Interesting twist on the interpretation of extremely urgent procurement rules -- re [2022] EWHC 46 (TCC)

One of the most awaited court decisions in the PPE procurement litigation saga in the UK was handed down yesterday—see R (Good Law Project and EveryDoctor) v Secretary of State for Health and Social Care [2022] EWHC 46 (TCC). The case concerned, among other things, the interpretation of the authorisation to use a negotiated procedure without prior publication on grounds of extreme urgency, and its limits, under reg.32(2)(c) and 32(4) of the Public Contracts Regulations 2015 (‘PCR2015’), which transpose Art 32(2)(c) of Directive 2014/14/EU verbatim.

The case required an EU law conforming interpretation due to the procurement predating the end of the Brexit transition period (see para [308]). The High Court thus engaged in an analysis of CJEU case law and a functional interpretation of reg.32(2)(c) and 32(4) PCR2015 that is directly of interest regarding the interpretation of Art 32(2)(c) Dir 2014/14/EU (on which see P Bogdanowicz, ‘Article 32’ in R Caranta and A Sanchez-Graells, European Public Procurement. Commentary on Directive 2014/24/EU (Edward Elgar, 2021) 350-362]. There are two points worth highlighting in the Judgment (see also Pedro Telles’ hot take yesterday).

First, the High Court confirmed the ‘blanket approach’ interpretation that the pandemic, in its early stages, was itself sufficient justification to ‘deactivate’ procurement rules through the exception to competitive requirements in reg.32(2)(c) and 32(4) PCR2015 / Art 32(2)(c) Dir 2014/24’EU (paras [329]-[331]). This has been the position of the UK Cabinet Office and the European Commission in their ‘pandemic procurement’ guidelines of March and April 2020, respectively, and one that I share (see A Sanchez-Graells, ‘Procurement in the time of Covid-19’ (2020) 71(1) NILQ 81-87, at 83; see also Bogdanowicz, above, at 32.23, contra Telles, above).

Second, and more interesting, the High Court considered whether the authorisation to carry out a negotiated procedure without prior publication is still subject to some of the requirements of the PCR2015 (and, by analogy, Directive 2014/24/EU). The High Court found that, under certain circumstances, extremely urgent procurement is still bound to respect the equal treatment requirement of reg.18 PCR2015 / Art 18 Dir 2014/24/EU. The High Court’s reasoning was that

It is … necessary to consider whether there are any constraints on the permissible approach by a contracting authority when acting under regulation 32; in particular, whether there is an irreducible minimum standard of objective fairness that applies to such procurements, even in the absence of open competition (at [334], emphasis added).

and that

Regulation 18 provides that contracting authorities shall treat economic operators equally and without discrimination and shall act in a transparent and proportionate manner. Regulation 32 does not expressly disapply the obligations set out in regulation 18. … the question that arises is whether there is any implicit exclusion, or modification, of this provision arising from operation of the negotiated procedure without notice (at [340], emphasis added).

Within this framework, and taking into account the peculiar circumstances of the case — ie the fact that the UK Government ‘operated a high priority lane (“the High Priority Lane”, also referred to as … “the VIP Lane”), whereby suppliers who had been referred by Ministers, [Members of Parliament] and senior officials were afforded more favourable treatment, significantly increasing their prospects of being awarded a contract or contracts’ (at [4]) — the High Court established that

It is reasonably clear that where there is only one economic operator who can provide the works, supplies or services, the principle of equal treatment can have no application. Where there is no alternative source, there will be no comparative exercise carried out and no question of any discrimination arises. However, where the contracting authority considers bids from more than one economic operator, whether at the same or at different times, there is no obvious rationale for disregarding the principle of equal treatment in terms of the criteria used to decide which bidders should be awarded a contract. Dispensing with a competition does not justify arbitrary or unfair selection criteria where more than one economic operator could satisfy the demand (at [341]).

I have two comments here. The first one is that the analysis at para [341] is partially flawed when it initially refers to the existence of a single supply source, as that is covered by the grounds in reg.32(2)(b) PCR2015 / Art 32(2)(b) Dir 2014/24/EU. A proper analysis under ground (c) on extreme urgency should have triggered a different logic, as the presence of extreme urgency allows contracting authorities to simply choose a provider regardless of the existence of alternative providers, precisely because the supply, works or services are so urgent that there is no time to consider alternatives. The choice of the specific supplier to which the contract will be awarded is discretionary, and subject only to documentary requirements primarily concerned with the concurrence of the circumstances justifying the use of the negotiated procedure without prior publication (see Sanchez-Graells, above, 83).

If this premise is correct, on the basis of a maiore ad minus logic, the argument is difficult to extend to a situation where the contracting authority makes repeated choices for the direct award of contracts. That does not mean that unequal treatment is allowed, but rather that the source of the requirement for equal treatment can hardly be found in reg.18 PCR2015 / Art 18 Dir 2014/24/EU in relation to reg.32(2)(c) PCR2015 / Art 32(2)(c) Dir 2014/24/EU because its exclusion is implicit in the authorisation to directly and discretionarily choose the economic operator to be tasked with the extremely urgent supply, service provision or works—regardless of whether there is only one possible source or not, as that is covered in ground (b) of those rules instead.

The High Court dismissed this argument as follows:

The Defendant submits that, as he was not constrained to implement any competitive tender process, it was lawful for the Defendant to elect to approach an economic operator of his choice and negotiate directly with such economic operator for the purposes of awarding any individual public contract. In those circumstances, it is submitted, the principle of equal treatment did not apply. In my judgment that submission goes too far. It would be open to the Defendant to justify the selection of one economic operator but only: (i) where he could bring himself within the conditions set out in regulation 32(2)(b), for example where only one economic operator could source the required PPE; or (ii) where he could justify the extent of such derogation from the principles in regulation 18 under regulation 32(2)(c), for example where only one economic operator could source the PPE within the required timescale. That interpretation is consistent with the guidance issued by the European Commission on 1 April 2020 [at [346]).

I submit that the legal analysis of the High Court in this point is incorrect, simply because there is no single source requirement in reg.32(2)(c) PCR2015 (or in Art 32(2)(c) Dir 2014/24), even if this can be a matter of policy, as reflected in the European Commission’s guidance (at 1 and 2.3). And the absence of a sole source requirement is entirely justified on operational grounds. Imagine a situation where the contracting authority with the extremely urgent need identifies a potential provider and successfully and quickly reaches an agreement to get its urgent need satisfied. It would defy all logic to require the contracting authority to then check whether ‘only [that] undertaking is able to deliver within the technical and time constraints imposed by the extreme urgency‘ (in terms of the Commission’s guidance) and, if not, then engage with additional negotiations with the other/s, which would only generate further delay in getting the extremely urgent (public) need satisfied. Sole source requirements simply make no sense in this setting. In fact, the Commission’s guidance was (contradictorily?) clear that ‘as set out in Art. 32 of Directive 2014/24/EU (the ‘Directive’), public buyers may negotiate directly with potential contractor(s) and there are no publication requirements, no time limits, no minimum number of candidates to be consulted, or other procedural requirements. No procedural steps are regulated at EU level. In practice, this means that authorities can act as quickly as is technically/physically feasible – and the procedure may constitute a de facto direct award only subject to physical/technical constraints related to the actual availability and speed of delivery‘ (emphasis added), with this requirement logically only meaning that the awardee of the contract needs to be able to actually deliver at speed (which was the flaw with eg the ventilator challenge, see here).

Conflating both requirements constitutes an improper interpretation that runs contrary to the CJEU case law on extreme urgency grounds for the use of the negotiated procedure without prior publication. This may seem like a technical point, but I think it is important. It is also a rather unnecessary point for the High Court to have made, as the Judgment does not rest on it. At paras [348] and [350], the Court is clear that the equal treatment requirement emerged from the way in which the discretion was exercised, because the VIP Lane created a procedure that was structurally and unavoidably discriminatory.

Linked to that, my second comment is that the exclusion of reg.18 by reg.32(2)(c) PCR2015 (and EU equivalents) should not have pre-empted the finding of an ‘irreducible minimum standard of objective fairness’ in the organisation of a system to make repeated or multiple direct awards in the context of an extremely urgent need (the VIP Lane). However, such requirements should derive from general administrative law rules or principles and, in particular in the context of procurement covered (and authorised to be carried out via a negotiated procedure without prior publication) by EU law, from the duty of good administration in Article 41 of the Charter of Fundamental Rights of the EU (‘Charter’) — although, admittedly, the relevance of Art 41 Charter to procurement carried out by the Member States is controversial (in favour, AG Sharpston, Opinion in Varec, C-450/06, EU:C:2007:643, at 43; cfr. AG Bobek, Opinion in HUNGEOD, C‑496/18 and C‑497/18, EU:C:2019:1002, at 50).

And, although I am not an expert in UK public law, I would also have thought that general requirements of administrative decision-making should apply to that effect, such as the requirement for decision-makers to consider all issues which are relevant to a decision and not to consider any issues which are not [for discussion in the context of automated decision-making, and with references to case law, see J Cobbe, ‘Administrative law and the machines of government: judicial review of automated public-sector decision-making’ (2019) 39 Legal Studies 636-655, at 650]. However, the High Court also dismissed this argument, although seemingly on the specific factual circumstances of the case (at [456]-[459]).

So it could be that the stringency of the English case law’s approach to the control of objectivity in administrative decision-making provides an explanation for the, in my view, improper interpretation of the requirements that can be attached to procurement via a negotiated procedure without prior publication on grounds of extreme urgency. Whether the CJEU is likely to follow a similar approach to the imposition of equal treatment requirements in the interpretation of Art 32(2)(c) Dir 2014/24/EU in the future is thus difficult to assess.

Why an appeal of the High Court Parliamentary approval Brexit judgment will bring the litigation to the cjeu?

The High Court has today issued its Judgment in the dispute about the UK Parliament's necessary approval of a Brexit notification--see R (Miller) -V- Secretary of State for Exiting the European Union [2016] EWHC 2768 (Admin). It has ruled that such Parliamentary approval is indeed required as a matter of UK constitutional and public law. The Government has already announced that it will appeal this decision to the UK Supreme Court (UKSC). The implications of such an appeal are important and need to be carefully considered. One such possible consequence is that the appeal (indirectly) brings the case to the docket of the  Court of Justice of the European Union (CJEU).

In my view, an appeal of the High Court's Judgment before the UKSC will indeed trigger a legal requirement under EU law for the UKSC to send a reference for a preliminary ruling to the CJEU. I have rehearsed most of my arguments on twitter earlier (see here and here) and this posts brings them together.

Basic EU Law Background

Article 267(1)(a) TFEU establishes the monopoly of interpretation of the CJEU and it indicates the Court shall have jurisdiction to give preliminary rulings concerning the interpretation of the Treaties. Article 267(2) then goes on to enable the domestic courts of the Member States to issue request preliminary rulings from the ECJ where questions of interpretation of EU law are raised before them and they consider that a decision on the question is necessary to enable them to give judgment. However, that discretion of domestic courts to request preliminary rulings from the CJEU does not apply to the courts or tribunals of a Member State against whose decisions there is no judicial remedy under national law. In that case, Article 267(3) indicates that where a question on the interpretation of EU law is raised, the highest court  shall bring the matter before the CJEU.

The uncertainties surrounding the interpretation of Art 50 TEU before the High Court

One of the extremely complex issues concerning the UK's potential withdrawal from the EU following the Brexit vote of 23 June 2016 concerns the interpretation of Article 50 TEU (on this, see here). One of the difficult sub-questions concerns the (ir)reversibility of an Art 50 TEU trigger notification. This is an essential element for an assessment of the UK's constitutional requirements for the delivery of such notification, as the High Court's Judgment makes clear.

Indeed, as a preliminary issue, in today's Judgment, the High Court has addressed the problematic interpretation of Art 50 TEU. Unanimously, the High Court has indicated that "Important matters in respect of Article 50 were common ground between the parties: (1) a notice under Article 50(2) cannot be withdrawn once it is given ..." para [10]; and that "Once a notice is given, it will inevitably result in the complete withdrawal of the United Kingdom from membership of the European Union and from the relevant Treaties at the end of the two year period, subject only to agreement on an extension of time ..." para [11].

There are two ways of interpreting the High Court's dealing with the argument on irreversibility of an Art 50 notification. First, that the High Court takes this approach in para [11] because it is common ground between the parties ex para [10]--what I would call the UK procedural approach. Second, that the High Court has of its own interpreted an Art 50 notification to be irreversible ex para [11], which happens to align with the common position of the parties in para [10]--what I would call the EU substantive interpretation approach.

The UK procedural approach is saved by the High Court's discretion under Art 267(2) TFEU to consider that the interpretation of Art 50 TEU is actually not necessary for it to adjudicate the matter at hand because this is not part of the controversy between the parties. However, the EU substantive interpretation does trigger some issues because, having recognised the interpretation of Art 50 TEU as an important aspect for the adjudication of the case, the High Court should not have taken it upon itself to interpret it and should rather have requested a preliminary ruling from the CJEU. However, unless under a very expansive interpretation of the principle of sincere or loyal cooperation in Art 4(3) TEU, this does not amount to a breach of EU law.

The uncertainties surrounding the interpretation of Art 50 TEU before the UK Supreme Court

Now, in case of an appeal of the High Court's decision before the UKSC, in my opinion, the referral to the CJEU is legally unavoidable (I will not deal for now with arguments of judicial politics or pragmatic views on the UKSC's likely course of action). Even if the parties do not challenge or even raise to the UKSC's consideration the matter of the (ir)reversibility of and Article 50 notification, it is a logical given that the UKSC needs to take a stance (even if implicit) on this point in order to be able to rule on the case. If it quashes the High Court's decision, it needs to clarify the points of law which the High Court would have gotten wrong--one of which concerns the irrevocability of an Art 50 notification. if it upholds the High Court's decision, it is (implicitly) accepting the assumption that an Art 50 notification is irrevocable. Either way, the UKSC cannot escape a substantial (implicit) consideration of the interpretation of Article 50.

In my view, this engages the UKSC's obligation to request a preliminary ruling from the CJEU under Article 267(3) TFEU and not doing so triggers a risk of infringement of EU law by the UK due to the acts (or omission, in this case) of its highest court.

Semi-Advanced EU Law Background

The UKSC's obligation to request a preliminary reference from the CJEU is controlled by the so-called CILFIT test, which establishes that "a court or tribunal against whose decisions there is no judicial remedy under national law is required, where a question of [EU] law is raised before it, to comply with its obligation to bring the matter before the Court of Justice, unless it has established that the question raised is irrelevant or that the [EU] provision in question has already been interpreted by the Court or that the correct application of [EU] law is so obvious as to leave no scope for any reasonable doubt. The existence of such a possibility must be assessed in the light of the specific characteristics of [EU] law, the particular difficulties to which its interpretation gives rise and the risk of divergences in judicial decisions within the [EU]" (283/81, EU:C:1982:335, para 21).

What does this mean for the UKSC in the Brexit litigation in case of appeal?

In short, my understanding of the CILFIT test is that a highest court of a Member State (the UKSC) must request a preliminary ruling on the interpretation of the Treaties to the CJEU and has no discretion not to do so unless: (a) the question is (objectively) irrelevant for the adjudication of the case, or (b) the provision has already been interpreted by the CJEU, or (c) there is no scope for reasonable doubt in the interpretation of the provision. None of these apply in the specific case of the Article 50 litigation.

First, it is inconceivable to me to argue that the interpretation of Art 50 and the (ir)revocability of a notice under it is irrelevant for the adjudication of this case. A different issue would be whether the UKSC could pragmatically sidestep the need to engage in that interpretation, either by presuming its content (the EU substantive interpretation approach mentioned above), or by insisting on the fact that it is common ground to the parties to the litigation and, therefore, the issue of the (ir)revocability of the notification is not (formally, explicitly) raised before it (the UK procedural approach.

However, in my opinion, neither of these avoidance strategies would meet the basic requirements of good faith in the interpretation of the CILFIT test, coupled with Article 4(3) TEU, which requires the domestic court to assess the need to request a preliminary ruling "in the light of the specific characteristics of [EU] law, the particular difficulties to which its interpretation gives rise and the risk of divergences in judicial decisions within the [EU]". The interpretation of Article 50 TEU is, to put it simply, the most relevant EU constitutional law issue since the OMT litigation and one of the top, if not the top, EU constitutional law issue since the entry into force of the Lisbon Treaty. Engaging in semantics in the analysis of the first prong of the CILFIT test against this background (ie, stretching the narrow interpretation "irrelevant") seems to me logically and legally unacceptable.

Second, it is plain that Art 50 has not been interpret by the CJEU yet. And, thirdly, it is also plain that there is scope (massive scope, a gaping hole) for reasonable doubt in the interpretation of Article 50 TEU. Thus, the so-called acte claire doctrine (ie the counterbalance of the CILFIT test) simply does not apply here.

Overall, in my opinion, the UKSC has an absolute and inexcusable obligation to request a preliminary ruling on the interpretation of Article 50 TEU from the CJEU the moment the appeal against the High Court's Judgment (eventually) reaches its docket. Otherwise, the UKSC risks triggering an infringement of EU law and eventually creating liability in damages under the Kobler / Traghetti del Mediterraneo strand of case law on State liability. Again, I am not dealing with the arguments on the likelihood of an actual infringement case brought forward by the European Commission, or the CJEU's eventual decision. I am, for now, simply stressing the state of EU law, which the UKSC would be well advised to bear in mind and uphold, unless it aims to contribute to the deterioration of the rule of law in the UK and the EU (which is something that keeps me awake at night).