The Finnish Supreme Administrative Court gave a decision concerning the aggregation of contracts between the Finnish Social Insurance Institution (Kela) and taxi companies

The Finnish Supreme Administrative Court gave a decision concerning the aggregation of contracts between the Finnish Social Insurance Institution (Kela) and taxi companies after requesting a preliminary ruling from the Court of Justice of the European Union

KHO 2016:37

C-269/14 Kansaneläkelaitos

 

The question was about the framework agreement between the Finnish Social Insurance Institution (Kela) and the Finnish Taxi Union (Suomen Taksiliitto ry) concerning an electronic scheme for direct reimbursement of transport costs of insured persons and a system of booking journeys. The reimbursement of the travel expenses is specified by the rules of the Health Insurance Act (1224/2004) and the Act on the Rehabilitation Benefits and Rehabilitation Allowance Granted by the Social Insurance Institution (566/2005) (566/2005).

According to the framework agreement, each insurance district of Kela designated one regional taxi company to serve as the dispatch center for taxi trips reimbursed by Kela, and entered into agreements with them for electronic compensation for the part of the taxi fares covered by Kela. Individual taxi companies can join the arrangement only by signing a contract with the regional taxi company that has entered into the agreement with Kela.

Several taxi companies filed a complaint to the Market Court concerning the frame agreement. The Market Court stated that based on the information given, the Act on Public Contracts should be applied to the framework agreement. To find out the detailed legal rules to be applied to the case, it was crucial to figure out, whether the framework agreement and the contracts between the regional designated taxi companies and the individual taxi companies was to be regarded as an ordinary service contract or a service concession.

The decision of the Market Court concerned the different levels of the agreement, the responsibilities, the liabilities, and the risk distribution, and the Court came to the conclusion that the frame agreement should be regarded as a service concession specified in the Act on Public Contracts that should have been put out to tender with the procedures defined in the Act of Public Contracts.

Kela appealed to the Supreme Administrative Court of the judgement of the Market Court. Kela stated in the complaint, for example, that the purpose of the framework agreement was not to procure the service to the procuring unit but to implement the direct reimbursement scheme specified in the Health Insurance Act; that there was no genuine financial interest in the framework agreement; and that that there was no sufficient risk involved in the arrangement.

The complaint provoked a plenty of arguments, counter-arguments, and statements concerning the nature and impacts of the framework agreement. The Supreme Administrative Court decided to issue an interim measure, by which the implementation of the decision of the Market Court was suspended, and requested a preliminary ruling from the Court of Justice of the European Union. The Finnish Supreme Administrative Court referred the following questions to the CJEU:

  1. Does a service concession extend to a complex arrangement which includes the payment of reimbursements within the authority’s organizational responsibility in the form of a direct reimbursement scheme, and at the same time a system of booking journeys which is not within the authority’s responsibility?
  2. What significance should be given to the indirect consequence of the scheme that the purpose of the booking system is to reduce the transport costs payable from public funds by Kela?

CJEU processed the questions jointly, and gave its judgment (C-269/14 Kansaneläkelaitos) on 21st May 2015. In the judgement it was stated that the framework agreement had to be considered as a service concession, required that the contracting authority has transferred to the concession holder all or at least a significant share of the risk which it faces. The ECJ stated that it was up to the national court to assess whether there has been a transfer of all, or a significant share, of the risk.

After the CJEU judgement, the process continued in the Supreme Administrative Court. According to the legal rulings of the CJEU judgement, the judicial question of the arrangement was now limited to the question of the distribution of the financial risk. The Supreme Administrative Court had to assess whether the arrangement was a service concession by taking into account all the features of the aggregation of contracts, and by considering, whether the risk related to the service had been transferred completely, or at least in a significant amount, from Kela to the concession assignees. The Court paid attention to facts that because of the electronic direct reimbursement, Kela did not have to manage the large number of contracts with individual taxi companies anymore, that the taxi companies had to make investments to implement the electronic direct reimbursement system, and that the incomes of the regional taxi companies depended directly on the telephone costs charged and the compensations paid by the individual taxi companies.

The Court stated that these factors proved that an essential part of the technical, financial and administrative risks belonging to Kela had in fact been transferred to the regional taxi companies. Thus the aggregation of contracts was a service concession that should have been put out to tender according the rules of the Act of Public Contracts.

Considering the sanctions for the breach of the Act on Public Contracts, the Supreme Administrative Court stated, contrary to the Market Court, that the sanctions specified in the Section 94, clauses 1-3, of the Act on Public Contracts, could not be applied to the case, as the petition has been initiated after the conclusion of the contract. The only possible sanction was to order the contracting authority to pay compensation to a party who would have had a genuine chance of winning the contract if the procedure had been correct. However, because in this case the contract had not been put out to tender at all, there were so many uncertainties concerning the results of the procurement process, that the prerequisites for ordering compensations were not fulfilled.