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||Neutral Citation Number:  EWHC 3326 (TCC)
||Case No: HT-2014-000053,HT-2014-000094,HT-2015-000163
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
||Royal Courts of Justice
Strand, London, WC2A 2LL
B e f o r e :
THE HONOURABLE MR JUSTICE FRASER
|| ENERGY SOLUTIONS EU LIMITED
||- and -
||NUCLEAR DECOMMISSIONING AUTHORITY
John Howell QC, Andrew Hunter QC and Ewan West (instructed by Skadden, Arps, Slate, Meagher & Flom (UK) LLP) for the Claimant
Nigel Giffin QC, Joseph Barrett and Rupert Paines (instructed by Burges Salmon LLP) for the Defendant
Hearing dates: 14, 15, 16, 17 November 2016
HTML VERSION OF JUDGMENT
Crown Copyright ©
JUDGMENT No.3 (2nd FRANCOVICH CONDITION)
Mr Justice Fraser:
- In these three sets of proceedings, there are three claims, each commenced by the entity that at the time was called EnergySolutions EU Limited (and is now called ATK Energy EU Limited) as Claimant ("Energy Solutions") against the Nuclear Decommissioning Authority ("NDA"). All three claims concern the same procurement exercise, and have been case-managed and tried together. This procurement exercise was in relation to the decommissioning of the UK's 10 Magnox power stations, together with two other separate nuclear research facilities. The 12 different sites no longer have active Magnox reactors, and they are all now in different stages of nuclear decommissioning. Energy Solutions was part of a consortium that was unsuccessful in the procurement exercise for that project, the consortium's other member being Bechtel Management Company Ltd ("Bechtel"). The consortium was called RSS, and Bechtel took no part in the litigation (although it has since issued separate proceedings against the NDA). The tender process was initiated by the NDA by way of publication on 18 July 2012 of a notice in the Official Journal of the European Union, published under the number 2012/S 136-227570 (the "OJEU Notice"), and was conducted under what is called the competitive dialogue procedure.
- The different bids were required to be submitted to the NDA by 1 November 2013, and a complex analysis of the different bids then took place whereby teams of Subject Matter Experts ("SMEs") at the NDA evaluated the different tenders and arrived at a score for each, to determine which bidder had submitted the most economically advantageous tender (sometimes in the contemporaneous documents and authorities referred to as "MEAT"). That determination by the SMEs was done against scoring criteria contained in the Statement of Response Requirements, or SORR, which formed part of the rules of the procurement competition by reason of being included in the Invitation to Submit Final Tenders. The contract that was to be awarded by the NDA which was the subject of the procurement was called the Transition Agreement. Assuming certain conditions precedent were complied with, a successful tenderer who was awarded the Transition Agreement would be awarded another contract with the NDA called the Parent Body Agreement (or "PBA") about six months after award of the Transition Agreement.
- The successful tender was submitted by a different consortium to RSS, which did not win the competition. At the time of the competition this other consortium was called the Cavendish Fluor Partnership, and had as its members Babcock Nuclear Services Ltd (through its subsidiary Cavendish Nuclear) and Fluor Enterprises Inc. (I will refer to this consortium as "CFP" throughout). Following the detailed evaluation exercise performed by the NDA, the overall scores given to these two different tenderers were 86.48% to CFP and 85.42% to RSS. The claims brought by Energy Solutions in the proceedings were founded on allegations that the basis upon which the evaluation exercise had been performed by the NDA upon both tenders was manifestly erroneous in certain discrete respects.
- Following the hearing of the trial of all liability issues which took place before me on different dates between November 2015 and July 2016 (in circumstances explained in  to  of that judgment, entitled Judgment No.2 (Liability)), I found that some of the scores for various Requirements in the tenders both of RSS and CFP had been awarded on a manifestly erroneous basis, and should be changed. I also found that CFP should have been disqualified from the competition entirely due to deficiencies in its tender in two of what were called Threshold Requirements, namely Requirements 306.5.1(j) and 401.5.1(b)(ix).
- After the appropriate weighting was applied to the new scores, the results of the procurement competition as adjusted in these proceedings following Judgment No.2 (Liability), and without taking account of the disqualification of CFP that I found should have occurred, should have been 91.48% for RSS and 85.56% for CFP. Accordingly, the most economically advantageous tender was that of RSS, whether as a function of the percentage outcome of the evaluation compared to CFP and the other tenderers (had CFP remained within the competition) or in any event (had CFP been disqualified as a result of the application of the terms of the SORR to CFP's Tender Submissions for Requirements 306.5.1(j) and 401.5.1(b)(ix)). Damages for Energy Solutions' claim are yet to be assessed, and this is to take place in the next round of the litigation.
- However, Edwards-Stuart J had, prior to the trial on liability, handed down judgment on three preliminary issues on 23 January 2015, and that judgment is at  EWHC 73 (TCC). I will refer to that as Judgment No.1 (Preliminary Issues). That judgment is relevant to this judgment, which I will call Judgment No.3 (2nd Francovich condition). The need for this third first-instance judgment arises in the following circumstances. Energy Solutions had issued proceedings in the First Claim, HT-2014-000053 on 28 April 2014 against NDA seeking damages. This post-dated the date by which proceedings must have been commenced to have triggered the automatic suspension that would have prevented the NDA from contracting with CFP. There is what is called a standstill period under Regulation 32A of the Public Contracts Regulations 2006 (SI 2006 No. 5) (the "Regulations") within which an authority is prohibited from entering into the contract (or framework agreement) with a successful bidder. That period starts with the notification of the outcome of the competition to the participants, and ends at the later of either midnight at the end of the 15th day after the relevant sending date, or the 10th day after the last date of receipt by the tenderers, of the regulation 32(1) notice. It is this notice which notifies the bidders of the outcome of the procurement competition. In this case, the standstill period ended at midnight on 14 April 2014. Energy Solutions therefore issued proceedings 14 days after that period had ended.
- If proceedings are issued within this standstill period, an automatic suspension operates to prevent an authority from entering into the contract the subject matter of the procurement. It was open to RSS, Bechtel and/or Energy Solutions (the latter two as members of the consortium) to have issued proceedings against the NDA under regulation 47C of the Regulations, and to notify the NDA that they had done so, before the end of the standstill period, and therefore before the Transition Agreement was entered into between the NDA and CFP. Had this been done, the NDA would have been required to refrain from entering into the contract under regulation 47G(1) of the Regulations. This automatic suspension is similar in effect to an injunction, and prevents an authority from contracting with the winner of a procurement competition if that outcome is under legal challenge by another bidder. Because the period within which proceedings had to be issued for such a suspension had elapsed, the Transition Agreement had already (when proceedings were issued by Energy Solutions) been entered into between the NDA and CFP on 15 April 2014. This was the day after the end of the standstill period. It should also be stated that the NDA had refused a request by RSS to extend the standstill period. Even in cases where proceedings are issued within the period necessary to initiate the automatic suspension, an authority is entitled to apply to the court (and often does) to have that lifted. The principles that apply in such a situation are analogous to those for interim injunctions, including the question of whether damages are an adequate remedy, and the availability (and efficacy) of cross-undertakings in damages. This is clear from a number of cases, most recently those such as NATS (Services) Ltd v Gatwick Airport Ltd and DFS Deutsche Flugsicherung GMBH  EWHC 3133 (TCC),  PTSDR 566 a decision of Ramsey J who found that the principles to be applied were the same as those contained in the seminal American Cyanamid test. The same principle has been applied subsequently, in cases such as Group M UK Ltd v Cabinet Office  EWHC 3659 (TCC) by Akenhead J and Bristol Missing Link Ltd v Bristol City Council  EWHC 876 (TCC), PTSR 1470 by Coulson J.
- Preliminary issues were tried by Edwards-Stuart J concerning whether, by Energy Solutions having failed to issue proceedings within the period which would have led to the automatic suspension of the contract award, Energy Solutions had in some way either damaged its position or broken the chain of causation. The findings on the three preliminary issues were then challenged on appeal by both parties. The judgment of the Court of Appeal (Lord Dyson, then Master of the Rolls, Tomlinson and Vos LJJ) on that appeal was handed down during the trial of liability. The judgment on the appeal is at  EWCA Civ 1262. The relevant preliminary issues (one of them did not arise) and the answers to them are therefore as follows after the appeal (in paragraph  of the judgment of Vos LJ):
"i) Energy Solutions' failure to issue and alert the NDA to a claim form before it entered into the Contract does not break the chain of causation between any breaches of the NDA's obligations that may be established and any loss caused to Energy Solutions in consequence of them.
ii) The English court has no discretion as to making an award of damages to Energy Solutions if it is shown to have suffered loss as a consequence of breaches of duty established against the NDA under the Regulations."
- The Court of Appeal refused NDA's application for permission to appeal to the Supreme Court. The NDA made an application for permission directly to the Supreme Court itself. Prior to the handing down by me of the draft Judgment No.2 (Liability), on 16 May 2016 the Supreme Court granted permission to the NDA on its appeal, and the hearing of that appeal is to occur in March 2017. It is therefore the case that the Supreme Court could potentially find that the so-called "Francovich conditions" are imposed on the damages claim by Energy Solutions, such that these conditions have to be satisfied in order for Energy Solutions to be entitled to recover any damages. These conditions are relevant to the argument raised by the NDA that the award of damages by the English court is a discretionary remedy in a situation such as this one. The term "Francovich conditions" refers to the three conditions applicable to awards of damages in EU law that were explained by the Court of Justice of the European Union ("CJEU") in Francovich v Italy (C-6/90)  ECR I-5357, as formulated by the CJEU in Brasserie du Pêcheur S.A. v Federal Republic of Germany, Regina v Secretary of State for Transport ex parte Factortame Limited (Joined cases C-46/93 and C-48/93)  QB 404 (the "Brasserie du Pêcheur" case). These conditions are as follows, namely that (i) the rule of law infringed must be intended to confer rights on individuals, (ii) the breach must be sufficiently serious, and (iii) there must be a direct causal link between the breach of the obligation and the damage sustained by the injured party. Energy Solutions' argument, which was accepted by Edwards-Stuart J and upheld in the Court of Appeal, was that ordinary English law principles were applicable to such awards of damages, and that once a breach of the Regulations was established the award of damages was not discretionary. In those circumstances, satisfaction of a requirement that the breach must be "sufficiently serious" for the award of damages did not arise and was not required. The NDA will be challenging those findings in the Supreme Court.
- The second of the Francovich conditions requires that a breach has to be "sufficiently serious" for damages to be awarded. The NDA argued in the Court of Appeal, unsuccessfully, that the phrase "may award damages" in Regulation 47J(2)(c) gives effect to the Francovich conditions in a claim such as this one. That argument is, unless the judgment of the Court of Appeal is overturned in the Supreme Court, not one which needs to be considered in this case. However, the situation concerning the possibility of a successful appeal by the NDA in relation to the preliminary issues has been in the background to the liability trial before me from before the date of the Pre-Trial Review on 9 October 2015. Once permission had been given for the appeal to be heard in the Supreme Court, the possibility of a successful appeal by the NDA became more than merely academic. Also, the Court of Appeal in October 2015 were told that the breaches would be considered on both bases at first instance as an alternative.
- This presented case management issues which were dealt with by agreement of the parties and approved by the court. The court will not, in the usual scheme of things, consider hypothetical or academic issues. However, all the evidence on breaches committed by the NDA during the evaluation of the tenders was heard for the liability trial. There could be no question of hearing such evidence a second time. In order to avoid a situation whereby the parties were faced with a situation where, potentially, breaches in relation to which evidence had been heard in late 2015 were being reconsidered by the court in late 2017 or even 2018, against a framework of whether or not they satisfied the second Francovich condition of being "sufficiently serious", the following course of action was adopted. The question of "sufficiently serious" breaches would be addressed prior to the appeal in the Supreme Court being heard, and against the findings of breach already found in Judgment No.2 (Liability), following further submissions by the parties on that specific issue. The court was therefore invited to make findings applying the jurisprudence on this issue but without knowing whether the NDA appeal in the Supreme Court would succeed or fail.
- This course of action has many advantages, not least that the parties will know exactly where they stand in the event of a successful appeal, but one specific disadvantage. No guidance or authority is yet available from the Supreme Court about how the test might be applied in the private law sphere generally, and in the procurement field specifically, if the condition is held to apply. This disadvantage became more than illusory when the parties complied with the request that they lodge some agreed wording for the issue under consideration.
- Issue 4 in the Agreed List of Issues for the liability trial (at  in Judgment No.2 (Liability)) stated as follows:
"4. If the Defendant acted unlawfully, whether any such unlawfulness (whether individually or cumulatively) constituted a sufficiently serious breach to give rise to a liability in damages (assuming that to be a requirement of such liability)."
This was the issue that it was agreed would be dealt with in this round of the litigation. However, it can be seen that it does not define "sufficiently serious breach" in terms of the Francovich conditions. Accordingly, the parties were invited to refine it, and to agree the necessary wording to make that clear.
- However, the parties went considerably further than that. The agreed wording for the issue became three separate heads, which overlapped, the third of which had eight parts, and one of those had eight sub-parts. The list was as follows:
Whether a failure to award a contract to the tenderer whose tender ought to have been assessed as the most economically advantageous offer, is in itself a sufficiently serious breach of the contracting authority's obligations to warrant an award of damages.
If not, whether in all the circumstances of this case, the breaches by the NDA of its obligations are sufficiently serious to warrant an award of damages.
In addition to the generality of those questions, particular issues include:
(i) For these purposes, whether the obligation to apply the evaluation criteria specified by the authority should be regarded as a clear and precise obligation, and whether its discharge involves any exercise of discretion and, if so, its nature and extent;
(ii) What is meant, in the context of a dispute about the evaluation of tenders in a procurement, by the authority having gravely and manifestly disregarded the limits on its powers or discretion;.
(iii) How the applicable factors for assessing the seriousness of a given breach or of breaches collectively are to be applied in the context of a procurement evaluation case;
(iv) The way in which the concepts of a breach being intentional, involuntary, inadvertent, and excusable should be understood in this context and the significance of any error being so classified;
(v) How (if at all) the following matters are to be taken into account –
(a) the size or value of the contract being awarded;
(b) the scale and complexity of the procurement exercise;
(c) the number of breaches committed;
(d) the number of scores awarded without challenge;
(e) the responsibility of the NDA as an institution for any breaches resulting from the actions of one or more individual NDA employees, and the relevance or otherwise of the breach arising from the actions of such individuals rather than from the policy of the NDA;
(f) whether any breach entails any discrimination on the basis of nationality and/or any impact upon the functioning of the single market;
(g) whether any breach involves a breach of the obligation of equal treatment and/or transparency; and
(h) the Remedies Directive;
(vi) Whether a failure to exclude a tender where that is required in accordance with the rules of the competition is in itself a sufficiently serious breach;
(vii) Which, if any, of the individual scores awarded by NDA in breach of its
obligations were themselves sufficiently serious breaches; and
(viii)Whether the NDA's breaches are sufficiently serious when considered
collectively, and whether they are capable of being sufficiently serious on this basis if they are not when considered individually.
- The parties in this case have had earlier difficulty in agreeing lists of issues. The list in the preceding paragraph reads as though they could not agree the issue (or even, if this required expanding into more than one, the issues) to be dealt with in this round, and simply added two different lists of issues together. Issues 3(vii) and 3(viii) are simply differently worded versions of Issue 2, for example. Energy Solutions, for example, used Issues 1 and 2 above as sub-headings for the two different sections of its skeleton argument. The skeleton argument did not separately address the 16 different parts of issue 3 at all, and Mr Howell QC for Energy Solutions told me orally he would be addressing Issues 1 and 2. When asked about Issue 3, he submitted that "Number 3 will be fed into wherever it is I am dealing with those particular points." Mr Giffin QC told me that some parts of Issue 3 were "the working out" of Issue 2.
- I have very real concerns that some elements of Issue 3 trespass directly on the matters before the Supreme Court. Quite apart from the obvious point that the Supreme Court is not likely to be even remotely assisted by the views of a first-instance judge, I do not have jurisdiction to make any findings in that respect in any event. At least two of the component parts of Issue 3 plainly fall into this category:
(f) whether any breach entails any discrimination on the basis of nationality and/or any impact upon the functioning of the single market;
(h) The Remedies Directive.
Also, in my judgment it is inconceivable that the subject matter of issues 3(v)(a) and (b) would not be considered by the Supreme Court, were it to be found that the second Francovich condition did apply to procurement competitions in domestic law.
- Such matters, in my judgment, will or may fall to be considered by the Supreme Court when considering NDA's appeal. In this judgment, therefore, I only address such elements of Issue 3 as are necessary to come to the relevant conclusions on Issue 1, and if it arises, Issue 2. In those issues, the phrase "sufficiently serious breach" is one that has the same meaning as that phrase in the second of the Francovich conditions.
The Legal Principles
- By way of overview, the claim that Energy Solutions has against the NDA is one under the Regulations, and was expressed by Vos LJ as "indeed a private law claim for breach of statutory duty" in  of the Court of Appeal judgment upon the preliminary issues in these proceedings. He continued in  "In these circumstances, it seems to me that the court in this case is concerned with a series of alleged breaches of statutory duty arising under the domestic law provisions of the Regulations." The starting point is the Brasserie du Pêcheur case itself, which is of central importance in relation to the Francovich conditions. However, not only was that not a procurement case (in fact it was two cases heard together) but both the actions concerned claims being advanced against Member States, in other words they were claims in public and not private law. The first was a claim for damages by a French brewing company against Germany arising from it having had to discontinue beer exports to Germany by reason of the purity requirements in German law, which violated the Treaty of the EU. The second was a claim for damages against the United Kingdom based on the registration conditions in the Merchant Shipping Act 1988 having been declared unlawful under EU law. That latter case was R v Secretary of State for Transport ex parte Factortame Ltd (No.4)  QB 404.
- Mr Howell QC for Energy Solutions submits that the concept of a "sufficiently serious breach" is usually a qualification for EU or Member State liability under EU law. That is undoubtedly a correct classification, but this judgment must proceed (if it is to have any usefulness at all) as though the principle applied to private law rights. There is a degree of artificiality in applying the dicta of the courts that consider discretion on the part of a Member State (or the EU), and comparing or applying it to discretion on the part of an authority conducting a procurement competition. This must be borne in mind when considering both Issue 1 and Issue 2. There may be discretion on the part of the authority when conducting an evaluation – for example where there are matters of judgment to be exercised in arriving at a suitable score, or arriving at a score without manifest error – but there is no discretion in deciding whether or not to award the contract in question to the most economically advantageous tenderer. If tenderer A submits a bid that, evaluated without manifest error, achieves a score of 80%, and tenderer B submits a bid that, evaluated without manifest error, achieves a score of 90%, the authority has no discretion regarding the tenderer to whom the contract should be awarded. The contract plainly, on this analysis, in order to comply with the Regulations, must be awarded to tenderer B. I will return to this point when analysing the nature of the breaches found to have been committed by the NDA in Judgment No.2 (Liability).
- In the Brasserie du Pêcheur case, the Opinion of Advocate General Tesauro, under the heading "Conditions for the State's Obligation to Pay Compensation" stated the following:
"59. In sum, it is undeniable that, from the point of view of state liability and the obligation to make reparation, Francovich was virtually a textbook case. The fact that the court did not feel the need to specify the limits of state liability, in particular in so far as it omitted expressly to indicate the Community criteria for judging whether the conduct of the state was unlawful, should be seen solely in the light of the particular features of the case before it. It is significant in this regard that different, even opposite, reactions are to be encountered in academic writings. According to some commentators, the court intended only to target serious infringements or infringements involving fault; it shows, among other things, that failure to implement a Directive constitutes a conscious breach, consequently a deliberate one and for that very reason one involving fault: see J. Temple Lang, "New Legal Effects Resulting from the Failure of States to Fulfil Obligations under European Community Law: The Francovich Judgment" (1992-1993) 16 Fordham International Law Journal 1. Others, in contrast, take the view that it appears from Francovich that any infringement of Community law gives rise to liability and an obligation to make reparation, in the sense that strict liability is involved in which fault plays no part: see, for example, Roberto Caranta, "Governmental Liability after Francovich"  C.L.J. 272; see also Allan Tatham, "Les recours contre les atteintes portées aux normes communautaires par les pouvoirs publics en Angleterre"  Cahiers de droit européen 597.
In the final analysis, the fact that the criteria required by Community law in order for the state to incur liability are not clearly defined in Francovich is closely connected with the particularly straightforward nature of that case. The court's very statement that the conditions under which state liability gives rise to a right to reparation depend "on the nature of the breach of Community law giving rise to the damage" should therefore be construed as meaning not only that the general conditions for liability to be incurred vary according to the type of breach, but also that the particular characteristics of a specific type of breach, such as failure to implement a Directive within the prescribed period, may be such as not to require detailed consideration as to whether one or more of the conditions in question are present."
- In the judgment of CJEU, under the heading "Conditions under which the state may incur liability for acts and omissions of the national legislature contrary to Community law (second question in Case C-46/93 and first question in Case C-48/93)", the following was stated in  – . It should be borne in mind that the liability of the Community institutions mirrors, for the most part, that of the Member States.
"45. The strict approach taken towards the liability of the Community in the exercise of its legislative activities is due to two considerations. First, even where the legality of measures is subject to judicial review, exercise of the legislative function must not be hindered by the prospect of actions for damages whenever the general interest of the Community requires legislative measures to be adopted which may adversely affect individual interests. Secondly, in a legislative context characterised by the exercise of a wide discretion, which is essential for implementing a Community policy, the Community cannot incur liability unless the institution concerned has manifestly and gravely disregarded the limits on the exercise of its powers: Bayerische HNL Vermehrungsbetriebe G.m.b.H. & Co. K.G. v. Council and Commission of the European Communities (Joined Cases 83/76, 94/76, 4/77, 15/77 and 40/77)  E.C.R. 1209, 1224, paras. 5 and 6.
46. That said, the national legislature—like the Community institutions—does not systematically have a wide discretion when it acts in a field governed by Community law. Community law may impose on it obligations to achieve a particular result or obligations to act or refrain from acting which reduce its margin of discretion, sometimes to a considerable degree. This is so, for instance, where, as in the circumstances to which the judgment in Francovich relates, article 189 of the Treaty places the member state under an obligation to take, within a given period, all the measures needed in order to achieve the result required by a Directive. In such a case, the fact that it is for the national legislature to take the necessary measures has no bearing on the member state's liability for failing to transpose the Directive. "
47. In contrast, where a member state acts in a field where it has a wide discretion, comparable to that of the Community institutions in implementing Community policies, the conditions under which it may incur liability must, in principle, be the same as those under which the Community institutions incur liability in a comparable situation."
- The CJEU re-stated the three Francovich conditions at , and then stated another directly relevant passage at  to  in the following terms:
"55. As to the second condition, as regards both Community liability under article 215 and member state liability for breaches of Community law, the decisive test for finding that a breach of Community law is sufficiently serious is whether the member state or the Community institution concerned manifestly and gravely disregarded the limits on its discretion.
56. The factors which the competent court may take into consideration include the clarity and precision of the rule breached; the measure of discretion left by that rule to the national or Community authorities; whether the infringement and the damage caused was intentional or involuntary; whether any error of law was excusable or inexcusable; the fact that the position taken by a Community institution may have contributed towards the omission, and the adoption or retention of national measures or practices contrary to Community law.
57. On any view, a breach of Community law will clearly be sufficiently serious if it has persisted despite a judgment finding the infringement in question to be established, or a preliminary ruling or settled case law of the court on the matter from which it is clear that the conduct in question constituted an infringement."
- It is clear therefore, that the extent of any discretion (whether it be wide, or narrow, or even non-existent) is directly relevant to consideration of satisfaction or otherwise of the Francovich conditions. A great deal of authority was cited to me demonstrating the approach of the European Courts to this question, in the context of the liability of Member States and Community Institutions. In my judgment, it is not necessary to recite that in detail, although it represents a cogent and compelling body of authority within the context of Member State and Community liability, and I have taken account of it. The reason that no detailed exposition of it is required in this judgment is because the House of Lords in R v Secretary of State for Transport ex parte Factortame Ltd (No.5)  1 AC 524, and more recently the Court of Appeal in Delaney v Secretary of State of Transport  EWCA Civ 172,  1 WLR 5177 both directly addressed the question of whether a breach was sufficiently serious to entitle a party to recover loss. All that is required is that the principles in those two cases (in fact, the latter applies and summarises the principles in the first) are considered and applied.
- R v Secretary of State for Transport ex parte Factortame Ltd (No.5)  1 AC 524 ("Factortame No.5") concerned an appeal by the Secretary of State for Transport from a decision by the Court of Appeal. The Court of Appeal had upheld a decision of the Divisional Court that the breaches of Community law resulting from the Merchant Shipping Act 1988 (which had been the subject of one of the two cases before the Court of Justice of the European Union in the Brasserie du Pêcheur case) were sufficiently serious to give rise to liability for any damage that might subsequently be shown to have been caused to the applicants. It should be noted that in the judgment in the Brasserie du Pêcheur case the UK case is referred to as Factortame (No.4) whereas in the House of Lords the same case is referred to as Factortame III. However, nothing turns on this and it is referred to here solely as Factortame No 5 to avoid possible confusion.
- The applicants in the Factortame cases were companies (or shareholders or directors of companies) and individuals who owned or managed vessels which were part of the British fishing fleet until they lost their registration on 31 March 1989 as a result of the legislation adopted in the United Kingdom. It was that legislation that was held by the European Court of Justice as constituting a breach of Community law by the United Kingdom. The legislation that was enacted, the Merchant Shipping Act 1988, was an attempt to prevent what was called "quota hopping" whereby vessels that were considered to be essentially Spanish and whose fishing catches went to Spain (although the vessels were registered in the UK) had been, effectively, fishing against what was called (by Lord Slynn at 531E) "the British national quota". This was prevented by means of the 1988 Act which restricted access to the British national shipping register through the concept of a "qualified company" and "qualified person". It was this restriction that had been held by the European Court of Justice to be contrary to the UK's EU treaty obligations. In dismissing the appeal by the Secretary of State, and thus upholding the decision of the Divisional Court (which is at  EuLR 475), the House of Lords set down the approach that should be adopted when considering the issue of a "sufficiently serious breach" giving rise to an entitlement to damages.
- Even though the position of the Secretary of State (and the Government of the United Kingdom in enacting the legislation in question) had been a respectable one, did not involve bad faith, and was taken after careful consideration and legal advice, the breaches of Community law were sufficiently serious to satisfy the Francovich conditions. Lord Hope stated (at 550E – H):
"It seems to me that three factors emerge from the facts of this case which justify the conclusion that the breach was sufficiently serious to entitle the respondents to damages. The first relates to the subject matter of the breach. In this regard I agree with the Court of Appeal  EuLR 456, 476 that the three conditions of nationality, domicile and residence in section 14 of the Merchant Shipping Act 1988 must be treated, in the context of the provisions of that Act, as cumulative. It is plain that we are dealing in this case with the adoption and retention in our national law of measures which were contrary to the obligations of the United Kingdom under the E.C. Treaty relating to nationality and domicile: see article 52, read with articles 5 and 7 (now article 43, read with articles 10 and 14). These are key areas of the Treaty in regard to the free movement of persons and the right of establishment. This is not a case where it can be said that the Treaty obligations were obscure or that they related to matters which were of minor importance. I would not go so far as to say, with the Court of Appeal, at p. 476, that the direct breach of a fundamental principle of the Treaty will almost inevitably create a liability in damages. But the nature of the breach will always be a highly relevant factor in the assessment. The more fundamental the breach, the easier it will be to regard it as sufficiently serious."
- He continued (at 551E – H):
"This then was more than a trivial or technical breach of the Community obligations. The words "manifest" and "grave" are not easy adjectives to apply in this context. But I have no difficulty at all in seeing what was done here as a breach which was sufficiently serious to entitle the respondents to compensation by way of damages for such losses as they can show flowed directly from the breach. If damages were not to be held to be recoverable in this case, it would be hard to envisage any case, short of one involving bad faith, where damages would be recoverable.
The Solicitor-General laid great stress on the point made by the European Court that one of the factors which could be taken into account in the assessment of seriousness was whether or not the breach was excusable. Much importance was attached by him to the legal advice which had been taken and received. But I was not impressed by this argument. The good faith of the Government is not in question. It is not suggested that it proceeded without taking advice, or that it acted directly contrary to the advice which it received. Nor is it suggested that there was a lack of clarity in the wording of the relevant provisions of the Treaty or that there was some other point which might reasonably have been overlooked. So this case cannot, I think, be described as one which went wrong due to inadvertence, misunderstanding or oversight. The meaning of the relevant articles was never in doubt. The critical issue related to the interaction between these articles and the common fisheries policy."
- Lord Clyde stated (at 553C):
"Where legislative measures are the result of choices of economic policy, it is only exceptionally and in special circumstances that liability for those measures should arise. That principle was recognised in the judgment of the court in Bayerische HNL Vermehrungsbetriebe G.m.b.H. & Co. K.G. v. Council and Commission of the European Communities  E.C.R. 1209, 1224, para. 5. In that case it was held (in para. 6 of the judgment) that the Community does not incur liability "unless the institution concerned has manifestly and gravely disregarded the limits on the exercise of its powers." The language appears to echo a passage in the argument presented by the Council, at p. 1216, that "It must be a breach which is particularly blatant, a particularly clear infringement and a manifest grave violation of the basic content of a principle." In Factortame III  QB 404, 499, para. 55 the court stated that "the decisive test for finding that a breach of Community law is sufficiently serious is whether the member state or the Community institution concerned manifestly and gravely disregarded the limits on its discretion."
Before coming to identify some of the non-exhaustive factors, he stated (at 554C)
"But it may be too narrow an approach in the practical application of the test to make the distinction between the categorisation of what is manifest and of what is grave. A broader approach is perhaps to be preferred. Moreover the application of the test laid down by the court comes eventually to be a matter of fact and circumstance. In the judgment the court  QB 404, 499, para. 56 lists some of the factors which may be taken into consideration. But that list does not pretend to be complete or exhaustive. It would doubtless be premature to attempt any comprehensive analysis. But it appears to be possible to identify some of the particular considerations which may properly be taken into account, although the relevance in particular cases and the weight to be given to them in particular circumstances may obviously vary from case to case. It is to be noted that liability does not require the establishment of fault as, to use the language of the Advocate General in his opinion  QB 404, 476, para. 90, "a subjective component of the unlawful conduct." It is on the objective factors in the case that the decision on liability requires to be reached. No single factor is necessarily decisive. But one factor by itself might, particularly where there was little or nothing to put into the scales on the other side, be sufficient to justify a conclusion of liability. Some of those factors can be identified as follows."
- Lord Clyde then went on to list a number of factors relevant to the conclusion as to whether a particular breach (or combination of breaches) could or should be categorised as being sufficiently serious for satisfaction of the second Francovich condition. This approach, with its number of factors, has been described as the multifactorial approach, most recently by the Court of Appeal in Delaney v Secretary of State of Transport  EWCA Civ 172,  1 WLR 5177. It is convenient to consider the factors from that judgment, in particular that of Richards LJ, as that provides a succinct summary of Lord Clyde's approach. In that case, the claimant, Mr Delaney, brought proceedings against the Secretary of State for Transport seeking damages for severe personal injury arising out of a motor accident caused by an uninsured driver of a vehicle in which the claimant had been a passenger. The Motor Insurers' Bureau ("MIB"), as the insurer of last resort, became involved once the driver's insurer avoided his policy of insurance on the basis of material non-disclosure and misrepresentation. The issue arose as to whether clause 6(1)(e)(iii) of the Motor Insurers' Bureau (Compensation of Victims of Uninsured Drivers) Agreement 1999 put the United Kingdom in breach of its European law obligations under Article 1(4) of Council Directive 84/5/EEC of 30 December 1983 relating to the availability of insurance cover for civil liability in respect of the use of motor vehicles. The former permitted an exception if the victim knew or ought to have known that the vehicle was being used in the course or furtherance of crime. This was relevant due to the presence of approximately ¼ kg of cannabis in the vehicle, both in the claimant's jacket and hidden in the sock of the driver. The claimant was referred to in the first instance judgment as "a drug dealer".
- At first instance, Jay J stated at  at  1 WLR 5177, 5201:
"84 As is well known, Lord Clyde set out in his opinion a non-exhaustive series of factors which fall to be weighed in the balance. I will be considering these subsequently. What it is important to recognise at this stage is that: (i) the test is objective (p 554D) (if a government acts in bad faith that is an additional factor which falls objectively to be considered); (ii) the weight to be given to these various factors will vary from case to case, and no single factor is necessarily decisive; and (iii) the seriousness of the breach will always be an important factor. Although not expressly mentioned by Lord Clyde, I would add that in a minimal/no discretion type of case it will be easier for the claimant to prove the requisite degree of seriousness."
- He rejected (at ) the submission for the Secretary of State that "some sort of moral culpability or egregious conduct must be established as a precondition for liability….Context is all: in a situation where the member state's discretion is minimal or non-existent, a material breach of clearly worded provisions of EU law with significant consequences for individuals will often constitute a sufficiently serious breach for these purposes, and (as a corollary, but no more) a manifest and grave disregard of the relevant obligation". (emphasis added)
- His conclusions, and the way that he reached them, were expressly approved by the Court of Appeal who rejected the appeal by the Secretary of State. Richards LJ stated as follows in :
"…. not only am I satisfied that the judge directed himself correctly and that his analysis was not flawed by material error or omission, but I agree in any event with the conclusion he reached. In my judgment, his conclusion was correct for the reasons he gave."
Kitchin and Sales LJJ both agreed.
- Richards LJ, in reaching that conclusion, started at  by summarising the way the judge had approached his task and how he had considered the list of Lord Clyde's factors in the following way  1 WLR 5177, 5226:
"The judge applied the multi-factorial approach described by Lord Clyde in R v Secretary of State for Transport, Ex p Factortame Ltd (No 5)  1 AC 524, 554-556. Lord Clyde identified the following factors, though the list was not exhaustive: (1) the importance of the principle which has been breached; (2) the clarity and precision of the rule breached; (3) the degree of excusability of an error of law; (4) the existence of any relevant judgment on the point; (5) the state of the mind of the infringer, and in particular whether the infringer was acting intentionally or involuntarily (ie whether there was a deliberate intention to infringe as opposed to an inadvertent breach); (6) the behaviour of the infringer after it has become evident that an infringement has occurred; (7) the persons affected by the breach, including whether there has been a complete failure to take account of the specific situation of a defined economic group; and (8) the position taken by one of the Community institutions in the matter. He said that the application of the "sufficiently serious" test "comes eventually to be a matter of fact and circumstance"; no single factor is necessarily decisive; but one factor by itself might, particularly where there was little or nothing to put in the scales on the other side, be sufficient to justify a conclusion of liability."
- Richards LJ therefore usefully summarised the factors to be applied. This is not an exhaustive list, as Lord Clyde had originally explained. As the issue is a "matter of fact and circumstance" it might be, in any particular case, that there is an important factor to be considered that arises in that case that does not fall within the list. However, the list is widely drawn, and in my judgment the important considerations in most cases will probably fall into one of Lord Clyde's factors. Certainly both parties before me argued the facts of this case by reference to these factors, which I consider to be the correct approach.
- Mr Giffin QC for the NDA submitted that the concept of "manifest and grave disregard" either connotes, or to use his term from his skeleton argument "echoes" (which means broadly the same thing) "the idea of flagrant misconduct". That comes perilously close, in my judgment, to the submission that was made on behalf of the Secretary of State in Delaney before Jay J that "some sort of moral culpability or egregious conduct" was required. Jay J rejected that submission and the Court of Appeal held that he was right to do so. Whether "flagrant misconduct" is wholly synonymous with "egregious conduct" is, perhaps, open to semantic debate, but only to an infinitesimal degree. This is because the two phrases are, in my judgment, almost wholly interchangeable. Synonyms of "egregious" include "flagrant", as well as deplorable, glaring, grievous and heinous. Flagrant misconduct is not a necessary ingredient for a sufficiently serious breach, and this is made clear in the cases and established by authority binding on me. I therefore reject that submission.
- Mr Giffin QC also submitted that "In English domestic law, for example, there is no general right to claim damages for acts that are unlawful in public law at all, regardless of the seriousness of the breach. Human rights claims aside, damages will normally only follow if the stringent conditions necessary to establish the tort of misfeasance in public office are met." However, that submission rather glosses over the fact that the claims in these proceedings, as with all procurement cases, are not damages claims in public law. They are private law claims for damages for breaches of statutory duty. Even if there were any room for doubt on that point – which in my view there is not – the correct identification of the type of claims involved was resolved conclusively by Vos LJ stating in  of the Court of Appeal judgment on the preliminary issues as "indeed a private law claim for breach of statutory duty". Mr Giffin QC's analogy with the restricted ability to claim damages in public law claims in domestic law does not therefore assist the NDA.
- The correct approach for the purposes of this judgment therefore is to consider the multifactorial approach of Lord Clyde against the different breaches which have been found by me to have occurred in Judgment No.2 (Liability). Before doing so, it is helpful to consider the types of breach or breaches that have been found to have occurred during the evaluation. I should record that bad faith on the part of the NDA or any of its employees involved in the evaluation is not alleged by Energy Solutions, and was not found by me.
- The NDA's position is that none of the breaches that I have found, either individually or cumulatively, is or are sufficiently serious to satisfy the second Francovich condition and hence lead to any entitlement on the part of Energy Solutions to damages if the NDA's appeal to the Supreme Court succeeds. Energy Solutions adopts a position at the very opposite end of the spectrum of that position, namely that all of the breaches, both individually and cumulatively, is or are sufficiently serious to satisfy the condition.
The nature of the breaches found
- The NDA was under an express obligation under Regulation 30(1)(a) to award the contract "on the basis of the offer which (a) is the most economically advantageous from the point of view of the contracting authority". The evaluation – indeed, the whole purpose of the procurement competition – was to arrive at the correct conclusion regarding which of the tenders that were submitted to the NDA was the most economically advantageous. Mr Howell QC would probably use the phrase "lawful conclusion" rather than "correct conclusion", but whichever phrase is adopted, the meaning is the same. As a high level summary of the different Regulations that apply, it can be stated that the purpose of the procurement competition was to arrive, after objective and lawful evaluation of the different tenders against the criteria that were known to the bidders, and treating the bidders equally, using weightings that were clearly stated in the relevant documents, at a final percentage score for each tender so that the most economically advantageous tender could be identified by means of comparing their different final percentage scores. This is neatly encapsulated in Regulation 18(27) (Regulation 18 being the relevant one that applies to the competitive dialogue procedure which was used in this case) which states:
"The contracting authority shall assess the tenders received on the basis of the award criteria specified in the contract notice or descriptive document and shall award the contract to the participant which submits the most economically advantageous tender in accordance with regulation 30(1)(a)".
- This was also made clear due to the way in which the evaluation was stated to the tenderers as being designed to operate. The tenders were to be evaluated against what was called the Evaluation Framework, which was set out in the tender documents. The most economically advantageous tender was referred to as Level 1 on the Evaluation Framework, which then had four Level 2 Evaluation Nodes. These were Cost; Commercial; Key Enablers; and Technical Scope and Methodology Underpinning (which was referred to generally as Technical Underpinning). Each Level 2 Evaluation Node was sub-divided into a number of Level 3 Evaluation Nodes. Each Level 3 Evaluation Node contained a number of what were referred to as Requirements. The Level 2 Cost Evaluation Node was divided into two sections, namely Target Cost, and Cost and Programming Underpinning (which was also called Cost Underpinning), but that subdivision is not relevant. Level 1 therefore included exactly the same provisions as Regulation 18(27).
- It was therefore perfectly clear, both under the Regulations and in accordance with the express terms of the competition, that the tenderer whose tender was adjudged to be the most economically advantageous would be awarded the Transition Agreement. A failure to do so is, in my judgment, a clear and rather obvious breach both of Regulation 18(27) and Regulation 30(1)(a), and of the rules of the competition. Accordingly, one view of the case is that it is this breach by the NDA that is the relevant one to consider (or two breaches, if each of those Regulations is considered separately) and that it is the single effect of this breach (or these two breaches) that gives Energy Solutions a private law claim against the NDA for breach of statutory duty.
- This way of approaching the matter shows that the failure to award the contract is not only a direct breach of Regulations 18(27) and 30(1)(a), and of the terms of the competition, but also a breach of the terms of the European Directive which are implemented by the Regulations. The Regulations correspond to Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004, the full title of that being "on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts" ("the Directive"). In particular Article 29.7 of the Directive states:
"Contracting authorities shall assess the tenders received on the basis of the award criteria laid down in the contract notice or the descriptive document and shall choose the most economically advantageous tender in accordance with Article 53."
Article 53(1) and 53(2) state:
(1) Without prejudice to national laws, regulations or administrative provisions concerning the remuneration of certain services, the criteria on which the contracting authorities shall base the award of public contracts shall be either:
(a) when the award is made to the tender most economically advantageous from the point of view of the contracting authority, various criteria linked to the subject-matter of the public contract in question, for example, quality, price, technical merit, aesthetic and functional characteristics, environmental characteristics, running costs, cost-effectiveness, after-sales service and technical assistance, delivery date and delivery period or period of completion, or
(b) the lowest price only.
(2) Without prejudice to the provisions of the third subparagraph, in the case referred to in paragraph 1(a) the contracting authority shall specify in the contract notice or in the contract documents or, in the case of a competitive dialogue, in the descriptive document, the relative weighting which it gives to each of the criteria chosen to determine the most economically advantageous tender.
Those weightings can be expressed by providing for a range with an appropriate maximum spread.
Where, in the opinion of the contracting authority, weighting is not possible for demonstrable reasons, the contracting authority shall indicate in the contract notice or contract documents or, in the case of a competitive dialogue, in the descriptive document, the criteria in descending order of importance."
- However, the conclusion that the NDA was in breach of its obligations (by awarding the tender to an economic operator other than the one who had submitted the most economically advantageous tender) can only be reached after assessing the effect of other, more numerous, breaches in the actual evaluation itself. Although it is possible to consider hypothetical scenarios in which there might be only one underlying breach in the evaluation itself (either a failure to evaluate a tender at all, say, or a single breach in the actual evaluation scoring that had an individual powerful effect on the final percentage score), in this case there were a number of underlying breaches that led to the conclusion of an overall breach of the Regulations and the terms of the competition (and the Directive). Within the terms of the competition, this would be expressed as breaches within Level 3 of the Evaluation Framework leading to a breach at Level 1 (which would obviously occur via Level 2).
- I consider that those underlying breaches within the Evaluation Framework can sensibly, at least in this case, be categorised in the following way.
(1) Those concerned with disqualification or so-called Threshold Requirements. As explained in  to  of Judgment No.2 (Liability), the Statement of Response Requirements ("the SORR") expressly stated that a failure by any bidder to achieve what was in some instances termed "Threshold", and in others was termed a "Pass" (where the choice was "Pass/Fail"), would result in that bidder's tender being deemed non-compliant by the NDA with the result that the bidder would be excluded from the competition. A single breach of duty by the NDA, therefore, in relation to the evaluation of a Threshold Requirement in the CFP tender, would (and did here) have the effect of leaving CFP in the competition, and being assessed as the most economically advantageous tender, when the correct and lawful conclusion should have led to CFP being disqualified altogether. I found that CFP should have been disqualified from the competition entirely due to deficiencies in its tender in two of these Threshold Requirements, namely Requirements 306.5.1(j) and 401.5.1(b)(ix). These Requirements (and some others) had been chosen by the NDA as meriting this potentially draconian consequence, although it is fair to say that the evidence before me at the liability trial was to the effect that the realisation of the prospect of disqualification only really dawned on the SMEs during the evaluation itself. There are only two breaches of this type that arise as a result of the findings on liability. Requirement 401.5.1(b)(ix) was a simple "Pass/Fail". CFP's bid was given a "Pass" when lawfully it should have been given a "Fail". Requirement 306.5.1(j) was to be evaluated with a score, with a "Below Threshold" level set for a particularly low score. The score that I found ought to have been lawfully awarded to CFP for this Requirement was "1", rather than the score of "4" that was awarded at the time. The consequence of the corrected score was that this became "Below Threshold". The score awarded of "4" was not "Below Threshold" and disqualification was not required for that higher score.
(2) Evaluation Requirements. These are ones where the evaluation leads to a score, that score then having appropriate weighting applied to it such that the overall percentage for the whole tender is a function of the total weighted scores on all the Evaluation Requirements. There are 16 different breaches of this character concerning the RSS tender as a result of my findings (two of which were conceded by the NDA), and four in the evaluation of the CFP tender (excluding the breach in relation to Requirement 306.5.1(j), which included both a score and a Below Threshold consequence). These 20 Evaluation Requirements are (in the order they appeared in Judgment No.2 (Liability)) as follows:
Upon the RSS tender: 411.5.3(c); 412.5.3(c); 414.5.3(c); 408.5.3(c); 405.5.3(j); 405.5.3(k); 410.5.3(i); 408.5.3(i); 409.5.1(a); 409.5.1(d); 303.5.2; 303.5.3; 110.5.9(c) and 112.5.9(c) (these two were conceded prior to the commencement of the trial of liability); 307.5.2(d); and 408.5.1(a).
Upon the CFP tender:106.5.6(b); 106.5.6(d); 405.5.3(k); and 406.5.1(d).
- In relation to any of the scores given (whether Threshold Requirements, or Evaluation Requirements) all required manifest error on the part of the SMEs before the court would interfere. The NDA, and the SMEs, had a margin of appreciation in terms of the score awarded. The court would not interfere merely because it disagreed with the score that had been given at the time. Further, some of the Evaluation Requirements involved breaches by the NDA of its obligation to treat the tenderers equally. This obligation of equal treatment is, Energy Solutions submits, intrinsic in the proper and lawful application of the SORR. Whether that is correct or not – and the NDA disputes this – some of the scores given for the Evaluation Requirements were expressly found by me (and are agreed by the parties) as having been found as breaching the obligation of equal treatment and also the obligation of transparency.
- One example of the former will suffice for these purposes, namely Requirement 411.5.3(c). This concerned Sample Project 2, Preparing the Dungeness Reactor Complex for Interim State. The active effluent treatment plant ("AETP") and saline groundwater pumping system were not treated as key critical assets in the RSS tender response, and because of this the tender was considered by the SMEs to have material omissions and was given a score of 1. In the CFP bid, however, the very same assets were not treated as critical assets either by CFP, and yet the CFP bid was marked as though there were no material omissions and was given a score of 3. This is a rather obvious example of the different bidders, CFP and RSS, being treated differently in respect of these identical assets, identical Requirements and considerations.
- I found the following in  of Appendix 3 to Judgment No.2 (Liability) (the appendix that dealt with challenges to the CFP score): "It should be noted that, in other words, the same SMEs thought the groundwater pump was a critical asset for both CFP and RSS initially. They then changed their mind, deciding it was not a critical asset for CFP, but remained of the view that it was a critical asset for RSS". This breach, therefore, represents both a manifest error in terms of the score that was given to RSS, but also a breach of the obligation of equal treatment.
- In other Evaluation Requirements, there was a breach by the NDA of its obligation of transparency. An example of this is as follows. Requirement 410.5.3(i) related to Sample Project 1 – Preparing Chapelcross CXPP and B141 for Interim State, both of which are buildings. The project involved removal of Intermediate Level Waste and then, after a period of six years, demolishing and "deplanting" these facilities. RSS was given a score of 5 initially, that was then reconsidered the following day, and reduced to a score of 3, which was said to be due to the content (or lack of it) regarding one of the assumptions. This score of 3 was approved and signed off by the three SMEs. However, after a period of two months, and after a step in the evaluation called the Burges Salmon Review, the score was reduced further, this time to a score of 1. This was, at the time it was changed, explained in the record as being due to an omission. Then, 11 days after this final score change, the word "material" was included in the reasons, so that the reason became "material omission". I found that there was no missing assumption, and that it was manifestly erroneous for the NDA to have marked the Requirement as though there were. I found that the score that would have been awarded absent manifest error was one of 5 (which happened to be the one first assessed by the SMEs). This is dealt with in  to  of Judgment No.2 (Liability). However, I also found that there was a breach by the NDA of its obligation of transparency in the following terms :
"I also consider that the reasons provided by the NDA to Energy Solutions in the consensus rationale and 11 April 2014 letter are in breach of the NDA's obligations of transparency. This is because the evidence available to the court makes it clear that the score of 1 was not awarded because of the supposed "material omission" at all. Indeed, the omission (if it were considered to be an omission) was not identified as "material" until 11 days after the score of 1 had been awarded. It was not the reason for the score of 1, and I find that the phrase "automatically scored" is wholly misleading concerning the award of the score, and lacking in transparency."
- Little distinction was made by Energy Solutions in its claims concerning whether the evaluation of any particular Requirement was simply manifestly erroneous, and/or constituted a breach of the obligation of equal treatment, and/or constituted a breach of the obligation of transparency. This is understandable because, on the state of the law as it was when the proceedings were issued (and is at the date of this judgment) such categorisation does not matter. Following the hearing of the submissions for this judgment concerning the application of the second Francovich condition, I invited the parties to agree which of the different breaches that I have found also included findings of breach of each of the obligations of equal treatment and/or transparency.
- Subject to the submission by Energy Solutions that any failure to apply the SORR correctly (which means any findings that lead to a change of score) involves a breach of the obligation of equal treatment (to which I will return), the findings in relation to the following Requirements are agreed by the parties as also constituting unequal treatment between RSS, and/or breaches of the obligation of transparency:
(1) Breach of the obligation of equal treatment:
Upon the RSS tender: 411.5.3(c); 405.5.3(j); 409.5.1(a); 409.5.1(d); 303.5.2;
Upon the CFP tender 401.5.1(b)(ix); 106.5.6(b); 106.5.6(d); and 405.5.3(k).
There are therefore a total of 10 instances of this type of breach.
(2) Breach of the obligation of transparency:
Upon the RSS tender: 410.5.3(i) and 408.5.3(i).
Upon the CFP tender 106.5.6(b); 106.5.6(d); and 405.5.3(k).
There are a total of six instances of this type of breach.
- The parties adopted positions at the opposite ends of the spectrum of breaches in this competition being "sufficiently serious". The NDA's submissions are that, if the second Francovich condition were to apply, none of the breaches by the NDA in the conduct of the procurement competition are sufficiently serious to lead to an entitlement on the part of Energy Solutions to damages, including the award of the contract to CFP even though the RSS tender was found to be the most economically advantageous tender. The position adopted by Energy Solutions is that all of the breaches, whether judged individually or cumulatively, are sufficiently serious to satisfy the condition.
- Mr Giffin QC's submission that flagrant misconduct on the part of the NDA is necessary is plainly, with respect to him, wrong in law. Another of his submissions, that it is the conduct of the NDA itself, rather than that of its employees, that is relevant, is also in my judgment incorrect. No corporate or public body can act other than through natural persons whom it either employs as employees, or appoints as directors or officers (or who is in a similar position within another body appointed by the authority to act, which does not arise here). In my judgment it would be an artificial distinction to approach the matter differently if an SME for any particular evaluation of any tender were a member of the NDA Board, rather than if they were appointed by that Board to perform the same role, or tasked with the same role as part of their duties as an employee.
- The broad purpose of the Directive and the Regulations is to open up the field of public works contracts to fair competition. Lord Hope made this clear at  in Risk Management Partners Ltd v Brent London Borough Council  UKSC 7,  2 AC 34, which concerned what is called the Teckal exemption, where a public authority contracts with another public authority or with a body which is owned by such authorities, and only provides goods and services for public functions. He stated:
"The 2006 Regulations were made under section 2(2) of the European Communities Act 1972. They give effect to Council Directive 2004/18/EC of 31 March 2004 on the co-ordination of procedures for the award of public works contracts, public supply contracts and public service contracts (OJ 2004 L134, p 114). The broad object of Directive 2004/18/EC, and of the Regulations that give effect to it, is to ensure that public bodies award certain contracts above a minimum value only after fair competition, and that the award is made to the person offering the lowest price or making the most economically advantageous offer."
- Fair competition has considerable advantages. Market forces mean that economic operators compete to win the contract. The authority is likely therefore to pay less, or at the least obtain a more efficient delivery, if the most economically advantageous tender is successful. Economic activity and competition is not only encouraged, but efficiency is rewarded. There is no need to embark upon an analysis of economic doctrine in order to realise that fair competition, whether across borders in different Member States or internally in domestic markets, is considered highly beneficial to society. Regardless of its benefits, it is what the Directive and the Regulations require.
- In order that this is achieved, authorities are mandated both to hold a fair competition to conclude which tenderer is offering the lowest price or the most economically advantageous tender, and then once that conclusion is reached, to award the contract to that tenderer as the economic operator who has emerged as the winner of the competition. These two limbs are both important, although sequential. There is little point in conducting a fair competition if the authority is not obliged to award the contract to the winner, after that competition has identified which tender is the winner. Although there is a very limited exception in certain circumstances, such as abnormally low tenders and the Teckal exemption (neither of which apply here), those two separate though connected limbs constitute the entire raison d'être of procurement law.
- A failure to award the contract to the operator offering the most economically advantageous tender (what I have termed above the "overall breach") goes directly to the heart of these principles. This can be seen not only from the purpose of the Regulations themselves generally, but in this competition from the fact that this formed Level 1 in the Evaluation Framework.
- Considering therefore the different factors enunciated by Lord Clyde in Factortame Ltd (No.5) the following conclusions can be reached. The first two, namely the importance of the principle which has been breached, and the clarity and precision of the rule breached, are made out in favour of Energy Solutions and lead to the conclusion that the failure to award the contract to the most economically advantageous tender is a breach that would entitle Energy Solutions to damages. In my judgment the overall breach is sufficiently serious to satisfy the second Francovich condition. The importance of the principle is considerable, and central as is made clear by the dicta of Lord Hope in Risk Management. It is both clear and precise, both in the Regulations and in the Directive itself. Not only that, but this is underpinned by the fact that the criteria used in the competition, and the weighting given to them, must also be clear and precise. Indeed, it is agreed in this case (as it must have been, given the law on this point) that a tenderer is entitled to have its bid evaluated on the basis of the criteria (the terms of the SORR) as they would be understood by a reasonably well informed and normally diligent tenderer. Mr Giffin QC sought to argue that the obligation to apply the evaluation criteria could not be seen as clear and precise, and also that there was a degree of discretion in the way that the evaluation was to be conducted. This is not the correct approach to the matter under consideration here, in my judgment. The relevant obligation upon the NDA is the one to award the contract to the most economically advantageous tenderer. That is clear and precise. The obligation to apply the evaluation criteria lawfully is also clear and precise, but this is a different obligation. Within the application of the criteria, the NDA have what is called a margin of appreciation in respect of matters of judgement, but not in respect of the obligation of transparency. This is made clear in the succinct statement of principles by Coulson J in Woods Building Services v Milton Keynes Council  EWHC 2011 (TCC)  to , and also  of the judgment of Morgan J in Lion Apparel Systems v Firebuy Ltd  EWHC 2179 (Ch),  EuLR 191. The NDA does not have any discretion at all once the conclusion of the competition has been reached. It is this conclusion that governs which of the tenderers has submitted the most economically advantageous tender. It is misleading to concentrate on "discretion" within the evaluation itself – more accurately described as the margin of appreciation in matters of judgement by the evaluators in applying the criteria to the contents of the tender to arrive at different scores for the different Requirements – and seek to elide that with discretion on the part of the NDA itself in the award of the contract upon the conclusion of the competition. The margin of appreciation has been taken into account in deciding whether or not there was a manifest error in the evaluation.
- The third of Lord Clyde's factor does not, in my judgment, really arise in this case. It is something that is more likely to arise when liability for legislative or policy acts falls to be considered. Even if it does arise, and might be argued as including errors by the SMEs that could be characterised as errors of law, I find that such errors were not excusable.
- Neither does the fourth factor assist the NDA. It might be said that "the existence of any relevant judgment on the point" could refer to any of the judgments in the field of procurement proceedings. If so, that body of jurisprudence all points to the same principle or principles, namely the importance of fair competition and the award of the contract in question to the winner of that competition. However, if it does not fall to be interpreted as referring to those judgments, in this case it does not arise.
- Again, the eighth factor either does not arise at all in this case, which is my view, or even if it does, it cannot assist the NDA. That is because Community institutions are bound by the same principles. Cases such as T-667/11 Veloss International SA v European Parliament (2015) 14 January (a case concerning the supply of Greek translation services for the European Parliament) and T-57/09 Alfastar Benelux SA v Council of the European Union (2011) 20 October (which concerned a tender for the supply of technical maintenance and help-desk services for the PCs and printers of the General Secretariat of the Council) demonstrate this. Claims for damages were advanced against Community Institutions for failures in procurement competitions.
- Turning therefore to the fifth and sixth of Lord Clyde's factors, namely the state of mind of the infringer (in particular whether the infringer was acting intentionally or involuntarily - ie whether there was a deliberate intention to infringe as opposed to an inadvertent breach), and the behaviour of the infringer after it has become evident that an infringement has occurred. The first point to decide is who is "the infringer"? In my judgment that must be the NDA, either by its officers, Board members or its SMEs. Here, these factors do not count against the NDA. There were no allegations of bad faith against the NDA generally, or any of the SMEs specifically. I made certain criticisms of some of the NDA witnesses, which were interpreted (at least initially) by the NDA's legal advisers as amounting to bad faith, but were not intended to do so. Whether in law they amounted to such findings was a point relied upon by the NDA in its application for permission to appeal, and upon the hearing of that application on 13 September 2016 and in my written reasons for refusal of permission I made clear that no such findings were included in Judgment No.2 (Liability) nor its appendices. There are therefore no findings that there was any deliberate intention to infringe in this case. However, so far as correction of the score of a particular Requirement is concerned, it matters little to an aggrieved tenderer why a manifestly erroneous score has been awarded; the important element is that the score was manifestly erroneous. I do not consider that this factor should be interpreted to mean that intention (or lack of it) will be of direct relevance in every case. Indeed, the passage where Lord Clyde states the following supports that interpretation:
"But that list does not pretend to be complete or exhaustive. It would doubtless be premature to attempt any comprehensive analysis. But it appears to be possible to identify some of the particular considerations which may properly be taken into account, although the relevance in particular cases and the weight to be given to them in particular circumstances may obviously vary from case to case."
- However, although the presence of such a factor would undoubtedly count against the NDA, I do not consider that the absence of such factors means that this is in the NDA's favour. I agree with Jay J who stated in Delaney  at  1 WLR 5177, 5201:
".....What it is important to recognise at this stage is that: (i) the test is objective.... (if a government acts in bad faith that is an additional factor which falls objectively to be considered); (ii) the weight to be given to these various factors will vary from case to case, and no single factor is necessarily decisive; and (iii) the seriousness of the breach will always be an important factor." (emphasis added)
Mr Howell QC is critical of the behaviour of the NDA after the decision to whom the contract was to be awarded was communicated to RSS, and this included the letter of 11 April 2014 from the NDA which is referred to in Judgment No.2 (Liability). However, this factor refers to behaviour "after it has become evident that an infringement has occurred". The whole point at this time in April 2014 was that the NDA did not consider that an infringement had occurred. It was entitled to rely upon its legal rights, and also to refuse to extend the standstill period. The fact that it was disorganised, or kept no record of, the authors of the different appendices to the letter of 11 April 2014 was regrettable. This led to the situation where no witnesses in the liability trial were prepared to identify themselves specifically as the particular author of any particular passages in any of the appendices, with the notable exception of Mr Grey. However, that is not something that in my judgment falls to be weighed very much in this case as counting towards a finding of "sufficiently serious breach". It is also very difficult for any court, in a procurement case, to consider the state of mind of the infringer if that is taken to mean the individual evaluators. Here, some of the SMEs gave evidence, and others did not. An authority could potentially, in an extreme case, choose to defend a procurement challenge without calling any evidence at all. Not all the relevant SMEs may be available, or even employed by the authority by the time of a trial. Requiring express consideration of not only whether an evaluation was manifestly erroneous, but also why it had happened, would expand the scope of the enquiry very widely and could in many cases simply not be possible. I do not therefore consider that this factor will arise to any appreciable extent in the vast majority of procurement cases, and certainly not in this one.
- The final factor therefore is the seventh one, namely the persons affected by the breach, including whether there has been a complete failure to take account of the specific situation of a defined economic group. There are two groups directly affected by the breach in this case, rather different in scale. The first group is the other tenderers, in particular RSS. This is a very small group. It has however been very powerfully affected by the breach. A tenderer who should have won the procurement competition did not do so, with the effect that a very sizeable and valuable contract (over £4.2 billion in value, for a contract period of 14 years) was awarded to a competitor. Its personnel were, for the most part, made redundant and its UK business sold. The second group is not a defined economic group, and so does not come to be considered within this factor, but is a wider group. It could be said that the whole of society has been affected in that such a very sizeable public contract has been awarded to a tenderer that is not the most economically advantageous tenderer. However, I doubt whether Lord Hope intended to include such considerations within his seventh factor in a case such as this one. I do not therefore consider that second wider group to be relevant. However, were I to do so, it would only reinforce my conclusion as that factor could only weigh towards a finding that this was a sufficiently serious breach.
- Lord Clyde stated that the application of the "sufficiently serious" test "comes eventually to be a matter of fact and circumstance" and that no single factor was necessarily decisive. He did however state that one factor by itself might, particularly where there was little or nothing to put in the scales on the other side, be sufficient to justify a conclusion of liability. Similarly Jay J in Delaney  stated:
"I would add that in a minimal/no discretion type of case it will be easier for the claimant to prove the requisite degree of seriousness."
I agree with that, and in my judgment this is a "no discretion" type of case. It is therefore easier for Energy Solutions to prove the necessary degree of seriousness.
- In my judgment, the first and second factors, without more, are sufficient to justify a finding that the breach by the NDA of the obligation to award the contract to the most economically advantageous tenderer is sufficiently serious to satisfy the second Francovich condition. The presence of these two factors, and the facts of the case, means that the breach by the NDA represents a manifest and grave disregard of its obligations. It is not therefore necessary to consider the underlying individual breaches in paragraph 44(1) and 44(2) above.
- However, in case I am wrong about my conclusion in the preceding paragraph, I wish to add the following. The breaches in respect of the Threshold Requirements identified in paragraph 44(1) above are in my judgment each, individually, also sufficiently serious to satisfy the second Francovich condition. This is because, in respect of each of them, their individual effect is the same as that of the overall breach. The failure by the NDA to disqualify a tenderer who should, lawfully, have been disqualified from the competition in accordance with the rules of that competition, has directly led to that tenderer being awarded the contract when it was not the most economically advantageous tenderer. Therefore the application of the factors specified by Lord Clyde would lead to the same result, namely that each of the breaches by the NDA in respect of each of the Threshold Requirements are sufficiently serious also to satisfy the second Francovich condition.
- Turning then to the breaches in respect of the different Evaluation Requirements. There are 20 different such breaches. This would become 21 if (for example) upon appeal the findings in Judgment No.2 (Liability) regarding Requirement 306.5.1(j) were changed to the effect that the score should have been as awarded by me, namely 1, but the NDA were not obliged to disqualify CFP even though that was a "Below Threshold" level set for the score. In those circumstances I should make it clear that the same principles would apply to that scoring evaluation breach as to the other 20 simple evaluation breaches.
- Lord Hope made it clear that fact and circumstance had to be considered when conducting this analysis. The difficulty with the approach advocated by Energy Solutions that every single individual breach alone is sufficiently serious is that, so far as I know (and I should make it clear that I do not have the weightings to be applied to individual scores, and have never been given them) no single breach in respect of any individual Evaluation Requirement is sufficient to have changed the result of the competition. Although that would fall to be considered when one comes to the third Francovich condition, which is effectively causation, it must also be borne in mind when one is considering the effect of an individual breach.
- In my judgment, each of the breaches of obligation in respect of the Evaluation Requirements are sufficiently serious for the purposes of the second Francovich condition when, or if, their effect, either individually or cumulatively, upon the scoring is such that the outcome of the competition would be altered. This is because the seventh of Lord Clyde's factors only comes to be considered at all in those circumstances. RSS would simply not be affected by any breaches of obligation in respect of a single Evaluation Requirements if that breaches did not lead to the tender submitted by RSS being correctly and lawfully concluded to be the most economically advantageous tender. I also consider that the same principles apply regardless of how those breaches of obligation are characterised, namely either or in any combination of manifestly erroneous evaluation without more; breaches of the obligation of equal treatment; and/or breaches of the obligation of transparency. This is because the effect of each of those types of breaches is the same upon the tender competition and the tenderer, namely a manifestly erroneous score that affected the overall outcome of the competition. In each of those situations, the individual affected by the breach is the tenderer, RSS. That tenderer is affected by the incorrect score, to the extent that the incorrect score counts towards the total score.
- It matters little to a tenderer such as RSS whether a Requirement was given a lower score than lawfully it should have been because it was treated differently and less favourably than CFP in respect of the very same asset; or for reasons simply not recorded and/or impossible to fathom and/or otherwise lacking in transparency; and/or simply because an SME scored a Requirement manifestly erroneously but did so transparently. One example of the latter (before the reasons relied upon were changed during oral evidence) was that the SMEs did not know that the letters "MCP10" referred to the Management and Control Procedure then in force at the relevant nuclear sites (and which been provided by the NDA itself to the bidders in the data room). Because of this failure to explain MCP10 in the tender submission, the Requirement was marked down. I do not consider that it can be said that such an error in evaluation, which I have found was manifest, ought to be treated any more or less seriously than any of the others. The important ingredient of that breach is its effect upon the score and the outcome of the competition, not an inherent categorisation of fault by comparison with other manifest errors or with more obvious breaches of equal treatment. On any analysis, in this case and on these facts, the result of each or any of these instances would still be that the lawful score was not entered into the system and was not collated into the overall percentage score for the RSS tender.
- This conclusion also means that it is not relevant for these purposes as to whether a manifestly erroneous score given in evaluation is characterised as merely that (which is Mr Giffin QC's submission), or also as a breach of equal treatment (because the authority had an obligation to apply the terms of the SORR equally and fairly to the different tenderers) (the approach contended for by Mr Howell QC). In my judgment, each of the different types of breaches within the evaluation should be treated as having equivalent seriousness; it is their effect upon the outcome of the competition (that is, the overall score of the tender) that is important.
- Accordingly, my findings on the two issues that have to be addressed on the matter dealt with in this judgment are as follows:
1. Whether a failure to award a contract to the tenderer whose tender ought to have been assessed as the most economically advantageous offer, is in itself a sufficiently serious breach of the contracting authority's obligations to warrant an award of damages.
2. If not, whether in all the circumstances of this case, the breaches by the NDA of its obligations are sufficiently serious to warrant an award of damages.
Answer: this does not arise given the answer to Issue 1 above. However, an individual breach by the NDA of its obligations is sufficiently serious to warrant an award of damages if it is a breach of obligation in relation to a Threshold Requirement, or one that was designated "Pass/Fail". For all other breaches of obligation in relation to Evaluation Requirements, these are sufficiently serious to warrant an award of damages if they would have affected the conclusion (whether individually or cumulatively) of the competition and which tenderer had submitted the most economically advantageous tender.
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