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You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Sidey Ltd v. Clackmannanshire Council & Anor [2010] ScotCS CSIH_37 (05 March 2010)
URL: http://www.bailii.org/scot/cases/ScotCS/2010/2010CSIH37.html
Cite as: [2010] ScotCS CSIH_37, 2010 SLT 607, 2010 GWD 19-383, [2010] CSIH 37

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FIRST DIVISION, INNER HOUSE, COURT OF SESSION

Lord President

Lord Clarke

Lord Mackay of Drumadoon

[2010] CSIH 37

OPINION OF THE COURT

delivered by LORD CLARKE

in

RECLAIMING MOTION BY THE SECOND DEFENDERS

in the cause

SIDEY LIMITED

Pursuers and Respondents;

against

(First) CLACKMANNANSHIRE COUNCIL

First Defenders:

and

(Second) PYRAMID JOINERY AND CONSTRUCTION LIMITED

Second Defenders and Reclaimers

_______

Pursuers and Respondents: Howie, QC, M Ross; MacRoberts LLP

First Defenders: Clark, QC, McGregor; Brodies LLP

Second Defenders and Reclaimers: I G Mitchell, QC, Lindhorst; Maxwell MacLaurin

5 March 2010


[1] This reclaiming motion raises important questions in relation to public procurement in
Scotland, in particular the role of the court when disputes in this field of activity arise and the means by which the courts' jurisdiction may be invoked in relation thereto.


[2] The present proceedings were brought by way of a commercial action. The background was as follows. The first defenders, by the beginning of 2009, wished to place a contract for replacement of kitchens and bathrooms in council houses in Alloa and Tillicoultry. The approximate value of this contract was assessed at £2,500,000. By virtue of the Public Contracts (
Scotland) Regulations 2006 (SSI 2006 No. 1) (hereinafter referred to as the "Scottish Regulations") a public authority, such as the first defenders, when seeking to place a public works contract, as defined in the Scottish Regulations, are bound to do so in accordance with those regulations. The Scottish Regulations are the legislative means by which the Scottish Government has implemented the provisions of Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the co-ordination of procedures for the award of public works contracts, public supply contracts and public service contracts ("the Directive"). The full scheme of the provisions of the Directive and, in their turn the Scottish Regulations, apply, however, only to contracts above a certain value described in the legislation as "the threshold". It was a matter of agreement among the participants in the present proceedings that the value of the contract to which the proceedings relate was below the threshold, which at the relevant time was €6,242,000 for public works contracts, (see Art. 7(c) of the Directive and Regulation 8(2) of the Scottish Regulations).


[3] Both the Directive and, in turn, the Scottish Regulations, prescribe very detailed procedures which require to be followed in respect of the procurement of contracts by public authorities whose value is above the threshold. These procedures are not prescribed for below threshold contracts. That is not to say that European law has no role, at all, to play in respect of such contracts. By Regulation 8(21) of the Scottish Regulations it is provided as follows:

"When a contracting authority proposes to award a public contract which has an estimated value for the purpose of paragraph (1) which is below the relevant threshold, or where a proposed public contract is otherwise exempt from the requirement for prior publication of a contract notice, the contracting authority shall, if required by its general Community obligations, for the benefit of any potential economic operator, ensure a degree of advertising and follow a procedure leading to the award of the contract which is sufficient to enable open competition and meet the requirements of the principles of equal treatment, non discrimination and transparency."

(There is apparently no equivalent provision in the regulations giving effect to the Directive in England and Wales). The provisions of Regulation 8(21), as will be seen, can be regarded as a legislative attempt at bringing together, to some extent, the effect of a number of decisions of the European Court of Justice in relation to below threshold public procurement contracts.


[4] In relation to above threshold contracts the Scottish Regulations prescribe four different types of procedure which may be adopted depending on the circumstances. They are - the open procedure -Regulation 15, the restricted procedure - Regulation 16, the negotiated procedure - Regulation 17 and the competitive dialogue procedure - Regulation 18.


[5] On 6 January 2009 the first defenders issued a contract notice providing information about the proposed public works contract ("the contract") relating to the replacement of the kitchens and bathrooms in Alloa and Tillicoultry council houses. The contract notice was published in the Public Contracts Scotland website. The first defenders sought tenders from interested parties. The notice provided, inter alia that the works would be let as a traditional contract, managed by the first defenders, that the approximate cost of the works was £2,500,000 and that "the restricted procedure" was to be used. The respondents, the reclaimers and some other contractors submitted tenders to the first defenders in respect of the contract. The guidance note provided by the first defenders to tenderers stated that they aimed to obtain the most economically advantageous tender and that they were allocating 30% of evaluation marks to price and 70% to quality. On
19 June 2009, following an evaluation process, the first defenders decided to accept the reclaimers' tender. The first defenders, however, did not inform the respondents of their decision in that respect until 29 June 2009. The respondents discovered that the contract had been awarded to the reclaimers on that date as a result of a conversation which took place between the respondents' commercial sales manager and an officer of the first defenders. The first defenders explained that they had sent a notification of their decision to award the contract to the reclaimers on 19 June 2009, but the fax message in question had been sent to the wrong number. On 2 July 2009 the first defenders wrote to the reclaimers accepting their offer. The first defenders did not inform the respondents that they had done so. On 3 July 2009 the respondents wrote to the first defenders seeking to appeal the award decision, in accordance with what they considered to be the prescribed procedure, on the basis that the summary of the points awarded to the respondents, in the evaluation exercise, disclosed errors. The first defenders thereafter stopped the contract process being taken further with the reclaimers. On 11 August 2009 an officer of the first defenders informed the respondents that he considered that the respondents' complaints about the evaluation process were well founded and that he proposed to recommend to the first defenders that the contract be awarded to the respondents. At a meeting, held on 25 August 2009 officers of the first defenders informed the respondents that a review of the procurement process carried out by the first defenders following the respondents' appeal, had revealed an error in the transfer of the respondents' score and that the respondents' tender was the most economically advantageous tender received by the first defenders. The present proceedings were raised by the respondents, as a commercial action, on 18 September 2009.


[6] It is of importance to notice, from the outset, the orders which the respondents seek in these proceedings. The first of these is in the following terms:

"For an order in terms of Regulation 47(8)(b)(i) of the Public Contracts (Scotland) Regulations 2006 to set aside the first defenders' decision to award the contract for the 2009/10 kitchen and bathroom replacement programme (reference 2286(a)) to the second defender."

The second conclusion seeks interim suspension of the first defenders' decision to award the contract to the reclaimers. The third conclusion seeks suspension and reduction and interim suspension of the contract entered into between the first defenders and the reclaimers. It is important to have regard to the terms of the fourth order sought. It is in the following terms:

"For an order ordaining the first defender to fulfil its statutory obligation in terms of Regulation 30(1) of the Public Contracts (Scotland) Regulations 2006 by awarding the contract for the 2009/10 kitchen and bathroom replacement programme (reference 2286(a)) to the pursuer."

It will be noted that that is an order seeking specific performance of a statutory duty. In the event an order in those terms was not sought from the Commercial judge but its presence in the pursuers' pleadings has not been removed by them. Conclusion 5 seeks interdict and interim interdict against the first defenders from "terminating the existing procurement process" in relation to the contract and "commencing a new procurement process". The sixth conclusion seeks interdict and interim interdict against the first defenders and the reclaimers from implementing "the purported contract" entered into between them. Conclusion 7 seeks an award of damages in the event of the contract not being awarded to the respondents.


[7] The terms of the respondents' pleas-in-law are instructive. Pleas-in-law 1-6 all, in support of the first six conclusions, refer to the respondents having been in breach of the Scottish Regulations. But each of these pleas goes further and seeks the orders in question on the basis that the first defenders have "acted irrationally, unlawfully and in manifest error, et separatim having acted in breach of its Community obligations". Plea-in-law 8 is in the following terms:

"Esto the pursuer is not awarded the contract, the first defender, being in breach of Regulation 4(3), 30(1) and 32(1)-(3) of the Public Contracts (Scotland) Regulations 2006, et separatim having acted irrationally, unlawfully and in manifest error and the pursuer having suffered loss and damage thereby, is liable to the pursuer in damages, in terms of Regulation 47(8)(b)(ii) of the Regulations."

The regulations relied upon by the respondents are as follows:

Regulation 4(3) provides:

"A contracting authority shall -
(a) treat economic operators equally and without discrimination;

and

(b) act in a transparent and proportionate manner."


[8] Regulation 4(1) provides that "In these Regulations, an 'economic operator' means a contractor, a supplier or a services provider".


[9] Regulation 30 specifies the criteria for the award of public contracts.


[10] Regulation 32(1) and (3) provide for the information that is to be given to economic operators about contract award procedures.


[11] Part 9 of the Scottish Regulations is headed "APPLICATIONS TO THE COURT". Regulation 47(1) provides:

"The obligation on

(a) a contracting authority to comply with the provisions of these Regulations ... and with any enforceable Community obligation in respect of a public contract or design contest (other than one excluded from the application of these Regulations by regulation 6, 8 or 33); and

(b) a concessionaire to comply with the provisions of regulation 37(3);

is a duty owed to an economic operator."


[12] Regulation 47(6) provides for a statutory jurisdiction in relation to the claims of breach of the duty referred to in Regulation 47(1). It provides:

"A breach of the duty owed in accordance with paragraph (1) or (2) shall be actionable by any economic operator which, in consequence, suffers or risks suffering, loss or damage and those proceedings shall be brought in the Sheriff Court, the Court of Session or in England and Wales and Northern Ireland, the High Court."


[13] Regulation 47(7) provides for certain time limits by which any such proceedings are to be raised. Regulation 47(8) and (9) provide for the remedies which are to be available in respect of breach of the relevant duty. They are in the following terms:

"47(8) Subject to paragraph (9), but otherwise without prejudice to any other powers of the Court, in proceedings brought under this regulation the Court may -

(a) by interim order suspend the procedure leading to the award of the contract or the procedure leading to the determination of a design contest in relation to the award of which the breach of the duty owed in accordance with paragraph (1) or (2) is alleged, or suspend the implementation of any decision or action taken by the contracting authority or concessionaire, as the case may be, in the course of following such a procedure; and

(b) if satisfied that a decision or action taken by a contracting authority was in breach of the duty owed in accordance with paragraph (1) or (2) -

(i) order the setting aside of that decision or action or order the contracting authority to amend any document;

(ii) award damages to an economic operator which has suffered loss or damage as a consequence of the breach; or

(iii) do both of those things.

47(9) In proceedings under this regulation the Court shall not have power to order any remedy other than an award of damages in respect of a breach of the duty owed in accordance with paragraph (1) or (2) of the contract in relation to which the breach occurred has been entered into."


[14] The reclaimers have a plea to competency which is in the following terms: "The pursuer's First, Second, Third, Fourth, Fifth and Sixth Conclusions being incompetent, decree in terms thereof should not be granted."


[15] Before the Commercial Judge, it was pointed out, on behalf of the reclaimers that the respondents sought to have the first defenders' decision set aside under statutory powers and not otherwise. The respondents could, it was argued, only succeed if they could establish that the Scottish Regulations applied to the actings of the first defenders complained of. Since the contract in question was a "below threshold" contract it was for the respondents to show that, nevertheless, Community rights had been engaged and to do so, it was necessary, to establish that cross-border interests arose in the context of the placing of the particular contract. While it was not disputed by the reclaimers that rights and obligations might arise in a below threshold contract case these would emanate from common law considerations and from general principles of Community law. They would not arise in terms of the Scottish Regulations and the fact that the first defenders behaved as if they were acting under those regulations did not mean that they were, in law, acting under those regulations. The first defenders had spoken of themselves having "opted into" the regulations. But while the general Community obligations might require there to be an effective remedy in favour of economic operators in respect of below threshold contracts, there was no entitlement to any particular remedy arising from the regulations. By their first conclusion, the respondents were seeking an order that by their failure to observe the provisions of Regulation 32 the first defenders were not entitled to proceed with the contract awarded to the reclaimers and that that contract should be set aside and the contract awarded to the respondents. Any such rights and remedies, however, would be available, to the respondents only if the regulations apply. While the respondents might have certain other rights and remedies, because of the engagement of Community law, the onus was on the respondents to demonstrate by averment and proof that those arose in the present context.


[16] The respondents' position before the Commercial Judge, was that the Scottish Regulations did apply to the present circumstances. Those regulations set out procedures to be followed for awards of public contracts by local authorities. Below threshold contracts were an exception to the general regulation established by Regulation 8. The respondents argued, however, that a local authority was not precluded from using the regulations. While it was not obliged by law to adopt the procedure set out in the regulations for below threshold contracts, there was no problem in a local authority using the procedures in question for below threshold contracts.


[17] The respondents' argument, before the Commercial Judge, was developed to the extent of contending that the terms of Regulation 8(21) obliged the first defenders to adopt the prescribed regulatory procedure to meet the requirements of equal treatment, non discrimination and transparency referred in that regulation but, it mattered not whether the first defenders had approached matters on that footing, or whether they simply had chosen to do so out of prudence.


[18] In reaching his decision on the matter which was to grant decree in terms of the first conclusion, and to grant decree of reduction in terms of the third conclusion, the Commercial Judge appears to have placed some weight on the fact that the respondents and the first defenders were in agreement before the court that the regulations did apply - see paragraph [56] of his Opinion. He did, however, proceed at paragraph [57], to address the provisions of Regulation 8(21) of the Scottish Regulations. In doing so he referred to the Opinion of the Advocate General in SECAP SpA v Comune di Torino C-147/06, [2008] ECR 1-03565 at para. 23 where the Advocate General observed:

"The setting of a financial threshold above which contracts are subject to public procurement directives is based on a single premiss, namely that contracts of small value do not attract operators established outside national borders; such contracts are thus devoid of Community implications. However, that rebuttable presumption is open to evidence to the contrary..."

His Lordship then turned to consider the debate which had taken place before him as to whether there had to be a prospect of, or potential for, cross-border interest in a contract before Community obligations are engaged. The judge indicated that he was "inclined to agree with the second defender's submission that there must be at least the prospect of cross-border interest in order for Community obligations to apply to a below threshold contract procedure" - paragraph [59]. He was of the view, however, that, as he put it, at paragraph [59]:

"However, it is not necessary for me to reach a concluded view on this question in the unusual circumstances of this case. It is for the contracting authority to assess whether there may be a cross-border interest in a below threshold contract - SECAP at paragraph 30, quoted at paragraph [23] above. That is what the Council has done in this case by considering in terms of Regulation 8(21) if it was required by its general Community obligations to follow a procedure which is sufficient to enable open competition and meet the requirements of the principles of equal treatment, non-discrimination and transparency, by reaching the view that it was so required, and by following the procedure set out in the regulations."


[19] At paragraph [60] the Commercial Judge continued:

"As the Advocate General observed in SECAP, the presumption that below threshold contracts are devoid of Community implications is rebuttable. Under our procedures, in order to rebut this presumption the pursuer is entitled to rely on admissions made by the Council. The assessment as to whether there may cross-border interests in a below threshold contract is one for the Council to make. It has made that assessment and, by deciding to adopt the procedure set out in the Regulations, it has clearly reached the view that there may be a cross-border interest in this contract. As the court observed in SECAP, that assessment may be subject to judicial review; however, the second defender has not sought to challenge that assessment in these proceedings. For these reasons I have reached the conclusion that the 2006 Regulations do apply to the procedures relating to the award of the contract which is the subject of this action."


[20] In the hearing before this court the reclaimers submitted that the judge had not been entitled to reach such conclusions without an inquiry as to whether the facts and circumstances justified any view taken by the first defenders, if it were taken, that Community obligations were engaged. In the remaining section of his judgment the Commercial judge addressed the question as to what remedies were available to the respondents. This he did under reference to Regulation 47(9) of the Scottish Regulations which limits the court's power to order any remedy, other than an award of damages in, circumstances where the relevant breach of the obligation has occurred after a contract has been entered into. In relation to the construction of Regulation 47(9) his Lordship opined, at paragraph [66] as follows:

"When interpreting Regulation 47(9) I am required to interpret it so as to be consistent with EC principles and jurisprudence, and to apply a purposive of interpretation - Marleasing (supra). Applying this approach, I consider that the proper interpretation of Regulation 47(9) is that it prevents the court from ordering any remedy other than an award of damages if the contract in relation to which the breach occurred has been properly entered into after the expiry of the standstill period. It does not prevent the court from ordering other remedies when a contracting authority purports to enter into a contract before the expiry of the standstill period. Any other interpretation would deprive the standstill period of much, if not all, of its effect, and would deprive an operator who was unsuccessful in the tendering process as a result of error on the part of the contracting authority of an effective remedy. To limit such an unsuccessful contractor's remedy to damages would be contrary to the underlying purpose of the Directives and the regulations, and contrary to the jurisprudence of the ECJ."


[21] At the hearing of the reclaiming motion, the first defenders were not initially represented by counsel. As a result of the way in which the debate before us began to develop, the first defenders were invited to be represented to assist the court, if appropriate, as to what their position was in relation to certain matters. That invitation was taken up and, in due course, both senior and junior counsel appeared for the first defenders.


[22] In opening his submissions senior counsel for the reclaimers submitted that there were a number of ways in which the Commercial Judge had gone wrong in his disposal of the case. In the first place he had, it was said, repelled the reclaimers' first plea-in-law as to competency when he had not been invited to do so. Secondly, he had granted the respondents certain of the remedies they sought against a clear factual dispute between the respondents and the reclaimers on certain matters which could only be resolved after inquiry. But more fundamentally the reclaimers' position was that the action should have been dismissed because the remedies sought by the respondents, and the procedural route to those remedies were unavailable to them in a below threshold procurement case.


[23] There were two classes of below threshold contracts, it was submitted, the first of which engaged certain community rights and obligations, the second of which did not. As regards the first class, what was engaged were certain European law principles, but not the detailed and distinct regulations set out in the relevant public procurement Directive and the Scottish Regulations. For example, a public body in awarding below threshold contracts were free to apply the "best value" criterion as opposed to the criteria specified in the Directive. Moreover, in cases below threshold contracts, in a situation like the present, it was for the public authority to demonstrate (a) that they had reached a view as to whether the contract in question engaged Community principles, (b) what their conclusion in that respect had been and (c) on what basis they had reached that conclusion. It was important to note that in relation to above threshold contracts the Directive and certain of its preambles set out the objective of the legislation. For example preamble 36 dealt with the issue of advertising and preamble 46 addressed the topic of the criteria to be operated in relation to such contracts. In the body of the Directive itself the basic principles to be applied are set out in article 2 as follows "Contracting authorities shall treat economic operators equally and non-discriminatorily and shall act in a transparent way." The applicability of the regime, set out in the Directive, was addressed in article 7 which specified the threshold amounts in respect of the different types of public procurement contracts. Chapter V sets out, in detail, procedures to be followed in relation to the placing of such contracts. Chapter VI embraces the rules on advertising and transparency and prescribes the form of public notices which are to be issued whereby relevant contractors may be notified of the contracting authorities' intention to contract. Article 41 in Chapter VI sets out rules regarding information to be given to contractors and tenderers of decision regarding the award of contracts.


[24] In the present case the first defenders maintained, apparently, that they were conducting the award of the contract in question under the "restricted procedure". They did not, however, do so expressly in their Contract Notice by reference to the Directive or the Scottish Regulations. They had advertised the proposed contract in the Scottish Government's website. They did not advertise it in the Official Journal as required by the Directive, and the Scottish Regulations, in relation to contracts to which that legislation applies. There was, accordingly, it was submitted, nothing to suggest to third parties that this was a procedure being conducted under European procurement rules. The remedies, however, sought by the respondents, were those prescribed by European law for above threshold contracts as prescribed by the Directive and the Scottish Regulations.


[25] As well as the procurement Directive itself, there existed Directives relating to remedies available to disappointed or aggrieved contractors in above threshold cases. In that regard there was now in place Directive 2007/66/EC of
11 December 2007 which bore to amend Council Directives 89/665/EEC and 92/13/EEC, with regard to improving the effectiveness of review procedures concerning the award of public contracts. The court was advised, as the Commercial Judge himself recognised, however, that the 2007 Remedies Directive was not in force at the time of the placing of the contract in the present case. The Remedies Directive at that time was the Directive of 21 December 1989 as amended in 1992.


[26] Senior counsel for the reclaimers drew the court's attention to decisions of the European Court of Justice which, it was submitted, provided the background to the provisions of regulation 8(21) of the Scottish Regulations. So in Telaustria Verlags GmbH and Telefonadress GmbH v Telekom Austria AG (Case- C-234/98) [2000] ECR 1-10770, the
European Court at paragraph 60 of its judgment had said in relation to below threshold contracts:

"In that regard, it should be borne in mind that, notwithstanding the fact that, as Community law stands at present, such contracts are excluded from the scope of Directive 93/38 [the relevant procurement directive at the time], the contracting entities concluding them are, none the less, bound to comply with the fundamental rules of the Treaty, in general, and the principle of non-discrimination on the ground of nationality, in particular".

In paragraphs 61-62 of their judgment the court continued

"As the Court held in Case C-275/98 Unitron Scandinavia and 3-S [1999] ECR 1-8291, paragraph 31, that principle implies, in particular, an obligation of transparency in order to enable the contracting authority to satisfy itself that the principle has been complied with.

That obligation of transparency which is imposed on the contracting authority consists in ensuring, for the benefit of any potential tenderer, a degree of advertising sufficient to enable the services market to be opened up to competition and the impartiality of procurement procedures to be reviewed."

At paragraph 63 the court continued:

"It is for the national court to rule on the question whether that obligation was complied with in the case in the main proceedings and also to assess the materiality of the evidence produced to that effect."

These views were expanded by the European Court in a number of subsequent cases. For example in Bent Mousten Vestergaard v Spøttrup Boligselskab (Case C-59/00) [2001] ECR 1-09505 the court, at paragraphs 19-21 of its judgment stated:

"To rule on the questions, it should be noted, to begin with, that the Community directives coordinating public procurement procedures apply only to contracts whose value exceeds a threshold laid down expressly in each directive. However, the mere fact that the Community legislature considered that the strict special procedures laid down in those directives are not appropriate in the case of public contracts of small value does not mean that those contracts are excluded from the scope of Community law.

Although certain contracts are excluded from the scope of the Community directives in the field of public procurement, the contracting authorities which conclude them are nevertheless bound to comply with the fundamental rules of the Treaty (see, to that effect, Case C-324/98 Telaustria and Telefonadress [2000] ECR 1-10745, paragraph 60).

Consequently, notwithstanding the fact that a works contract is below the threshold laid down in Directive 93/37 and thus not within the scope of that directive, the lawfulness of a clause in the contract documents for that contract must be assessed by reference to the fundamental rules of the Treaty, which include the free movement of goods in Article 30 of the Treaty."


[27] Our attention was also drawn to the Opinion of the Advocate General in Consorzio Aziende Metano (Coname) v Comune di Cingia de'Botti (Case C-231/03 [2005] ECR 1-07287). At paragraph [69] of his Opinion, the Advocate General referring to below threshold contracts said:

"Even if it is established that primary law, such as the fundamental freedoms, is applicable to a specific award, a further step is necessary in order to determine the specific obligations falling to the contracting authority or entity awarding the concession. It is therefore a matter of establishing the procurement rules which may be derived from the fundamental freedoms."

At paragraphs 82 and 83 of his Opinion the Advocate General continued:

"To begin with, it can be established that the rules on procurement that apply within the scope of the directives cannot in any event apply under primary law. Two reasons above all militate against such wholesale transposition.

First, the rules laid down solely in respect of the awards envisaged by the directives would in that case effectively apply, without any recourse to the legislative procedure provided for in primary law, even beyond the scope of those directives. In that way, the Community legislative procedure would be circumvented. Secondly, those directives, which lay down rules exclusively for specific awards, would be circumvented."


[28] The working out of these considerations in relation to the proposed concession, which was the subject matter in the Coname case, was, to some extent, addressed by the
European Court in its judgment at paragraph 20 where it stated that:

"With regard to the case in the main proceedings, it is not apparent from the file that, because of special circumstances, such as a very modest economic interest at stake, it could reasonably be maintained that an undertaking located in a Member State other than that of the Comune di Cingia de'Botti would have no interest in the concession at issue and that the effects on the fundamental freedoms concerned should therefore be regarded as too uncertain and indirect to warrant the conclusion that they may have been infringed..."

The court then, at paragraph [21] continued:

"In those circumstances, it is for the referring court to satisfy itself that the award of the concession by the Comune di Cingia de'Botti to Padania complies with transparency requirements which, without necessarily implying an obligation to hold an invitation to tender, are, in particular, such as to ensure that an undertaking located in the territory of a Member State other than that of the Italian Republic can have access to appropriate information regarding that concession before it is awarded, so that, if that undertaking had so wished, it would have been in a position to express its interests in obtaining that concession."


[29] Reference was also made to Parking Brixen GmbH v Gemeinde Brixen & Stadtwerke Brixen AG (Case C-458/03) [2005] ECR 1-08585. The
European Court's judgment in the case of Medipac-Kazantzidis AE v Venizeleio-Pananeio (Case C-6/05) [2007] ECR 1-04557 was instructive in making it clear that in relation to below threshold contracts the Directive's provisions did not apply as opposed to relevant general principles of Community law. At paragraph 31 of the Court's judgment it was noted that the Greek Government in that case had confirmed that the value of the contract in question was below the relevant threshold. In paragraph 31 of the Court's Opinion it was stated:

"The Court accordingly finds that the Austrian Government is correct in arguing that, in those circumstances, an interpretation of Directive 93/36 has no bearing on the outcome of these proceedings."

Having said that the Court nevertheless went on at paragraph 32 to say:

"However, a useful reply to the questions referred by the national court calls for the consideration of certain general principles applicable to public procurement."

In the Commission of the European Communities v Ireland (Case C-507/03) [2007] ECR 1-09777 the Court acknowledged that in below threshold cases, for there to be the required engagement of Community principles, there had to be some potential for cross-border interest in the contract in question - see paragraphs 30 and 32 of the Court's judgment. Various factors and considerations discussed in the authorities were brought together, to a large extent, by the European Court in its judgment in the joined cases of SECAP SpA (C-147/06) and Santorso Soc. coop arl (C-148/06) v Comune di Torino (Case C-147-06) [2008] ECR 1-03565. This the Court did first at paragraphs 19-21 of its judgment which are in the following terms:

"The strict special procedures prescribed by the Community directives co‑ordinating public procurement procedures apply only to contracts whose value exceeds a threshold expressly laid down in each of those directives (order in Case C-59/00 Vestergaard (2001) ECR 1-9505, paragraph 19). Accordingly, the rules in those directives do not apply to contracts with a value below the threshold set by those directives (see, to that effect, Case C‑412/04 Commission v Italy (2008) ECR 1-619, paragraph 65).

That does not mean, however, that contracts below the threshold are excluded from the scope of Community law (order in Vestergaard, paragraph 19). According to the established case-law of the Court concerning the award of contracts which, on account of their value, are not subject to the procedures laid down by Community rules, the contracting authorities are nonetheless bound to comply with the fundamental rules of the Treaty and the principle of non-discrimination on the ground of nationality in particular (Telaustria and Telefonadress, paragraph 60; the order in Vestergaard, paragraphs 20 and 21; Case C-264/03 Commission v France [2005] ECR 1-8831, paragraph 32; and Case C-6/5 Medipac-Kazantzidis [2007] ECR 1-4557, paragraph 33.)

However, according to the case-law of the Court, the application of the fundamental rules and general principles of the Treaty to procedures for the award of contracts below the threshold for the application of Community directives is based on the premiss that the contracts in question are of certain cross-border interest (see, to that effect, Case C-507/03 Commission v Ireland [2007] ECR 1-9777, paragraph 29, and Commission v Italy, paragraphs 66 and 67)."

The Court, at paragraph 30 of its judgment, significantly added the following:

"It is in principle for the contracting authority concerned to assess whether there may be cross-border interest in a contract whose estimated value is below the threshold laid down by the Community rules, it being understood that that assessment may be subject to judicial review."

The Court of Appeal in England and Wales had recently had to consider the relevant principles to be applied in below threshold public procurement contracts in Chandler, R (on the application of) v Secretary of State for Children, Schools and Families [2009] EWCA Civ 1011: (2010) C.M.L.R. 19. In the judgment of the court, given by Arden LJ, it was accepted that the jurisprudence of the European Court only applied to below threshold contracts if there was seen to be the requisite degree of cross-border interest in tendering for it. It was noted by the Court of Appeal that there was no authoritative guidance provided as to how that test fell to be applied and, in that respect, at paragraph 30 of their judgment they said: "We doubt whether the Court of Justice intended to hold that cross-border interest had been shown beyond reasonable doubt." Having reached the view that it was not necessary for them to reach a decision on these matters to resolve the question before the court, the court said "We will proceed on the basis most favourable to the appellant that if there is a realistic prospect of cross-border interest, the principles of the Treaty are engaged." In the present case, before us, all that was known was that four contractors had tendered for the contract, one from Devon, the other three being Scottish undertakings.


[30] In all the foregoing circumstances, and having regard to the authorities just referred to, senior counsel for the reclaimers submitted that the position with regard to below threshold contracts was this. First of all it was for the contracting authority (or anyone else claiming an interest) to rebut the presumption that Community principles were not engaged. If that was done and there had been a breach of those principles it was for an aggrieved party, with an appropriate interest, to seek the remedies available to him at common law. It was incompetent for him to seek to have remedies made available by the Directive and the Scottish Regulations. The remedies available at common law had, it was accepted, to be effective for the purposes of enforcing the rights in question - compare Peterbroeck, Van Campenhout & Cie SES v Belgian State (Case C-312/93) [1995] ECR 1-04599 at para 12 of the court's judgment. But such remedies were available at common law.


[31] For the foregoing reasons the reclaiming motion should be allowed because in the first place, the Commercial Judge had not been entitled to reach the conclusions he did, without appropriate inquiry, to the effect that the Community law principles had been engaged. But more fundamentally he had misdirected himself in holding that the respondents were entitled to remedies prescribed only in terms of the Directive and the Scottish Regulations.


[32] As senior counsel's discussion with the court on the question of competency developed, a more fundamental attack on the competency of the whole process emerged. That was as follows. Any relief which the respondents sought had to be brought, in our system, by way of a petition for judicial review. That arose from the combined effect of Rule of Court 58.3 and the decision of the court in West v Secretary of State for Scotland [1992] SC 383. Rule of Court 58.3 provides:

"(1) Subject to paragraph (2) an application to the supervisory jurisdiction of the court, including an application under section 45(b) of the Act of 1988 (specific performance of statutory duty), shall be made by petition for judicial review.

(2) An application may not be made under paragraph (1) if that application is made, or could be made by appeal or review under or by virtue of any enactment."

In West, at page 404, Lord President Hope under reference to the Rule of Court in its previous emanation (260B) said this:

"The following characteristics of Rule of Court 206B may therefore be noted at this stage. First, since it was introduced by Act of Sederunt without any further enabling power having been conferred on the court by general legislation, it was a procedural amendment only which did not and could not alter in any respect the substantive law. Thus neither the nature or scope of the supervisory jurisdiction nor the grounds on which it may be exercised were affected by the introduction of this new rule. Second, it requires that all applications to the supervisory jurisdiction must be made only by means of the new procedure. The former procedure by way of summons or petition is no longer to be available in such cases."

At pages 412-3 his Lordship defined the supervisory jurisdiction which is exercisable, and only exercisable, under Rule of Court 58 procedure in the following way.

"The Court of Session has power, in the exercise of its supervisory jurisdiction, to regulate the process by which decisions are taken by any person or body to whom a jurisdiction, power or authority has been delegated or entrusted by statute, agreement or any other instrument."

Attacks on decisions of local authorities relating to public procurement, where the contracts in question fall below the relevant threshold, it was submitted, had to be done by invoking the supervisory jurisdiction of the Court of Session and could only be done by way of Rule of Court 58 petition procedure. Reference was made to Sleigh v Edinburgh District Council 1987 SC 7 where the court indicated that it was not satisfied that where a party had raised proceedings to challenge a decision or act of a local authority in a procedure other than that provided for in Rule of Court 58 that it would be competent for him to seek to convert the procedure, by amendment, into a petition for judicial review. The respondents had, for these reasons, chosen an incompetent procedure and the action should be dismissed.


[33] While senior counsel for the respondents in reply initially sought to defend their position by making submissions to the effect that the Commercial Judge was entitled, having regard to various circumstances, to infer that the contract in question had a cross-border interest, without the need for an inquiry, he rapidly faced up to the difficulty which faced the respondents in relation to the competency of the procedure that had been chosen by them. Crucially he accepted that what the respondents were seeking to do was to attack an administrative decision or decisions of an administrative body and ultimately he was forced to accept that there appeared to be force in the proposition that such a challenge could only be made by way of petition for judicial review. The combined effect of the wording of Regulations 8(1) and (21) and Regulation 47 foreclosed in
Scotland, it seemed, the procedural route which the respondents had chosen in the present case.


[34] Senior counsel for the first defenders, after having taken instructions, advised the court that the position now adopted by the first defenders was to accept that there was force in the point of fundamental incompetence which had now been raised and they did not seek to make any submissions in relation to that matter.

Decision

[35] We are of the clear opinion that the procedure adopted in this case, being a commercial action, is in the circumstances fundamentally incompetent. By it the respondents seek remedies not only under reference to alleged breaches of the Scottish Regulations but also, in their pleadings, to principles of administrative law such as irrationality and manifest error. As previously noted, in Conclusion 4 they seek specific performance of an alleged statutory duty and this matter, although it was not insisted on before the Commercial Judge, remains in the respondents' pleadings.


[36] It is a matter of agreement, on all sides, that the contract in question was a below threshold contract. In that situation it is clear that, as a matter of law, the provisions of the Directive and the Scottish Regulations had no application to it. See for example the case of Coname, the Advocate-General's Opinion at paragraphs 82 and 83, the judgment of the Court at paragraph 16 and Medipac, the judgment of the Court at paragraphs 30 and 31. The review of the relevant case law of the European Court of Justice in relation to below threshold contracts, which we were favoured with, clearly establishes that, in relation to below threshold public procurement contracts, principles of community law may be engaged and may, therefore, require to be observed by contracting authorities in the public procurement activities involving below threshold contracts. Regulation 8(21) of the Scottish Regulations would, as has been noted, appear to be no more than a statutory recognition, in domestic law, of the effect of that jurisprudence. In the course of the discussion before us, difficult and as yet apparently unresolved, questions arose as to the application of that jurisprudence, although what is clear is that contracting authorities, in the first place, have to make a decision (an assessment) as to whether Community principles are engaged because there may be cross-border interest in the contract in question - see the decision in SECAP cited, above particularly at paragraph 30 of the judgment of the Court. But, as the
European Court made clear in the passage just referred to, the contracting authority's decisions upon such matters are not, in law, conclusive and are to be subject to judicial review. As has been seen the present case touched upon a number of issues as to how the relevant European jurisprudence falls to be applied and the Commercial Judge reached certain conclusions about how these issues should be addressed and resolved. Having regard to the view that we have taken as to the competency of the present process we do not require to address or answer these questions and would prefer that a consideration of them should be left until they are raised in proceedings which themselves are competent. Suffice it to say that our provisional view is that a number of the questions discussed before us are not free from difficulty and that there are serious questions about the appropriateness of the Commercial Judge's reasoning in relation to them, particularly his reasoning at paragraphs 60 and 66 of his Opinion. What is clear to us, however, is that when a party, in Scotland, seeks to have these questions, or indeed others, addressed in relation to this area of law in the context of a challenge to acts and decisions of a contracting authority, they must do so by resorting to our domestic law procedures and remedies and not by relying on the procedures and remedies provided by the relevant European Directives and the Scottish Regulations. That will be so even when the contracting authority has elected voluntarily to follow, in relation to below threshold contracts, procedures for placing of the contract apparently either identical or similar to those provided for in those statutory instruments. The remedial and procedural regime prescribed by those instruments have no effect in relation to such a voluntary adoption of contractual procedures and aggrieved parties must resort to the remedies and procedures provided by domestic law. There may, no doubt, in certain cases be a place for recourse to the ordinary law of contract but, in cases like the present, where the aggrieved person has not concluded a contract with the contracting authority, and the complaint is as to how the authority went about placing the contract it did, then resort will require to be made to the supervisory jurisdiction of this court by way of a petition for judicial review, relying upon the well established principles of administrative law. There is no doubt, in our mind, that that is what should have been done in this case and that proceeding by way of commercial action was incompetent.


[37] We were able to give our decision about the disposal of the reclaiming motion at the end of the hearing before us. The reclaimers' first plea-in-law as to competency does not, per se attack the competency point that emerged in the submissions made before us. We were of the view, however, that it was pars judicis for us to recognise that the proceedings, as a whole, were fundamentally incompetent and we allowed the reclaiming motion by dismissing it as being fundamentally incompetent for the reasons now given in this opinion.


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