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Remedies - a further twist

3 March 2010

No sooner had the Remedies Directive been implemented than the European Court of Justice (ECJ) ruled that the provisions in relation to the three month time limit for challenging a procurement decision lack certainty and are therefore incompatible with European law.

The Public Contracts Regulations 2006 state that procurement challenges must be brought "promptly and in any event within three months from the date when grounds for bringing proceedings first arose, unless the Court considers that there is a good reason for extending the period within which proceedings may be brought".

The case in question, Uniplex(UK) Limited v NHS Business Services Authority (Case C-406/08), considered two matters which related to the limitation period. The first was the question of when the three month time limit for bringing a claim actually begins to run and the second was whether the requirement to bring proceedings ‘promptly’ was sufficient to be compatible with the EU principles of legal certainty and effectiveness.

When does the clock start ticking and how fast does it tick?

Before the decision in Uniplex, the test for determining whether a claim had been brought in time was as described in Holleran v Severn Trent Water [2004] EWHC 2508. In Holleran, the trial judge held that the clock began "when the grounds first arose", i.e. the date of the infringement. He also held that there was a public interest in proceedings being brought 'promptly' on the basis that a speedy review of complaints was essential to an effective procurement process.

In Uniplex the ECJ effectively overuled Holleran ruling that:

• The time limit for bringing legal proceedings should run from the date on which the complainant became aware (or ought to have known) of the alleged breach
• The requirement to bring proceedings 'promptly' granted courts too much discretion to dismiss cases even before the end of the three month period, where they were not satisfied that the proceedings had been bought with sufficient promptness. The court held that this discretion breached the principles of legal certainty and effectiveness and therefore was not compatible with EU law

The ECJ has recently considered the same issue in relation to an action brought against the Irish Government by the European Commission. The Irish Superior Court Rules state that challenges to procurement awards must be made, "at the earliest opportunity or at any event within three months".

In a decision which supports the ruling in Uniplex (and was heard on the same day) the ECJ held that the Irish wording was too uncertain because it left tenderers and candidates in doubt as to the precise length of the limitation period and accordingly prevented them from being able to effectively exercise their right to review public procurement decisions.

So, what is the correct test?

Following Uniplex, the test appears to be as follows:

• The time limit for bringing proceedings begins to run only from the date on which the complainant knew, or ought to have known, of the infringement of the rules applicable to that procurement. In practice the court in Uniplex indicated that it was likely a complainant could only come to an 'informed view' once they had been given full details of why they had not won the contract
• The court has a duty to extend the period for bringing proceedings where it is necessary to ensure that the complainant has three months from the date on which they knew or ought to have known, of the infringement, rather than the date on which the infringement actually occurred (if different)
• In the absence of an amendment to the Public Contracts Regulations 2006 the courts should avoid applying the 'promptly' requirement

Implications

It is likely the new test will give aggrieved bidders greater opportunity to bring cases which, at first glance, might appear to be out of time. This may result in increased costs for defendants as there is a greater risk that limitation will become a preliminary issue to many proceedings.

There is a possibility that failed bidders may seek repeated clarifications as to the reasons why they did not win a tender, in order to extend the period for bringing a claim as long as possible. This may result in an increased administrative burden on contracting authorities.

Contracting authorities are no longer able to argue that a case should be dismissed because it has not been brought promptly, and should be aware that the courts may extend time-limits so as to ensure that complainants really do have a full three months.

It is likely we may see further amendments to the Public Contracts Regulations in the future as the judgment makes clear that member states should ensure that any limitation periods are precise, clear and foreseeable.

How can contracting reduce the risk of a challenge following this judgment?

As more budget cuts loom on the horizon, the last thing any public body wants is the cost, not to mention the publicity, associated with a protracted procurement challenge that may end up slow to come to an end. These quick pointers may help to minimise the risk of a challenge:

1. Ensuring that records of correspondence including all telephone calls, letters and emails and notes of any face to face meetings are kept so that there is a clear audit trail. These should be kept until you are satisfied under point 2 that there is no risk of a challenge.
2. Ensuring that full written reasons are offered to any unsuccessful bidders as soon as they have been informed that they have been unsuccessful. Making sure that if a face to face meeting is organised in order to feedback to an unsuccessful bidder comprehensive notes are taken. Doing this should improve the audit trail and give contracting authorities a greater level of certainty as to when their potential liability to any unsuccessful bidders would end.
3. Ensuring that all unsuccessful bidders are informed of the award decision at the same time, to keep the process as simple as possible (and prevent the need for any extension of the standstill period).

If you would like advice on how you can reduce the risks associated with procurement challenges from unsuccessful bidders we would be happy to assist you.

talk to us

Christopher Brennan 0121 237 3964 Associate

Emily Birkett 0121 237 3934 Solicitor

The content of this bulletin is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.