Judgment of the Court (Eighth Chamber) of 9 July 2026.#Sad Trasporto Locale SpA v Provincia autonoma di Bolzano.#Reference for a preliminary ruling – Transport – Public passenger transport services by rail and by road – Regulation (EC) No 1370/2007 – Article 5(1) and (2) – Direct award of a public passenger transport services contract to an internal operator – Conditions – Applicable rules – Directive 2014/23/EU – Award of concession contracts – Point 1 of Article 5 – Concept of ‘services concession’ – Transfer of an operating risk – Directive 2014/24/EU – Public procurement – Article 12 – Concept of ‘control similar to that which a contracting authority exercises over its own departments’ – National legislation limiting the direct award of public service contracts to an internal operator – Compatibility with EU law.#Case C-856/24.

Provisional text

JUDGMENT OF THE COURT (Eighth Chamber)

9 July 2026 (*)

( Reference for a preliminary ruling – Transport – Public passenger transport services by rail and by road – Regulation (EC) No 1370/2007 – Article 5(1) and (2) – Direct award of a public passenger transport services contract to an internal operator – Conditions – Applicable rules – Directive 2014/23/EU – Award of concession contracts – Point 1 of Article 5 – Concept of ‘services concession’ – Transfer of an operating risk – Directive 2014/24/EU – Public procurement – Article 12 – Concept of ‘control similar to that which a contracting authority exercises over its own departments’ – National legislation limiting the direct award of public service contracts to an internal operator – Compatibility with EU law )

In Case C‑856/24,

REQUEST for a preliminary ruling under Article 267 TFEU from the Consiglio di Stato (Council of State, Italy), made by decision of 10 December 2024, received at the Court on 11 December 2024, in the proceedings

Sad Trasporto Locale SpA

v

Provincia autonoma di Bolzano,

other parties to the proceedings:

Società Autobus Servizi d’Area (SASA) SpA – AG,

Agenzia per i procedimenti e la vigilanza in materia di contratti pubblici di lavori, servizi e forniture (ACP),

Strutture Trasporto Alto Adige (STA) – SpA,

LiBUS – Consorzio dei concessionari di linea della Provincia autonoma di Bolzano,

THE COURT (Eighth Chamber),

composed of O. Spineanu-Matei, President of the Chamber, S. Rodin and N. Piçarra (Rapporteur), Judges,

Advocate General: A. Rantos,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

–        Sad Trasporto Locale SpA, by G.A. Giuffrè and G. Greco, avvocati,

–        Provincia autonoma di Bolzano, by P. Mantini, P. Pignatta, L. Plancker and A. Roilo, avvocati,

–        the Italian Government, by S. Fiorentino, acting as Agent, and by A. Lipari and P. Palmieri, avvocati dello Stato,

–        the Czech Government, by J. Vláčil, M. Smolek and L. Halajová, acting as Agents,

–        the European Commission, by P.A. Messina, K. Walkerová and G. Wils, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

Judgment

1        This request for a preliminary ruling concerns the interpretation of Article 5(1) and (2) of Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 1191/69 and 1107/70 (OJ 2007 L 315, p. 1), as amended by Regulation (EU) 2016/2338 of the European Parliament and of the Council of 14 December 2016 (OJ 2016 L 354, p. 22) (‘Regulation No 1370/2007’).

2        The request has been made in proceedings between Sad Trasporto Locale SpA, a company incorporated under Italian law (‘SAD’), and the Provincia autonoma di Bolzano (Autonomous Province of Bolzano, Italy; ‘the competent authority’) concerning the legality of the direct award to an internal operator of the latter, namely Società Autobus Servizi D’Area (SASA) SpA – AG (‘SASA’), of a public service contract for passenger transport by bus.

 Legal context

 European Union law

 Regulation No 1370/2007

3        Recitals 6 and 18 of Regulation No 1370/2007 read as follows:

‘(6)      Many Member States have enacted legislation providing for the award of exclusive rights and public service contracts in at least part of their public transport market, on the basis of transparent and fair competitive award procedures. As a result, trade between Member States has developed significantly and several public service operators are now providing public passenger transport services in more than one Member State. …

…

(18)      Subject to the relevant provisions of national law, any local authority or, in the absence thereof, any national authority may choose to provide its own public passenger transport services in the area it administers or to entrust them to an internal operator without competitive tendering. However, this self-provision option needs to be strictly controlled to ensure a level playing field. …’

4        Article 2 of that regulation, entitled ‘Definitions’, provides:

‘For the purpose of this Regulation:

…

(h)      “direct award” means the award of a public service contract to a given public service operator without any prior competitive tendering procedure;

(i)      “public service contract” means one or more legally binding acts confirming the agreement between a competent authority and a public service operator to entrust to that public service operator the management and operation of public passenger transport services subject to public service obligations; depending on the law of the Member State, the contract may also consist of a decision adopted by the competent authority:

–        taking the form of an individual legislative or regulatory act, or

–        containing conditions under which the competent authority itself provides the services or entrusts the provision of such services to an internal operator;

(j)      “internal operator” means a legally distinct entity over which a competent local authority, or in the case of a group of authorities at least one competent local authority, exercises control similar to that exercised over its own departments;

…’

5        Article 5 of that regulation, entitled ‘Award of public service contracts’, provides:

‘1.      Public service contracts shall be awarded in accordance with the rules laid down in this Regulation. However, service contracts or public service contracts as defined in [Directive 2014/25/EC of the European Parliament and of the Council of 26 February 2014 on procurement by entities operating in the water, energy, transport and postal services sectors and repealing Directive 2004/17/EC (OJ 2014 L 94, p. 243)] or [Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC (OJ 2014 L 94, p. 65)] for public passenger transport services by bus or tram shall be awarded in accordance with the procedures provided for under those Directives where such contracts do not take the form of service concessions contracts as defined in those Directives. Where contracts are to be awarded in accordance with Directives [2014/25] or [2014/24], the provisions of paragraphs 2 to 6 of this Article shall not apply.

2.      Unless prohibited by national law, any competent local authority, whether or not it is an individual authority or a group of authorities providing integrated public passenger transport services may decide to provide public passenger transport services itself or to award public service contracts directly to a legally distinct entity over which the competent local authority, or, in the case of a group of authorities at least one competent local authority, exercises control similar to that exercised over its own departments.

…

3.      Any competent authority which has recourse to a third party other than an internal operator, shall award public service contracts on the basis of a competitive tendering procedure, except in the cases specified in paragraphs 3a, 4, 4a, 4b, 5 and 6. The procedure adopted for competitive tendering shall be open to all operators, shall be fair and shall observe the principles of transparency and non-discrimination. …

…’

 Directive 2014/23/EU

6        Article 5 of Directive 2014/23/EU of the European Parliament and of the Council of 26 February 2014 on the award of concession contracts (OJ 2014 L 94, p. 1), entitled ‘Definitions’, states in point 1 thereof:

‘For the purposes of this Directive the following definitions apply:

(1)      “concessions” means works or services concessions, as defined in points (a) and (b):

(a)      “works concession” means a contract for pecuniary interest concluded in writing by means of which one or more contracting authorities or contracting entities entrust the execution of works to one or more economic operators the consideration for which consists either solely in the right to exploit the works that are the subject of the contract or in that right together with payment;

(b)      “services concession” means a contract for pecuniary interest concluded in writing by means of which one or more contracting authorities or contracting entities entrust the provision and the management of services other than the execution of works referred to in point (a) to one or more economic operators, the consideration of which consists either solely in the right to exploit the services that are the subject of the contract or in that right together with payment.

The award of a works or services concession shall involve the transfer to the concessionaire of an operating risk in exploiting those works or services encompassing demand or supply risk or both. The concessionaire shall be deemed to assume operating risk where, under normal operating conditions, it is not guaranteed to recoup the investments made or the costs incurred in operating the works or the services which are the subject matter of the concession. The part of the risk transferred to the concessionaire shall involve real exposure to the vagaries of the market, such that any potential estimated loss incurred by the concessionaire shall not be merely nominal or negligible’.

 Directive 2014/24

7        Article 12 of Directive 2014/24, entitled ‘Public contracts between entities within the public sector’, provides in paragraph 3 thereof:

‘A contracting authority, which does not exercise over a legal person governed by private or public law control within the meaning of paragraph 1, may nevertheless award a public contract to that legal person without applying this Directive where all of the following conditions are fulfilled.

(a)      the contracting authority exercises jointly with other contracting authorities a control over that legal person which is similar to that which they exercise over their own departments;

(b)      more than 80% of the activities of that legal person are carried out in the performance of tasks entrusted to it by the controlling contracting authorities or by other legal persons controlled by the same contracting authorities; and

(c)      there is no direct private capital participation in the controlled legal person with the exception of non-controlling and non-blocking forms of private capital participation required by national legislative provisions, in conformity with the Treaties, which do not exert a decisive influence on the controlled legal person.

…’

 Italian law

8        Decreto legislativo n. 50 – Codice dei contratti pubblici (Legislative Decree No 50 establishing the Public Procurement Code) of 18 April 2016 (GURI No 91 of 19 April 2016 – Ordinary Supplement No 10), in the version applicable to the dispute in the main proceedings (‘the Public Procurement Code’), provides, in Article 18(1)(a) thereof:

‘The provisions of this code shall not apply … to concessions relating to public passenger transport services within the meaning of [Regulation No 1370/2007].’

9        Article 192(2) of the Public Procurement Code provides:

‘For the purposes of the direct award to an internal operator (in-house award) of a contract the subject matter of which are services available on the market in a competitive environment, the contracting authorities shall carry out a prior assessment of the financial merits of the offerings of the internal operator, in the light of the subject matter and the value of the services, and set out in the statement of reasons for the award decision the reasons for not having put the contract out to tender, as well as the benefits for society at large of the form of management chosen, by reference to, inter alia, the objectives of universality and social solidarity, efficiency, economy and quality of services and optimal use of public resources.’

 The dispute in the main proceedings and the questions referred for a preliminary ruling

10      By a decision of 27 October 2020, the competent authority approved the award of local public bus transport services under a mixed model, involving a public procurement procedure as well as, in the case of the passenger transport network classified as environmentally ‘sustainable’, a direct award to SASA, its internal operator.

11      SAD challenged that award before the Tribunale Regionale di Giustizia Amministrativa del Trentino Alto Adige, Sezione autonoma di Bolzano (Regional Administrative Court of Trentino Alto Adige, Autonomous Section of Bolzano, Italy), arguing that, in the circumstances of the dispute in the main proceedings, the competent authority could not rely on Article 5(2) of Regulation No 1370/2007. According to SAD, the legal relationship between the competent authority and SASA, its internal operator, could not be classified as a concession in the absence of the transfer of the ‘operating risk’ to that operator. Furthermore, since such a direct award did not come within the scope of that regulation, the competent authority had to comply with an enhanced obligation to state reasons as laid down in Article 192(2) of the Public Procurement Code, which requires it, inter alia, to demonstrate the existence of a market failure which justifies making a direct award to an internal operator.

12      The Tribunale Regionale di Giustizia Amministrativa del Trentino Alto Adige, Sezione autonoma di Bolzano (Regional Administrative Court of Trentino Alto Adige, Autonomous Section of Bolzano) dismissed that action, holding that Article 5(2) of Regulation No 1370/2007 was applicable in the case of a direct award to an internal operator such as that at issue in the main proceedings and rejecting SAD’s claim that that provision permitted a direct award only on condition that an ‘operating risk’ be transferred to that operator. In any event, according to that court, that risk was indeed transferred to SASA in the circumstances of the dispute in the main proceedings.

13      Furthermore, that court held that, under EU law, Article 192(2) of the Public Procurement Code did not apply to the local public passenger transport sector.

14      SAD brought an appeal against that judgment before the Consiglio di Stato (Council of State, Italy), which is the referring court, reiterating that the public passenger transport service contract awarded directly to SASA could not be classified as a ‘concession contract’ because there was no transfer of an operating risk to the latter and, therefore, that the award of that contract was not governed by Article 5(2) of Regulation No 1370/2007. On that basis, it claims, the enhanced obligation to state reasons laid down in Article 192(2) of the Public Procurement Code is applicable to the direct award at issue in the main proceedings, in accordance with Article 18(1)(a) of the Public Procurement Code, from which it is clear that that article applies to concessions for public passenger transport services which do not come within the scope of that regulation.

15      The referring court seeks to ascertain, in the first place, whether Article 5(2) of Regulation No 1370/2007 applies without distinction to any direct award to an internal operator or, as SAD contends, only to direct awards which involve the transfer of the operating risk to the internal operator. It states that the Court’s answer to that question will enable it to determine whether the direct award at issue in the main proceedings – which was decided by the competent authority without first adopting a formal concession agreement expressly intended to transfer the operating risk to SASA, its internal operator – comes within the scope of Article 5(2).

16      The referring court acknowledges that Article 5(1) draws a distinction between (i) the award of ‘service concessions contracts’, subject to the provisions of Article 5(2) to (6), and (ii) the award of ‘service contracts’ or ‘public service contracts’, governed by the provisions of Directives 2014/24 and 2014/25. However, given that both service concessions contracts and service contracts inherently involve an exchange of commitments between parties which are substantively and formally distinct, that court doubts that a procurement contract or concession contract, in the strict sense, can be envisaged in the case of a direct award to an internal operator. In its view, that operator remains a mere organisational unit of the competent authority and it is that authority which will ultimately suffer the economic consequences of any mismanagement by that operator.

17      That court concludes that the distinction between service concessions and service contracts, as established in Article 5(1) of Regulation No 1370/2007, may apply in the case of awards made to an operator substantially and formally distinct from the competent authority, but not in the case of awards to an internal operator.

18      According to the referring court, it is because of those significant differences between awarding contracts to an external operator and directly awarding contracts to an internal operator, ‘differences which can also be observed when it comes to the nature of the relationship established between the parties’, that the question arises as to whether all public passenger transport service contracts awarded directly to an internal operator are subject to the provisions of Article 5(2) of that regulation, a question which that court seems to answer in the affirmative.

19      In the second place, the referring court seeks to ascertain whether Article 192(2) of the Public Procurement Code can be applied in the dispute in the main proceedings. According to its explanations, that provision lays down an enhanced obligation to state reasons, by making the direct award of a public service contract to an internal operator subject to two cumulative conditions, the first requiring the competent authority to prove the existence of a market failure which can be remedied by choosing the proposed form of award, the second requiring that authority to demonstrate the existence of benefits for society at large resulting specifically from that direct award. That court adds that the purpose of that provision is to combat abusive use of direct awards by public authorities and that, under national law, putting contracts out to tender is the rule and direct awards are the exception.

20      That court adds that the dispute in the main proceedings raises the specific question of the compatibility of Article 192(2) of the Public Procurement Code with Article 5(2) of Regulation No 1370/2007. It seeks to ascertain whether the latter provision, in so far as it authorises direct awards to an internal operator ‘unless prohibited by national law’, only allows that national law to prohibit direct awards, or whether it also authorises it to limit the possibility of resorting to them.

21      The referring court notes that if Article 192(2) of the Public Procurement Code were found to be incompatible with EU law, the applicability of that provision to the types of award governed by Regulation No 1370/2007 would automatically be precluded. If that were not the case, it would be for the national court to ascertain whether that provision was complied with in the circumstances of the main proceedings.

22      In those circumstances, the Consiglio di Stato (Council of State) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘(1)      Must Article 5(1) and (2) of Regulation No 1370/2007 be interpreted as meaning that the rules referred to in Article 5(2) on the direct award of a public passenger transport service contract to an [internal operator] require a check on whether there is a transfer of the operating risk to the internal operator that is awarded the contract and that it does not apply where there is no such transfer of risk, or does the provision obviate the analysis of the transfer of operating risk altogether on the ground that an [internal operator] – which is subject to the requirement of similar control – is not an entity distinct from the [authority]?

(2)      Does [EU] law, in particular Article 5(2) [of] Regulation [No 1370/2007], with regard to the direct award to an internal operator of a public passenger transport service contract, in so far as it provides that such an award is possible “unless prohibited by national law”, preclude national legislation, of the kind provided for in Article 192(2) [of the Public Procurement Code], which, while not prohibiting recourse to [a direct award] altogether, allows it but subject to restrictions and, in particular, permits the authorities to use that model only where there is a proven situation of market failure, and not on the sole basis of an assessment of economic/administrative convenience?’

 Consideration of the questions referred

 The first question

23      By its first question, the referring court asks, in essence, whether Article 5(1) and (2) of Regulation No 1370/2007 must be interpreted as meaning that, in order for a competent authority to be able to decide to award a public service contract for passenger transport by bus directly to an internal operator, within the meaning of Article 2(j) of that regulation, that award must entail the transfer of an operating risk to that operator.

24      In the first place, in accordance with the first sentence of Article 5(1) of Regulation No 1370/2007, the award of public service contracts, within the meaning of Article 2(i) of that regulation, is, in principle, governed by that regulation.

25      However, by way of derogation from that principle, the second sentence of Article 5(1) provides that, where (i) a contract concerns public passenger transport services by bus or tram and (ii) that contract does not take the form of a service concession contract, it must be awarded in accordance with the general public procurement rules established by Directives 2014/24 and 2014/25 (see, to that effect, judgments of 21 March 2019, Verkehrsbetrieb Hüttebräucker and Rhenus Veniro, C‑266/17 and C‑267/17, EU:C:2019:241, paragraph 81; of 8 May 2019, Rhenus Veniro, C‑253/18, EU:C:2019:386, paragraph 29; and of 13 February 2025, Latvijas Sabiedriskais Autobuss, C‑684/23, EU:C:2025:90, paragraph 40).

26      Where those two conditions are satisfied, the third sentence of Article 5(1) provides that the special rules for awarding contracts referred to in Article 5(2) to (6) of Regulation No 1370/2007 do not apply, whereas the other provisions of that regulation remain applicable (see, to that effect, judgment of 27 October 2016, Hörmann Reisen, C‑292/15, EU:C:2016:817, paragraph 41).

27      It is thus apparent from Article 5(1) of Regulation No 1370/2007 that the public service contracts for passenger transport by bus or tram which take the form of service concessions contracts referred to in that provision are to be awarded in accordance with the rules laid down by that regulation, including inter alia Article 5(2) thereof. Under that provision, unless prohibited by national law, any competent local authority may award public service contracts directly, for the purposes of Article 2(h) of that regulation, to a legally distinct entity over which that authority exercises control similar to that exercised over its own departments, that is to say, to an internal operator, within the meaning of Article 2(j) of that regulation, without any prior competitive tendering procedure.

28      That difference in the applicable rules is explained by the fact that public service contracts for passenger transport by bus or tram which do not take the form of service concessions contracts were already subject, prior to the adoption of Regulation No 1370/2007, to the general public procurement rules laid down in Directive 2004/17/EC of the European Parliament and of the Council of 31 March 2004 coordinating the procurement procedures of entities operating in the water, energy, transport and postal services sectors (OJ 2004 L 134, p. 1) and by Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 2004 L 134, p. 114). New legislation was therefore not felt to be necessary for the award of such contracts (see, to that effect, judgments of 21 March 2019, Verkehrsbetrieb Hüttebräucker and Rhenus Veniro, C‑266/17 and C‑267/17, EU:C:2019:241, paragraph 73, and of 13 February 2025, Latvijas Sabiedriskais Autobuss, C‑684/23, EU:C:2025:90, paragraph 41).

29      In the second place, the definition of the concept of ‘service concessions contracts’, referred to in the second sentence of Article 5(1) of Regulation No 1370/2007, is clear from point (b) of the first subparagraph of point 1 of Article 5 of Directive 2014/23. Under the latter provision, the concept of ‘services concession’ refers to a contract for pecuniary interest by means of which a contracting authority entrusts the provision and the management of services to an economic operator, the consideration for which consists in the right to exploit the services concerned, possibly together with payment.

30      Under the second subparagraph of point 1 of Article 5 of that directive, the award of a services concession involves the transfer to the concessionaire of an operating risk, encompassing demand or supply risk or both, which entails uncertainty as to the possibility of recouping the investments made or the costs incurred in operating the services.

31      It follows that a public service contract differs from a services concession because of the nature of the consideration granted to the contractor for the services which it provides. The consideration for the tenderer to which a public contract is awarded consists of the payment made by the contracting authority, whereas the consideration for a concessionaire consists of the right to exploit the service which is the subject of the concession, together, where appropriate, with payment. The award of a concession therefore entails the transfer to the concessionaire of an operating risk (judgment of 1 August 2022, Roma Multiservizi and Rekeep, C‑332/20, EU:C:2022:610, paragraph 61; see also, to that effect, judgment of 10 November 2022, SHARENGO, C‑486/21, EU:C:2022:868, paragraph 60).

32      Neither Article 5(1) and (2) of Regulation No 1370/2007 nor point 1 of Article 5 of Directive 2014/23 lend themselves to an interpretation which disregards the analysis of the transfer of the operating risk, on the ground that the internal operator cannot be distinguished from the competent authority, which, accordingly, precludes such a transfer of risk and prevents the conclusion of a ‘services concession contract’, within the meaning of those provisions read together.

33      Although, under the definition set out in Article 2(j) of Regulation No 1370/2007, read in conjunction with Article 5(2) thereof, the competent authority exercises over the internal operator ‘control similar to that exercised over its own departments’, the fact remains that that operator constitutes a ‘legally distinct entity’. The transfer of an operational risk remains possible between two separate legal entities notwithstanding the fact that one exercises control over the other. Thus, the direct award of a services concession to an internal operator leads to the actual transfer of an operating risk whenever that operator is uncertain as to the possibility of recouping the investments made or the costs incurred in operating the services, as stated in paragraph 30 above.

34      In the light of the foregoing, the answer to the first question is that Article 5(1) and (2) of Regulation No 1370/2007 must be interpreted as meaning that, in order for a competent authority to be able to decide to award a public service contract for passenger transport by bus directly to an internal operator, within the meaning of Article 2(j) of that regulation, that award must entail the transfer of an operating risk to that operator.

 The second question

 Admissibility

35      The Italian Government expressed doubts as to the admissibility of the second question alleging that the referring court did not verify whether Article 192(2) of the Public Procurement Code was applicable in the circumstances of the dispute in the main proceedings, which, in its view, renders the question of the incompatibility of that provision with Article 5(2) of Regulation No 1370/2007 hypothetical.

36      It is apparent from the order for reference that the referring court raised that question on account of its doubts as to the compatibility of the enhanced obligation to state reasons, laid down in Article 192(2) of the Public Procurement Code, with Article 5(2) of Regulation No 1370/2007, in so far as that obligation restricts the possibility of making direct awards to an internal operator without, however, prohibiting that possibility altogether.

37      According to settled case-law, questions relating to EU law enjoy a presumption of relevance. The Court may refuse to rule on a question referred by a national court for a preliminary ruling only where it is quite obvious that the interpretation of EU law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see judgments of 13 July 2000, Idéal tourisme, C‑36/99, EU:C:2000:405, paragraph 20, and of 29 April 2025, Prezydent Miasta Mielca, C‑453/23, EU:C:2025:285, paragraph 26).

38      In the present case, it cannot be ruled out that the referring court may have to apply the enhanced obligation to state reasons laid down in Article 192(2) of the Public Procurement Code in the dispute in the main proceedings if it follows from the Court’s answer to the second question that Article 5(2) of Regulation No 1370/2007 must be interpreted as not precluding national legislation providing for such an obligation where the competent authority decides to award a public service contract directly to an internal operator. Consequently, in accordance with the case-law referred to in the preceding paragraph, that question is admissible.

 Substance

39      By its second question, the referring court asks, in essence, whether Article 5(2) of Regulation No 1370/2007 must be interpreted as precluding national legislation which makes any direct award of a public service contract to an internal operator subject to the obligation, for the competent authority, to first demonstrate (i) the presence of a market failure which can be remedied by choosing the proposed form of award and (ii) that there are advantages for society at large resulting specifically from that method of award.

40      It follows from Article 5(2) of Regulation No 1370/2007 that, ‘unless prohibited by national law’, any competent local authority may decide to provide public passenger transport services itself or to award public service contracts directly to a legally distinct entity over which it exercises control similar to that exercised over its own departments.

41      In that regard, a restrictive interpretation of the words ‘unless prohibited by national law’, to the effect that Member States may only prohibit direct awards altogether, without being able to prohibit them partially, is not borne out either by the wording of that provision, or by its context, or by the objectives of Regulation No 1370/2007.

42      First, such an interpretation is not supported by the wording of Article 5(2) of Regulation No 1370/2007, which covers any prohibition, whether total or partial. The possibility for Member States to provide for a partial prohibition is borne out by recital 18 of that regulation, according to which any competent authority may entrust public passenger transport services to an internal operator without competitive tendering ‘subject to the relevant provisions of national law’, without that recital providing any further details.

43      Secondly, the Court held, in the order of 6 February 2020, Rieco (C‑89/19 to C‑91/19, EU:C:2020:87, paragraph 42), which also concerned the enhanced obligation to state reasons laid down in Article 192(2) of the Public Procurement Code, that Article 12(3) of Directive 2014/24 does not preclude a provision of national law which makes the direct award to an internal operator conditional on it not being possible to use a public procurement procedure and, in any event, on the demonstration by the contracting authority of the benefits specifically arising, for society at large, from recourse to an internal transaction. That interpretation, given in the context of Article 12(3) – which does not contain an express condition allowing Member States to restrict the use of direct awards – is all the more justified in the context of Article 5(2) of Regulation No 1370/2007, which does provide for such a condition.

44      Thirdly, allowing Member States to restrict the possibility of making direct awards to an internal operator, without prohibiting it altogether, is consistent with the objective, which is apparent in particular from recitals 6 and 18 of that regulation, of promoting the award of public service contracts, within the meaning of Article 2(i) of that regulation, on the basis of transparent and fair competitive award procedures.

45      Furthermore, it is for the national court, which alone has jurisdiction to find and assess the facts in the case before it and to interpret and apply national law (see, to that effect, judgment of 31 January 2023, Puig Gordi and Others, C‑158/21, EU:C:2023:57, paragraph 61), to determine whether, in the circumstances of the dispute in the main proceedings, the competent authority was required to comply with the enhanced obligation to state reasons laid down in Article 192(2) of the Public Procurement Code.

46      In the light of the foregoing, the answer to the second question is that Article 5(2) of Regulation No 1370/2007 must be interpreted as not precluding national legislation which makes any direct award of a public service contract to an internal operator subject to the obligation, for the competent authority, to first demonstrate (i) the presence of a market failure which can be remedied by choosing the proposed form of award and (ii) that there are advantages for society at large resulting specifically from that method of award.

 Costs

47      Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Eighth Chamber) hereby rules:

1.      Article 5(1) and (2) of Regulation (EC) No 1370/2007 of the European Parliament and of the Council of 23 October 2007 on public passenger transport services by rail and by road and repealing Council Regulations (EEC) Nos 1191/69 and 1107/70, as amended by Regulation (EU) 2016/2338 of the European Parliament and of the Council of 14 December 2016,

must be interpreted as meaning that in order for a competent authority to be able to decide to award a public service contract for passenger transport by bus directly to an internal operator, within the meaning of Article 2(j) of Regulation No 1370/2007, as amended, that award must entail the transfer of an operating risk to that operator.

2.      Article 5(2) of Regulation No 1370/2007, as amended by Regulation 2016/2338,

must be interpreted as not precluding national legislation which makes any direct award of a public service contract to an internal operator subject to the obligation, for the competent authority, to first demonstrate (i) the presence of a market failure which can be remedied by choosing the proposed form of award and (ii) that there are advantages for society at large resulting specifically from that method of award.

[Signatures]

---

*      Language of the case: Italian.