian authorities had explained that the aim of the project was to maintain the capacity of the existing Paks I nuclear power plant. Its operational units would last only until mid-2030s, and they would have to be shut down between 2032 and 2037. Therefore, it was indispensable to replace them to ensure the security of supply by constructing two new nuclear power plant units.

[8] From the Commission’s decision of 30 October 2017 disclosing to the complainant documents concerning the infringement procedure, and from documents no 7, 8, 14 and 15 partially disclosed to the complainant.

[9] See footnote 4 above.

[10] See Article 2(7) of the Ombudsman’s Statute: “When the Ombudsman, because of legal proceedings in progress or concluded concerning the facts which have been put forward, has to declare a complaint inadmissible or terminate consideration of it, the outcome of any enquiries he has carried out up to that point shall be filed definitively.”

[11] Communication from the Commission — EU law: Better results through better application, C/2016/8600 (https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv%3AOJ.C_.2017.018.01.0010.01.ENG&toc=OJ%3AC%3A2017%3A018%3ATOC)

[12] The Commission grouped questions no 1, 2, 3, 5 and 8 and provided a global reply by making reference to document no 15 disclosed to the complainant. It also grouped questions no 4, 7 and 9 (sic!) and replied to them, without however referring to any of the documents disclosed to the complainant. Finally, the Commission replied to question no 6 and referred to document no 23 disclosed to the complainant.

[13] For instance, the reply to question no 6 is an answer, in fact, to question no 5. The reply to questions no 4, 7 and 9 seems to be rather an answer to question no 8. In addition, there is no question 9.