The new legal context of challenges to tender procedures tainted with illegality in France
French public central and local authorities are contracting authorities subject to rules of publication and competition under French laws that have introduced the provisions of Directives 2004/17/EC and 2004/18/EC of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts (which were replaced recently at the European level by Directives 2014/23/EU, 2014/24/EU and 2014/25/EU of the European Parliament and of the Council of 26 February 2014 and shall be introduced into French law by 18 April 2016). In accordance with these rules, when contemplating to execute a public contract or a concession contract with an economic operator, a French contracting authority shall in principle publish a tender notice which launches a tender procedure open to several economic operators.
However, it may occur that a tender procedure is marred by irregularities with regard to such rules. In this event the contract concerned may be disputed by an unsuccessful bidder within the framework of several legal actions (generally an administrative court), among which, in particular, the référé précontractuel (A) and the recently-amended action tending to challenge the validity of a public contract or Tarn-et-Garonne review (B).
In this respect it should be borne in mind that in the field of French administrative law, which applies to public contracts and concessions, the case law of the French supreme administrative court – the “Conseil d’Etat” or “CE” – is as important as statutory law.
Référé précontractuel: nature of the review, consequences
The object of the référé précontractuel
The référé précontractuel (pre-contractual summary proceedings) is a review procedure which can be filed, before the execution of a public contract subject to rules of publication and competition (it becomes inadmissible after the contract is executed), by any person who would have an interest in signing this contract, to challenge breaches of freedom of access to public procurement or equal treatment (French Code of Administrative Justice, art. L. 551-1). This review procedure results directly from the Directives on review procedures concerning the award of public contracts (see Council Directives 89/665/EEC of 21 December 1989 and 92/13/EEC of 25 February 1992 as amended by Directive 2007/66/EC of the European Parliament and of the Council of 11 December 2007 with regard to improving the effectiveness of review procedures concerning the award of public contracts).
The judge has jurisdiction only to examine violations of obligations of publication and competition within the framework of the conclusion of the contract. The extent of the review that is carried out by the judge depends on the nature of the breach put forward by the petitioner.
Furthermore, to be effective, the arguments invoked by the petitioner must be likely to harm them; otherwise, the arguments, regardless of whether or not they do prove that obligations of publication and competition have been infringed by the contracting authority, the petitioner’s claim must be dismissed (CE, Sect., 3 October 2008, SMIRGEOMES, n°305420).
Due to the limited period of time within which it can be filed (the “standstill period”, which could be as short as 11 days in certain cases), such unsuccessful bidder should be very attentive and quick to react when it receives a rejection letter from the contracting authority). Also, it should be noted that the burden of proof in such kind of litigation could be sometimes difficult to manage.
For unsuccessful tenderers, the référé précontractuel remains however the most efficient procedure when their applications or offers have been wrongfully rejected by a contracting authority.
The consequences of the référé précontractuel
In accordance with article L. 551-4 of the French Code of Administrative Justice (CJA), this review procedure has necessarily a suspensive effect (as the contracting authority shall not sign the contract) from when the petition is notified to the contracting authority until the decision is made by the judge. The judicial decision shall theoretically be made within 20 days (in general this timeframe is respected or exceeded by only a few days).
Pursuant to article L. 551-2 of the CJA, the judge may order the contracting authority to comply with its obligations and suspend the implementation of any decision related to the drawing up of the contract, except when they consider, in the light of all the interests likely to be harmed and in particular the public interest, that the negative consequences of these measures could prevail on the advantages.
The judge may also cancel the decisions related to the drawing up of the contract and suppress clauses or prescriptions intended to be part of the contract and infringe obligations of publication and competition.
In the event that a person who would have an interest in signing the contract concerned has been prevented from filing a référé précontractuel (in particular where they have not received any notification with regard to the dismissal of their bid and the execution of the contract or the standstill period to be observed where applicable), it can introduce a référé contractuel under the provisions of 551-13 and seq. of the CJA.
In addition to such kinds of summary proceedings, another review is opened: the review tending to challenge the validity of a contract. This recourse has significantly changed with the Tarn-et-Garonne decision which was issued by the Conseil d’Etat on 4 April 2014.
Tarn-et-Garonne review: an interesting but relatively limited course of action
An action with a view to challenge the validity of an executed contract may be introduced before an administrative court, as opened less than a year ago to third parties, other than unfortunate bidders, to administrative contracts by the Conseil d’Etat in a decision referred to as Département du Tarn-et-Garonne (CE, Ass., 4 April 2014, Département du Tarn-et-Garonne, n°358994), that can be accompanied by summary proceedings with a view to suspend the performance of the contract (référé-suspension) pursuant to Article L. 521-1 of the CJA. In the former state of case law, under the Tropic Travaux review, the efficiency of the référé-suspension was however very limited: the Conseil d’Etat considered again recently that urgency should not be assumed, even where it is purported by the petitioner that there is a breach of various public interests (CE, 23 July 2014, Société Téléimagerie médicale temps réel de Bourgogne, n°380474).
Regarding contracts which have been signed since 4 April 2014 (although a first instance administrative court has applied the principles laid down by the Tarn-et-Garonne decision within the framework of an action which had been filed under the former Tropic Travaux case law (TA Cayenne, 18 December 2014, Société Guyanet, n°1300581)), the Tarn-et-Garonne review substitutes itself for the former review referred to as Tropic Travaux (CE, Ass., 16 July 2007, Société Tropic Travaux Signalisation, n°291545). It has opened the faculty for third parties (including third parties other than unfortunate bidders, in particular, local taxpayers, local associations, the state’s local representative) to administrative contracts subject to a procedure of publication and competition, to challenge the validity of the contract before an administrative court within two months from the day the contracting authority complied with the appropriate publication measures (in practice, a notice duly filled in, published in the Bulletin officiel des annonces des marchés publics and the Official Journal of the European Union), and, if need be, to request that the consequential prejudice be indemnified. The possibility for unfortunate bidders to file such review is subject to two conditions:
- the interests of the petitioner must be likely to be harmed, in a sufficiently direct and certain manner, by the execution of the contract or of clauses of the contract;
- the petitioner may invoke only illegalities which are directly related to the harmed interest they put forward or those illegalities that the judge may raise by himself.
This appeal may lead to graded sanctions, which can go from damages paid by the contracting authority to the very cancellation of the contract. The judge shall take the nature of the illegalities invoked into consideration and determine whether, given the nature of these illegalities, the performance of the contract may continue or whether measures other than the cancellation of the contract should be pronounced. According to the seriousness of the alleged illegality, the judge may: (i) decide that it is possible to continue to perform the contract, or (ii) invite the parties to take regularisation measures within a specific time period or, failing this, to terminate the contract with effect only for the future or also in the past; or (iii) when the illegalities cannot be covered by a regularisation measure and do not allow the continuation of the performance of the contract, pronounce, if necessary with a differed effect in time, after checking that its decision would not excessively undermine the public interest, (a) either the termination or (b) where the contract has an illicit content or where it is marred by a defect related to consent or any other defect of a particularly serious character that the judge shall therefore raise himself, the cancellation of whole or part of the contract (in principle, the cancellation of a contract means that the said contract is null and void, which implies that it is considered as having never existed, even in the past; however, in the light of the recent French administrative case law, the judge can now give a differed effect in time to decisions of cancellation); or, (iv) grant damages to the petitioner, where it has requested so, to indemnify the prejudice resulting from the harmed interests.
Generally, recent French administrative law decisions have only penalised particularly serious illegalities by the cancellation of the contract. Illegalities such as defects in the conditions under which the contracting authority has given its consent or irregularities which have had an impact on the choice of the co-contracting party, could be regarded as particularly serious.
Although the Tarn-et-Garonne decision could be at first regarded as broadening the faculty for third parties to administrative contracts to challenge their validity, the examples of cancellation of such contracts should in practice be highly limited by the restrictive conditions set forth by the Conseil d’Etat. It is in our view to be expected that the référé précontractuel will remain the most efficient route to challenge the award of administrative contracts subject to rules of publication and competition. The success of legal actions filed by unsuccessful bidders within the framework of the Tarn-et-Garonne procedure will without any doubt be reserved to particularly serious breaches committed by contracting authorities or very specific situations (notably when it is extremely difficult, in the course of the reféré précontractuel litigation procedure, to demonstrate that a breach has been committed by the contracting authority).
Published on the Who"s Who Legal - April 2015