| SPOTLIGHT |
The Remedies Directive is to be implemented into English law in December. The effects could be dramatic, says Julie James.
The Remedies Directive (Directive 2007/66/EC) is aimed at “improving the effectiveness of review procedures concerning the award of public contracts” through amendments to the two existing Remedies Directives for the public sector and the utilities sector.
It aims to revise the rules on legal review procedures and remedies available under the EU procurement rules, make the procurement process more transparent, and to dissuade authorities from awarding contracts illegally. The Office of Government Commerce (OGC) is responsible for transposing the new directive into UK law.
The two main changes are:
The Remedies Directive was adopted on 11 December 2007 at European level and must be implemented by Member States by no later than 20 December 2009. Whilst major changes cannot be made to its implementation process it is still open to member states to influence transposition details.
OGC ran the first of two consultations on the implementation of the new Remedies Directive in the Autumn of 2008. OGC's second public consultation closed at the end of July.
The exercise elicited a good response from a wide range of contracting authorities, legal and advisory firms, and industry representatives. Detailed analysis of the responses has been done. Over the Autumn the implementation policy is to be finalised, the draft Regulations revised, and guidance prepared to support the transition. The new rules are scheduled to come into effect on 20 December 2009. They could have a serious impact on a successful supplier who could see themselves stripped of a contract they believe they won legitimately as a result of an ineffectiveness challenge.
Position after First Consultation
After the first consultation OGC considers that the option not to implement Article 1(5) (the implementation of a mandatory internal review by contracting authorities) was preferred and believes not implementing reduces the scope of grounds for an ineffectiveness claim as breach of 1(5), if implemented, gives rise to those grounds.
Article 2
A substantively new provision that contract procedures must be automatically suspended following a challenge of the award decision.
Article 2(3)
Mandatory suspension when the award decision is challenged will be transposed.
Article 2(a) (Standstill Period)
The Regulations will allow for electronic and non-electronic means of communication, although with the latter the standstill period should be increased to allow the communication to be received, so that the standstill period either starts 10 days following receipt of the communication or 15 days following dispatch.
Article 2(b)
The standstill derogations should be transposed. Authorities that wish to apply the standstill and avoid the risk of having the contract declared ineffective can do so via the voluntary transparency provisions at Article 2d(5).
Article 2d
It was agreed to implement prospective cancellation with alternative penalties as penalty for ineffective claims. No one supported retrospective cancellation for practical reasons and there were substantial objections to the option of court discretion. There was concern amongst those consulted about the impact on negotiations of complex contracts (especially with funders) and that the risk of ineffectiveness might undermine their confidence.
Article 2d(3)
It was agreed to transpose the ability of the court not to apply ineffectiveness if there are good reasons for maintaining the contract.
Article 2e
There was a strong majority in favour of implementing both the options of contract shortening (despite fears this could lead to counter- litigation if the impact on the supplier was significant) and imposing fines (although not setting a maximum at this stage to allow flexibility) and that it should be specified in the Regulations that penalties should be effective, proportionate and dissuasive. OGC suggests transposing only alternative penalties if there is a breach of a remedies rule but no a substantive breach of the main directive.
Second Consultation
This focused on whether the new rules should apply to all contracts as of 20 December 2009 or whether this would subject those involved in current projects to be subject to new penalties they did not know about and could not protect against when their project started.
Responses were also requested in respect of transitional position of frameworks and dynamic purchasing systems where they had been called off before 20 December 2009.
Concern was also raised in respect of what would happen if there was a declaration of ineffectiveness regarding a live call off contract under a framework or DPS which have already been awarded. One option is to protect them from challenges about the ineffectiveness of the framework. The other is the automatic ineffectiveness of any live call off contracts although OGC has reservations about this option.
Article 2(a)
This only requires award decision information to be sent to tenders concerned (currently authorities must inform all participants of the award decision). Discussion was encouraged about whether Regulation 32(1) should be narrowed.
As set out above, the directive is due to be transposed into domestic law on 20 December 2010.
Julie James is a consultant at Clarkslegal.
