In its recent judgment in case C-19/13 (Fastweb), the European Court of Justice gave a ruling on whether a contracting authority can always and in any event avoid contracts being declared ineffective as long as it publishes a voluntary ex ante transparency notice.

The ruling of the ECJ concerned a situation in which a contracting authority had directly awarded a contract claiming that, for technical reasons and reasons connected with the protection of exclusive rights, the contract could be performed only by a particular supplier. Prior to awarding the contract, the contracting authority had published a voluntary ex ante transparency notice. After the publication, it had waited the period set forth in national procurement legislation – in this case, ten days – before concluding the contract with the chosen supplier.

Illegal Direct Award of Contracts is a Serious Breach of EU Rules

In the ruling, the ECJ held that the publication of a voluntary ex ante transparency notice before awarding a contract cannot automatically mean that the national court is precluded from declaring the contract ineffective in accordance with the provisions of Directive 89/665/EEC on remedies in public procurement. This would be contrary to the objective of the Directive, which states that remedies should be effective. The illegal direct award of contracts is the most serious breach of the rules on public procurement laid down in EU law. Regardless of whether a voluntary ex ante transparency notice has been published, the national court must be able to review—even after the conclusion of a directly awarded contract—if the contracting authority has exercised its discretion in an appropriate manner.

Declaring the contract ineffective is a sanction that can be applied to most contracts exceeding the EU threshold. In Finland, the voluntary ex ante transparency notice must be submitted through the HILMA electronic notification system; from there, the notice is transmitted to the TED database for publication in the whole EU. The grounds for direct award pursuant to the procurement rules must be mentioned in the notice. The notice must also explain why the grounds for direct award mentioned in it can be applied to the procurement in question.

After 14 days have passed from the publication of the notice on TED, the contracting authority may conclude the contract. If an appeal against the procurement is lodged with the Market Court, this will automatically preclude the contract from being concluded.

Grounds for Direct Award Must Be Evaluated Carefully

Compared to Finnish practice, the ruling of the European Court of Justice adopts a stricter approach to the diligent assessment of the grounds for direct award of contracts. The ruling means that if the contracting authority knew or should have known that it awarded the contract directly in breach of the procurement rules, the publication of a voluntary ex ante transparency notice does not preclude the national court from declaring the contract ineffective if the contract is appealed. The contracting authority has the burden of proof as regards the existence of grounds for direct award. However, if the contracting authority behaves negligently, it is problematic both for the authority itself and for the company that is a party to the directly awarded contract.