All-clear still missing in the event of public land sales

If public authorities make larger real estate transactions, they have to issue an invitation to bid on a Europe-wide basis. This way, the federal government, States and municipalities may no longer sell their parcels of land to investors without restrictions if they make requirements with respect to a later development, such as the construction of a retail market, at the same time. This has now again been affirmed by the Karlsruhe Higher Regional Court (OLG) after the judges in Düsseldorf and Bremen had arrived at the same result (order of June 13, 2008, ref. 1 VK 1/08).

Thus disappears the hope of many a local authority that the strict judicature of OLG Düsseldorf of the last few months will soon be overturned by other high-court decisions. Until 2007, practice as well as German jurisprudence acted on the assumption that public land sales generally are not subject to bidding. Subject to an award were only such acquisition measures which equaled a "purchase" of the local authority. Such acquisition requirement was refused, however, in the event of the sale of a public parcel of land if the building to be constructed was subsequently not publicly used.

Specifically, the case before OLG Karlsruhe concerned the sale of a municipal parcel of land on which a food market was to be built. No Europe-wide invitations to bid had been issued for the sale. The complaint of a defeated bidder was dismissed based on what is known as "forfeiture of the review right". This right expires usually when the bidder has remained inactive for more than six months. However, according to the Higher Regional Court judges, this does not change anything in the basic necessity of a Europe-wide bid process and the limitations regarding the land sale upon determination of the construction at the same time. "At least now it has been established that existing contracts as a general rule may no longer be attacked", confirms Dr. Ute Jasper, Partner at the law office of Heuking Kühn Lüer Wojtek.

"Even the draft of a public procurement law reform resolved by the Federal government will, according to the statements by OLG Karlsruhe, be unlikely to lead to the return of freedom of award of real estate transactions", Jasper goes on to say. Under the draft reform, only such land sales with construction obligations are supposed to be classified as public construction orders subject to award which are made "on behalf of" the principal and "directly" benefit the same economically. OLG Karlsruhe now confirmed the doubts raised in many places whether the draft reform complies with European law. According to the view of the judges, the European specifications of the award directive are the determining factor. It would not show the necessity of a direct acquisition requirement.