Patrick McGovern 4 March 2011

IRELAND POLAND BUSINESS ASSOCIATION “Winning Public Tenders in Poland” Dublin Chamber of Commerce TENDERING LEGALITIES IN THE EU Patrick McGovern 4 March 2011

Fundamental Principles of EU Law • Equality • Non-Discrimination • Transparency • Proportionality (particularly relevant in this context) • Reflected expressly in Public Sector Directive 2004/18/EC and in European Communities (Award of Public Authorities’ Contracts) Regulations 2006 (SI No 329 of 2006) (eg Regulation 17)

Legislative Bases • Treaty on the Functioning of the EU (TFEU) • Transparency • Applies to Selection and Award Criteria • Long line of cases • Review of EU Procurement • Underway in 2011 • Takes into account “secondary” objectives in policy such as social, labour, environmental – Relevant to e.g. Shared Services • Green Paper on “Modernisation of EU Public Procurement Policy – Towards a more efficient European Procurement Market” (COM (2011) 15/4) published 27 January 2011 – consultation period to 18 April 2011 • Recent Green Paper on “Expanding Use of e-Procurement in the EU”, (COM (2010) 571 Final), 18 October 2010 – consultation closed 31 Janury 2011 • Directive 2004/18/EC • Recitals (5) and (6) Protection of the Environment and promotion of Sustainable Development – Again, relevant to Shared Services

Change and Scope of Change Rules • Change during Procurement and after Contract Award • Background – why does it matter? • – EU Fundamental Principles • Contracts • covered by Formalities of Directive • other contracts covered by Fundamental EU Principles including Rules in TFEU • Telaustria • Interpretative Communication • with Cross Border Interest e.g. NI/RoI • - Concessions especially Service Concessions • - Part B Services Contracts • - Sub-Threshold Contracts

Scope of Change Rules • Case C-454/06 Pressetext Nachrichtenagentur GmbH v Republik Österreich [2008] ECRI-4401 • - Brand New • - Existing Contract amended • Case C-91/08 Wall AG v Stadt Frankfurt am Main, 13 April 2010 • Materiality

Change – Pressetext • New/Amended Conditions/Provisions • 3 Conditions under Pressetext Materiality test • i. would have allowed for admission of, award to, different candidates / tenderers (e.g. major alteration of size/scope of contract) • ii. “Extends the scope of the contract considerably to encompass services not initially covered” • - even if no effect on interest or outcome • - impliedly some smaller extensions may be permissible • iii. amendment alters the “economic balance” in favour of Contractor • but some price adjustment may be permissible • - to Contractor’s detriment (but limits?) • - automatic/external (Euro) • - provided for in advance in Contract

Change – Pressetext • What Changes Provided for in Contract Permissible? • - Materiality • - Relevant Considerations • - precision (degree) with which circumstances/consequences of change stated • - if precision not possible, is there external/objective method used? • - objective justification for change • - commercial/normal practice (Alstom – Courtsought evidence) • - similarity of new and old obligations • - was additional work considered when assessing tenders • - See Alstom Transport v Eurostar International Ltd and Siemens PLC • [2010] EWHC 2747 (Ch) (Ch D, Vos J, 29 October 2010)

Change – Pressetext • Can Change ever be allowed if any one of Pressetext conditions applies? • - Exceptions under Regulations (Reg 32) and Directive • (e.g. further works/services with same supplier) • - If so, principle of Proportionality • Can failure to enforce amount to unlawful Change? • - Possibly • - J Varney & Sons Waste Management Ltd v Hertfordshire County • Council [2010] EWHC 1404 (QB) (QBD, Flaux J, 16 June 2010)

Change – Pressetext • Case C-226/09 European Commission v Ireland, 18 November 2010 • - Held against Ireland, following Adv-Gen Mengozzi, on Part B services • (interpretation/translation services) in procurement where: • - weightings of award criteria determined after bids submitted • - weightings attributed to award criteria altered after initial review of • submitted bids • - applied fundamental principles to Part B services • See also Federal Security Services Ltd v Northern Ireland Court Service [2009] NIQB 15 and Federal Security Services Ltd v Chief Constable PSNI [2009] NICh 3

Unlawful Change – New Remedies Directive • Illegal Direct Award • Mandatory Ineffectiveness • Unless Voluntary Ex Ante Transparency (VEAT) Notice • How much of Contract Ineffective? • - All contract? • - Amended Element? • - Mandatory EU Law? (Probably not) • - National Law?

Change - Wall AG v Stadt Frankfurt am Main Case C-91/08 13 April 2010 • Service concession (provision and cleaning of public lavatories and advertising space) • Proposed change of subcontractor in issue • Applied principles of equal treatment and non-discrimination • Applied principle of transparency (Telaustria) • Applied principles of materiality as to changes (Pressetext) • Court noted transborder interest on foot of EU wide advertisement (cf Federal Security Services Ltd v Chief Constable Police Service of Northern Ireland [2009] NICh 3 (QBD, NI, Deeny J, 25 February 2009)

Confidentiality • Confidentiality: obligation to observe • Case C-450/06 Varec SA v Belgian State [2008] ECRI-581 • (Considered in Amaryllis v HM Treasury (sued as OGC buying solutions.com (No. 2) [2009] EWHC 1666 (TCC) Coulson J) • Question of waiver • Striking balance in relation to waiver

Confidentiality / Other Information Entitlements • Directives and Regulations themselves • Freedom of Information Acts • Veolia Nottinghamshire Ltd v Audit Commission for Local Authorities [2009] EWHC 2382 (Admin) (English High Court) • No reference to Varec in High Court • But English Court of Appeal has reversed Veolia in light of Varec, EU Law and European Convention on Human Rights and Fundamental Freedoms: Veolia ES Nottinghamshire Ltd v Nottinghamshire County Council [2010] EWCA Civ 1214 (29 October 2010)

Confidentiality • Obligation of confidentiality where information could be used to distort competition, whether in an ongoing procurement procedure or in subsequent procedures • ECHR protection of “private life” applies also to companies – also influencing interpretation of EU Law • Freedom of Information Acts • Access to Information on the Environment – Directive • Specific statutory measures

Telaustria • Remember “Fundamental Principles”, above • Case C 324/98 Telaustria [2000] ECR I – 10745 • “Although certain contracts outside formalities, … contracting authorities … nevertheless bound to comply with fundamental rules of [EC] Treaty” • “… a degree of advertising sufficient to enable the services market to be opened up to communication and the impartiality of the procedures to be reviewed.” • Commission Interpretative Communication published OJ 01.08.06 • “A very modest economic interest at stake …” “… no interest to economic operators located in other Member States” • “Might potentially be of interest to economic operators located in other Member States … evaluation of individual circumstances of the case”

Telaustria • Subject matter of Contract, estimated value, specifics of sector concerned (size and structure of market, commercial practices etc.), geographic location/place of performance • If contract “is relevant to the internal market”, contracting entity “has to award it in conformity with the basic standards derived from Community Law” • Consider usefulness of device of non-mandatory notice(s) in OJEU

Shared Services • Contracting Authorities procuring together • Economic/Technical Imperatives • Central purchasing body • Framework Agreement • Provisions in Directive 2004/18/EC and European Communities (Award of Public Authorities’ Contracts) Regulations 2006 (SI No. 329 of 2006)

Shared Services - Teckal Exception • Case C-107/98 Teckal SrL v Comune Di Viano [1999] ECRI-8121 • Judicially created • Intended to cover in-house services or services provided by a “captive” subsidiary/entity • But under Public Procurement Law no general exception exists simply because contractual counterparty is itself also a Contracting Authority : Case C-84/03 Commission v Spain [2005] ECRI-139 • Rationale is that not really a contract with a different party or parties for purposes of Directive

Shared Services - Teckal Exception • Under Teckal, contracting authority must exercise “over the person concerned a control which is similar to that which it exercises over its own departments and, at the same time, that person carries out the essential part of its activitieswith the controlling authority or authorities” (emphasis added)

Shared Services - Teckal Exception • Two limbs • “control” element • activity • Teckal – private participation • Any element of private participation ousts benefit of Teckal exception • Case C-26/03 Stadt Halle and subsequent cases • However, where provision made for subsequent investment in Teckal vehicle it is not necessarily illegal before that investment would happen : Brent LBC v Risk Management Partners Ltd [2009] EWCA Civ 490 • However, Teckal allows more than one “parent” or controlling contracting authority over the SPV

Shared Services - Teckal Exception • See Case C-324/07 Coditel Brabant SA v Commune d’Uccle [2009] 1CMLR 29 • Multiplicity of small municipalities in Brussels Capital Region • Management of “Brutélé” • For benefit only of municipal authorities and with their hands on involvement of each • Contrast with Brent LBC • Case C-340/04 Carbotermo Spa v Comune di Busto Arsizio [2006] ECRI 4137

Shared Services - Teckal Exception • Risk Management Partners Ltd v Brent LBC [2009] EWCA Civ 490 • Mutual company formed by Brent and several other London boroughs to provide insurance arrangements to participating Boroughs • Contracts awarded without contract notice and without any competition to London Authorities Mutual Ltd (LAML) the SPV company • Challenge in High Court (Stanley Burnton LJ) and in Court of Appeal • Challenge successful on ultra vires grounds (relevant UK local government legislation) and on Public Procurement grounds (as unlawful or illegal direct award) • Judgment in Court of Appeal on 9 June 2009 – by coincidence the very same day as judgment in European Commission v Germany (Hamburg Waste Case) – see below

Shared Services - Brent – Some Peculiar Features • Business of SPV (London Authorities Mutual Limited) (“LAML”) under control of its Board • Majority of member directors nominated by six of the (representative) Boroughs (not Brent) • Award contracted independent management • Provision for Borough to be excluded from decision making in relation to a claim by itself (conflict of interest/insurance principles) • General Meeting empowered to give directions to Board by special resolution • General Manager was from private firm of managers with broad powers subject to direction by Board

Shared Services - Brent – Some Peculiar Features • Judgment held that control condition could be satisfied by joint control (multiple controllers over Teckal SPV entity) • Control test not satisfied on facts of case especially in light of peculiar features of relationship of insurer and insured together with independent manager • Teckal was an exception and fell to be construed narrowly as such • Court also adverted to fact that directors’ duties owed to LAML in context of large sums and with significant financial regulator requirements

Shared Services - Brent – Some Peculiar Features • Arrangements between Board and management company designed to produce “operational independence” but this not consistent with Teckal control regime • Court also noted differing interests of different authorities and affiliates – not consistent with collective control by the promoting Boroughs • However, Moore-Bick LJ thought use of contracted or private managements “not in itself fatal” but he adverted to “an air of unreality about the notion that a public body can obtain insurance from one of its own departments, since it is of the essence of insurance that risk is transferred from one person (the insured) to another person (the insurer).”

Shared Services - Some Questions arising from Brent • Very restrictive approach to Teckal in Court of Appeal • Quaere: if Board were not entitled to such significant powers might this, on relevant and appropriate conditions and in appropriate circumstances, still be consistent with Teckal provided these powers to be exercised for the benefit of the members • Quaere: whether directors’ fiduciary duties to company (rather than its shareholders a typical feature of English and Irish law) would necessarily be fatal - a benefit of Teckal exemption in Ireland or UK

Shared Services – Brent - UK Supreme Court • Coincidentally Court of Appeal Judgments delivered on very same day as Case C-480/06 Commission v Germany (Hamburg Waste), 9 June 2009 • Appeal heard from Court of Appeal before UK Supreme Court in December 2010 over three days • Separate Judgments given by Lord Hope, Deputy President, and Lord Rodger, with Lords Walker, Brown and Dyson concurring • Supreme Court held that: • Teckal exception applied to the UK Regulations – this was so even though the definitions in UK Regulations are slightly different from those in the Directive but, nevertheless, the purpose of the UK Regulations was to give effect in national law to the Directive. There was nothing to indicate that the UK Regulations were intended to depart from the Case Law of the ECJ (now CJEU) • Teckal exception was available in respect of insurance contracts. Whether the service was one which the local authority could provide for itself was irrelevant; the key was whether the arrangement satisfied the control test • the London Boroughs did exercise sufficient collective control over LAML

Shared Services – Brent - UK Supreme Court • Reference made by Supreme Court to • - LAML Board not validly constituted unless majority of those present were Directors representing a participating Borough • - each participating Borough had one vote at General Meetings and retained power to direct the board by special resolution • - the fact that a Director could not participate in a Board Meeting which considered a claim by a member (conflict of interest provision) was merely a matter of detail • - no private interests were involved • - the functional test (LAML must carry out the essential part of its activities with the controlling boroughs) – this was held to be satisfied here • Extensive review of ECJ Case Law • Purposive interpretation of Directive adopted • Purpose of Directive was not to protect commercial sector by compelling public authorities to obtain services which they needed on the commercial market – that would remain a matter of discretion for the relevant public authorities

Shared Services – Brent - UK Supreme Court • Rather, purpose of Directive was that, if public authorities chose or elected to seek to obtain services from outside bodies then proper procedures had to be followed to ensure that potential providers had an opportunity to compete fairly for the work • Accordingly, Directive did not apply where a public authority obtained goods or services from its own resources • Furthermore, applying Teckal, where public body obtains services from separate body so closely connected with it the public body should still be regarded as, in substance, obtaining the services in-house. Then procurement formalities did not apply • No distinction in principle between bodies being controlled by single local or public authority or several local or public authorities

Shared Services – Brent - UK Supreme Court • Teckal control test required public authority to exercise decisive influence over both strategic objectives and significant decisions of the controlled body • Sufficient that the public authority could exercise control over controlled body either alone or together with other public authorities • Applied test that no private investment in controlled body was permissible (Stadt Halle) • Consistent with Directive where public bodies allowed to participate in collective procurement of goods and services so long as no private interest involved and public bodies are acting in public interest • Any argument that individual control was necessary would contravene ECJ Case Law

Shared Services - Hamburg Case • European Commission v Germany Case C-480/06, ECJ, 9 June 2009 • Other Hamburg region local authorities made arrangements with Hamburg City to supply waste to Hamburg City which in turn went to market to secure construction and operation of incinerator plant • On foot of complaint, European Commission challenged arrangements between the City of Hamburg and the neighbouring districts or local authorities as to the arrangements between them for waste supply to each other • Contract for construction and operation of incinerator plant not impugned and outside the decision – it had gone to the open market

Shared Services - Hamburg Case • European Commission (supported by Advocate General) contended that a procurement competition was necessary because it was not a Teckal exemption case – on the basis that the neighbouring districts did not control the City of Hamburg • European Court sanctioned arrangements. Para 47 of Judgment states: • “… Community Law does not require public authorities to use any particular legal form in order to carry out jointly their public service tasks … . Such cooperation between public authorities does not undermine the principal objective of the Community rules on Public Procurement, that is, the free movement of services and the opening up of undistorted competition in all the Member States, where implementation of that cooperation is governed solely by considerations and requirements relating to the pursuit of objectives in the public interest and the principle of equal treatment … is respected, so that no private undertaking is placed in a position of advantage vis-a-vis competitors …”

Shared Services - Features/Rationale of Hamburg Judgment • There was no profit element whatever accruing to any of the participating districts (either Hamburg City or its neighbours) • Arrangements were cooperative between public authorities performing public tasks • Facilitating City of Hamburg and putting in place large facility to the benefit of Hamburg and its neighbours being regarded as in public interest • Cooperation between districts was not all one way – (merely supplying waste to Hamburg City) but there were important reciprocal elements • There were no financial transfers other than reimbursement of costs and importantly no profit making

Shared Services - Other Questionsarising from Hamburg Judgment • This appears to be new “exception” (if an exception at all) • Quite distinct from Teckal but clearly related: Case C-573/07 SEA Srl v Comune di Ponte Nossa, 10 September 2009 • Could have formed a Teckal company to put in place in Hamburg arrangements • All arrangements very local amongst contiguous authorities or municipalities (in that respect, similar to Coditel)

Shared Services - The Future • Each of Teckal and Hamburg seems to represent an important exception • Each to be construed narrowly • Nevertheless likelihood that each would be developed further in the near future • Recent English case R (Chandler) v Secretary of State for Children, Schools and Families, [2009] EWCA Civ 1011 [2010] EuLR 232 (9 October 2009)

Remedies - Context • Legal and Administrative • High Court • Judicial Review (General) (Order 84) • Procurement (Order 84A) • Limitation Period was formerly “at the earliest opportunity” but in any case within 3 months (but see now October 2009 Opinions of Advocate General Kokott leading to Judgments of Court of Justice on 28 January 2010 in Commission v Ireland and Uniplex) • European Commission • Subsidiarity • Consequences • Litigious Ireland

Remedies – Directives • Remedies Directives (still applicable, as amended) • General Public Sector Directive 89/665/EEC (SI No. 309 of 1994) • Utilities Directive 92/13/EEC (SI No. 104 of 1993) • Order 84A RSC (new September 2010) • New • Remedies Directive 2007/66/EC of 11 December 2007 amending the above Directives – was due for transposition by 20 December 2009 (the New Directive) • - direct applicability?

New Directive – Main Objectives • Formalisation of Judicially Created Standstill Period between the Award Decision (subject to what might be conveyed to Contracting Authority during the Standstill Period) and the conclusion of a Public Contract • Recognition of Importance of Standstill Notice and Standstill Period – backed by serious sanctions • Combating illegal direct awards of public contracts • Much enhanced Remedies • Information provisions framed around these and bear in mind purposive interpretation

New Directive – Standstill Notice and Period • Requires a “standstill period” notice to bidders of contracting authority’s intention to award a contract and to whom/which it is proposed to make award. • It is formalised (first time included in a Directive) and requires Contracting Authority to allow a minimum period of time after notice of such period before a contract would be concluded • Preserves the opportunity for aggrieved party to bring Court proceedings • Important changes to time-limits • Effectively a standstill period is an invitation to litigate

Standstill Period • Formally imposed by new Directive • New Directive requires minimum 10 and 15 day periods for electronically and non-electronic transmission, respectively • New Remedies Regulations impose a 14 day period where electronically transmitted and 16 days otherwise • Objective : allow for “effective” precontractual remedies – this has implications for information entitlements – see reasoning in Commission v Ireland and Uniplex

New Directive – New Sanctions • Sanctions for Violation of Standstill Obligations • Ineffectiveness of the contract • Alternative Remedies or Penalties including monetary fines • Ancillary Remedies (up to 10% of contract value) • Standstill obligations include information

New Directive –What InformationStandstill Notice Must Give • New Irish Regulations (Public Sector) (European Communities) (Public Authorities’ Contracts) (Review Procedures) Regulations 2010* (SI No. 130 of 2010) • Subject to exceptions below: • Inform candidates and tenderers of decisions reached concerning • conclusion of framework agreement • award of contracts or admittance to dynamic purchasing system • grounds for any decision not to conclude framework agreement or award contract for which had been call for competition or implement dynamic purchasing system (Reg 6(2)(a)) • State exact standstill period (Reg 6(2)(b)) * Parallel provisions in European Communities (Award of Contracts by Utility Undertakings) (Review Procedures) Regulations 2010 (SI No. 131 of 2010)

New Directive –What InformationStandstill Notice Must Give • To each addressee (subject to exceptions below) • (in case of unsuccessful candidate) a summary of the reasons for rejection • (in case of unsuccessful tenderer) a summary of the reasons for rejection and • if tenderer so requests in writing • characteristics and relative advantages of tender selected • name of successful tenderer or parties to framework agreement • statement why works, supplies or services do not meet performance or functional requirements (Reg 6(3)) • Exceptions: • release of information • would impede law enforcement • would be contrary to public interest • would prejudice legitimate commercial interests of economic operators, whether public or private • might prejudice fair competition between economic operators • A Standstill Notice must give • sufficient information to enable an unsuccessful bidder to decide whether there are grounds for seeking review • effectively due process imported in the same manner as an obligation to consult and enable the consultee to make an informed decision based upon meaningful information

New Directive –What InformationStandstill Notice Must Give • Existing Procurement Law under the (substantive) 2004 Directives (transposed into national law in 2006/2007) gives bidders, on their request, a right to be provided with a statement of the characteristics and relevant advantages of winning tender and names of successful tenderers. Under older law, this information may well come to hand too late for the exercise of rights to remedies, whether or not during the standstill period. New requirements seek to rectify this.

New Directive –When Standstill Not Required • No standstill period required in respect of: • contracts which do not require prior publication of contract notice in OJEU such as a Part B (“non-priority” contracts) (see below) • a contract where the only tenderer concerned is the one who is awarded the contract and there are no candidates concerned • a contract, based on a framework agreement, in respect of call off or draw down contracts • a contract based on a dynamic purchasing system

New Directive – Effect of Proceedings • Where proceedings are initiated the Contracting Authority may not conclude a contract unless the High Court sanctions it pending the outcome of such proceedings • Scope for abuse • Presumably Courts will be peremptory with abuse of process • See cases below

New Directive – Ineffectiveness • “Ineffectiveness” is mandatory setting aside of contracts • Available in respect of the following species of improperly awarded contracts: • illegal direct awards • failure to comply with the standstill obligations (including information) • concluding contract while internal review pending • concluding contract following application to the Court but before Court has made its decision • breaches of the rules pertaining to permissible call off or draw down contracts

New Directive – Alternative Remedies • Where Court considers that there are overriding reasons for allowing a contract to continue the Court may • impose “Alternative Remedies” by way of monetary fine (up to 10% of value of contract) or • terminate the contract illegally awarded or • Shorten the duration of an illegally awarded contract • This required so that will provide “effective, proportionate and dissuasive remedies” (New Directive) • Hitherto a declaration of voidness has been at the discretion of the Court

New Directive – Ineffectiveness/Alternative Remedies – Time Limits • Many instances – generally 30 days where notice to affected person • 30 days in case of dynamic purchasing system • But up to 6 months in case of Ineffectiveness

New Directive – Ineffectiveness • Ineffectiveness – no retrospectively • Implications for contract documents – making provision for the consequences of such an order as well as warranties as to proper conduct of procurement procedures becoming ever more important

Patrick McGovern 4 March 2011