It is now more than 18 months since the Public Contract (Amendment) Regulations (SI 2009/2992), which implemented the 2007 Remedies Directive (2007/66/EC), came into effect. Recital (3) of the Directive stated that the existing remedies directive should ‘be amended by adding the essential clarifications which will allow the results intended by the Community legislature to be attained’. The new remedies regime has three central features: standstill provisions; automatic suspension of the procurement process following the commencement of proceedings; and a new remedy of ineffectiveness to deal with particularly flagrant breaches of the rules. This article considers the second and third of these in the light of subsequent developments.
Regulations 47G and H deal with automatic suspension. Regulation 47G requires a contracting authority to refrain from entering into a contract once proceedings are started until either the Court brings the requirement to an end by interim order under regulation 47H(1)(a) or the proceedings at first instance are determined and no order has been made continuing the requirement. When deciding whether to make an order under regulation 47H (1)(a) the Court must consider whether, if regulation 47G(1) were not applicable, it would be appropriate to make an interim order requiring the contracting authority to refrain from entering into the contract. Only if the Court considers that it would not be appropriate to make such an interim order may it make an order under regulation 47H(1)(a).
There have been a series of cases concerning the lifting of the suspension since the regulation came into effect. These include Indigo1 , Exel2, HALO3, Metropolitan Resources4 and most recently, First4skills5 and Rutledge6. In all these cases other than First4skills, the court has lifted the automatic suspension. It is therefore worth considering the basis on which the courts have adopted this approach.
Indigo Services (UK) Ltd v The Colchester Institute Corporation
Indigo, the first case under the new Regulations where judgment was given on 1 December 2010, concerned the award of a cleaning contract by the Colchester Institute. Indigo, the incumbent, came third. Indigo alleged a number of irregularities in the tendering process, which failed to impress David Donaldson QC sitting as a deputy high court judge. Donaldson QC was also mindful of the urgency felt by the successful bidder as a result of having to mobilise to perform the contract. The judge concluded that the appropriate test was that in American Cyanamid1, notwithstanding the new Regulations. He rejected the suggestion that the Regulations provided a ‘steer’ in favour of an injunction and in any event the subject matter of the case meant that the injunction would have been discharged even if a ‘steer’ had been given. However, without a ‘steer’ it is hard to see how the Regulations achieve the objective set out in the recitals to the Remedies Directive.
Exel Europe Ltd v University Hospitals Coventry and Warwickshire NHS Trust
Indigo was followed by Exel where judgment was given on 21 December 2010. Exel concerned a tender process carried out by University Hospitals Coventry & Warwickshire NHS Trust, the Defendant, for the establishment of a framework agreement in order to transfer the responsibility of managing and operating the Healthcare Purchasing Consortium (HPC), which has been a collaborative procurement hub run by the Defendant on behalf of itself and some 40 NHS Trusts in the West Midlands and elsewhere. Exel believed that the information provided in or in connection with the ITT was insufficient and later withdrew from the tender process. Exel brought proceedings alleging various breaches of the rules. Akenhead J concluded that the legislation does indeed import the injunction test and the American Cyanamid principles; in assessing the balance of convenience, potential harm to the public interest, as well as the interests of the parties, are to be taken into account; there is no ‘steer’ in favour of the maintenance of the suspension; and Regulation 47(G) and (H) adequately transpose the Directive’s provisions and implement its policy. Akenhead J commented that, ‘I see nothing in Regulation 47H or in the application of the Cyanamid principles which offends or is not consistent with the Remedies Directive’. The balance of convenience required that the procurement should go ahead and damages were an adequate remedy.
The HALO Trust v The Secretary of State for International Development
The next case was Halo, again before Akenhead J who gave judgment on 27 January 2011. The Department for International Development tendered a contract under a framework agreement for mine clearance in Cambodia and appointed a company other than Halo. The entry into the contract was ‘urgent’ in the sense that it was supposed to be entered into by a certain date. Halo commenced proceedings alleging that there had been breaches of the procurement rules but without a great deal of merit. DFID went to court to have the automatic suspension in Reg 47H lifted. In deciding to lift the injunction, Akenhead J reiterated that there is no bias in favour of an injunction and that even if there had been a serious issue to be tried the public interest required the injunction to be lifted. Reasons cited at paragraph 61 of the judgment included that there was a public interest in DFID being able to continue de-mining operations; publicly competed contracts were preferable to a continuation of funding by grant; continuation of the suspension would take 5 – 7 months and it would be disproportionate to delay a decision for that time; whoever won the contract there would have been redundancies; and damages would be an adequate remedy.
Metropolitan Resources North West Ltd v Secretary of State for Home Department
Halo was followed by Metropolitan Resources on 1 April 2011 before Newey J. The case concerned whether the United Kingdom Border Agency’s decision to obtain initial accommodation services for asylum seekers from a provider, Happy Homes (who to date had only provided a different kind of accommodation for asylum seekers) instead of from Liverpool City Council (with whom it had a sub-contract but whose contract with UKBA was about to expire) without conducting any kind of competitive procedure was unlawful. The court found that the claimant had raised a serious triable issue, while observing that this was a low threshold. Furthermore, it found that damages would not be an adequate remedy for the claimant. However an award of damages might not be an adequate remedy for the defendant either, because it was unlikely that the claimant had sufficient resources to pay damages. The defendant authority would suffer greater irremediable harm if the suspension were maintained, and it succeeded at trial, than would be suffered by the claimant on the opposite case. If the Home Secretary was unable to enter into the contract, he would have to continue to procure the services from an existing local authority, which itself might amount to an unlawful procurement. On the basis of these findings the court found that the balance of convenience favoured disapplying the suspension.
Meanwhile in Northern Ireland
Finally, two cases before McCloskey J in the Northern Ireland High Court. In First4skills on 30 June the Court refused an application by the Department for Employment and Learning to lift the automatic suspension on the grounds that it had already given such relief in another case concerning the same procurement (which would appear to be unreported). The claimant had been rejected from the competition having failed to upload a spreadsheet which tender documents said was not to be evaluated and other tenderers had been given the opportunity to rectify such matters. On 5 July 2011 the High Court in Northern Ireland delivered its judgment in Rutledge. Rutledge concerned a procurement exercise for the provision of training services under the Department for Employment and Learning delivery of the ‘Steps to Work Programme’. The Department terminated a procurement exercise which Rutledge won and launched another exercise which it lost. Rutledge brought proceedings alleging various breaches of the procurement rules. The Department applied for the automatic suspension to be lifted. By way of contrast to First4skills, McCloskey J found there was no serious issue to be tried. On the balance of convenience the court concluded that there was a compelling need to award the contract without further delay, interruption or uncertainty. Public interest factors outweighed the disadvantages faced by Rutledge (there appear to have been no similar factors in First4skills or the point was not argued). The Court also took into account the fact that there were substantial obstacles to listing the substantive trial until November 2011. Whether any positive conclusions as far as claimants are concerned arise from First4skills is unclear.
In the light of this series of cases (First4skills excepted) the prospects for claimants appear rather bleak. It would seem that the 2009 Regulations have had little effect on the approach of UK courts and that contracting authorities will not have to try very hard to have the automatic suspension lifted. Judgments to date suggest that courts will find that the balance of convenience, taking into account the public interest, militates strongly against the maintenance of the suspension. In particular, a combination of the need to continue providing the services, the likely delay if the matter goes to trial and the possibility that the authority will have to extend illegally an existing contract all point to a discontinuance of the automatic suspension. While it is true that none of the cases exhibit a particularly strong triable issue, it seems likely that the court will require that claimants provide a cross-undertaking in damages if the injunction is to be continued (although this point is yet to be tested by the courts). Damages will be seen as an adequate remedy. Those who seek more than damages will need to anticipate in detail the arguments a contracting authority is likely to make although it now seems unlikely that an argument that the ‘balance of convenience’ test is not appropriate and does not properly implement the Remedies Directive will succeed. All of this is a long way from the position conceived at the time that the 2009 Regulations came into effect.
In view of the lack of success claimants have been having in the field of maintaining the automatic suspension and thereby getting more effective remedies under the procurement rules, it is worth noting by way of conclusion the outcome of the first case on ineffectiveness. In Alstom Transport v Eurostar International Ltd & Anor1, on 13 July 2011, the High Court (Mann J) struck out an application by Alstom for a declaration of ineffectiveness of a contract entered into between Eurostar and Siemens for the design, supply and maintenance of high speed trains. The High Court concluded that Alstom had not made out the grounds for ineffectiveness in Regulation 45K of the Utilities Contracts Regulations 2006 (as amended). In particular, the High Court concluded that Eurostar had published a relevant notice in the Official Journal. In addition, there was either no breach of the standstill period or, if there had been, this had not prevented Alstom from bringing proceedings before the contract was awarded. In any event, the High Court concluded that Alstom’s claim for a declaration of ineffectiveness had been brought out of time. It may not be possible to read too much into the Alstom judgement as, in the words of Mann J, ‘on the plain facts of this case, the ineffectiveness remedy [wa]s not available to Alstom’ (although Alstom’s argument that the changes to the contract were so substantial that there should have been a new tender process clearly had some substance and may merit an appeal). Whether others will be more fortunate remains to be seen.