Some lucrative public service contracts may have to be put out to public tender by the Government, following a critical opinion issued by Europe's highest court.
A key adviser to the European Court of Justice (ECJ) said yesterday that contracts given to An Post and Dublin City Council without public tender were illegal under EU law.
The opinion of advocate general Christine Stix-Hackl raises the prospect of An Post facing competition for its exclusive €47.5 million annual contract to supply social welfare payments to 1.1 million people. The contract is a big source of revenue for the semi-state firm, which is in the middle of difficult corporate restructuring.
Ms Stix-Hackl also said a €9 million State contract with Dublin City Council for emergency ambulance services also broke European law and should be re-advertised.
"There were no circumstances which would have allowed the services at issue to be provided without any advertising being undertaken," said the written opinion for both cases. This will be followed by a full judgment in the two related cases within a few months.
The opinions of advocates general are followed in 80 per cent of ECJ cases, which means the State is likely to be forced to undertake a review of its procurement policy.
During a hearing in April, the European Commission argued that private companies could have offered the same types of services as An Post or Dublin City Council.
The contracts should have been put out to tender under the rules of the common market, it said.
The Government defended its decision to offer the contracts without a competition, arguing that the general provisions of the EU treaties, particularly articles 43 and 49, mean this type of service can be exempted from public tender.
It was supported by France, The Netherlands, Denmark and Finland, which are all concerned that a negative ruling by the ECJ could force them to change their own policies.
Following the negative opinion yesterday, Minister for Social Affairs Séamus Brennan said he was "concerned" and had asked officials to consider how this might impact on the future delivery of payment services. He said he wanted to reassure all social welfare recipients that they would continue to receive their payment as normal.
The commission took the case against Ireland, following a complaint made in 1999 by the US group Transaction National Services (TNS). TNS claimed An Post benefited from an illegal subsidy when it was awarded the social welfare contract, and said that it was itself one of several companies that could conceivably bid against An Post in an open competition.
An Post could face financial problems if it lost the State contract to supply social welfare payments - this contract amounts to about 6 per cent of its total annual turnover.
Ms Stix-Hackl was also of the opinion that the Eastern Regional Health Authority's decision to fund Dublin City Council's provision of emergency ambulance services without putting the contract out to tender was illegal. If the ECJ agrees with this opinion, similar State contracts in the health sector could also be under threat.
Fianna Fáil MEP Eoin Ryan strongly criticised the advocate general's opinion.
"The issue of protecting the health of the people must be of paramount importance. Ambulance service contracts cannot be looked at from an economic and commercial viewpoint alone," he said.
"This is an issue about saving lives - it cannot be based on bottom-line figures."