Compensation for the entity excluded from the tender

In its judgment of 6 June 2024, in the matter C-547/22, the Court of Justice of the European Union (hereinafter “CJEU”) ruled that a company unlawfully excluded from a tender can claim compensation for the loss of the opportunity to obtain the contract, even if such a right is not explicitly provided for in the national law.

This right is crucial for companies that have been excluded from participating in a tender due to non-compliance with the tender requirements, for example, economic and financial standing, if such exclusion is overturned by a court after another contractor has already been selected.

Such was the case with tINGSTEEL, a Slovak company INGSTEEL, which, following its exclusion from the tender, it filed an appeal and won the case; a Pyrrhic victory as the contract had already been awarded to another entity.

As a result, INGSTEEL sought compensation before a Slovak court for the damage suffered due to the unlawful exclusion from the tender and the loss of the opportunity to be awarded the contract.

However, the Slovak national law and judicial decisions did not provide for the possibility of claiming compensation in such a situation, which prompted the Slovak court to seek preliminary ruling of the CJEU.

In its judgment, the CJEU held that the provisions of Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007, amending Council Directives 89/665/EEC and 92/13/EEC with regard to improving the effectiveness of review procedures concerning the award of public contracts (hereinafter: the “Directive”) impose an obligation on Member States to provide compensation to companies that have suffered damage due to a breach of EU public procurement rules, regardless of how national laws regulate this matter. The CJEU emphasized that this includes any form of damage suffered by companies, including that resulting from the loss of the opportunity to participate in the procedure – thus, not only the actual damage and profits lost. This is particularly significant in situations where the party is deprived of the possibility of utilizing the effectiveness (so-called “effet utile”) of other review remedies, which could, for instance,  result in returning to the tender procedure and resume participation.

The CJEU reiterated that, pursuant to the Court’s case law, in order to ensure the effectiveness of all provisions of Union law, the principle of primacy requires national courts to interpret their national law as far as possible in a manner consistent with the European Union law, and that this obligation of consistent interpretation may, in certain cases, entail the necessity for national courts to change established case law if it is based on an interpretation of national law that cannot be reconciled with the objectives of the Directive. In the context of the instant case, this involved changing the established practice of Slovak courts in interpreting the concept of “lost profits.”

In the context of the Polish legal order, it is accepted de lege lata that damage in the form of a lost opportunity is not subject to compensation unless a specific provision allows for it, such as Article 444. 2 of the Civil Code. However, given the judgment in question, the practice of courts concerning compensation for unlawful exclusion from a tender and the loss of the opportunity to be awarded a contract will have to move in the direction indicated by the CJEU. Naturally, in such cases, the excluded contractor will need to convince the court of the value of the lost opportunity . It appears, however, that the contractor who would have won the tender had it not been for the exclusion will be in a better legal position (demonstrating the extent of the damage by referring to the anticipated profits/margin specified in the bid) than the contractor whose bid could not have been successful (only judicial decisions will show how to evaluate the damage related to the inability to participate in the tender). The use of expert evidence may prove necessary here. These will not be simple cases.

In the context of the prohibition on concluding contracts in public procurement only during the appeal proceedings by the National Appeal Chamber (KIO), which does not apply when a complaint has been lodged against the KIO’s decision, the CJEU ruling may also influence the actions of contracting authorities. On the one hand, it may prompt them to conduct a more thorough analysis of the grounds for exclusion, while on the other hand, it may lead to delays in concluding the contract until it is definitively determined whether the exclusion was unlawful. Certainly, the period within which the contracting authority must expend the funds, as well as the assessment of the contractor’s chances of winning in the compensation proceedings, will be significant for the contracting authority’s decision.