The procurement of public contracts in EU law : Directive 2006 EC, the amended remedies Directive

Chapter No. Subject Paragraph No.

I Remedies in Community Law :
General Principles [1] – [4]

II The First Remedies Directive
[89/665/EEC] [5] – [9]

III The Amended Remedies
Directive [10] – [18]

IV Review by the Courts in the
United Kingdom [19] – [28]

The Honourable Mr. Justice Bernard McCloskey
Court of Judicature of Northern Ireland
Chairman, Northern Ireland Law Commission

I REMEDIES IN COMMUNITY LAW : GENERAL PRINCIPLES

[1] Infringements of Community law, the enforcement of Community law and ensuing remedies are all inextricably linked. The starting point is that the EC procurement rules may be enforced through proceedings brought by affected persons or entities before a domestic review body (which, typically, will be a court). The EU legal order is a decentralised system in which the rights of individuals under EU law are, for the most part, enforced and vindicated in proceedings before national courts. Such proceedings may raise questions of the compatibility of substantive national laws with provisions of EU law. Where there is any issue of conflict or incompatibility, EU law is supreme and must, therefore, be fully applied by the national courts. In the particular case of the United Kingdom, upon accession to the EU, this required the enactment of primary legislation which, effectively, abrogated a previously hallowed principle of constitutional law. That principle was to the effect that no person or body could make a rule over-riding or derogating from an Act of Parliament : the latter had to be respected and given effect by the courts in all cases. Section 2 of the European Communities Act 1972 effected a radical change. It provided for the recognition of all directly enforceable Community law in preference to any Act of Parliament, past or future. Thus, in cases of conflict, EU law trumps existing or future parliamentary legislation. In enacting the 1972 statute, the Westminster Parliament made history by limiting its sovereignty.

[2] However, where national procedural rules are concerned, an important distinction arises. The gist of what is known as the “Kapferer” principle is that, in general, EU law does not require national courts to disapply their own procedural rules in order to secure the vindication of EU rights. In Kapferer, the question referred by the Austrian Supreme Court to the ECJ was whether EU law required a national court to review and set aside a final judicial decision where it became apparent subsequently that the court’s decision was in breach of EU law. The ECJ answered this question in the negative. In doing so, it invoked the principle of res judicata and the doctrine of legal certainty :

“[20] … In order to ensure both stability of the law and legal relations and the sound administration of justice, it is important that judicial decisions which have become definitive after all rights of appeal have been exhausted or after expiry of the time limits provided for in that connection can no longer be called into question …

[21] Therefore, Community law does not require a national court to disapply domestic rules of procedure conferring finality on a decision, even if to do so would enable it to remedy an infringement of Community law by the decision at issue”.

Properly analysed, the principle enunciated in Kapferer explains the limits of the doctrine of the supremacy of EU law. In the same vein, the ECJ has upheld national time limits and limitation periods on the grounds of legal certainty and finality, even where such rules have the effect of precluding enforcement of EU law rights. In a later decision, the ECJ formulated the Kapferer principle in the following terms :

“Community law does not require a national court to disapply domestic rules of procedure conferring finality on a decision, even if to do so would make it possible to remedy an infringement of a provision of Community law, regardless of its nature, on the part of the decision at issue …”.

[3] The Kapferer principle gives rise to consideration of three important inter-related general principles :

(a) Firstly, where there are no relevant EU rules in existence, the remedies and procedures for enforcing EU law rules and the national implementation measures are, in principle, to be determined by the domestic laws of Member States : the principle of national autonomy.

(b) However, the first principle is subject to the general principle of Community law that remedies and procedures must be at least as favourable as those for enforcing comparable provisions of domestic law – the principle of equivalence.

“Accordingly, in the absence of Community rules on this subject, it is for the domestic legal system of each Member State to designate the courts having jurisdiction and to determine the procedural conditions governing actions at law intended to ensure the protection of the rights which citizens have from the direct effect of Community law, it being understood that such conditions cannot be less favourable than those relating to similar actions of a domestic nature …”

In the absence of such measures of harmonisation the right conferred by Community law must be exercised before the national courts in accordance with the conditions laid down by national rules.

(c) The third general principle is that Member States must make available an effective system of remedies for vindicating rights under EC law – the principle of effectiveness. In the earlier jurisprudence of the ECJ this principle was formulated in less exacting terms - that national law remedies must not be excessively difficult or impossible to obtain (through e.g. draconian limitation periods or extortionate court fees). The ECJ has consistently stated that national rules must not render the exercise of rights conferred by EU law impossible or excessively difficult.

In an important recent decision, the English Court of Appeal explained and rationalised these inter-related principles thus :

“The principle of effectiveness does not require that EU rights will be enforced by national courts in all circumstances. On the contrary, there are clearly limits to the application of the principle, as the reasoning of the [ECJ] in the Kapferer case demonstrates. Failure to comply with many procedural rules in national law, such as those concerned with limitation of actions or time limits for procedural steps, will be likely to restrict, at least to some extent, the right of affected parties to invoke EU rights before national courts. Nevertheless, such procedural rules normally do not infringe the principle of effectiveness because they are justified by the requirement of legal certainty”.

[4] In the field of enforcement and remedies, the principle of co-operation enshrined in Article 10 EC features prominently. This is illustrated particularly in the celebrated Factortame case , where the following question was referred by the House of Lords to the ECJ : whether a national court in a Community law case is obliged to disapply a rule of domestic law which precludes the court from granting interim relief to the Plaintiff. The ECJ answered this question in the affirmative :

“19. In accordance with the case-law of the Court, it is for the national courts, in application of the principle of cooperation laid down in Article 5 of the EEC Treaty, to ensure the legal protection which persons derive from the direct effect of provisions of Community law ( see, most recently, the judgments of 10 July 1980 in Case 811/79 Ariete SpA v Amministrazione delle finanze dello Stato (( 1980 )) ECR 2545 and Case 826/79 Mireco v Amministrazione delle finanze dello Stato (( 1980 )) ECR 2559 ).
20. The Court has also held that any provision of a national legal system and any legislative, administrative or judicial practice which might impair the effectiveness of Community law by withholding from the national court having jurisdiction to apply such law the power to do everything necessary at the moment of its application to set aside national legislative provisions which might prevent, even temporarily, Community rules from having full force and effect are incompatible with those requirements, which are the very essence of Community law ( judgment of 9 March 1978 in Simmenthal, cited above, paragraphs 22 and 23 ).
21. It must be added that the full effectiveness of Community law would be just as much impaired if a rule of national law could prevent a court seised of a dispute governed by Community law from granting interim relief in order to ensure the full effectiveness of the judgment to be given on the existence of the rights claimed under Community law. It follows that a court which in those circumstances would grant interim relief, if it were not for a rule of national law, is obliged to set aside that rule.
22. That interpretation is reinforced by the system established by Article 177 of the EEC Treaty whose effectiveness would be impaired if a national court, having stayed proceedings pending the reply by the Court of Justice to the question referred to it for a preliminary ruling, were not able to grant interim relief until it delivered its judgment following the reply given by the Court of Justice .
23. Consequently, the reply to the question raised should be that Community law must be interpreted as meaning that a national court which, in a case before it concerning Community law, considers that the sole obstacle which precludes it from granting interim relief is a rule of national law must set aside that rule .”
The fundamental principle of the supremacy of Community law, in tandem with the related principles of effectiveness and national co-operation, also features prominently in this decision.

II DIRECTIVE 89/665/EEC – THE FIRST REMEDIES DIRECTIVE

[5] Although they have been superseded, it is instructive to consider the original Remedies Directives, as they help to illuminate the existing regulatory regime. The Remedies Directive and the Utilities Remedies Directive were adopted following the Commission White Paper in 1985. This was addressed to the Council and its subject matter was completion of the internal market. A central theme of this paper was the inefficacy of existing Community measures. These included the exclusion of the entire utilities sectors, in which discriminatory or inefficient procurement of contracts was common. Separate directives on public works and public supplies followed. These amended the original Directives. Later, new consolidated Directives were introduced.

[6] In the Commission White Paper, one of the main mischiefs identified was the absence of effective enforcement mechanisms. This was the impetus for Directive 89/665 (the “Remedies” Directive), followed by its utilities counterpart, Directive 92/13. The successive Remedies Directives must be considered in conjunction with the EU procurement Directives. Most recently, the procurement of public works, supply and services contracts has been consolidated into a single directive (the “Public Sector” Directive 2004/18/EC) and a new Utilities Directive (2004/17/EC) was introduced simultaneously. Within these Directives, the general Community law principles of equal treatment, non-discrimination, proportionality and transparency are expressly articulated. These Directives were designed, inter alia, to simplify and clarify the relevant Community law rules. However, one respected commentator has observed :

“Despite these simplifying provisions, however, the rules remain unnecessarily complex and detailed. The new provisions are, for the most part, even more complex and convoluted than the old ones ; the new Directives include much unnecessary detail ; and the new provisions create many important new ambiguities. For utilities, problems are caused by carrying over some of the rules drafted originally for the public sector without taking account of the differences between the regimes. Additional uncertainties arise from the fact that the new explicit rules apply to negotiated procedures and frameworks for the public sector but not for utilities, even when these provisions appear intended to clarify existing rules applying in both sectors.”

[7] The 1989 Directive applied specifically to “ … the co-ordination of the laws, regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts”. Its recitals acknowledged that the existing arrangements at both national and Community levels for ensuring the application of the substantive directive provisions were not adequate to secure compliance with the relevant provisions of Community Law, particularly at a stage when infringements could be corrected. Notably, the recitals also highlighted that the inclusion of public procurement within the field of Community competition necessitated “a substantial increase in the guarantees of transparency and non-discrimination” and, linked to this, the need for “effective and rapid remedies”. To give effect to this aim it would be essential that competent review bodies be able to impose interim measures suspending the contract award procedure. It would also be necessary that alleged infringements be addressed “urgently”. The two main remedies promoted were those of setting aside unlawful decisions and compensation.

[8] By Article 1 of the 1989 Directive, Member States were required to take the necessary measures :

(a) To provide for effective review of decisions made by contract award authorities as rapidly as possible.

(b) To ensure no discrimination between the implementing national measures and other national rules.

(c) To make the review procedure available to “any person having or having had an interest in obtaining a particular public supply or public works contract and who has been or risks being harmed by an alleged infringement”.

By Article 2 of the 1989 Directive, the implementing national measures had to include provision for :

(a) Interim measures suspending the contract award.

(b) Setting aside unlawful decisions – including the removal of discriminatory technical, economic or financial specifications in any of the tender/contract materials.

(c) Awarding damages to any person harmed by an infringement.

Notably, the Directive conferred a substantial measure of latitude on Member States in various respects : see particularly Article 1, paragraphs 4 – 6. Furthermore, the enforcement provisions of the Directive were extremely general. Per Article 1/7 :

“The Member States shall ensure that decisions taken by bodies responsible for review procedures can be effectively enforced”.

The 1989 Directive did not require that the review body be judicial in character : see Article 1/8. [This remains unchanged].

[9] Notably, Article 3 of the 1989 Directive empowered the Commission, for the first time, to take enforcement action. This jurisdiction was exercisable only where the Commission considered that “… a clear and manifest infringement of Community provisions in the field of public procurement has been committed during a contract award procedure …”. As appears from the recitals, the rationale for this provision was that affected national undertakings might not seek review in certain cases. Pursuant to Article 4/1, the Commission was to review the operation and implementation of the 1989 Directive at most four years following the implementation date.

III THE AMENDED REMEDIES DIRECTIVE

[10] Some sixteen years later, the new Community measure – the Amended Remedies Directive - came into operation. It imposed a deadline of 20th December 2009 for transposition by Member States. The rationale of the Amended Remedies Directive, as expressed in its Recitals, was the existence of various weaknesses in the review mechanisms of Member States. In particular, per Recital (4) :

“The weaknesses which were noted include, in particular the absence of a period allowing an effective review between the decision to award a contract and the conclusion of the contract in question. This sometimes results in contracting authorities and contracting entities who wish to make irreversible the consequences of the disputed award decision proceeding very quickly to the signature of the contract. In order to remedy this weakness, which is a serious obstacle to effective judicial protection for the tenderers concerned, namely those tenderers who have not yet been definitively excluded, it is necessary to provide for a minimum standstill period during which the conclusion of the contract in question is suspended”.

Thus the need for a stricter, more rigorous regime was clearly identified. The standstill period is worthy of particular mention as it is one of the main reforming provisions of the new Directive. Its effect is to suspend the contract award procedure. Its rationale and purpose are clearly identifiable in the recitals : to afford sufficient time to the disappointed tenderers to examine the contract award decision with a view to deciding whether review proceedings should be initiated. This requires the provision of sufficient information to them. The standstill period must continue until the review body has made its decision. Where the review body finds that an illegal direct award of a contract has occurred, there must be “effective, proportionate and dissuasive sanctions”. Per recital (17) :

“A review procedure should be available at least to any person having or having had an interest in obtaining a particular contract and who has been or risks being harmed by an alleged infringement”.

One of the express aims of the Directive is to strengthen the efficacy of national review procedures so as to “… encourage those concerned to make better use of the possibilities for review by way of interlocutory procedure before the conclusion of a contract”. According to the same recital :

“In those circumstances, the corrective mechanism should refocus on the serious infringements of Community law on public procurement”.

The Directive also envisages that national law may make provision for stricter sanctions. Accordingly, the new Directive establishes a regime of minimum safeguards and standards.

[11] At the outset, it must be appreciated that the new Remedies Directive amended the extant Council Directives 89/665/EEC and 92/13/EEC. They were not repealed. This is re-emphasized by the heading in the text :

“Amendments to Directive 89/665/EEC”

However, for practical purposes, the 1989 Directive was repealed in substance. The structure of the Amended Remedies Directive is as follows :

(a) It inserts new Articles 1 and 2.

(b) It adds new Articles 2a, 2b, 2c, 2d, 2e and 2f.

(c) It inserts a new Article 3.

(d) It adds a new Article 3a and Article 3b.

(e) It inserts a new Article 4.

(f) It adds a new Article 4a.

The remainder of the Amended Remedies Directive is concerned with amendments to Directive 92/13/EEC. In short, in the field of public works and supply contracts the Directive establishes an entirely new remedies regime. The main provisions are summarised below.

The Main Provisions

(i) Article 1/1

The implementing national laws must provide for the review of contract award decisions “effectively and, in particular, as rapidly as possible …”.

(ii) Article 1/2

“Member States shall ensure that there is no discrimination between undertakings claiming harm in the context of a procedure for the award of a contract as a result of the distinction made by this Directive between national rules implementing Community Law and other national rules”.

(iii) Article 1/3

The review procedure must be available as a minimum to “any person having or having had an interest in obtaining a particular contract and who has been or risks being harmed by an alleged infringement”.

(iv) Article 1/4/5

Member States may permissibly require that, at the first stage, the review of the impugned decision be undertaken by the authority itself.

(v) Article 2

This stipulates that review procedures must include provision for the following matters :

(a) Interim measures designed to correct the alleged infringement or to protect further damage to the interests concerned, including suspension of the contract award.

(b) The removal of discriminatory elements in the contract award materials and setting aside unlawful decisions.

(c) Awarding damages to injured parties.

Where a review body is seised of a challenge, the contract may not be awarded. Per Article 2/5 :

“Member States may provide that the body responsible for review procedures may take into account the probable consequences of interim measures for all interests likely to be harmed, as well as the public interest, and may decide not to grant such measures when their negative consequences could exceed their benefits”.

Effective enforcement of the review body’s decisions is required.

(vi) Article 2a

This is concerned with the standstill period. It is clear from paragraph (1) that this mechanism is designed to protect “any person having or having had an interest in obtaining a particular contract and who has been or risks being harmed by an alleged infringement”. The “trigger” date is the date of the contract award authority’s decision to award the contract. Per paragraph (2), there must be a standstill period of at least ten calendar days, dating from transmission of the decision to all interested parties by facts or electronic means – and at least fifteen calendar days where transmission is by some other means, coupled with a minimum of ten calendar days dating from the day following receipt.

(vii) At this juncture, one may highlight two important procedural requirements governing contract award decisions :

(a) Firstly, they must include a summary of the reasons for the decision.

(b) Secondly, they must be accompanied by a precise statement of the standstill period prescribed by the relevant implementing national law.

(viii) Article 2b

Derogation from the standstill period is permissible in three cases :

(a) Where the 2004 Directive does not require prior publication of a contract notice in OJEC.

(b) Where the successful tenderer is the only tenderer.

(c) Where either Article 32 (contracts based on a framework agreement) or Article 33 (contracts based on a dynamic purchasing system) of the 2004 Directive applies. The (limited) exceptions to this discrete derogation should be noted.

(ix) Article 2c

This provision of the Directive can be linked to Recital No. (11). It contemplates that national law may permissibly require an aggrieved party to first seek review with the contracting authority concerned. Article 2c is concerned with time limits in applying for first stage review, in this sense. There is no mention here of the independent review body (normally a court). Rather, Article 2c is concerned with the first stage [where this exists in national law], at which the relevant affected tenderer requests the contract award authority to review its own decision. Where national law incorporates a first stage review procedure of this kind, it must allow [repeating the time limits prescribed by Article 2a. ] :

(a) At last ten calendar days beginning on the day following the date when the contract authority’s decision is sent by fax or electronic means to the party concerned.

(b) Where other methods of transmission are employed : at least fifteen calendar days beginning with the day following the date of transmission [e.g. by post] or at least ten calendar days beginning on the day following the date of receipt of the decision.

The implementing national laws may provide for more generous time limits. Notably, the contract award authority’s decision “… shall be accompanied by a summary of the relevant reasons”.

(x) Article 2d

This is concerned with independent/judicial review (i.e. the legal proceedings/litigation) designed to establish whether the relevant contract is legally ineffective. Under the new regime, ineffectiveness is one of the core provisions. Article 2d requires, firstly, that the review body be independent of the contracting authority. Secondly, it stipulates that the relevant national implementing laws must require the review body to find a contract award ineffective in the following three cases :

(a) Where there was no prior OJEC publication, in contravention of the 2004 Directive.

(b) Where there has been an infringement of Article 1/5 [initial review with the contracting authority], Article 2/3 [award of the contract following initiation of the review procedure] or Article 2a/2 [infringement of the standstill period requirements] – “If this infringement has deprived the tenderer applying for review of the possibility to pursue pre-contractual remedies where such an infringement is combined with an infringement of [the 2004 Directive], if that infringement has affected the chances of the tenderer applying for a review to obtain the contract”. In other words, any infringement of the standstill period requirements must have some practical/operational impact – it is not to be viewed in a vacuum .

(c) In cases where Member States have invoked the derogation from the standstill period under Article 2b(c).

Where the review body finds any of the aforementioned species of illegality, it is not obliged to declare the contract award ineffective, where –

“… overriding reasons relating to a general interest require that the effects of the contract should be maintained”.

In such a case, the implementing national law must make provision either for a fine on the contracting authority or a reduction of the contract period. It is clear that this is designed to operate as a very narrow exception indeed.

(xi) Article 2f

This contains further provisions relating to time limits for legal proceedings. It must be read in conjunction with Article 2c. The latter is couched in mandatory language. In contrast, Article 2f is couched in permissive or elective terms. It is concerned with applications for review pursuant to Article 2d(1). It authorises national law to stipulate a minimum limitation period of thirty calendar days measured from publication of the OJEC Notice or, as the case may be, notification of the contract award decision. Where the application for review is not made under Article 2d(1), the limitation period can be a minimum of six months measured from the day following the date of contract award. In all other cases, the limitation period shall be determined by national law, subject to Article 2c [regarding the standstill period, which is inviolable]. These contrasting time limits seek to promote two separate aims. The first is that challenges to public contract award decisions should be made and processed expeditiously. The second is that limitation periods/time limits for the initiation of such challenges must not be so strict as to effectively extinguish the right of challenge, thereby preventing vindication of any infringement of the rules.

[12] The remaining provisions of the Amended Remedies Directive may be summarised as follows :

(a) Article 3 confers enforcement powers on the Commission.

(b) Article 3a describes the content of a “voluntary ex ante transparency” notice under Article 2/d/4.

(c) Article 3b provides that the Commission shall be assisted by the Advisory Committee for Public Contracts.

(d) Article 4 empowers the Commission to require Member States to provide information on the operation of national review procedures.

(e) Article 4a requires the Commission to review the operation of the Directive by 30th December 2012.

The remaining provisions of the Amended Remedies Directive are concerned with amendments to Directive 92/13/EEC. This is concerned with the separate (though related) subject of Community rules governing the procurement procedures of public utilities viz. entities engaged in the provision of water, energy, transport and telecommunications.

[13] As the above résumé demonstrates, ineffectiveness and review have become two of the central elements of the new remedies regime in the field of EU procurement law. In the first place, enforcement at supra national level is possible, in proceedings brought by the Commission before the ECJ. The efficacy of this enforcement mechanism is illustrated in Commission –v- Denmark . In such proceedings, the ECJ can grant interim measures, pursuant to Article 279 TFEU (formerly Article 243 EC). In such cases, the Rules of Procedure are important. The three criteria applied are those of prima facie case ; urgency ; and the balance of interest. Enforcement proceedings under Article 258 TFEU, at the behest of an individual or the Commission, are also possible. In any case where the ECJ finds a failure by a Member State to fulfil a treaty obligation, the defaulting state must take the measures necessary to comply with the court’s judgment, pursuant to Article 260 TFEU. At this stage, enforcement proceedings by the Commission are possible.

[14] Enforcement at national level is more commonplace, given the Commission’s limited resources. It is clear from the new Directive that national review/enforcement proceedings do not have to be brought before a court. This reflects the reality that in certain Member States such complaints are determined by a specially designated body or board. This may have certain advantages : in particular, those of greater speed, less expense and enhanced expertise. Within the national enforcement regime required by the new Directive, there are certain elements of particular importance :

Interim Measures

This mechanism is critical in order to ensure effective enforcement of the public procurement rules. The obligatory standstill period and automatic suspension of contract award go hand in hand. As Recital (12) explains :

“Seeking review shortly before the end of the minimum standstill period should not have the effect of depriving the body responsible for review procedures of the minimum time needed to act, in particular to extend the standstill period for the conclusion of the contract. It is thus necessary to provide for an independent minimum standstill period that should not end before the review body has taken a decision on the application.”

Per Article 2(3) of the Directive, the contract cannot be executed before the review body has adjudicated either on the issue of interim measures or the substantive review challenge itself. Where national law requires the aggrieved party to seek a first stage review with the contracting authority, this step must also entail immediate suspension of contract award.

Damages

In the pioneering years of EU procurement law, the remedy of damages was rare. Under the new Directive, the review body must be competent to award damages to the aggrieved party. One would expect that any such awards will frequently be based on demonstrated loss of profit. In principle, any breach of EU public procurement rules, irrespective of intention or negligence on the part of the contracting authority, should qualify for the remedy of damages. See Commission –v- Portugal and Stadt Graz.

Ineffectiveness

This is one of the most important innovations introduced by the new Directive. It is considered in greater detail below.

[15] The remedy of a declaration of ineffectiveness (by the review body) is directed to the mischief of (in the language of Recital No. 13) “the illegal direct award of contracts … [which is] … the most serious breach of Community law in the field of public procurement …”. Accordingly, there must be “effective, proportionate and dissuasive sanctions”. Per Recital [14] :

“Ineffectiveness is the most effective way to restore competition and to create new business opportunities for those economic operators which have been deprived illegally of their opportunity to compete”.

The substantive rules are contained in Article 2d. Paragraph (2) thereof should be highlighted :

“The consequences of a contract being considered ineffective shall be provided for by national law … [which] … may provide for the retroactive cancellation of all contractual obligations or limit the scope of the cancellation to those obligations which have still to be performed. In the latter case, Member States shall provide for the application of other penalties within the meaning of Article 2d(2).

Article 2e provides that in specified cases, “alternative penalties”, rather than ineffectiveness, are applicable and these must be “effective, proportionate and dissuasive” and must take the form of either (a) the imposition of fines on the contracting authority or (b) the reduction of the duration of the contract. It is further provided that national law may confer on the review body a broad discretion to take into account a wide range of factors – including the seriousness of the infringement and the conduct of the contracting authority. The award of damages cannot constitute an alternative penalty.

[16] One waits with interest to see whether this significantly revised and undoubtedly stronger remedies regime will be more efficacious than its predecessor. In particular, in principle, there should now be stronger incentives for undertakings to bid for public contracts in other Member States. There are eager expectations that the new sanction of ineffectiveness will significantly bolster the new remedies regime. In summary, this sanction must be applied where there is an illegal direct award of a public contract ; or an operative failure to apply the standstill period depriving the agreed tenderer of the opportunity to secure pre-contractual remedies, where an infringement of Directive 2004/18 is established ; and where there have been infringements of Article 32 or Article 33 of Directive 2004/18 in awarding large contracts based on framework agreements and dynamic purchasing systems, if the Member State has invoked the derogation from the standstill period. Part of the impetus for the new ineffectiveness rules in the revised Remedies Directive was undoubtedly the decision of the ECJ in Commission –v- Germany (Waste) . There the Commission sought to establish that Germany had been under a Treaty obligation to rescind contracts unlawfully awarded in breach of the Directive, as found by the ECJ itself in an earlier judgment.
The judgment of the ECJ might be described as somewhat evasive and tepid on this discrete issue, giving rise to the omnibus conclusion (and an accompanying declaration) that the failure by Germany to adopt all necessary measures to comply with the earlier ECJ judgments, within the time limit specified in the reasoned opinion of the Commission, was in breach of its obligation under Article 228 EC. Basically, the ECJ approached the new proceedings from the perspective of a Member State’s conduct frustrating the operation of the Community legal order.

[17] The consequences of a judicial finding of ineffectiveness will depend upon the various national implementation laws. Either all contractual obligations will be retroactively cancelled or the contract will be cancelled prospectively, coupled with effective penalties (fines imposed on the contracting authority) or a reduction of the contract period. Any application for the remedy of ineffectiveness must be made within thirty days of the publication of the OJEC contract award notice or within six months of conclusion of the contract, where such notice has been omitted. If the implementing national laws include the minor derogation permitted by Article 2d(3) the review body will have to consider whether there are over-riding reasons based on the general interest supporting the maintenance of the contract.

[18] It is anticipated that, in practice the introduction of the new standstill period and the remedy of ineffectiveness will strengthen the principle of transparency. It is less clear whether the principle of non-discrimination will be similarly fortified. In particular, smaller economic operators may be deterred from bringing proceedings by a combination of cost and the complexity of the new remedies regime. The main incentives for full compliance by contracting authorities are the cost and delay of having to initiate a new procurement procedure ; financial fines ; and damage to reputation. Already there is a Commission Green Paper which contemplates still further reforms in this sphere.

IV REVIEW BY THE COURT IN THE UNITED KINGDOM
[19] Transposition of the Amended Remedies Directive was effected in the United Kingdom by amending the existing regulations viz. the Public Contracts Regulations 2006 and the Utilities Contracts Regulations 2006. The amendments were introduced by The Public Contracts (Amendment) Regulations 2009 ("the 2009 Regulations"). In summary :
(a) The standstill period amendments are reflected in an amended Regulation 32 and a new Regulation 32A of the 2006 Regulations – and, correspondingly, an amended Regulation 33 and a new Regulation 33A of the Utilities Regulations ; and
(b) The new remedies rules are reflected in an entirely new Part 9 of both Regulations, enlarging considerably the previous Regulations 45 and 47 respectively.
By Regulation 4(3) of the 2006 Regulations (as amended) :
"A contracting authority shall (in accordance with Article 2 of the Public Sector Directive) –
(a) treat economic operators equally and in a non-discriminatory way ; and
(b) act in a transparent way."
Under the scheme of the Regulations, there are two different types of contract, "Part A" and "Part B". The distinction between these two species of contract is of some significance, given that the regulatory and restrictive regime established by the 2006 Regulations is less intrusive in the case of a Part B public services contract : see, in particular, Regulation 5. The general principles enshrined in Regulation 4(3), quoted above, apply to both types of contract. It is appropriate also to highlight Regulation 26 :
"Subject to regulation 27, the contracting authority may require an economic operator to provide information supplementing the information provided in accordance with regulations 23, 24 or 25 or to clarify that information, provided that the information so required relates to the matters specified in regulations 23, 24 or 25."
This Regulation applies only to Part A contracts. Accordingly, the powers which it expressly confers on a contracting authority are not exercisable by the contracting authority in the case of Part B contracts. However, there is jurisprudence of the European Court of Justice in support of the proposition that it may be appropriate for a contracting authority to seek clarification of a tender in furtherance of the principle of proportionality.
[20] The issue of the criteria governing the award of a public contract is addressed in Regulation 30, in the following terms :
"(1) Subject to regulation 18(27) and to paragraphs (6) and (9) of this regulation, a contracting authority shall award a public contract on the basis of the offer which—
(a) is the most economically advantageous from the point of view of the contracting authority ; or
(b) offers the lowest price.
(2) A contracting authority shall use criteria linked to the subject matter of the contract to determine that an offer is the most economically advantageous including quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, cost effectiveness, after sales service, technical assistance, delivery date and delivery period and period of completion.
(3) Where a contracting authority intends to award a public contract on the basis of the offer which is the most economically advantageous it shall state the weighting which it gives to each of the criteria chosen in the contract notice or in the contract documents or, in the case of a competitive dialogue procedure, in the descriptive document.
(4) When stating the weightings referred to in paragraph (3), a contracting authority may give the weightings a range and specify a minimum and maximum weighting where it considers it appropriate in view of the subject matter of the contract.
(5) Where, in the opinion of the contracting authority, it is not possible to provide weightings for the criteria referred to in paragraph (3) on objective grounds, the contracting authority shall indicate the criteria in descending order of importance in the contract notice or contract documents or, in the case of a competitive dialogue procedure, in the descriptive document."
The subject matter of Part 9 of the 2006 Regulations is "Applications to the Court". The whole of Part 9 was substituted by Regulation 10 of the 2009 Regulations. The scheme of Part 9 is, firstly, to impose certain duties on contracting authorities. To this end, Regulation 47A provides :
"(1) This regulation applies to the obligation on—
(a) a contracting authority to comply with—
(i) the provisions of these Regulations, other than regulations 14(2), 30(9), 32(14), 40 and 41(1) ; and
(ii) any enforceable Community obligation in respect of a contract or design contest (other than one excluded from the application of these Regulations by regulation 6, 8 or 33) ; and
(b) a concessionaire to comply with the provisions of regulation 37(3).
(2) That obligation is a duty owed to an economic operator.
(3) Where the duty owed in accordance with this regulation is the obligation on a concessionaire to comply with the provisions of regulation 37(3)—
(a) references in this Part to a "contracting authority" include, despite regulation 3, the concessionaire ; and
(b) references in this Part to an "economic operator" include, despite regulation 4, any person—
(i) who sought, who seeks or would have wished, to be the person to whom a contract to which regulation 37(3) applies is awarded ; and
(ii) who is a national of a relevant State and established in a relevant State."
In short, the obligation imposed on a contracting authority to comply with specified provisions of the 2006 Regulations is characterised "a duty owed to an economic operator".
[21] The Regulations then make provision for an enforcement mechanism, under the rubric "Enforcement of Duties through the Court". Per Regulation 47C :
"(1) A breach of the duty owed in accordance with regulation 47A or 47B is actionable by any economic operator which, in consequence, suffers, or risks suffering, loss or damage.
(2) Proceedings for that purpose must be started in the High Court, and regulations 47D to 47P apply to such proceedings."
Regulation 47D prescribes a time limit for the initiation of such proceedings :
"(1) This regulation limits the time within which proceedings may be started where the proceedings do not seek a declaration of ineffectiveness.
(2) Subject to paragraphs (3) and (4), such proceedings must be started promptly and in any event within 3 months beginning with the date when grounds for starting the proceedings first arose."
The initiation of proceedings has important consequences, by virtue of Regulation 47G :
"(1) Where—
(a) proceedings are started in respect of a contracting authority’s decision to award the contract ; and
(b) the contract has not been entered into,
the starting of the proceedings requires the contracting authority to refrain from entering into the contract.
(2) The requirement continues until any of the following occurs—
(a) the Court brings the requirement to an end by interim order under regulation 47H(1)(a) ;
(b) 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).
(3) For the purposes of paragraph (1), proceedings are to be regarded as started only when the claim form is served in compliance with regulation 47F(1).
(4) This regulation does not affect the obligations imposed by regulation 32A."

Accordingly, where there is an application to the court and the relevant contract has not yet been executed, this has the important consequence of suspending the contract award process. This suspension continues until the legal proceedings are determined or the court terminates the suspension by an interim order.

[22] In what circumstances may the court make an interim order terminating the automatic suspension of the contract award process ? Regulation 47H provides :

"(1) In proceedings, the Court may, where relevant, make an interim order—
(a) bringing to an end the requirement imposed by regulation 47G(1) ;
(b) restoring or modifying that requirement ;
(c) suspending the procedure leading to—
(i) the award of the contract ; or
(ii) the determination of the design contest,
in relation to which the breach of the duty owed in accordance with regulation 47A or 47B is alleged ;
(d) suspending the implementation of any decision or action taken by the contracting authority in the course of following such a procedure.
(2) When deciding whether to make an order under paragraph (1)(a)—
(a) the Court must consider whether, if regulation 47G(1) were not applicable, it would be appropriate to make an interim order requiring the contracting authority to refrain from entering into the contract ; and
(b) only if the Court considers that it would not be appropriate to make such an interim order may it make an order under paragraph (1)(a).
(3) If the Court considers that it would not be appropriate to make an interim order of the kind mentioned in paragraph (2)(a) in the absence of undertakings or conditions, it may require or impose such undertakings or conditions in relation to the requirement in regulation 47G(1).
(4) The Court may not make an order under paragraph (1)(a) or (b) or (3) before the end of the standstill period.
(5) This regulation does not prejudice any other powers of the Court."

The circumstances in which the court may make such an interim order are considered in greater detail in paragraphs [23] – [27] below.

[23] The remedies which the court is empowered to grant to a successful challenger vary according to whether the contract in question has been executed. Regulation 47I is concerned with available remedies where the contract has not been executed :
"(1) Paragraph (2) applies where—
(a) the Court is satisfied that a decision or action taken by a contracting authority was in breach of the duty owed in accordance with regulation 47A or 47B ; and
(b) the contract has not yet been entered into.
(2) In those circumstances, 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.
(3) This regulation does not prejudice any other powers of the Court."
Notably, each of the remedies in the Regulation 47I list is discretionary in nature. This may be contrasted with Regulation 47J, which applies where the relevant contract has been executed :
"(1) Paragraph (2) applies if—
(a) the Court is satisfied that a decision or action taken by a contracting authority was in breach of the duty owed in accordance with regulation 47A or 47B ; and
(b) the contract has already been entered into.
(2) In those circumstances, the Court—
(a) must, if it is satisfied that any of the grounds for ineffectiveness applies, make a declaration of ineffectiveness in respect of the contract unless regulation 47L requires the Court not to do so ;
(b) must, where required by regulation 47N, 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 acts as described in sub-paragraphs (a) and (b) ;
(d) must not order any other remedies.
(3) Paragraph (2)(d) is subject to regulation 47O(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 regulation 47M(3) or 47N(10) (orders which supplement a declaration of ineffectiveness or a contract-shortening order)."
The concept of "ineffectiveness" is expanded in Regulation 47K. Regulation 47L prescribes certain public interest grounds which may be invoked for declining to grant the remedy of a declaration of ineffectiveness. By Regulation 47M, where such a declaration is made, the contract is deemed ineffective prospectively, rather than retrospectively. By virtue of Regulation 47N, where such a declaration is made the court must also order the contracting party to pay a "civil financial penalty" of a determined amount. It is unnecessary to consider the outworkings of this regime in the present context.
[24] As noted above, it is possible for the court to make an interim order terminating the automatic suspension of the contract award process. The criteria governing the exercise of this power are not spelled out in the Regulations. They have, rather, been developed and clarified by judge made law. The courts have consistently held that such applications are to be determined by applying the principles in American Cyanamid –v- Ethicon [1973] AC 396. In short, it is incumbent on the court, fundamentally, to decide at this stage whether the Plaintiff has a good arguable case (or has raised a serious issue to be tried) and, further, to evaluate the balance of convenience, taking into account particularly (but not exhaustively) the adequacy of damages as a remedy ; the availability, terms and apparent efficacy of any cross undertaking in damages by the Plaintiff ; the possibility of irremediable prejudice to third parties ; the obligation imposed by Article 4(3) of the Treaty on European Union (frequently labelled "the Maastricht Treaty") to take all appropriate measures to ensure the fulfilment of obligations arising under the Treaties [now Article 10 EC] ; and the demands of the public interest.

[25] The correct approach in principle was expressed by Akenhead J in Exel Europe –v- University Hospitals Coventry and Warwickshire NHS Trust [2010] EWHC 3332 (TCC) in the following way :
"26. For many years, the Courts of England and Wales have, with regard to interlocutory or interim injunctions, applied the principles and practice laid down in the well-known case of American Cyanamid Co v Ethicon [1975] AC 396. The first question which must be answered is whether there is a serious question to be tried and the second step involves considering ’whether the balance of convenience lies in favour of granting or refusing interlocutory relief that is sought (page 408B). The ’governing principle’ in relation to the balance of convenience is whether or not the claimant ’would be adequately compensated by an award of damages for the loss he would have sustained as a result of the defendant’s continuing to do what was thought to be enjoined between the time of the application and the time of the trial.’
27. It is quite clear that, prior to the amendments to Regulation 47 made by the 2009 Regulations (see above), Cyanamid principles were applied in considering whether or not an injunction should be granted to an unsuccessful or discontented tenderer preventing the placing of the relevant contract or agreement by the contracting authority. A good example is the recent case of Alstom Transport v Eurostar International Ltd and another [2010] EWHC 2747 (Ch), a decision of Mr Justice Vos. The Court of Appeal had upheld this approach in Letting International v London Borough of Newham [2007] EWCA Civ 1522.
28. The issue arises whether these principles apply following the imposition of the amendments to the Regulations. Regulation 47H addresses interim orders which the Court may make in circumstances, where, pursuant to Regulation 47G, the commencement of proceedings, as in this case, has meant that the contracting authority (the Defendant in this case) is statutorily required to refrain from entering into the framework agreement (in this case). In my judgement this is primarily simply a question of interpretation of Regulation 47H. Regulation 47H(1) gives the Court the widest powers in terms of what it may do with regard to entering into contracts. It is in Regulation 47H(2) that one finds what exercise the Court ’must’ do : it must consider whether, if regulation 47G(1) was not applicable, ’it would be appropriate to make an interim order requiring the contracting authority to refrain from entering into the contract’ ; it then goes on to say that it is ’only if the Court considers that it would not be appropriate to make such an interim order may it make an order under paragraph (1)(a)’. This is saying in the clearest terms that the Court approaches the exercise of interim relief as if the statutory suspension in Regulation 47 G(1) was not applicable. That means that one does not as such weight the exercise in some way in favour of maintaining the prohibition on the contracting authority against entering into the contract in question. What in practice it means is that the Court should go about the Cyanamid exercise in the way in which courts in this country have done for many years."

The courts in Northern Ireland have adopted the same approach : see First4Skills Limited –v- Department for Employment and Learning and Rutledge Recruitment and Training Limited –v- Department for Education and Learning.

[26] Accordingly, where there is an automatic suspension of the contract award process followed by an application to the court for an interim order terminating such suspension, it is incumbent on the court to make a reasonable evaluation of the merits of the Plaintiff’s substantive challenge. This is a difficult exercise, involving a delicate balance. On the one hand, the court does not conduct a substantive hearing of the challenge, rather adopts a broader brush approach. On the other hand, it is plainly desirable to weed out the truly fragile, frivolous or spurious challenges.

[27] Where there is more than one legal challenge to the impugned contract award decision, this can throw up some interesting questions. This is illustrated in First4Skills Limited –v- Department for Employment and Learning where, as regards this discrete issue, the basic facts were the following :

(a) This Plaintiff and another private sector commercial operator tendered unsuccessfully for the award of the contract in question.

(b) Following notification of the impugned decisions, each of the disappointed bidders corresponded with the public authority concerned (a government department), intimating a possible legal challenge.

(c) This stimulated a notification dated 18th April 2011 that the award of the contract would be deferred for an unspecified period.

(d) The other challenging party initiated proceedings by Writ of Summons issued on 4th April 2011.

(e) The Writ in the present case was issued on 27th May 2011.

(f) The court heard the Department’s application in the related case for an interim order pursuant to Regulation 47H of the 2006 Regulations on 27th June 2011 and gave judgment on the same date, refusing the application, thereby continuing the suspension.

(g) The hearing of the Department’s application in this case ensued the following day, 28th June 2011.

The initiation of proceedings by both this Plaintiff and the other challenging party had the effect of triggering the moratorium, or suspension, prescribed by Regulation 47G of the 2006 Regulations. As appears from the above chronology, on 27th June 2011, the court refused the Department’s application for an order extinguishing the Regulation 47G prohibition, thereby enabling it to execute the contract in question. The question which arose was whether, in the light of that decision, it was open to the court to accede to a second application, seeking precisely the same relief.

[28] The court dismissed the contract award authority’s application for an order terminating the automatic suspension. In doing so, the court reasoned as follows :

(a) Firstly, it would be plainly inappropriate – and manifestly illogical – for the court to make an order in the second application conflicting with its order in the first application.

(b) Secondly, in the exercise of what is plainly a discretionary jurisdiction, it would be simply incongruous for the court to make an order in the second application purporting to authorise the Department to take a course (viz. execute the contract) which would be unlawful, as it would be in breach of the court’s first order.

(c) Thirdly, the present application may be viewed through the prism of misuse of the court’s process. In my view, for the reasons elaborated, the present application entails a misuse of the court’s process.

(d) Fourthly, the court rejected the submission. In the court’s opinion, Regulations 47G and 47H are not framed in this way but are, rather, formulated in terms which confound this argument. In short, they are directed to the impersonal issue of awarding the contract and do not speak in any way to the challenging party or his identity. Thus, the court reasoned, the word "proceedings" in the two provisions in question is to be construed as "any proceedings". Accordingly, where, as here, one has the circumstance that more than one disappointed bidder has initiated separate legal challenges, the court’s dismissal of the Department’s application for an interim order under Regulation 47H in any of the actions thereby commenced prohibits the execution of the contract with any party and, hence, renders otiose any further such application brought under the aegis of a different Writ. While there might be possible exceptions to this rule, they are not easily envisaged.