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Content updated: 06-05-2022 14:50

On in-house transactions concluded by municipalities for the provision of public services

05-05-2022

The Constitutional Court, by its ruling of 5 May 2022, declared point 2 of paragraph 2 (wording of 20 December 2019) of Article 10 of the Law on Public Procurement to be not in conflict with the Constitution, insofar as an in-house transaction may be concluded under the conditions laid down in the law in cases where, under the procedure laid down in the Law on Public Procurement, a municipality assigns the provision of the services specified in point 1 of paragraph 2 of Article 9 of the Law on Local Self-Government to an already established public service provider.

The Constitutional Court held that the impugned legal regulation creates the preconditions for municipalities to implement the independent functions assigned to them by the law in relation to organising the provision of public services (water supply, wastewater treatment, heat supply, waste management, passenger transportation, the maintenance and management of territories and streets, catering services in educational, socialcare, or healthcare establishments), by concluding in-house transactions (i.e. without applying the respective requirements set out in the Law on Public Procurement), if the provision of public services cannot be organised by choosing a service provider through public procurement in accordance with the procedure laid down by laws and other legal acts. In such an exceptional case, in-house transactions may be concluded only where the aim is to ensure that the above-mentioned public services are provided on a permanent basis, are available to all residents, and are of high quality, as well as only after the assessment of the impact of such a decision on fair competition is made.

Thus, such a legal regulation, as held by the Constitutional Court, creates the preconditions for municipalities, in organising the provision of public services necessary to the territorial community, to pay regard to the principles forming the constitutional basis of the national economy (including, the requirements stemming from the guarantee of freedom of individual economic activity and initiative, fair competition, and the protection of consumer rights, as consolidated in Article 46 of the Constitution) and other constitutional imperatives (including, the requirements of the protection of human health and the environment), among other things, to organise the provision of public services necessary to the territorial community in such a manner that the market for the provision of public services is not monopolised, the equality of the participants of that market is not denied, and the availability, continuity, and good quality of such public services are ensured.

The Constitutional Court emphasised that, only based on such a systematic interpretation of the impugned legal regulation to the extent indicated in conjunction with the provisions of that law and other laws, the legal regulation in question should be regarded as not violating the requirements stemming from paragraphs 1, 3, and 4 of Article 46 and paragraph 2 of Article 120 of the Constitution and the constitutional principle of a state under the rule of law.