Slovenia the only EU Member State with only first-instance legal protection in public procurement procedures? Not any more

Slovenia is the only EU Member State whose legal protection regime in public procurement does not allow for full or even limited judicial protection against the decision of first-instance authority deciding on the legality of the award of public contracts. In Slovenia, the decision of National Review Commission (Državna revizijska komisija,“DKOM”) is final. DKOM is a special, independent and autonomous state first-instance authority but not a court. Such regime, under which no legal protection before a court as the second-instance authority is provided, is according to the Constitutional Court of the Republic of Slovenia[1] and the Court of Justice of the European Union[2] compliant with the law of public procurement. Regardless, there has been a lot of media and political pressure lately in terms of complaints that audit requests in Slovenia have the potential to block all major and important infrastructure projects in the country, and that the DKOM does not guarantee impartiality.

On 19 December 2019, the Amendments to the Legal Protection in Public Procurement Procedures Act (Zakon o pravnem varstvu v postopkih javnega naročanja, “ZPVPJN-C”) has entered into force, which aims inter alia to regulate full judicial protection against DKOM decisions, with the possibility of initiating an administrative dispute.

Current Regulation

The new regulation is without prejudice to the existing legal protection against infringements in the public procurement procedures, which is enforced through:

• the pre-review procedure before the contracting authority, the purpose of which is to rectify the alleged irregularities by the contracting authority itself;
• the review procedure before the DKOM, which is initiated ex lege, if the contracting authority in the pre-review procedure rejects the request for a review as unfounded, does not decide on it within the prescribed period or approve it and annuls the procurement procedure only partially.

In addition, current regulation allows to claim certain infringements before the District Court of Ljubljana. Such court procedure however does not constitute judicial protection against the decision of DKOM but it is intended to enforce (i) a challenge to an already concluded public procurement contract, and (ii) a compensation for damage incurred as a result of voidable contracts or other breaches of the public procurement law.

Administrative dispute against a decision of DKOM

The new regulation under the ZPVPJN-C introduces an administrative dispute as the second-stage legal protection in public procurement procedures. The legality of a DKOM decision may be challenged before the exclusively competent Administrative Court in Ljubljana within 30 days from the service of the decision.

Only so-called claim for declaratory judgment is allowed where the applicant is requesting the competent court to rule on whether the DKOM decision is illegal or not. Thus, the decision will not provide the applicant with an alternated or an abrogated DKOM decision.

The court must give its ruling within 90 days from the date of receipt of the claim. An appeal against the declaratory judgment of the court is not permitted.

The administrative dispute at hand is not allowed (regardless of the nature infringement), if the contract is awarded following a low-value contract procedure or a tendering procedure with prior publication of a contract notice or, if the first-stage legal protection procedure was against the content of the tender publication, the invitation to tender or the tender documentation.

The administrative dispute has no suspensive effect on the respective public procurement procedure; meaning that the latter will continue and may also be finished before a decision of the administrative court is adopted.

Should the administrative court rule that the respective DKOM decision is illegal, the only available legal remedy is claim for damages. The damages, incurred as a result of the illegality of the DKOM decision, must be claimed in a civil procedure in front of the competent court pursuant to the provisions of the ZPVPJN on damages, which refer to the obligations law on liability without culpability.

The provisions on administrative dispute will become applicable on 1 January 2021.

Added value of the adopted regulation allowing an administrative dispute?

Although we still have to wait for administrative court practice regarding newly regulation to develop, we are of opinion that the goal of the Slovenian legislator to provide for a full judicial legal protection is not achieved.

The administrative court cannot alter or abrogate a decision of the DKOM but can only establish its illegality. Thus, an unelected tenderer will not be able to improve its legal position in that particular public procurement procedure, even if the DKOM decision is declared to be illegal by the competent administrative court. The unsuccessful tenderer will only be entitled to damages, which it will have to enforce by bringing a new, separate claim before a civil court.

So, what is the legal benefit of legislating for an administrative dispute? Does the mere declaration of the illegality of a DKOM decision really bring greater legal certainty or a higher standard of protection of rights, as the legislator of the legal reform states?

And what is the added value of the new regulation for an unelected tenderer? Can a company, wishing to win business and not being awarded the contract due to a violation of public procurement law, really be satisfied with the possibility of (merely) requesting a declaration that the procurement law has been violated? Isn’t this about a Pyrrhic victory?

Following a scrutiny of the provisions introducing an administrative dispute, we evaluate that the adopted regulation only brings minor added value to the participants in public procurement projects. It is certainly not in their interest to merely establish abstract legal standards. Companies competing for public contracts wish to win new business in a lawful manner and even more seek for a legal environment where legal remedy is not only available, but it is available without long legal and administrative obstacles and battles. Unfortunately, the extent of adopted reform does not efficiently address their concerns.

[1] Decision of the Constitutional Court of the Republic of Slovenia, no. U-I-169/00-33 of 14 November 2002.
[2] Case C-296/15 of 8 June 2017, para 38.