Dutch District Court gives further clarity for its doctrine under which public entities must organize a selection procedure prior to selling land

On 24 October 2022 the District Court of Rotterdam (“Court”) ruled on the legality of the sale of a plot of land by a joint scheme of municipalities (“Joint Scheme”).[1] It held that the Joint Scheme violated the so-called Didam-doctrine by selling a plot of land without organizing a selection procedure prior to the sale. As it concerned the sale of land other than for pecuniary interest, the contract fell outside of the scope of EU and Dutch public procurement law, since it does not qualify as a public works contract under the Public Procurement directives.

The Didam-doctrine was established in a judgment of the Dutch Supreme Court back in November 2021. The judgment caused a seismic shift in the Dutch legal and administrative landscape. Ever since this judgment, public entities are obliged to organize a selection procedure for contracts which may fall outside the scope of public procurement law but in which at least two private parties are interested. The reasoning behind the obligation is that in accordance with Dutch civil law a public entity must follow the general principles of good administration when concluding contracts. The principle of equality comes with an obligation to give all potentially interested parties the opportunity to compete for that contract. In order to guarantee that all who are potentially interested can compete; objective, transparent and reasonable criteria must be defined and applied; to put it differently and more concise, a selection procedure must be organized.

The Didam-doctrine provides that it is prohibited for a public entity to sell land directly if there are two or more potentially interested buyers. Hence, when there is only one potential buyer, the land may still be sold directly. Therefore, public entities often argue that there was only one potential buyer. By which they effectively argue that the Didam-doctrine is not applicable since a failure to organise a selection procedure prior to the sale results in voidness of the contract.

Exception to the Didam-doctrine

In the case at hand the Joint Scheme tried to argue that the applicant did not show a true interest in buying the land. Thereby it invoked the exception to the Didam-doctrine, since they had a clear preference in selling the land directly, instead organising a selection procedure. Given the facts of the case this argument seems a bit of a stretch. This is particularly so since the applicant had shown interest in buying the land via email, telephone and so on, and at least a year prior to the sale of the land. The applicant even filed a complaint after the Joint Scheme made its intention to sell the land public.

It does not come as a surprise that the Court found that the applicant had made sufficiently clear its interest in buying the land. Since the applicant had shown interest in buying the land, the Joint Scheme should have organized a selection procedure on the basis of which it had to choose to whom to sell. Consequently, the Court prohibited the Joint Scheme from selling the land.

The Joint Scheme tried to argue that it had come up with criteria on the basis of which it came to the conclusion that there was only one interested buyer. The Court dismissed this argument by maintaining that a public entity must first decide on whether there are two or more potentially interested buyers, after which it can select the buyer on the basis of objective, transparent and reasonable criteria, not the other way around.

Final remark

Rather interestingly, Dutch law requires public entities to apply a selection procedure for the sale of land even though the sale is outside the scope of public procurement law. As the Didam-doctrine is still rather new, any guidance on its applicability is much welcome, as is this judgment.

[1] District Court of Rotterdam 24 October 2022, ECLI:NL:RBROT:2022:9029.