The Supreme Court decided preliminary issues on damages for breach of the public procurement rules in the award of a contract to decommission Magnox power stations. It held that European Union law requires a breach to be sufficiently serious before damages are recoverable and that the Public Contracts Regulations 2006 implement that minimum without going further. An economic operator who sues within the permitted time is not denied damages merely because it did not issue proceedings before the authority entered into the contract.
The Nuclear Decommissioning Authority (NDA) awarded a contract for decommissioning Magnox sites to the CFP consortium. EnergySolutions, later called ATK, was a member of the unsuccessful Reactor Site Solutions consortium. The Supreme Court proceeded on findings that CFP should have been disqualified and that the other consortium would in any event have scored higher if the tenders had been assessed correctly. The parties reached a settlement but asked the Court to decide the preliminary points argued on appeal.
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Two deadlines mattered. The NDA had to wait at least ten days after notifying the unsuccessful bidder before concluding the contract. The bidder had 30 days to challenge the decision. After a voluntary extension, the NDA signed on 15 April 2014. ATK issued proceedings on 28 April. A claim issued and brought to the authority’s attention before signature would have suspended the award, subject to the court’s power to lift the suspension.
A sufficiently serious breach under EU law
Lord Mance, with whom Lord Neuberger, Lady Hale, Lord Sumption and Lord Carnwath agreed, upheld the Court of Appeal on the first issue. The Francovich conditions apply to a damages claim against a contracting authority under the Remedies Directive. The infringed rule must be intended to confer rights on individuals, the breach must be sufficiently serious, and there must be a direct causal link between the breach and the damage. A breach is sufficiently serious where the limits of discretion have been manifestly and gravely disregarded. Relevant factors include the clarity of the rule, the extent of discretion, whether the infringement was intentional or the error excusable, and whether the breach persisted despite a ruling or settled case law.
The Court of Justice decision in Combinatie Spijker establishes that an awarding authority’s liability for infringement of the procurement rules is assessed by those conditions. They are minimum conditions, and domestic law may provide a wider remedy. Stadt Graz, which prevents damages being made conditional on fault, is consistent with this approach: a fixed fault requirement goes beyond the sufficiently serious breach test. The general wording of the Remedies Directive and the Government Procurement Agreement did not require a different result. The position is acte clair, so no reference to the Court of Justice was needed.
The reach of the 2006 Regulations
The second issue was whether regulations 47I and 47J, under which the court may award damages for loss caused by breach of the duty owed to economic operators, allow damages for every breach or only for a sufficiently serious breach. The Regulations were made under section 2(2) of the European Communities Act 1972. There was no Marleasing requirement to confine them to the EU minimum, and a wider domestic remedy would have been within the enabling power.
The government could have given bidders a more generous remedy when it amended the 2006 Regulations in 2009. The accompanying documents showed that it intended to implement the Directive’s requirements and had made no separate choice to pay damages for every breach. The Court of Appeal had therefore been wrong to dispense with the sufficiently serious breach condition in the domestic claim.
Not claiming before the contract was made
The third issue was whether damages may be refused because, although proceedings were started within the 30-day limit, the operator did not issue its claim and inform the authority before the contract was made. The United Kingdom had fixed the standstill at ten days but allowed 30 days for proceedings, so the authority could contract while a damages claim remained possible.
The NDA argued that ATK could have avoided its loss by moving sooner. But the legislation gave each side a choice. The bidder could use its full time to claim. The authority could sign once the standstill ended or wait to see whether proceedings were issued. Signing before the claim deadline carried a risk for the authority. ATK did not have to take on the burden and expense of seeking to prevent signature to preserve a damages claim.
Verdict: The Supreme Court allowed the NDA’s appeal on the scope of damages under the 2006 Regulations. The breach had to be sufficiently serious under both EU law and the domestic scheme. The NDA lost on mitigation. ATK’s failure to stop signature during the standstill did not defeat its timely damages claim. The judgment decided these preliminary points and did not award a sum.
Source: Nuclear Decommissioning Authority v EnergySolutions EU Ltd [2017] UKSC 34
