Procurement in a Nutshell – Appeal against the Courts’ ruling regarding concession contracts
25th October, 2019
A dispute between Ocean Outdoor Ltd (the "Claimant") and Hammersmith and Fulham LBC ("the Defendant") following the Defendant appealing against a decision that a grant of leases did not amount to services concession contracts.
What is a services concession contract?
An essential element of a services concession is that the contracting authority entrusts the provision and management of services to the economic operator and, that such services or works must be for the benefit of the contracting authority or its residents. There must therefore be a pecuniary interest for the contracting authority, to satisfy Regulation 3(3) of The Concession Contracts Regulations 2016 (“Concession Regulations”), for the Concession Regulations to apply.
In 2010, a lease for an area of land that contained two towers that supported digital advertising screens was granted to the Claimant. In 2017, the Defendant invited bids for a new leasing arrangement for the area of land. The highest bidder, this not being the Claimant, was awarded the lease. Following the award of this lease, the Claimant made a complaint that the Defendant did not comply with the necessary procedural formalities required during the procurement exercise, due to the Directive and Concession Regulations being applicable. To read our summary of the case when it was first heard, please click here.
The Court of Appeal Judge has re-considered the following 4 key factors during the appeal:
The nature of a service concession contract
The Judge was correct in concluding that the leases were not classed as services concession contracts. The court stated that the Defendant had no statutory obligation to provide advertising services for its residents and neither the Defendant nor its residents stood to benefit from the advertising.
Also, for a lease to fall within the definition of a services concession contract, there is a requirement that a services concession contract must include a legally enforceable commitment by the contractor to perform the relevant service. Due to there being no direct or immediately enforceable obligation for the successful tenderer to provide advertising services, the lease falls out of the scope of the Concession Regulation.
Did the land exemption apply?
The leases were almost exclusively concerned with the two towers on the land, something the land exemption was designed to accommodate for. Again, another reason as to why the Concession Regulations did not apply to this case.
Entitlement to damages
The Judge advised that, it would be incorrect in principle to hold that a Claimant in the position Ocean found themselves in are automatically entitled to claim damages as a result of a contracting authority’s failure to follow the Concession Regulations.
The Court of Appeal Judge affirmed the decision that was made originally. The Judge noted that, it should no longer be the practice in public procurement cases for the losing tenderer to claim damages, regardless of the absence of any possible connection between alleged illegality of the process and any loss it may have suffered by relying on the loss of chance principle.
Why is this important?
The Court’s focus on the subject-matter of a contract plays a key role in determining whether a contract, which would ordinarily meet the criteria for a concession, will fall outside of the Concession Regulations. If the subject-matter is found to not concern activities for the ‘public benefit’, as witnessed in the case above, the contract will not fall within the scope of the Concession Regulations. This case demonstrates how Local Authorities are looking for ways to commercialise their activities more often than what they previously have, and it’s important to note that not all of these activities will have the concession rules applied to them.
How can I find out more?
If you have any queries on the issues raised or on any aspect of procurement, please contact us via our procurement hotline on 0330 137 3451.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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