Master Slide

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What makes a remedy system effective?
Experiences of two EU countries on factors
contributing to the effectiveness of a remedy
system Dr. Peter Braun, LL.M.
Conference on "Public Procurement Review
Remedies SystemsDubrovnik 24-25 May 07
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Dr. Peter Braun, LL.M.

• Studied law at Kiel, Aberystwyth (Wales) and
  Nottingham
• Member of the Public Procurement Research Group
• Correspondent to the Public Procurement Law
  Review
• Ph.D. in Nottingham Practical application of EU
  Public Procurement rules to PFI/PPP projects
• Legal practitioner (Rechtsanwalt) with Hölters
  Elsing in Frankfurt am Main
• Public Procurement Law and Public-Private
  Partnership

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Agenda

• The UK experience
• The German experience
• Factors contributing to effectiveness

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United Kingdom

• The UK experience
• Brief introduction of the UK remedy system
• Analysis from the private sectors perspective
  Wood Review
• The German experience
• Factors contributing to effectiveness

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Introduction to the UK Remedy system
De facto not available
Interim relief
De facto not available
Set aside
Availablebut rarely used
Damages
Available but not used
Art 226 EC Treaty procedure
Complaint to the European Commission
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De facto not available
Interim measures

• Suspend the procedure
• No distinct procurement regulation with respect
  of remedies
• Originally not available against the Crown
  (Factortame II decisison)
• Requirements to be satisfied
• Arguable case
• Adequacy of damages
• Undertaking in damages
• Balance of Interest
• In practice, difficult to obtain interim measures

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De facto not available
Set aside

• Set aside an unlawfully adopted decision means to
  make it devoid of legal effect.
• Time several months. Hence, contracts will be
  generally concluded when the proceedings are
  launched and can no longer be set aside.
• In practice not available to bidders

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Availablebut rarely used
Damages

• Tort of misfeasance in public office public
  official must have maliciously exercised or
  deliberately abused its public power.
• Other torts (negligent mis-statement,
  misrepresentation, conspiracy)
• Damages under Regulations, requirements
• 1. Plaintiff must prove a breach of a duty owed
  to him
• 2. Defendant is liable for the duty
• 3. Proof that breach resulted in damage
  (causation)
• 4. Quantify the damage
• Section 19 of Local Government Act Recovery
  of costs for preparing bids
• Breach of implied contract (Blackpool decision)
• Only one successful case Harmon

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Wood Review

• Shrug your shoulders, thats what happens, move
  on
• Why wouldnt you fight a customer?
• Few examples of discrimination, difficult to
  prove
• Experience of courts on procurement cases is low
• Remedies are not perceived as a helpful solution
  to the problems encountered
• Preference for informal, less confrontational
  solutions

Recommendation N OGC should provide guidance for
business on the specific remedies available for
breaches of the public procurement rules, and the
available channels for pursuing a complaint.
Source Wood Review, November 2004
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Agenda

• The UK experience
• The German experience
• Brief introduction of the German remedy system
• Statistics on the practical use of the remedy
  system
• Factors contributing to effectiveness

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German Remedy system
Available!
Primary measures (Set aside, interim measures)
Review chambers
Court of Appeal (Procurement Senate)
Federal Court
Damages
Available, but rarely used!
Civil courts (Regional Court)
Court of Appeal
Complaint to the European Commission
Available!
Art 226 EC Treaty procedure
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German Remedy system
33 Review Chambers 16 Courts of Appeal
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Cases brought
Review Chamber Court of
Appeal 2002 1092 250 2003 1275 302 2004 1493 314
2005 1348 286 2006 1152 228
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• Which party succeeded?

Contracting Authority
Bidder 1999 53 47 2000 47 53 2001 33 67 2
002 47 53 2003 62 38 2004 65 35 2005 60 40
2006 58 42
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Primary measures (Review chamber)

• Complaint to the contracting authority
• Immediately after getting positive knowledge of
  the breach of pp law
• Must describe the breach of pp law (to give
  contracting authority the opportunity to rectify)
• Application to review
• Review chamber serves the contracting authority
  with the application (after cursory review)
• Contracting authority must not conclude the
  contract
• Decision of review chamber within 5 weeks,
  generally after a hearing
• Appeal within 2 weeks to Court of Appeal

Available!
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Available, but rarely used!
Damages (civil courts)

• Decision of the contracting authority was in
  breach of Procurement law and
• This resulted in damages
• Causal link between breach of pp law and damage
• Costs of preparing the tender - Bidder has to
  prove that without the breach of law it would not
  have incurred the transaction costs
• Profit Bidder has to prove that without the
  breach of law it would have succeeded in the
  bidding process

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Complaint to the EU Commission

• No costs for the complainant, loss of control
  over the procedure
• May lead to a 226 EC-Treaty infringement
  proceeding before the European Court of Justice
• Not directed towards the contracting authority,
  but the respective Member State
• Problem in a federal system How can the federal
  state which is subjected to the infringement
  procedure influence the decision-making on
  communal level (art 28 basic law)?
• Can the federal state claim damages from the
  contracting authority?
• Can the contract be cancelled due to an ECJ
  ruling?
• Difficulties in practice for contracting
  authority
• Negative Publicity
• Lack of Transparency
• No deadlines

Available!
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Agenda

• The UK experience
• The German experience
• Factors contributing to effectiveness
• Legal culture
• Costs
• Acquaintance with procedures
• Fear of retaliation
• Length of proceeding
• Chances of winning a case
• Approach to client relationship

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Factors contributing to effectiveness

• 1. Legal culture
• Cultural inhibitions about the (in)
  appropriateness of using litigation
• Litigious climate vs. non-confrontational culture
• Traditional alternative means of problem solving
  in the UK non-litigious legal culture
  out-of-court settlements
• Tradition of remedies before the EC Rules were
  implemented.
• In Germany, bidders were used to (weak) review
  system and the award of damages in civil courts,
  whereas in the UK there were no pre-existing

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Factors contributing to effectiveness

• 2. Costs
• Legal expenses
• Lawyers fees
• Courts fees
• Costs for litigation are substantial in the UK
  and have been criticised as a denial of access
  to justice (Lord Woolf, Access to Justice
  (1995)
• Application for interim measure will cost in the
  UK between 50,000 and 100,000, whereas in
  Germany between 15,000 and 30,000.
• In Germany, almost 30 of the cases are withdrawn
  before a formal decision is delivered. This
  results in halving the Courts fees.
• Distinction between solicitors and barristers in
  UK
• High security for an action of damages ( 650,000
  in Harmon) in the UK, much lower in Germany

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Factors contributing to effectiveness

• 3. Acquaintance with procedures
• In the UK, bidders are not acquainted with the
  procedure to lodge a complaint with the European
  Commission
• Scepticism towards Brussels
• Lawyers perceive procedure as useless and
  ineffective and too time-intensive
• Loss of control over procedure
• Difficulty for foreign bidders to move swiftly in
  a different legal context
• Market participants have to acquaint themselves
  to distinct review procedures, e.g. with respect
  to deadlines.

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Factors contributing to effectiveness

• 4. Fear of retaliation
• Firms fear that authorities might retaliate by
  not awarding contracts to them in the future
• Firms do not want to antagonise their potential
  customers
• Especially, if long-standing contractual
  relationship
• Dependent on specific market (services vs. supply
  and works contracts)
• Dependent on value and duration of the contract
• Dependent on relative market power of the company
  (new-comer vs. incumbent contractor)
• Outsider might be more willing to challenge
  decision as a means to enter a market.

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Factors contributing to effectiveness

• 5. Length of proceedings
• Swiftness of the procedure is paramount for the
  effectiveness and attractiveness of a remedy

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Factors contributing to effectiveness

• 6. Chances of winning the case
• Companies assess their chances of winning a case/
  the effectiveness of a specific remedy in a given
  case
• Due to the lack in considerable body of case law
  in the UK the chances of winning a case are
  difficult to assess.
• In Germany, case law (precedence) is extensive
  with more than 6300 cases brought within the last
  5 years.
• In Germany, chances of applicants have been
  lowered in recent years due to an ever stricter
  approach by review chambers with respect to
  formal requirements
• (Perceived) Experience of the court in
  procurement matters can effect the outcome
  assessment of bidders.

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Factors contributing to effectiveness

• 7. Approach to client relationship
• Acceptance of loosing a bid process is often
  viewed in the UK as a natural business risk
• In the UK, contracting authorities are rather
  viewed as valuable public sector clients
  (Pragmatic and business-oriented approach),
  whereas in Germany a more adversarial approach is
  prevalent.
• Differences between markets and sizes of
  companies

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Contact
Dr. Peter Braun, LL.M.Hölters
ElsingFreiherr-vom-Stein-Straße 24-26D-60323
Frankfurt am MainGermany Telefon 49 (0)69 /
71 588-340Telefax 49 (0)69 / 71
588-588E-Mail braun_at_hoelters-elsing.com