So what is the impact of the Remedies Directive so far?

The changes implemented by the Remedies Directive and the Public Contracts (Amendment) Regulations 2009 came into force on 20 December 2009. Prior to their introduction, there was a lot of talk about their likely impact. So, as Jeremy Glover asks, what actually happened? The new regime increased the level of detail contracting authorities are required to give to tenderers. Award letters had to include: (i) the award criteria; (ii) the bidder’s score; (iii) (in the case of an unsuccessful tenderer) name and score of the successful tenderer; (iv) a statement of the standstill period and a summary of the relevant reasons for the decision. The other two main changes introduced were:

(i) Automatic suspension

In recognition of the need to allow the courts sufficient time to act within the standstill period, the new regulations required that once an application for review has been made by an aggrieved tenderer, the contract cannot be entered into until the court has made a decision regarding the application.

(ii) Ineffectiveness

The new Remedies Directive stated that public contracts will be “ineffective” where there is a breach of the public procurement rules. By way of example, a contract will be rendered “ineffective” in the following circumstances:

(i) If the contracting authority awards a contract without prior publication of a notice in the Official Journal of the European Union.

(ii) If a contract is entered into under a framework agreement or dynamic purchasing system in breach of the public procurement rules.

(iii) Where a contract is concluded without application of a proper standstill period, or where rules governing the suspension of a contract pending court proceedings have been breached, and has affected the chances of the claimant winning the contract.

Automatic suspension: 18 months on

There have been a number of cases since 1 December 2009 where the Contracting Authority has sought to lift the automatic suspension. In all but one, the Contracting Authority has been successful. In Exel Europe Ltd v University Hospitals Coventry and Warwickshire NHS Trust,1 the Defendant applied to have the automatic suspension under Regulation 47G lifted. Mr Justice Akenhead confirmed that the principles with regard to interim injunctions as set out in the well-known case of American Cyanamid Co. v Ethican would apply to these situations. He said that “… the Court should go about the Cyanamid exercise in the way in which courts in this country have done for many years”. In other words, the Regulations do not favour maintaining the prohibition on the contracting authority against entering into the contract in question.2

Accordingly, the Judge applied the American Cyanamid principles. The first question to be answered is whether or not there is a serious question to be tried and the second question involves considering whether the balance of convenience lies in favour of granting or refusing the interlocutory relief sought. The governing principle in relation to the balance of convenience test is whether or not the claimant would be adequately compensated by an award of damages. Here, Mr Justice Akenhead found that there was a serious issued to be tried only in respect of one of the six allegations advanced by Exel. Exel alleged that the Defendant’s discussions/negotiations with, another party, HCA International five months immediately prior to the open public procurement process gave them an unfair advantage, distorted competition or breached the principles of equal treatment and transparency. Mr Justice Akenhead found that this was the only serious issued to be tried and that the remaining five issues were at best weak.

With respect to the balance of convenience test, the Judge found that this was an appropriate case which required that public interest be taken into account. He held that an important area of public interest is the efficient and economic running of the National Health Service and the procurement of medical goods, drugs, equipment and services. Here, the Defendant had clearly established an urgency for the procurement of this contract, as the existing agreements for the provision of the services had expired in March 2010. If the suspension was not lifted, a judgment would likely not be obtained before May or June 2011 at the earliest, thereby further jeopardising the services currently being provided. Finally, the Judge was wholly satisfied that damages would be an adequate remedy.

In Northern Ireland, McCloskey J has considered two cases. In the first, he took a similar line in lifting the suspension.3 The public interest outweighed the disadvantages that may be suffered by the aggrieved tenderer. To not do so would be of clear detriment to vulnerable and socially disadvantaged members of society. The Judge said:

“I am of the opinion that, considered collectively and dispassionately, these factors pale when juxtaposed with the public interest in play, identified above. The status quo in the Foyle area is plainly intolerable and should not be permitted to continue, absent some compelling justification. In my view, no such justification exists. The potent desirability of awarding the relevant contract without further delay, interruption or uncertainty is, by some measure, the dominant factor in the balance of convenience equation, comfortably eclipsing the sundry countervailing considerations advanced by the Plaintiff.”

The courts seem to be heavily influenced by the need to take into account the public interest in maintaining existing services or providing new ones. There has only been one exception to this trend, the case of First4Skills Ltd v the Department for Employment and Learning,4 which also came before McCloskey J. This case was a little unusual in that the court had already refused the Department’s application to lift the suspension in response to a claim brought by a different tenderer. Thus the court wasted little time in rejecting the Department’s application. However, the Judge did go on to review the merits. He specifically noted that the correct approach in principle was that expressed by Mr Justice Akenhead in the Exel case. He also noted, contrary to the other cases, that here there was a serious issue to be tried. In the other cases the judges had said that the exercising of the balance of convenience was not influenced by the strength of the claimant’s case.

Here the Judge had to balance the projected savings to the public purse; the improvements in the proposed new contractual arrangements; the advantages to both trainees and employers; the requirements of legal certainty; the limitation on any potential contract extension (not beyond March 2012); and the desirability of uniformity throughout the United Kingdom in the provision of training to apprentices against the plaintiff’s cross-undertaking in damages and the reasonable prediction that the proceedings would be completed to the stage of judgment in advance of March 2012, when the contract extension will expire. One significant difference between the two Northern Irish cases appears to be the lack of public interest factors in the First4Skills case.

So to date, the evidence from the courts is that the balance is in favour of the contracting authority being able to persuade the courts to lift any suspension, leaving the aggrieved tenderer to seek the remedy of damages.

Ineffectiveness and time limits

Towards the end of the summer, the long-running dispute over the award of a contract for a new generation of trains to be used in the Channel Tunnel came to an end. The part of the case discussed here5 is interesting for two reasons. Firstly, Alstom objected to the decision and commenced proceedings in which it sought a declaration of ineffectiveness in relation to a preliminary contract. Second, it was said that the claim was brought out of time. This was the first time that a declaration of ineffectiveness had been sought from the courts.

Here, Alstom argued that the contract eventually entered into with Siemens was materially different to the contract tendered for, which meant that the contract had been awarded without prior publication of a notice in the Official Journal. Further, this material difference meant that Eurostar had not observed a proper standstill period; both reasons why a proper procurement process had not been followed. Mann J looked at the qualification notice issued by Eurostar to commence the tender process and held that it was wide enough to cover the contract signed with Siemens, even in its varied form. The Judge said that the test of whether a proper notice has been provided is a “mechanistic” one which was satisfied here.

There was a further problem for Alstom in that, on the facts, there was no reason why Alstom could not have brought its claim for ineffectiveness before the end of the standstill period and so before the contract had actually been entered into. Alstom needed to establish that there was a breach of the standstill requirement and that that breach prevented Alstom from starting proceedings before the conclusion of the contract, or prevented it from bringing those proceedings to a conclusion. Here, there was a standstill period announced by Eurostar. There was a moratorium. Within that period Alstom managed to formulate and bring proceedings seeking to stop the contract. While those proceedings at that time did not have all the material currently available, it was apparent that the essence of the current argument about the varied contract was recognisable. Accordingly, either there had either been no breach of the standstill obligation, or if there had been, it had not deprived Alstom of the chance of starting proceedings. Mann J said:

“To some extent the ineffectiveness provisions are obviously intended to operate only when anticipatory proceedings could not be brought. One can understand that as a rationale - it was obviously thought that it would be better to try to stop a contract than to try to bring an existing contract to an end. Particularly after it has been on foot for some considerable time. The possibility of the former should exclude the latter; the latter should only be available when the former has not been possible because of act of the utility in not holding its hand on contracting to the requisite extent. In the present case Alstom’s own acts have demonstrated that it was able to launch proceedings before the contract was entered into.”

New amendment to the Public Procurement Regulations

On 1 October 2011, the Public Contracts Regulations 2006 were further amended by the Public Procurement (Miscellaneous Amendments) Regulations 2011. One reason for this was as a result of the Uniplex decision.6 In Uniplex, the European Court had suggested that the current UK requirements to bring procurement challenges promptly were imprecise and uncertain. The result of these changes is to increase the pressure on a contractor who considers that he might want to challenge the tender process, to do so promptly, albeit as the Alstom case demonstrates, that is already something contractors must be alive to, and by promptly we mean from the date when the contractor suspects that there has been a breach, and that is not necessarily at the end of the tender process.

The key change introduced is that the time limit for bringing a procurement claim will be reduced to 30 days from the date of knowledge, that is the date on which the economic operator first knew, or ought to have known, that grounds for starting proceedings had arisen. The court will continue to have discretion to extend this period where there is good reason for doing so, subject to an absolute maximum period of three months. If the date of knowledge was before 1 October 2011, then the old time limits, namely three months from the date of knowledge, will continue to apply. If a formal claim is to be made, the new regulations make it clear that proceedings will commence, and the time clock will stop ticking, on the issue of the claim form rather than the date of service on the defendant. The claim form must be served on the contracting authority within 7 days after the date of issue. The amendments also make it clear that the automatic suspension will be triggered when that authority becomes aware that a claim form has been issued.

Finally, the Regulations have also been amended to reflect the new criminal offences introduced by the Bribery Act 2010, which came into effect on 1 July 2011.

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• 1. [2010] EWHC 3332 (TCC).
• 2. The Judge took a similar view in the Halo Trust v The Secretary of State for International Development [2011] EWHC 87 (TCC).
• 3. Rutledge Recruitment & Training Ltd v Department for Employment & Learning and Anr, [2011] NI QB 61.
• 4. [2011] NI QB 59.
• 5. Alstom Transport v Eurostar International Ltd and Anr, [2011] EWHC 1828 (Ch).
• 6. Uniplex UK Ltd v NHS Business Services Authority [2010] 2 CMLR 47.