26 November 2013 #Public Procurement
Prior to the introduction of the Remedies Directive, an unsuccessful contractor who decided to bring proceedings against a contracting authority could not prevent the authority from entering into the contract with the winning bidder unless he also applied for an injunction. If he did not obtain an injunction, his only remedy was damages.
The biggest change brought in by the Directive was the new remedy of ‘ineffectiveness’, which enables the court to set aside a contract the authority has already entered into with another bidder. However, ineffectiveness is only available in limited circumstances. More useful for contractors is one of the other key changes introduced by the Directive which provides that when a tenderer issues proceedings, this now results in an automatic injunction under Regulation 47G, preventing the authority from entering into the contract.
In the recent case of Coventa v Merseyside Waste Disposal Authority the Court considered whether the automatic suspension applies to procurement processes started before the implementation of the Remedies Directive in 2009 (surprisingly, there are still a number of procurements ongoing which commenced prior to that time). The Court concluded that it did not.
Authorities who are anxious not to hold up the procurement process may apply to the Court for the automatic injunction to be lifted before the final hearing of the case. In such cases, the Court will look at whether there is a serious issue to be tried, whether damages would be an adequate remedy for the tenderer, and where the balance of convenience lies.
Case law shows that it can often be difficult for tenderers to satisfy the court that the injunction should remain in place when this test is applied. Although authorities are sometimes prepared to concede that there is serious issue to be tried, where they do not it can be tricky for tenderers to produce sufficient evidence to satisfy this test at an early stage of the proceedings, before disclosure has taken place. The nature of the procurement process means that contracting authorities very much have the upper hand because they hold all the relevant information and documents.
In relation to the third limb of the test, the “balance of convenience”, this involves the court weighing up the contractor’s right to have a chance of being awarded the contract against the authority’s right to place the contract and commence providing the services. With most major procurements taking place in key sectors such as healthcare, waste and education, the balance of convenience will nearly always come down on the side of the authority. It is very difficult for contractors to argue that the authority should have to wait a year or more for litigation to conclude before it can place the contract.
Consequently we have seen few examples in recent years of the English courts upholding the automatic suspension, although Scottish and Northern Irish courts have taken a more contractor-friendly approach. The position may not be as bleak for contractors as the case law suggests, though, as it must be remembered that many authorities choose not to apply to lift the suspension, often because they intend to settle.