Supreme Court overrules Court of Appeal public procurement decision
In a lands mark public procurement decision last year (Nuclear Decommissioning Authority v Energy Solutions EU Ltd) the Court of Appeal held, that in a claim for damages based upon a public authority’s failure to comply with the Public Procurement Regulations, it was not necessary for the unsuccessful bidder to show that the breach of the rules was “sufficiently serious”. The Appeal Court preferred the English common law approach, under which, provided there was a breach resulting in loss, damages would follow.
The Supreme Court overturned this decision applying instead the well established approach in European Law, that:
1. The rule breached must be intended to confer rights on individuals.
2. The rule breached must be sufficiently serious.
3. Which in turn, means, that not every legal error in the course of an award procedure can ground an award in damages.
This is a much harder test for the Claimant to satisfy and will require an examination of such issues as:
1. The Clarity and precision of the rule.
2. The measure of discretion left by the rule.
3. Whether the infringement was intentional or involuntary.
4. Whether any error of law was excusable of inexcusable.
Therefore, under this test the scope for argument by an infringing public authority is very wide. This will make damages claims in public procurement disputes a process fraught with risk.
The Supreme Court did however have one piece of good news for unsuccessful bidders. It held that failure to issue proceedings within the ten day standstill period necessary to invoke the automatic suspension to prevent the public body issuing the contract, did not prevent the claimant pursuing a damages claim. The NDA had argued that such failure amounted to a failure to mitigate its losses on the bidder’s part. This argument was rejected by the Supreme Court.
Over all however, this decision is good news for public bodies as not all breaches in procurement law will give right to a claim in damages on the bidder’s part. Bidders will now have to take in to account the difficulties in proving any breaches in procurement law will be difficult to prove and are likely to be resisted on the above grounds. Ignoring the ten day limitation period on any proceedings necessary to invoke the automatic suspension and limiting the claim to damages, no longer looks like an attractive option.
15 May 2017