Supreme Court judgment may impact on future procurement litigation

Micaela Diver, Partner at corporate law firm A&L Goodbody tells agendaNI how a recent Supreme Court judgment may affect future procurement litigation in Northern Ireland.

Public procurement continues to be a growing area of law in Northern Ireland, particularly in terms of litigation.

Procurement proceedings are unique, in that challenging a contract award within the ‘standstill period’ – an agreed period of time in which proceedings are suspended – automatically brings about an injunction against the contracting authority. Challenges may be made up to 30-days after the date of knowledge of the alleged breach but, in such instances, when started outside the standstill period, the litigation would be based on a remedy seeking damages only.

Head of the Public & Regulatory law group in A&L Goodbody’s Belfast office, Micaela Diver, explains that, following a recent Supreme Court judgment in Nuclear Decommissioning Authority -v- Energy Solutions EU Ltd [2017] UKSC 34, bringing procurement challenges outside of the standstill period may present a major hurdle to future claimants.

Judgment of the Supreme Court

In the original Court of Appeal case, ATK Energy EU brought a damages claim against the Nuclear Decommissioning Authority (NDA) in respect of the award of a public procurement contract for the decommissioning of 12 nuclear power stations. The judgment issued by the Supreme Court considered a preliminary issue relating to the claim for damages under the Public Contracts Regulations 2006 and the Public Procurement Directive 2004/18/EC.

The Supreme Court was asked to consider a series of questions relevant to ATK’s damages claim and relating to the fact that the proceedings had been brought after the expiration of the standstill period.

Supreme Court rules public procurement damages are only available for “sufficiently serious” breaches

In some instances the Supreme Court agreed with the Court of Appeal’s interpretation of the issues in this case. However, the Supreme Court did find that the Court of Appeal had erred in its assumption that a claim for damages in a procurement challenge was equivalent to a usual private law claim for a breach of a UK-based statutory duty. The Court of Appeal had determined that this categorisation automatically freed the claim from any conditions which would otherwise apply under EU law.

The Supreme Court found that the claim should not be considered under ordinary domestic law rules and instead there was a requirement to apply EU standards. Under EU rules, before an award of damages can be paid the breach must be deemed to be “sufficiently serious” under the ‘Francovich’ conditions. In this case the Supreme Court had to consider whether the authority “manifestly and gravely disregarded the limits on its discretion”. 

The implications of the judgment

The Supreme Court agreed with the Court of Appeal that bidders should still have the option to pursue claims outside of the standstill period (but within the 30-day time limit). However, contracting authorities are likely to welcome the decision that not all breaches of procurement law will give rise to a right to claim damages. Instead, the question will be whether or not the Court determines that the alleged breach was ‘sufficiently serious’.

There will inevitably be a level of uncertainty about the application of this judgment as claims for damages under a procurement law breach will now need to be determined on a case by case basis to determine whether a breach is sufficiently serious to merit damages.

This uncertainty will undoubtedly lead to future procurement litigation, but how this will be determined by the courts in Northern Ireland will remain to be seen.

 

 

 

To contact a member of the Public & Regulatory team at A&L Goodbody, please email mdiver@algoodbody.com or call 028 9031 4466.

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