In ?Auroux [2007] the ECJ held that works in a ‘public contract’ (and so subject to the formalities of the procurement regime) do not have to be carried out for the benefit of the public authority, but merely to its specification. That has led to concerns that s106 planning agreements may come within the scope of the procurement regime (ie because developers are carrying out works that have been agreed to the specification of a public body).

However, the general view is that such fears are largely unfounded, and s106 agreements do not raise procurement risks. In particular, a public works contract has to be ‘for pecuniary interest’, and under European law it is the economic benefit received by the contractor ‘on account of’ the works that is important. But, for most developments, the s106 agreement will be a severe economic burden, and will certainly not be a benefit (since typically they require developers to construct infrastructure, and then transfer it at no cost to the LA). Some commentators have countered that argument by suggesting that planning permission itself constitutes a ‘pecuniary interest’, but the answer to that is that if planning permission is being granted ‘on account of’ s106 works, then it is being bought – and that is fundamentally unlawful. Thus, the reality is that normal s106 agreements should not fall foul of the procurement regime (although the arguments become more complex when affordable housing is secured via an s106 deal). Source: Denton Wilde Sapte.