Procurement in a nutshell – The General Court dismisses application for interim relief during tender process
16th October, 2017
The week's update looks at the recent court decision in Wall Street Systems UK v ECB of the European General Court, in response to a claim brought by Wall Street Systems (WSS) against the European Central Bank (ECB), for the award of a contract to a third party instead of the applicant.
The case was useful in clarifying the conditions necessary for obtaining interim relief and also highlighted the incredibly high bar that an applicant must satisfy to be successful in these cases. This case was not brought under the provisions of the Procurement Directive, but it is illustrative of the courts approach to cases of aggrieved bidders.
Background
Interim relief provides a remedy for an aggrieved economic operator who wishes to stop a procurement process if they have suffered or are likely to suffer a loss as a result of an alleged wrong.
The test for granting interim relief originates from the American Cyanamid case, where the court established the strict criteria for granting applications:
- Is there a serious issue to be tried;
- Are damages alone an inadequate remedy for the harm suffered;
- Does the balance of convenience favour granting or refusing interim relief?
Since the case, courts have closely maintained this approach.
The case
The issue in question concerned the award of a contract for the provision of a treasury management system. The ECB initiated a tendering procedure and invited WSS and a third party for further negotiations. The ECB then informed WSS that its tender had not been selected for the award of the contract, because it was not the most economically advantageous tender.
WSS brought an action under Article 263 TFEU for an annulment of the contested decision and an application for interim measures was brought.
Court’s decision
The court began by highlighting the existing strict rules for granting interim measures and emphasised the importance of proving urgency. WSS had to show there was a strong case that the dismissal of the application would give rise to irreparable harm. In an attempt to satisfy this, WSS put forward two effects which they held constituted the existence of serious harm brought on as a result of this loss of contract, the court responded to both:
Loss of expertise
WSS claimed that their current contract with ECB had cost them considerably in resources and a loss of contract would entail redeployment costs. Further, they stated that 10% of their revenue comes from this contract and losing it could jeopardise their business.
However, the court held there was a lack of substantive detail given about these claims, this was not an exclusive market and this treasury management product was capable of being used in other sectors. Further, WSS also supplied a similar business to governmental bodies and large corporations. Even if this business did represent a segment of their business, it provided only 10% of their revenue, therefore in reality it is of little importance for WSS’s maintenance of know-how and expertise.
Loss of reputation
WSS claimed they would feel the economic effects from the result of a loss of reputation.
However the court found, where the rules governing the tendering procedure have been followed, the rejection of WSS’s tender was neither prejudicial nor discreditable. Winning and losing tenders is part of business life and something that all businesses should be aware of when submitting bids. It was also deemed unlikely that the contract in issue was the only prestigious contract which the applicant could rely on to support its commercial reputation.
The court held; the damage, even if proved, is not supported by any specific factor giving grounds to a finding of serious harm. The application for interim measures was therefore dismissed on the grounds of a lack of urgency and there was no need to address the other conditions.
Why is this important?
This case highlights the exceptional nature of interim relief and the court’s reluctance to grant it. The court has guaranteed the protection of this narrow relief and not opened it up to additional litigation from unhappy tenderers.
Interim relief should not be granted to tenderers who are merely unhappy they were not awarded a contract; they should be aware of the inherent commercial risks of submitting a bid. Undertakings should be encouraged as much as possible to submit bids, they should not hold back because they fear a successful tender could be jeopardised by an unhappy tenderer, courts must continue to ensure the procurement procedure remains attractive to undertakings. The court in this case secured this favourable position.
Although the case does not concern the Procurement Directive, it is very useful as it shows the courts addressing alternative mechanisms for challenging contracting authorities outside of the Procurement Regulations.
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 0191 204 4464.
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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