Federal Security Services Limited v Chief Constable for the Police Service of Northern Ireland and Resource Group Limited  NICh 3
Contracting authorities awarding non-priority service contracts will need to bear in mind a recent decision from the Northern Ireland High Court which found that a standstill period may be required for such awards under fundamental principles of EC law. The judgment is relevant not only to UK contracting authorities but to all contracting authorities awarding non-priority service contracts throughout the EU. A summary of the judgment is provided below.
In early 2008, the Police Service of Northern Ireland (the "PSNI") published an advertisement for a tender competition for a contract for security guarding and associated services. The contract services comprised services which fall within Annex IIB of Directive 2004/18 (the "Directive"). Annex IIB services (otherwise known as "non-priority services" or "residual services") are services which are generally deemed not to be of interest to service providers located in Member States other than the State where the contract is to take place. The plaintiff in the action, Federal Security Services Limited ("Federal") was the incumbent service provider. On 22 December 2008, it was informed that it had been unsuccessful in the tender competition. After writing to the PSNI to request reasons for the decision, Federal discovered that the PSNI had concluded the contract on 22 December without applying a standstill period between the announcement of the decision and the award of contract. The PSNI had decided not to apply a standstill period as the services comprised non-priority services and these were not subject to the mandatory standstill provisions under UK legislation (i.e. the Public Contracts Regulations 2006 (the "Regulations")). Federal subsequently initiated proceedings and sought an injunction to restrain the PSNI from taking any further steps towards implementing the contract. The successful tenderer, resourceTM Group Limited ("Resource") successfully applied to be joined to the proceedings.
The PSNI and Resource argued that the High Court lacked jurisdiction to grant an injunction as the contract had already been concluded. In particular, under UK law (i.e. Regulation 47(9) of the Regulations), a Court only has power to award damages in procurement cases where a contract has already been concluded. Federal argued that on the basis of the judgment of the European Court of Justice in the Alcatel case and fundamental principles of Community law that the Court must either (i) interpret Regulation 47(9) as only applying to a public contract entered into after a standstill period has been allowed for, or (ii) hold that a public contract entered into without a standstill period is void.
The Court agreed with Federal and granted an injunction to restrain the PSNI from proceeding with the case. In particular, the Court noted that fundamental principles of EC law including transparency, equal treatment and effectiveness of remedies, "may, in particular factual situations, require the use of a standstill period in contract procedures normally excluded from that obligation". The Court found that there were a number of circumstances in the case that required the application of a standstill period. For example, the PSNI was aware of the cross-border interest in the contract, the contract was substantial (i.e. £60 million), there were controversial aspects of the tender procedure, Federal had submitted the lowest priced tender and Federal was the incumbent service provider. The Court considered that the legislative provision limiting the available remedy to damages could be read in such a way so as to give the Court power to grant interim relief where the contract in question has not been awarded in accordance with Community law principles such as transparency, effectiveness of remedies and equality of treatment. Alternatively, the Court considered that it could disapply the legislative provision where such a provision infringed directly enforceable Community rights. Accordingly, the Court considered that it had jurisdiction to grant an injunction.
The case confirms that a standstill period may be required for the award of a non-priority service contract regardless of the fact that there is currently no legislative requirement for a standstill period for such awards. The case also highlights the fact that a concluded contract will not be immune from interim relief or an order of set aside where it has been awarded in breach of a Community law obligation.
The judgment is currently under appeal to the Northern Ireland Court of Appeal.