Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION [2009] CSOH 166
	OPINION OF LORD MENZIES in the cause SIDEY LIMITED Pursuer; against (FIRST) CLACKMANNANSHIRE COUNCIL AND (SECOND) PYRAMID JOINERY AND CONSTRUCTION LIMITED Defender: ­­­­­­­­­­­­­­­­­________________

Pursuers: M. Ross; Macroberts LLP Solicitors

First Defenders: Clark QC, McGregor; Brodies LLP Solicitors

Second Defenders: I.G. Mitchell QC, Lindhorst; Maxwell MacLaurin Solicitors

9 December 2009

Introduction

[1] In January 2009 Clackmannanshire Council ("the Council") issued an invitation to tender notice providing information about a proposed public works contract for the replacement of kitchens and bathrooms in council houses in Alloa and Tillicoultry. The notice was published on the Public Contracts Scotland Website. The approximate cost of the works was £2,500,000, and the type of procedure was specified as "restricted-purchaser will invite tenders from a selection of providers who have expressed interest in the contract." Thereafter a tender questionnaire was sent, with guidance notes, to selected contractors. The guidance notes stated that the Council aimed to obtain the most economically advantageous tender, and that they would allocate 30% of evaluation marks to price and 70% to quality.

[2] The pursuer and the second defender each submitted tenders to the Council in respect of this contract, as did two other contractors. On 19 June 2009, following an evaluation process, the Council decided to accept the second defender's tender. The Council did not inform the pursuer of its decision until 29 June 2009; before this date the pursuer had received no information about the result of the procurement process or the date on which such a result would be issued. On 29 June 2009 the pursuer's commercial sales manager spoke to an officer of the Council to ask whether a decision had been made, and was told that the Council had made its decision on 19 June 2009 and had sent notification by fax. It transpired that this had been sent to the wrong fax number. The Council notified the pursuer on 29 June 2009 that the pursuer had been unsuccessful and gave a summary of the pursuer's score, together with some comments explaining how it had been reached.

[3] On 2 July 2009 the Council wrote to the second defender to accept the second defender's offer. The Council did not inform the pursuer that it had done so. On 3 July 2009 the pursuer wrote to the first defender to appeal the award decision on the basis that the summary of the points awarded to the pursuer disclosed errors. On 6 July 2009 the Council's officer telephoned the pursuer's commercial sales director and advised him that the appeal had been received and that the Council had put a stop to the award of the contract pending investigation. On 7 July 2009 the Council wrote to the pursuer acknowledging receipt of the pursuer's appeal and confirming that progress on the contract had been halted. On 28 July 2009 a meeting took place between representatives of the pursuer and the Council, and on 11 August 2009 an officer of the Council wrote to the pursuer stating that he had investigated the position in relation to the award of the contract, that he considered that the points which the pursuer had raised had been substantiated, and as a result he proposed to recommend that the contract be awarded to the pursuer. At a meeting on 25 August officers of the Council explained to representatives of the pursuer how the Council's system for evaluation of tenders operated, that the review of the procurement process carried out by the Council following the pursuer's appeal had revealed and error in the transposition of the pursuer's score, and that the pursuer's tender was the most economically advantageous tender received by the Council.

[4] This action was raised on 18 September 2009. The pursuer seeks various remedies. For present purposes only two of these remedies are relevant. The first conclusion seeks an order in terms of Regulation 47(8)(b)(i) of the Public Contracts (Scotland) Regulations 2006 to set aside the Council's decision to award the contract to the second defender. The third conclusion seeks suspension and reduction of the purported contract entered into between the Council and the second defender, constituted by the second defender's tender and the letter from the Council to the second defender dated 2 July 2009. (The pursuer also has a conclusion for damages against the Council in the event that the contract between the Council and the second defender is not reduced and the pursuer is not awarded the contract.)

[5] I heard a debate which lasted five days on the issues of the competency of the pursuer's claim, the applicability of the 2006 Regulations to this contract, and whether any remedy other than damages was open to the pursuer. In the course of this debate the Council was represented but took no active part. The position adopted by the Council in its defences and its note of argument was broadly that it admitted that it committed breaches of the Public Contracts (Scotland) Regulations 2006, that it made errors when evaluating the score of the pursuer's tender and that in failing to award the contract to the pursuer the Council acted in error. The Council did not oppose the orders sought by the pursuer (with the exception of a conclusion for interdict and interim interdict, with which this opinion is not concerned).

Directives and regulations

[6] There were several passages of EU Directives and domestic regulations to which reference was made in the course of the debate. It is convenient to set out at this stage those passages to which most frequent reference was made (although the following excerpts are not exhaustive).

Directive 2004/18/EC

The preamble provides inter alia as follows:

"Whereas:

(2) The award of contracts concluded in the Member States on behalf of the State, regional or local authorities and other bodies governed by public law entities, is subject to the respect of the principles of the Treaty and in particular to the principle of freedom of movement of goods, the principle of freedom of establishment and the principle of freedom to provide services and to the principles deriving therefrom, such as the principle of equal treatment, the principle of non-discrimination, the principle of mutual recognition, the principle of proportionality and the principle of transparency. However, for public contracts about a certain value, it is advisable to draw up provisions of Community coordination of national procedures for the award of such contracts which are based on these principles so as to ensure the effects of them and to guarantee the opening-up of public procurement to competition. These coordinating provisions should therefore be interpreted in accordance with both the aforementioned rules and principles and other rules of the Treaty.

(46) Contracts should be awarded on the basis of objective criteria which ensure compliance with the principles of transparency, non-discrimination and equal treatment and which guarantee that tenders are assessed in conditions of effective competition. As a result, it is appropriate to allow the application of two award criteria only: 'the lowest price' and 'the most economically advantageous tender'.

To ensure compliance with the principle of equal treatment in the award of contracts, it is appropriate to lay down an obligation - established by case-law - to ensure the necessary transparency to enable all tenderers to be reasonably informed of the criteria and arrangements which will be applied to identify the most economically advantageous tender. It is therefore the responsibility of contracting authorities to indicate the criteria for the award of the contract and the relative weighting given to each of those criteria in sufficient time for tenderers to be aware of them when preparing their tenders. Contracting authorities may derogate from indicating the weighting of the criteria for the award in duly justified cases for which they must be able to give reasons, where the weighting cannot be established in advance, in particular on account of the complexity of the contract. In such cases, they must indicate the descending order of importance of the criteria.

Where the contracting authorities choose to award a contract to the most economically advantageous tender, they shall assess the tenders in order to determine which one offers the best value for money. In order to do this, they shall determine the economic and quality criteria which, taken as a whole, must make it possible to determine the most economically advantageous tender for the contracting authority. The determination of these criteria depends on the object of the contract since they must allow the level of performance offered by each tender to be assessed in light of the object of the contract, as defined in the technical specifications, and the value for money of each tender to be measured."

"Article 2

Principles of awarding contracts

Contracting authorities shall treat economic operators equally and non-discriminatorily and shall act in a transparent way.

Article 7
Threshold amounts for public contracts

This Directive shall apply to public contracts which are not excluded in accordance with the exceptions provided for in Articles 10 and 11 and Articles 12 to 18 and which have a value exclusive of value-added tax (VAT) estimated to be equal to or greater than the following thresholds:

(c)               EUR 6 242 000 for public works contracts.

Article 28
Use of open, restricted and negotiated procedures and of competitive dialogue

In awarding their public contracts, contracting authorities shall apply the national procedures adjusted for the purposes of this Directive.

They shall award these public contracts by applying the open or restricted procedure. In the specific circumstances expressly provided for in Article 29, contracting authorities may award their public contracts by means of the competitive dialogue. In the specific cases and circumstances referred to expressly in Articles 30 and 31, they may apply a negotiated procedure, with or without publication of the contract notice.

Article 41

Informing candidates and tenderers

1. Contracting authorities shall as soon as possible inform candidates and tenderers of decisions reached concerning the conclusion of a framework agreement, the award of the contract or admittance to a dynamic purchasing system, including the grounds for any decision not to conclude a framework agreement or award a contract for which there has been a call for competition or to recommence the procedure or implement a dynamic purchasing system; that information shall be given in writing upon request to the contracting authorities.

2.                  On request from the party concerned, the contracting authority shall as quickly as possible inform:

-                    any unsuccessful candidate of the reasons for the rejection of his application,

-                    any unsuccessful tenderer of the reasons for rejection of his tender, including, for the cases referred to in Article 23, paragraphs 4 and 5, the reasons for its decision of non-equivalence or its decision that the works, supplies or services do not meet the performance or functional requirements,

-                    any tenderer who has made an admissible tender of the characteristics and relative advantages of the tender selected as well as the name of the successful tenderer or the parties to the framework agreement.

The time taken may in no circumstances exceed 15 days from receipt of the written request."

Directive 89/665/EEC

"Whereas the existing arrangements at both national and Community levels for ensuring their application are not always adequate to ensure compliance with the relevant Community provisions particularly at a stage when infringements can be corrected...

Whereas in certain Member States the absence of effective remedies or inadequacy of existing remedies deter

Community undertakings from submitting tenders in the Member State in which the contracting authority is established whereas, therefore, the Member States concerned must remedy this situation

Whereas, since procedures for the award of public contracts are of such short duration, competent review bodies must, among other things, be authorized to take interim measures aimed at suspending such a procedure or the implementation of any decisions which may be taken by the contracting authority whereas the short duration of the procedures means that the aforementioned infringements need to be dealt with urgently

Whereas it is necessary to ensure that adequate procedure exist in all the Member States to permit the setting aside of decisions taken unlawfully and compensation of persons harmed by an infringement"

"Article 1

1.                  The Member States shall take the measures necessary to ensure that, as regards contract award procedures falling within the scope of Directives 71/305/EEC and 77/62/EEC, decisions taken by the contracting authorities may be reviewed effectively and, in particular, as rapidly as possible in accordance with the conditions set out in the following Articles, and, in particular, Article 2 (7) on the grounds that such decisions have infringed Community law in the field of public procurement or national rules implementing that law....

Article 2

1.                  The Member States shall ensure that the measures taken concerning the review procedures specified in Article 1 include provision for the powers to:

(a)               take, at the earliest opportunity and by way of interlocutory procedures, interim measures with the aim of correcting the alleged infringement or preventing further damage to the interests concerned, including measures to suspend or to ensure the suspension of the procedure for the award of a public contract or the implementation of any decision taken by the contracting authority

(b)              either set aside or ensure the setting aside of decisions taken unlawfully, including the removal of discriminatory technical, economic or financial specifications in the invitation to tender, the contract documents or in any other document relating to the contract award procedure

(c)               award damages to persons harmed by an infringement...

6.                 The effects of the exercise of the powers referred to in paragraph 1 on a contract concluded subsequent to its award shall be determined by national law.

Furthermore, except where a decision must be set aside prior to the award of damages, a Member State may provide that, after the conclusion of a contract following its award, the powers of the body responsible for the review procedures shall be limited to awarding damages to any person harmed by an infringement."

Directive 2007/66/EC

"Whereas:

(3) Consultation of the interested parties and the case law of the Court of Justice have revealed a certain number of weaknesses in the review mechanisms in the Member States. As a result of these weaknesses, the mechanisms established by Directives 89/665/EEC and 92/13/EEC do not always make it possible to ensure compliance with Community law, especially at a time when infringements can still be corrected. Consequently, the guarantees of transparency and non-discrimination sought by those Directives should be strengthened to ensure that the Community as a whole fully benefit from the positive effects of the modernisation and simplification of the rules on public procurement achieved by Directives 2004/18/EC and 2004/17/EC. Directives 89/665/EEC and 92/13/EEC should therefore be amended by adding the essential clarifications which will allow the results intended by the Community legislature to be attained.

(4) The weaknesses which were noted include in particular the absence of a period allowing an effective review between the decision to award a contract and the conclusion of the contract in question. This sometimes results in contracting authorities and contracting entities who wish to make irreversible the consequences of the disputed award decision proceeding very quickly to the signature of the contract. In order to remedy this weakness, which is a serious obstacle to effective judicial protection for the tenderers concerned, namely those tenderers who have not yet been definitively excluded, it is necessary to provide for a minimum standstill period during which the conclusion of the contract in question is suspended, irrespective of whether conclusion occurs at the time of signature of the contract or not...

(13)           In order to combat the illegal direct award of contracts, which the Court of Justice has called the most serious breach of Community law in the field of public procurement on the part of a contracting authority or contracting entity, there should be provision for effective, proportionate and dissuasive sanctions. Therefore a contract resulting from an illegal direct award should in principle be considered ineffective. The ineffectiveness should not be automatic but should be ascertained by or should be the result of a decision of an independent review body.

(14)           Ineffectiveness is the most effective way to restore competition and to create new business opportunities for those economic operators which have been deprived illegally of their opportunity to compete. Direct awards within the meaning of this Directive should include all contract awards made without prior publication of a contract notice in the Official Journal of the European Union within the meaning of Directive 2004/18/EC. This corresponds to a procedure without prior call for competition within the meaning of Directive 2004/17/EC...

(18) In order to prevent serious infringements of the standstill obligation and automatic suspension, which are pre-requisites for effective review, effective sanctions should apply. Contracts that are concluded in breach of the standstill period or automatic suspension should therefore be considered ineffective in principle if they are combined with infringements of Directive 2004/18/EC or Directive 2004/17/EC to the extent that those infringements have affected the chances of the tenderer applying for review to obtain the contract."

"Article 2d
Ineffectiveness

1. Member States shall ensure that a contract is considered ineffective by a review body independent of the contracting authority or that its ineffectiveness is the result of a decision of such a review body in any of the following cases:

(b)              in case of an infringement of Article 1(5), Article 2(3) or Article 2a(2) of this Directive, if this infringement has deprived the tenderer applying for review of the possibility to pursuer pre-contractual remedies where such an infringement is combined with an infringement of Directive 2004/18/EC, if that infringement has affected the chances of the tenderer applying for a review to obtain the contract;

2. The consequences of a contract being considered ineffective shall be provided for by national law.

National law may provide for the retroactive cancellation of all contractual obligations or limit the scope of the cancellation to those obligations which still have to be performed. In the latter case, Member States shall provide for the application of other penalties within the meaning of Article 2e(2).

3. Member States may provide that the review body independent of the contracting authority may not consider a contract ineffective, even though it has been awarded illegally on the grounds mentioned in paragraph 1, if the review body finds, after having examined all relevant aspects, that overriding reasons relating to a general interest require that the effects of the contract should be maintained. In this case, Member States shall provide for alternative penalties within the meaning of Article 2e(2), which shall be applied instead."

The Public Contracts (Scotland) Regulations 2006

"4. - Economic operators
(3) A contracting authority shall -

(a)               treat economic operators equally and without discrimination; and

(b)              act in a transparent and proportionate manner.

5. - Application

(1) ...these Regulations apply whenever a contracting authority seeks offers in relation to a proposed public supply contract, public works contract, Part A services contract, framework agreement or dynamic purchasing system other than a contract, framework agreement or dynamic purchasing system [referred to in paragraph (2) or] excluded from the application of these Regulations by regulation 6 or 8.

8. - Thresholds

(1) These Regulations [, except paragraph (21) of this regulation,] do not apply to the seeking of offers in relation to a proposed public contract, framework agreement or dynamic purchasing system, where the estimated value of the contract (net of value added tax) at the relevant time is less than the relevant threshold.

(21) When a contracting authority proposes to award a public contract which has an estimated value for the purpose of paragraph (1) which is below the relevant threshold, or where a proposed public contract is otherwise exempt from the requirement for prior publication of a contract notice, the contracting authority shall, if required by its general Community obligations, for the benefit of any potential economic operator, ensure a degree of advertising [and follow a procedure leading to the award of the contact] which is sufficient to enable open competition and meet the requirements of the principles of equal treatment, non discrimination and transparency.

32. - Information about contract award procedures

(1) Subject to paragraph (13), a contacting authority shall as soon as possible after the decision has been made, inform any economic operator which submitted an offer, applied to be included amongst the economic operators to be selected to tender for or to negotiate the contract, or applied to be party to a framework agreement, of its decision in relation to-

(a)               the award of a contract; or

(b)              the conclusion of the framework agreement;

and shall do so by notice in writing by the most rapid means of communication practicable.

(3) A contracting authority shall allow a period of at least 10 days to elapse between the date of despatch of the notice referred to in paragraph (1) and the date on which that contracting authority proposes to enter into the contract or to conclude the framework agreement.

47. - Enforcement of obligations

(1) The obligation on-

(a)               a contracting authority to comply with the provisions of these Regulations ... and with any enforceable Community obligation in respect of a public contract or design contest (other than one excluded from the application of these Regulations by regulation 6, 8 or 33);...

is a duty owed to an economic operator.

(8)              Subject to paragraph (9), but otherwise without prejudice to any other powers of the Court, in proceedings brought under this regulation the Court may-

(a)               by interim order suspend the procedure leading to the award of the contract or the procedure leading to the determination of a design contest in relation to the award of which the breach of the duty owed in accordance with paragraph (1) or (2) is alleged, or suspend the implementation of any decision or action taken by the contracting authority or concessionaire, as the case may be, in the course of following such a procedure; and

(b)              if satisfied that a decision or action taken by a contracting authority was in breach of the duty owed in accordance with paragraph (1) or (2)-

                                                                                   (i)                 order the setting aside of that decision or action or order the contracting authority to amend any document;

                                                                                   (ii)                  award damages to an economic operator which has suffered loss or damage as a consequence of the breach; or

                                                                                 (iii)                  do both of those things.

(9) In proceedings under this regulation the Court shall not have power to order any remedy other than an award of damages in respect of breach of the duty owed in accordance with paragraph (1) or (2) if the contract in relation to which the breach occurred has been entered into."

Submissions for the parties

Submissions by junior counsel for the second defender

[7] Mr Lindhorst began his submissions by examining the applicable Directives and the 2006 Regulations. He submitted that Directive 2007/66/EC could not be relied on and was not applicable to the procedures which were the subject of this action, because the date for its transposition into domestic law had not yet occurred. That date was specified as 20 December 2009. The United Kingdom government has not yet transposed this Directive into domestic law. In these circumstances he submitted that the 2007 Directive was not even available as a tool for interpretation. In support of this he referred to Hochtief AG and Linde-Kca-Dresden GmbH EU ECJ C-138/08 [2009 ECR].

[8] Junior counsel emphasised the distinction made in the Directive between a public works contract and a framework agreement, the latter being treated more flexibly than the former. If this Directive applied to the present contract, it would fall within the definition of a public works contract. Parties were agreed that this contract fell below the threshold provided in Article 7(c) of the 2004 Directive. He submitted that there were three categories of public contracts, two of which fell below this threshold. The first of these fell outwith the scope of the Directive (and any domestic regulations to implement it) because EC principles were not engaged, the value of the contract being so small that it was not of interest to contractors from another state. The second category was still below the threshold but it might be the case that general principles of EU Law were applicable as an economic operator in another state might be interested in the contract; however, the restrictive provisions of the Directive would still not apply to such a category because it was below the threshold. Only those contracts above the threshold are subject to the specific requirements of the Directive in their entirety.

[9] The purpose of Directive 89/665/EEC ("the Remedies Directive") was to ensure compliance with relevant EC provisions; the evil which it was aimed at was the absence of effective or adequate remedies which deter community undertakings, i.e. cross border applications. It therefore made provisions to require interim measures to set aside decisions (but not contracts), and to award compensation (but not the reduction of an award of a contract). Paragraph 1 of Article 2 was concerned with suspension of implementation of any decision taken by the contracting authority, and the setting aside of decisions taken unlawfully, but it was clear from paragraph 3 that review procedures need not in themselves have an automatic suspensive effect on the contract; paragraph 6 made it clear that it was open to the Member State to limit the powers of the review body to awarding damages once a contract had been concluded. The Directive therefore made a distinction between pre- and post‑conclusion of the contract; before conclusion of the contract no rights flow to the potential contractor, so a decision to award the contract to that potential contractor may be set aside, but after conclusion of the contract the situation may be different. The purpose of these procedures was not only to allow open competition but to have regard to the principles of business efficacy, not hampering unduly the awarding of contracts and the carrying out of works or services thereunder.

[10] The 2006 Regulations reflected the regime of the 2004 and 1989 Directives. Regulation 8(1) makes it clear that the regulations (accept paragraph (21) of Regulation 8) do not apply to below threshold contracts. Regulation 8(21) is only engaged if the contracting authority is required by its general Community obligations to ensure adequate advertising and to follow a procedure leading to the award of the contract. There must be particular Treaty obligations which require this; if there are none, the regulations in their entirety do not apply. It follows that if there are no Treaty obligations engaged, the ten day standstill period provided for in Regulation 32 does not apply to a below threshold contract.

[11] Regulation 47 recognised the distinction made in the Remedies Directive between pre- and post-contract remedies. Regulation 47(8) provided for wide ranging powers before conclusion of a contract, including the setting aside of decisions or actions and the amending of any documents. However, Regulation 47(9) provided that post-contract the only remedy that could be awarded was an award of damages.

[12] Case law from both the European Court of Justice and the United Kingdom supported the propositions (1) that the requirements for above and below threshold contracts are different, and (2) that below threshold contracts are only protected by the general principles as set out in the treaties, and only apply when Community rights are engaged. This distinction is expressly approved in the jurisdiction of the European Court of Justice - see e.g. the Opinion of the Advocate General in SECAP SpA v Comune di Torino C-147/06, [2008] ECR 1-03565 particularly at paragraph 24. Counsel accepted that public procurement procedures for below threshold contracts are subject to EC Law, but only if it can be shown that Treaty rights are engaged. A two stage approach was required: first, it was necessary to ascertain if a Community interest was involved, and if so, what specific aspect of the principles of the treaties are involved in the specific case. There is no automatic assumption that a Community interest is involved in a below threshold public procurement procedure; even if a Community interest was involved, it was necessary to identify whether there has been any infringement of the requirements of Community law.

[13] Counsel submitted that there had to be a cross-border element in order to engage Community obligations; the treaties were not concerned so much with internal competition as with ensuring that contractors outwith a Member State can compete on a level playing field. The goal of free competition between contractors within differing Member States may be affected by the internal practices of a Member State, so these rules or practices may be subject to criticism. There is a rebuttable presumption that a below threshold contract is devoid of Community implications - see paragraph 23 of the Advocate General's Opinion in SECAP. The distinction between above and below threshold contracts is recognised also in the judgment of the court in SECAP, which held (at paragraph 21) that

"...the application of the fundamental rules and general principles of the Treaty to procedures for the award of contracts below the threshold for the application of Community Directives is based on the premiss that the contracts in question are of certain cross-border interest."

The court went on to observe at (paragraph 30) that:

"it is in principle for the contracting authority concerned to assess whether there may be cross-border interest in a contract whose estimated value is below the threshold laid down by the Community rules, it being understood that that assessment may be subject to judicial review."

In the present case, the Council opted to apply the procedures under the regulations.

[14] For a below threshold contract to be subject to Community rules, it is necessary to point to a specific Treaty right which is engaged. For example, in Bent Mousten Vestergaard v SpØttrup Boligselskab [2001] ECR 1-09505 the court observed (at paragraphs 19 to 24) that the mere fact that the Community legislature considered that the strict special procedures laid down in those Directives are not appropriate in the case of public contracts of small value does not mean that those contracts are excluded from the scope of Community law, and that the lawfulness of a clause in the contract documents must be assessed by reference to the fundamental rules of the Treaty. However, in that case the contractor was able to point to a specific right which was infringed by the procedure in question, namely the free movement of goods set out in Article 30 of the Treaty. In the present case counsel submitted that the pursuer has not specified any particular Community obligation or Treaty right which has been infringed; it has not set out a relevant case to rebut the presumption that below threshold contracts do not involve Community rights. The approach of the European Court of Justice has been consistent and logical throughout: there needs to be cross-border interest and a breach of Treaty rights before Community law will apply to below threshold contracts. In support of this proposition counsel relied on Medipac-Kazantzidis AE v Venizeleio-Pananeio [2007] ECR 1-04557, particularly at paragraph 33; the Opinion of the Advocate General in Coname v Comune di Cingia de' Botti (Case C-231/03), [2005] ECR 1-07287 particularly at paragraphs 57/58, and Chandler v Secretary of State for Children, Schools and Families [2009] EWCA Civ 1011 in which (particularly at paragraph 30) the Court of Appeal held that there must be a realistic prospect of cross-border interest for the principles of the Treaty to be engaged. Counsel submitted that this was authority for the proposition that there was an onus on the party seeking to maintain that there is a cross-border interest to show that it arises.

[15] Counsel referred me to Peterbroeck Van Campenhout & Cie SCS v Belgium [1996] 1 CMLR 793, particularly at paragraph [12]. Lightways (Contractors) Limited v North Ayrshire Council [2008] CSOH 91 was an example of the 2006 Regulations being put into practice; although that case concerned a motion for an interim order to suspend implementation of a contracting authority's decision, Lord Bracadale observed (at paragraph [57]) that "if the contract is entered into the only right with which the pursuer would be left would be the right to damages." It was clear from the Directives, the regulations and the case law that there was no automatic right to suspension or setting aside or reduction of a decision. There was no requirement for reduction of a concluded contract, and no provision for such reduction in the regulations - which was entirely consistent with the Remedies Directive, which gave an option to the Member State to limit the remedy to damages in such a situation. Regulation 49 entitles an economic operator to seek damages within three months of a decision. The measures providing remedies for economic operators are detailed in the regulations and are in accordance with the Directive. In Boddington v British Transport Police [1999] 2 AC 143, [1998] UKHL 13, Lord Slynn of Hadley observed (at page 165) that the law has developed in a pragmatic way on a case by case basis, and that the court was not prevented at common law from, for example, reducing a decision and not reducing a contract. It was incumbent on the pursuers in the present case to set out a clear case as to what it was they sought. What they sought was not provided for under the Directives or the regulations, and if it is at common law, it requires to be spelt out clearly. Under reference to Parvaiz v Thresher Wines Acquisitions Limited [2008] CSOH 160, 2009 SC 151, counsel asked what it was in the present case that the pursuers founded on as an error on the part of the Council. He suggested that it was no more than a possibility that the pursuers might be able to plead a case of reduction of the contract on the ground of unilateral error, if the regulations do not apply.

[16] Next counsel turned to a critique of the pursuer's pleadings. The first and second conclusions of the summons were sought in terms of the regulations, but (1) the regulations do not apply to the present case and (2) even if they do, the orders sought cannot be granted because the contract has been concluded, and accordingly the limitation provided for in Regulation 47(9) applies. Although the regulations are not referred to in the third conclusion, the pursuer's third plea in law in support of this conclusion relies on a breach of Regulation 32(3). However, for the reason already advanced, the order sought was not competent - the only remedy open to the pursuer was damages. (Counsel made criticisms of other aspects of the conclusions, but as these conclusions were not insisted upon on behalf of the pursuer, I need not rehearse these criticisms here.)

[17] Counsel then attacked the averment in Article 2 of condescendence that "in providing that the restricted procedure, in terms of Regulation 16, would apply, the first defender opted to conduct the procurement in accordance with the regulations". The regulations either applied or they did not - it was not open to a contracting authority to "opt in" voluntarily to the regime of the regulations, and indeed this was prohibited. In any event, there was no explanation as to how the Council were said to have opted into the procedure. Regulation 8(21) is referred to, but no explanation is given as to why or what its relevance is. There is no averment as to why any Community rights were engaged. Counsel submitted that Regulation 8(21) did not set out any specific requirements or details, but was rather designed to remind economic operators that they may possibly have rights even in a below threshold contract. There was nothing in the averments on behalf of the pursuer to support a case of breach of the regulations, nor was there anything to justify a case founded on "Wednesbury unreasonableness" or material error. There was nothing in the averments to support an entitlement to the remedies sought.

[18] Finally, counsel commented on four cases on which the pursuer relied in its Note of Arguments. First, Alcatel Austria AG and Others [1999] EUECJ C-81/98, [1999] ECR 1-07671, was distinguishable on its facts from the present case. That case concerned a problem which arose because the Austrian system of procurement meant that a decision to award a contract occurred simultaneously with the contract being concluded, so there could be no standstill period. That was a quite different situation from the position in United Kingdom law, which provides for a standstill period. The measures are therefore in place in the United Kingdom - the fact that (unusually) at its highest for the pursuer the law may not have been followed was a very different situation from that considered by the court in Alcatel. Federal Security Services Limited v Chief Constable for the Police Service of Northern Ireland and Resource Group Limited [2009] NICh 3 was also distinguishable. That was a very special case on its facts, and quite different from the present case. The decision is not binding on this court; however, it was worthy of note that the court expressly held that cross-border interests were engaged, and that normal common law remedies were considered when granting interim measures. The case of Henry Brothers (Magherafelt) Limited and others v Department of Education for Northern Ireland [2008] NIQB 153 was decided at approximately the same time as the Federal Security Services Limited case. The result of that decision was that a framework agreement was set aside by the court, but not the contract which was concluded under it. Counsel submitted that this decision was contrary to the decision in Federal Security Services Limited. Finally, McLaughlin and Harvey Limited v Department of Finance and Personnel [2008] NIQB 122 resulted in the setting aside of a framework agreement. Counsel accepted that this was competent in terms of the Directive and the regulations (unlike the position with regard to a concluded contract). However, it was noteworthy that the court refused to add a party to the framework agreement. This added strength to his contention that it was not open to this court to order the Council to contract with the pursuers in the present case.

Submissions by counsel for the pursuer

[19] Under reference to recital (2) of the preamble to the 2004 Directive, counsel accepted that public procurement procedures were regulated in the European Union because it was considered desirable that the procedures should be integrated throughout the EU, and one reason for this was that there should not be impediments to cross-border trade; this is why thresholds were set in relation to public contracts, as higher value contracts may attract greater cross-border interest. However, the Treaty principles, although primarily concerned with cross-border interests, are not exclusively so - the principles of equality, transparency and proportionality are not confined to cross-border interests and contracting public authorities are obliged to conduct their proceedings in accordance with these principles. The first sentence of recital (2) related to all public contracts, including those below the value threshold, and the obligation on contracting authorities to apply these principles in all contracts (whether below or above threshold) is made clear in Article 2, which is reflected in Regulation 4(3) of the 2006 Regulations. In applying these principles, contracting authorities may adopt different procedures: Article 28 sets out the various types of procedure which may be applied, i.e. "open, restricted, competitive dialogue or negotiated." In the present case the Council stated that they were applying the restricted procedure. This is set out in Regulation 16. Article 41 obliges contracting authorities to inform unsuccessful candidates as quickly as possible of decisions reached concerning the award of the contract, and to provide reasons for the rejection of the unsuccessful candidate's application if requested to do so, all within a short timescale. The detailed provisions for review of such a decision, and for a standstill period, are contained within the Remedies Directive.

Counsel accepted that the pursuer could not rely directly on the terms of the 2007 Directive, because regulations transposing this into domestic law have not yet been made and the date by which such transposition must occur has not yet passed. However, counsel submitted that during the period between the date of the Directive and the date by which Member States must have transposed it into domestic law, Member States should not do anything which was contrary to the Directive. She submitted that it was appropriate for the court to have regard to the Directive, and in any event it reflected developments in European Case Law since the Remedies Directive. She drew my attention to recitals (3), (4), (13), (14) and (18) of the preamble, and submitted that the concept of ineffectiveness referred to therein was sufficiently wide to comprehend a variety of concepts and remedies familiar to Scots law, including declaring a contract to be void, nullity, setting aside and reduction. It was made abundantly clear that contracts concluded in breach of the standstill period should be considered ineffective. Article 2d provided that if there was an infringement of the standstill period and there had been a prior infringement of the 2004 Directive, a contract is to be considered ineffective. The onus of satisfying the court that there are overriding reasons why a contract should be maintained is placed on the party who was awarded the contract in error, in terms of paragraph 3 of Article 2d.

[20] Regulation 32 of the 2006 Regulations provided the domestic mechanisms for the standstill provisions, which required a period of at least ten days between notice of the contracting authority's decision to award the contract and the date on which the contract is to be entered into.

[21] Where a contract was award to a contractor in error, infringing the 2004 Directive, and also before the expiry of the standstill period, this could be categorised in one of two ways. First, it was a decision by the contracting authority which falls to be reviewed and which may be set aside under Regulation 47(8); or second, it is not a contract for the purposes of the regulations, and Regulation 47(9) requires to be read down accordingly. This is because an infringement of the requirements of the 2004 Directive, followed by a breach of the standstill period, deprives the contractor of his right to an effective review. It was important to note that no equivalent to Regulation 8(21) appears in the regulations applicable to England, Wales or Northern Ireland - the decision had been taken to opt into this scheme for Scotland. The result was that below threshold contracts in Scotland required to be dealt with under a procedure which is sufficient to enable open competition and meet the requirements of the principles of equal treatment, non‑discrimination and transparency. What triggers the adoption of this procedure is the contracting authority's assessment that it is required by its general Community obligations, for the benefit of any potential economic operator, to follow such a procedure. The pursuer is not in a position to second guess why the Council decided that it was required by its general Community obligations to do so in the present case - all that the pursuer received was the notice that the Council regarded this as restricted procedure. The pursuer was entitled to rely on this. Moreover, the Council has admitted in its defences to the present action that in providing that the restricted procedure in terms of Regulation 16 would apply, it opted to conduct the procurement in accordance with the regulations, that it decided to award the contract to the second defender on the basis of evaluation scores that were incorrect, that the Council was under an obligation to allow a standstill period of at least ten days following dispatch of the notice in terms of Regulation 32(1), and that it accepted the second defender's tender within the standstill period. The responsibility of deciding whether its general Community obligations required it to follow the regulations procedure was a matter for the Council; having decided that it would follow the regulations procedure, it became committed to that procedure.

[22] As an aid to interpretation, counsel referred me to Commission Interpretative Communication 2006/C 179/02, and observed that the basic standards set out for below threshold contracts in paragraph 2.3.3 of that document were almost indistinguishable from the requirements for above threshold contracts.

[23] Counsel then turned to a review of the authorities, which she divided into three chapters - (1) the "Telaustria line", (2) the "Alcatel line" and (3) "Northern Irish/ domestic cases." The first of these chapters began with Telaustria Verlags GmbH and Telefonadress GmbH v Telekom Austria AG [2000] ECR 1-10745 particularly at paragraphs 58 to 62. This was authority for the proposition that transparency is a fundamental rule of the Treaty and applies to all public procurement contracts, even those with no potential for cross‑border interest, whenever a contracting authority having regard to its obligations and to the nature and size of the contract decides that it is subject to Community obligations. The ECJ reiterated that even below threshold public procurement procedures are not excluded from the scope of Community law, and that the contracting authorities which conclude them are bound to comply with the fundamental rules of the Treaty - Vestergaard (supra) at paragraphs 19 and 20. This theme was reiterated by the ECJ in its judgment in Coname (supra - the judgment being reported at [2005] ECR 1-07287) particularly at paragraphs 15 to 18. The proposition that contracting authorities are bound by the fundamental rules of the Treaty, and by the principles of equal treatment of tenderers (even in the absence of discrimination on the grounds of nationality), and transparency even when the contracts are excluded from the scope of a particular Directive is supported by Parking Brixen GmbH v Gemeinde Brixen and another (C-458/03) [2006] 1CMLR 3, [2006] All ER (EC) ECJ 779, particularly at paragraphs 46 to 49. The ECJ reiterated the principle in Medipac-Kazantzidis (supra) at paragraph 33. There was a category of below threshold contracts in which the contracting authority had a degree of discretion, and to which the principle of proportionality applied. For example, in the SECAP case (in which reference had been made by junior counsel for the second defender to the Opinion of the Advocate General, but in which the judgment of the court was to be found at [2008] ECR 1-03565) the ECJ stated at paragraph 30 of its judgment that:

"It is in principle for the contracting authority concerned to assess whether there may be cross­‑border interest in a contract whose estimated value is below the threshold laid down by the Community rules, it being understood that that assessment may be subject to judicial review."

To the extent that paragraph 21 of the judgment (which indicates that the application of the fundamental rules and general principles of the Treaty to below threshold contracts is based on the premiss that the contracts in question are of certain cross‑border interest) may be inconsistent with paragraph 48 of the court's judgment in Parking Brixen, Parking Brixen should be preferred, as it applies the rules derived from the line of authorities based on Telaustria. In any event, the pursuer can rely on the council's decision in the present case, for the purpose of paragraph 30 of the SECAP judgment. The decision in Parking Brixen was not placed before the Court of Appeal in Chandler.

[24] In summary on this chapter, counsel submitted that given Scotland's geographical position, a requirement for cross-border interest in below threshold contracts would render Regulation 8(21) virtually meaningless; this cannot have been the intention of Parliament when implementing this regulation in relation to Scotland when there was no equivalent provision in relation to any other part of the United Kingdom. In any event, even if the prospect of some cross-border interest is necessary for a contracting authority's general Community obligations to be engaged for the purposes of Regulation 8(21), this is a matter for the contracting authority to determine. In the present case the Council has determined that it is required by its general Community obligations to follow such a procedure.

[25] The second chapter of authorities relied on by counsel for the pursuer was based on the line of authorities starting with Alcatel Austria (supra). The observations of the court at paragraphs 37/38 and 43 of Alcatel Austria are the beginning of the court's interpretation of the standstill period. The consequences of the standstill period have been developed by the court since then. In its decision in Stadt Halle [2005] ECR 1-00001, case C-26/03, the court emphasised that the concept of a decision taken by a contracting authority requires to be given a broad meaning; counsel submitted that this was capable of including a purported contract concluded in breach of the standstill requirements of the Directive. This was essential in order to provide an effective review. The court developed this principle further in Re Waste Water Contract: Commission of the European Communities v Germany [2007] 3 CMLR 40. In that case the Advocate General (at paragraph AG 75 et seq,) observed that all effects of contract awards contrary to Community law must be exhausted and everything suggests that the court would uphold the principle of the existence of an obligation to bring the contract to an end, and that

"rescinding a contract and subsequently launching a new invitation to tender with a view to implementing procurement law as effectively as possible should generally prove to be the best solution for taking account of the individual interest of unsuccessful tenderers".

Paragraph AG 81 states:

"Furthermore, it is not apparent why a contract concluded in breach of public procurement law, which of its nature will give rise to a continuing infringement of the fundamental freedoms, should be exempted a priori from the measures necessary to comply with a judgment establishing a failure to fulfil obligations".

In a relatively short judgment, the court rejected the argument that Member States were, by reason of Article 2(6) of the Remedies Directive, allowed to restrict a remedy post conclusion of contract to an award of damages, thereby excluding any possibility of rescission of the contract. The court accepted the Advocate General's Opinion. Finally under this chapter, counsel drew my attention to Konstantinos Adeneler and Others v Ellinikos Organismos Galaktos [2006] ECR 1-06057 in which the ECJ held that from the date upon which a Directive has entered into force, the courts of the Member States must refrain as far as possible from interpreting domestic law in a manner which might seriously comprise, after the period for transposition has expired, attainment of the objective pursued by that Directive. This was relevant when considering what weight should be attached to the 2007 Directive, which entered into force on 11 December 2007.

[26] Counsel began her third chapter by referring to McConnell Archive Storage Limited v Belfast City Council [2008] NICh 3, which she submitted was authority for the proposition that whatever the contracting authority may have purported to do before the expiry of the standstill period, there could not be a concluded or fully binding contract until the expiry of that period. Applying this reasoning to the circumstances of the present case, the standstill period did not commence until the pursuer was notified of the decision to award the contract to the second defender on 29 June 2009. The letter from the Council to the second defender purporting to conclude the contract on 2 July 2009 was within the ten day standstill period, as was the letter from the Council to the pursuer dated 6 July 2009 telling the pursuer that the Council had put a stop to the award of the contract pending investigation. The Council was entitled to do this because, correctly construed, there was no concluded contract until the end of the standstill period. The present case is therefore distinguishable on its facts from McLaughlin and Harvey Limited v Department of Finance and Personnel [2008] NIQB 122, because in the present case there was no concluded contract and there was no question of the second defender having performed work for the Council, or of a contract which was partly or wholly performed. Counsel referred me to Henry Brothers (Magherafelt) Limited and others v Department of Education for Northern Ireland (supra) and to the reasoning of the court at paragraph [20] thereof. The approach to the construction of Regulation 47(9) urged by counsel was consistent with the approach taken in Federal Security Services Limited v Chief Constable for the Police Service of Northern Ireland and Resource Group Limited [2009] NICh 3. That case was concerned with a part B contract, the remedies for which were much more restricted that than those available in relation to the present contract. Nonetheless, Deeny J was prepared to read into that procedure a requirement for a standstill period even where no such requirement was provided for in the Directive because of the need to provide effective remedies (paragraph [32]). He proceeded on the basis that Regulation 47(9) should be read as referring to a contract complying with the principles of European Community Law including transparency, effectiveness of remedies and equality of treatment. He expressed the view (at paragraph [40]) that:

"there is inequality of treatment because if the contract is allowed to stand without being considered by the court the second defendant is in a protected position and the first defendant is excluded from any possibility of now winning the contract even if the procedure adopted was unlawful. In my view the contract was award in breach of a Community obligation pursuant to Regulation 47(1)."

Counsel accepted that that case was concerned interim relief, but the reasoning was sound and supported her submission.

[27] Turning to the question of the applicability of the 2006 Regulations, counsel submitted that they did apply in the present case. Transparency, equal treatment, non‑discrimination and proportionality had a wider application as Community obligations than merely in circumstances where there were cross-border interests - if that was not the case, Regulation 8(21) would have little or no meaningful application in Scotland, and it should be remembered that it is exclusively a Scottish provision. The Council clearly considered if it was required by its general Community obligations to follow a procedure which was sufficient to enable open competition and meet the requirements of the principles of equality of treatment, non-discrimination and transparency. If the regulations were adhered to, the procedures would conform to these requirements. In practice, contracting authorities adopt the procedure set out in the regulations very frequently. It is in this sense that the Council opted into the regulations; it voluntarily took on the obligations set out in the regulations, as it was entitled to do. By adopting the course which the Council has adopted, there is a presumption that Community obligations are engaged, and the onus is on the party challenging (i.e. the second defender) to show that Community obligations are not engaged. The regulations therefore apply because of the decision which the Council took. In any event the pursuer relied on the Council's notice to all tenderers that this was a restricted procedure, and throughout all their actings they indicated that the regulations were engaged. The Council has admitted in its defences that the regulations applied and that it was in breach of its obligations under the regulations. Moreover, the pursuer has a right to an effective review mechanism, which is an essential part of the procedure which meets the requirements of Regulation 8(21). If there is no effective review mechanism the procedure is not transparent. The pursuer is entitled to an effective review, which must involve an effective enforcement mechanism. Just as the pursuer was entitled to expect the Council to give it a standstill period, so the pursuer is entitled to the remedies provided in Regulation 47. This means that the 2006 Regulations require to be interpreted as applying to a below threshold case; such an interpretation is necessary in order to comply with the pursuer's Community rights. Counsel accepted that the terms of Regulation 47(9) appeared to exclude the remedy of setting aside the Council's decision and reduction of the contract, but this was only a purported contract; it was awarded to the second defender in error and contrary to the 2004 Directive, and moreover before the expiry of the standstill period. It is not a contract for the purpose of Regulation 47; such a construction would be consistent with the 2007 Directive and also consistent with the authorities and the reasoning of the court in Federal Security Services Limited.

[28] Counsel adopted all the arguments contained in her revised Note of Argument (No 17 of process), and in particular with regard to the breach by the Council of the obligation on it to award the contract to the economic operator submitting the most economically advantageous tender and the obligation to allow a standstill period, contained in paragraphs 29 to 33 of that Note.

[29] There was no substance to the criticisms made by the second defender regarding the pursuer's pleadings. The Minute of Amendment which was allowed by the court on the second day of the debate addressed the only point of substance. There was no need for the pursuer in this case to aver a cross-border interest - the onus cannot rest on a party such as the pursuer when the decision was a matter for the Council. The pursuer's averments met the requirements of relevancy and specification.

[30] The issue in this case was clearly focussed; the Council has been candid and admitted the pursuer's material averments of fact. This was a contract awarded in error and moreover awarded before the expiry of the standstill period, thereby depriving the pursuer of an effective review. The combination of the standstill error and the earlier error had a compounding effect, and it is just this set of circumstances which is the target of the procurement Directives. Counsel sought decree in terms of the first conclusion of the summons, and in terms of the third conclusion (with exception of suspension). She did not seek decree in terms of the second, fourth, fifth and sixth conclusions, nor decree in terms of the seventh conclusion if reduction was granted in terms of the third conclusion. If however, decree of reduction was not pronounced in terms of the third conclusion, the seventh conclusion would remain live and further procedure would be required. She invited me to sustain the pursuer's first and third pleas-in-law, to refuse the pursuer's second, fourth, fifth, sixth and seventh pleas‑in‑law and to leave the eighth, ninth and tenth pleas-in-law for the pursuer standing.

Submissions by senior counsel for the second defender

[31] Senior counsel submitted that the core issue was whether the 2006 Regulations applied in this case. If the regulations do not apply, the remedies which the pursuer seeks are incompetent. The pursuer seeks to have the Council's decision set aside under statutory powers, and no other. If the regulations apply, the pursuer has a basis for complaining about the standstill issue. If they do not, there is no basis in the pleadings for the remedies which the pursuer seeks.

[32] By way of introduction, senior counsel addressed four issues. First, he asked whether the EU Procurement regime impinged in any way on the procurement process which was the subject of the present action. It was not always the case that Community rights were engaged. The pursuer had to show that the present procedure came within Treaty competencies, and cross‑border interests were an element in that issue. Second, the pursuer required to discharge the onus on it to show that there is such an engagement of EU cross-border elements. The pursuer makes no averments in this regard. All that is averred is that the Council believed itself to be bound by Community requirements. Third, senior counsel submitted that if the answer to the first issue was in the negative, the pursuer's case fell to be refused. If it was in the positive, it was then necessary to consider whether the EU regime applied to below threshold contracts. This case fell below the threshold. In the case of a below threshold contract to which the EU regime applied because of cross-border elements, the onerous rules contained in the Directive do not apply, and the contracting authority is only bound by the general Treaty obligations and derived obligations. They could adopt different criteria from those set out in the regulations regarding above threshold contracts - e.g. the domestic "best value" criteria. It was not disputed that rights and obligations might arise in a below threshold case, but they would not arise in terms of the regulations, and the fact that the Council behaved as if they were acting under the regulations does not mean that they were acting under the regulations.

[33] Fourth, senior counsel questioned what was meant by "opting into" the regulations. The general Community obligations might require there to be an effective remedy, but for below threshold contracts, they did not entitle a contractor to a particular remedy - merely an effective process of review through which the contractor might obtain a remedy. The submissions for the pursuer conflated the process of review with the remedy which one might obtain as a result of that process.

[34] On behalf of the second defender, it was not accepted that the errors claimed by the pursuer occurred. Looking to the averments on behalf of the pursuer, there was insufficient to engage the EU regime. The fundamental error into which the pursuer had fallen was to say that because you behaved as though you are covered by the terms of the Directive/obligations, you are so covered. The pursuer may have a remedy, but not the remedy which it seeks.

[35] In order to understand the public procurement regime it is necessary to understand that the EU legal order is essentially concerned with balance - a balance between the abstract notion of an EU order and the real demands of industry, and a balance between Treaty competencies and the proper interest of Member States beyond these. Articles 1, 2 and 5 of the EC Treaty make it clear that such a balance exists, and that there are activities which may properly be regulated by Member States which do not fall under Community control. There are Treaty principles or obligations, and derived obligations which flow from these. The Community is principally concerned with cross-border interests such as the free movement of goods, freedom of establishment and freedom to provide services (see Articles 23, 43 and 49). Derived obligations do not apply to all aspects of the public procurement regime. In terms of recital (2) of the preamble to the 2004 Directive only those contracts which engaged the principles of the Treaty were covered by the Directive. The Community jurisprudence only applies if there is shown to be the requisite degree of cross-border interest in tendering for the contract - there must be at least a realistic prospect of cross-border interest (Commission v Ireland at paragraph 29, Chandler at paragraphs 28/30). This was the reason for including Regulation 8(21) in the 2006 Regulations - only if the Community obligations require it are procedures required for below threshold contracts. The starting point is therefore to determine whether a particular contract may be of cross-border interest. Each case has to be considered on its own facts to determine whether a Community interest is engaged. ECJ jurisprudence is entirely consistent in this respect - see Coname at paragraphs 17 to 21. Subsequent decisions are founded on this reasoning, e.g. Parking Brixen at paragraphs 54/55, Medipac-Kazantzidis paragraph 33 and SECAP at paragraph 22 of the Advocate General's Opinion and paragraph 21 of the Judgment. It is a rebuttable presumption that below threshold contracts are devoid of Community implications (paragraph 23 of the Advocate General's Opinion in SECAP). Regulation 8(21) of the 2006 Regulations is consistent with this reasoning and applies the principle of balance. For above threshold contracts it is an irrebuttable presumption that Community rights are engaged, but for below threshold contracts it is a rebuttable presumption that they are not engaged.

[36] What then is the relevance of the pursuer's averment in Article 2 of condescendence that the Council opted to conduct the procurement in accordance with the regulations? Just because the Council conducted themselves as if they were acting under the regulations does not mean that they were in fact acting under the regulations. There is no suggestion in the averments for the pursuer that the Council applied a procedure which was equivalent to the regulations. The pursuer has no case based on breach of legitimate expectation. Moreover, the contract notice issued by the Council made no reference to the Directives or regulations. Rather, it stated that "the works will be procured under a traditional tender process, carried out under the JCT 1998 Contract", and the coding at paragraph 2.3 did not correspond with the codes at Annex 1 to the 2004 Directive. The expectation arising from this notice must be that the regulations do not apply to this contract.

[37] If the regulations do not apply, the Council has not breached an obligation arising under the regulations. It may perhaps have breached a Treaty obligation or a derived obligation, but not an obligation under the regulations. Paragraph 1 of Article 1 of the Remedies Directive requires Member States to take measures for effective review of procedures falling under the Directive; however, both the Directive and the regulations exclude below threshold contracts from their scope. The basis for a standstill period is Regulation 32 of the 2006 Regulations, but if the regulations do not apply, there is no breach of this provision. The first conclusion of the Summons seeks an order in terms of Regulation 47(8)(b)(i) of the 2006 Regulations, and Article 11 of condescendence relates entirely to alleged breaches of the regulations, but the standstill period is a creature of the regulations and they do not apply to a below threshold contract such as this. This is because of the balancing exercise carried out in both the Directives and the regulations; high value contracts which may be expected to result in cross-border interest have a stricter regulatory regime which includes a standstill period. Under that regime, it is open to a reviewing body to set aside a decision to award a contract before the contract has been concluded. No such strict requirements apply to below threshold contracts. The counter argument for the pursuer to the affect that this would breach the pursuer's Treaty rights by not providing it with an effective remedy is without foundation, because there are common law remedies available to a third party to reduce a contract entered into ultra vires by a local authority - Standard Commercial Property Securities Limited v Glasgow City Council 2001 SC 177 at paragraph [31]. It is for the Member State to ensure the legal protection which individuals derive from the direct effect of Community law - if a common law remedy such as reduction exists in relation to infringement of EU rights, this amounts to a perfectly satisfactory domestic remedy (Peterbroeck Van Campenhout). The pursuer does not have a properly focused case seeking a remedy which it is in the power this court to grant.

[38] Under reference to the Alcatel line of authorities, the pursuer was indeed entitled to an effective review, but a right to review does not entail a right to a particular remedy. Our domestic law provides arguably stronger remedies than those available under the Directives and the regulations, and they have the advantage that no reading down of the regulations or the Directives is required. The reading down of the Directives to enable them to apply to below threshold contracts would subvert the intention of the Community legislative procedure - see the Advocate General's Opinion in Coname at paragraphs 82/83.

[39] Summarising his position thus far, senior counsel submitted that the pursuer had to show that Community interests were engaged. That was a question of mixed fact and law which required a factual basis; no fair notice had been given in the pursuer's pleadings of the facts relied on to support this. If Community obligations are engaged, the value of the contract is below threshold, and the regulations do not apply. The Council has chosen to conduct itself as though the regulations do apply; while they may be entitled to do that, this is not the same thing as the regulations actually applying. The statutory powers which the court is being asked to exercise do not apply, because they apply only to above threshold contracts. The pursuer's case is therefore neither competent nor relevant.

[40] If, contrary to the above submissions, the regulations do apply, senior counsel then turned to consider the effect of Regulation 47(9) prohibiting any remedy other than an award of damages if the contract has been entered into. There was no need to read this down or disapply it; senior counsel adopted his junior's submissions in this respect and relied on recital (3) of the preamble to the 2004 Directive, and Article 2.6 of the Remedies Directive. The Scottish regulations faithfully carried through the scheme of the Remedies Directive, and it was competent to set aside a decision to award a contract during the standstill period without any reading down. The domestic law was therefore quite different from that considered in Alcatel and Stadt Halle. This view is consistent with the opinion of the Advocate General in Re Waste Water Contract: Commission of the European Communities v Germany. In the Advocate General's Opinion in that case (particularly at AG 79 - AG 81) the distinction is drawn between the protection of individual interests by the review procedure and the protection of Community interests by the objection procedure. That case involved protection of the public interest, unlike the present case, but the Advocate General's Opinion emphasised the question of proportionality.

[41] Turning to the 2007 Directive, senior counsel submitted that this has no application in the present case, and to the extent that some of the Irish cases suggest the contrary, they are wrong. This is clear from the recent case of Hochtief, particularly at paragraphs 28/9 of the court's judgment. That view is consistent with Adeneler at paragraphs 114 to 119. A Directive produces a legal effect for a Member State from the date of its publication; that legal effect is the obligation to transpose into domestic law. However, it has no effect on private interests in domestic law until the period for transposition has expired. A decision on the existing law (i.e. without taking account of the 2007 Directive) in the present case would not compromise attainment of the objective of that Directive after the period for transposition has expired, so the 2007 Directive has no relevance in the present case. In any event, the 2007 Directive did not confine itself to consolidating the case law of the ECJ - it is clear from recital (18) of the preamble and Article 2d that the Directive innovates on the pre-existing law.

[42] McLaughlin and Harvey Limited v Department of Finance and Personnel was concerned with the applicability of Regulation 47 of the equivalent regulations to a framework agreement, not to a public contract, and the observations at paragraphs [14] and [15] have to be read in that context. Henry Brothers (Magherafelt) Limited placed too much reliance on the 2007 Directive but nonetheless held that with regard to specific contracts entered into on the basis of a framework agreement the court was restricted in its power to order any remedy other than an award of damages, and it was conceded that the court did not have power to set aside such specific contracts that had been entered in to. Deeny J was wrong in Federal Security Services Limited to take the 2007 Directive into account. In any event, that case concerned interim relief and different issues from the present case; senior counsel submitted that I should not rely on this decision.

[43] There was no justification for the pursuer's position that "effective review" must mean reduction. Neither the case law nor the Directives support the proposition that it is necessary to read down the regulations to this effect; reading down is not necessary, because an effective review is provided by the present proceedings, and there is nothing wrong with the proposition that a contract which has been concluded is not amenable to reduction. Damages are an effective remedy in such a case. The Directive has struck a balance on this issue, which is reflected in the 2006 Regulations.

[44] Senior counsel invited me to repel the first and third pleas-in-law for the pursuers, and leave their tenth plea-in-law standing. He invited me to sustain the first and fourth pleas-in-law for the second defender, and the second plea-in-law insofar as the action was directed against the second defender. The fifth plea-in-law had been superseded. If the court was against the second defender's submissions, he invited me to reserve the second defender's second and third pleas-in-law, and to put the case out by order.

Reply by Counsel for the pursuer
[45] Counsel structured her reply to the submissions of senior counsel for the second defenders into four chapters - (1) the applicability of the 2006 Regulations, (2) the remedy sought, (3) the pleadings and (4) Regulation 47(9).

(1) Applicability of the 2006 Regulations

[46] The 2006 Regulations apply to the present case. The Regulations set out procedures to be followed for awards of public contracts by local authorities. Below threshold cases are an exception to the general regime established by Regulation 8. However, it does not follow that a local authority is precluded from using the regulations; it is not obliged by law to adopt the procedures set out in the regulations for below threshold contracts, but there is no prohibition on a local authority using the procedures for below threshold contracts. In terms of Regulation 8(21) it is for the Council to determine whether or not its Community obligations are engaged. The Council may or may not have had regard to the prospect of cross-border interest, but it has admitted that it proceeded under the regulations procedures, and has admitted breaches of the regulations. It is not for the pursuer to aver what considerations the Council had in mind; the pursuer cannot know whether the Council had regard to potential cross-border interest, and the second defender cannot know that there were no potential cross-border interests considered by the Council. Even if there were no cross-border interests it would still be open to the Council to conduct the procedure in terms of the regulations, in order to enable open competition and meet the requirements of the principles of equal treatment, non-discrimination and transparency. It was a presumption that the Council was entitled to do things incidental to their function; they must be entitled to assess tenderers fairly, and there was no suggestion in the regulations that a local authority was constrained not to follow the regulations.

[47] Looking at the contract notice (No16/1 of process), the type of procedure was specified as "restricted". This imported the meaning of the term used in the regulations and the Directive. Restricted procedure is defined in Regulation 2, and the distinction between open, restricted and negotiated procedure is to be found in Article 28 of the 2004 Directive. There was nothing novel in the proposition that the regulations applied - it was entirely normal for a contract of this size to be advertised in this way. Nothing turned on the discrepancy between the notice coding and the 2004 Directive codes, and nothing turned on the reference to the JCT 1998 contract - the type of contract which was ultimately entered into was neither here nor there for the purpose of procurement. In support of her proposition that the 2006 Regulations applied, and that both the pursuer and the Council proceeded on the basis that they applied, counsel pointed to the terms of the fax dated 19 June 2009 addressed to the pursuer (which was sent to the wrong fax number and only received by the pursuer on 29 June 2009). This began with the words "Dear sir, in accordance with the Public Contracts (Scotland) Regulations 2006 I acknowledge receipt of your tender for the above works...". This was the "disappointment letter" which required to be sent to unsuccessful tenderers in terms of Regulation 32.

[48] The second defender's "analogue argument" was misconceived, because it was open to the Council to contract into the regulations procedure, and that is what they did. Even if the Council was setting up a parallel procedure identical in every respect to the regulations, the pursuer can rely on that as it has rights under that procedure. The restricted procedure contains criteria for assessing competing contractors, and for a standstill period and review. That is what the Council committed themselves to, and the Council admits this. The Council admits breaches of the regulations, and against the background of the correspondence they had no option but to do so. The pursuer contends that Regulation 8(21) obliged the Council to adopt the regulation procedure in order to meet the requirements of equal treatment, non-discrimination and transparency, but it mattered not whether the Council took this course because they were obliged to do so or merely out of prudence. All that the court requires to do is to consider whether the pursuer can be granted the remedy which it seeks under the regulations - which both of the pursuer and the Council agree bind them. Were it to be held that the regulations could not be used for below threshold contracts and that it was not possible for a contracting authority to adopt the regulations in such a situation, there would be serious consequences for the many before threshold contracts which are concluded on that basis.

(2) Remedy
[49] The pursuer has a right in terms of Regulation 47 to bring court proceedings in this court. In any event, it has the right to an effective review. Review cannot be effective unless it produces an effective remedy. It is the possibility of setting aside or reducing a contract that renders the review effective. The second defender's argument that the pursuers might have a better remedy by other means, such as judicial review, is misconceived. Judicial review is only available where no remedy can be obtained by another form of action - Bell v Fiddes 1996 SLT 51. In the present situation the pursuer can rely on the remedy provided by the regulations, so judicial review is excluded. It was not open to the pursuer to seek judicial review, particularly as enforcement of the regulations is subject to a three month time limit. This is the only action which the pursuer is entitled to bring before the court. Damages are not an effective remedy. This was so for several reasons. It may be difficult to quantify the pursuer's loss arising from the Council's breach of the regulations. There was more for the pursuer in proceeding to a contract that just making a profit - it meant keeping its workforce employed, and maintaining visibility in the market place. Moreover, there were public policy reasons which might suggest that reduction was preferable to damages, as identified in the Irish cases, as damages would mean that the public purse would require to pay twice for the work performed.

(3) Pleadings

[50] The court should pay no heed to complaints by the second defender about lack of specification, particularly with regard to the applicability of the regulations. Until the Friday before the debate began, the second defender had admitted that the regulations were engaged. The Council continued to admit that the regulations were engaged. The pursuer had produced a full note of argument, which contrasted sharply with the short note of argument for the second defender which raised none of the points of specification.

(4) Regulation 47(9)

[51] Council did not seek argue that the 2007 Directive has direct effect at present. However, on the existing law, on the Alcatel line, the pursuer has a right to an effective review, and for a review to be effective, it cannot be limited to damages. The remedy is part of the effectiveness of the review. This "contract", which was entered into during the standstill period, is only a purported contract, not an effective contract, and can be set aside. The purpose of Regulation 47(9) is to protect contracts validly entered into after the standstill period has expired. That is not the situation in the present case. Alcatel is authority for the proposition that the contracting authority's decision prior to the conclusion of the contract as to the tenderer with which it will conclude the contract is in all cases open to review in a procedure whereby an applicant may have that decision set aside - see paragraph 43. It must be possible to review the decision before the contract is awarded. If Regulation 47(9) is to be construed as preventing the setting aide of the decision in circumstances such as the present, in which the contract was awarded during the standstill period, it would not have the required effect. This is the foundation of the 2007 Directive, which is not an innovation: what appears to be innovative is the combination of the infringement of the 2004 Directive with infringement of the standstill period. After the expiry of the transposition period for the 2007 Directive on 20 December 2009, a party will be able to rely on it and point to the combination of the two breaches, thereby entitling that party to the remedy of setting aside the contract. However, such a party can do this already by relying on paragraph 43 of Alcatel.

[52] Regulation 47(9) is incompatible with Community law as set out in Article 2(1)(a) and (b) and Article 2(6) of the Remedies Directive, as interpreted in Alcatel. It follows that Regulation 47(9) requires to be read down so that it is compatible. The court must interpret the 2006 Regulations in such a way that the requirement for an effective review is met - that is, a review which results in an effective remedy. That is an obligation on this court, in terms of Section 101 (and Sections 29 and 57) of the Scotland Act 1998. Regulation 32 provides for a standstill period; it cannot have been intended that a contract could be concluded within the standstill period. The regulations do not countenance a contract awarded during the standstill period, so Regulation 47(9) cannot have been intended to cover a contract awarded in breach of the standstill period. Regulation 47(9) must be interpreted as narrowly as possible so as to be within legislative competence - Marleasing SA v La Comercial Internacional de Alimentacion SA [1990] ECR 1‑04135. In Federal Security Services Limited the court read down the equivalent Regulation 47 as not restricting the remedy to damages where the contract was concluded in the standstill period, and this was the correct approach to adopt. If the court reached the view that it was not possible to read down Regulation 47(9) in this way, it should disapply the regulation on the basis of Fleming v Revenue and Customs Commissioners [2008] 1 All ER 1061.

[53] Regulation 47(9) is intended to protect contracts entered into after the standstill period has expired - if that was not the case, the inevitable result would be that a tenderer such as the pursuer would be prevented from obtaining an effective remedy. It must be possible to review the decision of a contracting authority to award a contract up to the end of the standstill period. The Remedies Directive and Alcatel were authority for the proposition that a Member State must not allow a situation such as this to occur. Regulation 47(9) does not authorise a Member State (which comprehends the court for present purposes) to do something which is contrary to Community law.

[54] Counsel reiterated her motion and agreed that the case should be put out By Order following the issuing of this Opinion.

Discussion

[55] I consider first the question of whether the 2006 Regulations apply to the procedures adopted in this case. As observed on behalf of the second defender, the case made in the pursuer's averments is founded on breach of the regulations, and the remedies which the pursuer seeks, and the legal basis for those remedies are to be found in the regulations. If the regulations do not apply, the second defender's attack on competency and relevancy will succeed.

[56] The circumstances of this action are somewhat unusual. In many proceedings under the EU and domestic public procurement regime a contractor alleges infringement of the regime by the contracting authority, and that authority denies the infringement. In the present case, with commendable frankness the Council has admitted infringement of the regulations. The pursuer avers that although the contract was below threshold in terms of Regulation 8, in providing that the restricted procedure in terms of Regulation 16 would apply, the Council opted to conduct the procurement in accordance with the regulations. Reference is also made to Regulation 8(21). The Council admits these averments. The pursuer goes on to aver that in terms of Regulation 16 the first defender issued to the pursuer a pre‑qualification questionnaire; again, the Council admits this averment. In answer 11 the Council expressly admits breaches of the regulations. It admits, under reference to Regulation 4(3) and the 2004 Directive, that in failing to award the contract to the pursuer it acted in error, and that in failing to award the contract to the pursuer it had not complied with Regulation 30(1). It admits that it was under an obligation to allow a standstill period of at least ten days following dispatch of the notice in terms of Regulation 32(1), and that it wrote to the second defender to accept its tender on 2 July 2009, that being within the standstill period. It is perhaps not surprising that the Council has adopted this position, standing the terms of the contract notice dated 6 January 2009 which describes the type of procedure as "restricted", and the fax from the Council to the pursuer dated 19 June 2009 (but sent to the wrong number and not received until 29 June 2009), which opens with the words "in accordance with the Public Contracts (Scotland) Regulations 2006 I acknowledge receipt of your tender...". Be that as it may, the pursuer and the Council are in agreement before this court that the regulations apply.

[57] Regulation 8(1) provides that the regulations, except Regulation 8(21), do not apply to below threshold contracts. All parties are agreed that this is a below threshold contract. As observed in the Advocate General's Opinion in SECAP at paragraph 23:

"The setting of a financial threshold above which contracts are subject public procurement Directives is based on a single premiss, namely that contracts of small value do not attract operators established outside national borders; such contracts are thus devoid of Community implications. However, that rebuttable presumption is open to evidence to the contrary..."

[58] Some time was spent in submissions for each party in considering the question whether there must be a prospect of or potential for cross-border interest in a contract before Community obligations are engaged. SECAP and Chandler provide support for the view that there must be at least a prospect of cross-border interest before Community obligations are engaged; some of the observations in Parking Brixen (particularly at paragraph 48) may be seen as providing support for the view that in the field of public procurement the principle of equal treatment of tenderers applies even without a cross-border interest.

[59] For what it is worth, I am inclined to agree with the second defender's submission that there must be at least a prospect of cross-border interest in order for Community obligations to apply to a below threshold contract procedure. Such a view is consistent with the aims and purposes of the Treaty and with the scheme of Community law which accepts that there are areas of activity which are not subject to Community legislation and are properly the concern of Member States. The principle of proportionality applies. However, it is not necessary for me to reach a concluded view on this question in the unusual circumstances of this case. It is for the contracting authority to assess whether there may be a cross-border interest in a below threshold contract - SECAP at paragraph 30, quoted at paragraph [23] above. That is what the Council has done in this case by considering in terms of Regulation 8(21) if it was required by its general Community obligations to follow a procedure which is sufficient to enable open competition and meet the requirements of the principles of equal treatment, non-discrimination and transparency, by reaching the view that it was so required, and by following the procedures set out in the regulations.

[60] As the Advocate General observed in SECAP, the presumption that below threshold contracts are devoid of Community implications is rebuttable. Under our procedures, in order to rebut this presumption the pursuer is entitled to rely on admissions made by the Council. The assessment as to whether there may be cross‑border interest in a below threshold contract is one for the Council to make. it has made that assessment and, by deciding to adopt the procedure set out in the Regulations, it has clearly reached the view that there may be a cross-border interest in this contract. As the court observed in SECAP, that assessment may be subject to judicial review; however, the second defender has not sought to challenge that assessment in these proceedings. For these reasons I have reached the conclusion that the 2006 Regulations do apply to the procedures relating to the award of the contract which is the subject of this action.

[61] I now turn to the question of what remedy may be available to the pursuer in respect of the Council's admitted breaches of the regulations. The second defender points to what is said to be the clear language of Regulation 47(9), limiting the court's power to order any remedy other than an award of damages if the contract to which the breach occurred has been entered into. The pursuer submits that this was not truly a contract for the purposes of the regulations because of the Council's admitted scoring error and its subsequent error in accepting the second defender's tender before the expiry of the standstill period, and that it was necessary to interpret Regulation 47(9) accordingly, to provide the pursuer with an effective remedy and to meet the purpose of the Directives.

[62] In deciding this question, it is appropriate to consider what weight, if any, should be attached to the 2007 Directive. Counsel for the pursuer did not seek to argue that it had direct effect; it came into force on 9 January 2008, but the date by which it must be transposed into domestic law is not until 20 December 2009. There may appear to be an element of artificiality in my closing my eyes to the terms of a Directive which will have direct effect within two week of the issuing of this Opinion, particularly when the pursuer's claim that the Council's contract with the second defender should be considered ineffective appears to fall squarely within the terms of Article 2d.1(b) of the 2007 Directive. However, the procedure with which this action is concerned occurred in about June/July 2009 and on the basis of Hochtief (particularly at paragraphs 28/29) I do not consider that it is appropriate for me to have regard to the 2007 Directive, even as an aid to interpretation. I bear in mind the observation of the ECJ in Adeneler (at paragraph 23) that

"from the date upon which a Directive has entered into force, the courts of the Member States must refrain as far as possible from interpreting domestic law in a manner which might seriously compromise, after the period for transposition has expired, attainment of the objective pursued by that Directive."

However, I do not consider that any interpretation which I may place on Regulation 47(9) in relation to a contract entered into during a standstill period in June/July 2009 is likely to compromise the attainment of the objective pursued by the 2007 Directive after 20 December 2009. The interpretation which I place on Regulation 47(9) is intended to reflect my understanding of the law before the period for transposition of the 2007 Directive has expired.

[63] That having been said, it does appear that the 2007 Directive contains little new, and is largely consolidatory of existing ECJ case law. Although paragraph 6 of Article 2 of the Remedies Directive expressly grants Member States the power to provide that after the conclusion of a contract following its award any remedy should be limited to damages, and although Regulation 47(9) falls within that power, it does not provide an effective remedy in terms of Article 2 of the Remedies Directive, as interpreted by the Alcatel line of authorities, referred to at paragraph [25] above.

[64] The underlying purpose of a standstill period is to enable an unsuccessful operator to set aside the decision of a contracting authority to place a contract with another operator. It would defeat the purpose of the standstill period if the contracting authority could avoid the setting aside of its decision by awarding the contract to the other operator before the expiry of the standstill period. Such an interpretation would defeat the purpose of the Directive, and would not promote open competition nor meet the requirements of the principles of equality of treatment and transparency.

[65] Although Henry Brothers (Magherafelt) Limited and others v Department of Education for Northern Ireland was concerned on its facts with a framework agreement and specific contracts entered into on the footing of this, I agree with the reasoning of Coghlin LJ at paragraph [20] of that case. I recognise that the Federal Security Services Limited case was concerned with the granting of an injunction by way of interim relief, and that different considerations may apply at that stage. Moreover, it does appear that Deeny J took the terms of the 2007 Directive into account when reaching his decision; as I have indicated above, I do not take account of the 2007 Directive in this case. Notwithstanding these differences, I agree with the view expressed by Deeny J at paragraph [40] of that decision, quoted at [26] above.

[66] When interpreting Regulation 47(9) I am required to interpret it so as to be consistent with EC principles and jurisprudence, and to apply a purposive interpretation - Marleasing (supra). Applying this approach, I consider that the proper interpretation of Regulation 47(9) is that it prevents the court from ordering any remedy other than an award of damages if the contract in relation to which the breach occurred has been properly entered into after the expiry of the standstill period. It does not prevent the court from ordering other remedies when a contracting authority purports to enter into a contract before the expiry of the standstill period. Any other interpretation would deprive the standstill period of much, if not all, of its effect, and would deprive an operator who was unsuccessful in the tendering process as a result of error on the part of the contracting authority of an effective remedy. To limit such an unsuccessful contractor's remedy to damages would be contrary to the underlying purpose of the Directives and the regulations, and contrary to the jurisprudence of the ECJ.

[67] For these reasons I propose to grant decree in terms of the first conclusion of the Summons, and decree of reduction (but not suspension) in terms of the third conclusion; I propose to sustain the first and third pleas in law for the pursuer and repel the second, fourth, fifth, sixth and seventh pleas-in-law for the pursuer. I propose to repel the first plea-in-law for the second defender. It may be that these orders will dispose of the action; however, as both the pursuer and the second defender invited me to do so, I shall put the case out By Order shortly after the issuing of this Opinion to enable parties to consider further procedure.