Under the European public procurement framework, contracting authorities may award contracts directly to a legally separate entity without applying standard tender procedures, provided specific conditions are met. These include the requirement that the contracting authority exercises control over the entity comparable to that exercised over its own departments. In addition, the controlled entity must carry out more than 80% of its activities for the controlling authority or authorities, calculated on the basis of average total turnover.
In practice, questions arise when the controlled entity is part of a corporate group. Two interpretations are possible in such cases. The 80% threshold can either be assessed solely on the turnover of the controlled legal entity, or on the turnover of the group to which it belongs. In its judgment of 15 January, the ECJ confirmed the latter approach. The Court held that the relevant assessment is not limited to the activities of the controlled entity itself, but may also include activities more broadly linked to it through group structures.
The case concerned public contracts for the collection and processing of residual household waste. These contracts had been directly awarded under the in-house exemption without an open tender procedure. The Dutch waste management company AVR-Afvalverwerking BV (AVR) challenged the award, arguing that the turnover of the entire group must be taken into account in order to reflect the underlying economic reality. According to AVR, focusing only on the turnover of the controlled entity could allow the in-house exemption to be circumvented by separating activities within a group, while other group companies continue to operate on the open market.
