Opening the doors to civil society litigation in public contracts, by SAPIENS Network Coordinator and Lead Researcher Prof. Roberto Caranta

Summary

Since 1971 (then) EEC directives have regulated award procedures for public procurement and later for concessions in order to create an internal market open to economic operators from all the Member States. Since 1989, EU law also provides economic operators with remedies to challenge contract awards breaching public procurement and concession rules. Today – and this trend is going to be much strengthened by the initiatives undertaken under the European Green Deal – EU public contracts rules are about more than just avoiding discrimination against economic operators from different Member States. Integrity is a concern. Public procurement and concessions are to contribute to sustainable development. This evolution calls for providing remedies not just for the benefit of economic operators, but for involving civil society in making sure that the different objectives of EU public contract law are achieved.

Part and parcel of the Internal Market

Since 1971, public procurements in the Member States have been regulated by directives. EU public procurements as well as concessions are currently regulated by several sector-specific directives, the more recent of which dates from 2014 (Directive 2014/24/EU, the general or ‘classic’ procurement directive will be referred to here as it lays the standard also followed by the other directives – Directive 2014/23/EU on concessions and Directive 2014/25/EU on utilities procurement). These directives lay down procedural rules for the award of those contracts to limit the risk of national preferences conditioning the purchasing choices. The objectives of these directives could not be entirely achieved if companies were unable to vindicate their rights in case of breaches. Therefore, starting in 1989 the EU adopted secondary law rules ensuring access to “clear, rapid and effective review” for those who consider their rights in a public procurement procedure to have been violated. Those rules have aimed to empower economic operators to act on their EU-granted rights in front of the national review bodies.

The objective of EU (substantive) public procurement law has been reasonably straightforward until fairly recently. Recital 2 of Directive 2004/18/EC indicated that “for public contracts above a certain value, it is advisable to draw up provisions of Community coordination of national procedures for the award of such contracts […] so as to ensure the effects of them and to guarantee the opening-up of public procurement to competition”. The same we find today in Recital 1 of Directive 2014/24/EU.

The remedies directives are coordinated with this aim. Under Article 1(3) of Directive 89/665/EEC, the first remedy directive, “3. The Member States shall ensure that the review procedures are available […] at least to any person having or having had an interest in obtaining a particular public supply or public works contract and who has been, or risks being harmed by an alleged infringement”. Market participants – economic operators – are given a right to challenge the award of public contracts. Here as elsewhere, EU law relies on the Mobilisierung des Unternehmens.

However, even if we keep to the safe ground of fundamental economic liberties, the most recent public procurement and concessions directives have gone extremely far in trying to ensure fair play in public contract awards. Contract modifications have been regulated to fight direct awards to preferred contractors (e.g., Article 72 of Directive 2014/24/EU). Conflicts of interest are to be identified, prevented and remedied (Article 24). Arguably, we are still concerned with dealings and practices harming the chances of economic operators – and especially foreign ones – to be awarded a contract. Still, these situations call into question the beautiful symmetry between EU substantive and remedies rules. Economic operators might simply not be best placed – or even have a strong enough interest – to challenge unlawful contract modification or conflict of interest.

Going beyond a pure internal market logic

Today EU public contract law is more than just allowing economic operators to compete for business opportunities in the different Member States. Recital 2 of Directive 2014/24/EU indicates that “Public procurement plays a key role in the Europe 2020 strategy […], as one of the market-based instruments to be used to achieve smart, sustainable and inclusive growth while ensuring the most efficient use of public funds”. Therefore, the 2004 directives deserved being “revised and modernised in order to increase the efficiency of public spending, facilitating in particular the participation of small and medium-sized enterprises (SMEs) in public procurement, and to enable procurers to make better use of public procurement in support of common societal goals”.

Still, with some exceptions, the 2014 directives are simply empowering but not obliging contracting authorities to buy sustainable products and services. EU law was often perceived as an obstacle to sustainable public procurement – SPP practices. The 2014 reform mainly aimed at indicating how SPP may be pursued while toeing with EU law. Limited binding SPP rules are to be found first of all in Article 18(2) of Directive 2014/24/EU, under which “Member States shall take appropriate measures to ensure that in the performance of public contracts economic operators comply with applicable obligations in the fields of environmental, social and labour law established by Union law, national law, collective agreements or by the international environmental, social and labour law provisions listed in Annex X”. The precise binding character of Article 18(2) is discussed, as (a) it refers to the Member States, not expressly to the contracting authorities and (b) under Article 57(4)(a) exclusion from the award procedures of economic operators found in breach of most rules referred to in Article 18(2) is simply an option. Exclusion of the tender is instead mandatory under Article 69(2) when the tender is abnormally low, and the tenderer fails to show compliance with the rules listed in Article 18(2). A more generally binding character of Article 18(2) should flow from the Court of Justice decision in TIM, when it held that the requirement to comply, in the performance of the contract, with obligations relating to environmental, social and labour law “constitutes, in the general scheme of that directive, a cardinal value with which the Member States must ensure compliance pursuant to the wording of Article 18(2) of that directive” (C-395/18, para 38).

Even more relevant is that the European Green Deal and many of the initiatives associated with it go towards mandating SPP (K. Pouikli, 2021). The Green Deal indicated that ‘Public authorities, including the EU institutions, should lead by example and ensure their procurement is green’ (COM(2019) 640 final, at p. 8).  The Circular Economy Action Plan indicates that “the Commission will propose minimum mandatory green public procurement (GPP) criteria and targets in sectoral legislation and phase in compulsory reporting to monitor the uptake of Green Public Procurement (GPP)”. Mandatory criteria are considered for inclusion in food procurement (COM(2021) 141 final), construction (COM(2020) 662 final), renewable energies (COM(2020) 562 final) and so on.

Innovative economic operators may be ready to challenge public procurement decisions breaching or flouting SPP mandatory criteria. This might however not always be the case, for instance when non-compliance is widespread or happens in far-flung countries part of a global supply chain. Moreover, SPP as designed under the Green Deal does not always translate into precise requirements or criteria to be applied in specific procurement procedures and whose misapplication might be challenged by an economic operator. It may be also targets, and possibly national targets as is already the case which Directive (EU) 2019/1161 of the European Parliament and of the Council of 20 June 2019 amending Directive 2009/33/EC on the promotion of clean and energy-efficient road transport vehicles sets national targets. Falling short of the national target is a difficult argument to raise in litigation referring to a specific procurement.

Focusing on standing rights for economic operators, Article 1(3) of Directive 89/665/EEC is uncoordinated with the evolution of EU public contract law as a tool to achieve “common societal goals”.

Giving standing to civil society

As Dragos rightly pointed out, the “[o]verall transparency of the procedure is essential so that conflicts of interest can be detected and sanctioned. The role of civil society as a public procurement watchdog needs to be strengthened” (Dragos, 2021, p. 272; see also Cravero, 2019).

An interesting case was decided last year by the Administrative Court of the (then) Queen’s Bench Division. Among a series of challenges against the way the UK government managed the response to COVID, an NGO challenged the failure/delays of the UK government in publishing contract award notices – CANs and other information regarding hundreds of contracts hastily negotiated to fight the COVID pandemics. Chamberlain J remarked that “An important purpose of the requirement to publish a CAN is to alert the public, including economic operators who might have hoped to be awarded the contract themselves, to the fact that a contract has been awarded. This purpose is particularly important in a case where the contract has been awarded without a competitive tender, because in such a case the public, including economic operators, may have no idea that the public body concerned was even looking to award the contract”. To challenge insufficient transparency, an economic operator “would presumably have to argue that, had the obligation been complied with, the public body might have published a CAN for a contract in which he might have had an interest and this CAN might have revealed something that would have enabled him to bring a claim for damages”. It is ‘very doubtful’ – continues Chamberlain J – that an economic operator would satisfy this test: “there are just too many imponderables. But even if the test could in principle be satisfied, an economic operator would have little incentive to bring a challenge in circumstances where the prospect of any material benefit was so speculative”. “A challenge alleging breach of the transparency obligations […], is accordingly not one that an economic operator can realistically be relied upon to bring”. The gap may only be filled by recognising standing to an NGO: “There is no dispute about the importance of the transparency obligations it claims have been breached. As to the ‘gravity’ of the alleged breaches, they relate to contracts worth (at least) several billion pounds; and there is a pleaded allegation […] that they result from a deliberate policy on the part of the Secretary of State. To my mind, there is a powerful public interest in the resolution, one way or the other, of the issues raised” (R (GLP et al) v Secretary of State for Health and Social Care [2021] EWHC 346 (Admin), paragraph 103 f).

The UK is no longer a Member State, but the shortcomings of a judicial protection system focused on economic operators only are the same in the EU. The common law has found a way to grant standing. EU legislation might have to fill the gap. Civil society organisations active in the fight against corruption and economic waste should be given the right to challenge procurement measures when transparency – or rather the lack of – may be detected, including concerning unlawful contract modifications such as price increases and conflict of interests.

Concerning specifically environmental NGOs, their standing is already grounded in Article 9(2) of the Aarhus Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters. This article provides that “the interest of any non-governmental organization” shall be deemed sufficient for having “access to a review procedure before a court of law and/or another independent and impartial body established by law”. The Aarhus Convention Compliance committee has already indicated that “While the Convention relates to environmental matters, there may be legal provisions that do not promote protection of the environment, which can be violated when a decision under article 6 of the Convention is adopted, for instance, provisions concerning conditions for building and construction, economic aspects of investments, trade, finance, public procurement rules, etc. Therefore, review procedures according to article 9, paragraph 2, of the Convention should not be restricted to alleged violations of national law “serving the environment”, “relating to the environment” or “promoting the protection of the environment”, as there is no legal basis for such limitation in the Convention” (Germany ACCC/C/2008/31; ECE/MP.PP/C.1/2014/8, 4 June 2014, para. 78).

As the Commission’s Communication on Improving access to justice in environmental matters in the EU and its Member States recalls, the Convention is “an integral part of the EU’s legal order and binding on the EU institutions and on the Member States under Article 216(2) TFEU” (COM(2020) 643 final, para 25). eNGOs are specifically suited to challenge ‘systemic’ breaches such as those concerning targets set in EU law, including in the measures to be adopted in the wake of the Green Deal. Many aspects of a civil society-driven SPP future cases may become part of the emerging pattern of climate litigation (F. Lichère & O. Sulpice, 2023).

SPP however goes well beyond Green PP. There is no reason judicial protection could not be afforded to human and social rights and indeed this should be done by empowering civil society and its organisations to challenge procurement policies and procurement decisions when conflicting with SPP rules.

The changes in the objectives pursued by the EU substantive directives should be reflected in a recast Article 1(3) of Directive 89/665/EEC to enable the Mobilisierung de Zivilgesellschaft.

References

R. Caranta & V. Fricova, ‘EU Procurement and Concessions Law’ in M. Scholten (ed), Research Handbook on EU Law Enforcement (Cheltenham, Elgar 2023 forthcoming)

C. Cravero, “Rethinking the Role of Civil Society in Public Procurement”, 14 (2019) Issue 1, European Procurement & Public Private Partnership Law Review, 30 ff.

D.C. Dragos, ‘Comment to Article 24’ in R. Caranta & A. Sanchez Graells (eds), European Public Procurement. Commentary on Directive 2014/24/EU (Cheltenham, Elgar 2021) 259

F. Lichère & O. Sulpice, ‘Mandatory requirements in public procurement law: the role of remedies, courts and public interest litigation’ in W.A. Janssen & R. Caranta (eds), Mandatory Sustainability Requirements in EU Public Procurement Law: Reflections on a Paradigm Change (Oxford, Hart 2023 forthcoming)

K. Pouikli, ‘Towards mandatory Green Public Procurement (GPP) requirements under the EU Green Deal: reconsidering the role of public procurement as an environmental policy tool’ 21 ERA Forum 2021, 699

This piece is originally published on REALaw.blog