Private damages claim, public procurement context: Essential limitation advice

21st January 2020

Why is this case of interest?

In the recent case of Secretary of State for Transport v Arriva Rail East Midlands [1], the Court of Appeal has highlighted the fact that public procurement processes can give rise to both public and private law claims.  Understanding the distinction between public and private law actions is essential, as the strict time limits within which claims must be brought differ between the two.  Walker Morris’ Commercial Dispute Resolution and Procurement specialists Gwendoline Davies and Lynsey Oakdene explain the key practical takeaways from this important case.

What are the key takeaways?

It is not necessary, for the purposes of this briefing, to explain the facts of Secretary of State for Transport v Arriva Rail East Midlands.  Suffice to say, a public procurement process relating to a number of rail franchises in the UK gave rise to various claims brought by tendering train operating companies.  What is important, are the legal and practical principles confirmed by the Court of Appeal in the case, namely:

• Public procurement processes can give rise to a variety of different legal actions – some public, some private. For example, this case involved claims of breach of statutory duty; claims for declarations and injunctions; for judicial review; and for damages for breaches of EU public procurement rules [2].
• Understanding the difference between public and private law claims, and correctly categorising any claims arising from a public procurement process is essential – not least because different procedures and, crucially, different limitation periods can apply.
• A three-month time limit applies to judicial review (public law) claims.
• A damages claim arising from a public authority’s decision will not automatically be a public law action.
• Rather, a damages claim which does not seek to undo the public law decision, but which accepts a public breach of duty and simply seeks compensation for its consequences, will be a private law action.
• Similarly, where a claim for declarations is, in effect, no more than a “staging post” [3] on the way to a successful claim for damages, such a claim would not generally constitute a public law action.
• The fact of a public procurement context does not restrict otherwise private law damages claims to a three-month limitation period by analogy with the judicial review limitation period.
• In relation to injunctions, however, a claim for an injunction to set aside a public law decision may well be subject to the three-month judicial review limitation period.
• A cause of action may arise in the course of an ongoing procurement exercise (for example on the issue of an invitation to tender or some other pre-completion decision), or at the final stage once a bid is rejected. That is a question of fact to be decided on a case-by-case basis.
• As a result, there is no hard and fast rule that a limitation period starts running at the provision of a tainted invitation to tender or other procurement decision.

Francovich damages and Brexit

Whilst this case was specifically concerned with breaches of EU public procurement rules in relation to railways, the principles confirmed in the case also have wider significance for all breach of statutory duty Francovich damages claims for as long as they continue to be available in the UK.  That raises the question: what will happen as a result of Brexit?

The ability to claim Francovich damages may be lost after Brexit, as they are generally excluded from the scope of retained EU law pursuant to the European Union (Withdrawal) Act 2018. However, there are some exceptions to this, and Francovich damages will be available: in any proceedings begun, but not finally decided, before a court or tribunal in the UK before exit day; in relation to any conduct which occurred before exit day which gives rise to any criminal liability; in relation to any proceedings begun within the period of two years beginning with exit day so far as the proceedings relate to anything which occurred before exit day.

Parties should note that there is therefore now a two-year window for bringing a claim for Francovich damages in respect of violations of EU law occurring before exit day.

WM Comment

It should be noted that Secretary of State for Transport v Arriva Rail East Midlands concerned a public procurement process to which the Public Contracts Regulations 2015 (the PCR) did not apply.  Where a public procurement is governed by the PCR, specific criteria will apply in relation to the accrual of any claim and specific time limits will apply to certain aspects of the process and to the time limits within which claims may be brought.  In such cases, the PCR should, therefore, be consulted directly, and specialist advice may be required [4].

In relation to all other public procurements, this case highlights that it is perhaps even more essential that urgent specialist legal advice is sought immediately there is any hint that any aspect of the procurement exercise may give rise to a claim.  Accurate analysis of the type of claim will dictate the procedure and timetable which must be followed if a claimant is to enforce their legal rights and to obtain any relief to which they might be entitled.  Any error at this stage could prove fatal to a claim.

If you would like any advice in relation to any potential procurement dispute, or indeed any potential Francovich damages claim, please do not hesitate to contact Gwendoline or Lynsey, who will be happy to provide their expert assistance.

[1] [2019] EWCA Civ 2259

[2] Claims for damages arising from a breach of EU law are often referred to as Francovich damages – named for the case which defined this cause of action (Francovich v Italy (C-6/90) EU:C:1991:428 (19 November 1991)).

[3] Ibid para 112

[4] See our recent briefing for further information and advice