WIXLIB

RE: MANSTON AIRPORT, THANET, KENTOPINIONIntroduction1. Manston Airport (“the Airport”) is owned by a company, Manston SkysportLimited, controlled by Mrs Ann Gloag. It acquired Manston in December 2013 for 1 and, despite public assurances that the Airport would continue to be operated,closed it in March of this year. This entailed the loss of some 150 local jobs and ofa facility which performs an important function in the local economy – somethingwhich is reflected in a number of policies in the statutory development plan, theThanet Local Plan.2. For some time, RiverOak Investment Corp LLC has been in negotiations with MrsGloag to purchase the Airport. RiverOak considers that the Airport would beviable as a cargo-only airport facility and has experience in the US of developingsimilar facilities. The Airport is particularly suitable for cargo because it has aparticularly long runway which can handle larger aircraft. Those negotiationsculminated in RiverOak offering Mrs Gloag the full price that she had asked for( 7 million) but then Mrs Gloag abruptly curtailed any further engagement ordiscussion. The stalemate persists and Mrs Gloag now refuses to treat any further.3. In those circumstances Thanet District Council (“the Council”) is contemplatingusing its powers under s. 226 of the Town and Country Planning Act 1990 (“the1990 Act”) to compulsorily acquire Manston Airport. It would undertake this withRiverOak’s financial backing and support, and by entering into an agreement withRiverOak. That agreement would involve RiverOak indemnifying the Council inrespect of the costs it would incur in pursuing compulsory purchase. Theagreement would also provide that the Airport once acquired would be transferredby the Council pursuant to s. 233(1)(a) of the 1990 Act to RiverOak who would beunder an obligation to reinstate the Airport for cargo use.The issues1

4. I am asked for my opinion on a number of matters:1) Whether in principle an agreement along the broad lines of that mootedabove, if entered into between the Council and RiverOak, would be subjectto the Public Contracts Regulations 2006 which transpose Directive2004/18/EC on the coordination of procedures for the award of publicworks contracts, public supply contracts and public service contracts (“theDirective”);2) Whether there is any unlawful State aid issue that arises from what scontemplated;3) Whether the Council needs to carry out its own "Feasibility Study" into theviability of reinstating the Airport use before resolving in principle to useCPO powers;4) Whether the Council itself needs to make an offer to acquire the Airportbefore it resolves in principle to use CPO powers;5) Whether what is proposed involves any personal financial risk toCouncillors.5. In relation to 1) and 2) above I should say that at this stage I have not seen anydraft agreement and proceed simply on the basis of the broad outline of what iscontemplated as set out above.(i)The procurement issueThe legal framework6. The aims and purposes of the Directive are: “to ensure that public bodies awardcertain contracts above a minimum value only after fair competition, and that theaward is made to the person offering the lowest price or making the mosteconomically advantageous offer”: Risk Management Partners Ltd v LondonBorough of Brent [2011] 2 A.C. 34 at para. 10 per Lord Hope.2

7. Reg. 2 of the 2006 Regulations defines “public contract” as meaning “a publicservices contract, a public supply contract or a public works contract”. To becaught by the 2006 Regulations an agreement must be a “public contract” 1.8. Reg 2 then defines:1) “public services contract” as meaning “a contract, in writing, forconsideration (whatever the nature of the consideration) under which acontracting authority engages a person to provide services but does notinclude— (a) a public works contract; or (b) a public supply contract”.“Services” are those listed in Schedule 3 and includes transport by air;2) “public supply contract” as meaning “a contract, in writing, forconsideration (whatever the nature of the consideration)— (a) for thepurchase of goods by a contracting authority (whether or not theconsideration is given in installments and whether or not the purchase isconditional upon the occurrence of a particular event), or (b) for the hire ofgoods by a contracting authority (both where the contracting authoritybecomes the owner of the goods after the end of the period of hire andwhere it does not); and for any siting or installation of those goods, butwhere under such a contract services are also to be provided, the contractshall only be a public supply contract where the value of the considerationattributable to the goods and any siting or installation of the goods is equalto or greater than the value attributable to the services”; and3) “public works contract” as meaning “a contract, in writing, forconsideration (whatever the nature of the consideration)— (a) for thecarrying out of a work or works for a contracting authority; or (b) underwhich a contracting authority engages a person to procure by any meansthe carrying out for the contracting authority of a work corresponding tospecified requirements”. In the 2006 Regulations “work” means “the“public contracts” is defined in Article 1(2)(a) of the Directive as follows:“‘Public contracts’ are contracts for pecuniary interest concluded in writing between one or moreeconomic operators and one or more contracting authorities and having as their object the execution ofworks, the supply of products or the provision of services within the meaning of this Directive.”13

outcome of any works which is sufficient of itself to fulfil an economic andtechnical function” and “works” are defined in Schedule 2 – this includesmost building operations e.g. construction, demolition, building installationetc;4) a “services concession contract” as meaning “a public services contractunder which the consideration given by the contracting authority consistsof or includes the right to exploit the service or services to be providedunder the contract”.9. Reg. 6(2)(m) excludes from the scope of the 2006 Regulations “a servicesconcession contract awarded by a contracting authority, subject to the applicationof regulation 46” 2. This exclusion is derived from the Directive itself.10. The Advocate-General in Case C ‑ 196/08 Acoset SpA v Conferenza Sindaci ePresidenza Prov. Reg. ATO Idrico Ragusa and Others said:“75. The present reference for a preliminary ruling throws into relief the first difficulties inthe task of distinguishing a public service contract from a public service concession.76. A public service contract involves consideration which is paid directly by thecontracting authority to the service provider; however, where the remuneration comes notfrom the public authority concerned, but from sums paid by third parties benefiting fromthe service, there is a public service concession.77. In addition, the transfer of the operating risk is one of the most valuable clues for thepurposes of examining that distinction, because it is an essential element of a concessionbut does not feature in a contract.”.11. In JBW Group Ltd v Ministry of Justice [2012] 2 C.M.L.R. 10 the Court of Appealsaid“40 As the EU authorities show, the paradigm case of a service contract is where the applicantperforms a service for the authority and is paid an agreed fee for that service “46.— Public service bodies(1) Where a contracting authority, other than one which is a contracting authority only by reason ofbeing a Schedule 1 entity, grants to a person other than a contracting authority, special or exclusiverights to carry on a service for the benefit of the public, it shall impose an express duty on that personin the terms referred to in paragraph (2).(2) The duty referred to in paragraph (1) is a duty not to discriminate in seeking offers in relation to, orin awarding, a contract for the purchase or hire of goods on the grounds—(a) of nationality, against a person who is a national of and established in a relevant State; or(b) that the goods to be supplied under the contract originate in another relevant State.”24

41 The paradigm case of a concession is where the applicant is put in possession of a businessopportunity which he can exploit by providing services to third parties and charging themdirectly for those services. The contractor then bears the risks of running the business whichare typically greater than those involved in performing a contract for a fixed fee. The ParkingBrixen [2006] 1 C.M.L.R. 3 and Wasser [2009] E.C.R. I-8377 cases are classic examples of suchcontracts, albeit that the risk in the latter case was limited. The fact that there may be someregulation of the price which the contractor can charge the third party for the service does notof itself prevent the arrangement constituting a concession. 43 a concession usually involves a direct contractual relationship with third party clients orcustomers of the service who are charged directly by the contractor.44 as Oymanns [2009] E.C.R. I-4779 makes clear, the concessionaire typically hasconsiderable control over the manner in which the service is provided; the authority takes aback seat 45 Finally, in a classic concession, although the contracting authority has an interest in theservice being performed for the benefit of third parties, it does not itself directly benefit fromits performance, as in this case.”12. Reg. 6(2)(e) provides that the 2006 Regulations do not apply to a contract “for theacquisition of land, including existing buildings and other structures” 3.13. In Case C-306/08 Commission v. Spain [2011] 3 C.M.L.R. 43 the CJEU noted thatit was clear “from the case law of the Court that, where a contract containselements relating both to a public works contract and another type of contract, it isthe main object of the contract which determines which body of EU rules on publiccontracts is to be applied in principle (see, to that effect, Auroux [2007] E.C.R. I-385at [37]).”Analysis14. First, self-evidently the contemplated agreement is not a “public supply contract”.15. Second, the contemplated agreement entails, as I understand it, no requirement forany work or works, as defined in Schedule 3 or otherwise, to be done. Theobligation imposed on RiverOak will merely be to reinstate the use; and this canbe done without any works being done. It certainly will not involve works beingIn R (Midlands Co-operative Society Limited) v Birmingham CC [2012] EWHC 620 (Admin)Hickinbottom J. left open a question whether the 2006 Regulations do not properly implement theDirective because Article 16(a) of the Directive provides that it shall not apply to public service contractsfor the acquisition of land, whereas reg. 6(2)(2) of the 2006 Regulations disapplies their effect to anypublic contract (including a public works contract) for the acquisition of land.35