Ruling gives companies time and certainty in public procurement disputes

Out-Law News | 01 Feb 2010 | 9:35 am | 2 min. read

Companies now have more time to file legal objections to the award of public contracts after Europe's top court overturned UK procurement law. The Government will have to re-draft its regulations and the ruling will take immediate effect.

Current UK regulations implementing the EU's Remedies Directive say that any company that wants to take action objecting to its failure to win a contract from a public authority must do so "promptly", and certainly within three months.

Some companies have had claims thrown out for not being prompt enough in their actions even when they had complained within three months, said procurement law expert James Bryan of Pinsent Masons, the law firm behind OUT-LAW.COM.

"The ruling says that the situation in the UK didn't give enough legal clarity and was incompatible with the EU Directive," said Bryan. "UK judges will now not be able to apply that part of the UK's Regulations and the Government will have to change the Regulations."

The ruling means that companies cannot be barred from taking action as long as they file their case within three months of learning that they did not win a contract.

Uniplex, a company that applied for an advertised NHS Business Services contract, took a case against the NHS when it was not awarded the contract. The High Court referred a question to the EU's Court of Justice asking whether the period within which Uniplex had to take action began when it found out about the alleged problem with the procurement process or from the moment the decision to reject Uniplex was taken.

The Court of Justice ruled that the time period should not start to run until a company learns not only that it has been rejected but some of the circumstances of that rejection. It is only then that it can have any idea that rules may have been broken.

"The fact that a candidate or tenderer learns that its application or tender has been rejected does not place it in a position effectively to bring proceedings. Such information is insufficient to enable the candidate or tenderer to establish whether there has been any illegality which might form the subject-matter of proceedings," said the ruling.

"It is only once a concerned candidate or tenderer has been informed of the reasons for its elimination from the public procurement procedure that it may come to an informed view as to whether there has been an infringement of the applicable provisions and as to the appropriateness of bringing proceedings," it said.

The UK's Public Contracts Regulations say that proceedings must be brought "promptly and in any event within three months from the date when grounds for the bringing of the proceedings first arose".

The High Court asked the Court of Justice whether this was a proper implementation of the Directive. The Court said that the demand that cases be brought 'promptly' was not. It said that the 'promptness' criterion, which was up to a court's discretion, was not compatible with the Directive.

Bryan said that the ruling gives failed applicants for public work more certainty. "In the past UK courts have said that the time runs not from when you knew there was a breach of procurement laws, but when the decision was made. But that is impractical if the decision was made behind closed doors and people are told later what the decision was," he said.

Bryan said that the removal of the demand for 'promptness' also gave companies more certainty. "If you want an injunction to actually stop a contract being awarded you still have to be very quick but if you want damages, then you now have three months from when you knew, or ought to have known, about the decision," he said.

The Court of Justice said that the High Court and other UK courts should refrain from applying the Regulations while they remained inconsistent with EU law.