HUNGARIAN SYSTEM OF REVIEWS AND REMEDIES IN PUBLIC PROCUREMENT

1. HUNGARIAN SYSTEM OF REVIEWS AND REMEDIES IN PUBLIC PROCUREMENT Gabriella Fribiczer Public Procurement Council « Public Procurement Review and Remedies »Ankara 26-27 February 2008

2. OVERVIEW • INSTITUTIONAL SET-UP • LEGAL BACKGROUND • REMEDIES IN PUBLIC PROCUREMENT

3. I. INSTITUTIONAL SET-UP

4. PUBLIC PROCUREMENT COUNCIL (PPC) I. • PPC was established in 1995 (at the same time that the first PP Act came into force) • aim: enforcing the objectives of the PP Act • centralized, autonomous body • subordinated only to the Parliamentmust report to the Parliament every year • central budgetary organ • the Council convenes 7 to 8 times every year

6. PUBLIC PROCUREMENT COUNCIL (PPC) II. • the PPC is constituted of 19 members: - President - 6 members responsible for the enforcement of the basic principles and public interest - 6 members representing the general interest of the contracting entities - 6 members representing the general interest of the tenderers • PPC members are not employed full-time (except the President) • the mandate of the PPC members is for not less than a two year term

7. PUBLIC PROCUREMENT COUNCIL (PPC) III. The President of the PPC • is elected with a two-thirds quorum for a five year term of service by the members of the Council (may be re-elected once) • employed full-time • independent • civil servant • entitled to salary and other benefits as due to senior state secretaries

8. STRUCTURE OF PPCSECRETARIAT • standing structure of PPC, led by the Secretary General • in charge of coordinating the activity of the Council, preparing and implementing the CPP’s decisions; • employing civil servants

9. STRUCTURE OF PPCARBITRATION BOARD • operates alongside the PPC • set up also in 1995 • first instance public procurement review body • independent, administrative • permanent „quasi-judicial” body • ”tribunal” entitled to make a reference to the ECJ (request for preliminary ruling)

10. STRUCTURE OF PPCARBITRATION BOARD • efficient operation of the Board is provided from the budget of the PPC • the Board consists of public procurement commissioners • the chairperson and the vice-chairperson of the Board are elected from the public procurement commissioners by the two-thirds of the members of the Council in attendance, for a five-year term(possibility of re-election is not restricted)

11. PUBLIC PROCUREMENT COMMISSIONERS I. • number of commissioners (staff of the Board) is determined by the PPC • commissioners are appointed and recalled by the PPC • they are full-time civil servants • strict rules on incompatibility related to the contracting entities and the tenderers

12. PUBLIC PROCUREMENT COMMISSIONERS II. Commissioners may be persons with • at least three years professional practice and • a university level qualification, as well as • a special examination in public administration and/or in law

13. JUDICIAL REVIEW Municipal Court Municipal Court of Appeals Ordinary Civil Courts (ineffectiveness + damages) – will change in the future („one court for all” concept)

14. II. LEGAL BACKGROUND

15. PP LEGISLATION • the former PP Act : Act XL of 1995 • present PP Act: Act CXXIX of 2003 • entered into force on 1st of May 2004 as a general rule;

16. PP LEGISLATION • implementation of Directives 2004/17 and 2004/18: 15th January, 2006 • implementation of Directive 2007/66: from 1st of January 2008 and partially from 1st of June, 2008 (the first text is ready, consultation process is on-going)

17. THE PP ACT IN FORCE • all the essential rules on award procedures and on review procedures, as well as on the operation of the PPC can be found in this one Act • however: certain topics (e.g. centralised procurements, order of publication, tender notices) are regulated in secondary legislation (governmental and ministerial decrees)

18. III. REVIEWS AND REMEDIES IN PUBLIC PROCUREMENT IN HUNGARY

19. THE COMPETENCE OF THE ARBITRATION BOARD • conducting a procedure related to the violation of the public procurement legislation • settling legal disputes regarding the amendment or the performance of the contract concluded in a public procurement procedure • conducting an ex officio procedure related to procedures without publication of a prior notice where the Chairperson of the Arbitration Board finds that the justification given for the choice of procedure is unacceptable

20. GENERAL PROVISIONS • the provisions of Act on the general rules of state administrative procedure shall apply to the procedure of the Arbitration Board • unless the PPA provides otherwise

21. PROCEDURE OF THE ARBITRATION BOARD May be initiated • upon application or • ex officio (two types)

22. PROCEDURE UPON APPLICATION Who may apply? An application may be submitted by • the contracting entity • any tenderer or • any other interested person whose right or lawful/legitimate interest has been violated or jeopardised by activity or failure which is in conflict with the PPA

23. EX OFFICIO PROCEDURES Ex officio procedures may be initiated by organisationsdefined in the PPA: • Members or the President of the PPC • the State Audit Office • the Government Control Office • the Public Administration Office of the county or Budapest • the Hungarian State Treasury (in respect of the use of tied subsidy or addressed subsidy granted to local governments) • the parliamentary commissioners • the entity providing subsidy for public procurements; • the entity authorized to conduct public procurement procedures in the scope of centralised public procurement

24. CONTROL OF PROCEDURES WITHOUT PRIOR PUBLICATION OF A NOTICE • PP Act obliges contracting entities to send the contract notice, along with the information and documents justifying the application of this procedure to the Chairperson of the Arbitration Board • if the Chairperson finds that the application of this procedure was unfounded, he/she initiates the ex officio review procedure of the Arbitration Board

25. CONTROL OF NEGOTIATED PROCEDURES WITHOUT PRIOR PUBLICATION OF A NOTICE • the Chairperson has 15 days to take this decision • if the panel of the commissioners finds that the application was unlawful, it sets aside of the decision of the contracting entity concerning the choice of procedure (except the contract has already been concluded) • in the latter case the Board imposes a fine (up to the 30 % of the value of the contract)

26. RULES OF PROCEEDING • time limits for bringing actions (15 or 8 days) • pre-conditions of submitting an application (contracting entity shall be notified by the complainant, application shall be submitted, administrative fee must be paid – 600 or 1500 euro)

27. RULES OF PROCEEDING • interim measuresmay be ordered (most frequently applied: suspension of the contract award procedure or prohibition of the conclusion of a contract); • time limits for the Arbitration Board to ensure rapid and effective remedies (15 days without a hearing and 30 days if a hearing is held; may be extended with 10 days, once) • in most of the cases the Arbitration Board holds hearings

28. DECISION MAKING I. • three commissioners shall proceed in the public procurement matters as a general rule • each time the members of the panel are appointed by the chairperson of the Board • at least two of them shall be a lawyer and one member shall have a university or college degree in the field mostly connected with the subject of the matter

29. DECISION MAKING II. • the expert member shall have knowledge of building and construction, IT etc. • all commissioners shall have pp knowledge • the leader of the panel shall be the one with legal qualification

30. DECISION MAKING III. • the commissioners cannot be instructed in the specific cases • their activity is governed exclusively by the provisions in the PP legislation • it is not uncommon that the Arbitration Board finds against the same organisations or companies whose representatives are members of the Council

31. LEGAL CONSEQUENCES I. In its decision, the Arbitration Board • refuses unfounded applications • prior to the completion of the public procurement procedure, may request the person causing the violation of law to proceed in accordance with the rules of the PPA, and/or may make the decision to be made by the contracting entity subject to a condition • may set aside of the decision of the contracting entity made in the course of the public procurement procedure, or completing the public procurement procedure, except for the case if the contract has already been concluded on the basis of this decision

32. LEGAL CONSEQUENCES II. Furthermore the Arbitration Board • in addition to indicating the violated provision of the PPA, may establish the occurrence of the violation of law • obliges the person violating the law to bear the fee and costs of the review procedure • may prohibit the tenderer, for not more than five years, to take part in a public procurement procedure

33. LEGAL CONSEQUENCES III. Furthermore the Arbitration Board • may strike the tenderer from the official list of qualified tenderers • may impose penalty • may order the compulsory application of the PPA, regardless of the value of the procurement, if the contracting entity violates the rules on prohibition of splitting up of procurements

34. JUDICIAL REVIEW I. • the decision of the Arbitration Board may be the subject of judicial review • the persons whose rights or lawful interests are violated by the decision of the Arbitration Board made on the merits of the case, may request the court to review the decision in the form of a claim

35. JUDICIAL REVIEW II. • the claim shall be submitted to the Arbitration Board within fifteen days from the date of delivery of the decision • the submission of the claim has no delaying effect with regard to the implementation of the decision • this court procedure shall have priority over other cases (accelerated procedure) • the Court may change the decision of the Arbitration Board or may also order a new proceeding of the Board

36. JUDICIAL REVIEW III. • an appeal may be lodged against the decision of the court of the first instance within eight days from the communication of the decision • the court of second instance may change the decision of the Municipal Court or may also order a new proceeding of the Board

37. NUMBER OF REVIEW PROCEDURES IN 2007 • number of review procedures: 751 (decrease: in 2005: 1091, 2006: 858) • among these: upon the initiative of the Chairperson of the Arbitration Board: 109

38. DECISIONS OF THE ARBITRATION BOARD IN 2007 • rejection (appeal unfounded): 318 • the case was terminated: 148 148 • appeal founded: 227 • pending proceedings: 58

39. JUDICIAL REVIEW • in 2007 122 decisions of the Arbitration Board were brougt to Court (16%, usually around 22%) • in 2006 the Court finished 61 cases, in 4 cases the decision of the Board was changed, in 2 cases the Court ordered new procedure of the Arbitration Board; in all other cases the decision of the Board was approved by the court/s

40. PUBLICATION OF THE DECISIONS AND THE RULINGS • both the decisions of the Arbitration Board and the rulings of the courts shall be published in the Public Procurement Bulletin (official organ of the PPC) • as the Bulletin is published on the Internet as well, the decisions and the rulings are also available there, free-of-charge

41. THANK YOU FOR YOUR ATTENTION www.kozbeszerzes.hu fribiczer.gabriella@kozbeszerzesek-tanacsa.hu