Fratelli Costanzo SpA v. Comune di Milano (Municipality of Milan) and Another (Case 103/88) Before the Court of Justice of the European Communities

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1 Fratelli Costanzo SpA v. Comune di Milano (Municipality of Milan) and Another (Case 103/88) Before the Court of Justice of the European Communities ECJ (Presiding, Due C.J.; Joliet and Grévisse PP.C.; Slynn, Mancini, Schockweiler and Moitinho de Almeida JJ.) Herr Carl Otto Lenz, Advocate General 22 June 1989 Reference from Italy by the Tribunale Amministrativo Regionale per la Lombardia (Regional Administrative Tribunal for Lombardy) under Article 177 EEC. Public works contracts. Tenders. The requirement in Article 29(5) of Directive 71/305 that rejection of the lowest tender should be preceded by discussion with the tenderer and submission of reasons to the special EEC Advisory Committee means what it says. It is not permissible to replace those requirements with a mere mechanical rule disqualifying especially low tenderers according to a specified arithmetical calculation. [19] & [21] Public works contracts. Tenders. The requirement in Article 29(5) of Directive 71/305 that rejection of a tender that is obviously abnormally low shall be preceded by discussion with the tenderer and submission of reasons to the special EEC Advisory Committee also applies where the tender appears merely abnormally low but not obviously so. [27] National courts. Directives. Direct effect. Wherever the provisions of a directive appear, as far as their subject-matter is concerned, to be unconditional and sufficiently precise, those provisions may be

2 relied upon by an individual against the State where that State has failed to implement the directive in national law by the end of the period prescribed or where it has failed to implement the directive correctly. [29] Directives. Direct effect. State authorities. The reason why an individual may rely upon the directly effective provisions of a directive in proceedings before the national courts is that the *240 obligations arising under those provisions are binding upon all the authorities of the member- States, including municipalities. Such authorities are under a direct obligation to apply such provisions. [31] Directives. Direct effect. Administrative authorities. Public works contracts. Tenders. The rules in Article 29(5) of Directive 71/305 laying down procedures for the rejection of abnormally low tenders have direct effect. An individual may therefore plead them before the national courts; and all organs of the administration, including decentralised authorities such as municipalities, are obliged to apply them. [32] The Court interpreted Article 29(5) of Directive 71/305 in the context of Italian legislation which laid down a mechanically determined arithmetical minimum below which a tender would be automatically rejected even though it was the lowest, contrary to the wording of the directive which in such circumstances required that the tenderer be asked to justify the genuineness of the tender and a report be made to the special EEC advisory committee set up for the purpose, to the effect that such departure from the requirements of the directive was not justified, that the rule applied both where the tender was ' obviously abnormally low' (as stated in the directive) and where it was merely 'abnormally low', that local authorities were directly bound by the directive, that the rule was of direct effect, and that the direct effect applied as much to the conduct of the municipality as to the judgments of courts. Representation Avvocato L. Acquarone and (in the written proceedings only) Avvocati M. Ali, F. P. Pugliese, M. Annoni and G. Ciampoli, for the plaintiff company. Avvocato P. Marchese and (in the written proceedings only) Avvocati L. Lopopolo and S. Ammendola, for the defendant. Avvocato G. Pericu and (in the written proceedings only) Avvocato E. Zauli, for the intervening company. R. Silva de Lapuerta and (in the written proceedings only) J. Conde de Saro for the Spanish Government as amicus curiae. Professor L. Ferrari Bravo, Head of the Legal Department of the Ministry of Foreign Affairs, assisted by I. M. Braguglia, Avvocato dello Stato, for the Italian Government as amicus curiae.

3 G. Berardis, a member of the Commission's Legal Department, for the E.C. Commission as amicus curiae. The following cases were referred to in the judgment: 1. Transporoute et Travax SA v. Minister of Public Works (76/81), 10 February 1982: [1982] E.C.R. 417, [1982] 3 C.M.L.R. 382 Gaz:76/ Becker v. Finanzamt Münster-Innenstadt (8/81), 19 January 1982: [1982] E.C.R. 53, [1982] 1 C.M.L.R. 499 Gaz:8/81. * Marshall v. Southampton and South-West Hampshire Area Health Authority (Teaching) (152/84), 26 February 1986: [1986] E.C.R. 723, [1986] 1 C.M.L.R. 688 Gaz:152/84. The following further cases were referred to by the Advocate General: 4. Re Type Approval Directives: E.C. Commission v. Belgium (102/79), 6 May 1980: [1980] E.C.R. 1473, [1981] 1 C.M.L.R. 282, [1982] 2 C.M.L.R. 622 Gaz:102/ Gebroeders Beentjes BV v. State (Netherlands) (31/87), 20 September 1988: [1988] E.C.R. 4635, [1990] 1 C.M.L.R. 287 Gaz:31/ Felicitas Rickmers-Linie KG & Co. v. Finanzamt für Verkehrssteuern In Hamburg (270/81), 15 July 1982: [1982] E.C.R. 2771, [1982] 3 C.M.L.R. 447 Gaz:270/ Direct Cosmetics v. Commissioners of Customs and Excise (5/84), 13 February 1985: [1985] E.C.R. 617, [1985] 2 C.M.L.R. 145 Gaz:5/ Rewe Handelsgesellschaft Nord GmbH and Rewe Markt Steffen v. Hauptzollamt Kiel (150/81), 7 July 1981: [1981] E.C.R. 1805, [1982] 1 C.M.L.R. 449 Gaz:150/ SpA International Chemical Corporation v. Amministrazione delle Finanze dello Stato (66/80), 13 May 1981: [1981] E.C.R. 1191, [1983] 2 C.M.L.R. 593 Gaz:66/80. TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE Opinion of the Advocate General (Herr Carl Otto Lenz) Facts of the case The proceedings for a preliminary ruling on which I shall give my views today are concerned with the interpretation and effect of Council Directive 71/305 of 26 July 1971 concerning the co-ordination of procedures for the award of public works contracts. [FN1] The court submitting the questions, the Tribunale Amministrativo Regionale per la Lombardia, wishes essentially to establish the content and scope of Article 29(5) of Directive 71/305, and to ascertain whether it is directly applicable and whether national administrative authorities are entitled--or indeed obliged--to apply Article 29(5) even in the face of conflicting national law.

4 FN1 [1971] O.J. Spec. Ed The questions submitted to this court are relevant to the decision on a dispute between Fratelli Costanzo SpA and the Comune di *242 Milano (Municipality of Milan) in which the plaintiff contests the procedure for the award of the contract for the modernisation of the 'G. Meazza Stadium' in preparation for the 1990 World Cup for football. In accordance with section 24(a)(2) of Act 584 of 8 August 1977, implementing Directive 71/305, the criterion for the award was that of the lowest priced bid, subject to the admission of supplementary bids. Under a transitional arrangement introduced by decree-law, intended to accelerate procedures for the award of public works contracts during a two-year period, [FN2] the invitation to tender allowed for the automatic exclusion of abnormally low tenders, determined on a purely arithmetical basis. Through the application of that temporary special rule the plaintiff was excluded from the tendering procedure. The plaintiff was the only tenderer whose bid was less than the basic amount of 82,043,643,386 lire. The contract was won by a consortium (Ing. Lodigiani SpA) whose tender exceeded the set figure by 9.85 per cent. FN2 Section 4 of Decree-Laws 206 of 25 May 1987,302 of 27 July 1987 and 393 of 25 September Subsequently the validity of section 4 of the Decree-Law--the legal basis for the accelerated procedure--was disputed and it was not converted into statute. However, administrative measures adopted under the Decree-Law were declared definitive. The plaintiff argues inter alia that the criteria whose application led to its elimination are incompatible with Article 29(5) of Directive 71/305. The national court has put a series of questions to this Court concerning the interpretation of that directive. It also wishes to know whether the defendant municipal authority was 'empowered, or obliged, to disregard the domestic provisions which conflicted with the... Community provision...' Reference is made to the Report for the Hearing for a fuller account of the facts of the case and the submissions of the parties. Opinion Although the questions submitted by the national court were considered in the written procedure to be inadmissible in part, it must be accepted that the request addressed to the Court was legitimate. At most, there may be some doubt as to the admissibility of the questions in so far as they ask whether national law is compatible with Community law. The Court has consistently held that it is not its duty to examine whether national law is compatible with Community law. In such cases the Court regularly reformulates the questions and lays down the guiding criteria on the basis of which the national court may resolve for itself the issue of compatibility. Whenever questions on the interpretation of Community law are unclear the Court has taken upon itself the task of establishing the *243 relevant issue of

5 Community law and answering the national court accordingly. The questions referred to the Court should be arranged in a logical order as follows: first, the criteria for the interpretation of Article 29(5) of Directive 71/305 must be defined, on the basis of which the compatibility of national legal measures with Community law can be assessed by the national court. Only in the event of their being found to be incompatible does the question arise whether the provision in the directive is directly applicable. If it is, consideration must be given to the extent to which State bodies-- specifically, the administrative authorities of the member-states--are entitled and obliged to give effect to Community law. Question A of the reference for a preliminary ruling asks, in effect, to what extent the legislative content of Article 29(5) of Directive 71/305 must be incorporated in the national provision implementing it. The terms used are somewhat confused, inasmuch as they distinguish between the 'provisions as to results' and the 'provisions as to form and methods' of a directive. That distinction is an oblique reference to the definition of a directive contained in Article 189 EEC, according to which a directive is binding, as to the result to be achieved, upon each member-state to which it is addressed, but leaves to the national authorities the choice of form and methods. The formulation itself shows that it is inappropriate to distinguish within a directive between provisions as to results and provisions as to form and methods, since by definition a directive is silent as to the form and methods of transposition. The extent to which a member-state is obliged to incorporate the provisions of a directive without amendments or, conversely, is permitted to depart from them must be determined by the interpretation of the provision at issue. The basis must be the wording of the provision, and the purpose and objectives of the directive must be ascertained. Article 29(5) of Directive 71/305, which is at issue here, is worded as follows: If, for a given contract, tenders are obviously abnormally low in relation to the transaction, the authority awarding contracts shall examine the details of the tenders before deciding to whom it will award the contract. The result of this examination shall be taken into account. For this purpose it shall request the tenderer to furnish the necessary explanations and, where appropriate, it shall indicate which parts it finds unacceptable. If the documents relating to the contract provide for its award at the lowest price tendered, the authority awarding contracts must justify to the Advisory Committee set up by the Council Decision of 26 July 1971 the rejection of tenders which it considers to be too low. Article 29 of Directive 71/305 enumerates the criteria for the award of a contract and lays down the procedure to be followed in each case. The enumeration of the criteria governing the award and the establishment of the procedure to be observed give *244 transparency to what is done and at the same time represent an element of legal certainty. It is precisely the standardisation of procedure which that Article seeks to achieve that gives potential tenderers a clearer view of the conditions to which they submit when taking part in the tendering procedure. Thus Article 29(5) not only requires the awarding authority to examine tenders

6 which are obviously abnormally low in relation to the transaction, and states how that must be done, but also provides a procedural guarantee for the tenderer concerned. He cannot be disqualified on account of an obviously abnormally low tender until an official procedure to examine it has been conducted. [FN3] FN3 See Case 76/81, Transporoute v. Minister of Public Works: [1982] E.C.R. 417, [1982] 3 C.M.L.R. 382, at para. [18]. A similar procedural guarantee is contained in the obligation, set out in the last sentence of Article 29(5), to state the reasons for the rejection of a tender considered to be too low if the criterion chosen for the award of the contract is that of the lowest price tendered. The commencement, conduct and conclusion of the examination procedure are laid down in binding terms. They constitute a kind of common minimum standard. As a rule it is not possible to depart from such 'binding' provisions of directives on account of exceptional circumstances or particular urgency unless the directive itself recognises exceptions of that kind. By contrast, Article 29(5) does not indicate precisely what is to be understood by an 'obviously abnormally low tender;' no specific procedure is laid down for determining such a tender. Here there is undoubtedly room for specific provisions in the implementing measures of the member-states. For the same reason it is not absolutely essential for the terms to be reproduced verbatim in the implementing measure. It is more important to emphasise the exceptional nature of the low tender, such that it raises doubts whether the tender is a genuine one. The investigation and, where appropriate, elimination of those doubts is the purpose of the examination procedure. The imbalance between the transaction and the tender is what characterises the situation envisaged, and this must be reflected in the implementing measure. Whilst the procedure for designating a tender as being obviously abnormally low is left open, once its abnormality has been affirmed the examination procedure must be initiated. Automatic disqualification would be incompatible with that rule. If an implementing measure meets the criteria set out above, discrepancies in the terms used, such as 'abnormally low tenders' instead of ' obviously abnormally low tenders' do not make the measure inconsistent with Community law (question C (a) and (b)). It remains to be determined (Question B.1) whether a national measure enacted for the implementation of a directive may *245 subsequently be amended by the legislature of the member-state concerned. The first point is that in formal terms a national implementing measure is entirely the same as the autonomous legislation of a member-state. A priori, therefore, it may be amended in just the same way as any other national legal measure. However, in so far as the national legislature was bound by the substance of a directive when adopting the implementing provisions in the first place, the same must necessarily apply to subsequent amendments. In areas in which the national legislature enjoys some discretion it may certainly introduce subsequent amendments. It is, indeed, in accordance with Community

7 law to introduce improvements by reference to Community provisions where the need arises. Provisions which run counter to the provisions and objectives of a directive are not permitted. The form to be taken by amendments which are acceptable in substance is determined by national law alone (Question B.2). Since in formal terms this is autonomous national legislation, procedural principles governing the Community legislative process cannot be transposed to the legal system of a member-state as a supplementary condition of validity. The requirement under Article 190 EEC to state the reasons on which Community acts are based therefore has no bearing on the adoption of national legal provisions. In Question D of the reference to the Court the Tribunale Amministrativo asks whether the municipal authority was bound by Community provisions, in the event that the Court should find the Italian legislation in question to be inconsistent with Article 29(5) of Directive 71/305. Since, as I have already pointed out, it is not for the Court of Justice but for the national court to resolve this point, on the basis of the criteria set out by the Court of Justice, any further discussion must proceed on the assumption that the national implementing measures are incompatible with the directive. In determining whether and to what extent the national administrative authorities are bound by Community provisions in the event of inconsistency between Community and national law, a distinction must first be drawn according to the legal nature of the relevant Community measures. Community regulations, which have general application and are binding in their entirety and directly applicable in all member-states (Article 189(2) EEC), partake without qualification of the primacy of Community law and thus have priority over conflicting national law. This is a hierarchy of legal rules established a priori. The application of a regulation must reflect the primacy of Community law. *246 The effect of a directive calls for a more modulated approach. Since a directive, containing instructions to adopt certain measures, is addressed to the member-state, it does not, in the first instance, give rise to rights or obligations on the part of individuals. The Court has held that exceptions from that rule are possible only where the member-state has failed to comply, or has complied incorrectly, with its obligation under Community law to implement the directive. [FN4] FN4 See Case 102/79, E.C. Commission v. Belgium: [1980] E.C.R. 1473, [1981] 1 C.M.L.R. 282, at para. [12] and Case 31/87, Beentjes v. Netherlands: [1988] E.C.R. 4635, [1990] 1 C.M.L.R. 287, at para. [40]. The judgments of the Court do not seek to put in question the legal nature of directives but amount to sanctioning the unlawful conduct of a member-state, in the interests of Community citizens. The case law on the direct applicability of directives is not intended to secure comprehensive observance of the directive otherwise than through its implementation in national law, as is clear from the fact that the provisions of a directive which impose obligations on individuals

8 cannot be directly applicable. Before a provision of a directive can be directly applicable it must therefore meet specific requirements. In the absence of implementing measures adopted within the prescribed period, individuals may rely upon 'the provisions of a directive [which] appear, as far as their subject-matter is concerned, to be unconditional and sufficiently precise... as against any national provision which is incompatible with the directive or in so far as the provisions define rights which individuals are able to assert against the state.' [FN5] Where the Community legislature seeks to vest rights in the individual through national law and the obligation of the member-state to grant those rights has become definitive--following the expiry of the prescribed period, for example--the member-state's failure to act can no longer work to the detriment of the individual. FN5 Case 8/81, Becker v. Finanzamt Münster-Innenstadt: [1982] E.C.R. 53, [1982] 1 C.M.L.R. 499, at para. [25]. The situation must be viewed differently if the member-state has already adopted an implementing provision. A distinction must be drawn here between correct and incorrect implementation. If the implementation is correct, the individual will be governed solely by the national measure, [FN6] with the result that there will be no possibility of relying upon the directive. [FN7] It is therefore not possible to invoke the directive even if the national measure departs, within the permitted limits, from the content of the directive. Incorrect implementation may consist in a legal measure incompatible with *247 the directive ab initio or a subsequent change in the legal situation which only later causes it to be incompatible. In such circumstances the member-states' obligation under Articles 189 and 5 EEC to implement directives fully and accurately continues to subsist or is revived, as the case may be. In such cases, too, the Court of Justice has allowed individuals to rely on the directive. [FN8] It should be noted in this connection that the subsequent amendment of the legal situation constitutes a separate act contrary to Community law. For their part, State authorities may not rely against individuals on action by the member-state which is contrary to Community law. [FN9] FN6 Case 270/81, Felicitas Rickmers Linie v. Finanzamt für Verkehrsstevern: [1982] E.C.R. 2771, [1982] 3 C.M.L.R. 447, at para. [14] and Case 8/81, supra, at para. [19]. FN7 This does not affect the possibility of interpreting an implementing provision on the basis of the directive. FN8 See Case 102/79, supra, at para. [12]. FN9 See Case 5/84, Direct Cosmetics v. Commissioners of Customs and Excise: [1985] E.C.R. 617, [1985] 2 C.M.L.R. 145, at para. [37] et Seq.

9 On the assumption that the relevant Italian legal provisions are incompatible with Article 29(5) of Directive 71/305, the question arises whether that Article is directly applicable. The question whether the administrative authorities are required to take account of it has already received an affirmative answer. The Court has ruled, in its judgment in Case 31/87, [FN10] that Article 29 of Directive 71/305 may in principle have direct effect. Although the Court did not give that ruling with express reference to paragraph (5) of Article 29 of Directive 71/305, it must be equally valid in respect of that provision: the examination procedure to be commenced in the event of an imbalance between a transaction and a tender which is obviously abnormally low is not subject to any other condition and is laid down in detail. The provision is therefore unconditional and sufficiently precise. Its application does not necessarily presuppose the adoption of further legal measures. FN10 Cited above, at para. [42]. Lastly, Article 29(5) of Directive 71/305 is of such a nature as to create rights for individuals. As the Court ruled in the Transporoute [FN11] judgment, and confirmed in Case 31/87, [FN12] 'the aim of the provision... is to protect tenderers against arbitrariness on the part of the authority awarding contracts.' That aim could not be achieved if it were left to that authority to judge whether or not it was appropriate to seek explanations. The obligation to examine the tender, which has the effect of a procedural guarantee, may be construed as a right vesting in the tenderer who submits an obviously abnormally low tender. FN11 Case 76/81, cited above, at para. [17]. FN12 Cited above, at para. [42]. In order to answer the question whether administrative authorities may be entitled, or indeed obliged, to refrain from applying national law which contravenes Community law (inasmuch as it is incompatible with a directive), it must first be recalled that *248 Community law forms part of the national legal system; [FN13] Community law takes precedence over the law of the member-states; and all State authorities are, as a matter of principle, obliged to conduct themselves in accordance with Community law. FN13 See Case 8/81, cited above, at para. [23]. The obligation to apply Community law thus also concerns State authorities. When the State as a whole is prohibited from relying against individuals on provisions derogating from the directive which were introduced or maintained in disregard of obligations under Community law, the State authorities are also materially affected. [FN14] This comprehensive duty to act in accordance with Community law finds expression in Article 5 EEC.

10 FN14 See Case 5/84, cited above, at paras. [37] and [38]. In previous cases where a national of a member-state has pleaded the direct applicability of the provisions of a directive, the Court has always proceeded on the assumption that he does so in proceedings before the national courts, and that those courts must observe the directly applicable measures as valid Community law. [FN15] FN15 See Case 8/81, cited above, at para. [23]. However that may be, the individual must also have the right to rely on a directly applicable directive in dealings with State administrative authorities. If he succeeds, then the authorities of the member-state have acted in accordance with Community law. From the point of view of Community law there is then no need to bring proceedings before a court of law. Thus the matter does not necessarily have to come before a court. Applied to the present case, this means that if the City of Milan had adhered to the procedure under Article 29(5) and had taken account of the outcome when making its decision, from the point of view of Community law there would have been no need for proceedings before a court of law. Such proceedings are required only if the individual has invoked the directly applicable directive unsuccessfully in his dealings with the authorities. In such a case it is the duty of the courts to safeguard the individual's position with regard to Community law. From the point of view of the individual it is essential that he should be able to rely on the directly applicable measures. If need be he must take the matter to court, and in doing so may avail himself of the full range of national legal remedies, as if he were basing his case on national law alone. However, the possibilities for relying on a directly applicable provision of a directive do not go so far as to create new procedures for the protection of legal interests. [FN16] FN16 See Case 150/80, Rewe v. Hauptzollamt Kiel: [1981] E.C.R *249, [1982] 1 C.M.L.R. 449, at para. [31] et Seq. Since the Court has held in another context that the system of legal protection established by the Treaty, as set out in particular in Article 177, implies 'that it must be possible for every type of action provided for by national law to be available before the national courts for the purpose of ensuring observance of Community provisions having direct effect, on the same conditions concerning admissibility and procedure as would apply were it a question of ensuring observance of national law, [FN17] it may legitimately be said to represent a form of guarantee of legal redress serving to give effect to directly applicable Community law. FN17 See Case 158/80, cited above, at Para. [46].

11 From the point of view of the administrative authorities, on the other hand, a distinction should be drawn according to whether the authorities are in doubt as to the consistency of the national provision with Community law or the dispute has already been the subject of a judicial ruling. In that regard we must base ourselves on established case law, whereby an individual may rely on such provisions in court proceedings. If he may do so before the courts he must also be accorded the right to do so in dealings with the administrative authorities, so as to ensure that those authorities are fully informed of the individual's basic position in the matter to be resolved. If, however, the individual has the right to present his arguments to the administrative authorities, then those authorities must be given the right to agree with them. It would indeed be absurd to prevent the authorities from making a decision consistent with Community law, as they are ultimately obliged to do. The sole question is whether it is possible to oblige them under Community law to do so. In my view it is not possible, because it is not open to the administrative authorities to refer the matter to the Court of Justice and obtain a ruling on the direct applicability of the relevant provision of the directive. If it applies the directly applicable provisions of a directive and disregards conflicting national law, it does so at its own risk and without the endorsement of the Court. In my opinion they are entitled to act in this manner but are not obliged to do so, because the Treaty does not afford it the requisite legal protection for doing so. That conclusion also resolves the problem raised during the oral procedure by the representative of the Commission, namely whether the Commission has two opportunities to bring an action against a member-state which has not given effect to a directive--first on account of failure to implement it and secondly for failure to apply it. In so far as the administrative authorities are not, I submit, obliged to apply directly a provision in a directive, there is no possibility of bringing an action against a member-state. This is where it differs from a regulation. The administrative authorities of the member-states are not merely entitled but positively obliged to *250 apply a regulation, even in the face of conflicting national law. In doing so they enjoy the protection of Article 189 EEC: the binding nature and direct applicability of a regulation are beyond doubt. The application of provisions of that kind falls within the normal duties of all administrative authorities. The counter-arguments, which basically rely on the thesis that the differences between a directive and a regulation have been effaced, do not refute my view, in so far as administrative authorities are not also obliged to observe directly applicable directives. In that regard, the fact that an authority has no legal means of referring the matter to the Court directly for a preliminary ruling does not represent a problem. It will apply the directly applicable provision of the directive only if it is convinced that its applicability is, in the specific circumstances of the case, beyond doubt. In that event it acts as a body giving effect to Community law. For the rest, the duty of the legislature to amend national law is unaffected, since only proper implementation can create the obligation for the administrative authority to give effect to a legal situation consistent with the directive.

12 The circumstances are similar in the event of a prior judicial ruling. Once the conflict of rules has been resolved in abstracto the administrative authorities cannot be prevented from applying the directly applicable measures in concreto, especially since they are no longer entitled to rely against an individual on the measures contrary to Community law. [FN18] The matter need not necessarily have been resolved by a national court but may instead have been settled by the Court of Justice in previous proceedings for a preliminary ruling. Although preliminary rulings do not formally have effect erga omnes, the Court has held in respect of rulings concerning the validity of Community provisions in proceedings under Article 177 EEC that a judgment, although addressed only to the national court which has requested it, is sufficient reason for any other national court to regard the act in question as void for the purposes of a judgment which it has to give. The Court of Justice bases its decision on the requirements of a uniform application of Community law and the need for legal certainty. [FN19] An individual must also have the right to rely on a directive in dealings with administrative authorities, and those authorities must be entitled to comply with his request. FN18 See Case 5/84, cited above, at Paras. [37] and [38]. FN19 Case 66/80, International Chemical Corporation v. Amministrazione delle Finanze dello Stato: [1981] E.C.R. 1191, [1983] 2 C.M.L.R Subject to those stringent conditions, a directly applicable provision of a directive may be given the same effect as other provisions of Community law having general application. Since, in those circumstances, the conflict of rules is settled by their abstract hierarchical relationship no further judicial proceedings are needed. *251 In view of the fact that Article 29(5) of Directive 71/305 has been held in a preliminary ruling to be directly applicable, [FN20] it may be inferred for the purpose of answering the questions now before the Court that the administrative authorities were entitled to apply Article 29(5) of Directive 71/305 directly. It is true that the judgment referred to was not delivered until after the authority had made its decision. [FN21] FN20 See Case 31/87, cited above. FN21 The judgment in Case 31/87 was given on 20 September 1988, the contested decision on 24 July 1987 (reference to the Court dated 16 December 1987; first paragraph under heading 'Facts of the case'). Nevertheless, the illegality of a procedure for the automatic exclusion of an 'obviously abnormally low tender' had already been established by the Court. [FN22] In substantive law there were therefore cogent grounds for the authority concerned to refrain from applying a legal measure requiring exclusion on a purely arithmetical basis.

13 FN22 Case 76/81, cited above. Although it is therefore possible to infer justification under Community law for refraining to apply the national legal measures in question, no obligation to do so can be derived from the above considerations. Whenever serious doubts remain as to the applicability of Community law, the administrative authorities must have the opportunity of seeking guidance. Even the courts are at liberty to submit further questions to the Court of Justice for clarification following an earlier preliminary ruling. Indeed, they are entitled to do so whether the earlier ruling relates to another legal dispute or even to the same legal proceedings. Costs In so far as the parties to the main action are concerned, the proceedings are in the nature of a step in the proceedings before the national court. The decision on costs is therefore a matter for that court. The costs incurred by the Spanish and Italian Governments and by the Commission are not recoverable. Conclusion (1) The examination procedure required by Article 29(5) of Directive 71/305 when tenders are 'obviously abnormally low' is indispensable and must therefore be incorporated in national implementing measures (Question A). The precise definition of an 'obviously abnormally low' tender, on the other hand, is for the national legislature to determine (Question C). (2) In principle, every member-state is entitled to amend the measures adopted to give effect to a directive, provided that the provisions remain, in substance, within the limits laid down by the directive. The form and methods by which *252 amendments are made are governed by national law alone (Question B). (3) In the event that national implementing provisions are incompatible with the directive, the administrative authorities are entitled--and, once the content and scope of the measures have been clarified in judicial proceedings, obliged--to refrain from applying national law. However, if the authority is in doubt as to the legal position it is quite at liberty to seek clarification from the courts, and in doing so may use any means available under national law (Question D). JUDGMENT [1] By order of 16 December 1987, which was received at the Court Registry on 30 March 1988, the Tribunale Amministrativo Regionale per la Lombardia referred to the Court for a preliminary ruling under Article 177 EEC a number of questions on the interpretation of Article 29(5) of Council Directive 71/305 of 26 July 1971 concerning the co-ordination of procedures for the award of public works contracts, [FN23] and Article 189(3) EEC. FN23 [1971] O.J. Spec. Ed. 682.

14 [2] The questions were raised in proceedings brought by Fratelli Costanzo SpA (hereinafter referred to as 'Costanzo'), the plaintiff in the main proceedings, for the annulment of a decision of the Giunta Municipale (Municipal Executive Board) of Milan eliminating the tender submitted by Costanzo from a tendering procedure for a public works contract and awarding the contract in question to Ing. Lodigiani SpA (hereinafter: 'Lodigiani'). [3] Article 29(5) of Council Directive 71/305 provides as follows: If, for a given contract, tenders are obviously abnormally low in relation to the transaction, the authority awarding contracts shall examine the details of the tenders before deciding to whom it will award the contract. The result of this examination shall be taken into account. For this purpose it shall request the tenderer to furnish the necessary explanations and, where appropriate, it shall indicate which parts it finds unacceptable. If the documents relating to the contract provide for its award at the lowest price tendered, the authority awarding the contracts must justify to the Advisory Committee set up by the Council Decision of 26 July 1971 the rejection of tenders which it considers to be too low. [4] Article 29(5) of Directive 71/305 was implemented in Italy by the third paragraph of section 27 of Act 584 of 8 August 1977 amending the procedures for the award of public works contracts in accordance with the directives of the European Economic Community. [FN24] FN24 [1977] G.U.R.I *253. That provision is worded as follows: If, for a given contract, tenders are abnormally low in relation to the transaction, the authority awarding the contract shall, after requesting the tenderer to furnish the necessary explanations and after indicating, where appropriate, which parts it considers unacceptable, examine the details of the tenders and may disallow them if it takes the view that they are not valid; in that event, if the call for tenders provides that the lowest tender price is the criterion for the award of the contract, the awarding authority is obliged to notify the rejection of the tenders, together with its reasons for doing so, to the Ministry of Public Works, which is responsible for forwarding the information to the Advisory Committee for Public Works Contracts of the European Economic Community within the period laid down by the first paragraph of section 6 of this Act. [5] Subsequently, in 1987, the Italian Government adopted three decree-laws in succession which provisionally amended the third paragraph of section 24 of Act 584 (Decree-Law 206 of 25 May 1987; [FN25] Decree-Law 302 of 27 July 1987; [FN26] and Decree-Law 393 of 25 September 1987 [FN27]). FN25 [1987] G.U.R.I. 5. FN26 [1987] G.U.R.I. 3.

15 FN27 [1987] G.U.R.I. 3. [6] The three decree-laws each contain a section 4 worded in identical terms, as follows: In order to speed up the procedures for the award of public works contracts, for a period of two years from the date on which this decree enters into force tenders with a percentage discount greater than the average percentage divergence of the tenders admitted, increased by a percentage which must be stated in the call for tenders, shall be considered abnormal for the purposes of the third paragraph of section 24 of Act 584 of 8 August 1977 and shall be excluded from the tendering procedure. [7] The decree-laws lapsed because they were not converted into statutes within the period prescribed by the Italian constitution. However, a subsequent Act provided that the effects of legal measures adopted pursuant to them were to remain valid (section 1(2) of Act 478 of 25 November 1987 [FN28]). FN28 [1987] G.U.R.I. 3. [8] In preparation for the 1990 World Cup for football, to be held in Italy, the Comune di Milano issued a restricted call for tenders for alteration work on a football stadium. The criterion chosen for awarding the contract was that of the lowest price. [9] The call for tenders stated that in accordance with section 4 of Decree-Law 206 of 25 May 1987 tenders which exceeded the basic amount fixed for the price of the work by a percentage more than ten points below the average percentage by which the tenders admitted exceeded that amount would be considered anomalous and consequently eliminated. [10] The tenders admitted to the procedure exceeded the basic amount fixed for the price of the work by an average of per *254 cent. In accordance with the call for tenders any tender which did not exceed the basic amount by at least 9.48 per cent. was to be automatically eliminated. [11] The tender submitted by Costanzo was less than the basic amount. Accordingly, on 6 October 1987 the Giunta Municipale, on the basis of section 4 of Decree-Law 393 of 25 September 1987, which in the meantime had replaced the decree-law cited in the call for tenders, decided to exclude Costanzo's bid from the tendering procedure and to award the contract to Lodigiani, which had submitted the lowest tender of those which fulfilled the condition set out in the call for tenders. [12] Costanzo challenged that decision in proceedings before the Tribunale Amministrativo Regionale per la Lombardia, claiming inter alia that it was illegal on the ground that it was based on a decree-law which was itself incompatible with Article 29(5) of Council Directive 71/305. [13] The national court therefore referred the following questions to the Court of Justice for a preliminary ruling: A. Given that, under Article 189 of the EEC Treaty, the provisions contained in a

16 directive may relate to the 'result to be achieved' (hereinafter referred to as 'provisions as to results') or else be concerned with the 'form and methods' required to achieve a given result (hereinafter referred to as 'provisions as to form and methods'), is the rule contained in Article 29(5) of Council Directive 71/305 of 26 July 1971 (where it provides that--should a tender be obviously abnormally low--the authority must 'examine the details' of the tender and request the tenderer to furnish the necessary explanations, indicating where appropriate which parts it finds unacceptable) a 'provision as to results' and therefore of such a nature that the Italian Republic was obliged to 'transpose' it without any amendment of substance (as indeed it did, by the third paragraph of section 24 of Act 584 of 8 August 1977) or is it a 'provision as to form and methods', with the result that the Italian Republic could derogate from it by providing that where a tender is abnormally low the tenderer must automatically be eliminated from the tendering procedure, without any 'examination of the details' and without any request to the tenderer to furnish 'explanations' for the 'abnormal tender'? B. If the reply to Question (A) is negative (in the sense that Article 29(5) of Council Directive 71/305 is to be held to be a 'provision as to form and methods'): B.1 Did the Italian Republic (after 'transposing' the aforesaid provision by way of Act 577 of 5 August 1977 without introducing any amendment of substance regarding the procedure to be followed in cases where a tender is abnormally low) retain the power to amend the domestic implementing provision? In particular, could section 4 of Decree-Law 206 of 25 May 1987, Decree-Law 302 of 27 July 1987 and Decree-Law 393 of 25 September 1987 (whose wording is identical) amend section 24 of Act 584 of 8 August 1977? B.2 Could the (identically worded) sections 4 of the decree-laws mentioned above amend Article 29(5) of Council Directive *255 71/305, as implemented by Act 584 of 5 April 1977, without stating adequate reasons therefor, regard being had to the fact that a statement of reasons--which is necessary for Community legislation (cf. Article 190 of the EEC Treaty)--appears also to be necessary for domestic legislation introduced to give effect to Community provisions (which is therefore 'sub-primary' legislation and, in the absence of indication to the contrary, must also be subject to the rule which requires 'primary' legislation to state reasons)? C. Is there, in any event, a conflict between Article 29(5) of Council Directive 71/305 and the following provisions: (a) the third paragraph of section 24 of Act 584 of 8 August 1977 (which refers to 'abnormally low' tenders, whereas the directive is concerned with tenders which are 'obviously' abnormally low and provides for examination of the details only in cases of 'obvious' abnormality); (b) Section 4 of Decree-Laws 206 of 25 May 1987, 302 of 27 July 1987 and 393 of 25 September 1987 (which make no allowance for preliminary examination of the details or a request for clarification to the party concerned, contrary to Article 29(5) of the directive; furthermore, the decree-laws mentioned above do not refer to 'obviously' abnormal tenders and to that extent appear to be invalid, as does Act 584 of 8 August 1977)?

17 D. If the Court of Justice rules that the aforesaid Italian legislative provisions conflict with Article 29(5) of Council Directive 71/305, was the municipal authority empowered, or obliged, to disregard the domestic provisions which conflicted with the aforesaid Community provision (consulting the central authorities if necessary), or does that power or obligation vest solely in the national courts? [14] Reference is made to the Report for the Hearing for a fuller account of the facts of the case before the national court, the applicable legislation, the course of the procedure, and the written observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court. The second part of the third question and the first question [15] In the second part of the third question the Tribunale Amministrativo Regionale seeks in essence to establish whether Article 29(5) of Council Directive 71/305 prohibits member-states from introducing provisions which require the automatic exclusion from procedures for the award of public works contracts of certain tenders determined according to a mathematical criterion, instead of obliging the awarding authority to apply the examination procedure laid down in the directive, giving the tenderer an opportunity to furnish explanations. In its first question it asks whether the member-states may, when implementing Council Directive 71/305, depart to any material extent from Article 29(5) thereof. *256 [16] With regard to the second part of the third question it should be noted that Article 29(5) of Directive 71/305 requires the awarding authority to examine the details of tenders which are obviously abnormally low, and for that purpose obliges the authority to request the tenderer to furnish the necessary explanations. Article 29(5) further requires the awarding authority, where appropriate, to indicate which parts of those explanations it finds unacceptable. Finally, if the criterion adopted for the award of the contract is the lowest price tendered, the awarding authority must justify to the Advisory Committee set up by the Council Decision of 26 July 1971 [FN29] the rejection of tenders which it considers to be too low. FN29 [1971] O.J. Spec. Ed [17] The Comune di Milano and the Italian government maintain that it is in keeping with the aim of Article 29(5) to replace the examination procedure which it envisages, giving the tenderer an opportunity to state its views, with a mathematical criterion for exclusion. They point out that the aim of that provision is, as the Court ruled in Case 76/81, Transporoute v. Minister of Public Works, [FN30] to protect tenderers against arbitrariness on the part of the authority awarding the contract. A mathematical criterion for exclusion affords an absolute safeguard. It has the further advantage of being faster in its application than the procedure laid down by the directive. FN30 [1982] E.C.R. 417 at 428, [1982] 3 C.M.L.R. 382 at 396.

18 [18] That argument cannot be upheld. A mathematical criterion for exclusion deprives tenderers who have submitted exceptionally low tenders of the opportunity of demonstrating that those tenders are genuine ones. The application of such a criterion is contrary to the aim of Directive 71/305, namely to promote the development of effective competition in the field of public contracts. [19] The answer to the second part of the third question must therefore be that Article 29(5) of Council Directive 71/305 prohibits member-states from introducing provisions which require the automatic exclusion from procedures for the award of public works contracts of certain tenders determined according to a mathematical criterion, instead of obliging the awarding authority to apply the examination procedure laid down in the directive, giving the tenderer an opportunity to furnish explanations. [20] With regard to the first question it should be observed that it was in order to enable tenderers submitting exceptionally low tenders to demonstrate that those tenders are genuine ones that the Council, in Article 29(5) of Directive 71/305, laid down a precise, detailed procedure for the examination of tenders which appear to be abnormally low. That aim would be jeopardised if member-states were able, when implementing Article 29(5) of the directive, to depart from it to any material extent. *257 [21] The answer to the first question must therefore be that when implementing Council Directive 71/305 member-states may not depart to any material extent from the provisions of Article 29(5) thereof. The second question [22] In its second question the national court asks whether, after implementing Article 29(5) of Council Directive 71/305 without departing from it to any material extent, member-states may subsequently amend the domestic implementing provision, and if so whether they must give reasons for doing so. [23] The national court raised this question only in the event that the answer to the first question should be that member-states could, when implementing Article 29(5) of Directive 71/305, depart materially from it. [24] In the light of the answer given to the first question the second question is devoid of purpose. The first part of the third question [25] In the first part of its third question the national court seeks to establish whether Article 29(5) of Council Directive 71/305 allows member-states to require the examination of tenders whenever they appear to be abnormally low, and not only when they are obviously abnormally low. [26] The examination procedure must be applied whenever the awarding authority is contemplating the elimination of tenders because they are abnormally low in relation to the transaction. Consequently, whatever the threshold for the

19 commencement of that procedure may be, tenderers can be sure that they will not be disqualified from the award of the contract without first having the opportunity of furnishing explanations regarding the genuine nature of their tenders. [27] It follows that the answer to be given to the first part of the third question is that Article 29(5) of Council Directive 71/305 allows member-states to require that tenders be examined when those tenders appear to be abnormally low, and not only when they are obviously abnormally low. The fourth question [28] In the fourth question the national court asks whether administrative authorities, including municipal authorities, are under the same obligation as a national court to apply the provisions of Article 29(5) of Council Directive 71/305 and to refrain from applying provisions of national law which conflict with them. *258 [29] In Case 8/81, Becker v. Finanzamt Münster-Innenstadt [FN31] and Case 152/84, Marshall v. Southampton and South-West Hampshire Area Health Authority [FN32] the Court held that wherever the provisions of a directive appear, as far as their subject-matter is concerned, to be unconditional and sufficiently precise, those provisions may be relied upon by an individual against the State where the State has failed to implement the directive in national law by the end of the period prescribed or where it has failed to implement the directive correctly. FN31 [1982] E.C.R. 53 at 71, [1982] 1 C.M.L.R. 499 at 512. FN32 [1986] E.C.R. 723 at 748, [1986] 1 C.M.L.R. 688 at 710. [30] It is important to note that the reason for which an individual may, in the circumstances described above, rely on the provisions of a directive in proceedings before the national courts is that the obligations arising under those provisions are binding upon all the authorities of the member-states. [31] It would, moreover, be contradictory to rule that an individual may rely upon the provisions of a directive which fulfil the conditions defined above in proceedings before the national courts seeking an order against the administrative authorities, and yet to hold that those authorities are under no obligation to apply the provisions of the directive and refrain from applying provisions of national law which conflict with them. It follows that when the conditions under which the Court has held that individuals may rely on the provisions of a directive before the national courts are met, all organs of the administration, including decentralised authorities such as municipalities, are obliged to apply those provisions. [32] With specific regard to Article 29(5) of Directive 71/305, it is apparent from the discussion of the first question that it is unconditional and sufficiently precise to be relied upon by an individual against the State. An individual may therefore plead that provision before the national courts and, as is clear from the foregoing,

20 all organs of the administration, including decentralised authorities such as municipalities, are obliged to apply it. [33] The answer to the fourth question must therefore be that administrative authorities, including municipal authorities, are under the same obligation as a national court to apply the provisions of Article 29(5) of Council Directive 71/305 and to refrain from applying provisions of national law which conflict with them. Costs [34] The costs incurred by the Spanish Government, the Italian Government and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to *259 the main proceedings are concerned, in the nature of a step in the action before the national court, the decision on costs is a matter for that court. Order On those grounds, THE COURT, in answer to the questions referred to it by the Tribunale Amministrativo Regionale per la Lombardia by order of 16 December 1987, HEREBY RULES: 1. Article 29(5) of Council Directive 71/305 prohibits member-states from introducing provisions which require the automatic exclusion from procedures for the award of public works contracts of certain tenders determined according to a mathematical criterion, instead of obliging the awarding authority to apply the examination procedure laid down in the directive, giving the tenderer an opportunity to furnish explanations. 2. When implementing Council Directive 71/305, member-states may not depart to any material extent from the provisions of Article 29(5) thereof. 3. Article 29(5) of Council Directive 71/305 allows member-states to require that tenders be examined when those tenders appear to be abnormally low, and not only when they are obviously abnormally low. 4. Administrative authorities, including municipal authorities, are under the same obligation as a national court to apply the provisions of Article 29(5) of Council Directive 71/305 and to refain from applying provisions of national law which conflict with them. (c) Sweet & Maxwell Limited [1990] 3 C.M.L.R. 239 END OF DOCUMENT