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Tighter reins on the use of VTNs – the Fastweb judgement
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Tighter reins on the use of VTNs – the Fastweb judgement

A European procurement case published in 2014 has whipped away the fig leaf that Voluntary Transparency Notices potentially provided to contracting authorities worried about their contracts being declared ineffective.In this article, first published in the Procurement and Outsourcing Journal, Rebecca Rees and Lucy Doran explore the Fastweb Case (C-19/13) and explore the repercussions for contracting authorities.

Background to the Ineffectiveness remedy

One of the most serious breaches of the public procurement rules is the direct award of a contract by a contracting authority without prior notification to the market and/or the absence of a competitive process. Prior to Directive 2007/66/EEC (the Remedies Directive), there was little an aggrieved bidder could do about such a breach as, particularly in the UK, once a directly awarded contract had been entered into it could not be set aside, even if it had been entered into in breach of the public procurement rules.

To address this issue, the Remedies Directive introduced a new remedy of "ineffectiveness" (set out at Article 2). This remedy has been implemented into the domestic law of England, Wales and Northern Ireland via Regulation 47K of the Public Contracts Regulations 2006 (as amended) (the Regulations) and has been copied out verbatim in the new draft Public Contracts Regulations 2015 (the Draft Regulations).

Grounds for ineffectiveness

This remedy allows the Court to set aside a contract that has already been awarded in three scenarios:

  • Ground One - Where the contract was “directly” awarded to a provider without prior notice to the market or an appropriate competition being run;
  • Ground Two - Where the contracting authority failed to observe a compliant standstill period, therefore depriving the unsuccessful bidders the opportunity to suspend the award process prior to award of the contract;
  • Ground Three - Where the contract has been awarded under a framework arrangement and the rules on “mini-competitions” were not followed correctly.

Consequences of Ineffectiveness

If a contract is declared "ineffective", the terms of the contract will be rendered prospectively (but not retrospectively) ineffective. The Court is also obliged to impose a civil financial penalty on the contracting authority (and such a penalty must be "effective, proportionate and dissuasive" – see Regulation 47N(4)) and may also impose damages.

Exception where a VTN is issues

Regulation 47(K)(3)(b) of the Regulations provides a defence to the remedy of ineffectiveness and enables a contracting authority to avoid a declaration of ineffectiveness in relation to Ground One by publishing a voluntary transparency notice in the Official Journal of the European Union (OJEU). In order to rely on the defence, the contracting authority must have:

  • considered the award of the contract without prior publication of a contract notice to be permitted by the Regulations;
  • published in the OJEU a voluntary transparency notice (VTN) expressing its intention to enter into the contract. Regulation 47(K)(4) provides a list of information that the notice must contain, including "a justification of the decision of the contracting authority to award the contract without prior publication of a contract notice"
  • not entered into the contract for a period of at least 10 (calendar) days beginning with the day after the date on which the voluntary transparency notice was published in the OJEU.

Use of VTNs by contracting authorities

Given the potential defence to ineffectiveness a VTN may provide, contracting authorities have sought to publish VTNs to mitigate the risk of a Court subsequently imposing such a remedy.

The publication of a VTN as part of an overall risk mitigation approach has been seized upon by numerous contracting authorities within the UK over the past few years. Publication of a VTN has even been required by funders as a pre-condition to the draw-down of financing on public-sector projects in order to remove or mitigate any perceived residual risk in a project.

Issuing a VTN is often seen as a tool to "flush out" any potential challenges. It is hoped that once the 10 day standstill period has elapsed, the contracting authority is safe to contact and provided that enough information is included in the VTN (making any potential challengers aware of their grounds of challenge), the risk of a damages claim is reduced after 30 days.

However, a VTN in its own right is not a panacea that can be used to correct all breaches or as a method to avoid compliance with the procurement rules. The justification for use and the contents of the VTN need to be carefully considered and the Commission has previously warned that it would be monitoring the use of VTNs to ensure that they are not misused.

Despite the widespread use and discussion of VTNs in the UK, no jurisprudence or judicial guidance on the use of VTNs existed until the 2014 Court of Justice of the European Union case, Ministero dell'Interno v Fastweb (Case C-19/13).

Facts of the case

In 2003, the Ministero dell'Interno entered into a contract with Telecom Italia for the management and development of telecommunications services. This contract was due to expire on 31 December 2011 so on the 15th December 2011, the Ministero dell'Interno appointed Telecom Italia as the supplier and technological partner for the management and development of these services.

The Ministero dell'Interno considered for the purposes of awarding the contract directly to Telecom Italia, that it was able to rely upon the grounds for using the negotiated procedure without prior publication of a contract notice. This is permissible where for technical reasons or reasons connected with the protection of exclusive rights, only one economic operator is able to perform the contract (see Regulation 14(a)(iii) in the Public Contracts Regulations 2006 for the UK provision).

On 20th December 2011, the Ministero dell'Interno published a notice in the Official Journal announcing its intention of awarding the contract to Telecom Italia. The parties entered into the contract on the 31 December 2011 and a contract award notice was published in the Official Journal on the 16th February 2012.

FastWeb challenged this contract in the Italian administrative court. It contended contending that the conditions laid down in Directive 2009/81/EC were not satisfied (grounds to rely on the negotiated procedure without prior publication of a contract notice). This challenge was upheld by the administrative court, which held that the grounds used by the Ministry were not 'technical reasons' within the meaning of the law but for reasons of expediency. The administrative court therefore annulled the decision awarding the contract and declared the contract ineffective from 31 December 2013 onwards (it is not clear from the judgements why this date in particular was significant).

Both Parties lodged an appeal to the Consiglio di Stato (the Council of State). The Consiglio drew parallels with the administrative court and found that the Ministry had awarded the contract to Telecom Italia SpA not because it was impossible to find another contractor, but because that would have involved costs, changes and would have required a period of adjustment. They therefore agreed with the administrative courts that the Ministry did not have valid grounds for relying upon the negotiated procedure without prior publication of a contract notice.

However, the Consiglio was unsure as to whether as a result of these findings, they could declare the contract ineffective as the Ministry had published a VTN and waited 10 days before entering into the contract. The Directive and equivalent provisions in Italian legislation state that where these conditions are satisfied, a contract should not be declared ineffective (see Regulation 47K (3) for the UK provisions). 

The Consiglio therefore decided to stay the proceedings and asked the Court of Justice whether a national court is precluded from declaring a contract to be ineffective, where before awarding the contract the contracting authority published a VTN and waited at least 10 days before concluding the contract, even if it is established that the grounds for justifying award of a contract without prior publication of a notice had not been justified

The Court of Justice reinforced the Advocate General's view that the exception to the general rule on ineffectiveness was introduced to reconcile the various interests in play. This involves the undertaking that has been adversely affected and to which it is important to make available the remedies of interim relief and annulment and the interests of the contracting authority and the other party to the contract where there is a need to prevent the legal uncertainty that might be engendered by the ineffectiveness of the contract. However, as this was an exception to the general rules on ineffectiveness it must be interpreted strictly.

The Court of Justice went on to look at the conditions for the exception to the general rule and in particular the need to state the justification for the decision in the VTN. The Court of Justice held that the "justification" must disclose clearly and unequivocally the reasons that moved the contracting authority to consider it legitimate to award the contract without prior publication of a contract notice so that interested parties are able to deicide with full knowledge of the relevant facts whether they consider it appropriate to bring an action.

To rely upon the exception to the general rule, the Court of Justice held that it will be necessary for the national review body to determine whether when the contracting authority took the decision to award a contract without prior publication of a contract notice, it acted diligently and whether it could legitimately hold that the conditions in the Directive (use of negotiated procedure without prior publication of a notice) were satisfied. The national review body will take into account the circumstances and reasons provide by the contracting authority in the VTN.

The Court of Justice held that if a national court is therefore satisfied that the conditions for the general exemption are met then it may not then declare the contract ineffective.

The second part of the judgement looked at whether the exception was valid in light of the principle of non-discrimination and the right to an effective remedy. Fastweb had argued that the publication of a VTN was not consistent with the principle of effective judicial protection. Fastweb claimed that publication of a VTN does not guarantee that potential competitors are informed of the award of a contract to a particular economic operator, especially if publication takes place during a period when activities are reduced or suspended.

The Court of Justice reiterated that it is settled law that the setting of reasonable time-limits for bringing proceedings, in the interests of legal certainty and protection of both the individual and the administrative authority concerned, is compatible with the fundamental right to effective judicial protection provided that such time limits do not make it impossible or excessively difficult to exercise the rights conferred. Effective legal protection requires that the interested parties be informed of an award decision a reasonable time before the contract is concluded so that they have a real possibility of bringing proceedings and applying for interim measures.

The Court of Justice noted that the 10 day standstill period following publication of the VTN allowed interested parties the opportunity to challenge the award of a contract and also the fact that even after the 10 day period has elapsed, economic operators who have been adversely affected may still bring an action for damages. For these reasons, the Court of Justice held that the exception to the ineffectiveness rules was not contrary to principle of judicial protection or the principle of non-discrimination.


Given the Fastweb judgement, it is clear that a VTN will not provide any protection to a contracting authority who knew that it needed to advertise a contract in the OJEU, but published a VTN instead. In such a scenario, an aggrieved bidder will have up to 6 months from the award of the contract to seek a declaration of ineffectiveness.

Further, the publication of a VTN and observation of the subsequent standstill period is unlikely to protect a contracting authority from a declaration of ineffectiveness unless the contracting authority can show that it acted diligently and legitimately believed that the conditions for a direct award were satisfied in that particular case.

The Court of Justice in Fastweb indicated that the national court must scrutinise the contracting authority's reasons and justifications to ensure that the contracting authority had acted diligently and that the justification(s) set out in the VTN support the contracting authority's position that it was entitled to make a direct award.

The Court of Justice did not provide any guidance as to how a contracting authority can prove it acted diligently, but it is recommended that an "audit trail" is created and maintained in order to show that the contracting authority considered the grounds entitling direct award, it sought legal advice on the issue (if proportionate/appropriate) and that it held relevant discussions within its organisation to confirm the adopted procurement route (e.g. whether to advertise or not).

The audit trail is important to ensure that a contracting authority can show that its decision was genuinely and legitimately held. The Court in Fastweb did not go as far as to indicate whether a declaration of ineffectiveness would be available if the contracting authority's conclusion was genuine but incorrect, but what is clear from the judgement is that the Court will assess the diligence the contracting authority has acted with in arriving at its decision (however mistaken that decision might be). If the Court does not view that the contracting authority adopted a sufficiently diligent approach to this issue, it might be more inclined to declare the contract ineffective.


The Fastweb judgement is not surprising given the Court of Justice's stance that exemptions to the rules should be interpreted strictly. Going forward, contracting authorities needs to act with caution and not simply assume that a VTN is an exemption in its own right.

If a contracting authority knows that it should advertise a contract in the OJEU, but chooses not to, the publication of a VTN is likely to exacerbate the risk position (by bringing the direct award of the contract to the market-place's attention), rather than ameliorate it as previously thought.

If a contracting authority is unsure as to whether a direct award is permissible or not, it should ensure that any subsequent decisions are recorded in writing and that the audit trail shows that it has acted diligently and that the ensuing position is legitimately held.


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