The Council of the European Union and the European Parliament on 15 November 2007 adopted a Commission proposal for a Directive reviewing EU rules on remedies in the area of public procurement. This new Directive improves the national review procedures that businesses can use when they consider that a public authority has awarded a contract unfairly.
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The Commission’s proposal followed extensive consultationson the functioning of the existing Remedies Directives with all major stakeholders,including Member States, awarding authorities, businesses, lawyers and professional associations. Notably businesses reported that in the area of public procurement, the current national review procedures in practice do not always allow for effective correction of unfair award decisions.
Two key issues were identified. First, legal remedies which can be introduced at a stage before a public contract is actually concluded, are not sufficiently effective in all Member States and should therefore be strengthened. Second, illegal direct awards of public contracts, which are the most serious violations of Community law in the area of public procurement, should be combated more fiercely.
In order to address these issues in particular, the Commission proposed a new Directive, amending the existing Remedies Directives, to provide businesses, wherever in the EU they would like to bid for public contracts, with more effective national review procedures when awarding authorities have violated the EU Directives on public procurement.
The Remedies Directives coordinate the national review procedures in the area of public procurement in situations where a (potential) bidder alleges that a public contract has been awarded unfairly, in violation of the rules. These Directives cover remedies for public contracts which fall within the scope of the substantive EU Directives on public procurement, i.e. Directive 2004/18/EC (works, supplies and services contracts in the classical sector) or Directive 2004/17/EC (works, supplies and services contracts in the sectors of water, energy, transport and postal services.
According to the new Directive, contracting authorities need to wait for at least 10 days after deciding who has won the public contract before the contract can actually be awarded. This “standstill period” is designed to give bidders time to examine the award decision and to assess whether it is appropriate to initiate a review procedure. If this standstill period has not been respected, the Directive requires national review bodies under certain conditions to set aside the signed contract, by rendering the contract “ineffective”.
The new Directive introduces a specific remedy in case a contracting authority has awarded a public contract directly, without prior transparency and prior competitive tendering, where this is not allowed. National review bodies will be empowered to render these contracts “ineffective” after their conclusion. In these cases, the contract will need to be tendered again, this time according to the appropriate rules. National review bodies may decide that these contracts remain in force only if required by overriding reasons relating to a general interest. In those cases, alternative penalties must be applied instead. These alternative penalties must be effective, proportionate and dissuasive, and may entail the shortening of the duration of the contract or the imposition of fines on the contracting authority. An application for ineffectiveness of a public contract must be filed within 30 days after publication of the contract award notice. If no such notice has been published, businesses have up to 6 months after contract conclusion to file their application for the ineffectiveness of the contract.
The new Directive will increase economic operators confidence in the fairness and transparency of the public procurement procedures in all Member States. With the new rules, national review bodies, such as national courts or administrative review bodies, will have more effective means of enforcing the EU Directives on public procurement. This will urge all EU contracting authorities to better comply with the rules on transparency and competitive tendering. As a consequence, business opportunities for all businesses in the Internal Market will increase, especially for the most competitive ones, and the new Directive will act as an incentive to bid for public contracts anywhere in the EU.
