Workshop “Review procedure: complaint and evidence”

1. Workshop “Review procedure: complaint and evidence” What private companies / procuring entities must know when dealing with review procedures - practical examples Johannes S. Schnitzer EBRD-Consultant, WOLF THEISS Kiev, 19 April 2012

2. Agenda Review Procedure Alternative dispute resolution/clarifications Interim measures Time limits & fees Contestable decision / preclusion Access to procurement file Case Study – brand new case law from Austria Facts of the case Procedure Lessons learnt Conclusion

3. Review Procedure – General considerations (1) How to avoid a review procedure ? Filing of complaint might “escalate” situation Complaint is legal dispute with envisaged client (CA) “Don’t bite the hand that feeds you” Prior alternative dispute resolution Thorough analysis of tender documents Vagueness, contradictions Potential discrimination Unrealistic specifications (time, quantity, annual turn-over, etc)  Request for clarification ! Discrimination might be honest mistake Often assisting CA in optimizing the tender process If CA insists on provisions file complaint

4. Review Procedure – General considerations (2) Principal purpose of the complaint is to get the contract Damages are secondary Interim measures (injunctions) as condition not to lose contract Different approaches in EU regarding interim measures Automatically as soon as complaint is filed Automatically as long as no conflict with public interest No automatic suspensive effect  request for interim measure (e.g. in Austria) Imminent danger of damage to the interests of the contractor Prima facie evidence of relevant circumstances Exact description of (necessary and adequate) measure (injunction for whole tender procedure; only certain acts/decisions) Weighing of contractor’s interest and public interest

5. Review Procedure – General considerations (3) Time limits 7-10 days before deadline for submission of bid/request to participate (Austria) Other countries 10 days from receipt of tender documents  Short time frame available ! Preclusive effect if decisions are not contested !(e.g. in Austria) Complaint as means to delay tender procedure ? Fees for filing a complaint Important for effectiveness of remedy system – fees might factually hinder pursuing of legal protection E.g. in Austria rather low but amendment is planned (up to EUR 150.000 for works and EUR 50.000 for goods & services contracts !) In Slovakia fees are up to 1% of the contract volume (maximum EUR 600.000 !)

6. Review Procedure – What can be challenged? Usually only certain decisions of CAs are contestable (e.g. in Austria) Publication notice Tender documents Non-admittance to second stage Other determinations during deadline for bid submission/ negotiation phase Clarifications/ adjustments/ corrections ! Award decision (selection of party for framework agreement)  Sometimes need to wait for the next contestable decision !

7. Review Procedure – What if not challenged in due time ? Preclusive effect (contestable vs non-contestable decisions) Rationaleto structure procurement procedure into different phases Every phase ends with a contestable decision In the event that such decision is not (successfully) challenged it is deemed effective and becomes final and absolute – any not successfully challenged defect “heals”! A decision may be challenged only once (for instance, tender documents) For instance, in Austria, review bodies are not entitled to challenge illegalities ex officio  Different in, for instance, Slovakia In practice considerable debate as to whether any deficiency precludes Suppression of preclusion in case an evaluation of the economically most advantageous tender is not possible at all? (e.g. in case award criteria are not weighted at all or not adequately specified) If not, breach of fundamental EC principles (effectiveness of remedies) ?

8. Review Procedure – power to file a complaint Only a contractor having or having had an interest in obtaining a particular public contract and who has been or is at risk of being harmed by the alleged infringement  Only companies that could suffer damages Power to file a complaint is denied if a request for participation/ bid is out of the question to be selected In this case, no damages could be suffered and therefore the complaint must be rejected In practice considerable debate on this (very strict) approach Almost impossible to submit „perfect“ bids being in absolute compliance with the requirements Even minor mistakes result in a denial of legal protection (mandatory rejection of such complaint) Especially problematic regarding mandatory revocation of tender  Austrian case law that (also) no power to file a complaint in case CA is obliged to cancel the tender procedure

9. Review Procedure – Gathering information (1) Access to the procurement file Access to the records is essential for the verification of Compliance of submitted requests for participation/ bids of competitors with tender documents/specifications Application by contracting authority of a non-discriminatory approach when examining the different requests for participation/ bids Prohibition of access (to certain records) is principally justified by the protection of trade and business secrets (proportionality!) ECJ case C-450/06 Varec Applicant in a review procedure is entitled to inspect and comment on the evidence and observations submitted to the reviewing body  Restriction of the applicant's access only insofar as necessary to protect the business secrets of the applicant's competitors  General denial of access violates the principle of fair competition  Justification only in “narrow” cases

10. Review Procedure – Gathering information (2) Access to the tender records ECJ case C-450/06 Varec The review body responsible must be able to decide whether the information in the file should not be communicated to the parties or their lawyers Only if it is required by community law in order to ensure the protection of fair competition or the legitimate interests of economic operators “Cautions approach” in Austria Immanent risk of disclosure of business secrets Blacking out or covering of certain parts of documents to be protected (proportionality) Global denial of access to a file should not be accepted Insisting on being provided with comprehensive reasons as to why particular parts of the file are confidential

11. Case study – review procedure in Austria Facts of the case Tender procedure CA: Austrian social security body Tender procedure for the selection of a party to a framework agreement (FWA) Subject: supply of tick vaccination (including distribution) Review procedure Applicant: pharmaceutical company X which submitted bid Bid X comes in 2nd place (lowest bid by company Z is 40% cheaper); one additional bidder X challenges decision to select Z as party for the FWA Abnormally low bid + CA did not seek explanation Anti-competitive agreement and illegal multiple participation (Z and its supplier submitted bids)  Mandatory exclusion of Z

12. Case study – review procedure in Austria Facts of the case (2) X also files for interim measures CA: argues public interest due to threat to life and limb for CA’s beneficiaries because of imminent danger hinders injunction Complex procedure for injunction; several written pleadings Finally interim measure is granted  CA is prohibited to conclude contract until review body decides Proceedings before review authority CA failed to seek explanation on low bid  Decision to select Z as party to FWA is annulled ! CA re-evaluates bids Selects Z again !

13. Case study – review procedure in Austria Facts of the case (3) Should X challenge the CA’s decision again on (remaining) grounds ?? Abnormally low price Anti-competitive agreement and illegal multiple participation In the meanwhile… CA buys vaccine from Z without commencing tender procedure X challenges purchase for illegal (1) direct award and (2) negotiated procedure w/ 1 contractor without notice (+injunction) X alternatively request for declaration of illegality by review authority CA, suddenly, argues that its purchase is covered by old 2011 FWA  “Like a rabbit out of a hat"

14. Case study – review procedure in Austria Review authority Does not grant interim measures  Not competent because FWA has already been concluded – declaration of nullity is not possible any more Only request for declaration of illegality is admissible Oral hearing – decision of 11 April 2012 Declaration of illegality Annulment of contracts ex nunc (impossible to undo vaccination, otherwise ex tunc annulment) Old FWA did not cover purchase (value) and distribution  Illegal direct award Review authority imposes highest fine ever in Austria on CA (EUR 90.000)

15. Case study – review procedure in Austria Lessons learnt X did not win tender/ was not awarded the contract  always successful party before review authority ! Client does not profit from imposed fine High legal expanses because of 2 complex review procedures including procedures for interim measures  No reimbursement of costs Damages for first review procedure ? FWA does not oblige CA to purchase at all  Frustrating for client Likely that fine will prevent (other) CAs from similar actions

16. Conclusion In principal, the Austrian remedy system is evolved but there still are some unresolved issues Power to file a complaint Company might lose for purely formalistic reasons There is no perfect bid ! Appealing the decision of the review authority is not practicable Win the bid protest or leave it ! De-facto very unlikely to get damages

17. Contact Johannes S. Schnitzer, Dr. iur, LL.M. Tel: + 43 / 1 / 51510 – 2350 Fax: +43 / 1 / 51510 – 665355 E-Mail: johannes.schnitzer@wolftheiss.com WOLF THEISS Attorneys-at-LawSchubertring 61010 ViennaAustria