Public procurement litigation – a comparative view

1. Public procurement litigation – a comparative view Andrew Denny 30 March 2012

2. Procurement litigation – the perfect storm? • Major public sector cost cutting • Banks increasingly nervous about lending • Major de-scoping or abandonment of existing and proposed projects • Significant pressure to favour bidders who will create/protect local jobs • New legal regime/changing legal landscape • Major risk of planning challenge (particularly on EU environmental grounds)

3. Challenges under the procurement regulations 2009-2011 No. of claims proceeding to judgment in England and Wales 2009: 4 claims 2010: 13 claims 2011: 12-14 claims 2012 (so far): 2 claims Note that: only includes reported cases (do not reflect settlements prior to judgments etc) spate of JR challenges to Legal Services Commission disproportionate number of cases in Northern Ireland What is the position in other European jurisdictions?

4. Belgium • Challenges against contracting authorities for suspension or annulment considered in summary proceedings in Council of State • Damages can only be obtained in the civil courts • Legal fees usually between €15,000 and €40,000. • Estimated number of procurement challenges against public authorities: more than 137 challenges a year • Public authorities win more than 70% of the cases. • Strong litigation culture regarding procurement cases. • Not seen as “hostile” to challenge - usually no fear of blacklisting • Seen as showing that you are eager and serious about the contract and as a signal that the authority is being watched • A number of challenges are strategic and lead to out of court settlements (and the claim being withdrawn) prior to judgment

5. The Netherlands • More than 90% of public procurement challenges are considered in summary proceedings (kort geding) in the civil courts. • The costs (legal fees) of pursuing a challenge are usually between €20,000 and €40,000. • The number of procurement challenges per year is around 130 • On average, public authorities win 65% of the cases, bidders 32% and in 3% no clear winner. • Relatively many public procurement challenge as summary proceedings are relatively fast (1-2 months) and not too expensive.

6. France • Procedures available for unsuccessful bidders: • summary proceedings - duration: one month, no appeal before the Conseil d’Etat • Proceedings on the merits: around one year to get a judgment • Legal fees: from €5.000 for summary proceedings to more than €50.000 for more complex cases (without appeal) • Since 2008, French caselaw has become more strict: • claimants must prove that alleged irregularity reduced, at least potentially, chances to win the bid (SMIRGEOMES - Conseil d'Etat, 2008) • decisions tend to favour the preservation of contractual relations in case of minor irregularities (Commune de Béziers, Conseil d'Etat in 2008 and 2010) • Challenges against public procurement procedures for small to mid-size tenders more frequent - more rare that large companies, especially in construction sector, bring challenges

7. Italy • Public procurement litigation consists of challenging of (i) calls for tenders (bandi di gara); (ii) decisions to exclude a company from a bid or (iii) the award of a contract • Claims must be filed with Regional Administrative Tribunal within 30 days from knowledge of measure to be challenged • 2000-2009: (i) 48.5% of tenders higher than 15,000k in value and (ii) 35.2% of tenders from 5,000k-15,000k in value resulted in litigation (National Surveillance Authority for Public Contracts) • During 2011 number of claims has decreased, possibly due to the increase in taxes to be paid when filing the claim

8. Poland • First instance - appeal to the National Chamber of Appeal • tribunal-like body • fixed fee of PLN 15,000 (approx. €3,500) • proceedings suspend the award of a public contract • Second instance - petition to a state court • fee of 5% of tender value, max of PLN 5 million (approx. €1.25 million) • 2010: out of 19,000 public tenders, 13% were subject to challenges filed with the Chamber (approx. 2,500) • approx. 26% of the challenges were successful • High number of challenges at first instance due to: • Poor quality of tender documents • Too-restrictive tender conditions • Low fee and fast proceedings (12 days on average) • Second instance - high fee limits usefulness. Challenge process is usually restricted to first instance

9. Why is the UK different? • Higher costs • Formality of procedure (c.f. administrative tribunal) • Fear of backlash? • Lack of challenge “culture” – if challenges are regular then claimants will not be singled out • Traditional judicial review approach is deference to decision-maker - may affect judge’s thinking and claimants’ perception of chances of success

10. Conclusion • UK unlikely to see same levels of litigation as rest of Europe due to higher costs • But does seem to be an increase, perhaps due to change in law and economic conditions • Increase may be self-perpetuating – may lead to a more litigation-friendly tendering culture

11. Questions? These are presentation slides only. The information within these slides does not constitute definitive advice and should not be used as the basis for giving definitive advice without checking the primary sources. Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. The term partner is used to refer to a member of Allen & Overy LLP or an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Allen & Overy LLP's affiliated undertakings.