ECJ on reinstatement of former cartelists as trusted procurement tenderers

On 24 October 2018, the European Court of Justice ("ECJ") ruled for the first time on the new EU public procurement rules regarding the process of allowing an economic operator to take part in procurement proceedings despite its past involvement in a cartel. The preliminary ruling gives some guidance as to the level of cooperation required from an economic operator to be reinstated as a trusted tenderer. 

Under Article 57(4)(d) of Directive 2014/24 ('the 2014 Public Procurement Directive') an economic operator can be excluded from public tender procedures where the contracting authority has "sufficiently plausible indications to conclude that the economic operator has entered into agreements with other economic operators aimed at distorting competition". Exclusion can be automatic or at the discretion of the contracting authority. 

Exclusion from public tenders for breach of competition law was already possible under the previous 2004 Public Procurement Directive, although under the heading of "grave professional misconduct" (C-470/13 Generali-Providencia Biztosito).

An important innovation of the 2014 Public Procurement Directive is the possibility of so-called "self-cleaning" measures, so that an economic operator can recover its eligibility to participate in tenders. Under Article 57(6) an economic operator should no longer be excluded if it sufficiently demonstrates its reliability to the contracting authority by proving that it has:

• paid (or undertaken to pay) compensation for the damage caused by the misconduct; 
• actively collaborating with the investigating authorities to clarify the facts and circumstances; and 
• adopted concrete technical, organisational and personnel measures that are appropriate to prevent further offences. 

The new rules also specify that the exclusion period should not exceed three years from the "relevant event". 

Background of the case

The case (Case C-124/17, Vossloh Laeis - v - Stadtwerke München) originated in Germany where a contracting authority (Stadtwerke München) excluded Vossloh Laeis GmbH ("Vossloh") from its public contract award procedure following the Bundeskartellamt's decision fining Vossloh for its involvement in a rail track cartel until 2011. 

Vossloh sought to avoid the exclusion by demonstrating that it had taken organisational and personnel measures to reform itself and prevent the repetition of anti-competitive conduct. It also expressed its willingness to compensate the damage caused by its unlawful behaviour. However, Vossloh refused to submit the Bundeskartellamt decision to the contracting authority on the ground that its cooperation with the competition authority in the framework of the leniency programme should be regarded as sufficient. Such refusal was most likely motivated by the parallel action for damages brought by Stadtwerke München against Vossloh in relation to the rail cartel. Because of this refusal, the contracting authority rejected Vossloh's self-cleaning claims. 

Vossloh challenged the exclusion decision before the public procurement board for South Bavaria which referred questions to the ECJ. Those questions related to the extent cooperation with the contracting authority could be required and the 'relevant date' for calculating the start of the three-year exclusion period. 

The ECJ ruling

The ECJ ruled that the contracting authority can ask an undertaking to actively cooperate in order to provide it with proof of the re-establishment of its reliability, but only to the extent that that cooperation is limited to the measures strictly necessary for that examination. The ECJ further specified that:

• the procurement entity can request the undertaking to provide the competition authority decision even if such access might facilitate the introduction of a damages claim against it;
• the transmission of the decision establishing the infringement but applying a leniency rule to the tenderer should suffice to prove to the contracting authority that it has collaborated with the competition authority to clarify the facts and circumstances; 
• the contracting authority can, if necessary, ask the tenderer for factual information to show that the self-cleaning measures are appropriate even if that evidence has already been requested by the competition authority.

The ruling also clarified that the three-year exclusion period for competition law infringements starts when the competition authority's decision is adopted and not when the participation to the cartel ended.  

Comment

The judgment provides useful guidance as to the level of cooperation required from tenderers to re-establish their reliability. But, at the same time, it leaves several questions open about the required standard to be reinstated as a trusted tenderer and also articulation between the self-cleaning procedure and damages claims:

• First, the present ruling confirms that cooperation with the competition authority is key to successful self-cleaning. Cooperation under a leniency procedure should be enough to demonstrate that the facts and circumstances of the infringement have been clarified. Cooperation under a settlement procedure or more informal forms of cooperation are also relevant. The contracting authority should, however, be able to ask for the competition authority's decision to verify whether the economic operator has indeed cooperated with the latter authority.
• Second, it is not clear from the ruling which version of the competition authority's decision (only the non-confidential version or also the confidential one) the contracting authority can require. In Germany, decisions fining an undertaking are usually not published by the competition authority. However, access to the non-confidential version is guaranteed to damage claimants. In the case at hand, Stadtwerke München may have an interest in seeing the confidential version of the decision to gather additional evidence for its follow-on damage action. In this context, the referring court will have to decide whether access to the confidential version is necessary to ascertain the re-establishment of the tenderer’s reliability.
• Third, infringement decisions are frequently challenged and may not become final for many years. In the vast majority of cases, damages claims also go on for many years after infringement decisions. Yet, the ruling confirms:

— that the three-year exclusion period runs from the date of the competition authority's decision;and 

— that self-cleaning requires payment of (or an undertaking to pay) compensation.

Together, these different factors imply that an operator could effectively be required to give up the damages claim battle if it wants a successful and timely self-cleaning process. It remains to be seen whether the payment of (or undertaking to pay) compensation can be made contingent on the outcome of any ongoing court proceedings. 

• Lastly, the judgment gives no concrete guidance as to the technical, organisational and personnel measures to be undergone to ensure a successful self-cleaning process. Recitals of the 2014 Public Procurement Directive nonetheless refer to a series of relevant compliance measures, which include monitoring and audits. The centrality of compliance programmes to restoring reliability indeed mirrors a trend in Europe towards taking the existence of such programmes into account as a mitigating factor, in the event of competition law breaches.

With thanks to Jessica Bracker of Ashurst for her contribution