CJEU decouples limitation periods for award challenges and for damages actions in EU public procurement (C-166/14)

In its Judgment in MedEval, C-166/14, EU:C:2015:779, the Court of Justice of the European Union (CJEU) has clarified the rules on the establishment of limitation periods applicable to damages actions based on the infringement of EU public procurement rules. The CJEU has interpreted the EU Remedies Directive in a way that excludes the establishment of absolute time periods. In particular, the CJEU has ruled that , when it comes to damages actions for breach of EU public procurement rules, the establishment of an absolute 6-month limitation period from the day after the date of the award of the public contract in question runs contrary to the principle of effectiveness of EU law. 

In the case at hand, which concerned Austrian procurement rules, actions seeking damages for the illegal award of a public contract could only be derived or of a follow-on nature. That is, damages actions were conditional upon a prior declaration by the competent procurement supervisory authority that the implementation of a public procurement procedure without prior notice or without prior call for competition was unlawful. Such original action, from which the damages claim could only derive, had to be lodged within 6 months of the day following the date of the award of the contract. As a result of this dual requirement, and even if no specific time period was foreseen for damages actions themselves, the latter were absolutely time barred at the expiry of a 6-month period from the day after the date of the award of the public contract.

MedEval challenged this implicit or indirect absolute 6-month limitation period for the exercise of damages claims on the basis that it made it particularly difficult, if not totally impossible, to challenge direct awards that were never disclosed to the public. Under Austrian law, and under a strict interpretation of those cumulative requirements, it would be possible for a contracting authority to enter into an illegal direct award and shield itself from any liability in damages, provided only that it could keep such illegal direct award secret for 6 months. 

In MedEval's view, it should be possible for disappointed bidders to challenge illegal direct awards and obtain reparation in damages provided they acted promptly from the moment when they became aware of the unlawfulness of the procedure at issue. Ultimately, as the referring court stressed, that would be in line with the Judgment in Uniplex (UK) (C-406/08, EU:C:2010:45), according to which the period for bringing proceedings to obtain damages should start to run from the date on which the claimant knew, or ought to have known, of that alleged infringement.

The CJEU has accepted such an approach and has stressed that, indeed, the establishment of absolute limitation periods would have a very negative impact on the effectiveness of EU public procurement law. In the MedEval Judgment, the CJEU reasoned that
35 As regards actions for damages, it must be noted that Directive 89/665 provides ... that Member States may provide that where damages are claimed, the contested decision must first be set aside ‘by a body having the necessary powers’ without, however, laying down a rule as regards the time-limits for bringing actions or other conditions for the admissibility of such actions.
36 In the present case it appears, in principle, that ... Directive 89/665 does not preclude a provision of national law ... under which a claim for damages is admissible only if there has been a prior finding of an infringement of procurement law. However, the combined application [of the 6-month time limit applicable to that prior action] ... has the effect that an action for damages is inadmissible in the absence of a prior decision finding that the public procurement procedure for the contract in question was unlawful, where the action for a declaration of unlawfulness is subject to a six-month limitation period which starts to run on the day after the date of the award of the public contract in question, irrespective of whether or not the applicant was in a position to know of the unlawfulness affecting that award decision.
37 ... it is for the Member States to lay down the detailed procedural rules governing actions for damages. Those detailed procedural rules must, however, be no less favourable than those governing similar domestic actions (principle of equivalence) and must not render practically impossible or excessively difficult the exercise of rights conferred by EU law (principle of effectiveness) (see, to that effect, judgments in eVigilo, C-538/13, EU:C:2015:166, paragraph 39, and Orizzonte Salute, C-61/14, EU:C:2015:655, paragraph 46).
38 In consequence, it is necessary to examine whether the principles of effectiveness and equivalence preclude a national rule such as that set out in paragraph 36 of the present judgment.
39 As regards the principle of effectiveness, it is appropriate to point out that the degree of necessity for legal certainty concerning the conditions for the admissibility of actions is not identical for actions for damages and actions seeking to have a contract declared ineffective.
40 Rendering a contract concluded following a public procurement procedure ineffective puts an end to the existence and possibly the performance of that contract, which constitutes a significant intervention by the administrative or judicial authority in the contractual relations between individuals and State bodies. Such a decision can thus cause considerable upset and financial losses not only to the successful tenderer for the public contract in question, but also to the awarding authority and, consequently, to the public, the end beneficiary of the supply of work or services under the public contract in question. ... the EU legislature placed greater importance on the requirement for legal certainty as regards actions for a declaration that a contract is ineffective than as regards actions for damages.
41 Making the admissibility of actions for damages subject to a prior finding that the public procurement procedure for the contract in question was unlawful because of the lack of prior publication of a contract notice, where the action for a declaration of unlawfulness is subject to a six-month limitation period, irrespective of whether or not the person harmed knew that there had been an infringement of a rule of law, is likely to render impossible in practice or excessively difficult the exercise of the right to bring an action for damages.
42 Where there has been no prior publication of a contract notice, such a limitation period of six months is likely not to enable a person harmed to gather the necessary information with a view to a possible action, thus preventing that action from being brought.
43 Awarding damages to persons harmed by an infringement of the public procurement rules constitutes one of the remedies guaranteed under EU law. Thus, in circumstances such as those at issue in the main proceedings, the person harmed is deprived not only of the possibility of having the awarding authority’s decision annulled, but also of all the remedies provided for in ... Directive 89/665.
44 Consequently, the principle of effectiveness precludes a system such as that at issue in the main proceedings (C-166/14, paras 35-44, emphasis added).
This Judgment is particularly important for jurisdictions that set absolute time limits for the start of proceedings, particularly if they create similar cumulative effects of definitely time-barring actions for damages based on infringements of EU public procurement law (ie where damages actions are necessarily of a derivative or follow-on nature). Those jurisdictions will likely need to change their procedural rules to adapt to MedEval

In the UK, however, there seems to be no need to reform reg.92 of the Public Contracts Regulations 2015, which already establishes time periods based on the the starting point of when the economic operator first knew or ought to have known that grounds for starting the proceedings had arisen (see here).