The remedies for the breach of the EU Public Procurement Rules - an overview

Introduction

The Treaty of Rome established four fundamental principles to be applied to the award of public contracts, whatever their value without laying down specific rules; the principles of non-discrimination on the grounds on nationality, free movement of goods, freedom of establishment and freedom to provide services.

Building on these four principles, the EU has laid down in the form of Directives, the legal framework governing the award of public contracts, so as to support the creation of a single market for contracts awarded by public bodies within the EU.

Three Directives called the Public Sector Directives govern the award of contracts by state, local and other regional or municipal authorities and public bodies collectively called "contracting authorities". The Directives are as follows: -

• Council Directive 93/36/EEC of 14th June 1993 on the co-ordination of procedures for the award of public supply contracts (the Supplies Directive).
• Council Directive 93/37/EEC of 14th June 1993 on the co-ordination of procedures for the award of public works contracts (the Works Directive).
• Council Directive 92/50/EEC of 18th June 1992 on the co-ordination of procedures for the award of public service contracts (the Services Directive).

There are a parallel set of rules set out in Council Directive 93/38/EEC of 14th June 1993 on the co-ordination of the procurement of procedures of entities operating in the water, energy, transport and telecommunications sectors (the Utilities Directive).

When do the Directives Apply?

The rules set out in the Directives for the award of public contracts by contacting authorities will apply if the contract in question exceeds a specific value threshold, which are set out in the Directives.

What happens if the Directives are breached?

The procurement rules governing the award of public contracts by contracting authorities under the Public Sector Directives and the Utilities Directive listed above, are supported by two specific Directives which deal with remedies for breaches (collectively called "the Remedies Directive") which are as follows: -

• Council Directive 89/665/EEC of the 21st December 1989 on the co-ordination on the laws regulations and administrative provisions relating to the application of review procedures to the award of public supply and public works contracts (the Supplies, Works and Services Directives).
• Council Directive 92/13/EEC of the 25th February 1992 on the co-ordination of the laws regulations and administrative provisions relating to the application of Community Rules on the procurement procedures of entities operating in the water, energy, transport and telecommunications sectors (the Utilities Directive).

The Remedies Directives oblige each member state to ensure that effective remedies and means of enforcement are made available to suppliers, contractors and service providers in the Courts of the member states where these suppliers, contractors and service providers believe that they have been harmed as a consequence of a breach of the public procurement rules.

Implementation of the Remedies Directives in Ireland

The Remedies Directives have been implemented into Irish law by two Statutory Instruments, SI No. 309/1994 and SI No. 104/1993.

Proceedings alleging a breach of the EU Procurement Rules must be brought in the High Court. Available remedies include;

• Interim Orders (Injunctions)
• Set Aside Orders
• Awards in damages

In addition to these remedies, aggrieved parties may also bring an application before the High Court, seeking judicial review of the decisions complained of, which must be brought within tight timeframes.

Complaints to the EU Commission

Quite apart from any actions brought before national courts, aggrieved parties may also lodge complaints with the EU Commission. Once such a complaint is lodged the EU Commission may invoke what is known as "a corrective" procedure, if it is satisfied that a clear and manifest breach of the public procurement rules has been committed prior to the award of the contract concerned.

In such circumstances, the EU Commission will formally notify the contracting authority and the relevant member state of the complaint. The EU Commission will set a time limit of at least 21 days in the case of the public sector, or 30 days in the case of the utility sectors within which the parties to whom the complaint has been addressed, must respond.

In circumstances where the EU Commission is not satisfied with the explanations that it has received, it is entitled to commence formal proceedings under the provisions of the Treaty of Rome, which could ultimately result in a case being brought before the European Court of Justice.

Alternative Dispute Resolution

As with most commercial disagreements, disputes arising as a result of an alleged breach of the procurement rules, will usually be most effectively dealt with if the parties to the dispute engage in arbitration, rather than litigation.

Under Remedies Directive 92/13/EEC, there is a conciliation procedure laid down for the utilities sectors. Recourse to this conciliation procedure would involve the following steps: -

• A request for the use of the conciliation procedure to the EU Commission by the supplier concerned;
• The request by the EU Commission to the utility concerned to confirm its willingness to participate. It the utility declines this invitation, the matter cannot proceed further;
• The proposal by the EU Commission of a conciliator drawn from a list of independent persons. Both sides to the dispute must state whether this party is acceptable and each side can designate an additional conciliator;
• The complainant, the utility concerned and other relevant tenderers have the opportunity to make representations to the conciliator, and;
• The function of the conciliator is to endeavour to reach agreement in accordance with EU law.

Because it is a conciliation process, there is no compunction to remain engaged in the process. Either party to the dispute may withdraw at any time and unless specifically agreed otherwise, each party must bear their own costs.

For further information or general enquiries contact: -
Patrick Ryan
Email: pryan@kilroys.ie
Telephone: +3531-439 5600
Fax: +3531-439 5601/439 5602

© Kilroys Solicitors August 2002