New paper on competition-based checks on executive discretion in procurement


I have just uploaded on SSRN a new working paper where I try to operationalise a substantive and procedural test for the enforcement of the principle of competition enshrined in Article 18(1) of Directive 2014/24/EU. The paper is still very much work in progress and I will need to revise it before final publication in an edited collection, so any feedback or comments would be most welcome.

The abstract of the paper is as follows:

In this paper, I go beyond prior general discussion on the place for and implications of a competition goal or principle within the EU public procurement architecture and aim to operationalise the 'competition-based constraints' on the exercise of executive discretion that derive from the prohibition to 'artificially narrow down competition'. I do so in relation to the exercise of discretion for the inclusion of social, green and human rights clauses in tender documentation. The first part of the paper revisits the case law of the Court of Justice of the European Union on the inclusion of environmental, social and labour requirements in procurement procedures, and fleshes out the ways in which competition considerations have underpinned the Court's assessment of the exercise of executive discretion in the design of tender procedures. The second part proposes a presumption-based substantive balancing test between, on the one hand, these 'competition-based constraints' and, on the other hand, the needs of 'responsible procurement' derived from the mandate to ensure environmental, social and labour compliance. The third part takes the alternative approach of a test of procedural traceability and considers the documentary obligations that contracting authorities need to discharge in relation with the exercise of executive discretion to propose the creation of a safe harbour to modulate the operation of the substantive presumption. I conclude reflecting on the desirability of the proposed tests in the context of future litigation.

The full citation of the paper is A Sanchez-Graells, 'Some Reflections on the 'Artificial Narrowing of Competition' as a Check on Executive Discretion in Public Procurement', in S Bogojević, X Groussot & J Hettne (eds), Discretion in EU Public Procurement Law, IECL Series (Hart, forthcoming). Available at SSRN:

Interesting guidance on confidentiality of commercial secrets in procurement litigation issued by the TCC


In July 2017, the Technology and Construction Court (a sub-division of the Queen's Bench Division, part of the High Court of Justice for England and Wales) adopted new guidance on procedures for public procurement litigation (see Appendix H to the Technology and Construction Court Guide; the TCC guidance).

The TCC guidance includes two interesting sets of recommendations. One concerns an invitation to exhaust the possibilities for alternative dispute resolution before proceeding to full-fledged litigation (see paras [4] to [8]). The other concerns the disclosure of confidential information between the parties of the dispute (see paras [27] to [48]).

The latter is an issue that raises difficult problems for the protection of business secrets, and I find the TCC guidance interesting in the balance it tries to achieve between ensuring that disappointed tenderers gain access to the information they need to support their claims, and the broader considerations surrounding the need to ensure adequate protection of business secrets in order not to deter participation in public tenders (which is a tricky issue facing all EU jurisdictions, including the rules applicable to procurement carried out by the EU Institutions, and on which we are concentrating in the on-going research of the EPLG).

As the TCC guidance puts it, indeed, "[c]onfidentiality is not a bar to disclosure. However, the need to protect confidential information needs to be balanced by the basic principle of open justice", at para [27]. The TCC guidance aims to achieve such balance through practical approaches and general criteria for the balancing of interests. The approaches adopted by the TCC have been praised for being less restrictive than some of the decisions previously adopted in the context of procurement litigation in England and Wales (Kotsonis & Williams). 

In my view, beyond the effects it can have in litigation in England and Wales, the TCC guidance can be useful as a benchmark for the treatment of confidential information in other jurisdictions -- provided that the practical solutions that derive from the peculiarities of the British legal culture are adapted to domestic idiosyncrasies.

In particular, there are three aspects that I would identify as best practice susceptible of replication or adaptation in other legal contexts:

1. Promotion of the use of redacted versions of documentation rather than absolute bans on the disclosure of materials, as the use of redacted documents enables documents to be more widely disclosable (see paras [32]-[33]), and thus avoids decisions on confidentiality being taken on an 'all-or-nothing' basis for each of the documents. The guidance also indicates the best way of preparing and submitting to the court redacted versions of documents containing confidential information in a manner that allows for scrutiny and a speedy narrowing down of any discrepancies between the parties on the need to redact any specific bits of information.

2. Creation of one- or two-tier confidentiality rings. TCC guidance defines confidentiality rings as comprising persons to whom documents containing confidential information may be disclosed on the basis of their undertakings to preserve confidentiality, at para [34]. Importantly, the guidance indicates both that the party's external legal advisors will need to be included in the confidentiality ring (para [37]) and that the inclusion of personnel of the parties, including their in-house lawyers, will need to be assessed on the basis of relevant factors likely to include "that party’s right to pursue its claim, the principle of open justice, the confidential nature of the document and the need to avoid distortions of competition and/or the creation of unfair advantages in the market (including any retender) as a result of disclosure" (para [39], emphasis added). In reaching a decision about a specific individual, account needs to be taken of "his/her role and responsibilities within the organisation; the extent of the risk that competition will be distorted as a result of disclosure to them; the extent to which that risk can be avoided or controlled by restrictions on the terms of disclosure; and the impact that any proposed restrictions would have on that individual (for example by prohibiting them from participating in a re-tender or future tenders for a period of time)" (para [40], emphasis added). Similar reasoning would apply to other specialist advisors (such as accountants or other experts) (see para [43]).

Interestingly, the TCC guidance clarifies that employee representatives may need to be "admitted to a confidentiality ring on different terms from external representative" (para [41]), this giving rise to two-tier confidentiality rings--which administration can take different forms: ie, either court administered, with the judicial body establishing the conditions of access by different categories of representatives of the parties, or by delegating the management of the access to the confidentiality ring to the external advisors of the parties, who would then act as gatekeepers of the confidential information (para [42]). This second possibility may be foreign to practice and legal culture in other jurisdictions, but the first (court-administered) possibility for a two-tier confidentiality ring seems quite promising to me.

3. Establishment of (enforceable) undertakings to prevent unauthorised uses of the information gained as part of a confidentiality ring. TCC guidance establishes that access to confidential information will only be allowed where the members of confidentiality rings provide undertakings that "will preclude the use of the relevant material other than for the purposes of the proceedings and prevent disclosure outside the ring" (para [44]). More importantly, the TCC guidance explicitly contemplates the possibility for additional undertakings to be necessary "where there are concerns that disclosure could have an impact on competition and/or any subsequent procurement", and that such additional measures can include: "(1) Preventing employee representatives from holding copies of documents at their place of work and requiring them to inspect the material at a defined location (such as the offices of their external lawyers) ; (2) Limiting the involvement of a recipient of a document in any re-procurement of the contract which is the subject of the litigation; (3) Limiting the role which a recipient can play in competitions for other similar contracts for a fixed period of time in a defined geographic area; and/or (4) Preventing the recipient from advising on or having any involvement in certain matters, again for a fixed period of time" (para [45], emphasis added).

Of course, the monitoring of such undertakings will be complex and there can be very difficult evidentiary issues linked to claims of undue subsequent use of confidential information gained in the context of previous procurement litigation. On that issue, the TCC guidance establishes a strict proportionality test, whereby "[w]hilst the Court will give weight to the need to protect competition in the market, the more onerous the proposed restriction is, the more clearly it will need to be justified" (para [46]). In my view, this will play both ways. On the one hand, high risks of competition distortions will be able to justify the imposition of heavy restrictions on future activity of the employee concerned. On the other, an in reverse reasoning, the Court will have to ensure that future restrictions are not disproportionate to the value of the information and the position of the employee within its organisation.

However, there is a third implication that may bear spelling out, which is that some risks of future distortions of competition will be so high, that no acceptable restrictive measure can be designed--in which case I would argue against the inclusion of the relevant person in the confidentiality ring (eg I would not grant the CFO of a company access to the detailed financial schedule of any of its competitors).

* * * * 

Overall, I think that the TCC guidance will be useful and it will be interesting to see to what extent the practical roll-out of these recommendations provide an even more detailed case study that can serve as benchmark in other jurisdictions seeking to regulate the disclosure of confidential information in the context of public procurement litigation.

Is the flexibilisation of formal requirements in public procurement going both ways? (T-394/12)

In its Judgment in Alfastar Benelux v Council, T-394/12, EU:T:2014:992, the General Court (GC) resolved a dispute concerning public procurement activity of the European Institutions (in this case, the Council). One of the main claims of the disappointed bidder was that the Council had failed to discharge its obligation to state reasons because one of the sentences of the extracted evaluation report that was made available to it by the Council was incomplete.
In the applicant's view, the incompleteness of the extract prevented it from assessing the reasons that justified the Council's decision to award the contract to another tenderer. The applicant submitted that the fact that the Council had complemented the extract at a later stage did not overcome the initial ommission and that the Council should be made liable for damages. The GC rejected the claim. The reasoning of the GC in dismissing the action triggers some comments.
Firstly, it is worth emphasising that the GC has continued pushing for a strengthening of the duty to provide reasons in abstracto (and, indirectly, as a result of the bindingness of the right to good administration as recognised in Art 41(2)(c) of the EU Charter of Fundamental Rights). Indeed, the GC emphasised that, as a general point of law,
since infringement of the obligation to give reasons is a matter of public interest, the European Union judicature must raise it of its own motion and, therefore, the fact that the applicant raised it belatedly does not render such a plea inadmissible (see, to that effect, BP Products North America v Council, T-385/11, EU:T:2014:7, paragraph 164) (T-394/12 at para 25, emphasis added).
This creates a strong incentive for contracting authorities to 'err on the side of excessive disclosure' when it comes to the reasons for the adoption of a procurement decision, which may be detrimental for competition and for the protection of the legitimate commercial interests of other tenderers (as clearly recognised in art 55(3) Dir 2014/24 and art 113(2)II Financial Reg, but not always properly understood or applied). This also follows on the GC's previous tough approach and continues to create excessive incentives towards transparency in public procurement (as criticised here, here and in A Sánchez 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). Hence, the general approach continues to create the wrong incentives and should be reassessed.
Secondly, however, when it comes to the specifics of the case, the GC adopts a very sensible and reasonable approach to the assessment of the claim of breach of the duty to state reasons in particular. Indeed, the GC dismisses the claim on the basis that the incomplete sentence only omitted a limited amount of information concerning the general comments of the evaluators and, additionally, the tenderer had been provided with more details in the remainder of the extract from the evaluation report. Interestingly, the GC stressed that
The general comments may easily be inferred from the detailed technical evaluations of the successful tenderer’s bid which are not concerned by the formatting error, since the general comments constitute a succinct summary of material contained in the contested decision (T-394/12 at para 30, emphasis added).
As such, this reasoning should not be surprising and the GC could hardly be expected to have decided otherwise. Having adopted a more formalistic approach would not only have annulled a procurement decision for no good reason, but would also have opened the floodgates to an unforeseeable volume of litigation (particularly if one takes into account that the guarantees provided by Art 41 EUCFR are applicable in all procurement covered by Dir 2014/24). Hence, it is a sensible decision.
However, the better question seems to be whether this same 'anti-formalistic' approach will hold when the clerical mistakes and partial ommissions affect the documentation submitted by the tenderers. Functionally, the rules applicable to the interpretation of documents and the avoidance of formal requirements where the parties engaged in the procurement process 'can make sense' of the documentation exchanged should go both ways. However, this is not necessarily the case yet, as recently discussed regarding Cartiera dell’Adda and Cartiera di Cologno, C-42/13, EU:C:2014:2345 (see here).
Hence, it will be interesting to see if the incipient push towards a more functional approach to public procurement takes root and ends up creating a system that is less 'based on rights' and more oriented towards good procurement outcomes [a problem that also affects 'the other side of the Atlantic', as discussed in S Schooner & P Kovacs, "Affirmatively Inefficient Jurisprudence?: Confusing Contractors’ Rights to Raise Affirmative Defenses with Sovereign Immunity" (2012) 21 Federal Circuit Bar Journal 686].

Competition lawyers, please, please, please be aware of public procurement rules: A comment on Bornico & Walden (2011)

I have just read L Bornico & I Walden, 'Ensuring Competition in the Clouds: The Role of Competition Law?' (2011) 12(2) ERA Forum 265-85 (part of the largest QMUL Cloud Legal Project) and have been, once more, surprised at the complete oversight of the public procurement rules that would have been relevant to the competition law analysis.

The paper engages in an exploratory analysis of the role of EU competition law could have in keeping the cloud computing industry competitive and, if possible at all, free from (potential) abuses of dominance by its main players. The paper has the good intuition to suggest that public procurement decisions by governments may play a key role in either the promotion of undistorted competition (if they opt for transparent standards based on interoperability) or, on the contrary, the creation of a very concentrated and potentially monopolistic market structure (if they unduly impose specific technological solutions). This is a very important point, and one that public procurement economists and commentators have been stressing for a long time.

However, when the paper moves on to suggest how to legally prevent and control those issues, it is completely oblivious to the existence of EU public procurement rules. Indeed, Bornico & Walden indicate that, where the contracting authority imposes a given (propietary) technological solution
... harmed competitors may challenge the choice of the public administration alleging that their specifications fit best the requirements ... or may challenge the behaviour of the firm whose specifications were chosen, but only if the firm can be considered dominant. More importantly competitors may challenge the choice of the public administration under Article 107 TFEU if the outcome of public procurement distorts competition.  The choice of formal specifications may soon be a source of disputes in the EU market, along the lines of the Google dispute in the US [by reference to  Google Inc. and Onix Networking Corporation v. The United States and Softchoice Corporation (United States Court of Federal Claims 2011)]; although it is too early to tell how technological choices made by public administrations will be dealt with by competition authorities in the EU. (p. 27, emphasis added).
There are three important points to stress here. Firstly, this is nothing new, but State aid litigation based on public procurement decisions is very limited, generally unsuccessful, and likely to be 'phagocytised' by 'pure' procurement litigation [for an extended discussion, see A Sanchez Graells, 'Enforcement of State Aid Rules for Services of General Economic Interest before Public Procurement Review Bodies and Courts' (2014) 10(1) Competition Law Review 3-34]. 

Secondly, aggrieved competitors would have a much better shot under the applicable rules on the design of technical specifications. Indeed, it has long been the position of the ECJ, now consolidated in the applicable Directives 2004/18 (and/or 2014/24, where transposed), that '[u]nless justified by the subject-matter of the contract, technical specifications shall not refer to a specific make or source, or a particular process, or to trade marks, patents, types or a specific origin or production with the effect of favouring or eliminating certain undertakings or certain products. Such reference shall be permitted on an exceptional basis, where a sufficiently precise and intelligible description of the subject-matter of the contract ... is not possible; such reference shall be accompanied by the words "or equivalent".' (emphasis added) [art 23(8) dir 2004/18, and now art 42(4) dir 2014/24; for discussion, see S Arrowsmith, The Law of Public and Utilities Procurement. Regulation in the EU and UK, 3rd edn, vol. 1 (London, Sweet & Maxwell, 2014) 254-55 and 1068 ; and A Sanchez Graells, Public procurement and the EU competition rules (Oxford, Hart Publishing, 2011) 271-72]. Consequently, specific technological choices that excluded equivalent solutions would immediately be in breach of EU public procurement rules.

Thirdly, a breach of those rules gives aggrieved bidders and other interested economic operators a ground to challenge the procurement procedure before domestic courts or procurement complaints boards, under the provisions of Directives 89/665 and 92/13 (as amended by dir 2007/66). This is a much clearer litigation path and one that would yield much better results to disappointed bidders and competing (technological) firms.

Consequently, in this specific area, competition law is not the best tool to achieve pro-competitive results in the public procurement setting. Public procurement law is. So, competition lawyers, please familiarise yourselves with public procurement rules. In the end, they are two sides of the same coin [C Munro, ‘Competition Law and Public Procurement: Two Sides of the Same Coin?’ (2006) 15 Public Procurement Law Review 352; and A Sanchez Graells, 'Competition Law Against Public Restraints in the Public Procurement Field: Importing Competition Considerations into the EU Public Procurement Directives' (2010)].

CJEU rejects avoidance of litigation as a valid 'overriding reason in the public interest' justifying a direct award of a concession contract (C-212/12)

In its Judgment of 14 November 2013 in case C-221/12 Belgacom, the CJEU has rejected that the avoidance of litigation can be considered a valid 'overriding reason in the public interest' justifying a direct award of a concession contract. In other terms, the fact that the award of the services concession forms part of a settlement agreement is irrelevant for the purposes of determining compliance with the EU primary law requirements applicable to the award of such contracts.
In very clear terms, the CJEU has indicated that
37 [...] since such a concession is of certain cross-border interest, its award, in the absence of any transparency, to an undertaking located in the Member State to which the contracting authority belongs, amounts to a difference in treatment to the detriment of undertakings which might be interested in that concession but which are located in other Member States. In excluding those undertakings, that difference in treatment works primarily to their detriment and therefore amounts to indirect discrimination on grounds of nationality, which is, in principle, prohibited by Articles 49 TFEU and 56 TFEU (see, to that effect, ASM Brescia, paragraphs 59 and 60 and the case-law cited).

38 Such a measure might, exceptionally, be allowed on one of the grounds set out in Article 52 TFEU or justified by overriding reasons in the public interest, in accordance with the Court’s case-law (see, by analogy, Engelmann, paragraphs 51 and 57 and the case-law cited, and Joined Cases C‑357/10 to C‑359/10 Duomo Gpa and Others [2012] ECR I-0000, paragraph 39 and the case-law cited). On this last point, it is clear from a combined reading of paragraphs 51 and 57 of Engelmann that no distinction need be drawn between objective circumstances and overriding reasons in the public interest. Objective circumstances must, ultimately, be accepted as overriding reasons in the public interest.

39 The grounds put forward in the application in the present case, whether considered separately or together, cannot be regarded as being overriding reasons in the public interest.

40 The principle of legal certainty, which is a general principle of European Union law, provides ample justification for observance of the legal effects of an agreement, including – in so far as that principle requires – in the case of an agreement concluded before the Court has ruled on the implications of the primary law on agreements of that kind and which, after the fact, turn out to be contrary to those implications (see, to that effect, ASM Brescia, paragraphs 69 and 70). However, that principle may not be relied on to give an agreement an extended scope which is contrary to the principles of equal treatment and non-discrimination and the obligation of transparency deriving therefrom. It is of no import in that regard that that extended scope may offer a suitable solution for putting an end to a dispute which has arisen between the parties concerned, for reasons outside their control, as to the scope of the agreement by which they are bound
(Case C-221/12 at paras 37-40, emphasis added).
This is a very important finding, as it comes to limit the discretion of contracting authorities to (re)negotiate contract awards and to extend the scope of contracts in order to settle arising legal disputes. It may be seen as a significant restriction of sensible contract and dispute management strategies in the altar of transparency, but the CJEU seems to have opted to err on the cautious side of the balance--which I consider appropriate, given that renegotiations are an area prone to massive manipulation and rule avoidance in public procurement in many Member States.
However, the practical effects of the Belgacom Judgment may be relatively limited once the future procurement Directives are adopted, as they will expressly regulate contract modification and set clear limits that will trigger the obligation to retender the contract (see art 72 of the new public sector procurement Directive and art 42 of the new Concessions Directive).

Difficult balance between #transparency and #competition in #publicprocurement

This paper stresses the negative impact that the excessive levels of transparency imposed by public procurement rules can have on competition for public contracts and, more generally, on the likelihood of cartelisation of the markets where public procurement takes place. The paper critically assesses some recent Judgments of the Court of Justice of the European Union and the General Court from this perspective and shows how the top EU Courts are still oblivious to the fact that excessive transparency may diminish the effectiveness of procurement by reducing competition. It also indicates that the case law itself has unused balancing tools that may help reduce the negative impact of excessive transparency, particularly if coupled with a reduction of the financial incentives offered to litigants that have no other claim than a 'mere' lack of compliance with full transparency. The paper concludes that a reform in the enforcement and oversight mechanisms oriented towards the setting up of a semi-opaque review system would overcome some of the deficiencies identified in the current case law from a law and economics perspective.
Sánchez Graells, A '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' (November 2013). University of Leicester School of Law Research Paper No. 13-11. Available at SSRN:

Enforcement of State Aid Rules for SGEIs before Public Procurement Review Bodies and Courts

I will be presenting it at the "Competition and State Aid Litigation – The Effect of Procedures on Substance", CLaSF/University of Luxembourg Conference, 19-20 September 2013.

ABSTRACT: One of the criticisms against the new rules applicable to the granting of State aid to finance the provision of services of general economic interest in the "Almunia package" is that enforcement is likely to be their weakest point. Similarly, in the more general setting of the "private" enforcement of State aid rules, the 2006 Study on the Enforcement of State Aid Law at National Level recommended that the European Commission created a common minimum standard of remedies applicable in all EU jurisdictions, stressing that "one possible means of creating such a standard would be to adopt a remedies directive for State aid cases, which could be modelled on the remedies directive for procurement cases".

Building up on these considerations, the extent to which the existing remedies within the system for the enforcement of EU public procurement rules provide an effective platform to enforce EU State aid rules (and, more specifically, those for the financing of SGEIs) before public procurement review bodies and courts is assessed. The paper describes the main groups of cases where public procurement litigation "phagocytises" State aid considerations. It then proceeds to explore the viability, from an EU law perspective, of configuring public procurement review bodies and courts as "State aid courts" for the purposes of the simultaneous enforcement of both sets of rules in a single setting of "private" litigation. It also submits that using the public procurement system in this way provides effective remedies for the enforcement of the Almunia Package for the financing of SGEIs.