Regulation 100 – General interest grounds for not making a declaration of ineffectiveness

Commentary

Regulation 100 PCR2015 transposes Article 2d(3) of Directive 89/665 as amended by Directive 2007/66 (here), and establishes the general interest grounds for not making a declaration of ineffectiveness that would otherwise derive from Regulation 99 PCR2015. Under Regulation 100(1) PCR2015, where the Court is satisfied that any of the grounds for ineffectiveness of Regulation 99 applies, it must not make a declaration of ineffectiveness if the contracting authority or another party to the proceedings submits such a request, and the Court is satisfied that overriding reasons relating to a general interest require that the effects of the contract should be maintained.

For these purposes, the general interest grounds for not making the declaration of ineffectiveness should, in principle, not be of an economic nature. Where the reasons adduced to oppose the declaration of ineffectiveness are of an economic nature, the additional conditions of Regulation 100(2) to (4) PCR2015 need to be complied with. In that regard, it should be stressed that economic interests in the effectiveness of the contract may be considered as overriding reasons only if in exceptional circumstances ineffectiveness would lead to disproportionate consequences (Regulation 100(2)); and, in any case, economic interests directly linked to the contract cannot constitute overriding reasons relating to a general interest (Regulation 100(3)).

Regulation 100(4) PCR2015 clarifies that such economic interests directly linked to the contract include (a) the costs resulting from the delay in the execution of the contract; (b) the costs resulting from the commencement of a new procurement procedure; (c) the costs resulting from change of the economic operator performing the contract; and (d) the costs of legal obligations resulting from the ineffectiveness. Therefore, the scope for purely economic interests to be taken into account in order to bar ineffectiveness is rather limited although, to the best of our knowledge, there is no guiding case law that clarifies this provision. For general discussion of the practical application of this provision, see K Struckmann & P Hodal, “Private Enforcement of Contract Ineffectiveness: A Practitioner’s Point of View” (2014) 1 European Procurement & Public Private Partnership Law Review 27-35.

If on the one hand we expressed concerned on Regulation 99 regarding the very limited grounds for ineffectiveness, on the other hand it appears that the potential exceptions or defences have been clearly restricted as well. It therefore appears that it may be easier for a contracting authority trying to avoid a declaration of ineffectiveness to put the emphasis of its arguments on the effects upon the potential beneficiaries of what is being procured than the direct economic costs of correcting a mistake.

Last modified: December 6, 2016 by Pedro Telles

100.—(1) Where the Court is satisfied that any of the grounds for ineffectiveness applies, the Court must not make a declaration of ineffectiveness if—

(a)the contracting authority or another party to the proceedings raises an issue under this regulation; and

(b)the Court is satisfied that overriding reasons relating to a general interest require that the effects of the contract should be maintained.

(2) For that purpose, economic interests in the effectiveness of the contract may be considered as overriding reasons only if in exceptional circumstances ineffectiveness would lead to disproportionate consequences.

(3) However, economic interests directly linked to the contract cannot constitute overriding reasons relating to a general interest.

(4) For that purpose, economic interests directly linked to the contract include—

(a)the costs resulting from the delay in the execution of the contract;

(b)the costs resulting from the commencement of a new procurement procedure;

(c)the costs resulting from change of the economic operator performing the contract; and

(d)the costs of legal obligations resulting from the ineffectiveness.

(5) For the purposes of paragraph (1)(b), overriding reasons may be taken to require that the effects of the contract should be maintained even if they do not require the Court to refrain from shortening the duration of the contract by an order under regulation 102(3)(a).