Council of State rejects appeal against annulment of in-house award for asbestos inventory — requirement of own representative in decision-making bodies of intermunicipal entity not met
The Council of State rejects the annulment appeal brought by SCRL Sambre & Biesme against the SWL's decision to annul the award of an asbestos inventory contract to intermunicipal entity IGRETEC under horizontal cooperation (Article 12(3) of Directive 2014/24/EU), because Sambre & Biesme does not have its own representative in IGRETEC's decision-making bodies, as required by the Court of Justice (judgments C-383/21 and C-384/21 of 22 December 2022).
What happened?
SCRL Sambre & Biesme, a public housing company supervised by the Société wallonne du logement (SWL), sought to award an asbestos inventory contract for its real estate portfolio to the intermunicipal entity IGRETEC. Sambre & Biesme invoked the in-house exception under Article 12(3) of Directive 2014/24/EU (horizontal cooperation between contracting authorities), claiming that it jointly exercised control analogous to control over its own departments together with other shareholders. However, Sambre & Biesme held a participation of only 0.0000049% in IGRETEC. The SWL, exercising its supervisory authority over housing companies, annulled the award decision on 11 March 2022. Sambre & Biesme lodged an annulment appeal before the Council of State. The central question concerned Article 12(3) of Directive 2014/24/EU, which allows a contract to be excluded from the scope of the procurement rules when it is concluded exclusively between contracting authorities that jointly exercise control analogous to control over their own departments, provided that those authorities are represented in the decision-making bodies of the controlled entity. The Council of State had referred preliminary questions to the Court of Justice of the European Union (joined cases C-383/21 and C-384/21), which delivered its judgment on 22 December 2022. The Court of Justice held that Article 12(3) has direct effect: an economic operator may rely on this provision before national courts to challenge reliance on the in-house exception. Regarding the representation requirement, the Court clarified that the contracting authority concerned must be represented by its own representative in the decision-making bodies of the controlled entity. The fact that a municipal councillor of the Municipality of Farciennes sat on both the board of Sambre & Biesme and the bodies of IGRETEC was insufficient: this councillor sat on IGRETEC's bodies as a representative of the Municipality of Farciennes, not as a representative of Sambre & Biesme. The interests of the municipality and the housing company do not necessarily coincide. The Council of State applied this case law and found that Sambre & Biesme did not have its own representative in IGRETEC's decision-making bodies. The condition of Article 12(3) was therefore not met. The SWL had lawfully annulled the award. The single plea was unfounded. The appeal was rejected.
Why does this matter?
This ruling directly applies the Court of Justice case law (C-383/21 and C-384/21) on the horizontal in-house exception. Three key takeaways emerge. First, Article 12(3) of Directive 2014/24/EU has direct effect and can be invoked by a third-party economic operator to challenge improper reliance on the in-house exception. Second, the representation requirement in the decision-making bodies demands the contracting authority's own representative: a natural person sitting on the bodies of the controlled entity in a different capacity (as a municipal representative, for instance) does not satisfy this requirement, even if that person also sits on the bodies of the contracting authority invoking the exception. Third, a negligible participation (0.0000049%) is insufficient to establish the joint analogous control required for the in-house exception.
The lesson
The horizontal in-house exception (Article 12(3), Directive 2014/24/EU) requires that each participating contracting authority be represented in the decision-making bodies of the performing entity by its own representative. The accumulation of mandates by the same natural person is insufficient if that person does not specifically represent the contracting authority in question. In practice, housing companies (or other small contracting authorities) wishing to use an intermunicipal entity through the in-house exception must ensure they formally designate their own representative there. Failing that, the contract must be awarded through ordinary competitive procurement rules.
Ask yourself
As a contracting authority wishing to invoke the horizontal in-house exception: do I have my own representative, designated in that capacity, in the decision-making bodies of the entity to which I wish to award the contract? Does this representative act on behalf of my organisation, or do they sit in a different capacity (representative of a municipality, of another entity)? Is my participation in the performing entity sufficient to establish joint analogous control? As a third-party economic operator: if a contracting authority invokes the in-house exception to avoid competitive procurement, have I verified that all conditions of Article 12(3) are actually met?
About this database
The Council of State (Raad van State / Conseil d'État) is Belgium's supreme administrative court. In disputes over public procurement — from contract awards to tenderer exclusions — the Council of State is the final arbiter. The rulings in this database are summarised by TenderWolf in plain language, with practical lessons for tenderers and contracting authorities. View all rulings →