Trends and Features in the Review and Remedies System in Germany

1. Trends and Features in the Review and Remedies System in Germany International Conference in Dubrovnik 24th – 25th May 2007 „Public Procurement Review and Remedies Systems“ Dr. Gabriele Herlemann

2. Special features of the German Public Procurement Law • Regulated under various different laws • „Cascade“: regulated in a variety of different sources of law (historic reasons) • In the beginnings: public procurement = part of budget law only •  no redress in law for the tenderers towards the state (contracting authorities)

3. Economic importance of public contracts • Opening-up of public procurement to community competition: Common market for public procurement • Primary law not sufficient Secondary law (=EU Directives) was issued

4. General character of EEC secondary law • Provides only a framework for the national laws of the member states • Member states have to decide how to adapt their national laws to the Directives • Member states must work within the framework •  pp-law varies across EU-member states

5. Adaptation of German Law to Directive 89/665/EEC of 21 December 1989 • Directive 89/665/EEC = basis for the review and remedies system • Integration of review system into German antitrust law • Reflections of the German legislator: having both to do with competition • However: Antitrust law and pp-law do not hang together  no necessity

6. Directive´s new aspects for German law • Redress in law, rights for tenderers towards the state regarding pp-law • Introduction of thresholds: Directive is only relevant for public contracts above a certain value • Introduction of a new definition of „public contractor“: also subjects to private law can under certain circumstances be defined as public contractors

7. Below thresholds: EEC Directives do not regulate pp below thresholds: German system adapts this division absence of effective remedies German Constitutional Court: division goes conform with German constitution Above thresholds: Effective remedies in a sense of „primary“ legal protection, which means: the tenderer´s chance to get the contract still exists, not only recovery of damages at civil courts. Division of German review system into two parts

8. In the following: focus on tendering procedures above thresholds.

9. Institutions in charge • 1st instance: Public Procurement Tribunals. Legal status: part of the administration. Attention: Directive demands „courts“, but: not necessarily in a constitutional sense. • 2nd instance:Higher Regional Courts (pp chambers). • 3rd instance? No (but see below).

10. Germany as a Federal State – consequences for the institutions in charge: • 1st instance: • Federal Public Procurement „Tribunals“ (3 special divisions of the Federal Cartel Office), if the contracting authority is federal; • State PPT´s, if the contracting authority is a state authority. • 2nd instance: Higher Regional Court for the region of the 1st instance that has issued the decision. • Federal Supreme Court (= High Court of Justice):Competent only if one Higher Regional Court intends to release a decision which differs from another Higher Regional Court´s decision in an identical case. Rarely the case  diversified jurisdiction.

11. Composition of PPTs in 1st instance: • Chairperson (=civil servant) • Two associate members, of whom one serves in a honorary capacity (= a layman). Intention: honorary associate should have practical experience. • Judicial in character: PPT exercise their functions independently and on their own responsibility.

12. The two major requirements for applications at the PPT in German law: • Interest in obtaining a particular public contract, risk of being harmed by an alleged infringement • Previous notification to the public contracting authority of the alleged infringement

13. Basis for these requirements for applications: Article 1 Section 3 of the Review and Remedies Directive

14. Review procedures are only available for: • Persons having an interest in obtaining a particular public contract and • Who risk being harmed by an alleged infringement  Review procedure is not successful in any case of an infringement, but only if the infringement causes a damage to the person seeking the review

15. Jurisdiction of Germany´s Federal Court of Justice: Tenderer must be excluded from participation in a public contract if: • a reference for the proof of his economic, financial standing/his technical or professional ability (=criteria for qualitative selection), which has been required by the public contractor, does not accompany the offer • The offer is not complete, if for example a price for one position is missing

16. Important: The legal consequence does not depend on how significant the missing reference/declaration is!

17. Strict legal consequence for the tenderer concerned: • Substantive law: tenderer is not allowed to compete for this specific public contract for formal reasons • Application at the PPT is inadmissible as a tenderer who is not allowed to compete can´t be harmed by an infringement (no chance to get the award)

18. Advantage: Transparency, as strict consequence does not depend on significance no litigation about: which missing reference etc. is significant and justifies the exclusion of the tenderer? Economic disadvantage:  often the formally most correct offer is being selected for the award, not the economically advantageous offer Consequence of the formalistic approach:

19. Necessary previous actions of the applicant: • Applicant has to notify the contracting authority previously of the alleged infringement and of his intention to seek review: „without undue delay after becoming aware“ of the violation of provisions • If not: the application at the pp tribunal is inadmissable • Previous payment of minimum fee =2.500.- Euros (only Federal Public Procurement Tribunal)

20. Tribunal procedure 1st instance • Initiation of review proceedings only upon application, not ex officio • Accelerated proceedings  maximum 5 weeks • Person who is supposed to get the award according to the public authority: = competitor of the person seeking review  he has to be invited to take part in the review procedure and can play an acitve role; has the same rights as the applicant.

21. Parties may inspect the files. Exception: competitor´s business- secrets Lawyer not necessary in the 1st instance Decision on the basis of a Hearing Investigation principle

22. Most important effect of the review procedure: • Automatic suspension of the contract to which the procedure relates  contracting authority is not allowed to make the award prior to the decision and before the expiry of the period for a complaint • Otherwise: invalidity of the contract •  effective, „primary“ legal protection

23. Contracting authority´s „weapon“ against automatic suspension: Application to the PPT  PPT may allow the contracting entity to award the contract if, taking into account all interests which may be impaired as well as the interests of the general public in the quick conclusion of the award procedure the negative consequences of delaying the award until the end of the review outweigh the advantages involved.

24. 2ndinstance • Time for appeal: 2 weeks. Lawyer necessary. • No limited period for the Higher Regional Court´s decision • Automatic suspension effect: only for 2 weeks, afterwards: applicant has to apply for the extension of the suspension effect. Depends on the prospects of success. If the Court doesn´t extend the suspension: public authority is allowed to make the award immediately, applicant can only claim damages.