Under most construction contracts, the contractor takes on the ground conditions risk. However, a recent case has demonstrated that the risk can fall on the employer.
The Opinion covers the question whether a subsidiary that is entitled to provide works, services or supplies to its parent without the need for an EU tender process (1) has to follow the EU procurement rules for its own purchases.
We have always said that this is the correct legal position, but there is now support for this view from the Advocate General (2). The case in which the Advocate General issued this Opinion concerned a wholly owned subsidiary of the state railway company that manufactured and maintained railway rolling stock for that company.
Although Opinions of the Advocate General are not technically law, they are strongly persuasive and, more often than not, are followed by the European Court of Justice. We are, therefore, expecting this Opinion to be followed when the case finally comes before the European Court.
Assuming the European Court follows the Advocate General’s opinion, any subsidiary of a registered provider, local authority or other contracting authority that relies on the exemption for the supply of works or services to its parent company will need to follow the EU procurement rules for its own purchases.
(1) Under Regulation 12 of the Public Contracts Regulations 2015, which enacted the Teckal case.
(2) In the case of LitSpecMet UAB v Vilniaus lokomotyvu remonto depas UAB.
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