The judgement of Nuclear Decommissioning Authority v EnergySolutions EU Ltd (2017) UKSC 34 provides significant legal clarification on the recovery of damages in procurement challenges.
The Supreme Court judgement followed a number of judgements in this litigation. It had previously been found that the Nuclear Decommissioning Authority (the "Authority") had acted contrary to its obligations under the Public Contracts Regulations 2006 (SI 2006/5) (the "Regulations") when awarding a contract for nuclear power plant decommissioning works. The successful bidder had failed to meet certain selection criteria, coupled with which the Authority had made manifest errors in the evaluation process. Consequently, the contract in question should have been awarded to the Claimant.
The appeal concerned the Claimant’s ability to recover damages in circumstances where it had not sought to prevent the Authority from entering into contract. The Claimant did not issue proceedings prior to the expiry of (or immediately after) the ten day standstill period, which would have resulted in automatic suspension and the Authority proceeded to enter into contract with the successful bidder. However, the Claimant subsequently issued proceedings within the 30 day limitation period pursuant to the Regulations, seeking significant damages.
The judgement addressed three important issues, namely:
- Whether as a matter of EU law, the breach in question had to be “sufficiently serious” before damages would be awarded. In deciding this issue the Court were effectively ruling whether the conditions established in Francovich v Italian Republic (Joined Cases C-6/90 and C-9/90) [1995] ICR 722; [1991] ECR I-5357 ("Francovich") were applicable to the Public Procurement Directive (2004/18/EC) (the "PP Directive");
- Whether the standard imposed under UK law, in accordance with the Regulations, differs to that set out in EU law in accordance with (1) above; and
- Whether by virtue of seeking a damages remedy, there was an obligation on the Claimant to mitigate its loss and if so, whether the Claimant had neglected to do so by issuing proceedings following the expiry of the standstill period.
Taking each issue in turn, Lord Mance ruled:
- EU law imposes that the breach must be sufficiently serious and the Francovich conditions are therefore applicable to the PP Directive.
- Domestic law does not impose a higher standard than that imposed by EU law as detailed at (1) above. This is of particular significance when contracting authorities and contractors consider the application of and compliance with the Regulations.
- That the damages claim was not being sought in the context of a private contractual claim and therefore the duty on the Claimant to mitigate its loss was not synonymously applicable. Notably Lord Mance stated that the risk of implementing a wrongful award decision is borne by the contracting authority and therefore the Claimant is not under an obligation to issue proceedings during the standstill period in order to prevent the authority from committing a breach.
The judgement's assessment of important technical legal issues is of particular significance and the precise threshold for a sufficiently serious breach, and the interpretation of this standard if an authority acts diligently and makes a decision in good faith, will be of on-going note. From a political perspective the judgement's analysis of the interaction of EU and domestic procurement legislation provides an interesting insight in the context of the European Union (Withdrawal Bill).
This article is taken from Building Interest - Spring 2018.
