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COURT PROTECTION IN PUBLIC PROCUREMENT PROCEDURES

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INTERNATIONAL CONFERENCE LEGAL REMEDIES IN PUBLIC PROCUREMENT PROCEDURES ... privileges or other benefits, or concealment or submission of falsified data, etc. (Art. ... – PowerPoint PPT presentation

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Title: COURT PROTECTION IN PUBLIC PROCUREMENT PROCEDURES


1
COURT PROTECTION IN PUBLIC PROCUREMENT PROCEDURES
  • Srdan imac, M.S.
  • President of the High Commercial Court of the
    Republic of Croatia
  • INTERNATIONAL CONFERENCE LEGAL REMEDIES IN
    PUBLIC PROCUREMENT PROCEDURES
  • Dubrovnik, 24-25 May 2007

2
Protection of rights in public procurement
procedures
  • Administrative protection of rights
  • Court protection of rights

3
Administrative protection of rights
  • ADMINISTRATIVE OVERSIGHT OF LEGALITY
  • - Protection of rights in procedures before the
    client by lodging an objection against its
    decisions (administrative instrument).
  • - Protection of rights before the State Public
    Procurement Oversight Commission (hereinafter
    State Commission) by filing an appeal.
  • ADMINISTRATIVE OVERSIGHT OF LEGALITY
  • - Croatian Governments Public Procurement
    Office (through petitions and initiatives for
    oversight).
  • - Office of the Auditor General (control of use
    of finances and legality of financial
    transactions).
  • - Internal budget oversight.

4
Court protection of rights
  • In administrative court proceedings
  • In indemnity claims
  • In misdemeanour and criminal litigation
  • In cases before the Constitutional Court of the
    Republic of Croatia

5
Administrative court proceedings
  • Court protection, in compliance with Article 72
    of the Public Procurement Act, is secured in
    administrative lawsuits before the Administrative
    Court of the Republic of Croatia.
  • Secured by filing suit against the final ruling
    of the State Commission.
  • The party to the administrative lawsuit is the
    State Commission, not the client.

6
Administrative court proceedings
  • Administrative lawsuits are meant to assess the
    legality of decisions by the State Commission
    and, indirectly, also decisions of the client in
    public procurement procedures.
  • Decisions of the Administrative Court of the
    Republic of Croatia are legally binding in terms
    of administrative law.
  • Decisions of the Administrative Court are deemed
    prejudicial (as they establish the facts of
    legality of client actions) in possible
    litigation involving indemnity claims.

7
Indemnity claims
  • Regulations governing public procurement
    procedures do not contain specific legal
    protection provisions for compensation of any
    damages that may arise during such procedures
    so in such cases general regulations governing
    indemnification are applied, above all those
    contained in the Contracts Act.

8
Indemnity claims
  • A party whose subjective rights are violated
    either by the decision of the client or the
    legally-binding decision of the State Commission
    may file a claim to seek indemnification for
    damages incurred by these decisions.
  • Indemnity claims are filed with municipal courts.

9
Indemnity claims
  • The defendant in an indemnity claim may be the
    client and Republic of Croatia, but the State
    Commission may not be directly named in a lawsuit
    (Art. 10(4) of the State Commission Act The
    Republic of Croatia shall be held accountable for
    the liabilities of the State Commission.).
  • An indemnity claim may be validly filed prior to
    expiry of the statute of limitations for such
    claims.

10
Basic liability for damages in public procurement
procedures
  • Contractual arises due to breaches of contract.
  • Extra-contractual arise independently of
    contractual obligations.

11
Assumption of liability for damages
  • The existence of a party contractually liable for
    damages injuring party and injured party.
  • Damaging action of injuring party the injuring
    party must commit damaging actions.
  • Damage must be incurred by the injured party.
  • Causal link between damaging actions as the
    cause and damage as the result.
  • Illegality of damaging actions objective
    element (damaging actions violate a legal rule),
    subjective element (damaging actions occur at the
    fault of the injuring party)

12
Damage
  • SUBSTANTIVE DAMAGE
  • - Damage or loss diminishment of anothers
    assets
  • - Lost benefits prevention of increased gain
  • CONSEQUENTIAL DAMAGE
  • - Violation of legal personality

13
Consequential damage
  • In cases of violation of the goodwill and other
    personality rights of a legal person the court
    will, if it deems that the severity of the
    violations and the circumstances of the case so
    justify, award just monetary compensation,
    regardless of compensation of substantive damage,
    and also when the latter are not awarded (Art.
    1100(3) of the Contract Act, Narodne novine
    (Official Journal), no. 35/05).
  • The above violations are infringements of
    goodwill, reputation and name, specifically the
    company/corporate name of the legal person.

14
Burden of proof of damages incurred
  • The burden of proof of the existence of damage
    and an injuring rests with the claimant injured
    party.
  • Damage or loss is contained inthe costs of
    preparing tender documentation and compiling a
    bid. It is easily proven, but also minimal.
  • Difficulties arise in proving lost benefit, gains
    which the claimaint would have earned in the
    regular course of events had this claimant been
    selected in the tender in compliance with the
    conditions specified in the tender and by law.
  • If there are more than two bidders, the claimant
    most often encounters considerable difficulty in
    proving that its bid should have been selected
    instead of the other one.

15
Examples in which liability for damages is
assumed to exist
  • Example 1.
  • Two capable bidders apply in the tender
  • The client selects one of them which, according
    to the tender criteria, is not the best bid
  • The client rejects the objection of the other
    bidder that submitted the essentially more
    favourable bid
  • The State Commission also overrules the appeal
  • The client concludes a contract with the
    selected, less favourable bidder
  • The more favourable bidder succeeds in a claim
    filed with the Administrative Court of the
    Republic of Croatia (the State Commissions
    decision is ruled null and void)
  • The State Commission overrules the clients
    selection decision
  • The client makes a new decision to select the
    factually more favourable bidder
  • Indemnity claim
  • Compensation paid with reference to damages and
    lost benefit.

16
  • Example 2.
  • The client decides to select the best
    bidder/accept the best bid
  • The other bidders objection is rejected
  • The State Commission also rejects the appeal
  • In this manner, the selection decision becomes
    final and executable
  • Despite fulfilment of all criteria for conclusion
    of a contract/document on concluded legal
    transaction, the client withdraws from conclusion
    of a contract with the selected best bidder
  • At this stage in the tender, the client is
    obliged to conclude a contract with the selected
    best bidder this is a legal obligation, and the
    client may refuse to accept the bid, void the
    selection and withdraw from conclusion of a
    contract only in cases of fraud, undue influence
    exercised in selection, conferral of rewards,
    privileges or other benefits, or concealment or
    submission of falsified data, etc. (Art. 68 of
    the Public Procurement Act).
  • Insofar as the conditions specified in Article 68
    of the Public Procurement Act are not met, the
    selected bidder may file an indemnity claim to
    collect damages.

17
  • Example 3.
  • The rule is that once a legal remedy (appeal and
    claim) is filed, the conclusion of a contract
    with the selected bidder is halted, although
    there is an exception to this rule
  • There is the legal possibility of exceptional
    approval of continuaton of public procurement
    procedures even if an appeal or claim are filed
  • The State Commission decides on this exclusively
    at the request of the client, but only in cases
    of the assume possibility of disproportionate
    damages incurred by the client (restrictively
    interpreted)
  • This is a sort of adhesion procedure, i.e., a
    procedure joined with the appeal, and the
    decision that ensues therefrom is similar to the
    decision in a security procedure (temporary
    measure)
  • The decision in this procedure is therefore made
    prior to completion of the appeal process in
    which the legality of the selection decision and
    the entire procurement procedure is assessed
  • Approval for continuation of procurement at this
    phase of the procurement procedure means approval
    for the client to conclude a contract with the
    selected bidder prior to finality of the
    selection decision
  • Illegalities in the public procurement procedure
    that may possibly be ascertained by the State
    Commission or the Administrative Court opens an
    avenue for the dissatisfied party to file suit to
    nullify the contract so concluded and to collect
    damages

18
Opportunity in seeking damages?
  • Indemnity claims filed against clients are very
    rare.
  • The reasons for this are usually
  • - the desire of bidders to maintain sound
    relations with clients in the future, even when
    their rights are in fact violated in a specific
    tender, due to fear of potential loss of future
    business.

19
Court protection in misdemeanour and criminal
cases
  • Protection of rights and values protected in
    public procurement procedures may be secured in
    misdemeanour (magristrates court) and criminal
    proceedings (municipal court).
  • This is not a matter of protection of individual
    subjective rights, rather of public, fundmental
    values whose protection is stipulated in
    misdemeanour regulations and the criminal code.
  • Thereofore, the initiative for this type of legal
    protection in public procurement procedures by
    means of oversight is primarily rests with the
    Public Procurement Office, the Office of the
    Auditor General and, naturally, the Public
    Prosecution of the Republic of Croatia.

20
Constitutinal legal protection in public
procurement procedures
  • In public procurement procedures, violations of
    constitutional rights as specified by the
    Constitution of the Republic of Croatia, may not
    be excluded.
  • Constitutional legal protection is ensured by the
    Constitutional Court of the Republc of Croatia.
  • A prerequisite for exercising constitutional
    legal protection is that all other avenues of
    legal protection are first exhausted.
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