First application for Declaration of Ineffectiveness fails

Readers will probably be aware that the Remedies Directive made available a new remedy to claimants known as a 'declaration of ineffectiveness'. Briefly, this allows the court to overturn an awarded contract in three specific situations:

  • Ground one - where the contract was directly awarded without notice or appropriate competition
  • Ground two - where the contracting authority failed to run a compliant standstill period, which deprived the bidder of the opportunity to suspend the award process prior to award
  • Ground three - where the contract was awarded under a framework arrangement and the rules on 'mini-competitions' were not followed correctly.

This new regime has its own time limits which are separate from the general time limits for procurement damages claims. In short, a claimant has up to 6 months from the day after the contract was entered into, unless:

  • a contract award notice is published in the OJEU; or
  • the contracting authority informs the bidder of the award and a summary of the relevant reasons and relative advantages and characteristics of the successful bid.

In the latter two cases, the bidder's time limit is reduced to 30 days from the day after the notice is published or the reasons given.

Last week the first claim for one of these declarations of ineffectiveness was heard, in the case of Alstom v Eurostar which concerned a contract for the replacement of the Eurostar fleet of trains.

Back in 2010, Alstom had already applied for an injunction to prevent award - this failed and the contract was duly awarded. Alstom therefore turned to the new ineffectiveness regime to try to get the contract overturned. The claim was actually brought under the Utilities Contracts Regulations 2006, which run parallel to the more commonly used Public Contracts Regulations 2006 and contain many of the same provisions, although there are also some key differences.

The contract was awarded using a qualification system, which is provided for in the Utilities Regulations but not in the Public Contracts Regulations. Alstom complained that:

  • the qualification notice Eurostar issued was not a 'notice' for the purposes of the first ground of ineffectiveness, therefore there had been no notice and the first ground of ineffectiveness was satisfied; and
  • the standstill period had not been run correctly and Alstom had been deprived of an opportunity to seek redress for breaches.

The application was again unsuccessful and the contract was upheld. The judgment brings out the following useful pointers as to how the courts are minded to apply these new provisions:

  • a qualification notice was a notice for the purposes of the first ground of ineffectiveness. Note that this is a concept particular to the Utilities Regulations and the ineffectiveness provisions in the parallel Public Contracts Regulations clearly state that it is an OJEU contract notice which is required (as opposed to, say, a Prior Information Notice);
  • given that Alstom had brought injunction proceedings back in 2010 to try to prevent the award, it could hardly argue that the second ground of ineffectiveness applied now. The fact that it made the application for the injunction demonstrated that, whether or not the standstill period had been correctly run, it had not been deprived of a chance to prevent the award of the contract; and
  • the judge applied the 30 day time limit and made some useful observations about the duty to 'give reasons' in these situations, saying that this should be done in a short document in order to lessen commercial uncertainty; it is undesirable to have a limitation period dependent on a long and potentially contentious document.

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