Michael Bowsher QC and Anneliese Blackwood win important case on the application of Article 56 TFEU to development contracts

28 Sep 2012

Hounslow Council proposed to enter into an agreement with Legal & General (“L&G”) which would have allowed L&G to develop a parcel of land in Hounslow which was partially owned by the Council. Quidnet, a developer who owned property in Hounslow, challenged the legality of the proposed agreement on the basis that even if it was not a works contract pursuant to the Public Contracts Regulations 2006 (the determination of this issue had been stayed) the proposed agreement was in breach of Article 56 of the Treaty on the Functioning of the European Union (“TFEU”) as there had been insufficient advertising of the opportunity to enter into the proposed agreement.

Mr Justice Coulson held that there was no breach of Article 56 TEFU because:

i) Article 56 could not be applied to activities which were confined in all respects within a single Member State. The dispute before the court was wholly internal to the UK as the parties involved in the proceedings were all English and the land which was the subject matter of the proposed agreement was in England.
ii) The proposed agreement, when properly constructed, did not impose an obligation on L&G to provide services and the substance of the proposed agreement was for the grant of a long lease not the provision of services.
iii) The proposed agreement did not impose any restriction on the ability of third parties to provide services.

Mr Justice Coulson also added that, even if he was wrong and Article 56 TFEU did apply to the proposed agreement, he would be inclined to exercise his discretion and refuse to grant the declaration sought by Quidnet. The reasons he gave were that the claim was hypothetical, in the sense that there was no evidence that a party from another Member State had any interest in the contracting with the Council instead of L&G, and that damages ought to be an adequate remedy.

Please click below for the judgment.

AG Quidnet Hounslow LLP v Mayor and Burgesses of the London Borough of Hounslow