Competition Corruption and Procurement – The Fosen Linjen Saga

1. Prof. Dr. iur. Dr. rer. pol. h.c. Carl Baudenbacher Independent Arbitrator and Consultant Door Tenant at Monckton Chambers, London Former President of the EFTA Court Full Professor em. University of St. Gallen Competition Corruption and Procurement – The Fosen Linjen Saga King’s College London – GWU Law Annual Symposium, 18 March 2019

2. Europeanization of PP law • PP law is originally national law • European law put over • Legislation and case law • General • No federal courts in EU and EEA/EFTA States • National courts are at the same time domestic courts and European courts • IV. Tensions • Single market rationale doesn’t always fit • Other areas of economic law (e.g. general tort law, contract law, IP law, company law).

3. Damages as a remedy • Example • Article 2(1)(c) Remedies Directive • “1. Member States shall ensure that the measures taken concerning the review procedures specified in Article 1 include provision for powers to: [….] (c) award damages to persons harmed by an infringement.” • Which compensation to a wronged tenderer? • Very divergent case law.

4. Damages as a remedy II. ECJ 1. Commission v Portugal (C-275/93): National legislation requiring proof of culpability as a precondition for award of damages set aside. 2. Strabag (C-314/09, 30 September 2010, 3rd Chamber, K. Lenaerts (Rapporteur), President, E. Juhász, G. Arestis, T. von Danwitz and D. Šváby) Commission v Portugal confirmed. Austrian legislation required rather strict liability (i.e. presumed fault and reversed burden of proof) – ECJ nevertheless struck it down. Moreover: Sufficiently seriousness standard not applied in public procurement law; strict liability.

5. Damages as a remedy II. ECJ 3. Combinatie (C-568/08, 9 December 2010, 2nd Chamber, of J.N. Cunha Rodrigues (Rapporteur), President, A. Arabadjiev, A. Rosas, A. Ó Caoimh and P. Lindh) Member States must make provision for possibility of awarding damages in case of infringement of EU law on award of public contracts. But no detailed statement as to the conditions and as to determination of amount of damages in Article 2(1)(c) of the Remedies Directive. “That provision gives concrete expression to the principle of State liability for loss and damage caused to individuals as a result of breaches of EU law for which the State can be held responsible [….].” (Paragraph 87.)

6. Damages as a remedy • III. Issues • 1. State liability • State is privileged. • Remains of the concept of sovereign immunity (rex non potest peccare, the King can do no wrong). • Moral hazard • 2. Strict liability • Is moral hazard argument convincing in every case? • What about the honest, but clumsy authority? • Tax payer’s money involved.

7. Fosen I I. The opinion Battle going on not in the EU, but in the EU‘s side-car so to speak, the EEA. EEA law is single market law, identical in substance to EU law, but the EFTA States have their own court, the EFTA Court. CB has been the President of that Court until a bit more than a year ago. E-16/16 Fosen Linjen: A simple breach of European public procurement rules may suffice to trigger liability of a public authority which has awarded a contract to the wrong bidder. State liability standard doesn’t apply.

8. Fosen I

9. Fosen I I. The opinion Against UK Supreme Court Nuclear Decommissioning Authority (Appellant) v EnergySolutions (no citation). UK Supreme Court: Such compensation should, under EU law, only be paid if the authority’s breach was sufficiently serious to merit such compensation. No reference to the ECJ; assumption that there is acte clair.

10. Fosen I II. Main reasons Contracting authority does not act in an authoritative manner when carrying out a procurement procedure; conclusion of a contract between equal partners. If public authorities take part in commercial activities, they must be subject to the same rules as private companies. To privilege the state for the sole reason that it is the state cannot be justified. The principle that economic operators must be held responsible, i. e. liable, for their mistakes is a pillar of any market economy system.

11. Fosen I III. Corrections via the causality requirement? German courts: A causal link is already given when there was a concrete possibility that the decision would have been different in the absence of the alleged procedural irregularity. Better approach: The unsuccessful bidder must prove that he would very probably have been awarded the contract had the authority acted in conformity with the law. As a rule, only a bidder who was shortlisted will be able to prove this. Left open in the opinion (no question to that effect).

12. Fosen II • I. Norwegian case law before Fosen • Compensation limited to circumstances where the authority had committed a material error (significant breach). • II. Referring court refuses to follow the EFTA Court • III. Discussion in Norway: • What about authorities trying to do their honest best making judgments which may or may not prove to be wrong? • Fosen is too strict. • IV. Second reference.

13. Fosen II • V. Peculiar circumstances. • Professors who dislike Fosen call on the Supreme Court to make a second reference because the EFTA Court has a new composition (CB no more there). • Supreme Court refers although no party had made an application. • Question whether positive interest is covered. • The bitterness with which this is fought out is probably no coincidence. • It is imv a consequence of the tensions that exist between the European level and the domestic level in public procurement law.

14. Brexit • I. Sec. 6 European Union (Withdrawal) Act 2018 • Interpretation of retained EU law • A court or tribunal “may have regard to anything done on or after exit day by the European Court, another EU entity or the EU so far as it is relevant to any matter before the court or tribunal” (para. 1). • “But [….] the Supreme Court is not bound by any retained EU case law.” (para. 4a) • “In deciding whether to depart from any retained EU case law, the Supreme Court [….] must apply the same test as it would apply in deciding whether to depart from its own case law.” (para. 5)

15. Brexit • II. EEA option • UK joining the EEA on the EFTA side? • UK docking to the institutions of the EFTA pillar? • Substantive PP law would continue to apply. • But own Court. • That court’s rulings may constitute persuasive authority for the ECJ.