Suit leaves public bodies exposed

A RECENT Court of Appeal decision could open the floodgates for claims against public bodies previously regarded as "time barred", according to lawyers acting in the case.

The decision came in the case of Matra Communication SAS v the Home Office, which centred on the rights of the French company Matra to sue the Home Office.

The claim is over the Home Office's handling of a contract, worth about £1.5bn over more than 15 years, to supply the UK police with a new secure mobile radio system.

The initial contract was for the supply and subsequent maintenance of the system, although its long-term value was likely to be huge in view of the fact that the equipment would, ultimately, also be attractive to other public users.

Matra sought to sue the Home Office, accusing it of discrimination under European Law provisions in the way it handled the contract.

The company claimed the Home Office specification that the system must be based on TETRA technology effectively blocked its tender because its system was based on different technology, TETRAPOL.

Matra argued that the Home Office's refusal to extend the project to include other equivalent technologies – such as TETRAPOL – breached Articles 30 and 59 of the Treaty of Rome, the provisions of Council Directive 92/50/EEC and the UK Public Services Contracts Regulations 1993, which relate to procedures for the award of public service contracts and provides that contracting authorities ensure there is no discrimination between different service providers.

However, Mr Justice Rattee ruled in the High Court that the proceedings launched against the Home Office were subject to a three-month time limit under the UK regulations, and that Matra had left it too late. He chose not to extend the time using his discretion under the regulations.

Now the Court of Appeal has upheld his decision. The judgment means the appeal judges have greatly extended the ability of aggrieved contractors to claim damages against contracting authorities for breaches of the public procurement rules so long as they can be said to be "sufficiently serious" breaches of Articles 30 and 59 of the Treaty.

While they failed to overturn the judgment at the first instance, lawyers at Nabarro Nathanson who represented Matra say the ruling is of major significance.

According to Robert Bell, the competition and public procurement partner acting for Matra, the decision has clearly indicated that, given the right circumstances, aggrieved contractors can rely on breach of Treaty provisions under a far longer time period than the three-month limitation.

He says the ruling of Lord Justices Hirst, Mummery and Buxton paves the way – in some cases – for a limitation period of six years rather than three months in claims against public bodies such as government departments, local authorities and contracting authorities covered by the rules.

"This is the real significance of the judgment, but I do not think the full importance of it has been appreciated," he says.

"Effectively, the decision in the case is one which could open a floodgate for claims against contracting authorities which thought they were safe from claims after the short three-month period had expired."

The key factor determining whether the three-month or six-year limitation period applies is the nature of the claim.

Bell says the new ruling has made it clear that if an alleged breach under the EC public procurement rules is "sufficiently serious" then the parties can commence an action for damages under the principles set out in the Francovich case – a leading European Court of Justice (ECJ) authority that has a six-year limitation period as opposed to three months under the regulations.

Bell continues: "The decision is a highly significant ruling for public procurement and risks creating a very uncomfortable precedent for contracting authorities inv-olved in tendering their works, supplies or services.

"This ruling follows a number of ECJ rulings on the liability of the state and state-related bodies for breaches of EC law. It has confirmed the widely held view that, as a matter of EC law, contracting authorities cannot possibly be allowed to hide behind the extremely short period under the regulations to escape liability for their wrongful acts in the procurement process."