Eurostar to Siemens

Procurement disputes have become a feature of the economic downturn with major corporates bringing out the big guns to help them secure contracts.

The ongoing legal battle that has pitted Alstom Transport against Eurostar International and Siemens over the procurement of trains is a case in point. It is one of the biggest cases of the year (3 January 2011) and involves a contract that was worth millions to claimant Alstom Transport but was ultimately awarded by Eurostar to Siemens.

In October last year Eurostar granted Siemens the contract for building a new fleet of trains in anticipation of the Channel Tunnel being opened up to its competitors. 

Alstom is a manufacturer of trains, and was the supplier of the rolling stock currently used by Eurostar for Channel Tunnel crossings. Alstom tendered for the new contract, but was unsuccessful.

Eurostar’s decision ignited a trail of litigation, starting with Alstom’s attempt to get a court injunction against the award and ending most recently with the High Court upholding the defendants’ strike-out bid against the claim (see judgment).

The claimant instructed Hogan Lovells partners Ciara Kennedy-Loest and Rupert Sydenham, who instructed Keating Chambers’ Sarah Hannaford QC to lead Jessica Stephens, also of Keating Chambers.

They argued that in awarding the contract to Siemens, Eurostar had breached Utilities Contracts Regulations. The injunction, which was rejected by Mr Justice Vos, was intended to stop any contract being awarded before the full claim was heard by the court.

Facing them on the opposite side of the courtroom were the heavyweights instructed by co-defendants Eurostar and Siemens.

Burges Salmon partner Chris Jackson instructed Monckton Chambers’ Michael Bowsher QC to lead Ewan West of the same set for Eurostar. Freshfields Bruckhaus Deringer partner Jane Jenkins instructed Blackstone Chambers’ John Howell QC to lead Monckton Chambers’ Rob Williams for Siemens.

The original claim was for damages and a declaration of ineffectiveness – a remedy that would have forced the agreement between the defendants to end. But, on 4 May this year, Alstom sought to amend its claim to introduce new material and in particular a new claim for a declaration of ineffectiveness in relation to the final contract.

In response, the defendants asked for the claim to be struck out.

Consequently, Mr Justice Mann moved the case forward on a number of assumptions, including that the regulations, which Alstom alleged Eurostar had breached, were applicable in the case and that the contract awarded to Siemens was materially different to the invitation to tender.

Those regulations governed a range of matters including how the tender invites should work and what remedies should be applied should they be breached.

It was the first time the High Court considered an application for seeking a declaration of ineffectiveness on the grounds submitted by the claimant, and both failed.

The judge held that the first ground, that the contract was put out to tender without sufficient notice, could be dismissed. The ’qualification notice’ issued by Eurostar when the contract was put out to tender was sufficient to allow Siemens to tender, Mann J said.

On the second ground, where it was argued that the defendants had held up its ability to commence legal proceedings over the contract breach, Mann J said the claimant’s own interim application for an injunction last October had damaged its cause.

“To some extent the ineffectiveness provisions are only intended to operate when anticipatory proceedings could not be brought,” the judge said.

It is not clear whether the claimants will appeal the decision. What is clear is that challenging agreed contracts through the courts is a costly business. Jumping in with injunctions may have been an error in this matter that ultimately cost the claimant the case.