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You are here: BAILII >> Databases >> England and Wales High Court (Technology and Construction Court) Decisions >> Energy Solutions Eu Ltd v Nuclear Decommissioning Authority [2015] EWHC 73 (TCC) (23 January 2014) URL: https://www.bailii.org/ew/cases/EWHC/TCC/2015/73.html Cite as: [2015] EWHC 73 (TCC), [2015] PTSR 1106, [2015] WLR(D) 41 |
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QUEEN'S BENCH DIVISION
TECHNOLOGY AND CONSTRUCTION COURT
Strand, London, WC2A 2LL |
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B e f o r e :
____________________
Energy Solutions EU Ltd |
Claimant |
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- and - |
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Nuclear Decommissioning Authority |
Defendant |
____________________
(instructed by Freshfields Bruckhaus Deringer LLP) for the Claimant
Nigel Giffin Esq, QC & Joseph Barrett Esq
(instructed by Burges Salmon LLP) for the Defendant
Hearing dates: 1st December 2014;
Additional written submissions: 4th & 5th December 2014; and 8th December 2014
____________________
Crown Copyright ©
Mr. Justice Edwards-Stuart:
Introduction
The preliminary issues
"a. whether the fact that the Claimant did not issue a claim form and notify the Defendant that it had done so before the Defendant's entry into the Contract means that, given regulation 47G of the Public Contracts Regulations 2006, any loss that the Claimant has suffered in consequence of any breach of its obligations by the Defendant is not attributable to any such breach.
b. if the Claimant has suffered any loss in consequence of any breach by the Defendant of its obligations:
i. whether the Court has any discretion not to make any award of damages in respect of that loss or a discretion to make only a partial award of damages in respect of any such loss; and
ii. if so:
(1) on what basis any such discretion is to be exercised; and
(2) whether the fact that the Claimant did not issue a claim form before the Defendant's entry into the Contract and notify the Defendant that it had done so means that, given regulation 47G of the Public Contracts Regulations 2006, it would be inappropriate for the court to make any award of damages or one in relation to the full loss suffered by the Claimant."
"As to causation ... our client does not suggest that a claimant's failure to act so as to trigger, or to seek to maintain, the statutory suspension on entry into the contract means that, automatically or necessarily in every case, any financial loss resulting from the claimant's potential loss of the contract cannot be said to have been caused by any breach committed by the contracting authority. Similarly, it is not our client's case that any such failure must always lead to a damages remedy being withheld as a matter of discretion.
Rather, our client's case is that:
(a) A failure by a claimant to trigger the statutory suspension, or to take steps to maintain a suspension, may break the chain of causation between the authority's breach (if any) and the financial loss that the claimant has suffered. Whether the chain of causation has in fact been broken will depend upon an assessment of all the relevant factual circumstances. A failure of the kind mentioned is amongst those relevant circumstances.
(b) Under regulation 47J(2)(c), the Court has a general discretion as to whether to award damages in the circumstances in which that provision applies. How that discretion should be exercised depends upon the view which the Court takes of all the circumstances of the case. The discretion must be exercised consistently with EU law principles including the principle of effectiveness however, there is no breach of that principle where a claimant is properly deprived of a remedy because of its own conduct (whether that conduct consist of acts or omissions). A failure to trigger or maintain the statutory suspension is amongst the circumstances which are relevant to the exercise of the discretion."
i) The nature and extent of the breaches of duty by the authority which have been found by the Court to have occurred;
ii) Whether those breaches demonstrate a grave and manifest disregard of its duties by the authorities;
iii) The extent to which the wider public interest would or would not be served by an award of damages;
iv) The effect upon the bidder of taking one course of action in relation to remedy rather than another (including any considerations arising from not all members of the bidding consortium being amongst the claimants in the proceedings);
v) The claimant's failure to invoke the statutory suspension, in the context of the opportunity which it had to do so, what would have happened if it had done so, and the reasons (if any are offered) why it did not do so.
"(iii) Delay in entering the Contract would have caused the Defendant substantial financial loss. If the suspension had been activated by the Claimant, but the Claimant had refused to offer an adequate cross-undertaking in damages, then the Defendant would have applied to lift the suspension, so as to be able to enter the Contract if that application succeeded. If the Claimant had been willing to offer an adequate cross-undertaking, the Defendant would have had to consider whether to make any such application in the light of the nature of the claim, the extent to which delay in entering the contract would have caused any prejudice not capable of being remedied through the cross-undertaking, the date when a trial (if expedited) would have taken place, and the legal advice which it received. Because of the manner in which the Claimant in fact proceeded, this situation did not arise.
(iv) In the premises, any financial loss suffered by the Claimant in consequence of the award of the Contract is attributable to its own omission, which was the effective cause such loss, rather than to any breach committed by the Defendant."
"We can confirm that our client will consent to the proposed amendments to the Defence on the basis that any issues of law raised by the amendments are dealt with at the preliminary issue hearing listed for 1 December 2014, and that our client reserves the right to apply under the CPRs either for summary judgment or to strike out any part of the defence as amended in the light of any judgment given following the hearing on 1 December 2014."
The Remedies Directive
"Whereas Community Directives on public procurement ... do not contain any specific provisions ensuring that effective application;
Whereas the existing arrangements at both national and Community levels for ensuring their application are not always adequate to ensure compliance with the relevant Community provisions particularly at a stage when infringements can be corrected;
... Effective and rapid remedies must be available in the case of infringements of Community law in the field of public procurement, or national rules implementing that law;
Whereas in certain Member States the absence of effective remedies or inadequacy of existing remedies deter Community undertakings from submitting tenders in the Member State in which the contracting authority is established; whereas, therefore, the Member States concerned must remedy this situation;
...
Whereas it is necessary to ensure that adequate procedures exist in all the Member States to permit the setting aside of decisions taken unlawfully and compensation of persons harmed by an infringement"
"1. ...
Member States shall take the measures necessary to ensure that, as regards contracts falling within the scope of Directive 2004/18/EC, decisions taken by the contracting authorities may be reviewed effectively and, in particular, as rapidly as possible in accordance with the conditions set out in Articles 2 to 2f of this Directive, on the grounds that such decisions have infringed Community law in the field of public procurement or national rules transposing that law.
2. Member States shall ensure that there is no discrimination between undertakings claiming harm in the context of a procedure for the award of a contract as a result of the distinction made by this Directive between national rules implementing Community law and other national rules.
3. Member States shall ensure that the review procedures are available, under detailed rules which the Member States may establish, at least to any person having or having had an interest in obtaining a particular contract and who has been or risks being harmed by an alleged infringement.
4. Member States may require that the person wishing to use a review procedure has notified the contracting authority of the alleged infringement and of his intention to seek review, provided that this does not affect the standstill period in accordance with Article 2a(2) or any other time limits for applying for review in accordance with Article 2c."
"1. Member States shall ensure that the measures taken concerning the review procedures specified in Article 1 include provision for powers to:
(a) take, at the earliest opportunity and by way of introductory procedures, interim measures with the aim of correcting the alleged infringement or preventing further damage to the interests concerned, including measures to suspend or to ensure the suspension of the procedure for the award of a public contract or the implementation of any decision taken by the contracting authority;
(b) either set aside or ensure the setting aside of decisions taken unlawfully, including the removal of discriminatory, economic or financial specifications in the invitation to tender, the contract documents or in any other document relating to the contract award procedure;
(c) order damages to persons harmed by an infringement.
2. ...
3. When a body of first instance, which is independent of the contracting authority, reviews a contract award decision, Member States shall ensure that the contracting authority cannot conclude the contract before the review body has made a decision on the application either for interim measures or for review. The suspension shall end no earlier than the expiry of the standstill period referred to in Article 2a(2) and Article 2d(4) and (5).
4. ...
5. Member States may provide that the body responsible for review procedures may take into account the probable consequence of interim measures for all interests likely to be harmed, as well as the public interest, and may decide not to grant such measures when their negative consequences could exceed their benefits.
A decision not to grant interim measures shall not prejudice any other claim of the person seeking such measures.
6. Member States may provide that where damages are claimed on the grounds that a decision was taken unlawfully, the contested decision must first be set aside by a body having the necessary powers.
7. Except where provided for in Articles 2d to 2f, the effects of the exercise of the powers referred to in paragraph 1 of this Part on a contract concluded subsequent to its award shall be determined by national law.
Furthermore, except where a decision must be set aside prior to the award of damages, a Member State may provide that, after the conclusion of a contract in accordance with Article 1(5), paragraph 3 of this Article or Articles 2a to 2f, the powers of the body responsible for review procedures shall be limited to awarding damages to any person harmed by an infringement.
8. Member States shall ensure that decisions taken by bodies responsible for review procedures can be effectively enforced."
The United Kingdom has taken up the second part of paragraph 7 set out above by way of regulation 47J(2)(d).
The Public Contracts Regulations 2006 (as amended)
"(1) Where-
a claim form is issued in respect of a contracting authority's decision to award the contract;
the contracting authority has become aware that the claim form has been issued and that it relates to that decision; and
the contract has not been entered into,
the contracting authority is required to refrain from entering into the contract.
(2) The requirement continues until any of the following occurs-
(a) the Court brings the requirement to an end by interim order under regulation 47H(1)(a).
..."
"(1) In proceedings, the Court may, where relevant, make an interim order-
bringing to an end the requirement imposed by regulation 47G(1);
...
(2) When deciding whether to make an order under paragraph (1)(a)-
(a) the Court must consider whether, if regulation 47G(1) were not applicable, it would be appropriate to make an interim order requiring the contracting authority to refrain from entering into the contract; and
(b) only if the Court considers that it would not be appropriate to make such an interim order may it make an order under paragraph (1)(a).
(3) If the Court considers that it would not be appropriate to make an interim order of the kind mentioned in paragraph (2)(a) in the absence of undertakings or conditions, it may require or impose such undertakings or conditions in relation to the requirement in regulation 47G(1).
..."
"(1) Paragraph (2) applies where-
the Court is satisfied that a decision or action taken by contracting authority was in breach of the duty owed in accordance with regulation 47A or 47B; and
the contract has not yet been entered into.
(2) In those circumstances, the Court may do one or more of the following-
(a) order the setting aside of the decision or action concerned;
(b) order the contracting authority to amend any document;
(c) award damages to an economic operator which has suffered loss or damage as a consequence of the breach.
(3) This regulation does not prejudice any other powers of the Court."
"(1) Paragraph (2) applies if-
the Court is satisfied that decision or action taken by contracting authority was in breach of the duty owed in accordance with regulation 47A or 47B; and
the contract has been entered into.
(2) In those circumstances, the Court -
(a) must, if it is satisfied that any of the grounds for ineffectiveness applies ...
(b) must, where required by regulation 47N [which concerns penalties in addition to, or instead of, ineffectiveness] ...
(c) may award damages to an economic operator which has suffered loss or damage as a consequence of the breach, regardless of whether the Court also acts as described in sub-paragraphs (a) and (b);
(d) must not order any other remedies.
(3) ..."
(My emphasis)
The submissions
"A claimant who behaves as this Claimant has done places the public authority which is procuring the contract on the horns of a dilemma. Delay in awarding the contract may well expose the authority, and thus the public purse, to the risk (if not the certainty) of substantial financial loss. That might simply be because the price payable under the new contract is significantly lower than what the authority would have to pay to secure a service in the interim, by extending existing arrangements or entering into new and temporary arrangements. Or it might be because the tender price is only guaranteed to a certain date, or because the authority bears the risk of interest rate or exchange rate movements. Or there may be a risk that delay could cause the winning bidder to withdraw, or that for some other reason the procurement may collapse and have to be re-run. If the statutory suspension is not triggered, it is of course to open to the defendant authority voluntarily to hold off from awarding the contract, but if the defendant then succeeds at trial, the loss suffered through the delay will be irrecoverable - in the absence of the claimant seeking to maintain a suspension, there is no mechanism by which a cross-undertaking can be imposed, and no other means by which the claimant can be held responsible for that loss."
The position of Bechtel
"Since the Claimant was/is one member of a consortium yet to be incorporated, if the Claimant had issued its Claim Form in time to trigger suspension, on what basis could the Claimant have resisted an application by the Defendant to lift the suspension if it (the Claimant) was not an operator (being only one member of the consortium that put in the tender) to whom the contract could have been awarded?
Does the outcome depend on whether Bechtel would have been willing to keep the tender open until trial?"
The second issue: is an award of damages a discretionary remedy, and, if so, what criteria affect the discretion?
"This is a case where Mears' loss or risk of loss can be adequately compensated by damages and that provides an appropriate remedy."
This suggests to my mind that Ramsey J did not have in mind an award of damages that would represent anything other than the ordinary measure of damages.
"I see nothing in the Regulations, nor in the Remedies Directive 92/13 EEC, which justifies the submission made by Mr. Carr that the effectiveness of enforcement of the Regulations requires or supports a presumption in favour of the grant of restraining relief rather than confining a provider to a claim for damages. I think the factors with which the courts are familiar are material to what is expressed to be a general discretion as to whether to grant relief and, if so, to decide the appropriate relief to be granted. Those factors include delay, prejudice, the adequacy or otherwise of damages and the general policy conditions to which I have referred."
"It is important at this stage to note that the damages claimed are not what Mr. Vaughan described before the Judge, and which for purposes of identification only I will continue to refer to, as Norbrook damages; that name being taken from Case C-127/95 Norbrook Laboratories v Ministry of Agriculture , 2 April 1998. In Case C-127/95 the European Court of Justice restated the conditions imposed by Community law on the recovery of damages for a breach of Community law by a member state. The Court of Justice said in its ruling, at pp. 1598-1999, paras 106-107:
'It must be remembered, first, that as the Court has held repeatedly, the principle of State liability for loss and damage caused to individuals as a result of breaches of Community law for which the State can be held responsible is inherent in the system of the Treaty (Joined Cases C-6/90 and C-9/90 Francovich and Others v. Italian Republic [1991] ECR I-5357, paragraph 35; Joined Cases C-46/93 and C-48/93 The Queen v. H.M. Treasury, ex parte British Telecommunications [1996] I-1631, paragraph 38; Case C-5/94 The Queen v. MAFF, ex parte Hedley Lomas [1996] ECR I-2553, paragraph 24; and Joined Cases C-178/94, C-179/94, C-188/94, C-189/94 and C-190/94 Dillenkofer and others v. Germany [1996] ECR I-4845, paragraph 20). It is clear from the above case-law that three conditions must be satisfied for a Member State to be required to compensate for damage thus caused: the rule of law infringed must have been intended to confer rights on individuals; the breach must be sufficiently serious; and there must be a direct causal link between the breach of the obligation resting on the State and the damage sustained by the injured parties (Brasserie du Pecheur and Factortame paragraph 51; British Telecommunications, paragraph 39; Hedley Lomas, paragraph 25; and Dillenkofer and others, paragraph 24, all cited above).'
It is clear that the damages claim in our case is not a Norbrook claim not only because Mr. Vaughan so said; but also because no attempt is made in the statement of claim to plead, much less to establish, that the breach on which the claim is based was 'sufficiently serious' in Norbrook terms."
"Some of the more detailed implications of this dispute will have to be taken up in addressing the individual issues in the appeal. In more general terms, however, I am of opinion that:
1. The 'damages' referred to in Article 2.1(c) are not Norbrook damages. As already noted that is conceded in this case, but the point needs to be underlined. At the date of Directive 89/665, not only did the Directives to which it was subsidiary not contain provisions to ensure their effective application in the member states, as the recitals to Directive 89/665 acknowledged in terms, but also it was uncertain whether, in at least a number of member states, there could be any, or at least any general, recourse to damages as a remedy for infringement of directly effective Community rights: for example, see the position in 1989 in the United Kingdom as set out in the judgments in this court in Bourgoin SA v Ministry of Agriculture [1986] 1 QB 716. The right to damages that the member states are obliged by Article 2.1(c) to create must therefore be, in Community terms, sui generis, and must find its origins and limits in the specific provisions of Directive 89/665 rather than in more general principles of Community law.
2. That Directive 89/665 creates its own limited code of remedies is underlined by the fact that it only applies, because the underlying Directive 92/50 only applies, to contracts of a value in excess of ECU 200,000: Directive 92/50, Article 7.1. If the remedies envisaged by Directive 89/665 were general remedies already available in member states through the requirements of Community law, rather than being remedies imposed on the member states by Directive 89/665 itself, not only would there have been no need for Directive 89/665 at all, but also the exclusion from contracts of a certain size of the Directive 89/665 remedies would equally beat the air.
3. Once the obligation of the member state to provide that remedy in damages has been discharged by the United Kingdom by the terms of regulation 32(5)(b)(ii) those damages provided by domestic law remain damages on the basis envisaged by Directive 89/665; but regulation 32(5)(b)(ii) nonetheless thereby creates a private law, non-discretionary, remedy, because within the national legal order any remedy in damages necessarily has those qualities.
4. The obligation under Article 2.1(c) arises in the context of a scheme of remedies that are intended, as the recitals to Directive 89/665 state, to be effective and rapid."
"85 By its fourth question, part (c), the referring court asks, in essence, whether, if the awarding authority has to make good the damage arising from an infringement of EU law on the award of public contracts, EU law provides criteria on the basis of which the damage may be determined and estimated and, if so, what those criteria are.
86 Article 2(1)(c) of Directive 89/665 clearly indicates that Member States must make provision for the possibility of awarding damages in the case of infringement of EU law on the award of public contracts, but contains no detailed statement either as to the conditions under which an awarding authority may be held liable or as to the determination of the amount of the damages which it may be ordered to pay.
87 That provision gives concrete expression to the principle of State liability for loss and damage caused to individuals as a result of breaches of EU law for which the State can be held responsible. According to case-law developed since the adoption of the Directive 89/665, but which is now consistent, that principle is inherent in the legal order of the Union. The Court has held that individuals harmed have a right to reparation where three conditions are met: the rule of EU law infringed must be intended to confer rights on them; the breach of the rule must be sufficiently serious; and there must be a direct causal link between the breach of the loss or damage sustained by the individuals (Joined Cases C-6/90 and C-9/90 Francovich and Others v. Italian Republic [1991] ECR I-5357; Joined Cases C-46/93 and C-48/93 Brasserie du Pecheur and Factortame [1996] ECR I-1029, paragraph 31 and 51; and Case C-445/06 Danske Slagterier [2009] ECR I-2119, paragraphs 19 and 20)."
"90 In the absence of EU provisions in that area, it is for the legal order of each Member State to determine the criteria on the basis of which damage arising from an infringement of EU law on the award of public contracts must be determined and estimated (see, by analogy, Case C-315/01 GAT [2003] ECR I-6351, paragraph 46; and Case C-314/09 Strabag and Others [2010] ECR I-8769, paragraph 33) provided the principles of equivalence and effectiveness are complied with (see, to that effect, Joint Cases C-295/04 to C-298/04 Manfredi and others [2006] ECR I-6619, paragraph 98).
91 It is apparent from well-established case law that the detailed procedural rules governing actions for safeguarding an individual's rights under EU law must be no less favourable than those governing similar domestic actions (principle of equivalence) and must not render practically impossible or excessively difficult the exercise of rights conferred by EU law ....
92 Therefore, the answer to the fourth question, part (c) is that, as regards State liability for damage caused to individuals by infringements of EU law for which the State may be held responsible, the individuals harmed have a right to redress where the rule of EU law which has been infringed is intended to confer rights on them, the breach of that rule is sufficiently serious, and there is a direct causal link between the breach and the loss or damage sustained by the individuals. In the absence of any provision of EU law in that area, it is for the internal legal order of each Member State, once those conditions have been complied with, to determine the criteria on the basis of which the damage arising from an infringement of EU law on the award of public contracts must be determined and estimated, provided the principles of equivalence and effectiveness are complied with."
"In particular, in order to determine the loss or damage for which reparation may be granted, the national court may enquire whether the injured person showed reasonable diligence in order to avoid the loss or damage or limit its extent and whether, in particular, he availed himself in time of all the legal remedies available to him."
I do not consider that this passage assists Mr. Giffin. It seems to me that it is really no more than a statement of the rule relating to avoidable loss, which I have already discussed.
"58 By its fifth question, the referring court essentially asks whether Community law precludes a rule such as that laid down in para. 839(3) of the BGB which provides that an individual cannot obtain reparation for loss or damage which he has wilfully or negligently failed to have by utilising a legal remedy ….
…
60 As regards utilisation of the available legal remedies, the Court held in Brasserie du Pêcheur [1996] 1 CMLR 889 at [84], in relation to liability of a Member State for breach of Community law, that the national court may inquire whether the injured person showed reasonable diligence in order to avoid the loss or damage or limit its extent and whether, in particular, he availed himself in time of all the legal remedies available to him.
61 Indeed, it is a general principle common to the legal systems of the Member States that the injured party must show reasonable diligence in limiting the extent of the loss or damage, or risk having to bear the loss or damage himself (Mulder v Council of the European Communities (C 104 & 37/90) [1992] ECR I-3061 at [33], and Brasserie du Pêcheur [1996] 1 CMLR 889 at [85]).
62 It would, however, be contrary to the principle of effectiveness to oblige injured parties to have recourse systematically to all the legal remedies available to them even if that would give rise to excessive difficulties or could not reasonably be required of them."
"It would, however, be contrary to the principle of effectiveness to oblige an injured party to have recourse systematically to all the legal remedies available to it if that would give rise to excessive difficulties or could not be reasonably required."
"Consequently, it is to be concluded that Community law does not preclude the application of a national rule such as that laid down in para. 839(3) of the BGB, provided that utilisation of the legal remedy in question can reasonably be required of the injured party. It is for the referring court to determine in the light of all the circumstances of the main proceedings whether that is so."
"Whether it would in fact be appropriate to withhold the damages remedy in a given case would depend on the Court's overall assessment of all the circumstances as established at trial. Relevant factors may include: the nature and context of the breaches of duty by the authority which have been found by the Court to have occurred; whether those breaches demonstrate a grave and manifest disregard of its duties by the authority; the extent to which the wider public interest would or would not be served by an award of damages; the effect upon the bidder of taking one course of action in relation to remedy rather than another (including any considerations arising from not all members of the bidding consortium being amongst the claimants in the proceedings); and the claimant's failure to invoke the statutory suspension, in the context of the opportunity which it had to do so, what would have happened if it had done so, and the reasons (if any are offered) why it did not do so."
Note 1 Or before the conclusion of the contract, although once the standstill period has expired without proceedings having been issued, the contract can be entered into at any time. [Back]