Public procurement: if you want to complain, do it quickly

John Uwins outlines the importance of adhering to any applicable time limits regarding complaints

The Court of Appeal in the UK has recently had to consider an application by a French company concerning a possible breach of EC procurement rules by the British Government.

The issues concerned the award of a public supply contract under EU Procurement Rules. The British Government had issued a consultation document regarding the provision of a new secure radio system for the police service and other public service users. The contract was likely to have a value of £1.5 billion over a 15 year period. The Government’s policy, subsequently published in the Official Journal, was to require a product called Tetra for the project.

Matra Communication, a French company, specialises in the design of a mobile radio telephone system called Tetrapol. This system was a rival product to the Tetra system which was produced by one of Matra’s competitors. Matra discovered the British Government’s policy and sent letters of complaint to the Government. Nevertheless, a formal invitation to tender was issued by the Government specifying Tetra and, despite further correspondence between Matra and the Government, it was made clear that the procurement process would not be interrupted because of Matra’s complaint.

The essence of Matra’s complaint was that, by specifying Tetra as a product, Matra was prevented from supplying goods and services within the UK. Therefore, the Government was in breach of provisions of the EU Treaty and applicable Directives which provided that contracting authorities should ensure that there is no discrimination between different service providers. Matra claimed damages in respect of its lost opportunity of being awarded the contract and earning profit on that contract. The British Government’s defence was that the EU Procurement Rules required them to specify Tetra as being the approved EU standard.

The issue of EU standards was never determined because the Court of Appeal, in the UK, had first to consider the Government’s application that Matra’s action should be struck out due to Matra’s delay in commencing proceedings. The applicable UK regulations provide that claims must be brought promptly and in any event within three months from the date when the grounds for the bringing of the proceedings first arose. So, there were three questions for the Court to consider:

• Had Matra’s action been brought promptly and within three months from when grounds for bringing the action first arose, as required by UK regulations?
• Were the applicable UK regulations in conformity with European Community Law?
• If yes, was there a basis for extending the time prescribed by the regulations?

Prompt action

The issue here was: when did Matra first have grounds for bringing proceedings? The correspondence between Matra’s lawyers and the Government made it quite clear that Matra regarded itself as having been excluded from the project. On any sensible view of the facts, it was clear to the Court that Matra’s exclusion from the project had been established at least 15 months before Matra issued legal proceedings.

Matra argued that its loss did not crystallise until the British Government actually issued a contract to another contractor and that Matra had acted very promptly once this had happened. However, the difficulty with this argument was that Matra’s claim was based on the fact that Matra had lost the chance to be awarded the contract (ie, Matra lost that chance, and therefore suffered damage, whether or not the British Government awarded the contract to anyone else). Matra’s argument confused the question of liability for the loss claimed with the assessment of the quantum of its loss. In this case, Matra could not get away from the fact that its claim was based on the fact that liability arose when Matra lost its chance to bid for the project rather than at any later date.

The Court also decided that Matra’s argument was fundamentally inconsistent with the scheme of the applicable EU Directive (89/665). The whole range of remedies envisaged by the Directive is required to be provided rapidly and no distinction is drawn between damages and other remedies. Therefore, a delay of 15 months was outside the contemplation of the Directive.

Conformity with Community Law

This was a central issue to the case; ie, whether the UK regulation which prescribed time limits for bringing proceedings conformed with Community law? It was accepted that the regulations correctly transposed the substance of Directive 89/665. However, whilst the Directive generally supports the concept of prompt action, it did not lay down specific time limits. Therefore, by stipulating a specific time limitation, was the British Government in breach of its obligation to provide remedies for breaches of Community provisions?

The Court considered previous decisions of the European Court of Justice, in particular the Palmisani case, reported in 1997. In that case, the European Court of Justice said:

“It is on the basis of the rules of national law on liability that the State must make reparation for the consequences of the loss or damage caused; further, the conditions, in particular time limits, for reparation of loss or damage laid down by national law must not be less favourable than those relating to similar domestic claims (the principle of equivalence) and must not be so framed as to make it virtually impossible or excessively difficult to obtain reparation (the principle of effectiveness).”

On the principle of equivalence, Matra had to identify a domestic action or procedure, in the UK, similar to its claim asserting Matra’s Community rights. In other words, Matra had to establish that a similar domestic action was available in the UK; as Matra’s lawyers put it, to identify a “comparator”. This they failed to do and the Court concluded there was no such comparator for a claim under the regulations. Hence, the time limitation period provided by the regulation was not open to objection under the principle of equivalence.

Turning to the principle of effectiveness, did the remedy provided by the UK regulations make it “virtually impossible or excessively difficult” for Matra to exercise its right to that remedy? The Court decided that the principle of effectiveness was a very limited criterion and even Matra had to accept that it had difficulties in arguing a case under this principle. Therefore, on the test laid down in the Palmisani case, the time limits prescribed in the UK regulations were not unlawful as being a breach of Community law.

Extending time for Matra’s proceedings

The Court had a discretion as to whether or not to extend the time limits prescribed by the regulation. The Court of Appeal refused to do so. Firstly, as a matter of construction of the regulations themselves; and secondly on consideration of the question of prejudice. The Court was quite certain that claims, such as Matra’s, which could have a disruptive effect on the contracting process, must be made promptly. That consideration underlies the essence of recourse available to would-be litigants in the Directive (89-665) itself. Matra knew some 15 months before issuing proceedings that it might suffer damage as a result of the British Government’s specification of Tetra. Matra had been well informed throughout and had taken a commercial decision not to assert its entitlement to a legal remedy earlier. Accordingly, there was no basis on which a Court should exercise its discretion in Matra’s favour by allowing legal recourse outside the applicable time limit.

Clearly, Matra’s application failed on the particular wording of the applicable UK regulations. However, the regulations did comply with the substance of the EU Directive and the Court took a practical approach in refusing to extend Matra’s time for bringing legal proceedings. The moral of the story is obvious: if you have a complaint, find out whether any particular time limits apply and if they do, make sure you adhere to them.