Ineffectiveness etc. in relation to specific contracts based on a framework agreement under reg.103 Public Contracts Regulations 2015

Reg.103 of the Public Contracts Regulations 2015 (PCR2015) establishes rules on ineffectiveness and shortening of duration in relation to specific contracts based on a framework agreement. This regulation alters the rules of regs.99 to 102 in relation to specific contracts based on a framework agreement. However, most of the comments made in relation to those regulations apply here as well (see Pedro's comments here).

Reg.103(1) PCR2015 determines the scope of application of these special rules and clarifies that  the “specific contracts” it covers are those which are based on the terms of a framework agreement; and were entered into before a declaration of ineffectiveness (if any) was made in respect of the framework agreement on which they are based. The need for these special rules derives from reg.103(2) PCR2015, which determines that a specific contract is not to be considered to be ineffective merely because a declaration of ineffectiveness has been made in respect of the framework agreement. 

Ineffectiveness of 'relevant' specific contracts

In that case, following reg.103(3), where a declaration of ineffectiveness has been made in respect of the framework agreement, the Court must make a separate declaration of ineffectiveness in respect of each relevant specific contract. Therefore, regs.103(2) and (3) clearly decouples the (in)effectiveness of contracts awarded within a framework agreement before the declaration of its ineffectiveness from the ineffectiveness of the latter itself. 

For these purposes, a specific contract is relevant only if a claim for a declaration of ineffectiveness in respect of that specific contract has been made within the time limits mentioned in reg.93 PCR2015 as applicable to the circumstances of the specific contract; regardless of whether the claim was made at the same time as any claim for a declaration of ineffectiveness of the framework agreement [reg.103(4) PCR2015]. 

This is bound to limit the issue of ineffectiveness of specific contracts within the framework to those that are actually litigious, and is in line with the option for a restriction of the consequences of a declaration of ineffectiveness only for the future, or ex nunc, under reg.101(1) PCR2015. 

General interests excluding ineffectiveness of 'relevant' specific contracts

When determining whether a relevant specific contract should be declared ineffective on top of the ineffectiveness of the framework agreement it is based on, reg.100 PCR2015 (general interest grounds for not making a declaration of ineffectiveness) applies insofar as the overriding reasons relate specifically to the circumstances of the specific contract [reg.103(5)].  

Ineffectiveness of (non-'relevant') specific contracts due to general grounds

Moreover, reg.103(6) coordinates the rule in reg.103(3) and (4) with those in reg.95 PCR2015, to the effect of preventing the contracting authority from entering into specific contracts based on a framework which effectiveness has been challenged. That obligation is implicit and, consequently, where a claim form has been issued in respect of a contracting authority’s decision to award the framework agreement, the contracting authority has become aware that the claim form has been issued and that it relates to that decision, and a/any specific contract(s) have not been entered in, the contracting authority is required to refrain from entering into any such specific contracts based on the litigious framework agreement--and, failing that, it will be considered to have infringed the requirements of reg.95 PCR2015 and the Court will be able to declare the ineffectiveness of any such specific contracts. The same applies in relation to interim measures altering or restoring such suspension of the contract-making powers of the contracting authority.

In terms of reg.103(6)(b), thus, the regulation not prejudice the making of a declaration of ineffectiveness in relation to a specific contract in accordance with other provisions on the basis of the second ground of ineffectiveness set out in reg.99(5), where (i) the relevant breach of the kind mentioned in reg.99(5)(a) is entering into the specific contract in breach of regs.95 or 96(1)(b) PCR2015, and the relevant 'additional' breach of the kind mentioned in reg.99(5)(b) relates specifically to the award of the specific contract and the procedure relating to that award, rather than to the award of the framework agreement and the procedure relating to it. Further to this, and even if the clarification is quite circular and unnecessary, under reg.103(6)(a), the third ground of ineffectiveness set out in reg.99(6) and (7) also applies to the entering into of specific contracts based on a framework agreement.

No other grounds for ineffectiveness of specific contracts

Reg.103(7) PCR2015 limits the possibilities to declare the ineffectiveness of a specific contract based on a framework agreement other than in accordance with reg.103(3) (separate declaration of ineffectiveness in respect of each relevant specific contract) or on a basis mentioned in reg.103(6)--which, basically, comes to exclude the possibility of declaring the ineffectiveness under the first ground foreseen in reg.99 PCR2015. 

Effects derived from the ineffectiveness of specific contracts

According to reg.103(8) PCR2015, where a declaration of ineffectiveness is made in respect of a specific contract in accordance with reg.103(3), reg.101 (the consequences of ineffectiveness) applies, but reg.102(1) (requirement to impose a civil financial penalty) does not apply. This makes sense and avoids the imposition of excessive penalties when the ineffectiveness of a relevant specific contract derives from or comes in addition to the ineffectiveness of the framework agreement it is based on--which will already have triggered the imposition of penalties under reg.102 PCR2015.  

A contrario, where the ineffectiveness of a (non-'relevant') specific contract derives from other grounds, as foreseen in reg.103(6) PCR2015, the full remedies foreseen in reg.98 are available and regs.101 and 102 need to be applied strictly.

Reg.103(9) foresees that, where the Court refrains from making a declaration of ineffectiveness which would otherwise have been required on the basis of general interest grounds, the Court must order that the duration of the contract be shortened to the extent specified in the order. The extent by which the duration of the contract is to be shortened is the maximum extent, if any, which the Court considers to be possible having regard to what is required by the overriding reasons of general interest [reg.103(10)]. For these purposes, “duration of the contract” refers only to its prospective duration as from the time when the Court makes the order [reg.103(11) PCR2015].  

It is interesting to note that these considerations are not exactly parallel to those derived from shortening of contracts which ineffectiveness is excluded by general interest grounds under reg.102(2)(a) and (3) PCR2015, where the limits to the shortening of the contract derived from the general interest grounds are not expressly referred to. However, in my view, there is no reason not to apply these rules analogously to that case.

Penalties in addition to, or instead of, ineffectiveness under reg.102 Public Contracts Regulations 2015

Reg.102 of the Public Contracts Regulations 2015 (PCR2015) determines the penalties that the Court must impose in addition to, or instead of, the ineffectiveness of a contract awarded in violation of any of the grounds set out in reg.99 PCR2015, which are fundamentally limited to a shortening of the duration of the contract and/or the payment of civil financial penalties by the contracting authority (see Pedro's remarks here). It is important to stress that the Court has no discretion to decide not to impose any of these penalties, given that reg.98(2)(b) PCR2015 requires it to impose some penalty when the conditions of reg.102 are met--which cover two different cases.

Firstly, the Court must impose the payment of civil penalties where it declares the ineffectiveness of the contract [reg.102(1) PCR2015].

Secondly, the Court must impose penalties even if it does not declare the ineffectiveness of the contract because either (a) it is satisfied that any of the grounds for ineffectiveness applies but does not make a declaration of ineffectiveness because reg.100 requires it not to do so; or (b) the Court is satisfied that the contract has been entered into in breach of any requirement imposed by regs.87, 95 or 96(1)(b) and does not make a declaration of ineffectiveness, whether because none was sought or because the Court is not satisfied that any of the grounds for ineffectiveness applies [reg.102(2) PCR2015]. 

In these cases, the Court must order at least one, and may order both, of the following penalties: (a) that the duration of the contract be shortened to the extent specified in the order [in which case, “duration of the contract” refers only to its prospective duration as from the time when the Court makes the order; reg.102(16) PCR2015]; or/and (b) that the contracting authority pay a civil financial penalty. 

If the Court imposes the payment of a civil financial penalty in either of these cases, in determining its amount, the overriding consideration is that the penalties must be effective, proportionate and dissuasive [reg.102(4) PCR2015; for a comparative view of the level of such penalties in other EU jurisdictions, see the report recently published by the Commission on "Economic efficiency and legal effectiveness of review and remedies procedures for public contracts" (April 2015)]. 

Reg.102 PCR2015 establishes two additional general rules. Firstly, in determining the appropriate order, it is made explicit that the Court must take account of all the relevant factors, including the seriousness of the relevant breach of the duty owed in accordance with reg.89 or 90; the behaviour of the contracting authority; and, where the order is to be made without a declaration of ineffectiveness, the extent to which the contract remains in force [reg.102(5) PCR2015]. Moreover, it is also established that, where more than one economic operator starts proceedings in relation to the same contract, the determination of the  effective, proportionate and dissuasive character applies to the totality of penalties imposed in respect of the contract [reg.102(6) PCR2015; ie a sort of ne bis in idem].

Civil financial penalties

Reg.102(7) to (11) establishes specific the rules concerning the payment of civil financial penalties and, in particular, whom the penalties are payable to. This may be of interest to public lawyers. However, from a public procurement perspective, this does not deserve any further comments.

Contract shortening

More interestingly, reg.102(12) to (16) establish specific rules for the shortening of the contract that cannot be declared ineffective. The regime is quite similar to the rules governing the consequences of a declaration of ineffectiveness under reg.101 PCFR2015. In that regard, the Court may make any order that it thinks appropriate for addressing the consequences of the shortening of the duration of the contract [reg.102(12)] and such an order may, for example, address issues of restitution and compensation as between those parties to the contract who are parties to the proceedings so as to achieve an outcome which the Court considers to be just in all the circumstances [reg.102(13)].

Reg.102(14) foresees the possibility for the parties to have previously regulated contractually the consequences of an order shortening the contract and, consequently, reg.102(15) determines that, in those circumstances, the Court must not exercise its power to regulate the shortening of the contract in any way which is inconsistent with those provisions, unless and to the extent that the Court considers them incompatible with the primary order to shorten the contract. The same issue of (in)existence of compensation for loss or damage resulting from the shortening of the contract arises as in relation to effectiveness, so the comments made in relation to reg.101 PCR2015 to the effect of excluding any such compensation apply here as well.

Consequences of ineffectiveness under reg.101 Public Contracts Regulations 2015

Reg.101 of the Public Contracts Regulations 2015 (PCR2015) determines the consequences of the ineffectiveness of a contract declared under reg.99 PCR2015. According to reg.101(1) PCR2015, the declaration of ineffectiveness determines that the contract is to be considered to be prospectively, but not retrospectively, ineffective as from the time when the declaration is made and, accordingly, those obligations under the contract which at that time have yet to be performed are not to be performed.

This means that the effects of the declaration of ineffectiveness are ex nunc or from now on, which is a possibility allowed for under Art 2d(2) of Directive 89/665 as amended by Directive 2007/66 (here). In this case, though, the limitation of the effects of the ineffectiveness to the future triggers an obligation to impose additional penalties, which are dealt with by reg.102 PCR2015. Pedro concurs.

Given that such decision can be appealed and, consequently, the declaration of ineffectiveness can be stayed, reg.101(2) PCR2015 clarifies that, in case of exercise of any power under which the orders or decisions of the Court may be stayed, at the end of any period during which a declaration of ineffectiveness is stayed, the contract is to be considered to have been ineffective as from the time when the declaration had been made. Consequently, the practical effects of the declaration of ineffectiveness need to be adjusted to the time of the adoption of such declaration, even if that means that it gains some retrospective effectiveness upon confirmation (or lift of the stay).

In practical terms, reg.101(3) PCR2015 allows the Court making a declaration of ineffectiveness to make any appropriate order addressing the implications of the declaration of ineffectiveness and any consequential matters arising from the ineffectiveness. Such order can be made at the same time of the decision on ineffectiveness, or at any time after doing so. Reg. 101(4) PCR2015 further clarifies that such an order may, for example, address issues of restitution and compensation as between those parties to the contract who are parties to the proceedings so as to achieve an outcome which the Court considers to be just in all the circumstances.

Reg.101(5) PCR2015 regulates the possibility that the contracting authority and the contractor may have self-regulated the consequences of a declaration of ineffectiveness. In that case, for the contractual regime to have effect, it is necessary that the parties to the contract have agreed before the declaration of ineffectiveness and by contract any provisions regulating their mutual rights and obligations in the event of such a declaration being made. That is, the contractual regime applicable to the ineffectiveness needs to pre-exist the declaration of ineffectiveness so as to avoid strategic behaviour between the parties. 

In any case, should there be a contractual regulation of the consequences of the declaration of ineffectiveness, reg.101(6) PCR2015 determines that the Court must not exercise its power to make an order under reg.101(3) in any way which is inconsistent with those provisions, unless and to the extent that the Court considers them incompatible with the requirements in reg.101(1) or (2)--that is, unless they restrict the future ineffectiveness of the contract, considered from the date of the declaration.

One of the issues that is likely to trigger more litigation concerns any sort of compensation for loss or damage derived from the ineffectiveness of the contract (either contractual, or as a result of an issue of compensation under a Court order)--which, in my view, would run contrary to the effectiveness of the remedies Directive and, consequently, should not be allowed [in similar terms, see J Arnould, "Damages for performing an illegal contract: the other side of the mirror - comments on the three recent judgments of the French Council of State" (2008) 17(6) Public Procurement Law Review NA274-281]. 

This was an unresolved issue in the CJEU Judgment in Commission v Germany, C-503/04, EU:C:2007:432, para 36: "even if it were to be accepted that the principles of legal certainty and of the protection of legitimate expectations, the principle pacta sunt servanda and the right to property could be used against the contracting authority by the other party to the contract in the event of rescission, Member States cannot rely thereon to justify the non-implementation of a judgment" declaring the ineffectiveness of a public contract (emphasis added). 

  

In my view, such compensation of damages should not be allowed because it would entail a payment derived from an infringement of EU law that actually benefits a party intimately involved in the infringement. Moreover, the grounds for ineffectiveness are extremely limited and the infringements that trigger ineffectiveness are clear-cut and easy to monitor by the contractor, so that it is impossible for it to seriously claim lack of knowledge of the infringement (bad faith) for the purposes of claiming compensation [in similar terms, see S Treumer, "Towards an obligation to terminate contracts concluded in breach of the E.C. Public procurement rules - the end of the status of concluded public contracts as sacred cows" (2007) 16(6) Public Procurement Law Review 371-386, 381: "if for example the contract party has been fully aware or should have been fully aware that the public procurement rules have been disregarded, this will presumably reduce the consideration given to the interest of the contract party in maintaining the contract. It might even lead to the exclusion of consideration to this interest of the contract party in cases where they have been fully aware of violation of the rules combined with very active participation in the violation". For a slightly different approach and a discussion of the standard of diligence required from a contractor considering claims in this setting, see MA Simovart, "The new Remedies Directive: would a diligent businessman enter into ineffective procurement contract?" (2009)].

General interest grounds for not making a declaration of ineffectiveness under reg.100 Public Contracts Regulations 2015

Reg.100 of the Public Contracts Regulations 2015 (PCR2015) transposes Art 2d(3) of Directive 89/665 as amended by Directive 2007/66 (here), and establishes the general interest grounds for not making a declaration of ineffectiveness that would otherwise derive from reg.99 PCR2015. Under reg.100(1) PCR2015, where the Court is satisfied that any of the grounds for ineffectiveness of reg.99 applies, it must not make a declaration of ineffectiveness if the contracting authority or another party to the proceedings submits such a request, and the Court is satisfied that overriding reasons relating to a general interest require that the effects of the contract should be maintained. Pedro discusses it here.

For these purposes, the general interest grounds for not making the declaration of ineffectiveness should, in principle, not be of an economic nature. Where the reasons adduced to oppose the declaration of ineffectiveness are of an economic nature, the additional conditions of reg.100(2) to (4) PCR2015 need to be complied with. In that regard, it should be stressed that economic interests in the effectiveness of the contract may be considered as overriding reasons only if in exceptional circumstances ineffectiveness would lead to disproportionate consequences [reg.100(2)]; and, in any case, economic interests directly linked to the contract cannot constitute overriding reasons relating to a general interest [reg.100(3)]. 

Reg.100(4) PCR2015 clarifies that such economic interests directly linked to the contract include (a) the costs resulting from the delay in the execution of the contract; (b) the costs resulting from the commencement of a new procurement procedure; (c) the costs resulting from change of the economic operator performing the contract; and (d) the costs of legal obligations resulting from the ineffectiveness. Therefore, the scope for purely economic interests to be taken into account in order to bar ineffectiveness is rather limited although, to the best of my knowledge, there is no guiding case law that clarifies this provision [for general discussion of the practical application of this provision, see K Struckmann & P Hodal, "Private Enforcement of Contract Ineffectiveness: A Practitioner's Point of View" (2014) 1 European Procurement & Public Private Partnership Law Review 27-35].

New paper on principle of competition and pursuit of horizontal policies in public procurement

I have uploaded on SSRN a new paper entitled: Truly Competitive Public Procurement as a Europe 2020 Lever: What Role for the Principle of Competition in Moderating Horizontal Policies? I will be presenting it at UACES 45th Annual Conference.

The paper discusses issues of balance between promotion of competition and the pursuit of horizontal or secondary policies in public procurement under the rules of Directive 2014/24. The abstract is as follows:

Public procurement is a pillar in the Europe 2020 strategy and one of the core policies derived from the Single Market Acts I and II. Majoritarian views advocate for an interventionist approach and instrumental utilisation of procurement for the promotion of horizontal policies seen as deeply embedded in the Europe 2020 strategy. Conversely, public procurement can only make such a contribution by promoting the maximum degree of competition and being open to market-led innovation, instead of trying to mandate or ‘drive’ such innovation or ‘greening’ of procurement.

This paper takes the view that the principle of competition is the main tool in the post-2014 procurement toolkit and the moderating factor in the implementation of any horizontal (green, social, innovation) policies under the new rules—that is, that competition remains the main consideration in public procurement and that the pursuit any horizontal policies, including those aimed at delivering the Europe 2020 strategy, need to respect the requirements of undistorted competitive tendering. To substantiate that claim, the paper focusses on the interpretation of Article 18(1) of Directive 2014/24, which consolidates the principle of competition, and proposes a strict proportionality test applicable to the promotion of horizontal procurement policies where such ‘strategic’ or ‘smart’ use of public procurement can generate market distortions.

The full reference is: Sanchez-Graells, Albert, Truly Competitive Public Procurement as a Europe 2020 Lever: What Role for the Principle of Competition in Moderating Horizontal Policies? (July 31, 2015). Available at SSRN: http://ssrn.com/abstract=2638466. Comments welcome!

Grounds for ineffectiveness under reg.99 Public Contracts Regulations 2015

Reg.99 of the Public Contracts Regulations 2015 (PCR2015) establishes the grounds for ineffectiveness of contracts already entered into by the time the Court determines whether there was a breach of the duty owed under regs.89 and 90 PCR2015. As reg.99(1) clearly states, there are three grounds for ineffectiveness, which map those foreseen in Art 2d of Directive 89/665, as amended by Directive 2007/66 (consolidated version available here). As Pedro points out, benefiting from them may not be as simple as it seems.

First ground: lack of prior publication

Under reg.99(3) PCR2015, the first ground applies where the contract has been awarded without prior publication of a required contract notice. That is, in all instances were the award of the contract without prior publication was not allowed under the rules of Part 2 PCR2015--which mainly boils down to cases of improper use of the negotiated procedure without prior publication in cases not covered by reg.32 PCR2015.

This first ineffectiveness ground can be disapplied under reg.99(3) and (4) PCR2015 where a set of cumulative conditions are met, which amount to prove that the contracting authority erred in good faith in the assessment of the possibility to award the contract without prior publication and, in any case, gave transparency to its intention to award the contract (ie created equivalent transparency of the award of the contract). These conditions are: (a) the contracting authority considered the award of the contract without prior publication of a contract notice to be permitted by Part 2; (b) the contracting authority has had published in the Official Journal a voluntary transparency notice expressing its intention to enter into the contract [with the requirements of reg.99(4), of which the justification of the decision of the contracting authority to award the contract without prior publication of a contract notice is especially important]; and (c) the contract has not been entered into before the end of a period of at least 10 days beginning with the day after the date on which the voluntary transparency notice was published in the Official Journal [ie there has been a standstill period equivalent to that required by reg.87 PCR2015].

One of the key issues in the application of the exception in reg.99(3) PCR2015 is the assessment of the discretion/diligence of the contracting authority in its assessment of the possibility to award the contract without prior publication in order to meet the condition in reg.99(3)(a) PCR2015. This was discussed in Fastweb, C-19/13, EU:C:2014:2194, where the CJEU rejected the lenient approach recommended by AG Bot (who proposed a stringent test whereby recourse to the exception would only be declined if "the contracting authority has deliberately and intentionally infringed the rules on advertising and competitive procedure", which I criticised here) and established a clear duty of diligent assessment of the possibility to award without prior notice by the contracting authority (see paras 46-52, particularly 50, where the CJEU stressed that "the review body is under a duty to determine whether, when the contracting authority took the decision to award a contract by means of a negotiated procedure without prior publication of a contract notice, it acted diligently and whether it could legitimately hold that the conditions laid down in [Art 32 of Directive 2014/24/reg.32 PCR2015] were in fact satisfied"; emphasis added) [for discussion, see A Brown, "When will publication of a voluntary ex ante transparency notice provide protection against the remedy of contract ineffectiveness? Case C-19/13 Ministero dell'Interno v Fastweb SpA" (2015) 24(1) Public Procurement Law Review NA10-16]. 

Consequently, it seems clear to me that the interpretation of the conditions for the exception to the first ground of ineffectiveness to apply needs to be restrictive and ultimately rely on objective tests [see R Caranta, "Remedies in EU Public Contract Law: The Proceduralisation of EU Public Procurement Legislation" (2015) 8(1) Review of European Administrative Law 75, 83-84].

Second ground: contract entered into in violation of suspension obligation

As foreseen in reg.99(5)(a) PCR2015, the second ineffectiveness ground applies where the contracting authority has entered into the contract in violation of an existing suspension of its contract-making powers under: (i) reg.87 PCR2015 (the standstill period), (ii) reg.95 PCR2015 (contract-making suspended by challenge to award), or (iii) reg.96(1)(b) PCR2015 (interim order). 

In any of theses cases, under reg.99(5) PCR2015, three additional cumulative conditions need to be met for the ineffectiveness ground to apply: (1) there must also have been a breach of the duty owed to the economic operator in accordance with reg.89 or 90 PCR2015 in respect of obligations other than those imposed by reg.87 (the standstill period) and Chapter 6 of Part 3 PCR2015 (ie mainly, regs.95 and 96) [the 'additional breach']; (2) the breach of the existing suspension of the contracting authority's contract-making powers has deprived the economic operator of the possibility of starting proceedings in respect of that additional breach, or pursuing them to a proper conclusion, before the contract was entered into; and (3) that additional breach has affected the chances of the economic operator obtaining the contract. 

This set of additional breaches boils down to clarifying that a mere infringement of the suspension obligation does not trigger the ineffectiveness of the contract if the contracting authority complied scrupulously with the rules governing the tender. However, this does not mean that the contracting authority can take a free pass and disregard suspension obligations, nor that it cannot face other consequences derived from the infringement of the suspension obligation, such as a shortening of the duration of the contract and/or the payment of a financial penalty as required buy reg.102(2)(b) and (3) PCR2015 (commented in due course). Those can also be coupled with the payment of damages to the aggrieved tenderer, although they will probably be unlikely or reduced if it cannot prove that its chances of having obtained the contract were affected (which could ultimately reduce the incentive to claim under this ground, of course). Hence, the inapplication of the ground of ineffectiveness to the mere infringement of the suspension obligation does not come without consequences and contracting authorities need to take compliance with it seriously.

Third ground: framework agreements and dynamic purchasing systems

As established in reg.99(6) PCR2015, this last ground applies where all the following conditions are met: (a) the contract is based on a framework agreement or was awarded under a dynamic purchasing system; (b) the contract was awarded in breach of any requirement imposed by: (i) reg.33(11) PCR2015 (award of contracts based on framework agreements through re-opening of competition), or (ii) reg.34(21) to (24) PCR2015 (award of contracts under dynamic purchasing systems); and (c) the estimated value of the contract is equal to or greater than the relevant threshold mentioned in reg.5 PCR2015. This ground is relatively straightforward in theoretical terms but, practically, the problem for its application derives from the opacity or delayed transparency of the decisions to award contracts within framework agreements or under a dynamic purchasing system (see here). Thus, it may have limited practical relevance, unless economic operators involved in these schemes have access to the required information and keep the contracting authority under close scrutiny.

Reg.99(7) PCR2015 establishes an exception to this third ineffectiveness ground that is parallel to that in reg.99(3) and (4) [see above], whereby it does not apply if all the following are met: (a) the contracting authority considered the award of the contract to be in accordance with reg.33(11) PCR2015 or reg.34(21) to (24) PCR2015; (b) the contracting authority has, despite reg.86(5)(c) PCR2015, voluntarily complied with the requirements set out in regulation 86(1) to (4) (regarding notices of decisions to award a contract); and (c) the contract has not been entered into before the end of the standstill period. Given that it shares the basic elements of the exception to the first ground, an equally restrictive interpretation is required.

Remedies where the contract has been entered into under reg.98 Public Contracts Regulations 2015

As Pedro mentions, reg.98 of the Public Contracts Regulations 2015 (PCR2015) adopts a similar structure as reg.97 and determines the remedies available where the contract has been entered into. The list of remedies available where there has been a breach of the duty owed to an economic operator in accordance with regs.89 or 90 and the contract has been entered into differs from that in reg.97 in that it is both more prescriptive and more inclusive.

Under reg.98(2) PCR2015, the Court (a) must, if it is satisfied that any of the grounds for ineffectiveness of reg.99 PCR2015 applies, make a declaration of ineffectiveness in respect of the contract unless reg.100 PCR2015 requires the Court not to do so; (b) must, where required by reg.102 PCR2015, impose penalties in accordance with that regulation; (c) may award damages to an economic operator which has suffered loss or damage as a consequence of the breach, regardless of whether the Court also makes a declaration of ineffectiveness or imposes penalties; and (d) must not order any other remedies.

Reg.98(3) PCR2015 clarifies that paragraph (2)(d) is subject to reg.103(3) and (9) (additional relief in respect of specific contracts where a framework agreement is ineffective) and does not prejudice any power of the Court under reg.101(3) or 102(12) (orders which supplement a declaration of ineffectiveness or a contract-shortening order). 

The set of remedies available where the contract has been entered into is sufficiently complex as to require its specification in several regulations, particularly as the eventual ineffectiveness of the contract improperly awarded is concerned. In my view, other than the issue of ineffectiveness and its effects (commented later in relation to other regulations), the most controversial remedy under reg.98 PCR2015 concerns the award of a compensation for loss or damage. In that regard, the issues recently discussed in Energy Solutions EU Ltd v Nuclear Decommissioning Authority [2015] EWHC 73 (TCC) concerning the discretion of the Court (not) to grant damages are most relevant.

In that regard, it is worth reminding that, in its Judgment of 23 January 2015 in Energy Solutions v NDA, the High Court ruled on a preliminary issue in a public procurement dispute and held that the review court has no discretion (not) to grant damages for losses resulting from a breach of the public procurement rules. In my view, the Energy Solutions v NDA Judgment should be criticised at least for two reasons: firstly, because it misinterprets the EU rules on public procurement remedies and their link with the general principle of State liability for breaches of EU law; and secondly, because it creates an analytical framework based on the commercial decisions of disappointed bidders that would result in excessive (strategic) claims for damages. My arguments are fully developed here.

In my view, given that it is possible to challenge award decisions beyond the mandatory stand-still period and, consequently, after the contract has been awarded in conditions that make its declaration of ineffectiveness difficult [see comment to reg.99(5) PCR2015], the Court should overrule Energy Solutions v NDA and go back to an interpretation whereby a judgment of ‘reasonableness’ of the claim (and, significantly, of the time at which the proceedings are started) is conducted on a case by case basis and damages are by no means awarded automatically. 

Granted, this interpretative option creates legal uncertainty and may trigger further litigation at EU level. Consequently, in the long run, it would be preferable to amend the Public Contracts Regulations 2015 so that the standstill period and the time-limit to initiate actions coincide. In that case, I would expect the standstill to be extended, rather than the time-limit to be reduced. One way or the other, though, the system needs fixing in order to close the gaps that can now trigger excessive (strategic) litigation.

Remedies where the contract has not been entered into under reg.97 Public Contracts Regulations 2015

Reg.97 of the Public Contracts Regulations 2015 (PCR2015) lists the remedies that can be provided by the Court where the contract has not been entered into. However, this regulation does not prejudice any other powers of the Court--and, consequently, the available remedies can be broader if the claimant can resort to a different legal basis.

Under reg.97 PCR2015, where the contract has not yet been entered into and once the Court determines that a decision or action taken by a contracting authority was in breach of the duty owed in accordance with reg.89 or 90 PCR2015--ie that there has been a breach of the applicable rules and that the aggrieved party had active standing to claim for such breach; the Court may do one or more of the following: (a) order the setting aside of the decision or action concerned; (b) order the contracting authority to amend any document; (c) award damages to an economic operator which has suffered loss or damage as a consequence of the breach. Pedro focuses on the issue of damages in his comment.

This set of remedies is clearly tailored towards correcting the infringement--either by setting it aside or having it modified--and providing the claimant with sufficient compensation for the loss or damage suffered as a consequence of the breach. Of these remedies, the one that tends to trigger more difficulties is the compensation for loss or damage (further discussed tomorrow). 

However, an important point that can be easily overseen is that of the interconnection of the remedies. In my view, given that reg.97 is exclusively concerned with cases where there is no issue of ineffectiveness of a contract and its effects, as well as the possibility to exclude them (see comment to regs.98 and ff), the proper interpretation of reg.97(2) PCR2015 is that the Court must always grant either a remedy under reg.97(2)(a) and set aside the the decision or action concerned, or a remedy under reg.97(2)(b) and order the contracting authority to amend any document; and in either of the cases, where appropriate, it can additionally grant compensation for loss or damage. However, damages cannot be granted as a self-standing remedy under reg.97(2)(c) PCR2015 and claims exclusively for damages should be dismissed. 

The reason for this interpretation lies in the ancillary nature of the compensation for loss or damage under the EU system of public procurement remedies, which has never been intended as a main remedy (see arguments here). In that regard, given that the contract has not yet been entered into, if the Court can eg set aside the challenged award decision and make the contracting authority go back to the procedural moment prior to the relevant breach of the duty owed to the claimant, there may well not be any (relevant) loss or damage to be compensated--other than legal costs, possibly. Hence, a systemic interpretation of reg.97 PCR2015 should restrict the award of compensation for loss or damages to very exceptional cases because, in the absence of contractual completion, the situation should be relatively easy to correct and claimant's interests should be satisfied by retracting the tender to the moment prior to the infringement of the duty owed by the contracting authority.

A different (also difficult) claim would be for the economic operator to intend to have the award decision amended in its favor under reg.97(2)(b) PCR2015; for instance, where the claim is that the scores were improperly calculated and a proper application of the scoring rules should have resulted in such award. In these cases, the Court may well be reluctant to carry out any such sort of "amendment" of the document reflecting the award decision and rather refer the case back to the contracting authority for such recalculation. 

However, in my view, nothing should oppose a direct finding that a contract should have been awarded to claimant if the Court has all necessary information to determine ipso facto that such would be the clear (unique) result of a proper application of the rules. Either way, where the Court is able to determine which bidder should have been awarded the contract, it should take all appropriate steps to ensure that the remedy used creates that result.

Interim orders under reg.96 Public Contracts Regulations 2015

Reg.96 of the Public Contracts Regulations 2015 (PCR2015) establishes rules for the adoption of interim measures aimed at securing the possibility of setting aside an award decision that has been challenged or, reversely, to lift the suspension of the contract-making powers of the contracting authority following such a challenge under reg.95 PCR2015. In any case, however, the adoption of interim measures cannot shorten the mandatory non-litigation related stand-still period (Alcatel stand-still) [reg.96(4)], and the limited scope of the interim measures foreseen in reg.96 PCR2015 does not prejudice any other powers of the Court [reg.96(5) PCR2015].

When it comes to interim measures concerned with the suspension of the contract-making powers of the contracting authority under reg.95(1) PCR2015, reg.96(1) PCR2015 clearly foresees that the Court may, where relevant, make an interim order bringing it to an end, as well as an order restoring or modifying that requirement [reg.96(1)(a) and (b)]. In order to do so, ie in order to bring the litigation-related stand-still obligation to an end, the Court must consider whether, if reg.95(1) PCR2015 were not applicable, it would be appropriate to make an interim order requiring the contracting authority to refrain from entering into the contract; and only if the Court considers that it would not be appropriate to make such an interim order may it make an order to bring it to an end [reg.96(2)]. 

For discussion of the highly contentious issue of the lifting of the automatic suspension obligation (now) derived from reg.95(1) PCR2015, see L Wisdom, "United Kingdom: automatic suspensions in the TCC: the cases of NATS and Group M" (2015) Public Procurement Law Review NA44-50; R Ashmore, "Fresh hope for a fresh award but realism must prevail: High Court upholds automatic suspension on contract-making in a public procurement action but finds no illegal award or material variation: R (Edenred (UK Group) Limited) v HM Treasury and others" (2015) Public Procurement Law Review NA88-93; and L Wisdom, "Another automatic suspension lifted in the TCC: Solent NHS Trust v Hampshire County Council" (2015) Public Procurement Law Review NA140-143. All these comments stress the link between lifting the suspension and confining the remedies available to the claimant to a compensation for damages (which will be discussed regarding regs.97 and 98).

The Court can also make an interim order suspending the procedure leading to the award of the contract, or the determination of the design contest, in relation to which the breach of the duty owed in accordance with reg.89 or 90 PCR2015 is alleged [reg.96(1)(c)]; or suspending the implementation of any decision or action taken by the contracting authority in the course of following such a procedure [reg.96(1)(d) PCR2015].

Reg.96(3) opens the possibility for the Court to require or impose undertakings or conditions in relation to the requirement to suspend the contract-making powers of the contracting authority [Pedro offers some example in his post]. Its drafting is unnecessarily complex and may seem to limit the possibility to impose undertakings or conditions to cases linked to reg.95(1) PCR2015, which would make no sense because the tenor of that regulation is unconditional. Hence, in my view, the Court has full powers to impose undertakings or conditions whenever it considers them appropriate and the contract-making powers of the contracting authority are suspended (or remain suspended) as a result of the interim order.

Contract-making suspended by challenge to award decision under reg.95 Public Contracts Regulations 2015

As Pedro briefly discussed earlier today here, reg.95 of the Public Contracts Regulations 2015 (PCR2015) sets up the conditions under which a challenge to an award decision suspends any contract-making possibilities for the contracting authority--ie triggers a litigation-related stand-still obligation.  It is important to stress that reg.95(3) PCR2015 clarifies that this litigation-related stand-still obligation does not affect any of the obligations eventually imposed by reg.87 PCR2015 (ie the Alcatel or non-litigation related stand-still obligation). Therefore, a stand-still obligation derived from reg.95 can arise even if the Alcatel stand-still period was not applicable to the specific award decision or, if applicable, has elapsed; provided the conditions set out in reg.95(1) PCR2015 are met.

In that regard, under reg.95(1) PCR2015, such litigation-related stand-still obligation applies, and the contracting authority is required to refrain from entering into the contract, where a claim form has been issued in respect of a contracting authority’s decision to award the contract, the contracting authority has become aware that the claim form has been issued and that it relates to that decision, and the contract has not been entered into. 

Hence, this is an obligation that the contracting authority needs to comply with in good faith and in order to preempt the possibility of a successful challenge beyond the minimum Alcatel period (if any), should the contracting authority still not had taken the necessary steps to conclude the contract and get its performance started. It is, in my view, a sort of estoppel that prevents the contracting authority to rush to conclude a contract only after having become aware of a challenge of the previous award decision.

Reg.95(2) PCR2015 determines that such litigation-related stand-still obligation will remain until either the Court brings the requirement to an end by interim order under reg.96(1)(a) PCR2015 (discussed tomorrow); or the proceedings at first instance are determined, discontinued or otherwise disposed of and no order has been made continuing the requirement (for example in connection with an appeal or the possibility of an appeal).

In my view, this is an important procedural mechanism and imposes clear incentives on contracting authorities to enter into contracts promptly after the expiry of the Alcatel stand-still obligation, where it applies [see reg.86 PCR2015] and, generally, once it is clear that there is no need to wait any further before proceeding to conclusion and performance.

Short break for holidays

Pedro Telles and I are taking a break to accommodate some much needed holidays. Not sure what he will do, but I intend to remain off-line for a change.

Our procurement tennis will resume on July 27 (not such a long break after all...).

Happy holidays everyone!

Starting proceedings under reg.94 Public Contracts Regulations 2015

Reg.94 of the Public Contracts Regulations 2015 (PCR2015) establishes rules for starting proceedings under Chapter 6 PCR2015. Generally, the economic operator must serve the claim form on the contracting authority within 7 days after the date of issue where proceedings are started [reg.94(1)]. For these purposes, “serve” means serve in accordance with rules of court, and for the purposes of this regulation a claim form is deemed to be served on the day on which it is deemed by rules of court to be served [reg.94(5)].
 

However, there is a requirement for speedier service of the claim where ineffectiveness or a prohibition on concluding a not yet performed contract are involved. This covers cases where proceedings are started (i) seeking a declaration of ineffectiveness, or (ii) alleging a breach of (a) the standstill period imposed in reg.87 PCR2015, (b) suspension derived from a challenge to the award decision as per reg.95 PCR2015, or (c) an obligation derived from an interim measure restoring or modifying the requirement to suspend as per reg.96(1)(b) PCR2015, where the contract has not been fully performed [reg.94(2) PCR2015].

In those cases, the economic operator must, as soon as practicable, send a copy of the claim form to each person, other than the contracting authority, who is a party to the contract in question [reg.94(3) PCR2015]. In that regard, the contracting authority must, as soon as practicable, comply with any request from the economic operator for any information it may reasonably require for the purpose of complying such a duty to send a copy of the claim form to each person, other than the contracting authority, who is a party to the contract in question [reg.94(4) PCR2015].

These requirements make sense, given the relevance of ensuring that contracts are not executed when they are affected by a significant risk of ineffectiveness.

Special time limits for seeking a declaration of ineffectiveness under Reg. 93 Public Contracts Regulations 2015

Reg.93 of the Public Contracts Regulations 2015 (PCR2015) establishes special time limits for seeking a declaration of ineffectiveness. In this case, proceedings still need to be started within 30 days [reg.93(2)(a)], but the relevant time when the clock starts ticking changes (see below). In any event, though, proceedings must be started within 6 months beginning with the day after the date on which the contract was entered into [reg.93(2)(b)]. For these purposes, proceedings are to be regarded as started when the claim form is issued [reg.93(7) PCR2015].

Therefore, the general rule is that ineffectiveness can be sought up to 6 months after the contract was entered into, except in two specific cases in which potential claimants can be seen as possessing specific information that triggers their duty to start procedures within 30 days from the relevant fact.

The first case concerns procedures where a relevant contract award notice has been published in the Official Journal of the European Union, in which case the relevant date is the day after the date on which the notice was published [reg.93(3)]. For that purpose, a contract award notice is relevant if, and only if the contract was awarded without prior publication of a contract notice; and the contract award notice includes justification of the decision of the contracting authority to award the contract without prior publication of a contract notice [reg.93(4) PCR2015]. 

The second case concerns procedures where the contracting authority has informed the economic operator of the conclusion of the contract, and a summary of the relevant reasons, in which case the relevant date is the day after the date on which the economic operator was informed of the conclusion or, if later, was informed of a summary of the relevant reasons [reg.93(5)].  Such “relevant reasons” means the reasons which the economic operator would have been entitled to receive in response to a request under reg.55(2) PCR2015 [reg.93(6)].

General time limits for starting proceedings under reg.92 Public Contracts Regulations 2015

Reg.92 of the Public Contracts Regulations 2015 (PCR2015) establishes the general time limits for starting proceedings to seek remedies other than ineffectiveness derived from breaches of Part 2 PCR2015 or EU actionable procurement rules [time limits for proceedings seeking ineffectiveness are established in reg.93 PCR2015]. 

In general, and in a simplified manner, proceedings must be started within 30 days beginning with the date when the economic operator first knew or ought to have known that grounds for starting the proceedings had arisen [reg.92(2)]. However, the Court may extend the time limits imposed where it considers that there is a good reason for doing so [reg.92(4)], but it must not exercise that power under so as to permit proceedings to be started more than 3 months after the date when the economic operator first knew or ought to have known that grounds for starting the proceedings had arisen [reg.92(5) PCR2015].

For discussion on the calculation of these time limits, see R Ashmore "Curing the "incurable"? The possibility of serving a technically defective claim form "out of time" as recognised in Heron Bros Limited v Central Bedfordshire Council" (2014) 23(4) Public Procurement Law Review NA134-NA139. Even if the case discussed was Irish (and hence subjected to different rules), the issue of knowledge in relation to time limits for bringing proceedings is addressed in an interesting way by P McGovern, "Application of the principle of transparency in stating criteria, and application of the concept of knowledge in relation to time limits for bringing proceedings: the case of Gaswise Limited v Dublin City Council" (2014) 23(5) Public Procurement Law Review NA145-NA148.

Enforcement of duties through the Court under Reg. 91 Public Contracts Regulations 2015

Reg.91 of the Public Contracts Regulations 2015 (PCR2015) determines that economic operators can enforce the duties owed to them under regs.89 and 90 through the Court and, in particular, reg.91(2) assigns competence for such proceedings to the High Court. 

Reg.91(1) PCR2015 determines that breach of the duty owed in accordance with reg.89 or 90 is actionable by any economic operator which, in consequence, suffers, or risks suffering, loss or damage. This is not necessarily limited to those that actually participated in the tender procedure and other economic operators can claim if they believe that the breach of the PCR2015 prevented them from participating [see P Craig and M Trybus, "England and Wales", in R Noguellou & U Stelkens, Comparative law on public contracts (Brussels, Bruylant, 2010) 339, 360].

Duty owed to economic operators from certain other (non-EEA) states under Reg. 90 Public Contracts Regulations 2015

Similarly to reg.89, reg.90 of the Public Contracts Regulations 2015 (PCR2015) creates a duty owed to economic operators from certain other (non-EEA) states whereby contracting authorities must comply with the provisions of Part 2 PCR2015; and any enforceable EU obligation in the field of public procurement in respect of a contract or design contest falling within the scope of Part 2 PCR2015.

Under reg.90(1) PCR2015, this duty is owed also to an economic operator from a GPA state, but only where the GPA applies to the procurement concerned; and to an economic operator which is not from an EEA state or a GPA state, but only if a relevant bilateral agreement applies. This comes to specify the duty of equal treatment and non-discrimination that the GPA and bilateral international trade agreements can create.

For the purposes of duties owed to economic operators from GPA state (ie any country, other than an EEA state, which at the relevant time is a signatory to the GPA), the GPA applies to a procurement if the procurement may result in the award of a contract of any description; and at the relevant time a GPA State has agreed with the EU that the GPA shall apply to a contract of that description, and the economic operator is from that GPA state [reg.90(2)]. This could have been expressed simply and more directly by reference to the schedules of coverage of the GPA (available here) as amended from time to time.

For the purposes of duties owed to third country economic operators, a relevant bilateral agreement applies if there is an international agreement, other than the GPA, by which the EU is bound; and in accordance with that agreement, the economic operator is, in respect of the procurement concerned, to be accorded remedies no less favourable than those accorded to economic operators from the EU in respect of matters falling within the scope of the duty owed in accordance with reg.89 PCR2015 [reg.90(3)]. 

In my view, reg.90(3) PCR2015 could have been expanded to bilateral agreements that may bind the UK without necessarily binding the EU (either currently or in the future, which is at least theoretically are possible, depending on how the EU exercises its trade competences in the future; for discussion, see Y Devuyst "European Union trade policy after the Lisbon Treaty: the Community method at work" in N Witzleb, A Martinez Arranz & P Winand (eds), The European Union and Global Engagement: Institutions, Policies and Challenges (Cheltenham, Edward Elgar, 2015) 138-158].

More generally, the normative question of whether all candidates and tenderers should be afforded the same protection regardless of their nationality remains open and is a complex issue in trade regulation. At the EU level, the proposal of the European Commission to potentially limit access to procurement markets (and hence, the available remedies) by third country economic operators has not gained as much traction as could have been expected when it was first proposed [for discussion, see K Dawar, "The Proposed ‘Buy European’ Procurement Regulation: An Analysis" (2012) 11 Global Trade Alert 89-97].

In my view, opting for universal protection of tenderers could incentivise participation by economic operators from jurisdictions without strong (legal) trade links with the UK and the EU and, more generally, it is hard to understand why contracting authorities would be allowed to disregard the legitimate expectations of economic operators genuinely interested in a public tender--which could strengthen competition and challenge incumbents in cosy relationships with the public sector. However, this is clearly a normative point and, as mentioned regarding reg.89 PCR2015, it is clearly not the UK (English) tradition to give extensive rights of claim against the public sector. Hence, the scope of protection devised in reg.90 PCR2105 needs to be interpreted in strict terms

Duty owed to economic operators from EEA states under Reg. 89 Public Contracts Regulations 2015

Reg.89 of the Public Contracts Regulations 2015 (PCR2015) sets the duty owed to economic operators from EEA states, whereby contracting authorities are required to comply with the provisions of Part 2 PCR2015; and any enforceable EU obligation in the field of public procurement in respect of a contract or design contest falling within the scope of Part 2 PCR2015. Reg89(2) PCR2015 explicitly states that such obligation is a duty owed to an economic operator from the United Kingdom or from another EEA state. 

For a continental lawyer, this is a regulation that does not make much sense and that seems superfluous. Under general conceptions of public law (at least in Spain and in other countries based on the French system of public law and public administration), public bodies (and other contracting entities governed by public law) must abide by the law and any infringement can result in individual rights to claim for any negative consequences of such a procedural or substantive breach. 

On the contrary, as far as I understand it, under English (and Welsh?) public/administrative law, individuals and undertakings only have a claim against the public sector if it breaches a duty owed to them. This has been made quite clear in a recent opinion of Lord Reed, in a recent Supreme Court decision where he stressed that:

A public authority can violate the rule of law without infringing the rights of any individual: if, for example, the duty which it fails to perform is not owed to any specific person, or the powers which it exceeds do not trespass upon property or other private rights. A rights-based approach to standing is therefore incompatible with the performance of the courts’ function [on review] of preserving the rule of law ... [AXA General Insurance Ltd. v HMAdvocate [2011] UKSC 46, [2012] 1 A.C. 868 at [169]–[170]; apud JNE Varuhas, “The Reformation of English Administrative Law? “Rights”, Rhetoric and Reality” (2013) 72 Cambridge Law Journal 369-413, 382; emphasis added].

Consequently, reg.89 PCR2015 is the cornerstone of the system of remedies envisaged in Chapter 6 PCR2015, as it creates the rights to claim on the basis of a breach of such duty for economic operators from EEA states. The extension of such duty (and ensuing right to claim) to economic operators from certain other states is established in reg.90 PCR2015, which will be discussed tomorrow.

The existence of broader possibilities to challenge procurement-related decisions without the coverage of a duty owed under regs.89 and 90 PCR2015 is a contentious issue under English law. For discussion, see SH Bailey, "Reflections on standing for judicial review in procurement cases" (2015) 24(4) Public Procurement Law Review 122-132. See also P Henty, "Can a trade union judicially review a breach of the PCRs?: R. (on the application of Unison) v NHS Wiltshire Primary Care Trust and others" (2012) 21(4) Public Procurement Law Review NA203-207; and SH Bailey, "Contracting and judicial review: R. (on the application of A) v Chief Constable of B Constabulary" (2013) 22(4) Public Procurement Law Review NA106-108.

GC stresses need for balanced protection of confidential information in public procurement (T-536/11)

In its Judgment in European Dynamics Luxembourg and Others v Commission, T-536/11, EU:T:2015:476, the GC has dismissed a challenge against a European Commission's decision to limit the disclosure of (confidential) information made available to a disappointed tenderer. 

In the case at hand, the Commission had redacted some of the comments made by the evaluation team in order to protect business secrets of tenderers ranked higher than Evropaïki Dynamiki. The latter argued that, by doing so, the Commission failed to discharge its duty to give reasons for its decision not to rank Evropaïki Dynamiki first in the cascade mechanism that would determine call-offs within a framework agreement for software services. The GC dismissed Evropaïki Dynamiki's challenge on the basis that the Commission had struck an appropriate balance between Evropaïki Dynamiki's right to access the information needed to defend its legal rights and third party business interests.

Some of the issues discussed (again) by the GC are worth mentioning, particularly as the duty to disclose the relative merits of the bids submitted by the successful tenderers is concerned (for a recent discussion, in relation to the UK's transposition of disclosure and debriefing rules in Directive 2014/24, see here).  The GC, with a good sense of the need to balance the right to be informed of the reasons for an award decision with the rights of competitors to have their business secrets protected, dismissed Evropaïki Dynamiki's challenge on the following grounds:

48 ... although the applicants submit that the Commission must disclose the information concerning the other successful tenderers’ bids that could be considered to be confidential and state how those tenderers could be harmed by that disclosure, they merely make a general request, without indicating, in the part of the pleadings relating to that plea in law, the comments or the parts of the bids to which they refer, whose disclosure is allegedly necessary for effective legal and judicial protection.
49 It should be recalled that ... the contracting authority is entitled not to disclose certain details where disclosure would hinder application of the law, would be contrary to the public interest or would harm the legitimate business interests of public or private undertakings or could distort fair competition between those undertakings.
50 In addition, it is apparent from the case-law that, in the context of an action brought against a decision taken by a contracting authority in relation to a contract award procedure, the adversarial principle does not mean that the parties are entitled to unlimited and absolute access to all of the information relating to the award procedure concerned. On the contrary, that right of access must be balanced against the right of other economic operators to the protection of their confidential information and their business secrets. The principle of the protection of confidential information and of business secrets must be observed in such a way as to reconcile it with the requirements of effective legal protection and the rights of defence of the parties to the dispute and, in the case of judicial review, in such a way as to ensure that the proceedings as a whole accord with the right to a fair trial (see, to that effect, judgment of 23 November 2011 in bpost v Commission, T‑514/09, EU:T:2011:689, paragraph 25 and the case-law cited). It is apparent from the applicants’ detailed observations set out in their letter of 5 August 2011 that they had sufficient knowledge of the relative advantages of the other successful tenderers’ bids (T-536/11, paras 48 to 50, emphasis added).

The GC could not have expressed it in any clearer terms, and this line of reasoning clearly aims at reaching an appropriate balance between, on the one hand, facilitating access to procurement remedies by disclosing necessary information and, on the other hand, ensuring the protection of information which disclosure could have a negative effect on competition and/or harm legitimate business interests. 

This is a much needed restriction of the excessive level of transparency that oftentimes affects public procurement settings and, consequently, must be warmly welcomed [for discussion, see A Sanchez-Graells, The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives (University of Leicester School of Law Research Paper No. 13-11, 2013)].

Applications to the Court and their interpretation under reg.88 Public Contracts Regulations 2015

Reg.88 of the Public Contracts Regulations 2015 (PCR2015) establishes some rules for the interpretation of Chapter 6, which concerns applications to the Court on the basis of the facilitation of remedies derived from the notification obligations and standstill period of regs.86 and 87 PCR2015. The content of reg.88 PCR2015 does not deserve independent comments (cfr Pedro's views), as it simply introduces some precisions and cross-references that need to be taken into account when interpreting the rules of regs.89 to 104 PCR2015. Hence, those precisions will be taken into account and highlighted were relevant.

Facilitation of remedies under regs.85 to 87 Public Contracts Regulations 2015

Regs.85 to 87 of the Public Contracts Regulations 2015 (PCR2015) establish rules for the facilitation of remedies. They create both an obligation to issue notices of decisions to award a contract or conclude a framework agreement [reg.86] and to comply with a standstill period prior to entering into the contract or concluding the framework agreement [reg.87]. 

These regulations are not a result of the transposition of Directive 2014/24, but rather of Directive 89/665 as amended by Directive 2007/66 [for discussion, see the contributions to S Treumer & F Lichere (eds), Enforcement of the EU public procurement rules (Copenhagen, DJØF, 2011)]. Indeed, as stressed in the Explanatory Memorandum of the PCR2015, "[t]hese Regulations also re-enact the relevant provisions of the Remedies Directives (Directive 89/665/EEC as amended by Directive 2007/66/EC), on remedies and review procedures for public procurement, as implemented by the UK in the Public Contracts Regulations 2009" (para 2.1). 

In that regard, the Explanatory Memorandum also clarifies that "[t]he general approach has been to move the existing remedies rules from the 2006 Regulations into this instrument, with only comparatively minor amendments, including adjustments necessary to mesh with the new Regulations overall and some minor drafting improvements. However, we have taken the opportunity to provide for the remedies to be available not only to economic operators from non-EEA countries where covered by the WTO Agreement on Government Procurement (which the 2006 Regulations did) but also to those from other third countries where required by any other international agreement by which the EU is bound" (para 7.3). Consequently, there are no significant changes resulting from regs.85 to 87 PCR2015.

Reg.85 PCR2015 simply determines that the remedies regulated in Part 3 PCR2015 only apply to contracts covered by Part 2, ie contracts with a value above the EU thresholds [see regs. 3 and 5 PCR2015].

Notices under reg.86 PCR2015

Reg.86 PCR2015 creates an obligation for contracting authorities to send to each candidate and tenderer [as defined in reg.86(7) and (8)] a notice communicating its decision to award the contract or conclude the framework agreement [reg.86(1)]. The content of those notices is detailed in reg.86(2) to (5) PCR2015. This is the set of requirements that aim to provide the candidate or tenderer with sufficient information for it to assess whether to challenge the award decision, ultimately as a guarantee of their right effective judicial protection under Article 47 of the Charter of Fundamental Rights of the European Union (see here). 

In my view, they are the crux of the problem of excessive disclosure of information in the public procurement setting, particularly in view of the obligation to disclose the name of the tenderer to be awarded the contract, or to become a party to the framework agreement [reg.86(2)(c) PCR2015; see discussion in A Sanchez-Graells, The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives (University of Leicester School of Law Research Paper No. 13-11, 2013) and here]. 

In that regard, it is important to stress that reg.86(6) PCR2015 creates a straightforward exception to disclosure of certain information whereby a contracting authority may withhold any information where the release of such information (a) would impede law enforcement or would otherwise be contrary to the public interest; (b) would prejudice the legitimate commercial interests of a particular economic operator, whether public or private; or (c) might prejudice fair competition between economic operators. This is coincidental with the same exception in reg.55(3) PCR2015 (see my comments on the use of such exception here). Pedro has a very different view and considers that "price disclosure should be part of the cost ... for suppliers to work in public procurement". I strongly disagree with him on this point, not least, because the actual cost of excessive transparency is unavoidably borne by contracting authorities and, ultimately, tax payers.

In my view, a proper understanding of the exception in reg.86(6) PCR2015 and the way it should be interpreted and applied, in conjunction with reg.18(2) and (3) PCR2015 establishing the principle of competition, is fundamental to avoid the current excess of transparency in public procurement and its knock-on effect on the ease of cartelisation of public procurement markets. Hence, contracting authorities will be well-advised to adopt strategies that minimise disclosure of information where possible and proportionate, so that competition is not damaged and incentives to collusion and bid rigging are not exacerbated [for background, see A Sanchez-Graells, “Prevention and Deterrence of Bid Rigging: A Look from the New EU Directive on Public Procurement”, in G Racca & C Yukins (eds), Integrity and Efficiency in Sustainable Public Contracts (Brussels, Bruylant, 2014) 171-198].

Reg.86(5) PCR2015 sets more limited exceptions whereby contracting authorities need not comply with reg.86(1) in any of the following cases: (a) where the contract or framework agreement is permitted by Part 2 to be awarded or concluded without prior publication of a contract notice; (b) where the only tenderer is the one who is to be awarded the contract or who is to become a party to the framework agreement, and there are no candidates; (c) where the contracting authority awards a contract under a framework agreement or a dynamic purchasing system. Regarding the latter exception, it is worth stressing that the opacity it creates regarding the working of framework agreements and dynamic purchasing systems may be excessive and that a system of quarterly reporting would be preferable (see here and, in relation to reg.50 PCR2015, here).

Standstill under reg.87 PCR2015

Reg.87 PCR2015 establishes the so called Alcatel standstill obligation for contracting authorities not to enter into the contract or framework agreement subjected to a reg.86 notice until a period of 10 or 15 days has elapsed, depending on the means of communication used to send the notices to the interested candidates and tenderers. 

For discussion of the specific rules on calculation of those time and the UK (Eng & W) case law on this topic, see M Trybus, "An Overview of the United Kingdom Pubic Procurement Review and Remedies System with an Emphasis on England and Wales", in S Treumer & F Lichere (eds), Enforcement of the EU public procurement rules (Copenhagen, DJØF, 2011) 201, 216-17; and  LRA Butler, "Below Threshold and Annex IIB Service Contracts in the United Kingdom: A Common Law Approach", in D Dragos & R Caranta (eds), Outside the EU procurement directives - Inside the Treaty? (Copenhagen, DJØF, 2012) 283, 326-29].