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Two steps forward, one step back? ECJ on damages in public procurement law


On June 6th, 2024, the European Court of Justice ruled in the INGSTEEL case (C-547/22, EU:C:2024:478) that a bidder who was unlawfully excluded from a procurement procedure may claim damages for the loss of a past opportunity. However, the liability claim cannot be unlimited; national law is decisive.

The construction of soccer stadiums as controversial subject

Fittingly, amid the ongoing Men’s European Soccer Championship, the case in question concerns the modernization and construction of soccer stadiums in Slovakia. INGSTEEL spol. s r. o., the plaintiff in the original case, was excluded from the award procedure (as part of a bidding consortium) (see judgment of July 13th, 2017, Ingsteel and Metrostav, C-76/16, EU:C:2017:549) and is now claiming damages, particularly the reasonable profit, which it would have been entitled to if the contract had been awarded in its favor. The exclusion from the award procedure had previously been declared unlawful by the Slovak courts.

The Slovak court referred to the case was unclear about the scope of the compensation rules of the “Public Procurement Remedies Directive” (Directive 89/665/EEC as amended). This specifically concerned the application of national provisions regarding the award of damages in the form of lost profits. Consequently, the Slovakian court referred a number of questions to the ECJ for a preliminary ruling.

The ECJ’s legal opinion

After determining the admissibility of the referred questions, the ECJ dealt with the content of the questions referred.

To begin with, the ECJ pointed out that the award of damages for unlawful exclusion from a procurement procedure is broadly defined in the Remedies Directive. Therefore, excluding a specific category of damages, such as loss of profit, is not permissible. This is understandable: Companies that are not awarded the contract, even though they would have been eligible to provide the tendered services, are potentially harmed. On the one hand, this damage lies in the expense they have incurred in preparing the participation and tender documents. On the other hand, they may also have suffered damage as a result of not being able to perform a contract and thus not being able to generate any turnover/profit.

Reference to national law

After this fundamental recognition of loss of profit as compensable damage, the ECJ backtracks somewhat and refers to national law for the assertion of claims. Specifically, it is up to each member state to establish the criteria within its legal system for determining and assessing the damage resulting from the loss of the opportunity to participate in a public procurement procedure to obtain the contract. However, the member states must observe the EU law principles of equivalence and effectiveness.

A categorical exclusion of the award of lost profit is, in any case, inadmissible, which may necessitate changes in national judicature on compensation law.

Our experts Johannes Hartlieb and Florian Krumbiegel from the Public Procurement Law team will be happy to answer any further questions you may have on this topic.

Disclaimer

This article is for general information only and does not replace legal advice. Haslinger / Nagele Rechtsanwälte GmbH assumes no liability for the content and correctness of this article.

 

1. July 2024

 
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