The European Court of Justice has published a highly significant judgement
on procurement matters - Stadt Halle (Case C-26/03).

The decision relates to the Public Services Contracts Directive (which governs
the award of services contracts by contracting authorities). It can though
be expected to apply to the award by such authorities of works and supplies
contracts too. In short:

  • where a contracting authority seeks to award a contract to a legally distinct
    company, in which both the authority and a private undertaking hold capital,
    then the procurement rules will apply. That is to say, the award will NOT
    be treated as an in-house award escaping the procurement rules even if the
    contracting authority has a majority stake; and
  • all decisions taken in the procurement process must be capable of review,
    even if a disgruntled party might already have the right to seek damages.
    This requirement extends even to decisions as to whether the procurement
    rules apply to a tendering procedure. The requirement does not though catch
    acts which do not have legal effect such as the preliminary study of a market.
    In the UK, the availability of judicial review of public sector actions might
    meet the European Court's demand. Undoubtedly though there are gaps in the
    UK regime as illustrated by the UK's current moves to legislate to accommodate
    the decision in Alcatel (Case C-81/98) that between announcing the preferred
    bidder and signing the contract there should be a delay to permit third parties
    to challenge the award if there are grounds for doing so.

This is a particularly interesting judgement given the earlier decision of
the ECJ in Teckal. In that case, the court found that the procurement rules
generally do not catch the award of a contract by a local government to a company
(i) which the local government controls in the same way as it controls its
own departments and (ii) whose work is performed mostly for the local government
in question. Undoubtedly this is an area of the law which develop further over
the coming months.

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