Some potentially bad news for claimants under the Public Contracts Regulations can be found in a recent case involving the Nuclear Decommissioning Authority.
The recent Supreme Court decision of EnergySolutions EU Limited v Nuclear Decommissioning Authority stemmed from the procurement of a £4.2bn nuclear decommissioning contract, regulated by the Public Contracts Regulations 2015 (PCRs).
The question arose as to whether a successful claimant would always be entitled to damages.
Facts of the case
The claimant was an unsuccessful tenderer who alleged serious breaches of the PCRs, in particular relating to the evaluation.
The High Court and Court of Appeal agreed with the claimant that the process was flawed by a series of manifest errors, that the preferred bidder ought to have been disqualified from the process, and that the claimant ought to have been the preferred bidder if the rules of the tender had been properly applied.
Add to that a failure by the NDA to keep proper records and you have a textbook example of exactly how not to run a procurement process.
In the Supreme Court
The NDA argued that even that was not enough to entitle the claimant to damages.
It submitted that European Court of Justice case law pointed to financial compensation only being available for infringements of EU law which were “sufficiently serious” and that this threshold had not been met.
The Supreme Court agreed with the NDA on the first part of its defence. Reviewing the implementing UK legislation (the PCRs), it found that while the PCRs stated the court “may award damages”, these were not an automatic right.
There was no evidence the UK government had intended to go beyond the minimum level of protection required by the directive.
“The requirement to establish “sufficient seriousness” creates an extra obstacle for claimants to clear on the road to compensation and creates some uncertainty about when and whether they will get it”
The Supreme Court did not rule directly on how the “sufficiently serious” test should be applied to the facts of this case. However, this had been ruled on by the High Court, which adopted an earlier decision in the case of Factortame (No 5).
That case indicated that the test should consider a number of factors, including whether the breach had been intentional or involuntary, the importance of the rule breached and the importance of the principle that had been infringed.
This High Court held that, on the facts of this case, the sufficiently serious test would be satisfied, notwithstanding that the breaches had not been wilful.
That judgment also suggested that a failure to appoint the most economically advantageous tenderer in accordance with the rules of the competition would go a long way to demonstrating sufficient seriousness, particularly given the effect this can have on the public purse.
What it means
On the face of it, the Supreme Court’s decision is bad news for claimants.
The requirement to establish “sufficient seriousness” creates an extra obstacle for them to clear on the road to compensation and creates some uncertainty about when and whether they will get it.
However, claimants will hope that the High Court’s logic on the assessment of whether the breach was “sufficiently serious” to warrant damages is adopted in future litigation.
If it is not, the effect of this judgment may be sufficiently serious to deter future procurement challenges.
Paul Henty is a partner specialising in EU procurement law at Charles Russell Speechlys