CJEU rejected AG Wathelet's proposal for vicarious liability for agent's behaviour in competition law: a more stringent test, but how stringent? (C-542/14)

In its Judgment of 21 July 2016 in VM Remonts and Others, C-542/14, EU:C:2016:578, the Court of Justice of the European Union (CJEU) issued an important clarification of the rules applicable to the attribution of (vicarious) liability for infringements of EU competition law, thus expanding its case law on the subjective elements (ie mens rea-like requirements) of the prohibition of anticompetitive behaviour in Art 101(1) TFEU.

In doing so, the CJEU rejected the proposal for stringent vicarious liability formulated by AG Wathelet (see my criticism here) and formulated a more stringent test for the attribution of anticompetitive behaviour of an independent agent. The test formulated by the CJEU raises some interpretative issues, though, and it deserves some comment.

It is worth reminding that the case addressed issues concerning the imputability of anticompetitive practices in which a third party services provider is engaged to the 'client' undertaking that hired those services (ie how to make the 'client' undertaking liable for the anticompetitive behaviour of one of its services providers). 

The case was quite convoluted because it concerned the imputability of a bid rigging offence to a supplying company that engaged a consultant to help it formulate a bid in a tender for a public contract. After the fact, it became apparent that the consultant engaged in collusion with other tenderers in the same bid. The question was, thus, to what extent the bidder should be liable for the collusion that resulted from the allegedly independent activity of the consultant (third party services supplier) and, in any case, what level of proof of anticompetitive intent would be necessary to impose liability on the 'client' undertaking.

In addressing this issue, the CJEU rejected a parallelism between the rules applicable to an undertaking's employees to its agents, and determined that 'where a service provider offers, in return for payment, services on a given market on an independent basis, that provider must be regarded, for the purpose of applying rules aimed at penalising anti-competitive conduct, as a separate undertaking from those to which it provides services and the acts of such a provider cannot automatically be attributed to one of those undertakings' (C-542/14, para 25, emphasis added).

However, the CJEU stressed that this different treatment is based on the independence of market activity of the service provider and, consequently, it would not be justified where the client undertaking exerted significant control over the apparently independent service provider. To that effect, the CJEU determined that

Article 101(1) TFEU must be interpreted as meaning that an undertaking may, in principle, be held liable for a concerted practice on account of the acts of an independent service provider supplying it with services only if one of the following conditions is met:

–  the service provider was in fact acting under the direction or control of the undertaking concerned, or
– that undertaking was aware of the anti-competitive objectives pursued by its competitors and the service provider and intended to contribute to them by its own conduct, or
–  that undertaking could reasonably have foreseen the anti-competitive acts of its competitors and the service provider and was prepared to accept the risk which they entailed (C-542/14, para 33, emphasis added).

Of particular relevance in the field of public procurement, the CJEU also provided some clarification regarding the unauthorised disclosure of commercially sensitive information by the agent, by stressing that

Whilst it is true that [an undertaking is liable for a competition infringement] when that undertaking intended, through the intermediary of its service provider, to disclose commercially sensitive information to its competitors, or when it expressly or tacitly consented to the provider sharing that commercially sensitive information with them ... the condition is not met when that service provider has, without informing the undertaking using its services, used the undertaking’s commercially sensitive information to complete those competitors’ tenders (C-542/14, para 32, emphasis added).

In my view, the VM Remonts Judgment should be welcome for what it does not do. That is, for its rejection of AG Wathelet's proposal for a reversal of the burden of proof, to the effect that the 'client' undertaking would have been considered liable unless it could adduce sufficiently convincing evidence (i) relating to the fact that the agent (services provider) had acted outside the scope of the functions that had been entrusted to it, (ii) regarding the precautionary measures taken by the ‘client’ undertaking at the time of designation of the agent and during the monitoring of the implementation of the functions in question, and (iii) regarding the ‘client’ undertaking's conduct upon becoming aware of prohibited behaviour--so as to demand a public distancing and positive reporting, under the analogous rules of Dansk Rørindustri and Others v Commission, C-189/02 P, C-202/02 P, C-205/02 P to C-208/02 P and C-213/02 P, EU:C:2005:408.

However, regarding the positive test that it sets for the assessment of whether anti-competitive activity by an agent can be imputed to the client undertaking, the VM Remonts Judgment seems less satisfactory, in particular due to the last condition of the test in its paragraph [33], whereby 'an undertaking may, in principle, be held liable for a concerted practice on account of the acts of an independent service provider supplying it with services ... if  ... that undertaking could reasonably have foreseen the anti-competitive acts of its competitors and the service provider and was prepared to accept the risk which they entailed' (emphasis added).

This seems to be an adaptation of the test developed in Commission v Anic Partecipazioni, C-49/92 P, EU:C:1999:356, paragraph [87], to which the CJEU refers in VM Remonts to stress that 'an undertaking may be held liable for agreements or concerted practices having an anti-competitive object when it intended to contribute by its own conduct to the common objectives pursued by all the participants and was aware of the actual conduct planned or put into effect by other undertakings in pursuit of the same objectives or that it could reasonably have foreseen it and was prepared to accept the risk' (C-542/14, para 29, emphasis added).

The adaptation of this test to cases of anticompetitive behaviour by an agent seems problematic because it stretches its last part concerning the acceptance of a risk of occurrence of anticompetitive behaviour by third parties (in that case, co-conspirators). In Anic, the undertaking concerned had been attending meetings with other undertakings that formed part of a cartel. Therefore, the assessment of whether the undertaking could reasonably foresee specific types of anti-competitive conduct by its co-conspirators (formally, third parties) derives from its own participation in meetings--that is, derives from its own observation of the behaviour of other entities that participate in the anti-competitive practice.

This cannot be the case in a scenario such as that presented by VM Remonts, where the client undertaking does not participate in any meetings and where it has no (proven) knowledge of the activity of the agent. In these cases, it would seem that the first two prongs of the VM Remonts test would suffice: ie the client undertaking is liable for the anticompetitive behaviour of the agent if (a) it controls the agent or (b) is aware of the anti-competitive behaviour between the agent and third parties, and aims to contribute to it. Introducing the third condition, according to which the client undertaking can also be liable if (c) it could have reasonably foreseen anticompetitive behaviour between its agent and third parties and was prepared to accept the risk which they entailed, seems to far fetched. 

Whereas in an Anic-like scenario the reasonable prediction of anticompetitive behaviour by co-conspirators derives from information directly acquired in the meetings in which the undertaking participates--that is, can be presumed under logical rules--in a VM Remonts-like scenario, any claim as to the undertaking's duty to foresee anticompetitive behaviour would be pure speculation.

If the client undertaking has no positive knowledge of the anticompetitive behaviour in which the agent [otherwise, the prong (b) of the test would apply], how is it ever going to be possible to determine that it ought to have foreseen it? If this is on the basis of its relationship with the agent, this dangerously reopens the door to a test like the one developed by AG Wathelet or, worse, creates a sort of culpa in eligendo of its agent that is equally troublesome.

If (factual) speculation is to be avoided and the imposition of vicarious liability is rejected by the CJEU in VM Remonts (para 26, although see para 27, which makes it less clear-cut), the only reasonable interpretation of the prong (c) of the test developed in paragraph [33] of VM Remonts is that it can simply never be applied. In which case, one can be forgiven for wondering if the CJEU did not pay sufficient consideration to the adaptation of the Anic test to a situation involving an independent service provider.

AG Wathelet proposes creation of excessive presumption of liability for third party infringement of Art 101 TFEU (C-542/14)

In his Opinion of 3 December 2015 in case VM Remonts and Others, C-542/14, EU:C:2015:797 (not yet available in English), Advocate General Wathelet advised the Court of Justice of the European Union (CJEU) on issues concerning the subjective elements (ie mens rea-like requirements) of the prohibition of anticompetitive behaviour in Art 101(1) TFEU. 

In particular, the case addresses issues concerning the imputability of anticompetitive practices in which a third party services provider is engaged to the 'client' undertaking that hired those services (ie how to make the 'client' undertaking liable for the anticompetitive behaviour of one of its services providers). In my view, AG Wathelet's proposal is clearly excessive (see critical assessment below) and deserves closer inspection. 

The case is quite convoluted because it concerns the imputability of a bid rigging offence to a supplying company that engaged a consultant to help it formulate a bid in a tender for a public contract. After the fact, it became apparent that the consultancy engaged in collusion with other tenderers in the same bid. The question was, thus, to what extent the bidder should be liable for the collusion that resulted from the allegedly independent activity of the consultancy (third party services supplier) and, in any case, what level of proof of anticompetitive intent would be necessary to impose liability on the 'client' undertaking.

In AG Wathelet's Opinion, it is not necessary to prove a personal behavior of any corporate officer of the 'client' undertaking, or his knowledge or consent to the behavior of the external services provider that also acted on behalf of other participants in a possibly prohibited agreement. AG Wathelet proposes to create a presumption of (vicarious?) liability, so that it is incumbent upon the 'client' undertaking to adduce sufficiently convincing evidence to rebut that presumption and escape liability. 

In particular, AG Wathelet considers that the necessary proof concerns (i) evidence relating to the fact that the third party (services provider) has acted outside the scope of the functions that had been entrusted to it, (ii) evidence regarding the precautionary measures taken by the 'client' undertaking at the time of designation of the third party and during the monitoring of the implementation of the functions in question, and (iii) evidence regarding the 'client' undertaking's conduct upon becoming aware of prohibited behavior.

AG Wathelet's VM Remonts Opinion follows the expansive/strict interpretation of the subjective elements in the prohibition of Art 101(1) TFEU in recent cases such as AC-Treuhand v Commission (C-194/14 P, EU:C:2015:717, re liability of a cartel facilitator, see an interesting comment here); Schenker and Others (C-681/11, EU:C:2013:404, re reliance on third party advice, see comments here); or Kone (C-557/12, EU:C:2014:917, re extension of 'umbrella' liability for damages to third parties to a cartel, see comments here). 

This is a very relevant opinion, with potentially very significant effects commensurate to those of the presumption of liability of the parent company, which has shaken competition law enforcement in the EU for the last 5 years or so.  

Therefore, it is interesting to look at AG Wathelet's reasoning in some more detail:

60. In my view, two extreme positions must be rejected. On the one hand, the automatic imputation of responsibility to the undertaking for the actions of a third party, regardless of the degree of involvement of the undertaking, which would go against fundamental principles governing the imposition of competition law sanctions (in particular the principles of personal responsibility and legal certainty), and, on the other hand, the obligation of the competent competition authority to demonstrate convincingly that the undertaking receiving the services from the third party was aware of the criminal acts committed by the latter or had consented to them, which would create a risk of seriously undermining the effectiveness of competition law.

61. Indeed, "... the prohibition on participating in anti-competitive practices and agreements and the penalties which infringers may incur are well known, it is normal that the activities which those practices and agreements involve take place in a clandestine fashion, for meetings to be held in secret, frequently in a non-member country, and for the associated documentation to be reduced to a minimum. " Therefore, it would be too easy to "hide" behind a third party in order to go unpunished under competition law.

62. Moreover, the importance of keeping free competition allows for companies that entrust third parties with functions such as those at issue in the present case [ie public procurement consultancy services] to be required to take all possible precautions to prevent such third parties from infringing competition law, avoiding, in particular, any negligence or recklessness in the definition or in the monitoring of these functions.

63. In line with this, the solution I propose for cases such as that in the main proceedings is to establish a rebuttable (iuris tantum) presumption of liability of the undertakings for acts contrary to competition law committed by a third party whose services it has engaged and which cannot be considered its subsidiary or ancillary body. Such a presumption can maintain the balance between, on the one hand, the objective of effectively suppressing behavior contrary to the competition rules, in particular to Article 101 TFEU, and to prevent their recurrence bearing in mind that respect for these rules requires an active corporate behavior at all times and, on the other hand, the requirements arising from the fundamental rights regarding the imposition of sanctions. Such a presumption would apply even if the acts performed by the third party were different from the functions entrusted to it, and even when it was not possible to demonstrate that the undertaking that used the services was aware of the acts of the provider or consented to them.

64. This presumption should apply to an undertaking from the moment the authority responsible for the enforcement of competition rules proves the existence of an act contrary to competition law committed by a person working for (or providing services to) the undertaking but which does not, directly or indirectly, form part of its organisational chart.

 65. In order to respect the balance to which I referred in point 63 of this Opinion, the undertaking may rebut the presumption of liability by submitting all elements supporting its claim that it was unaware of the illegal behavior  in which the third party service provider engaged, and by demonstrating that it took all necessary measures to prevent such a breach of competition law precautions, and this in three stages.

66. The first is when his appointment or hiring occurs. It refers in particular to the choice of supplier, the definition of the functions and the monitoring of its implementation, the conditions (or exclusion) of recourse to subcontracting, obligations to ensure respect for the law, in particular, competition, and the sanctions for breach of contract, as well as whether authorization was required for  any act not provided for in the contract.

67. The second stage includes the period of execution of the functions entrusted to the third party, ensuring that the latter strictly sticks to its functions as defined in the contract.

68. The third stage is when the third party commits a breach of competition law, even if committed at the back of the undertaking. The undertaking cannot simply ignore that behaviour, it should distance itself publicly from the forbidden act, prevent its repetition or report it to the administrative authorities. Indeed, as stated by the Court: "... passive modes of participation in the infringement, such as the presence of an undertaking in meetings at which anti-competitive agreements were concluded, without that undertaking clearly opposing them, are indicative of collusion capable of rendering the undertaking liable under Article [101(1) TFEU], since a party which tacitly approves of an unlawful initiative, without publicly distancing itself from its content or reporting it to the administrative authorities, encourages the continuation of the infringement and compromises its discovery" (C-542/14, paras 60-69, references omitted, own translation from Spanish, emphasis added).

In my own opinion, the creation of the presumption proposed by AG Wathelet goes way too far. In simple conceptual terms, it excessively erodes the principle of personal responsibility and falls short of meeting the desirable balance that the AG presents himself. The 'client' undertaking and the third party service provider are, in these cases, completely independent undertakings and the creation of the presumption would go beyond the acceptable limits of expansion of the concept of (functional) single economic entity. 

Plainly, it is excessive to impose this type of burden of proof (probatio diabolica) on undertakings that simply lack the knowledge and manpower required to monitor the execution of the activities contracted out to the third party to the standard created by AG Wathelet. This applies at least in stages one (design of the contract) and two (monitoring of execution), where the 'client' undertaking will in many cases be affected by significant asymmetries of information and gaps in human capital. Otherwise, what would be the economic rationale for contracting out something the undertaking could carry out on its own?

I would thus prefer the CJEU to deviate from the proposal of AG Wathelet in this case and to reject the creation of such rebuttable presumption of liability for the anticompetitive behaviour of third parties to which a 'client' undertaking has outsourced certain types of functions. The competent competition authority should always be obliged to demonstrate, at least at the level of sufficient indicia (balance of probabilities, but for?), that the recourse to the third party aimed to circumvent the prohibition of Art 101(1) TFEU--ie, that there was an anticompetitive agreement (by object) between the 'client' undertaking and the third party services provider because the outsourcing had the object of creating further restrictions of competition (on the issue of prohibitions by object, see here). Thus, if the contracting out arrangement was not genuine or if there are indications that the outsourcing aimed at a restriction of competition, then the burden of proof could be reversed. But to create a presumption of liability in the way that AG Wathelet proposes is excessive.

Another excessively formalistic Judgment on conflicts of interest in public procurement (T-403/12)

Following its incipient line of public procurement case law that sets the burden of proof of conflicts of interest too high (see here), the General Court (GC) of the Court of Justice of the European Union has once more taken a very formalistic approach to the assessment of situations were certain bidders should be presumed to hold an unfair competitive advantage. In its Judgment of 13 October 2015 in Intrasoft International v Commission, T-403/12, EU:T:2015:774, the GC has adopted a  very formalistic approach to the 'objective' assessment of an unfair competitive advantage derived from prior involvement of a tenderer in the preparation of documentation used in a specific tender. Once more, the case involves procurement by the EU Institutions, but the legal arguments and the reasoning of the GC is relevant for procurement under the general EU rules.

In Intrasoft International v Commission, the excluded tenderer had been involved in the preparation of tender documents in an indirect way or as a result of relative happenstance. Indeed, the tenderer had not drafted documents specifically for the tender at hand, but it had been involved in the drafting of tender documentation for a previous project that ended up being 'reused' by the contracting authority. This situation was assessed in conflicting ways between the contracting authority (the European Commission) and the excluded tenderer.

According to the Commission, the (indirect) previous involvement sufficed to provide the tenderer with an undue competitive advantage that required its exclusion from the tender process as the only remedy to that conflict of interest. As summarised by the GC

the Commission argues that ... a certain number of documents drafted by the applicant under the previous contract were joined to the terms of reference for the new tendering procedure. These documents ‘constitute[d] the basis for an important portion of the activities due under the ongoing tender’. The Commission does not dispute, as the applicant observes, that the documents were made available to all potential candidates. However, it contends that the applicant had access to them before the other tenderers and thus enjoyed a competitive advantage, in particular, in searching for qualified experts. Furthermore, while not claiming that this was actually the situation in the present case, the Commission suggests that, having participated in their drafting, the applicant would have been in a position to draft the documents in a way that gave it a competitive advantage for the procurement contract at issue (T-403/12, para 65).

Not surprisingly, the excluded tenderer disagrees and has an opposite assessment of the advantage derived from the previous (indirect) involvement in the drafting of the tender documentation

the applicant states that it was not involved in drafting the terms of reference or the project-related requirements for [the specific tender]. The applicant states, in addition, that it did not have in its possession any more information than that available to all the tenderers. Consequently, according to the applicant, the fact that it had taken part in drawing up a number of technical documents in connection with another tendering procedure could not, in itself, constitute a sufficient reason to draw the unfavourable inference that the applicant was subject to a conflict of interest. Further, it considers that it is apparent from the Court’s case-law (judgment of 3 March 2005 in Fabricom, C-21/03 and C-34/03, ECR, EU:C:2005:127) that the experience acquired under a previous contract is not capable of distorting competition, because if that were the case most tenderers would have to be excluded from new tendering procedures on that ground (T-403/12, para 63).

In addressing these diverging assessments of the situation of conflict of interest potentially affecting the excluded tenderer, the GC adopts a very formalistic approach, which builds up as follows:

76 The awarding authorities are under no absolute obligation to exclude systematically tenderers in a situation of a conflict of interests, such exclusion not being justified in cases in which it is possible to show that that situation had no impact on their conduct in the context of the tender procedure and that it entails no actual risk of practices liable to distort competition between tenderers. On the other hand, the exclusion of a tenderer where there is a conflict of interests is essential where there is no more appropriate remedy to avoid any breach of the principles of equal treatment of tenderers and transparency (judgment in Nexans France v Entreprise commune Fusion for Energy, [T-415/10], EU:T:2013:141, paragraphs 116 and 117).

79 It is apparent from the case-law ... that the reasoning in terms of risk of conflict of interests requires a concrete assessment, first, of the tender and, second, of the situation of the tenderer concerned, and that the exclusion of that tenderer is a remedy designed to ensure respect for the principles of transparency and equality of opportunity for tenderers.

80 In order to determine whether, in the present case, there has been an infringement ... it is, therefore, necessary to examine, in the context of an objective analysis without taking into account the applicant’s intentions, whether the risk of a conflict of interests stems from the applicant’s situation and from a concrete assessment of its tender.

81 In the first place, it should be noted that, according to the Commission, the exclusion of the applicant because of a conflict of interests has the purpose of ensuring observance of the principle of equal treatment of tenderers. It argues that the applicant had access, before the others, to certain documents used as the basis for some of the activities connected with the call for tenders at issue, on the ground that the applicant was part of the consortium which drafted the documents in question for another call for tenders. It is apparent from the letter of 10 August 2012 that that access would have made available to the applicant ‘privileged information’ ... The Commission therefore takes the view, in accordance with what appears in the letter in question, that that access, before the other tenderers, would have given the applicant a competitive advantage in relation to those tenderers.

82 However, it cannot be accepted that the risk of a conflict of interests can be based on the mere fact that the applicant had access, before the other tenderers, to the documents specific to another call for tenders because it belonged to the consortium which prepared those documents which, subsequently, were retained to be used as a reference for the activities associated with the call for tenders at issue in the present case (T-403/12, paras 76 and 79-82, emphasis added).

This first part of the argument seems to follow the general Fabricom approach against instances of automatic exclusion of tenderers previously involved in the design of tender procedures. However, the specific application of this approach to the circumstances of the case becomes very quickly very formal and restrictive by putting what I see as excessive reliance on the fact that the tender documents 'originally belonged' to a different procedure or, in other words, were not exclusive for the tender procedure at hand. That part of the GC's argument goes as follows:

84 Within the meaning of the case-law ... the risk of a conflict of interests exists for the person responsible for the preparatory work for a public contract who participates in that same contract. In this respect it should be noted that, when the Court of Justice used the expression ‘preparatory work’ at paragraph 29 of the judgment in Fabricom, cited in paragraph 63 above (EU:C:2005:127), it was referring to work carried out in the context of one and the same call for tenders.

85 Therefore, the Commission was not entitled to treat the preparation of documents drafted in the course of another call for tenders in the same way as preparatory works under the tendering procedure at issue, within the meaning of the case-law mentioned at paragraph 63 above, unless to show objectively and specifically, first, that those documents had been prepared in the light of the tendering procedure at issue and, secondly, that they had given the applicant a real advantage. If this is not demonstrated, the documents prepared in the course of another tendering procedure, and chosen subsequently by the contracting authority as a reference for part of the activities in a different tendering procedure, are not considered ‘preparatory works’ within the meaning of the case-law previously cited ...

86 In the present case it must be stated that the applicant’s exclusion from the award of the contract was based on the mere fact that it was part of a consortium which drafted the documents under a previous tendering procedure, whereas it has not been argued that the other tenderers did not have access to those same documents in sufficient time. Furthermore, the preparation of those documents did not involve the applicant’s participation in the preparation of the tendering specifications in the call for tenders at issue. Therefore, it has not been established that the applicant was in possession of more information than the other tenderers, which would have amounted to a breach of the principles of equal treatment and of transparency.

87 It follows that the documents at issue do not constitute ‘privileged information’ ... The exclusion of the applicant, contrary to what is claimed by the Commission, is not therefore covered ... and is thus not justified by an infringement of the principles of equal treatment and transparency.

88 Moreover, to classify the documents prepared in the context of another tendering procedure as ‘preparatory work’, on the basis that they have been retained by the contracting authority as a reference for the activities connected to a subsequent tendering procedure, would lead, as the applicant rightly maintains, to it being automatically considered that the experience acquired through participation in an earlier call for tenders is liable to distort competition (T-403/12, paras 84-88, emphasis added).

The specific decision in the case at hand resulted in an annulment of the exclusion decision, but primarily on the basis of lack of evidence of the actual advantage enjoyed by the tenderer previously (indirectly) involved in the preparation of tender documentation. 

Beyond the specific case, the formal approach taken by the GC can create difficulties in actually excluding tenderers with a previous indirect involvement in the preparation of documents used in a specific tender process, particularly because the test created in para 85 of Intrasoft International v Commission comes to set a very high burden of proof that will be hard to discharge: the contracting authority cannot 'treat the preparation of documents drafted in the course of another call for tenders in the same way as preparatory works under the tendering procedure at issue, unless to show objectively and specifically, first, that those documents had been prepared in the light of the tendering procedure at issue and, secondly, that they had given the applicant a real advantage'. Such element of 'linkage' to the specific tender will definitely be very problematic. In my opinion, it can also infringe the general requirement that the assessment of conflicts of interest be totally objective, as stressed by the GC itself in this same case: 

The concept of a conflict of interests is objective in nature and, in order to establish it, it is appropriate to disregard the intentions of those concerned, in particular whether they acted in good faith (see judgment of 20 March 2013 in Nexans France v Entreprise commune Fusion for Energy, T-415/10, ECR, EU:T:2013:141, paragraph 115 and the case-law cited) (T-403/12, para 75, emphasis added).

If the expression 'prepared in the light of the tendering procedure at issue' is constructed to require (positive, recorded) knowledge by the tenderer preparing the documentation that it would be used in more than one tender procedure, then the GC may have just created a requirement of probatio diabolica where it is hard to see how that could be proved in cases where the 'reuse' of the documentation is decided subsequently to the involvement of the tenderer or, more importantly, where it is decided from the beginning but that decision is informal or never recorded (and regardless of it actually being disclosed to the tenderer participating in its preparation). 

Once more, thus, the development of the case law on conflicts of interest in public procurement under a strict and formalistic approach seems to leave a number of questions open. It will be interesting to see how the Court of Justice itself addresses them if they ever reach its docket.

Of lost emails, the duty to state reasons and a dimming light in the horizon of eProcurement (T-424/12)

In its Judgment of 28 November 2013 in case T-424/12 UAB Gaumina v Institut européen pour l’égalité entre les hommes et les femmes (EIGE), the General Court has ruled once more on the boundaries of the duty to state reasons in decisions addressed to tenderers whose offers are rejected in public procurement procedures. In my view, despite not advancing the law, this case is relevant because it deals with a fact that is bound to gain relevance as eProcurement (and the use of electronic means of communication in procurement) advances: emails may get lost (sometimes). 

In the case at hand, the contracting authority claims to have sent a disappointed tenderer an email detailing the reasons for the rejection of its offer (ie a detailed evaluation report showing that the offer did not reach the minimum 80% of technical points required to proceed to financial evaluation). The tenderer claims to never have received the email. The authority submitted evidence proving the email was sent from its server. However, there was no (clear) evidence supporting reception of the email by the tenderer. In these circumstances (slightly complicated due to the fact that the parties introduced or offered to submit evidence at different procedural phases), the legal issue at stake basically required determining whether the contracting authority had satisfactorily discharged its duty to state reasons by sending an email for which it had no proof of receipt.

The GC has assessed this issue on the basis of the requirements derived from Article 100(2) of the Financial Regulation applicable to the procurement activities of the EU bodies and institutions [Reg 1605/2002, now repealed by Reg 966/2012, which art 113 imposes the same substantive requirements], according to which

The contracting authority shall notify all candidates or tenderers whose applications or tenders are rejected of the grounds on which the decision was taken, and all tenderers whose tenders are admissible and who make a request in writing of the characteristics and relative advantages of the successful tender and the name of the tenderer to whom the contract is awarded.

With this background, the GC has considered that:

46 [...] in this case, the log of server connection history relied upon by EIGE is not susceptible of establishing receipt of the email of 13 August 2012 by the applicant. Indeed, [...] it is likely that this document was generated solely by EIGE's computer system and it is only capable of showing sent status for the email of 13 August 2012 to the applicant, but not of its receipt by the latter. EIGE could not demonstrate that the applicant's computer system guaranteed the delivery of the email of 13 August 2012, which was challenged by the applicant [...]

48 [ ...] contrary to what EIGE has essentially argued at the hearing, the fact that, during the proceedings before the Court, it presented several pieces of evidence that it had actually sent the email of 13 August 2012 to the applicant does not create the presumption that the latter also received this email, and so that it is for the applicant to prove the contrary. Indeed , for such a reversal of the burden of proof to eventually take place, EIGE should not only provide indicia that it had sent the email of 13 August 2012 to the applicant, but also that the applicant had received said email. However, in this case, the fact that EIGE sent the email to the correct email address and the document entitled "detail record" are only clues that EIGE sent the email of 13 August 2012 to the applicant, but not of the fact that the latter received it.

49 It follows from the foregoing that EIGE has failed to demonstrate that the applicant had received the email of 13 August 2012. It must therefore be held to have infringed the obligation to state reasons imposed on it by Article 100, paragraph 2 of the Financial Regulation [...]

54 [...] as EIGE failed to prove that the email of 13 August 2012 had been received by the applicant, it is clear that EIGE should be considered as not having responded to the request of the applicant to obtain additional information about the rejection of its bid in a timely manner (T424/12 at paras 46 to 54, own translation from French, emphasis added).

In my view, the Judgment can hardly be criticised for adhering to high standards of evidence submission and for upholding the burden of proof against the contracting authority (although some relaxation or a reversal of the burden of proof could have been created on the basis of the server log + use of the correct email address argument).

However, in practical terms, its implications can be very troubling and effectively put a brake on the take-off of eProcurement and the massive extension of the use of electronic means of communication intended by the European Commission as a development fostered by the impending adoption of new procurement Directives.

If authorities cannot invest in secure eProcurement technology and they have to create a paper trail when they use electronic means of communication (ie email), the advantages of the digital revolution can be doubted. Hence, it remains to be seen how technological developments can actually be used to their full extent in an area where traditional administrative law principles and guarantees are so deeply rooted.