Dispute over Cologne exhibition halls escalates
EU launches public procurement infringement proceedings against Germany. A breach or otherwise of public procurement law is not the only murky issue surrounding the construction of four new exhibition¶ halls in Cologne-Deutz.
The construction of four new exhibition halls in Cologne can't stop hitting the headlines. Dispute over the contract award to a closed-end real estate fund belonging to Oppenheim-Esch-Holding, a private investment company, has now also prompted action by the European Union. The EU is putting pressure on Germany, respectively Cologne, with breach of contract proceedings against Germany for the infringement of European public procurement law. In the opinion of the competent EU Commission the contract should have been put out to public tender - Europe-wide. That was not done, however, at the end of 2003. In the final instance the proceedings now opened could be referred to the European Court of Justice (ECJ) - with the prospect of fines running into millions of euros if the court finds against Germany, which now has two months to reply.The Commission interprets the agreements between Cologne fair company, Cologne council and the Esch fund (a joint venture between Europe's biggest private bank, Cologne-based Sal. Oppenheim, and property developer Josef Esch from Troisdorf near Cologne) as a public works contract. This would then be subject to the EU rules on awarding public contracts. However, the Federal Republic and the city of Cologne have a different take on matters, complaining of a very broad legal interpretation by the EU. "We have checked it. It's all above board under European law, public procurement law and antitrust law," city treasurer Peter Soénius insists. In his opinion the parties have merely entered into a rental contract. And indeed, the city is leasing the new northern halls built by Oppenheim in order to sub-let them to Koelnmesse. But this argument does not wash with the EU, which points out that Cologne council issued precise specifications for construction of the new halls and can therefore hardly be considered an ordinary tenant. Municipal law experts take a similar view. "The case in point is a miscarried attempt to circumvent the mandatory contract award procedure by declaring the contract a rental agreement," says Jan Byok for one. The specialist speaks in this context of unlawful evasion. Some local politicians now fear the dispute will dent Cologne's image. And according to information available to m+a report, exhibition company CEO Jochen Witt also cautioned against the terms of the contract, pushing at the very least for stringent examination in view of a possible duty to invite public tenders. Like the city fathers, Oppenheim is observing the controversy with equanimity. "We have nothing to say on the situation at present," the project financers insist, adding that there is no need for a statement because it is a matter between the EU and the German government. "We are merely observers." The same applies to Koelnmesse, who are likewise not willing to comment on the proceedings - which are, incidentally, just one case among some 700 public procurement infringement proceedings. The public procurement row is not the only murky issue surrounding construction of the four new exhibition halls in Cologne-Deutz. For over a year the public prosecutor has been conducting investigations into Fritz Schramma (a member of the conservative CDU), mayor of Cologne and chairman of the exhibition company supervisory board, on suspicion of malpractice, accepting bribes and personal enrichment. The probe is focusing on whether the selection, in the face of other more favourable bids, of private investors Oppenheim-Esch, who have been awarded contracts on various occasions by the city of Cologne - the projects Kölnarena and Coloneum, for instance, were jointly realised - is "creating economically unjustifiable payment commitments to the detriment of the city of Cologne". By way of background information, the municipality has undertaken to pay the annual rent for the halls, which starts at EUR 20.7 million, up to 2035 in the event that Koelnmesse is no longer able to do so from its own resources. Depending on the general level of price increases, the city could therefore be liable for more than EUR 750 million. According to the public investigator, an end to his inquiry is therefore "still nowhere in sight".Meanwhile the city of Cologne has nothing more to fear from local legislation. Although Cologne District President Hans Peter Lindlar placed massive dereliction of duty in connection with the new-build project at Schramma and Co.'s door, the rent agreements are operative. He says he has no way of imposing sanctions on the municipal authorities or the persons involved. "You have to ask whether all council members were in a position to judge what they were voting for," concedes Lindlar, who believes "shrewd folk" masterminded the city fathers actions. Carsten Dierig
m+a report Nr.7 / 2006 vom 27.10.2006
m+a report vom 27. Oktober 2006