New Paper: Assessing Public Administration’s Intention in EU Economic Law: Chasing Ghosts or Dressing Windows?

I have uploaded a new paper on SSRN that explores the issue of the assessment of 'intention' for the purposes of enforcing EU economic law against the public administration.

The paper looks at public procurement and State aid rules as two examples of areas of EU economic law subjected to interpretative and enforcement difficulties due to the introduction, sometimes veiled, of subjective elements in their main prohibitions. The paper establishes parallels with other areas of EU economic law, such as antitrust and non-discrimination law, and seeks benchmarks to support the main thesis that such intentional elements need to be ‘objectified’, so that EU economic law can be enforced against the public administration to an adequate standard of legal certainty. This mirrors the development of the doctrine of abuse of EU law, where a similar ‘objectification’ in the assessment of subjective elements has taken place.

The paper draws on the case law of the Court of Justice of the European Union to support such ‘objectification’ of intentional elements in EU economic law, and highlights how the Court has been engaging in such interpretative strategy for quite a long time. It then goes on to explore the interplay between such an approach and more general protections against behaviour of a public administration in breach of EU law: ie the right to good administration in Article 41 of the Charter of Fundamental Rights of the European Union, and the doctrine of State liability for infringement of EU law. The paper concludes with the normative recommendation that EU economic law should be free from subjective elements in its main prohibitions.

 

The full reference is: A Sanchez-Graells, 'Assessing Public Administration’s Intention in EU Economic Law: Chasing Ghosts or Dressing Windows?' (August 7, 2015). Available at SSRN: http://ssrn.com/abstract=2641051.

Duty to state reasons for the ranking of tenders in public procurement: Evropaïki Dynamiki strikes back (T-297/09)

In its Judgment in Evropaïki Dynamiki v EASA, T-297/09, EU:T:2015:184, the General Court (GC) has assessed once more the contours of the obligation to state the reasons underlying public procurement decisions, this time regarding the classification of a tenderer in second or third position in a cascade procedure leading to the conclusion of 'ranked' framework contracts--and, once more, upon a challenge of a procurement decision by an EU Institution (this time, the European Aviation Safety Agency, EASA) by Evropaïki Dynamiki. On this occasion, the GC annuls some of EASA's Decisions classifying Evropaïki Dynamiki's tenderer in second or third position in the cascade procedure, but it does not award damages and imposes a 25/75 split of costs between the parties. The reasoning of the GC deserves some close attention and it is worth reminding that the case was on procurement controlled by Financial Regulation (EC, Euratom) No 1605/2002. 

The case is interesting and rather unconventional because it is concerned with framework agreements that EASA planned to conclude with the 3 top tenderers for each of the 5 lots tendered. Evropaïki Dynamiki's tenders being ranked second and third for different lots, then, did not exclude the undertaking from the framework agreements--which thus reduced the challenge to the ranking itself, but not to the conclusion of the ensuing framework agreements or the call-offs within them. Consequently, the challenge is actually concerned with the inclusion in the framework agreements of other tenderers, which looks like a rather uncommon setting for a procurement dispute.

This triggered an objection of inadmissibility by EASA, on the grounds that Evropaïki Dynamiki is one of the tenderers to which framework contracts were awarded for four lots, so it cannot be precluded that it will conclude specific contracts with EASA; and, second, that Evropaïki Dynamiki cannot challenge the award decisions, since it signed four framework contracts for the four lots in question and annulment of the contested decisions would serve no useful purpose. The GC rejected these arguments and declared the action admissible on the following grounds:

41 According to settled case-law, an action for annulment brought by a natural or legal person is admissible only in so far as that person has an interest in the contested measure being annulled (judgments of 14 September 1995 in Antillean Rice Mills and Others v Commission, T‑480/93 and T‑483/93, ECR, EU:T:1995:162, paragraph 59; 25 March 1999 in Gencor v Commission, T‑102/96, ECR, EU:T:1999:65, paragraph 40; and 14 April 2005 in Sniace v Commission, T‑141/03, ECR, EU:T:2005:129, paragraph 25). That interest must be vested and present (judgment of 17 September 1992 in NBV and NVB v Commission, T‑138/89, ECR, EU:T:1992:95, paragraph 33) and is evaluated as at the date on which the action is brought (judgment of 16 December 1963 in Forges de Clabecq v High Authority, 14/63, ECR, EU:C:1963:60, p. 357, at 371, and judgment in Sniace v Commission, cited above, EU:T:2005:129, paragraph 25).

42 In the present case, as EASA observes, each framework contract is implemented by specific contracts concluded according to the cascade mechanism. According to Section 2.7.1 of the tender specifications, when more than one contractor is nominated, EASA determines the specifications of the services required and will first address its request to the contractor who has been ranked first. If this contractor is unable to meet any of the criteria, EASA will address the same request to the contractor who has been ranked second. This process will end with conclusion of a specific contract with one of the contractors who were ranked among the top three and who can meet all the specifications of the services. It follows that if the applicant had been ranked first according to the cascade, this might have secured an advantage for it and that its ranking in a lower position amounts to a significant loss of opportunity. Such a ranking decision therefore produces legal effects vis-à-vis the applicant.

43 Moreover, the fact that the framework contracts which are the subject of the call for tenders at issue have been signed and implemented does not call into question the applicant’s legal interest in bringing proceedings. It is settled case-law that, even where a decision to award a contract has been fully implemented for the benefit of other competitors, a tenderer retains an interest in the annulment of such a decision; such interest consists either in the tenderer’s being properly restored by the contracting authority to his original position or in prompting that authority to make suitable amendments in the future to the tendering procedure if that procedure is found to be incompatible with certain legal requirements (see, to that effect, judgments of 6 March 1979 in Simmenthal v Commission, 92/78, ECR, EU:C:1979:53, paragraph 32, and of 14 October 1999 in CAS Succhi di Frutta v Commission, T‑191/96 and T‑106/97, ECR, EU:T:1999:256, paragraph 63). In the present case, the applicant retains at least an interest in the tenderers’ being correctly ranked according to the cascade (T-297/09, paras 41 to 43, emphasis added).

This is an interesting point to take into consideration. In my view, the implication of the reasoning of the GC is that, should a framework agreement not carry any of the rankings into the call-off phase (ie where the call-offs are either based on a free choice of the contracting authority, or based on a mini-competition), there seems to be no legitimate interest for a contractor included in the framework agreement to challenge the inclusion of other competitors in the contract--that is, the contractor does not have a right to determine whose competitors to face within the framework agreement. 

 

In my view, though, that is not necessarily the case, particularly if the exclusion of a given tenderer would have resulted in a framework including a more limited number of contractors. Hence, a case by case approach seems necessary in all instances, and no a contrario interpretation of the GC's reasoning in Evropaïki Dynamiki v EASA should be made.

The second part of the Judgment that I consider relevant concerns the award for damages. Given that the GC had determined that the admissibility of the claim rested on the fact that being ranked higher "secured an advantage ... and that ... ranking in a lower position amounts to a significant loss of opportunity", it would have seemed logical to expect a claim for compensation due to such "significant loss of opportunity" to be accepted and compensation, at some level, to be granted to Evropaïki Dynamiki. 

 

In that regard, I find it internally inconsistent that the GC has contrarily determined that 

As regards lots 2, 3 and 5, it is true that the contested decisions are vitiated by an inadequate statement of reasons and must be annulled for that reason. However, the inadequacy of the statement of reasons does not mean that the award of the contracts to the tenderers ranked higher in the cascade constitutes wrongful conduct or that there is a causal link between that fact and the loss alleged by the applicant (see, to that effect, judgment of 25 February 2003 in Renco v Council, T‑4/01, ECR, EU:T:2003:37, paragraph 89). It follows that the application for damages in respect of the alleged harm suffered as a result of the contested decisions in the context of lots 2, 3 and 5 of the call for tenders at issue must be dismissed as unfounded in so far as it is based on the inadequate statement of reasons for those decisions (T-297/09, para 185, emphasis added).

In my view, if the rankings were set out in a way that failed to state adequate reasons and Evropaïki Dynamiki has prevailed in getting those decisions annulled, then the preference given to the first ranked contractor should also have been annulled or, at least, compensated for. 

The decision of the GC makes some more sense if one takes into account that Evropaïki Dynamiki decided to limit the challenge to the decision on ranking itself (as set out in para 39, it withdrew "its application for annulment of all further related decisions contained in its first head of claim; that head of claim concerned only the decisions to rank its tenders second or third in the cascade. It follows that this action relates only to the contested decisions. Accordingly, the scope of the present application for annulment must be restricted to an examination of the lawfulness of those decisions."). 

However, the internal consistency of the consideration of a "significant loss of opportunity" regarding the admissibility of the claim is hard to reconcile with the apparent neutrality that the annulment of the decisions seems to have on the financial interests of Evropaïki Dynamiki in the view of the GC.

CJEU offers clarification on identification and assessment of conflicts of interest in public procurement (C-538/13)

In its Judgment in eVigilo, C-538/13, EU:C:2015:166, the Court of Justice of the European Union (CJEU) has offered very much needed guidance on the assessment of conflicts of interest in public procurement, as well as the degree of forcefulness with which contracting authorities must tackle such important issue. 

Its guidance will be very relevant in the interpretation and application of Article 24 of Directive 2014/24 on conflicts of interest, as well as the related provision on exclusion of economic operators affected by conflicts of interest [art 57(4)(e) dir 2014/24]. Thus, the eVigilo Judgment and the CJEU's reasoning deserve some close analysis.

Concerning the issue of conflict of interest (there were others to be addressed, particularly regarding the time limits for the challenge of a procurement decision), it is worth highlighting that eVigilo challenged the award on the basis of a bias of the experts who evaluated the tenders due to the existence of professional relations between them and the specialists referred to in the winning tender. 

More specifically, eVigilo claimed that the specialists referred to in the tender submitted by the successful tenderers were colleagues at the Technical University of Kaunas (Kauno technologijos universitetas) of three of the six experts of the contracting authority who drew up the tender documents and evaluated the tenders. In its view, this was sufficient to strike the award decision down.

This is a situation that, in my view, would now be clearly covered by Art 24 Dir 2014/24 (not applicable to the conflict time-wise), whereby "conflicts of interest shall at least cover any situation where staff members of the contracting authority or of a procurement service provider acting on behalf of the contracting authority who are involved in the conduct of the procurement procedure or may influence the outcome of that procedure have, directly or indirectly, a financial, economic or other personal interest which might be perceived to compromise their impartiality and independence in the context of the procurement procedure" (emphasis added). 

Hence, the CJEU's assessment of the claim is highly relevant. After reiterating its case law on the principles of equality, non-discrimination and transparency, and stressing that "[u]nder the principle of equal treatment as between tenderers, the aim of which is to promote the development of healthy and effective competition between undertakings taking part in a public procurement procedure, all tenderers must be afforded equality of opportunity", the CJEU considered that

37 The finding of bias on the part of an expert requires in particular the assessment of facts and evidence that comes within the competence of the contracting authorities and the administrative or judicial control authorities.
38 It should be pointed out that neither Directive 89/665 nor Directive 2004/18 contains specific provisions in that regard [and, it is worth adding, Directive 2014/24 does not contain any specific procedural rules as to how to assess these issues either].
39 The Court has consistently held that, in the absence of EU rules governing the matter, it is for every Member State to lay down the detailed rules of administrative and judicial procedures for safeguarding rights which individuals derive from EU law. Those detailed procedural rules must, however, be no less favourable than those governing similar domestic actions (principle of equivalence) and must not render impossible in practice or excessively difficult the exercise of rights conferred by EU law (principle of effectiveness) (see judgment in Club Hotel Loutraki and Others, C‑145/08 et C‑149/08, EU:C:2010:247, paragraph 74 and the case-law cited).
40 In particular, the detailed procedural rules governing the remedies intended to protect rights conferred by EU law on candidates and tenderers harmed by decisions of contracting authorities must not compromise the effectiveness of Directive 89/665 (see judgment in Uniplex (UK), C‑406/08, EU:C:2010:45, paragraph 27 and case-law cited).
41 It is not, as a general rule, contrary to those principles for an expert’s bias to be established in a Member State solely on the basis of an objective situation in order to prevent any risk that the public contracting authority could be guided by considerations unrelated to the contract in question and liable, by virtue of that fact alone, to give preference to one tenderer.
42 Concerning the rules on evidence in that regard, it should be pointed out that ... the contracting authorities are to treat economic operators equally and non-discriminatorily and to act in a transparent way. It follows that they are assigned an active role in the application of those principles of public procurement.
43 Since that duty relates to the very essence of the public procurement directives (see judgment in Michaniki, C‑213/07, EU:C:2008:731, paragraph 45), it follows that the contracting authority is, at all events, required to determine whether any conflicts of interests exist and to take appropriate measures in order to prevent and detect conflicts of interests and remedy them. It would be incompatible with that active role for the applicant to bear the burden of proving, in the context of the appeal proceedings, that the experts appointed by the contracting authority were in fact biased. Such an outcome would also be contrary to the principle of effectiveness and the requirement of an effective remedy ... in light, in particular, of the fact that a tenderer is not, in general, in a position to have access to information and evidence allowing him to prove such bias.
44 Thus, if the unsuccessful tenderer presents objective evidence calling into question the impartiality of one of the contracting authority’s experts, it is for that contracting authority to examine all the relevant circumstances having led to the adoption of the decision relating to the award of the contract in order to prevent and detect conflicts of interests and remedy them, including, where appropriate, requesting the parties to provide certain information and evidence.
45 Evidence such as the claims in the main proceedings relating to the connections between the experts appointed by the contracting authority and the specialists of the undertakings awarded the contract, in particular, the fact that those persons work together in the same university, belong to the same research group or have relationships of employer and employee within that university, if proved to be true, constitutes such objective evidence as must lead to a thorough examination by the contracting authority or, as the case may be, by the administrative or judicial control authorities.
46 Subject to compliance with the obligations under EU law, and specifically with those referred to in paragraph 43 above, the concept of ‘bias’ and the criteria for it are to be defined by national law. The same applies to the rules relating to the legal effects of possible bias. Thus, it is for national law to determine whether, and if so to what extent, the competent administrative and judicial authorities must take into account the fact that possible bias on the part of the experts had no effect on the decision to award the contract (C-538/13, paras 37 to 46, emphasis added).

In my view, the CJEU has handed down a very straightforward Judgment that clearly favours (or, actually, imposes) a strong reaction to allegations of bias and conflict of interest, and which sets a very high threshold regarding the relevant duty of the contracting authority to investigate and to act. Ultimately, this derives from the obligation of contracting authorities to enforce the general principles of procurement (now in art 18 dir 2014/24, which includes the principle of competition) and its diligent administration implications.

The reader will allow me to submit that this is fundamentally in line with my interpretation of the rules on conflict of interest under Art 24 Dir 2014/24 as developed in Public Procurement and the EU Competition Rules, 2nd edn (Oxford, Hart, 2015) 369-373, which I reproduce below. 

Consequently, I cannot but welcome the CJEU's eVigilo Judgment and hope that Member States will take it into due account in the transposition of the rules of Dir 2014/24 into their domestic legal orders.

As a preliminary issue with potential ramifications regarding all the decisions to be adopted at the stage of evaluation of the tenders and award of the contract—although, as mentioned previously, it is also relevant in various previous phases related inter alia to the qualitative selection of tenderers—in our view, contracting authorities are under an obligation to adopt an approach to the development of these tasks that is both neutral and possibilistic. The existence of a duty of neutrality or ‘impartiality’ of procurement procedures—and, implicitly, of contracting authorities—as a specification of the principles of equal treatment, of the ensuing transparency obligation, and of the principle of competition is a clear requirement of the system envisaged in the directives,[1] and has been hinted at in the EU case law by requiring that ‘the impartiality of procurement procedures’ is ensured.[2]

The existence of such a neutrality requirement is fundamental, and the EU judicature has consistently stressed the obligation of contracting authorities to guarantee equality of opportunity of tenderers at each and every stage of the tendering procedure.[3] Importantly, it should be stressed that

Under the principle of equal treatment as between tenderers, the aim of which is to promote the development of healthy and effective competition between undertakings taking part in a public procurement procedure, all tenderers must be afforded equality of opportunity when formulating their tenders, which therefore implies that the tenders of all competitors must be subject to the same conditions (emphasis added).[4] Moreover, this ultimately rests on the clear position that a system of undistorted competition, as laid down in the Treaty, can be guaranteed only if equality of opportunity is secured as between the various economic operators.[5]

In this regard, it has been emphasised that contracting authorities are under a particular duty to avoid conflicts of interest[6] with the result that, after the discovery of such a conflict of interests between a member of the evaluation committee and one of the tenderers, the contracting authority must act with due diligence and on the basis of all the relevant information when formulating and adopting its decision on the outcome of the procedure for the award of the tender at issue in order to comply with the basic obligation of ensuring equality of opportunity.[7] This might require different reactions from the contracting authority, depending on the circumstances of the case, but should always be oriented towards preventing instances of discrimination—ie, not favouring, or discriminating against, a tenderer as a result of the bias of the member of the evaluation committee.[8] Therefore, there should be no doubt as to the neutrality requirements in the conduct of the evaluation of tenders and award of public contracts. This is now particularly clear in light of the provisions in article 24 of Directive 2014/24, which expressly requires that Member States ensure that contracting authorities take appropriate measures to effectively prevent, identify and remedy conflicts of interest arising in the conduct of procurement procedures so as to avoid any distortion of competition and to ensure equal treatment of all economic operators.[9] This measure is complemented by the new ground for exclusion of economic operators in clonflict of interest (as discussed above §II.A.vii). Consequently, under the 2014 rules, contracting authorities are under a very clear mandate to detect, investigate and effectively tackle conflicts of interest.

As regards the adoption of a ‘possibilistic’ or anti-formalistic approach—oriented towards maintaining the maximum possible degree of competition by avoiding the rejection of offers on the basis of too formal and/or automatic rejection criteria—it is important to underline that the relevant case law has already offered some guidance that points in this direction by stressing that ‘the guarantees conferred by the European Union legal order in administrative proceedings include, in particular, the principle of good administration, involving the duty of the competent institution to examine carefully and impartially all the relevant aspects of the individual case’ (emphasis added)[10]—which, in the case of public procurement, should be interpreted as requiring contracting authorities to exercise due care in the evaluation of the bids submitted by tenderers.[11] To be sure, the obligation of contracting authorities to review the bids for possible mistakes and to contact tenderers to seek for correction is limited as a mandate of the principle of non-discrimination (below §II.B.ix); but the scope for clarification of the tenders and for the establishment of rules allowing for a flexible treatment of formally non-fully compliant bids (on this, below §II.B.iv), support the adoption of a possibilistic approach towards the evaluation of bids as a specification or particularisation of the duty of due care or diligent administration that is required of contracting authorities.

In this regard, as reasoned by EU case law, the evaluating team is under an obligation to conduct the revision of the bids in accordance with the principle of good administration and is, consequently, under an obligation to exercise the power to ask for additional information in circumstances where the clarification of a tender is clearly both practically possible and necessary, and as long as the exercise of that duty to seek clarification is in accordance with the principle of equal treatment.[12] It is submitted that this means that the evaluating team is to adopt an anti-formalistic approach that renders the effective appraisal of the tenders possible—regardless of minor deficiencies, ambiguities or apparent mistakes. Indeed, as stressed by the jurisprudence, in cases where the terms of a tender themselves and the surrounding circumstances known to the authority indicate that the ambiguity probably has a simple explanation and can be easily resolved, then, in principle, it is contrary to the requirements of good administration for an evaluation committee to reject the tender without exercising its power to seek clarification. A decision to reject a tender in such circumstances is, consequently, liable to be vitiated by a manifest error of assessment on the part of the institution in the exercise of that power,[13] and could result in an unnecessary restriction of competition. In that regard, it should be taken into consideration that

it is also essential, in the interests of legal certainty, that the contracting authority should be able to ascertain precisely what a tender offer means and, in particular, whether it complies with the conditions set out in the specifications. Thus, where a tender is ambiguous and it is not possible for the contracting authority to establish, swiftly and efficiently, what it actually means, that authority has no choice but to reject that tender (emphasis added).[14]

Therefore, in a nutshell, contracting authorities should ensure that the evaluation of bids leading to the award of the contract is based on the substance of the tenders, adopting a possibilistic or anti-formalist approach that excludes purely formal decisions that restrict competition unnecessarily; subject, always, to guaranteeing compliance with the principle of equal treatment. In that vein, it is important to stress that the duty of good administration does not go so far as to require the evaluation team to seek clarification in every case where a tender is ambiguously drafted.[15] Particularly as regards calculations and other possible non-obvious clerical mistakes, the duty of good administration is considerably more restricted and the evaluation team’s diligence only requires that clarification be sought in the face of obvious errors that should have been detected by the purchasing agency when assessing the bid.[16] This is so particularly because the presence of non-obvious errors and their subsequent amendment or correction might result in breaches of the principle of equal treatment.[17] Therefore, as general criteria, it seems that the relevant case law intends to favour the possibilistic approach hereby advanced, subject to two restrictions: i) that it does not breach the principle of equal treatment (ie, that it does not jeopardise the neutrality of the evaluation of tenders), and ii) that it does not require the contracting authority to develop special efforts to identify errors or insufficiencies in the tenders that do not arise from a diligent and regular evaluation.

Therefore, it is submitted that contracting authorities should develop the activities of evaluation of bids and award of the contract on the basis of such a neutral and possibilistic approach—which must be aimed at trying not to restrict competition on the basis of considerations that are too formal (ie, effectively to appraise which is the tender that actually or in substance offers the best conditions, regardless of minor formal defects or non-fulfilment of immaterial requirements) and, at the same time, ensuring compliance with the principle of non-discrimination and the ensuing transparency obligation.

---

[1] In this regard, it should be stressed that the principles of non-discrimination and competition present close links; see above ch 5 §IV.A, with references to the relevant case law.

[2] Case C-324/98 Telaustria and Telefonadress [2000] ECR I-10745 62. See also H-J Prieβ, ‘Distortions of Competition in Tender Proceedings … and the Involvement of Project Consultants’ (2002) 156.

[3] See: Case C-496/99 P Succhi di Frutta [2004] ECR I-3801 108. See also Case T-406/06 Evropaïki Dynamiki (CITL) [2008] ECR II-247 83; Joined Cases T-376/05 and T-383/05 TEA–CEGOS [2006] ECR II-205 76; Case T-160/03 AFCon Management Consultants [2005] ECR II-981 75; and Case T-145/98 ADT Projekt [2000] ECR II-387 164.

[4] Case T-345/03 Evropaïki Dynamiki v Commission (CORDIS) [2008] ECR II-341 143; and Case T-86/09 Evropaïki Dynamiki v Commission [2011] ECR II-309 61.

[5] Case C-202/88 France v Commission [1991] ECR I-1223 51; Case C-462/99 Connect Austria [2003] ECR I-5197 83; and Case T-250/05 Evropaïki Dynamiki (OPOCE) [2007] ECR II-85 46.

[6] As now emphasised in recital (16) of Directive 2014/24: ‘Contracting authorities should make use of all possible means at their disposal under national law in order to prevent distortions in public procurement procedures stemming from conflicts of interest. This could include procedures to identify, prevent and remedy conflicts of interests.’

[7] Case T-160/03 AFCon Management Consultants [2005] ECR II-981 75; and, by analogy, Case T-231/97 New Europe Consulting [1999] ECR II-2403 41. Recently, see Case T-297/05 IPK International v Commission [2011] ECR II-1859 122.

[8] For an overview of evaluating teams regulation and practice in the US—which focus on similar concerns—see SW Feldman, ‘Agency Evaluators in Negotiated Acquisitions’ (1991–1992) 21 Public Contract Law Journal 279; and DI Gordon, ‘Organizational Conflict of Interest: A Growing Integrity Challenge’ (2005–2006) 35 Public Contract Law Journal 25.

[9] Arrowsmith (n 28) 1295–96. Generally, see P Lascoumes, ‘Condemning corruption and tolerating conflicts of interest’, in JB Auby, E Breen and T Perroud (eds), Corruption and Conflicts of Interest: A Comparative Law Approach, Studies in Comparative Law and Legal Culture (Cheltenham, Edgar Elgar, 2014) 67–84. See also DI Gordon and G Racca, ‘Integrity Challenges in the EU and U.S. Procurement Systems’, in G M Racca and C R Yukins (eds), Integrity and Efficiency in Sustainable Public Contracts (Brussels, Bruylant, 2014) 117–46.

[10] Case T-236/09 Evropaïki Dynamiki v Commission [2012] pub. electr. EU:T:2012:127 45; and Joined Cases T-376/05 and T-383/05 TEA–CEGOS [2006] ECR II-205 76.

[11] ibid.

[12] See: Case T-211/02 Tideland Signal [2002] ECR II-3781 37–38, and cited case law. See also C-599/10 Slovensko [2011] ECR I-10873 and Case C-336/12 Manova [2013] pub. electr. EU:C:2013:647.

[13]  Case T-211/02 Tideland Signal [2002] ECR II-3781 37–38; Case T-63/06 Evropaïki Dynamiki v OEDT [2010] ECR II-177 98; Case T-195/08 Antwerpse Bouwwerken v Commission [2009] ECR II-4439 56; Case T-554/08 Evropaïki Dynamiki v Commission [2012] pub. electr. EU:T:2012:194 56; and Case T-553/11 European Dynamics Luxembourg v ECB [2014] pub. electr. EU:T:2014:275 300.

[14] Case T-211/02 Tideland Signal [2002] ECR II-3781 34; Case T-63/06 Evropaïki Dynamiki v OEDT [2010] ECR II-177 98; and Case T-8/09 Dredging International and Ondernemingen Jan de Nul v EMSA [2011] ECR II-6123 71.

[15] See: Case T-211/02 Tideland Signal [2002] ECR II-3781 37 ab initio.

[16] See: Case T-495/04 Belfass [2008] ECR II-781 65–71.

[17] Case T-19/95 Adia Interim [1996] ECR II-321 43–49. Similarly, Case T-169/00 Esedra [2002] ECR II-609 49; and Case T-195/05 Deloitte Business Advisory [2007] ECR II-871 102.

Is the flexibilisation of formal requirements in public procurement going both ways? (T-394/12)

In its Judgment in Alfastar Benelux v Council, T-394/12, EU:T:2014:992, the General Court (GC) resolved a dispute concerning public procurement activity of the European Institutions (in this case, the Council). One of the main claims of the disappointed bidder was that the Council had failed to discharge its obligation to state reasons because one of the sentences of the extracted evaluation report that was made available to it by the Council was incomplete.

 

In the applicant's view, the incompleteness of the extract prevented it from assessing the reasons that justified the Council's decision to award the contract to another tenderer. The applicant submitted that the fact that the Council had complemented the extract at a later stage did not overcome the initial ommission and that the Council should be made liable for damages. The GC rejected the claim. The reasoning of the GC in dismissing the action triggers some comments.

 

Firstly, it is worth emphasising that the GC has continued pushing for a strengthening of the duty to provide reasons in abstracto (and, indirectly, as a result of the bindingness of the right to good administration as recognised in Art 41(2)(c) of the EU Charter of Fundamental Rights). Indeed, the GC emphasised that, as a general point of law,

since infringement of the obligation to give reasons is a matter of public interest, the European Union judicature must raise it of its own motion and, therefore, the fact that the applicant raised it belatedly does not render such a plea inadmissible (see, to that effect, BP Products North America v Council, T-385/11, EU:T:2014:7, paragraph 164) (T-394/12 at para 25, emphasis added).

This creates a strong incentive for contracting authorities to 'err on the side of excessive disclosure' when it comes to the reasons for the adoption of a procurement decision, which may be detrimental for competition and for the protection of the legitimate commercial interests of other tenderers (as clearly recognised in art 55(3) Dir 2014/24 and art 113(2)II Financial Reg, but not always properly understood or applied). This also follows on the GC's previous tough approach and continues to create excessive incentives towards transparency in public procurement (as criticised here, here and in A Sánchez Graells, 'The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives', University of Leicester School of Law Research Paper No. 13-11). Hence, the general approach continues to create the wrong incentives and should be reassessed.

 

Secondly, however, when it comes to the specifics of the case, the GC adopts a very sensible and reasonable approach to the assessment of the claim of breach of the duty to state reasons in particular. Indeed, the GC dismisses the claim on the basis that the incomplete sentence only omitted a limited amount of information concerning the general comments of the evaluators and, additionally, the tenderer had been provided with more details in the remainder of the extract from the evaluation report. Interestingly, the GC stressed that

The general comments may easily be inferred from the detailed technical evaluations of the successful tenderer’s bid which are not concerned by the formatting error, since the general comments constitute a succinct summary of material contained in the contested decision (T-394/12 at para 30, emphasis added).

As such, this reasoning should not be surprising and the GC could hardly be expected to have decided otherwise. Having adopted a more formalistic approach would not only have annulled a procurement decision for no good reason, but would also have opened the floodgates to an unforeseeable volume of litigation (particularly if one takes into account that the guarantees provided by Art 41 EUCFR are applicable in all procurement covered by Dir 2014/24). Hence, it is a sensible decision.

 

However, the better question seems to be whether this same 'anti-formalistic' approach will hold when the clerical mistakes and partial ommissions affect the documentation submitted by the tenderers. Functionally, the rules applicable to the interpretation of documents and the avoidance of formal requirements where the parties engaged in the procurement process 'can make sense' of the documentation exchanged should go both ways. However, this is not necessarily the case yet, as recently discussed regarding Cartiera dell’Adda and Cartiera di Cologno, C-42/13, EU:C:2014:2345 (see here).

 

Hence, it will be interesting to see if the incipient push towards a more functional approach to public procurement takes root and ends up creating a system that is less 'based on rights' and more oriented towards good procurement outcomes [a problem that also affects 'the other side of the Atlantic', as discussed in S Schooner & P Kovacs, "Affirmatively Inefficient Jurisprudence?: Confusing Contractors’ Rights to Raise Affirmative Defenses with Sovereign Immunity" (2012) 21 Federal Circuit Bar Journal 686].

Three recent cases on EU Institutions' procurement and one common theme: good administration and confidential information (T-498/11, T-91/12 & T-199/12)

Within the last week, the General Court has ruled on three disputes concerning public procurement activities of the European Commission to which the Financial Regulation was applicable. All cases involved the rejection of tenderers/tenders (at different stages of the procurement procedures) and challenges against the immediate rapport established between the Commission and the disappointed tenderers, which involved some sort of (discretionary) management of confidential information by the contracting authority. Remarkably, all cases have been decided in favour of the European Commission.

Reading them together, a common theme emerges from the Judgments in Evropaïki Dynamiki v Commission (OLAF), T-498/11, EU:T:2014:831; Flying Holding and Others v Commission, T-91/12, EU:T:2014:832; and Euro-Link Consultants and European Profiles v Commission, T-199/12, EU:T:2014:848. Functionally, all these Judgments are concerned with the duty of good administration, some of its more specific requirements (such as the duty to provide reasons, or the duty to protect confidential information), and its boundaries--which is a topic of increasing relevance in EU public law and, particularly, in EU public procurement law [see J Mendes, ‘Good Administration in EU Law and the European Code of Good Administrative Behaviour’, EUI Working Paper Law 2009/09, and some related comments here].

 

In my view, these three Judgments clearly indicate that despite the increasing complexity and detail of the public procurement rules, most decisions end up being assessed on the basis of the reasonableness, objectivity and proportionality of the decisions taken by contracting authorities as implicit requirements of the principle of good administration. The following is a closer discussion on why I think this is so.

 

(1) Evropaïki Dynamiki v Commission (OLAF) is concerned with the rejection of an offer submitted for the services contract concerning the revamping of the website of the European Anti-Fraud Office (OLAF). More specifically, Evropaïki Dynamiki challenges the withholding of information regarding the technical aspects of the winning offer, which the Commission justified on the basis that it 'might affect the successful tenderer’s legitimate business interests ..., or might distort fair competition between the undertakings concerned' (which follows what is established in art 100(2) Financial Regulation, as discussed here, here and here). In the applicant's view, this amounts to a violation of the duty to state reasons and, ultimately, of the principle of good administration.

 

The GC engages in a detailed assessment of the duty to state reasons and the balance with the protection of the confidential information and business interest of other tenderers (and, particularly, the awardee of the contract) (paras 28-50). In my view, the argument is ultimately concerned with compliance with these two conflicting requirements of the more general duty of good administration. It is worth highlighting that the GC clarifies that

in order to fulfil its obligation to state reasons, the [contracting authority] was required to communicate to the applicant the reasons for the rejection of its tender, the characteristics and relative merits of the successful tender, and the name of the successful tenderer (order of 29 November 2011 in Case C-235/11 P Evropaïki Dynamiki v Commission, not published in the ECR, paragraph 46). By contrast, it does not follow from those provisions or from the judgment of 10 September 2008 in Case T-59/05 Evropaïki Dynamiki v Commission, not published in the ECR [...] that the [contracting authority] was required to provide the applicant with a complete copy of the evaluation report (see, to that effect, order of 20 September 2011 in Case C-561/10 P Evropaïki Dynamiki v Commission, not published in the ECR, paragraph 25) (T-498/11 at para 43).

It is also important to stress that the GC finds no shortcoming based on the principle of good administration in the use of relatively generic justifications for the withholding of information:

It is thus apparent that the [contracting authority] fulfilled its obligation to state reasons [...] regardless of the fact that the wording of those letters was stereotypical in nature as regards the reasons for the removal of some information (see, to that effect, judgment of 24 April 2012 in Case T‑554/08 Evropaïki Dynamiki v Commission, not published in the ECR, paragraph 141). Such wording is permissible in light of the fact that it may be impossible to state the reasons precisely justifying the confidentiality of each of the pieces of information concerned without disclosing them and therefore negating the effectiveness of the second subparagraph of Article 100(2) of the Financial Regulation (T-498/11 at para 45, emphasis added).

In my view, this Judgment is important in that it should reinforce the message that the principle of good administration requires a careful balance of the duty to state reasons against the duty to protect propietary and confidential business information, which should allow contracting authorities to give more importance to the second element and be less afraid of litigation on the basis of alleged shortcomings in the duty to state reasons. Generally, it may contribute to a better balance between transparency and competition in the public procurement setting, which should be welcome [for discussion, see A Sánchez Graells, Albert, 'The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives' (2013) University of Leicester School of Law Research Paper No. 13-11].

 

(2) Flying Holding and Others v Commission (not available in English) concerned the hire of aerotaxis for the President and other members of the EU Institutions and was organised as a two-stage restricted procedure. In this case, Flying Holding and its subsidiaries were not invited to the second phase of the tender due to the incompleteness of the documentation supporting their expression of interest and, in particular, certain security audits.

The dispute revolves around the (lack of) clarity of the documentary requirements included in the call for expressions of interest, as well as the Commission's unwillingness to accept the belated submission of those documents by Flying Holding due to a previous false declaration that they did not exist. The arguments of the challenger fundamentally rely on alleged breaches of the principles of proportionality, right to defence, and good administration. Interestingly, the GC has upheld the initiative taken by the Commission to directly contact the relevant aviation authorities to enquire about the safety of the operations of Flying Holding and its subsidiaries in the absence of documentation in the expression of interest. Furthermore, the GC has considered that even if the way in which such contact was carried out may have amounted to a violation of the right of defence, that would not have altered the outcome of the procedure due to the automatic application of the exclusion grounds based on falsity of (self)declarations in the public procurement setting (under art 94 Financial Regulation).

 

The reasoning of the GC is riddled with very technical points (see paras 41-50) but, in my opinion, the ultimate functional reading is that contracting authorities that proactively seek to clarify the (in)existence of a ground for exclusion/qualitative selection of tenderers are adequately discharging their duties under the principle of good administration, even if they contact third parties or authorities [for discussion of the new rules under Directive 2014/24, see A Sánchez Graells, 'Exclusion, Qualitative Selection and Short-listing in the New Public Sector Procurement Directive 2014/24', in F Lichere, R Caranta and S Treumer (ed) Novelties in the 2014 Directive on Public Procurement, vol. 6 European Procurement Law Series, (Copenhagen, Djøf Publishing, 2014)]. The requirements of the right of defence in that case are limited to communicating the result of such enquiries to the candidate or tenderer concerned, as well as providing it with an opportunity to comment.

 

It is also interesting to stress the reasoning the GC undertakes in relation to false or inexact (self)declarations and their relationship with the right to defend against the imposition of administrative sanctions (paras 51-79), which in my view are bound to trigger significant litigation in non-institutional (or general) procurement once Directive 2014/24 gets transposed (and, particularly, its rules on the European Single Procurement Document of art 59). The GC sees no breach of the principle of proportionality in the application of very strict standards in the interpretation and enforcement of exclusion grounds (paras 81-91). On that point, some more space may be created in the treatment of non-fully compliant tenderers, in the same way as for abnormally low and non-fully compliant bids [for discussion, see A Sánchez Graells, (2013), 'Rejection of Abnormally Low and Non-Compliant Tenders in EU Public Procurement: A Comparative View on Selected Jurisdictions' in M Comba & S Treumer (eds), Award of Contracts in EU Procurements, vol. 5 European Procurement Law Series, Copenhagen, DJØF, 2013, 267-302].

 

(3) Euro-Link Consultants and European Profiles v Commission concerned the provision of services related to the 'Crimean tourism diversification and support project', for which the challenging consortium's offer was not selected. Legally, this case is peculiar because the application of the Financial Regulation derives from the Practical Guide to Contract Procedures for EU external actions, in its 2010 version, updated in March 2011 (‘the PRAG’). Generally, the case is interesting because it focusses on the irregular situation where the disappointed tenderer seemed to have gained access to confidential information while the tender procedure was still under way, which triggered the involvement of the European Anti-Fraud Office (OLAF) [however, I could not find public information on that strand of the case].

 

As procurement is concerned, in the case at hand, Euro-link had access to a version of the CV of the team leader proposed by a competing tenderer and used it to challenge the technical assessment of her experience. Avoiding issues of confidentiality of that document, the GC considered that, even if the two versions of the CV (the one submitted by the competing consortium and the one used by Euro-link in its challenge) were different, this was not relevant. In its words,

As regards the alleged infringement of the principle of equal treatment, it must be noted that, according to settled case-law, that principle requires that comparable situations not be treated differently and different situations not be treated alike unless such treatment is objectively justified (see judgment of 10 October 2013 in Manova, C‑336/12, ECR, EU:C:2013:647, paragraph 30 and the case-law cited). In the present case, it must be noted that the different treatment of the version of Ms T.’s CV submitted to the Evaluation Committee by the consortium led by GDSI and that submitted by the applicants is justified by the different situations in which those two documents were submitted. The first, submitted in the context of the evaluation procedure, was intended to be examined by the contracting authority, whereas the second, submitted after the contract had been awarded, did not constitute, subject to the examinations carried out by the Commission, evidence capable of calling into question the probative value of the first (T-199/12 para 78).

This reasoning based on the principle of equal treatment seems odd and it is submitted that an alternative assessment based on the principle of good administration may have led to the same conclusion. Where the Commission has carried out a proper evaluation procedure and is satisfied that all requirements are met by a given tenderer, there is no breach of its duty of good administration if it does not reassess that position on the basis of (confidential) documentation submitted by a tenderer that does not provide substantial new facts.

 

As a tentative working conclusion, I think that this group of cases highlight the increasing trend of litigation of procurement decisions based on general principles of EU administrative and public law. Moreover, it makes it clear that contracting authorities will not be blamed for balancing the duty to state the reasons for their decisions with competing needs, even if they: 1) ensure a high level of protection of confidential information, particularly where third party (business) interests are at stake; 2) take proactive steps in the verification of the information provided by candidates (hence, lifting partially the confidentiality of the procedure or seeking access to third party confirmation, provided defence rights are upheld); or 3) disregard competing claims based on confidential information if they have carried out their own verification procedures (at evaluation stage).

 

Generally, I think that this group of cases should show that contracting authorities that exercise discretion in the management of confidential information are much less open to (viable) legal challenge than could have been though. And this should reduce the existing pressure towards excessive transparency in the public procurement setting, which can ultimately result in a healthier competitive environment. Consequently, this line of legal development must be welcome.

GC hints at a reduction of the burden of motivation of administrative decisions under EU law (T-319/11)

In its Judgment of 8 April 2014 in case T-319/11 ABN Amro Group v Commission, the General Court has indicated that the context in which an administrative decision is adopted may reduce the burden of motivation imposed on an institution when it deals with undertakings as interested parties, particularly when the alleged failure to provide sufficient motivation concerns a relatively secondary matter.

 

In the context of the judicial review of a State aid Decision adopted by the European Commission in the recapitalisation of ABN Amro by the Dutch State, the challengers of the Decision argued that the Commission had breached its duty of good administration and, more especifically, its obligation to provide reasons for the rejection of certain commitments linked to the restructuring of the bank.

 

Taking a pragmatical approach to the issue of whether the succint explanations provided by the Commission allowed the interested bank to assess its legal position, and whether the general motivation of the Decision was sufficient to discharge the requirements of the duty of good administration, the GC ruled that

138 [...] referring, by analogy, to the case-law according to which the reasons given for a measure adversely affecting a person are sufficient if that measure was adopted in a context which was known to that person and which enables him to understand the scope of the measure concerning him (see Case C‑417/11 P Council v Bamba [2012] ECR, paragraph 54 and case-law cited), it cannot be accepted in this case that the reasons stated in the contested decision do not meet the requisite legal standard because the decision does not discuss the alternative measures proposed by ABN Amro during the investigation procedure and rejected by the Commission (T-319/11 at para 138, emphasis added).

In my view, this Judgment can have interesting and positive implications if it is properly carried through to other areas of EU administrative law where, to date, the CJEU has adopted a much more demanding approach. In particular, I think that this incipient string of case law can be very helpful in the area of public procurement, where the current state of the law imposes what I deem as excessive debriefing obligations on the basis of the duty to provide reasons--which, in turn, result in a very dangerous and detrimental transparency in public procurement settings [for discussion, see "The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives", University of Leicester School of Law Research Paper No. 13-11]. I therefore hope that such pragmatical approach will be further developed and properly adjusted to other areas of EU Economic law, such as public procurement.

#CJEU does not tolerate a slacker @EU_Commission in #Stateaid control (C-615/11): Commission counter-attacks with 'case management' excuses

In its Judgment of 16 May 2013 in case C-615/11 Commission v Ryanair, the Court of Justice of the European Union (CJEU) has dismissed the Commission's appeal against the prior Judgment of the General Court where it was found that the Commission failed to fulfill its obligations under the Treaty by not adopting a decision following a complaint lodged by Ryanair. 

Building up on the prior case law in Athinaïki Techniki AE v Commission (C-521/06), the CJEU has imposed upon the European Commission a clear duty to act when it is put in possession of information regarding alleged unlawful aid and called upon to to define its position within the meaning of Article 265(2) TFEU. In the view of the CJEU

27 As a preliminary point, it should be borne in mind that, under Article 20(2) of Regulation No 659/1999, any interested party may inform the Commission of any alleged unlawful aid and of any alleged misuse of aid.

28 Where it has in its possession information, from whatever source, regarding alleged unlawful aid, the Commission is required, under Article 10(1) of Regulation No 659/1999, immediately to examine the possible existence of aid and its compatibility with the internal market. The examination of such information, on the basis of that provision, gives rise to the initiation of the preliminary examination stage under Article 108(3) TFEU (see, to that effect, Case C‑322/09 P NDSHT v Commission [2010] ECR I‑11911, paragraph 49 and the case-law cited).

29 At that stage, and where it considers that there are insufficient grounds for taking a view on the case, the Commission, in accordance with the second sentence of Article 20(2) of Regulation No 659/1999, must communicate that finding to the interested parties which have sent it the information in question and must also allow those parties to submit additional comments within a reasonable period (see, to that effect, Athinaïki Techniki v Commission, paragraph 39).

30 Article 13(1) of Regulation No 659/1999, which is applicable in the context of an examination of alleged unlawful aid, obliges the Commission to close that preliminary examination stage by adopting a decision pursuant to Article 4(2), (3) or (4) of that regulation, that is to say, a decision finding that aid does not exist, raising no objections or initiating the formal investigation procedure, since that institution is not authorised to persist in its failure to act during the preliminary examination stage (Athinaïki Techniki v Commission, paragraph 40).

31 It follows […] that the preliminary examination stage, which ultimately obliges the Commission to take a position, requires that, where that examination is carried out on the initiative of an interested party, information concerning alleged unlawful aid be sent to the Commission by that party (C-615/11 at paras 27 to 31, emphasis added).

The extent of the Commission's duties is crystal clear and, consequently, the Institution should better internalize this obligation--which, more generally, is not much more than a specific expression of the duty of good administration that is increasingly recognised as a general principle of EU (Administrative) Law.

Indeed, this Judgment should seriously be taken into consideration in the current State Aid Modernisation (SAM) initiative--which the Commission should use to streamline its procedures as necessary to discharge the (raised) duty of diligence that derives from the CJEU's Ryanair Judgment. In this regard, it is positive to see that, as part of SAM (and probably in view of the defeat suffered before the GC and the likely, now actual, defeat before the CJEU), the Commission is already proposing to modernise the Procedural Regulation (659/1999) with regard to complaint-handling and market information tools. According to the Commission's proposal:

The Commission is required to conduct a diligent and impartial examination of complaints submitted from interested parties and take a decision thereon without undue delay. Where the Commission takes a decision finding that there exists no State aid as alleged by a complainant, the Commission must at least provide the complainant with an adequate explanation of the reasons for which the facts and points of law put forward in the complaint have failed to demonstrate the existence of State aid [COM(2012)0725 final, Explanatory Memorandum].

This begs the question why did the Commission not desist from the appeal in case C-615/11 if it had, itself, already assumed that it was in the wrong in the Ryanair case? (although the potential Art 340 TFEU claim for non-contractual liability of the European Commission that may follow today's CJEU Judgment seems the obvious explanation...).

Going back to the specific proposals of the Commission to improve the way it handles State aid complaints, the positive impression disappears when one realizes that the December 2012 proposal aims to modify Regulation 659/1999 to expressly regulate the way in which complaints need to be lodged--and, consequently, the reform is largely a 'self-defence' instrument for the European Commission, which feels overburdened by State aid complaints. As explained (excusation non petita...)

the Commission receives on average more than 300 complaints every year, whether lodged by interested parties or not, among which many are either not motivated by genuine competition concerns or not sufficiently substantiated. Most complaints are not treated as a priority and the average duration of those cases therefore tends to increase. Therefore, the complaints handling procedure is sometimes perceived by Member States and complainants as unpredictable and lacking transparency [COM(2012)0725 final, Explanatory Memorandum].

Hence, the Commission is proposing to consolidate in the regulation some of the 2009 Code of Best Practices for the conduct of State aid procedures, which expected benefits 'of shorter duration, increased efficiency and greater predictability – have not fully materialised [Moreover] Best Practices could not address some of the main shortcomings of the current system, since they directly stem from the Procedural Regulation. That is why a reform of the Procedural Regulation itself is proposed to address those issues.' Therefore, the European Commission proposed the following modifications:

In the interests of transparency and legal certainty (sic), the conditions to lodge a complaint which put the Commission in possession of information regarding alleged unlawful aid and thereby set in motion the preliminary examination should therefore be clarified. Indeed it is appropriate to require that:

– complainants submit a certain amount of compulsory information. To that end, it is appropriate to empower the Commission to adopt implementing provisions to define the form and the content of a complaint.

– complainants demonstrate that they are interested parties within the meaning of Article 108(2) TFEU and Article 1(h) of the Procedural Regulation and that they therefore have a legitimate interest to lodge a complaint. To reach that objective, it is proposed to specify in Article 20(2) on the "rights of interested parties" that "any interested party may lodge a complaint".

In cases where the information received will not be classified as a complaint since it will not have passed the admissibility criteria, the Commission will no longer be under an obligation to adopt formal decisions. Those submissions will be registered as market information and could be used at a later stage to conduct ex officio investigations.

To complete the staged procedure introduced by the Best Practices Code, the Procedural Regulation should formalise the possibility for the Commission to deem complaints withdrawn if the complainant does not return to it with meaningful information or otherwise fails to cooperate during the procedure. In that way, the treatment of complaints could be streamlined and improved (emphasis added and references omitted).

In my view, these changes are self-serving and would simply (aim to) deactivate the functional approach and the high duty of administrative diligence stressed by the CJEU in the Ryanair Judgment and, consequently, may diminish significantly the effectiveness of the complaints mechanism, sacrificing it in the altar of workload allocation and Commission liability-proofing. The trade-off may likely reduce the effectiveness of State aid control in the long run. 

Interestingly, these proposals were the object of a consultation and, hopefully, the Commission will issue a revised proposal in view of those and other considerations. In my opinion, given the very clear approach followed by the CJEU in Ryanair, the European Commission should abandon its self-centered approach to the reform of the rules on the handling of complaints in State aid cases and, in the spirit of institutional loyalty and in with the aim to keep (or develop) a well-functioning State aid control system, introduce more flexibility in the criteria for the lodging of complaints by (non)interested parties.

Again on the protection of confidentiality in procurement evaluation: A step forward? (T-339/10 and T-532/10)

In its Judgment of 29 January 2013 in Joined Cases T‑339/10 and T‑532/10 Cosepuri Soc. Coop. pA v European Food Safety Authority (EFSA), the General Court has ruled again on the topical issue of the protection of confidentiality and business secrets in tender evaluation--and, in principle, has shown a more balanced approach than in previous Judgments concerned with transparency at debriefing stage. 

However, in my opinion, the case law in this area still falls short from guaranteeing a proper balance between transparency and protection of business secrets and continues to promote excessive disclosure.

In the case at hand, Cosepuri challenged the EFSA's evaluation procedure on the basis of the confidential treatment of financial assessment. The GC has taken no issue with the degree of confidentiality imposed by EFSA, but on a series of grounds that still seem (partially) inadequate:

32 First, the applicant calls into question the fact that Part II.8.2 of the tender specifications provided that the tender evaluation procedure was to be confidential. It should be noted in that regard that the applicant has the right to challenge, as an incidental plea, the lawfulness of the specifications in the present action (see, to that effect, Case T‑495/04 Belfass v Council [2008] ECR II‑781, paragraph 44). […]

33 Article 89(1) of the Financial Regulation provides that all public contracts financed in whole or in part by the budget are to comply, inter alia, with the principle of transparency. In the present case, it must be noted that Part II.8.2 of the specifications, which provides that the procedure for the evaluation of the tenders is to be conducted in secret, satisfies the requirement of preserving the confidentiality of the tenders and the need to avoid, in principle, contact between the contracting authority and the tenderers (see, on this point, Article 99 of the Financial Regulation and Article 148 of the Implementing Rules). The principle of transparency, referred to in Article 89(1) of the Financial Regulation, which is invoked by the applicant, must be reconciled with those requirements. Accordingly, there is no basis on which it can be concluded that Part II.8 of the specifications is vitiated by unlawfulness.

34 Second, the applicant challenges the fact that it was not able to ascertain the price proposed by the successful tenderer. In particular, the applicant states that EFSA ensured that it would not be possible for any subsequent verification to be carried out by redacting from the evaluation report the price offered by the successful tenderer. In that regard, without there being any need to rule in the present case on whether the price proposed by the successful tenderer formed part of the information which the contracting authority should have communicated to the unsuccessful tenderers (sic), it is clear from the evidence submitted that the applicant was in a position to ascertain the price in question. It is apparent from Section 2.4 of the evaluation committee report that the applicant and the successful tenderer offered the same price in respect of points 2 to 7 of the financial bid, both obtaining the maximum score of 15 points. The price offered by the successful tenderer in respect of points 2 to 7 of the financial bid is therefore abundantly clear from the evaluation committee report. Moreover, with regard to point 1 of the financial bid, the evaluation committee report indicated the price offered by the applicant and the mark obtained. Although it does not expressly refer to the price offered by the successful tenderer, that report specifies the mark obtained by it. Taking account of those factors, it was possible to calculate, without any difficulty, the price proposed by the successful tenderer in respect of point 1 of the financial bid, as submitted by EFSA in connection with the second plea. Furthermore, the Court has been able to verify, by way of the measure of inquiry adopted at the hearing (see paragraph 16 above), that the price mentioned by EFSA in its written pleadings was in fact the price proposed by the successful tenderer. In view of all the foregoing considerations, the Court considers that, even if EFSA had erred by failing to indicate expressly to the applicant the price proposed by the successful tenderer, such an error would have had no effect on the lawfulness of EFSA’s decision to reject the applicant’s tender and award the contract at issue to another tenderer whose bid was considered to be better, since the applicant was in a position to ascertain that price. The applicant’s arguments in that regard must therefore be rejected.

35 Third, with regard to the principle of sound administration relied on by the applicant, according to case‑law, guarantees afforded by the European Union legal order in administrative proceedings include, in particular, the principle of sound administration, which entails the duty on the part of the competent institution to examine carefully and impartially all the relevant aspects of the individual case (see the judgment of 15 September 2011 in Case T‑407/07 CMB and Christof v Commission, not published in the ECR, paragraph 182 and the case‑law cited). In the present case, the arguments put forward by the applicant in the first plea, which essentially consist in criticising the fact that it was not granted access to the financial bid of the successful tenderer, do not demonstrate that EFSA failed to examine carefully and impartially all the relevant aspects of the case. In the absence of more detailed evidence, the applicant’s arguments in that regard must be rejected. (T-339/10 and 532/10 at paras. 32 to 35, emphasis added).

In my view, paragraphs 33 and 35 of the Cosepuri Judgment must be welcome, as they set a more balanced framework for the assessment of the obligation to disclose confidential information and business secrets under the principles of transparency and good administration.

On the contrary, paragraph 34 deserves a clear rejection, given that the GC keeps a very formalistic approach to the protection of confidential information and takes no issue with the fact that such sensitive information as price can be disclosed indirectly, and considers that that does not infringe either the rights of the 'disclosed' undertaking to protection of its business secrets, nor the procedural rights of the disappointed bidder that is granted indirect access to that information.

I think that the GC should have taken a stronger position and clearly confirmed that both direct and indirect disclosure of price elements and financial evaluations can be restricted or excluded on grounds of protection of confidentiality. Otherwise, the incentives continue to push contracting authorities for an excessive degree of transparency in public procurement settings--which creates significant risks of collusion [Sánchez Graells, "Public Procurement and Competition: Some Challenges Arising from Recent Developments in EU Public Procurement Law" in Bovis (ed) Research Handbook on European Public Procurement  (forthcoming), http://ssrn.com/abstract=2206502].