Just before the summer, the Court of Justice of the European Union (CJEU) issued a landmark judgment in case C-547/22, paving the way for unsuccessful tenderers to recover part of their lost profits or damages for lost opportunities.
To date, Slovenian case law has maintained that in instances of procedural violations in public procurement, unsuccessful tenderers are entitled only to compensation for the actual damages incurred rather than for the profit they might have earned had the public procurement rules been followed during the process.
The CJEU, in the judgment mentioned in the introduction, rejected this position and emphasised that Article 2(1) of Directive 89/665/EEC covers all types of damages suffered by tenderers due to breaches of EU law, including damages for lost opportunities. However, damage resulting from a lost opportunity cannot be equated with lost profit, as understood in Slovenian law. It pertains to the value of the anticipated lost profit, from which the assessed risk of not being awarded the public contract is deducted. The CJEU thus allowed for the recovery of part of the anticipated profit, with the final amount contingent on the likelihood that the unsuccessful tenderer could reasonably have expected to earn the claimed profit.
Under public procurement rules, a contracting authority is entitled to reject all submitted bids and choose not to award the contract after completing the procurement process. Additionally, the authority also has the option to terminate the contract with the selected tenderer. In practice, the accuracy of the anticipated profit at the time of signing the public procurement contract is often uncertain. A contractor’s final profit can be affected by factors such as price fluctuations, quality of workmanship, performance delays, etc. The most important factor is the actual tenders submitted, which are ranked according to the relevant criteria. As a result, each tenderer has different expectations regarding potential profit. Therefore, an unsuccessful tenderer is entitled only to compensation for lost profit, adjusted to reflect the specific likelihood that such profit would have been realised.
The CJEU did not specify how this likelihood should be determined or calculated. The method for calculating the likelihood of securing a disputed contract could be introduced through amendments to the Legal Protection in Public Procurement Procedures Act (“ZPVPJN”) or, more likely, shaped by case law.
In conclusion, it is important to highlight that proving the unlawfulness of the selection process, and therefore, the liability of the contracting authority, is a difficult task. If the National Review Commission (“DKOM”) upholds the lawfulness of the selection decision, the unsuccessful tenderer will need to file a damages claim with the District Court in Ljubljana. In its claim, the tenderer will be need to demonstrate the contracting authority’s unlawful conduct, which will be challenging to prove, especially in light of a DKOM decision upholding the selection decision. The situation would be different if the unsuccessful tenderer first established the unlawful conduct in an administrative-law action under Article 39.a of ZPVPJN. However, this would necessitate at least two court cases, which could prove costly and prolong the overall process. Answers to these issues are likely to emerge with the evolution of case law, particularly in cases currently under review by the Supreme Court of the Republic of Slovenia.
Author: Matevž Klobučar, Attorney at Law
