Nullity of a concession contract can be identified on general grounds as well

Triniti

On 5 November 2012 the Estonian Supreme Court adopted a judgement which summarises that if the principles of the Treaty on the Functioning of the European Union (TFEU) have been significantly violated upon granting a concession, then the nullity of the concession contract can be identified even if the Public Procurement Act (PPA) does not directly prescribe it. Among other effects, the Supreme Court again confirmed with this the superiority of the European Union law over the Estonian domestic law. The judgement also serves to indicate the severity and intensity of supervision over the use of public resources and over the relevant procedure.

Regulation in the Public Procurement Act

Pursuant to the second sentence of § 4 (2) of the PPA, the non-compliance with the requirements stipulated in the act has no impact on the validity of the public contract, if not stipulated otherwise in that act. § 69 (1) and (11) of the PPA prescribe a list of situations where a public contract is void.

In summary, this means a public contract (incl. a concession contract) is void only if certain rules of the tendering procedure have been violated and the PPA prescribes a nullity of the public contract as a result of such a violation. In that case the person whose rights were harmed by violating the rules of the tendering procedure can file a request to identify the nullity of the public contract.

Opinion of the Supreme Court

The author considers that in the aforementioned judgement, the Supreme Court has significantly expanded the opportunities of interested parties to file requests for identifying the nullity of concession contracts. Namely, the Supreme Court has found while analysing the practice and opinions of the European Court of Justice among other materials, that if the granting of a concession has significantly violated the principles of the TFEU (primarily its Articles 49 and 56) and § 3 of the PPA, which is based on those principles, and if the provisions of the PPA doesn’t seem to allow to identify the nullity of that concession contract, the request for identifying the nullity of the concession contract can be filed on grounds of the general law – § 87 of the General Part of the Civil Code Act (GPCCA).

Expansion of the right to file such requests is supported inter alia by the opinion of the European Court of Justice that violations of the TFEU must be countered by effective judicial means of legal protection. At the same time it should still be noted that the exercising of that right is subject to certain specific preconditions and it cannot be exercised lightly. The Supreme Court has stressed inter alia that the right to file a request for identifying the nullity of a concession contract on general grounds – i.e. on grounds of § 87 of the GPCCA – may be exercised by a person whose rights are harmed by the non-compliance with the provisions of the PPA.

Recommendations

In order to ensure protection of both the tenderers and the contracting entities, it is very important to conduct the entire tendering procedure from the beginning to the end in conformity with the PPA and the European Union law. If the procedural rules and requirements are still violated, the interested party should certainly consider the options for contesting the tendering procedure and if the party’s rights are clearly harmed, then the relevant request should be filed.

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