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England and Wales Court of Appeal (Civil Division) Decisions


You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> The Law Society, R (on the application of) v Legal Services Commission [2007] EWCA Civ 1264 (29 November 2007)
URL: http://www.bailii.org/ew/cases/EWCA/Civ/2007/1264.html
Cite as: [2007] EWCA Civ 1264, [2008] 2 All ER 148, [2008] QB 737, [2008] 2 WLR 803

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Neutral Citation Number: [2007] EWCA Civ 1264
Case No: C1/2007/2013, 2007/2055 & 2007/2056

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
MR JUSTICE BEATSON
CO/3268/2007 & HQ07X01529

Royal Courts of Justice
Strand, London, WC2A 2LL
29/11/2007

B e f o r e :

THE LORD CHIEF JUSTICE
LORD JUSTICE WALL
and
LORD JUSTICE LAWRENCE COLLINS

____________________

Between:
The Queen on the application of the Law Society
Claimant/Appellant
- and -

Legal Services Commission
Defendant/
Respondent
The Lord Chancellor and the Secretary of State for Justice
Interested Party
And


Dexter Montague & Partners (a firm)
Claimant/Appellant
-and-

Legal Services Commission
Defendant/
Respondent

____________________

Mr John Howell QC, Mr Javan Herberg and Mr Mark Vinall
(instructed by Bircham Dyson Bell LLP) for
The Law Society and Dexter Montague & Partners
Robert Jay QC, Paul Darling QC, Rhodri Williams and Sarah Hannaford
(instructed by Legal Services Commission and the Treasury Solicitor) for the
Legal Services Commission, the Lord Chancellor and the Secretary of State for Justice

Hearing dates : October 15 & 16, 2007

____________________

HTML VERSION OF JUDGMENT
____________________

Crown Copyright ©

    Lord Phillips of Worth Matravers CJ:

    I Introduction

  1. This is the judgment of the court, to which all of its members have contributed.
  2. Provisions in the new Unified Contract between the Legal Services Commission ("the LSC") and solicitors wishing to undertake publicly funded work contain extensive powers of unilateral amendment on the part of the LSC. This appeal concerns the compatibility of those provisions with general principles of public procurement law and with Council Directive 2004/18/EC on the coordination of procedures for the award of public works contracts, public supply contracts and public services contracts ("the Public Sector Directive") and United Kingdom regulations dealing with public sector procurement, the Public Contract Regulations 2006 ("the 2006 Regulations").
  3. On 27 July 2007, Beatson J, sitting in the Administrative Court of the Queen's Bench Division in proceedings for judicial review brought by the Law Society against the LSC, in which the Lord Chancellor and Secretary of State for Justice ("the Secretary of State") was an interested party, made a declaration that the rights of the LSC to amend the Unified Contract referred to in clause 13.1 of that Contract (other than amendments permitted under clause 13.2) were incompatible with Regulations 9(2), 9(4) and 9(7) of the 2006 Regulations insofar as they were applicable to technical specifications (as defined in Regulation 9(1) of those Regulations).
  4. He refused to make a similar declaration in the Law Society's favour in relation to Regulation 4(3) of the 2006 Regulations. He gave the Law Society permission to appeal against that refusal, and at the same time gave both the LSC and the Secretary of State permission to cross-appeal against the declaration made in favour of the Law Society.
  5. Concurrently with the Law Society's application for judicial review, a firm of solicitors, Messrs Dexter Montague & Partners ("Dexter Montague") had brought proceedings against the LSC in the Queen's Bench Division for damages for breach of the LSC's obligations under the 2006 Regulations in relation to the Unified Contract. Dexter Montague is based in Reading and, until it refused to sign the Unified Contract, handled about a thousand publicly funded civil cases per annum.
  6. These proceedings were pleaded and advanced on identical grounds to the claim advanced by the Law Society, with the consequence that on 5 June 2007, by consent, the Master of the Crown Office ordered that there be a split trial of Dexter Montague's claim, and that the question of liability only be referred to the Administrative Court to be determined at the same time as the judicial review proceedings brought by the Law Society.
  7. Accordingly, and consistently with the declaration which he made in favour of the Law Society, in the Dexter Montague proceedings Beatson J. gave limited judgment on liability to like effect in its favour. He directed that the two consequential issues which arose in those proceedings (namely whether or not the publicly funded work undertaken by Dexter Montague would have reached the threshold required to subject it to the Regulations, and if so whether or not Dexter Montague had suffered any loss or damage) be heard separately. He also gave Dexter Montague permission to appeal against his refusal of relief under Regulation 4(3).
  8. This court is concerned with only one, but important, aspect of the Unified Contract, namely whether or not the powers of amendment given under it to the LSC satisfy the transparency provisions of the 2006 Regulations. The appeals and the cross appeal do not embrace any wider considerations of the Unified Contract, which is a substantial document, running to some 96 pages with a further 123 pages (Part D) of specifications and rules covering all aspects of civil work. Nor do they concern certain matters decided by Beatson J which are not the subject of these appeals, namely that (a) the Unified Contract is not a public services concession (which would have put it outside the scope of the 2006 Regulations); (b) there has been no delay in the proceedings for judicial review; and (c) the Law Society has standing.
  9. It should thus be made clear at the outset of this judgment that it is limited in its scope to a consideration of the one issue identified above. In particular, this court was not invited to rule on any other aspect of the Unified Contract, or on the changes introduced by the Secretary of State and the LSC to the system for public funding of legal services.
  10. II Background

    1 The Access to Justice Act 1999

  11. Beatson J summarised the origin and role of the LSC in the following way (paragraphs 6 to 11 of the judgment), which we adopt:
  12. 6. The LSC is a statutory corporation established under Part 1 of the Access to Justice Act 1999 ("the 1999 Act"). Section 1(2) of the 1999 Act confers powers and imposes duties on the LSC in relation to the Community Legal Service (the "CLS") and the Criminal Defence Service (the "CDS").
    7. The Community Legal Service was established by the 1999 Act to promote the availability to individuals of specified legal services and securing within available resources and priorities that individuals have access to services that effectively meet their needs: section 4(1) of the 1999 Act. By section 4(4) those exercising any function relating to the CLS are required to have regard to the desirability of doing so, so far as is reasonably practicable so as to (a) promote improvements in the range and quality of services provided, (b) secure services that are appropriate having regard to the nature and importance of the matter, and (c) secure the swift and fair resolution of disputes without unnecessary or unduly protracted proceedings in court.
    8. Section 4(5) requires the LSC to fund the specified services and section 5(1) requires it to establish and maintain a fund known as the Community Legal Service Fund. By section 5(7), in funding services as part of the CLS, the LSC "shall aim to obtain the best possible value for money". Funding priorities are set by the LSC in accordance with directions given by the Lord Chancellor and taking into account the need for the specified services. Section 6(3)(a) of the 1999 Act empowers the LSC to fund services by "entering into contracts with persons or bodies for the provision of services by them".
    9. By section 10 (1) of the 1999 Act a person for whom services are funded by the LSC as part of the Community Legal Service "shall not be required to make any payment in respect of the services except where regulations otherwise provide". The Community Legal Service (Financial) Regulations 2000 (SI 2000 No. 516) as amended by SI 2007 No. 906 make provision for the assessment of the financial resources of individuals in order to determine eligibility to receive funded services and to assess any contribution to be made. Contributions in respect of the costs of any services provided are to be paid to the LSC unless it has delegated that function under contract or the funding code. Section 22(2) of the 1999 Act provides that a person who provides services funded by the LSC as part of the CLS or the CDS "shall not take any payment in respect of the services apart from (a) that made by way of that funding, and (b) any authorised by the Commission to be taken".
    10. In January 2000, acting under its powers pursuant to section 6(3)(a) of the 1999 Act, the LSC started to contract for the provision of legal services. From the outset the contracts contained provisions empowering the LSC unilaterally to amend the contracts. The former General Civil Contracts, which expired on 31 March 2007, contained such a power. The LSC does not purchase a specified amount of services by means of the contracts. The contracts permit the solicitors and not for profit organisations who have obtained the requisite quality standard, and agree to abide by the terms of the contract, to undertake legal aid work.
    11. In relation to legal advice, known as controlled work, the permission to undertake legal aid work is subject to a maximum number of new cases (called "matter starts"). In relation to certificated representation before the courts there is no maximum. Initially there was a single legal aid quality standard, the "SQM". In a "bid round" in 2004 the LSC introduced additional criteria concerning quality and access for new civil contracts. In her statement Ms Wayte says that "when contracting commenced … the sole requirement was that the provider needed to demonstrate compliance with the SQM. There was no competition as such, although the fixed budget for controlled work meant that there was only a limited number of matter starts to be distributed".

    2 Developments since the implementation of the 1999 Act

  13. The financial aspects of the provision of services funded by the LSC were until recently governed by the Community Legal Service (Financial) Regulations 2000 (SI 2000/516) (the 2000 Regulations) as amended by the Community Legal Service (Financial) (Amendment) Regulations 2007 (SI 2007/906). However, following the publication of the report, Legal Aid: a Market Based Approach to Reform, by Lord Carter of Coles in July 2006, the government published a consultation paper, Legal Aid: a Sustainable Future, which set out its proposals for reform. The consultation period expired on 21 November 2006, whereupon the LSC and what was then the Department of Constitutional Affairs published a White Paper entitled Legal Aid Reform: The Way Ahead (Cmd 6993). As Beatson J. recorded (paragraph 2 of his judgment):
  14. …… The main change is an alteration to the payment structure from a system based on hourly rates towards one based on fixed and graduated fees. The LSC has also indicated that there will be further changes. The Unified Contract will be extended to cover publicly funded criminal work from 1 April 2008. The LSC may wish to introduce a minimum contract size so that publicly funded work will be restricted to firms undertaking more than that minimum amount of work. The standard to be achieved by firms in peer review may be raised from "competence" to "competence plus".
  15. All general civil contracts between solicitors and the LSC were due to expire on 31 March 2007. The documents comprising the new Unified Contract were sent to solicitors under cover of a letter dated 27 February 2007, and the solicitors were required to complete, sign and return them to the LSC no later than 31 March 2007 if they wished to continue to undertake publicly funded work. It was common ground that the documents were sent to solicitors on what was described as a "take it or leave it" basis.
  16. 3 The positions of the parties

  17. In his witness statement dated 19 April 2007, Mr Desmond Hudson, the Chief Executive of the Law Society makes a number of complaints both about the Unified Contract itself, and the timing of its introduction. For present purposes, his principal complaint is that the Unified Contract contains provisions giving the LSC a broad power to make unilateral amendments to the contract terms, including the technical specifications. These provisions, he argues, render it impossible for solicitors to determine with any reasonable degree of certainty what they will be required to do and on what terms over the contract period, and are unlawful.
  18. Faced with the "take it or leave it" choice, many solicitors signed the Unified Contract. Amongst those who did not, however, was Dexter Montague. Its position is set out in the Particulars of Claim in its action against the LSC, in which it asserts that the inclusion by the LSC of the right unilaterally to amend parts of the contract, including its technical specifications, constitutes a breach of the transparency provisions contained in the Public Sector Directive. In paragraph 6 of the Particulars of Claim the firm asserts that the LSC owes it a duty under the 2006 Regulations:
  19. (1) to act in a transparent way, in accordance with Article 2 of (the Public Sector Directive);
    (2) to specify in the contract documents …. any and all technical specifications … which must be met by the services to be provided under the Unified Contract;
    (3) where defining technical specifications required for the Unified Contract in terms of performance or functional requirements, to do so in terms which were sufficiently precise to allow an economic operator to determine the subject of the contract and the Defendant to award the contract;
    (4) to ensure that technical specifications afforded equal access to economic operators and did not have the effect of creating unjustified obstacles to the opening up of public procurement to competition.
  20. Dexter Montague claims that the LSC is in breach of this duty and seeks damages on the basis that the breach has prevented it from signing the contract with the consequence that it has suffered a loss of profit on the work which it would have undertaken pursuant to the Unified Contact, together with loss and expense consequent upon the winding up of the firm's civil legal aid practice.
  21. The LSC's response is contained in the witness statement of Ruth Wayte, its Legal Director. Having dealt in some detail with the events leading up to the despatch of the Unified Contact, she asserts that the LSC tried to set out the proposed reform programme as clearly as possible, and argues that since the specification to the Unified Contract sets out the payment rates, both firms of solicitors and the Law Society were made aware that the new fee schemes would lead to amendments to the contract, a fact which the LSC has made clear throughout the consultation and the implementation process. She also points out that 95% of solicitors signed the Unified Contract, and asserts that Dexter Montague is "very much an isolated case at present". She argues that the latter's stance illustrates that it is the fact that the proposals are in the public domain which has driven the firm's decision rather than any lack of transparency in the process. In paragraph 27 of her statement she says:
  22. Finally, I would wish to make it clear that the changes to the Specification planned for October 2007 are entirely necessary to underpin the move from hourly rates to fixed fees. Given the level of importance of the October 2007 changes, I understand that the Lord Chancellor, in line with previous practice, proposes to set forth the new fee arrangements in a Funding Order made by him under section 6(4) of [the 1999 Act]. The [LSC] has already carried out consultation on the new Specification …. but before the Funding Order is laid before Parliament, there would be further consultation. In this way, the contract documents and the Funding Order are brought into line, and the contract amendments may be seen as being both the LSC's own proposal and a response to legislative changes. The provision allowing for the amendment could therefore be either clause 13.1(i) or 13.1(iii) read in conjunction with clause 13.2: the effect would be the same.

    III The Unified Contract

  23. The Unified Contract comprises: (1) the contract for signature by the individual contracting organisation, and schedules authorising particular offices within the organisation to provide services and specifying the maximum and minimum "starts" for a given period; (2) the standard terms which apply to all contracting organisations; and (3) the contract specification and payment annex.
  24. The relevant terms are set out in Annex 1 to this judgment. The effect of clauses 7 and 10 is that a firm of solicitors entering into the Contract is required to comply with specified quality assurance standards, and its work must receive certain ratings determined by an independent peer review process. Higher ratings are required if the firm is to be eligible for a contract extension and to bid for a new Unified Contract.
  25. The provisions for amendment are crucial to this appeal, and we shall deal with them more fully below. Clause 13 provides (inter alia) that the LSC may amend any of the terms of the Contract if it considers it "necessary or desirable to do so in order to facilitate a Reform of the Legal Aid Scheme" (clause 13.1). "Reform of the Legal Aid Scheme" is defined in clause 1 to mean such reforms as the LSC may wish to implement in order better to comply with its statutory duties or fulfil its statutory functions including (a) such changes as it wishes to make to, or as are related to the Community Legal Service, Criminal Defence Service, or both, consequent on, or related to, the paper Legal Aid Reform: the Way Ahead Cm 6993; or (b) new approaches to procurement and contracting for the provision of publicly funded legal services.
  26. Provision is made for consultation on amendments (clause 13.3-7). The amendments take effect from such date as the LSC may specify, which (in general) is to be not less than 28 days after notice of the amendment is given if the LSC considers that there is an urgent need for compliance, and not less than 42 days after notice of the amendment is given in any other case: clause 13.8. A firm may terminate the Contract following an amendment which is not acceptable to it: clauses 13.13 and 30.2. Such a termination takes effect on the day before the amendment comes into effect. On termination the firm is immediately to cease acting for the clients concerned: clause 31.
  27. IV The Public Sector Directive and the 2006 Regulations

  28. It is common ground that in the material respects the 2006 Regulations faithfully implement the terms of the Public Sector Directive. We set out those provisions of the Directive which are of particular significance in Annex 2 to this judgment. For present purposes it is only necessary to point out that the Recitals make it clear that the Directive is based on the case-law of the European Court (Recital (1)); that it is subject to the principles of equal treatment, non-discrimination, mutual recognition, proportionality and transparency (Recitals (2) and (46), and Article 2); and that technical specifications must be set out in the contract documents (Article 23).
  29. The critical Regulations are Regulations 4 and 9, the material parts of which are set out in Annex 3 to this judgment. It is only necessary at this stage to mention that Regulation 4(3) provides that a contracting authority shall "(a) treat economic operators equally and in a non-discriminatory way; and (b) act in a transparent way"; and that Regulation 9 contains elaborate provisions for the laying down of technical specifications in the contract documents, including a provision that where technical specifications are defined in terms of performance or functional requirements they must be "sufficiently precise to allow an economic operator to determine the subject of the contract …" (Regulation 9(7)). Regulation 47 gives a right to damages to persons to whom, but for a breach of the Regulations, a contract would have been awarded.
  30. V The judgment of Beatson J and the issues on appeal

    1. The judgment

  31. A critical feature of the judge's judgment is the distinction he drew between the duty of transparency imposed by the Regulations on the LSC under Regulation 4(3) and that imposed under Regulation 9. In particular, he considered it significant (paragraphs 80 and 93 of the judgment) that Regulation 4(3) did not require the relevant information to be in the contract documents, whereas Article 23 of the Public Sector Directive and Regulation 9 provided that the specifications had to be set out in the contract documents.
  32. In a very full and careful judgment, the judge's conclusion was that there was no breach of the requirement of transparency in Regulation 4(3), because the identification and publication of the information about the parameters of the programme of reform and thus of the amendments contemplated enabled reasonably well-informed tenderers to interpret the scope of the amendments which were contemplated in the same way.
  33. In particular, he found, the possibility of amendment was clearly stated in the contract documents. Although the power was very wide, it was not unlimited, since the exercise of the power would have to be in accordance with the principles governing the exercise of discretionary powers by public authorities, including propriety of purposes and the consideration only of relevant factors. In assessing transparency, regard had to be had to what was known about the intentions of the LSC: the parameters of the programme of reform and of the possible amendments had been identified throughout the consultation process, published in the White Paper, and set out on the LSC's website. In assessing whether the obligation of transparency had been satisfied, it was also relevant that the present case was not one in which there had been a competitive bidding process where a choice had been made between bidders, since the Unified Contract had been offered to all organisations which had General Civil Contracts with the LSC, and the evidence was that new providers had also been given an opportunity of obtaining a contract, depending upon the coverage in any particular area, in accordance with the LSC's bid rules.
  34. The judge, however, reached a different conclusion in relation to Regulation 9. He found that if the standard of care to be used in providing the legal services, the quality assurance standards, and the key performance indicators could be amended unilaterally, the solicitors would not able to determine the level of service they were to provide. In a contract for services the quality and level of services were of importance and were part of the "subject" of the contract; the amendment provisions did not contain the criteria and parameters of change, and did not comply with Regulation 9(7).
  35. 2. The appeal

  36. On this appeal neither side supports the judge's view that there is a decisive difference between Regulation 4(3) and Regulation 9 for the determination of the issues.
  37. The parties were in agreement that there was an inconsistency between the conclusion reached by the judge in relation to Regulation 4 and that reached by him in relation to Regulation 9. The LSC and the Secretary of State argued that the reasoning that led the judge to find that the principle of transparency underlying Regulation 4 was satisfied should also have led him to the same conclusion in relation to Regulation 9. The Law Society and Dexter Montague argued that the lack of transparency that the judge found in relation to Regulation 9 was equally an infringement of Regulation 4. In these circumstances, much of the argument was applicable both to Regulation 4 and Regulation 9.
  38. Law Society and Dexter Montague

  39. The Law Society and Dexter Montague accept that the principle of transparency does not prevent a contracting authority from reserving a right to amend the terms of the contract. But if the contracting authority wishes to reserve such a right, not only must all those who may be interested in the contract be informed of that possibility, but they must also be informed of "the detailed rules" governing its exercise (Case C-496/99 P Commission v CAS Succhi di Frutta SpA [2004] ECR I-3801, at [111], [118]) so that "the subject-matter of [the] contract [is] clearly defined" (Case C-340/02 Commission v France [2004] ECR I-9845, at [34]).
  40. The obligation of transparency is not satisfied here. The contract contains general and unlimited powers of amendment. It is not sufficient for the LSC to satisfy the obligation of transparency simply by virtue of the fact that the power of amendment is limited by public law limitations. Even if public law limitations may exclude purely arbitrary or improper amendments in fact being made, that is insufficient to satisfy the obligation of transparency in relation to the definition of the content of the rights and obligations of any contract on offer.
  41. Nor is it sufficient for the LSC to satisfy the obligation of transparency by reference to the knowledge of solicitors as to the general parameters of reform which may be likely in the future. In fact it cannot be said that the scope of possible amendments is already known, since the power is not limited to amendments to give effect to proposals in the White Paper.
  42. The judge rightly held that the reservation of a unilateral power to amend the technical specifications on such short notice creates an unjustified obstacle to the opening up of public procurement to competition contrary to Regulation 9(4). But this applies equally to Regulation 4(3).
  43. Contrary to the judge's view, it does not matter that there has been no competitive bidding process, because the uncertainty involved will necessarily deter service providers and because there is still a risk of favouritism or arbitrariness or other abuse in the exercise of the power of amendment which the principle of transparency seeks to preclude by a clear definition of the rights and obligations of the parties under any contract at the outset.
  44. LSC and Secretary of State

  45. The essence of the case for the LSC and the Secretary of State is that the Unified Contract is compatible with the principle of transparency because it clearly sets out the power of amendment and the procedures for its exercise. Their principal attack on the judgment is that Regulation 9 is concerned with the specifications in the contract and does not deal with the right to amend. In particular, Regulation 9(7) does not relate to a power to amend technical specifications, and consequently a general power of amendment is in no sense incompatible with Regulation 9(7).
  46. More generally they argue that in the competitive context, the purpose of the principles of equal treatment and transparency is to ensure that one tenderer does not obtain an unfair advantage over another, and the purpose of transparency is not to enable a party to avoid the effect of amendments of which it does not approve. The solicitors have a right to terminate if the amendments are unacceptable.
  47. Where there has been no competitive bidding, the mere existence of a wide power to amend does not disadvantage a particular tenderer because the power applies to all. What is required to prevent discrimination or favouritism in favour of certain tenderers in a competitive context is not the same as what was required in a context such as this.
  48. Amendment clauses form part of almost every type of contract, whether for works, services or supplies, whether public or private and whether subject to EU law principles or not. Without such clauses, the contract terms would be immutable and the contract would frequently become unworkable. The precise content, nature and effect of every amendment during the life of a contract cannot be anticipated or identified before the parties enter into the contract.
  49. The LSC and the Secretary of State accept that purported amendments which depart substantially from the subject-matter of the contract may amount to a new contract which should therefore be the subject of a new tender exercise in accordance with the Regulations. Whether an amendment is so substantial as to require a new tender exercise is a matter to be judged at the time the proposed amendment is made, is a matter of fact and degree and will depend on factors such as the type and subject-matter of the contract, its factual matrix, the nature of the change, the reasonable expectations of the industry and industry practice.
  50. 3. The issues

  51. The principal questions which arise therefore on this appeal are these:
  52. (1) What relevant principles are laid down by the Directive and the Regulations?

    (2) Is it sufficient compliance with the principle of transparency for there to be an express power of amendment in the contract?

    (3) Does it make a difference that there is no competitive tendering process?

    (4) What is the effect of the contractual provisions as to termination?

    (5) Does the Unified Contract satisfy the requirements of Regulation 4?

    (6) Does the Unified Contract satisfy the requirements of Regulation 9?

    VI Discussion and conclusions

    1 The principles

  53. The Directive and the Regulations are concerned with the award of contracts by public authorities. Their objective is to open up public procurement to competition. To this end the award of contracts must comply with the principles of equal treatment, non-discrimination and transparency. Technical specifications must clearly set out the requirements of the authority so that tenderers will be aware of what they will be required to do under the contract for which they are tendering. This is an application of the principle of transparency.
  54. This court was referred to several cases, almost all in contexts very different from the present case, in which the European Court has applied, or emphasised the importance of, the principle of transparency in public procurement.
  55. In Case C-340/02 Commission v France [2004] ECR I-9845 the European Court said (at [34]) that "the principle of equal treatment of service providers, laid down in … the Directive, and the principle of transparency which flows from it … require the subject-matter of each contract and the criteria governing its award to be clearly defined."
  56. The rationale of the principle has been expressed in a number of different ways:
  57. (1) First, it enables the contracting authority to satisfy itself that the principles of equal treatment and of non-discrimination on the grounds of nationality have been complied with: Case C-324/98 Telaustria Verlags GmbH v Telekom Austria AG [2000] ECR I-10745, at [61]; Case C-19/00 SIAC Construction Ltd. v Mayo County Council [2001] ECR I-7725, at [41]; Case C-340/02 Commission v France [2004] ECR I-9845, at [34].

    (2) Second, it facilitates competition: Case C-324/98 Telaustria Verlags GmbH v Telekom Austria AG [2000] ECR I-10745, at [62]; Case C-458/03 Parking Brixen GmbH v Geimeinde Brixen [2005] ECR I-8612, at [50], [52]; Case C-174/03 Impresa Portuale di Cagliari Srl v Tirrenia di Navagazione SpA, per Jacobs AG at [75].

    (3) Third, it enables the impartiality of procurement procedures to be reviewed: Case C-324/98 Telaustria Verlags GmbH v Telekom Austria AG [2000] ECR I-10745, at [62]; Impresa Portuale di Cagliari Srl v Tirrenia di Navagazione SpA, per Jacobs AG at [75].

    (4) Fourth, it precludes any risk of favouritism or arbitrariness on the part of the contracting authority: Case C-496/99 P Commission v CAS Succhi di Frutta SpA [2004] ECR I-3801, at [111].

    (5) Fifth, it promotes a level playing field by enabling all tenderers to know in advance on what criteria their tenders will be judged and those criteria are assessed objectively; Case C-19/00 SIAC Construction Ltd. v Mayo County Council [2001] ECR I-7725, per Jacobs AG, at [38].

  58. This case is concerned with the compatibility of a unilateral right of amendment in favour of the LSC with the principles underlying the Directive and the Regulations.
  59. It is clear that, where amendments to the tender criteria or to the contract are made after an award to one party, such amendments are liable to infringe the principles in that, had the other tenderers been aware in advance of the terms of the contract actually put in place, this might have affected the terms of their tenders. Such amendments can violate the principle of transparency and of equality of treatment.
  60. Thus in Case C-87/94 Commission v Belgium [1996] ECR I-2043, a case concerning an invitation to tender in an open procedure for the supply of buses, the Belgian local authority took into account fuel consumption figures submitted by a tenderer after the opening of tenders, and awarded the contract to that tenderer on the basis of figures which were different from those stipulated in the contract documents. It was held that a unilateral departure from requirements in tender documents which were to be understood as unalterable which favoured one tenderer without giving all other tenderers an opportunity to revise their figures was a breach of Belgium's equal treatment and transparency obligations.
  61. So also in Case C-496/99 Commission v CAS Succhi di Frutta SpA [2004] ECR I-3801 (a decision to which it will be necessary to revert) there was a material alteration in the terms of contracts with the European Commission for the supply of fruit juice as aid to the Caucasus after the award of the contracts by tender. This was held to be a breach of the principle of transparency. The Commission could not subsequently amend the conditions of the tendering procedure, and in particular those relating to the tender to be submitted, in a manner not laid down by the notice of invitation to tender itself, without offending against the principle of transparency.
  62. 2 Is it sufficient compliance with the principle of transparency for the Unified Contract to contain an express power of amendment?

  63. We have already summarised the relevant provisions of the Unified Contract, the principal provisions of which are set out in Annex 1 to this judgment. The most important, but not the only, provision in the Unified Contract allowing for amendment is clause 13. The following features of the power of amendment are relevant for present purposes:
  64. (1) The power extends to "Contract Documents" (clause 13.1), and "Contract Documents" are defined in clause 1 to mean (a) the Contract for Signature (including the Key Information Tables); (b) the Schedules; (c) the Contract Standard Terms; and (d) the Specification, where "Specification" means the Contract Documents designated as such by the LSC.

    (2) The LSC has the power to amend the Contract Documents "from time to time" if they "consider it necessary or desirable to do so in order to facilitate a Reform of the Legal Aid Scheme" (clause 13.1(i)), where "Reform of the Legal Aid Scheme" is defined in clause 1 to mean such reforms as the LSC might wish to implement in order better to comply with their statutory duties or fulfil their statutory functions including (a) such changes as they might wish to make to, or as are related to the Community Legal Service, Criminal Defence Service, or both, consequent on, or related to the White Paper Legal Aid Reform: The Way Ahead or (b) new approaches to procurement and contracting for the provision of publicly funded legal services.

    (3) The amendments may include, without limitation, amendments to any of the terms of a Schedule; changes to payments provisions; imposing controls not previously imposed; excluding from the Contract any description of Contract Work and amending procedures in the Specification.

  65. Other provisions of the Unified Contract which contain a power of amendment include:
  66. (1) Clause 11A.2 and clause 11A.6, which authorise amendments to the Civil Office Schedule.

    (2) Clause 11B which gives the LSC the power, when it extends the contract to cover Crime Work, to amend and/or extend such of the provisions of the Contract as it thinks appropriate to take account of such extension (subject to compliance with the consultation obligations in clauses 13.3 to 13.6).

  67. In each Category of Law, Contract Work must achieve a rating of 1, 2 or 3 as determined by "the Independent Peer Review Process". The Independent Peer Review Process is defined as the process described in a named document "or any document adopted in its place following consultation". A rating of 4 as so determined (if confirmed) is a breach of contract and a rating of 5 as so determined (if confirmed) constitutes a fundamental breach: clauses 10.4 to 10.7. Consequently standards to which Contract Work must be performed, what counts as a breach and a fundamental breach of the Unified Contract, and the process by which the assessment of compliance is made may be amended by the LSC by the adoption of a different document.
  68. So also the Unified Contract provides for Key Performance Indicators (KPIs), defined as "such measure of your performance as [the LSC] may specify": clause 1. The Standard Terms list five current KPIs and indicate that the Unified Contract may be amended to make failure to comply with them a breach after 31 March 2008: clauses 10.9 to 10.11. It is also provided that [the LSC] "may at any time amend any KPI(s) and/or introduce any additional KPI(s)": Annex G. The Unified Contract may also be amended so that failure to achieve them is also a breach of contract: Annex G. Accordingly what counts as a KPI and what may involve a breach of contract if it is not complied with may be unilaterally amended by the LSC.
  69. Compliance with any amendment is from the date specified for it, and in principle the date is to be not less than 28 days after notice of the amendment is given if the LSC considers there is an urgent need for compliance and not less than 40 days after notice in any other case: clause 13.8.
  70. A firm has a right to terminate if it is unwilling to accept the amendments, but the effect is that the termination has to take effect at the same time as the amendments, and in principle the firm has to cease acting: clauses 13.13; 30.2 and 31.2 and 31.3.
  71. The LSC argued that the principle of transparency could not be infringed by the Unified Contract inasmuch as the likelihood that the contract would be amended was spelled out to all in advance and such amendments as were subsequently made would apply to all. When dealing with Regulation 4 the judge accepted this submission. He held:
  72. 80. In assessing transparency for the purposes of regulation 4(3) or the obligation of transparency implied from the general principle of equal treatment, regard should also be had to what is known about the intentions of the LSC. The parameters of the programme of reform and thus of the possible amendments have, as I have observed, been identified throughout the consultation process, published in the White Paper, and set out on the LSC's website. Although not in the contract documents, this information is available to all potential service providers …
  73. The judge said that the possibility of amendment was clearly stated in the contract documents. Any problems caused by the provisions concerning the position of a firm which wants to disengage from legally aided work after an amendment are also not the consequence of a lack of transparency because the provisions about that are in the contractual documents and their scope is reasonably clear.
  74. The Law Society accepts that the principle of transparency does not preclude the reservation for a contracting authority of any right to amend any of the terms of the contract. But, if the contracting authority wishes to reserve such a right, not only must all those who may be interested in the contract be informed of that possibility, but they must also be informed of "the detailed rules" governing its exercise: Case C-496/99 Commission v CAS Succhi di Frutta SpA [2004] ECR I-3801, at [111], [118].
  75. The essence of the case for the LSC and the Secretary of State, who also rely on Case C-496/99 Commission v CAS Succhi di Frutta SpA [2004] ECR I-3801, is that the Unified Contract is compatible with the principle of transparency because it clearly sets out the power of amendment and the procedures for its exercise. Amendment clauses form part of almost every type of contract, whether for works, services or supplies, whether public or private and whether subject to EU law principles or not. Without such clauses, the contract terms would be immutable and the contract would frequently become unworkable. The precise content, nature and effect of every amendment during the life of a contract cannot be anticipated or identified before the parties enter into the contract.
  76. If the scope of the actual amendments had to be identified in the contract documents, then an amendment clause would serve no useful purpose. It would prevent a contracting authority from using the clause to make any amendments after the conclusion of the contract, unless such amendments had been identified and formulated prior to the contract being amended. Such a step would not amount to an "amendment" of the contract at all, but simply the incorporation of a contractual clause stipulating the provision of services (or supplies or works) complying with different technical specifications at a set time during the currency of the contract.
  77. In the present case the Unified Contract provided the procedural rules for doing so. These rules included provisions about when and how amendments could be made, notification, consultation, extensions to consultation periods, approval by Consultative Bodies, including the Law Society (under clause 13(ii)) and gave a right to services providers to terminate, on notice, following an amendment.
  78. The LSC and Interested Party accept that purported amendments which depart substantially from the subject-matter of the contract may amount to a new contract which should therefore be the subject of a new tender exercise in accordance with the Regulations. They say that whether an amendment is so substantial as to require a new tender exercise is a matter to be judged at the time the proposed amendment is made, is a matter of fact and degree and will depend on factors such as the type and subject-matter of the contract, its factual matrix, the nature of the change, the reasonable expectations of the industry and industry practice. It is a constraint on the operation of an amendment clause. It does not make unlawful the inclusion of an amendment clause in a contract subject to EU law.
  79. We do not consider that the fact that the Unified Contract contains express provision for amendment, and also includes a consultation procedure, is of itself sufficient to satisfy the principle of transparency.
  80. The only decision of the European Court which is of assistance is Case C-496/99 P Commission v CAS Succhi di Frutta SpA [2004] ECR I-3801, and since both parties rely on the decision, it is necessary to deal with it fully. The decision of the European Court was on appeal from the Court of First Instance and concerned an invitation to tender (pursuant to Commission Regulations) for the supply of fruit juice as aid to the Caucasus whereby the supplier was to be paid in apples or oranges (as the case might be) held in the Commission's intervention stocks. The possibility of withdrawing other fruit was not mentioned in the Regulations or in the invitations to tender.
  81. A successful bidder (Trento Frutta) stated that, in the event of there not being enough apples in intervention stocks, it would accept peaches. When its bid was accepted the Commission notified the Italian Intervention Agency of the fruits which Trento Frutta would be able to withdraw. Subsequently there were Commission Decisions allowing the successful tenderers to substitute other fruits, and setting quantities.
  82. An unsuccessful bidder sought annulment of a Commission Decision relating to substitution of products. as the successful tenderer would receive a given quantity of apples or alternatively other fruit. Subsequently, the Commission fixed coefficients of equivalence between the different fruit. The Commission Decision was annulled by the Court of First Instance and an appeal was dismissed by the European Court.
  83. The Court of First Instance held that, when a contracting entity had laid down prescriptive requirements in the contract documents, observance of the principle of equal treatment of tenderers required that all the tenders must comply with them so as to ensure objective comparison of the tenders; and that the procedure for comparing tenders had to comply at every stage with both the principle of the equal treatment of tenderers and the principle of transparency so as to afford equality of opportunity to all tenderers when formulating their tenders. The Commission was obliged to specify clearly in the notice of invitation to tender the subject-matter and the conditions of the tendering procedure, and to comply strictly with the conditions laid down, so as to afford equality of opportunity to all tenderers when formulating their tenders. In particular, the Commission could not subsequently amend the conditions of the tendering procedure, and in particular those relating to the tender to be submitted, in a manner not laid down by the notice of invitation to tender itself, without offending against the principle of transparency.
  84. The European Court re-iterated (at [109]) that the principle that tenders should be treated equally implied an obligation of transparency in order to permit verification that it had been complied with.
  85. The Court went on:
  86. 111. The principle of transparency which is its corollary is essentially intended to preclude any risk of favouritism or arbitrariness on the part of the contracting authority. It implies that all the conditions and detailed rules of the award procedure must be drawn up in a clear, precise and unequivocal manner in the notice or contract documents so that, first, all reasonably informed tenderers exercising ordinary care can understand their exact significance and interpret them in the same way and, secondly, the contracting authority is able to ascertain whether the tenders submitted satisfy the criteria applying to the relevant contract.
    118. Should the contracting authority wish, for specific reasons, to be able to amend some conditions of the invitation to tender, after the successful tenderer has been selected, it is required expressly to provide for that possibility, as well as for the relevant detailed rules, in the notice of invitation to tender which has been drawn up by the authority itself and defines the framework within which the procedure must be carried out, so that all the undertakings interested in taking part in the procurement procedure are aware of that possibility from the outset and are therefore on an equal footing when formulating their respective tenders.
    120. If, when the contract was being performed, the contracting authority was authorised to amend at will the very conditions of the invitation to tender, where there was no express authorisation to that effect in the relevant provisions, the terms governing the award of the contract, as originally laid down, would be distorted.
    121. Furthermore, a practice of that kind would inevitably lead to infringement of the principles of transparency and equal treatment as between tenderers since the uniform application of the conditions of the invitation to tender and the objectivity of the procedure would no longer be guaranteed.
    126. Moreover, as the Court of First Instance expressly held …., the Commission could, if necessary, have made provision, in the notice of invitation to tender, for the possibility of amending the conditions for payment of the successful tenderers in certain circumstances by laying down in particular the precise arrangements for any substitution of other fruit for that expressly prescribed as payment for the supplies at issue. In that way, the principles of equal treatment and transparency would have been fully observed.
  87. This was a case where the Commission had not reserved any right to amend the contract terms, and where it was plain that the right to accept different fruits from intervention stocks might have significantly altered the tendering process. It was also a case in which the failure to give all tenderers the same rights affected competition, and infringed the principles of transparency and equal treatment.
  88. That was the context in which the Court said that, if the contracting authority wished to be able to amend some conditions of the invitation to tender, after the successful tenderer had been selected, it was required expressly to provide for that possibility, as well as for the relevant detailed rules.
  89. It is plain, however, from the facts of the case, and the context, that (contrary to the submission of the LSC and the Secretary of State) in speaking of the "relevant detailed rules" the European Court was not speaking exclusively of procedural rules. The whole point in that case was that all tenderers needed to know the conditions under which they were entitled to withdraw other fruits. That was not a procedural matter.
  90. We do not accept, therefore, the submission by the LSC and the Secretary of State that the effect of Succhi di Frutta is that the principle of transparency is satisfied by an amendment power, however wide, if it is included in the contract and provides detailed procedural rules. It is clear that in the circumstances of that case the European Court was concerned with the substantive changes to the contractual terms relating to what fruit could be withdrawn from intervention stocks.
  91. What is also plain is that among the most important factors for compliance with the principle of transparency are the definition of the subject matter of the contract and need for certainty of terms. That is why both Article 2 of the Public Sector Directive and Regulation 4(3) require the contracting authority to "act in a transparent way" and why Regulation 9(7) requires technical specifications in terms of performance or functional requirements to be "sufficiently precise to allow an economic operator to determine the subject matter of the contract…"
  92. We do not consider that transparency was achieved by the limitations on the express powers of amendment which the judge perceived. The first point on which he relied was that any exercise of the power of amendment by the LSC would have to comply with principles governing the exercise of discretionary powers by public authorities, including propriety of purposes and the consideration only of relevant factors.
  93. It is true that the LSC could not make arbitrary or improper amendments. That would follow not only from general principles of public law, but also from the Regulations and no doubt also from an implied term to that effect in the Unified Contract or from the express term (clause 2.2 of Unified Contract) that the LSC will act as a "responsible public body". But that would not achieve the transparency of the contractual terms, any more than it achieved the transparency of the Commission's actions in Succhi di Frutta.
  94. Nor is it achieved by the point that the parameters of the possible amendments had been published in Legal Aid Reform: the Way Ahead. The right reserved to amend the contract under clause 13.1(i) "to facilitate a Reform of the Legal Aid Scheme" is on its face not limited to amendments to give effect to proposals in the White Paper. The power to make amendments is better to comply with the LSC's statutory duties or fulfil its statutory functions. Changes consequent on Legal Aid Reform: The Way Ahead are merely an example of the changes which may be made, and even those may be changes which are "related to" the White Paper. The power also includes changes consequent on "new approaches to procurement and contracting."
  95. It cannot therefore be said that there are any effective limitations, still less that the parameters of change will be known to the profession. The power of amendment is so wide in this case that it amounts to a power to rewrite the Contract.
  96. 3 Does it make a difference that there is no competitive bidding process?

  97. In this case the context differs from that of the cases decided by the European Court. Most of those cases involved contracts awarded under competitive tenders in which claims were brought by unsuccessful tenderers who had been competing for the contract. The Unified Contract was not the subject of competition.
  98. The LSC did not offer a contract to any solicitor who wanted one (or for any amount of work a solicitor might want) or give any solicitor an opportunity to obtain one without any competition: it simply offered contracts to existing service providers who had General Civil Contracts with the LSC, and the LSC had stated that new providers would have an opportunity of obtaining a contract in accordance with its rules.
  99. The judge's view was that it was relevant that the present case was not one in which there had been a competitive bidding process where a choice had been made between bidders, since the Unified Contract had been offered to all organisations that had General Civil Contracts with the LSC, and the evidence was that new providers had also been given an opportunity of obtaining a contract, depending upon the coverage in any particular area, in accordance with the LSC's bid rules. Where there has been no competitive bidding, the mere existence of a wide power to amend does not disadvantage a particular tenderer because the power applies to all. He said:
  100. 82. In assessing whether the obligation of transparency has been satisfied in the present context, it is relevant that the present case is not one in which there has been a competitive bidding process where a choice has been made between bidders. ... What is required to prevent ... favouritism in a competitive context is not the same as what is required in a context such as this.
    83. In the light of the purpose of the Directive and the regulations, in a case such as this where there has been no competitive bidding, the mere existence of a wide power to amend does not disadvantage a particular tenderer because the power applies to all.
  101. We consider that the principle of transparency will not be satisfied in the present context if uncertainty as to the nature of effect of the amendments that may be made deters, or is liable to deter, some potential service providers from entering into the contract. The reservation of such a unilateral power to amend the contractual terms on such short notice creates an unjustified obstacle to the opening up of public procurement to competition. The uncertainty involved will necessarily deter service providers.
  102. We further consider that a power to amend will infringe the principle of equal treatment if it permits amendments that may favour some contractors but not others.
  103. 4 Do the contractual termination provisions make a difference?

  104. The LSC and the Secretary of State accept that the fact that a firm has a right to terminate the contract if the amendments are unacceptable does not affect the outcome. This is no doubt because the consequences of termination (involving stopping work on all existing matters) would be such that it would be practically impossible for a firm with a substantial legal aid practice to terminate.
  105. Mr Paul Darling QC for the Secretary of State advanced the following argument in relation to the termination rights granted to both the LSC and suppliers of services under the Unified Contract. The LSC has the right to terminate the contract on 6 months notice in order to facilitate a reform of the legal aid scheme. Suppliers have a right to terminate on 3 months notice. Why, instead of terminating and offering new contracts, should the LSC not have a power to amend in circumstances where those suppliers who were not content with the amended terms could themselves terminate? Under the first alternative those content with the new terms would enter into new contracts. Under the second alternative, those not content with the amended terms would terminate.
  106. This argument did not lie happily with the concession made by Mr Jay QC that the LSC's power to amend did not extend to amendments that constituted a "new contract". Furthermore, Mr Darling's submissions were not realistic. Solicitors who have subscribed to the Unified Contract will not readily be able to contemplate withdrawing from it on three months notice and the implications to which we have referred if they do so will be severe. It is the prospect of being faced with such a choice, when the terms and effect of possible amendments are uncertain, that the Law Society and Dexter Montague contend constitutes a significant inhibition on entering into the Unified Contract.
  107. Consequently we are satisfied that the LSC's right to amend the terms of the Unified Contract does not cease to be objectionable simply because firms who are not content with the amended terms have a right to terminate their contracts.
  108. 5 Conclusion on Regulation 4(3)

  109. We accept that changes may become necessary or desirable during the life of a contract; and that a contracting authority may need to reserve a power to amend terms. It is not necessary to decide in this case what level of detail (substantive or procedural) the principle of transparency would require, or when amendments create a "new contract" which would engage the public procurement process. The reason is that this is an extreme case where the contracting authority has reserved to itself a virtually unlimited power of amendment, subject only to some limited procedural conditions. Indeed, the power to amend is better characterised as a power to rewrite the contract.
  110. The judge's characterisation (at paragraph 100) in the context of Regulation 9(7) of one of these provisions is equally true in relation to Regulation 4(3): "The provision in Clause 13.1(i) is insufficiently precise. The parameters and criteria for amendment are not indicated beyond the broad statutory objects. A firm or organisation cannot determine with what performance or functional requirements it may in fact be obliged to comply during the contract period and thus may be unable to assess whether to present a bid".
  111. 6 Compliance with Regulation 9

  112. The judge said that the fact that there was clarity as to the technical specifications at any given moment did not provide sufficient precision within Regulation 9(7) and sufficient prospective clarity during the performance of the contract. In the case of technical specifications, what was required was a definition of the object of the contract in sufficiently precise terms to enable interested undertakings to assess whether to present a bid and (Regulation 9(4)) to prevent the technical specifications constituting an unjustified obstacle to the opening up of public procurement to competition.
  113. The judge accepted that it would be possible to amend the technical specifications during the life of the contract to take emergent technology into account without going through a fresh procurement procedure. Where the effect of a change did not alter the economic balance of the contract, a power to amend might not violate Regulation 9(7). But a power to amend could only be narrow, and had to be based on objective criteria.
  114. In our judgment the extreme and unusual features of the power in this case impel the conclusion that the Unified Contract does not comply with the requirement in Regulation 9(7) that technical specifications in terms of performance or functional requirements must be "sufficiently precise to allow an economic operator to determine the subject matter of the contract…"
  115. Case C-174/03 Impresa Portuale di Cagliari Srl v Tirrenia di Navagazione SpA was a reference on Council Directive 93/38/EEC (on procurement procedures of entities in the water, energy, transport and telecommunications sectors) in which the European Court was asked (inter alia) (a) whether the Directive applied to an award of a port services contract by a company whose activity was the shipping of goods and persons; and (b) whether the technical specifications required by Article 18 of the Directive had to be laid down before the selection of the successful bidder and whether they had to be publicised. Article 18 required contracting entities to include the technical specifications in the general documents or the contract documents relating to each contract. The provision imposed no other publicity requirement prior to the award.
  116. The reference was withdrawn before a ruling was made, but after Jacobs A-G had delivered his opinion. He considered that the award was not subject to the Directive but was nevertheless subject to the principles of equal treatment and non-discrimination which implied an obligation of transparency. His opinion on question (b) was on the hypothesis that the Directive applied. He said:
  117. 72. Technical specifications define the object of the contract in precise terms, they enable interested undertakings to assess whether to present a bid and they provide contracting authorities with the technical parameters to assess in relation to their needs the various offers presented. It clearly follows from their very nature that they must be established prior to the selection of a contractor.
    75. The Court held in Telaustria, however, that, even when contracts are excluded from the scope of the procurement directives, 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.  That principle implies an obligation of transparency, which includes ensuring, for the benefit of any potential tenderer, a degree of advertising sufficient to enable the market to be opened up to competition and the impartiality of procurement procedures to be reviewed.

    76. .... As the Court has held, the duty to treat tenderers equally lies at the heart of the procurement directives and, together with the principle of transparency, must be complied with in every stage of the award procedure so as to afford equality of opportunity to all tenderers when formulating their tenders. Thus, those general principles cover not only the definition of technical specifications by contracting authorities but also the means by which those specifications are made known to potential bidders.
  118. There is no doubt that the Unified Contract lays down performance or functional requirements for the purposes of Regulation 9(7).
  119. We accept that amendments to technical specifications may become necessary during the life of a contract and that a contracting authority may reserve the right to make amendments. Again it is not necessary to decide on the degree of specificity which must be reserved in the contract, because this is such an extreme case that we accept that reserving a unilateral power to insert new technical specifications, and to amend any existing technical specification, without any restriction is incompatible with the requirement in Regulation 9(7) to specify any such requirements sufficiently precisely to allow a potential service provider to determine the subject matter of the contract. A solicitor cannot determine in advance with what performance and functional requirements he may in fact be obliged to comply during the contract period. Again we emphasise that the power is not simply to make technical modifications, but to rewrite the performance standards.
  120. Consequently, we agree with Beatson J that the Unified Contract does not conform to the principle of transparency, but we consider that that result flows not only from Regulation 9 but also from Regulation 4(3). In the result, therefore, we allow the appeal by the Law Society and Dexter Montague, and dismiss the appeal by the Legal Services Commission and the Secretary of State.
  121. Annex 1: The terms of the Unified Contract

  122. Clause 1 includes these definitions:
  123. "Contract documents" means (a) the Contract for Signature (including the Key Information Tables); (b) the Schedules; (c) the Contract Standard Terms; and (d) the Specification;
    "Reform of the Legal Aid Scheme" means such reforms as we may wish to implement in order better to comply with our statutory duties or fulfil our statutory functions including (a) such changes as we wish to make to, or as are related to the [Community Legal Service], [Criminal Defence Service], or both, consequent on, or related to, the paper "Legal Aid Reform: the Way Ahead Cm 6993;" or (b) new approaches to procurement and contracting for the provision of publicly funded legal services;
    "Specification" means the Contract Documents designated as such by us ….
  124. The Supplier is required by clause 7.6 to comply with the Quality Assurance (QA) Standard specified in the Key Information Tables (which are part of the Contract for Signature: clause 11.3). If the Supplier's QA Standard is not the Specialist Quality Mark (SQM) and it ceases to meet its QA Standard, the LSC may require it to comply with the SQM.
  125. Clause 10 is headed "Approved Personnel and Supervisors, standard of Contract Work, Independent Peer Review and Key Performance Indicators", and obliges the Supplier to perform all Contract Work in a timely manner and with all reasonable skill, care and diligence. It provides (clause 10.4) that in each Category of Law, Contract Work must receive either rating 1, 2 or 3 as determined by the Independent Peer Review Process. It goes on:
  126. (5) If your Contract Work in any Category of Law receives a rating of 4, as determined by the Independent Peer Review Process, you may make representations in accordance with the Independent Peer Review Process by completing the appropriate form (currently found at Appendix 5 to the Independent Peer Review Process) and giving it to us within 28 days of your receipt of the review report and file sample. If the rating is confirmed, this is a breach of Contract.
    (6) If your Contract Work in any Category of Law receives a rating of 5, as determined by the Independent Peer Review Process, you may make representations in accordance with the Independent Peer Review Process by completing the appropriate form and giving it to us within 28 days of your receipt of the review report and file sample. If the rating is confirmed, this is a Fundamental Breach.
    ..
    (8) To qualify as a Preferred Supplier and to be eligible for a contract extension and to bid for a new Unified Contract (when this Contract expires) your Contract Work must receive ratings of 1 or 2 as determined by the Independent Peer Review Process.
    Key Performance Indicators
    (9) The current Key Performance Indicators are set out in the Key Performance Indicator Annex (Annex G). Such standards are likely to be part of the entry criteria for Preferred Supplier status.
    (10) A failure to achieve any of the specified standards for KPIs Nos. 1 to 5 (inclusive) as shown in such Annex or any additional KPI introduced under that Annex, on or before 31 March 2008, shall not of itself be a breach of Contract (but without prejudice to our rights if it separately involves a breach of any other obligation under this Contract).
    (11) A subsequent failure to achieve any of those specified standards shall not of itself be a breach of Contract (but without prejudice to our rights if it separately involves a breach of any other obligation under this Contract) unless we have amended this Contract (in accordance with Clause 13) so that such failure is of itself a breach.
  127. Clause 11.4, under the heading "What are Key Information Tables?" provides:
  128. You must notify us as soon as you know that any information in your Key Information Tables has changed. We will issue an amended Key Information Table when any information in it changes and may amend and / or extend the information required by a Key Information Table from time to time as and when we think appropriate.
  129. Clause 11B is headed "Office Schedules – Crime" and provides:
  130. When we extend this Contract to cover crime work we may amend and/or extend such of its provisions as we think appropriate to take account of any such extension, subject to our compliance with the consultation obligations in Clauses 13.3 to 13.6 inclusive and in accordance with the timetable in Clause 13.8.
  131. Clause 13 is headed Amendments to Contract Documents and provides:
  132. When may we amend the Contract Documents?
    1. Subject to the provisions of this Clause 13, we have the right to amend the Contract Documents from time to time if, (i) we consider it necessary or desirable to do so in order to facilitate a Reform of the Legal Aid Scheme, or (ii) our proposed amendments have been approved by Consultative Bodies, or (iii) our proposed amendments are permitted under Clause 13.2 or any other provision of this Contract authorising us to make amendments.
    What if any legislation affects this Contract?
    2. We may make such amendments to this Contract as we consider necessary in the circumstances to comply with, or take account of, any U.K. legislation or any EU legislation having direct effect, or as a result of any decision of a U.K. court or tribunal, or a decision of the European Court of Human Rights or of the European Court of Justice or any other institution of the European Union, or to comply with the requirements of any regulatory body or tax or similar authority.
    Such amendments may include without limitation:
    (a) amendments to any of the terms of a Schedule;
    (b) changes to payments provisions;
    (c) imposing controls not previously imposed;
    (d) excluding from this Contract any description of Contract Work; and
    (e) amending procedures in the Specification.
    What must we do before we amend documents?
    3. Except for amendments made under any other provision of this Contract authorising us to make amendments, we may not amend either the Contract for Signature, the Contract Standard Terms or the Specification without prior consultation in accordance with this Clause.
    4. If a proposed amendment affects only one Supplier, we will consult with that Supplier. Otherwise, we will consult with the Consultative Bodies.
    5. If we consider that there is an urgent need to make the amendment, consultation with the Consultative Bodies may last no longer than 21 days. Otherwise it may last no longer than 42 days.
    6. We wish to use each consultation period as a period during which consultation actually take place, and we will be willing to engage with the Consultative Bodies during this period to ensure that we are able to take full account of their views. After consultation, we will explain what decisions we have made, and why.
    What amendments may we make after consultation?
    7. After consultation, we may amend the document as originally proposed, or in a modified form, or leave it un-amended and any amendment made by us shall be binding on you.
    When do amendments take effect and when must you comply with them?
    8. You must comply with any amendment from such date as we may specify for it. Subject to Clauses 13.10 or 13.11 and/or any other provision of this Contract authorising us to make amendments on other notice, such date shall not be less than 28 days after notice of the amendment is given if we consider that there is an urgent need for compliance with it and shall not be less than 42 days after notice of the amendment is given in any other case.
    What about amendments from 1 April 2010?
    9. Subject to Clauses 13.11 and 13.12, and/or any other provision of this Contract authorising us to make amendments on other notice, we will require compliance with any amendments to the Contract Documents made on or after 1 April 2010 with effect from a date within either of two periods during each year – (a) April or May, or (b) October or November.
    10. If, in any case, a Consultative Body has requested a longer consultation period than the 21 days or 42 days specified in Clause 13.5 we may require compliance with an amendment at another point in the year, but will always consider whether delaying the requirement to comply until a date within either of the following two periods (a) April or May, or (b) October or November (as appropriate) is a practicable alternative.
    11. Clauses 13.9 and 13.10 do not apply (and we may require compliance with effect from another point in a year) if we consider that it is impracticable to require compliance with effect from a date within either of the following two periods (a) April or May, or (b) October or November, or if the amendments after fewer than 10% of the number of our Suppliers, and in any case where the Consultative Bodies agree. Examples of when we may consider that it is impracticable to require compliance from a date within either of the following two periods (a) April or May, or (b) October or November are:
    (a) if the Department for Constitutional Affairs requires an amendment; or
    (b) if the amendment is related to a competitive tendering exercise and will affect only those Suppliers that are affected by the outcome of the exercise.
    May we amend Contract Documents for some Suppliers and not others?
    12. When we are entitled to amend the Contract Documents, we may make amendments that affect all, or fewer, Suppliers.
    Your right to terminate following an amendment
    13. If you wish to terminate this Contract following an amendment you may do so if you give notice in accordance with Clause 30.2.
    ….
  133. By clause 30 the Supplier has the right to terminate on three months' notice: clause 30.1. The LSC has the right to terminate on 6 months' notice, but only if it considers it necessary to do so in order to facilitate a Reform of the Legal Aid Scheme: clauses 30.3 and 30.4.
  134. By clause 30.2:
  135. If we amend this Contract at any time under Clause 13, you may serve notice on us terminating this Contract at any time before the amendment comes into effect and any such notice shall take effect on the day before the day on which the amendment would otherwise have come into effect.

    9. The consequences of termination are set out in clause 31. They include:

    What about Clients and Contract Work files?
    1. When you become aware that your right to perform any Contract Work will end (e.g. if you receive a notice to that effect), you must immediately notify all Clients who will be affected by that, take all reasonable steps to protect them and their rights, and provide them with information about other Suppliers able to continue their matter or case (and offer to make appointments with them) and with such other information as we may specify.
    What happens to your rights, authorisations etc when this Contract (or part of it) ends?
    2. Subject to Clause 31.10, when this Contract ends:
    (a) all rights, authorisations, approvals, powers, licences and any status under it (of you and of all your personnel) end immediately;
    (b) you must immediately stop all Contract Work;
    (c) you must immediately stop holding yourself out as able to perform Contract Work;
    (d) you must immediately stop holding yourself out as a Supplier.
    3. Subject to Clause 31.10, when any authority to perform Contract Work in any Category of Law or Class of Work, or from any Office ends, you must immediately stop all Contract Work in the relevant Category of Law, Class of Work, or from the relevant Office and must immediately stop holding yourself out as able to perform it.
    What about work in progress?
    7. When this Contract ends or your right to perform Contract Work in any Category of Law, Class of Work, or from any Office, ends you must immediately send us such Contract Report as we may require and Claims for all matters and cases that are not transferring to another Supplier.

    Annex 2: The Public Sector Directive

  136. The recitals include:
  137. (1) ...This Directive is based on Court of Justice case-law, in particular case-law on award criteria, which clarifies the possibilities for the contracting authorities to meet the needs of the public concerned, including in the environmental and/or social area, provided that such criteria are linked to the subject-matter of the contract, do not confer an unrestricted freedom of choice on the contracting authority, are expressly mentioned and comply with the fundamental principles mentioned in recital 2.
    (2) The award of contracts concluded in the Member States on behalf of the State, regional or local authorities and other bodies governed by public law entities, is subject to the respect of the principles of the Treaty and in particular to the principle of freedom of movement of goods, the principle of freedom of establishment and the principle of freedom to provide services and to the principles deriving therefrom, such as the principle of equal treatment, the principle of non-discrimination, the principle of mutual recognition, the principle of proportionality and the principle of transparency. However, for public contracts above a certain value, it is advisable to draw up provisions of Community coordination of national procedures for the award of such contracts which are based on these principles so as to ensure the effects of them and to guarantee the opening-up of public procurement to competition. These coordinating provisions should therefore be interpreted in accordance with both the aforementioned rules and principles and other rules of the Treaty……..
    (29) The technical specifications drawn up by public purchasers need to allow public procurement to be opened up to competition. To this end, it must be possible to submit tenders which reflect the diversity of technical solutions. Accordingly, it must be possible to draw up the technical specifications in terms of functional performance and requirements, and, where reference is made to the European standard or, in the absence thereof, to the national standard, tenders based on equivalent arrangements must be considered by contracting authorities … The technical specifications should be clearly indicated, so that all tenderers know what the requirements established by the contracting authority cover.
    (46) Contracts should be awarded on the basis of objective criteria which ensure compliance with the principles of transparency, non-discrimination and equal treatment and which guarantee that tenders are assessed in conditions of effective competition. As a result, it is appropriate to allow the application of two award criteria only: 'the lowest price' and 'the most economically advantageous tender'. To ensure compliance with the principle of equal treatment in the award of contracts, it is appropriate to lay down an obligation — established by case-law — to ensure the necessary transparency to enable all tenderers to be reasonably informed of the criteria and arrangements which will be applied to identify the most economically advantageous tender. It is therefore the responsibility of contracting authorities to indicate the criteria for the award of the contract and the relative weighting given to each of those criteria in sufficient time for tenderers to be aware of them when preparing their tenders …
  138. Article 2 provides:
  139. Principles of awarding contracts
    Contracting authorities shall treat economic operators equally and non-discriminatorily and shall act in a transparent way.
  140. By Article 23:
  141. Technical specifications
    1. The technical specifications as defined in point 1 of Annex VI shall be set out in the contract documentation, such as contract notices, contract documents or additional documents …
    3. Without prejudice to mandatory national technical rules, to the extent that they are compatible with Community law, the technical specifications shall be formulated:
    (a) either by reference to technical specifications defined in Annex VI and, in order of preference, to national standards transposing European standards, European technical approvals, common technical specifications, international standards, other technical reference systems established by the European standardisation bodies or — when these do not exist — to national standards, national technical approvals or national technical specifications relating to the design, calculation and execution of the works and use of the products. Each reference shall be accompanied by the words 'or equivalent';
    (b) or in terms of performance or functional requirements; the latter may include environmental characteristics. However, such parameters must be sufficiently precise to allow tenderers to determine the subject-matter of the contract and to allow contracting authorities to award the contract;
    (c) or in terms of performance or functional requirements as mentioned in subparagraph (b), with reference to the specifications mentioned in subparagraph (a) as a means of presuming conformity with such performance or functional requirements;
    (d) or by referring to the specifications mentioned in subparagraph (a) for certain characteristics, and by referring to the performance or functional requirements mentioned in subparagraph (b) for other characteristics.

    Annex 3: The 2006 Regulations

    The material parts of Regulations 4 and 9 are:

    Economic operators

    4.-
    (1) In these Regulations, an "economic operator" means a contractor, a supplier or a services provider.
    (2) When these Regulations apply, a contracting authority shall not treat a person who is not a national of a relevant State and established in a relevant State more favourably than one who is.
    (3) A contracting authority shall (in accordance with Article 2 of the Public Sector Directive)—
    (a) treat economic operators equally and in a non-discriminatory way; and
    (b) act in a transparent way.
    Technical specifications in the contract documents
    9. –
    (1) In this regulation -
    "common technical specification" means a technical specification drawn up in accordance with a procedure recognised by the member States with a view to uniform application in all member States and which has been published in the Official Journal;
    "European standard" means a standard adopted by a European standards organisation and made available to the general public;
    "European technical approval" means an approval of the fitness for use of a product, issued by an approval body designated for the purpose by a member State, following a technical assessment of whether the product fulfils the essential requirements for building works, having regard to the inherent characteristics of the product and the defined conditions of application and use;
    "international standard" means a standard adopted by an international standards organisation and made available to the general public;
    "British standard" means a standard adopted by a British standards organisation and made available to the general public;
    "recognised bodies" means test and calibration laboratories and certification and inspection bodies which comply with applicable European standards and "recognised body" shall be interpreted accordingly;
    "standard" means a technical specification approved by a recognised standardisation body for repeated and continuous application, compliance with which is not compulsory and which is an international standard, a European Standard or a British standard;
    "technical reference" means any product produced by European standardisation bodies, other than official standards, according to procedures adopted for the development of market needs; and
    "technical specifications" means—
    (a) in the case of a public services contract or a public supply contract, a specification in a document defining the required characteristics of materials, goods or services, such as quality levels, environmental performance levels, design for all requirements (including accessibility for disabled persons) and conformity assessment, performance, use of a product, safety or dimensions, including requirements relevant to the product as regards the name under which the product is sold, terminology, symbols, testing and test methods, packaging, marking and labelling, user instructions, production processes and methods and conformity assessment procedures, and
    (b) in the case of a public works contract, the totality of the technical prescriptions contained, in particular, in the contract documents, defining the characteristics required of the work, works, materials or goods, which permits the work, works, materials or goods to be described in a manner such that it fulfils the use for which it is intended by the contracting authority and these characteristics shall include—
    (i) levels of environmental performance, design for all requirements (including accessibility for disabled persons) and conformity assessment, performance, safety or dimensions, including the procedures concerning quality assurance, terminology, symbols, testing and test methods, packaging, marking and labelling, user instructions and production processes and methods;
    (ii) rules relating to design and costing, the test, inspection and acceptance conditions for work or works and methods or techniques of construction; and
    (iii) all other technical conditions which the contracting authority is in a position to prescribe, under general or specific regulations, in relation to the finished work or works and to the materials or parts which they involve.
    (2) Where a contracting authority wishes to lay down technical specifications which must be met by—
    (a) the services to be provided under a public services contract and the materials and goods used in or for it;
    (b) the goods to be purchased or hired under a public supply contract, or
    (c) the work or works to be carried out under a public works contract and the materials and goods used in or for it;
    it shall specify those technical specifications in the contract documents.

    (4) A contracting authority shall ensure that technical specifications afford equal access to economic operators and do not have the effect of creating unjustified obstacles to the opening up of public procurement of competition.
    (5) Subject to technical requirements which are mandatory in the United Kingdom and to the extent that those requirements are compatible with Community obligations, a contracting authority shall define the technical specifications required for a contract in accordance with paragraph (6), (7), (8) or (9).
    (6) A contracting authority may define the technical specifications referred to in paragraph (5)—
    (a) by reference to technical specifications in the following order of preference—
    (i) British standards transposing European standards;

    (ii) European technical approvals;
    (iii) common technical specifications;
    (iv) international standards; or
    (v) other technical reference systems established by the European standardisation bodies; or
    (b) in the absence of the technical specifications referred to in sub-paragraph (a), by reference to the following technical specifications—
    (i) British standards;
    (ii) British technical approvals; or
    (iii) British technical specifications relating to the design, calculation and execution of the work or works and use of the products;
    and each reference to a technical specification made in accordance with this paragraph shall be accompanied by the words "or equivalent".
    (7) A contracting authority may define the technical specifications referred to in paragraph (5) in terms of performance or functional requirements (which may include environmental characteristics) provided that the requirements are sufficiently precise to allow an economic operator to determine the subject of the contract and a contracting authority to award the contract.
    (8) A contracting authority may define the technical specifications referred to in paragraph (5) by defining performance and functional requirements as referred to in paragraph (7) with reference to the technical specifications referred to in paragraph (6) as a means of presuming conformity with such performance or functional requirements.
    (9) A contracting authority may define the technical specifications referred to in paragraph (5) by reference to technical specifications referred to in paragraph (6) for certain characteristics and by reference to performance or functional requirements referred to in paragraph (7) for other characteristics.
    (10) Where a contracting authority defines technical specifications as referred to in paragraph (6), it shall not reject an offer on the basis that the materials, goods or services offered do not comply with those technical specifications if an economic operator proves to the satisfaction of the contracting authority by any appropriate means that the one or more solutions that economic operator proposes in its tender satisfy the requirements of those technical specifications in an equivalent manner.
    (11) Where a contracting authority defines technical specifications in terms of performance or functional requirements as referred to in paragraph (7), it shall not reject an offer for materials, goods, services, work or works which complies with—
    (a) a British standard transposing a European standard;
    (b) a European technical approval;
    (c) a common technical specification;
    (d) an international standard; or
    (e) a technical reference system established by a European standardisation body;
    if those technical specifications address the performance or functional requirements referred to by the contracting authority and the economic operator proves in its tender to the satisfaction of the contracting authority by any appropriate means that the work, works, materials, goods or services meet the performance or functional requirements of the contracting authority.


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