GC stresses need for balanced protection of confidential information in public procurement (T-536/11)

In its Judgment in European Dynamics Luxembourg and Others v Commission, T-536/11, EU:T:2015:476, the GC has dismissed a challenge against a European Commission's decision to limit the disclosure of (confidential) information made available to a disappointed tenderer. 

In the case at hand, the Commission had redacted some of the comments made by the evaluation team in order to protect business secrets of tenderers ranked higher than Evropaïki Dynamiki. The latter argued that, by doing so, the Commission failed to discharge its duty to give reasons for its decision not to rank Evropaïki Dynamiki first in the cascade mechanism that would determine call-offs within a framework agreement for software services. The GC dismissed Evropaïki Dynamiki's challenge on the basis that the Commission had struck an appropriate balance between Evropaïki Dynamiki's right to access the information needed to defend its legal rights and third party business interests.

Some of the issues discussed (again) by the GC are worth mentioning, particularly as the duty to disclose the relative merits of the bids submitted by the successful tenderers is concerned (for a recent discussion, in relation to the UK's transposition of disclosure and debriefing rules in Directive 2014/24, see here).  The GC, with a good sense of the need to balance the right to be informed of the reasons for an award decision with the rights of competitors to have their business secrets protected, dismissed Evropaïki Dynamiki's challenge on the following grounds:

48 ... although the applicants submit that the Commission must disclose the information concerning the other successful tenderers’ bids that could be considered to be confidential and state how those tenderers could be harmed by that disclosure, they merely make a general request, without indicating, in the part of the pleadings relating to that plea in law, the comments or the parts of the bids to which they refer, whose disclosure is allegedly necessary for effective legal and judicial protection.
49 It should be recalled that ... the contracting authority is entitled not to disclose certain details where disclosure would hinder application of the law, would be contrary to the public interest or would harm the legitimate business interests of public or private undertakings or could distort fair competition between those undertakings.
50 In addition, it is apparent from the case-law that, in the context of an action brought against a decision taken by a contracting authority in relation to a contract award procedure, the adversarial principle does not mean that the parties are entitled to unlimited and absolute access to all of the information relating to the award procedure concerned. On the contrary, that right of access must be balanced against the right of other economic operators to the protection of their confidential information and their business secrets. The principle of the protection of confidential information and of business secrets must be observed in such a way as to reconcile it with the requirements of effective legal protection and the rights of defence of the parties to the dispute and, in the case of judicial review, in such a way as to ensure that the proceedings as a whole accord with the right to a fair trial (see, to that effect, judgment of 23 November 2011 in bpost v Commission, T‑514/09, EU:T:2011:689, paragraph 25 and the case-law cited). It is apparent from the applicants’ detailed observations set out in their letter of 5 August 2011 that they had sufficient knowledge of the relative advantages of the other successful tenderers’ bids (T-536/11, paras 48 to 50, emphasis added).

The GC could not have expressed it in any clearer terms, and this line of reasoning clearly aims at reaching an appropriate balance between, on the one hand, facilitating access to procurement remedies by disclosing necessary information and, on the other hand, ensuring the protection of information which disclosure could have a negative effect on competition and/or harm legitimate business interests. 

This is a much needed restriction of the excessive level of transparency that oftentimes affects public procurement settings and, consequently, must be warmly welcomed [for discussion, see A Sanchez-Graells, The Difficult Balance between Transparency and Competition in Public Procurement: Some Recent Trends in the Case Law of the European Courts and a Look at the New Directives (University of Leicester School of Law Research Paper No. 13-11, 2013)].

A new European Dynamics challenge rejected: let's focus on admissibility of claims (T-553/11)

In its Judgment of 23 May 2014 in case T-553/11 European Dynamics Luxembourg v ECB, the General Court (GC) has ruled on yet another challenge filed by European Dynamics (ED) against procurement decisions of the EU Institutions and, in this case, the European Central Bank (for previous episodes in the appeals saga, see here).

In this case, the legal framework applicable to the procurement is basically contained in Decision ECB/2007/5 of the ECB of 3 July 2007 laying down the rules on procurement. However, the issues discussed are fundamentally common to those under the EU procurement Directives, which makes the case generally relevant.

 

Generally, the challenges brought by ED concern the duty to state reasons and potential abuses of power by the contracting authorities and, with some small differences based on the specific content of the procurement decision appealed, they tend to be subjected to exactly the same legal tests (which tend to result in the dismissal of their appeals). In my view, this case is not materially different from the previous ones as those issues are concerned.

 

However, there is an element in this saga of cases that is often overlooked because it is purely procedural, which relates to the admissibility of the challenges themselves (as, oftentimes, ED is rather 'non-selective' or not sufficiently precise in the identification of the procurement decision subjected to appeal). In that regard, the Judgment in T-553/11 is interesting (?) in that it assesses two points: a) the admissibility of (independent) challenges against confirmatory decisions in internal appeal procedures, and b) the admissibility of claims requesting the annulment of all decisions related to the 'core' procurement decision subject to challenge.

 

(Independent) appeals against internal review confirmatory decisions In the first part of the Judgment, the GC engages in a rather lengthy discussion on the admissibility of a challenge against both the initial decision not to invite ED (as leading undertaking in a grouping) to submit an offer in a negotiated procedure and the subsequent decision of the procurement review body (PRB) to dismiss the internal appeal and confirm the initial decision. The GC clearly indicates that those are two separate decisions and that both are open to challenge. However, it immediately stresses that:

there is no need to specifically examine the legality of the decision of [the PRB], but [...] it is appropriate to conduct a review of the legality of the rejection of the consortium’s application taking into account all the reasons relied on during the procedure, bearing in mind that in public procurement, the obligation to state reasons pertaining to a decision may be fulfilled in several stages (see, to that effect and by analogy, Case T‑50/05 Evropaïki Dynamiki v Commission [2010] ECR II‑1071, paragraph 133 and the case-law cited, and judgment of 22 May 2012 in Case T‑6/10 Sviluppo Globale v Commission, not published in the ECR, paragraph 29), and must be assessed in the light of information available to the applicant at the time of bringing the action (Case T‑183/00 Strabag Benelux v Council [2003] ECR II‑135, paragraph 58, and Case T‑4/01 Renco v Council [2003] ECR II‑171, paragraph 96) (T-553/11 at para 49, emphasis added).

Both parts of the reasoning on admissibility seem functionally contradictory, given that the individualisation or distinction between the decisions should make them amenable to different grounds for a challenge. However, the 'holistic' approach adopted by the GC comes to institute de facto a full review of the (content) of all decisions involved in a procurement process prior to the application for judicial review. 

 

Hence, the valuable message derived from this lengthy discussion is, in my view, that regardless of the number of formal decisions adopted in a procurement procedure and the possibility to challenge them separately, the reviewing court must take the content of all of them (ie the full procurement file, at least as regards that candidate or tenderer) into account when a challenge is actioned against a decision adopted at any stage of the process. However, this may not be particularly new and should not have been controversial, as it seems to derive rather plainly from the power to conduct full reviews of the findings in fact and in law in which a procurement decision is based.

 

Appeals against 'all decisions related' to the main challenged decisionIn my opinion, this discussion is very formalistic and, to a certain extent, unnecessary. It revolves around whether the claimant submits a valid challenge if it requests the annulment of 'all decisions related' to the main procurement decision object of the appeal. The argument against the admissibility of such (secondary) claim is that it is inespecific and, consequently, does not meet the requirements of precision that are common to most judicial review systems. In the reasoning of the GC

54 Heads of claim [...] that seek the annulment of acts related to challenged acts which are not identified must be declared inadmissible as a result of the lack of precision of their subject-matter (see, to that effect, order in Case T‑166/98 Cantina sociale di Dolianova and Others v Commission [2004] ECR II‑3991, paragraph 79).

55 That finding is not undermined by the fact that it has been held, first, that the identification of the contested act could be implicitly inferred from the indications contained in the application and from the argument therein as a whole and, secondly, that an action formally brought against an act that is part of a series of acts forming a whole could be regarded as directed also, so far as necessary, against the others (order in Case T‑320/09 Planet v Commission [2011] ECR II‑1673, paragraph 23). Indeed, such a deduction is impossible specifically when the arguments contained in the application manifestly lack clarity and precision (order in Case T‑64/96 Jorio v Council [1997] ECR II‑127, paragraph 35), as is the case in the present case (T-553/11 at paras 54-55, emphasis added).

Hence, in the case at hand, the GC dismisses the claim for annulment of  'all related decisions of the ECB'. However, materially, this may not have any effect on the final outcome of the process if the appeal is upheld. In this regard, it must be taken into consideration that, (possibly) differently from other areas of (contract) law, the remedies against the illegal conclusion of a public contract may or may not involve the annulment of the contract depending on the grounds on which the illegality is founded, and irrespective of the specific claims brought forward by the applicant.

 

In the specific case of the review of EU institutional procurement, this discussion may have some purpose, as Article 263 TFEU  does not expressly regulate the remedies available. However, more generally, outside the scope of the review of the procurement decisions of the EU Institutions, the Remedies Directive allows Member States to restrict the ineffectiveness (ie voidability?) of public contracts to certain very grave cases (see art 2d) so, other than in those cases (where ineffectiveness must be declared, even if it was not expressly required by the appellant, as a matter of direct effect and supremacy of the Remedies Directive itself), the ineffectiveness of those decisions may be barred by domestic rules, regardless of the content of the action exercised by the appellant.

 

In my view, given the possibility for Member States to balance public and private interests in their domestic rules concerned with the effectiveness of illegally awarded public contracts, in public procurement litigation, the annulment of 'all related decisions' or their preservation (with a consequent indemnification of damages and, if applicable, the imposition of fines) is a matter of determination of the adequate remedy by the review court and, consequently, the discussion on the admissibility of this head of claim remains fundamentally superfluous.