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Part 2 - The Lancashire ruling discussed


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Summary: Further confirmation that Procurement law is to support “sufficiently serious breaches” only and the unintended consequences.

Previously, in June 2017, the Supreme Court had handed down a rather controversial ruling in the matter of Nuclear Decommissioning Authority v ATK Energy EU Ltd (formerly Energy Solutions EU Ltd) [2017 UKSC 34] that the Public Contracts Regulations only require damages to be awarded for a "sufficiently serious" breach of the rules rather than simply any breach (in accordance with the second principle of liability for breaches of Community law from the judgment of the Court of Justice in Francovich v the Italian Republic [1995] ICR 772).

The idea that a breach must be “sufficiently serious” is not one which is explicitly enshrined in the Directive nor UK Regulations and many commentators found this incompatible with accepted procurement law principles. It is also a significant change to the general position in English and Welsh law which is that damages are recoverable once a breach has been established - provided there is a causal link. 

Subsequently however, the EFTA Court in Case E-16/16 - Fosen-Linjen AS v AtB AS, ruling on a matter of an EEA law breach in Norway, completely rejected the idea that a breach had to be “sufficiently serious” for damages to be payable.  The EFTA Court is the CJEU equivalent for members of EEA but not the EU (i.e. Norway, Iceland and Liechtenstein).  Its judgments are not binding in the UK but a good indicator of the likely position of the CJEU. 

The Lancashire case (described in Part 1 of this blog) has already applied the Supreme Court’s judgment in the NDA case. The result was that the judge in Lancashire upheld the automatic suspension at an interlocutory hearing. This prevents the Council signing the contract with the winner of the competition until the outcome of an expedited trial. One of the factors that helped Fraser J come to this decision was that he found it impossible to consider at that stage of proceedings whether the breaches (if they occurred) were sufficiently serious. This means that damages may not be available to the Claimants at all at full trial. If the contract is already signed, then they would be left without remedy. 

So the NDA ruling is already having unforeseen consequences.  This could mean that for defendants it be harder to get the automatic suspension lifted in the future.  Defendants trying to do so will be in the uncomfortable position of having to argue that their breaches (if they happened!) were sufficiently serious, so that damages are not only an appropriate but an available remedy. 

If there is no clarity on this point from the CJEU between now and the end of any Brexit transitional period (assuming there is to be one), then we may be dealing with its implications for some time.

For those of you who have read Part 1 of this blog on the Lancashire case I highlighted the incongruity of a decision which seemingly puts the public sector in a better position than the private sector claiming against other public bodies under procurement law. I suggested this may be at odds with original procurement law objectives, designed to assist genuine cross-border trade for economic operators.

The “sufficiently serious” ruling also leaves us with a peculiar state of affairs; a UK ruling not derived from English law principles and also seemingly unsatisfactory under the EU law upon which it was purportedly based.  It will curtail the ability of bidders to challenge public sector contract award decisions by limiting the availability of damages. As the Lancashire decision demonstrates, this is far more likely to affect for-profit claimants for whom damages may be their only remedy – but in respect of whom the law was originally meant to protect.

Again, this must raise serious questions post-Brexit about what we in the UK think the role and objective of public procurement law actually is and consider whether changes are needed to make sure those objectives are achieved.

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