European Court judgements from 2023

In November 2023, I attended the Estonian Public Procurement Conference and presented an overview of the European Court of Justice and General Court decisions in the field of public procurement from the previous year. The annual conference is a good opportunity to see familiar faces, meet new ones, and stay informed about developments in the field.

While the European Court interprets procurement directives mainly through preliminary rulings (usually recognizable by the letter "C" in the decision), it is also worth keeping an eye on General Court decisions (starting with the letter "T"). Although the General Court resolves procurement disputes involving EU agencies under the financial regulation, the court has found that when the regulation is the same as in the directive, the Court of Justice's decisions on interpreting the directive are taken into account and vice versa.

Here are some key takeaways from this year's decisions made before November 1, 2023:

💡 Hyperlinks in a bid cannot be considered part of the bid (T-376/21, Instituto Cervantes vs. Commission)

💡 The right to be heard, as set out in Article 41(2)(a) of the EU Charter, also applies in procurement procedures, but this right is ensured at the time of submitting the bid and by giving the bidder the opportunity to seek clarifications on the terms of the tender documents. After the evaluation of bids, the contracting authority is not required to ensure the right to be heard for the unsuccessful bidder (T-376/21, Instituto Cervantes vs. Commission)

💡 If an unsuccessful bidder submits a written and justified claim to the contracting authority, explaining why the successful bid was unreasonably low, the contracting authority must provide a detailed response. Any other interpretation would deprive the unsuccessful bidder of their right to an effective legal remedy guaranteed by the EU Charter of Fundamental Rights (C-101/22P, European Commission vs. Sopra Steria Benelux, Unisys Belgium)

💡 In the case of a joint tenderer whose previous breach of a procurement contract is the basis for exclusion, every member of the business association responsible for the proper performance of the procurement contract must have the opportunity to prove, before being temporarily excluded from procurement procedures, that the deficiencies leading to the termination of the contract were not related to their individual actions. If, after a specific and individual assessment of the activities of the relevant business operator, it is evident that the operator did not cause the identified deficiencies and it cannot reasonably be expected that they would have done more to remedy those deficiencies, their exclusion is not justified (C-682/21, "HSC Baltic" UAB)

💡 Subcontracting is just one way for a contractor to rely on the capabilities of other entities, and the contracting authority cannot make the conclusion of a subcontracting agreement mandatory for a bidder participating in a public procurement (C-403/21, SC NV Construct)

💡 When conducting a cross-border central procurement, the dispute resolution rules of the member state where the central contracting authority conducting the procurement is located apply (C‑480/22, 23.11.2023, EVN Business Service and others)

In this specific case, a central procurement authority in the network sector, located in Austria, conducted a procurement procedure for a network sector entity in Bulgaria, and the work was to be carried out in Bulgaria. Both Austrian and Bulgarian courts considered the procurement dispute to be outside their jurisdiction, as it would violate the principle of territoriality under international law. Finally, the Austrian court sought a preliminary ruling to clarify which member state's court is competent to resolve the matter under the remedies directive. The European Court did not address the principle of territoriality directly but found that "since the central contracting authority must organize central public procurement in accordance with the legal rules of the member state in which it is located, it seems logical that the dispute resolution procedure that may be initiated takes place in accordance with the law of that member state, and the competence of the relevant dispute resolution body is determined based on the same law" (para. 44).

Why I was particularly interested in the principle of territoriality is that it would help answer the question of when a contracting authority acts cross-border without a joint or central procurement. The procurement directives do not regulate the applicable law on this issue, only in the case of cross-border joint or central procurements. If a network sector entity, without registering a new entity, starts operating outside its member state's territory and conducts procurement there, which country's substantive and procedural law applies? The principle of territoriality in international law states that one country's (administrative) court cannot adjudicate over another country. For example, an Estonian administrative court cannot adjudicate over a Latvian network sector entity if it decides to operate in Estonia, conduct procurement here, and a complaint is filed regarding it (see HKMS § 4(3)).

💡 For the qualification of a change in a public service contract as "significant," the parties do not need to have signed a written agreement explicitly intended for that change since the mutual intention to make such a change can be inferred from other written materials prepared by the parties (Joined Cases C-441/22 and C-443/22, 7.12.2023, Obshtina Razgrad)

This case concerns a structural support dispute, which is also present in our country. The interests of the Estonian government were at play here as well, as it presented its position in the proceedings. In Estonian jurisprudence, there are already decisions where it has been found that for the purposes of RHS § 123, there does not need to exist an officially signed document called "contract amendment" for the amendment of a procurement contract; the amendment can be identified based on de facto circumstances. For example, if the contracting authority tolerates exceeding the deadline, and the European Court has endorsed this position.

💡 Ordinary weather conditions and legally prescribed periods for construction cannot justify exceeding the deadline for the works explicitly defined in the original procurement contract. A diligent contracting authority must anticipate such aspects when planning a public procurement (Joined Cases C-441/22 and C-443/22, 7.12.2023, Obshtina Razgrad)

💡 The contracting authority must adhere to the general principles of EU law on good administration, including the obligation to provide reasons for decisions, especially when identifying that a bidder is in one of the situations referred to in Article 57(4) of this directive but deciding not to exclude the bidder from the procurement procedure, for example, because exclusion would be a disproportionate measure. The decision not to exclude a bidder from the procurement procedure, while there are some optional grounds for exclusion, affects the legal situation of all other economic operators participating in that procurement procedure, and they must be able to protect their rights and decide, based on the reasons provided in that decision, whether to challenge that decision further (C-66/22, 21.12.2023, Infraestruturas de Portugal and Futrifer Indústrias Ferroviárias).

The European Court, in another decision this year, is expanding the obligation of contracting authorities to provide reasons for the protection of the rights of competing economic operators. See also the decision C-101/22P, European Commission vs. Sopra Steria Benelux, Unisys Belgium mentioned above. So far, the obligation of contracting authorities to provide reasons has been limited to justifying negative decisions, such as when the contracting authority excludes a bidder from the procurement, which must be justified in writing (factually and legally). According to Estonian jurisprudence, a decision not to exclude a bidder does not need to be "justified" in a way that would allow understanding whether the respective bidder, for example, had grounds for exclusion but the contracting authority decided not to exclude them.

💡 A public service contract does not have to provide the service provider with a complete compensation that, through periodic indexation, covers the entire increase in costs associated with the management and provision of that service that is not under their control, and neither does the principle of proportionality require it. Member States' competent authorities, using their discretion, may establish a reimbursement scheme that, due to the parameters of its calculation and the distribution of the costs defined by those authorities, does not automatically guarantee the full coverage of those costs to the public passenger transport service provider (C-421/22, 21.12.2023, DOBELES AUTOBUSU PARKS).

Public procurement think tank started in october
Think Tank on amending procurement contracts

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