The European Commission has proposed the adoption of a new directive which will, for the first time, allow national courts to overturn contracts awarded in breach of Community procurement law.  Under the current rules, the only remedy available to aggrieved tenderers once the contract is concluded is a claim for damages.

The Commission's proposal develops the principle articulated by the European Court of Justice in the landmark Alcatel ruling in which it was held that contracting authorities have an obligation to 'stand still' during the period between announcing the selection a successful bidder and entering into a contract.  This standstill obligation is designed to permit aggrieved parties to challenge the relevant decision before the relevant deal is signed.

This standstill period was formally introduced into the new UK procurement regulations which came into force at the end of January 2006. 

The Commission's proposal also develops the standstill position with regard to contracts which a contracting authority considers may be awarded directly.  For these contracts, the contracting authority must implement the standstill period but more importantly must also publish the proposed award in the form of a simplified award notice in order to make the standstill period effective.  

Under the new proposal, if a contracting authority breaches the standstill requirement then the national court would have the right to annul the contract.  It is proposed that the contract would remain 'at risk' in this way for at least six months after it was entered into, after which point it may be possible to protect it from further annulment challenge.  However, the Commission proposes that the national court would be able to retain some effects of the contract where there were certain overriding reasons (based on a general interest of a non-economic nature).

The Commission believes that the introduction of these rights will create stronger incentives for EU businesses to bid for contracts anywhere in the EU and are crucial to making sure that contracts ultimately go to the company which has made the best offer thereby building confidence among businesses and the public that public procurement procedures are fair.

The Commission's proposal is certainly a major development in the field of public procurement remedies. The proposal sets out for the first time a formal means of penalty should the standstill period not be implemented.  It also closes a potential loop-hole in the standstill rules, i.e. how is the standstill obligation effectively enforced?  However, it also risks seriously undermining contractual certainty for successful bidders.

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