Litigation 2019

Last Updated July 15, 2019

Contributed By Suciu Popa

Trends and Developments


Authors



Suciu Popa Suciu Popa is a top full-service Romanian business law firm with a reputation built during 20 years of acting for major strategic investors and investment funds, local entrepreneurs and foreign corporations, public authorities and international financial institutions. Its lawyers have an exceptional track record in complex transactions, with high levels of expertise that have proved critical in helping clients achieve their business goals in a market of constant change and complexity. Suciu Popa represents clients in all industries and has particularly strong capabilities in mergers & acquisitions, energy & natural resources, litigation, international arbitration, capital markets, infrastructure, PPP & public procurement, construction, real estate, competition and IP, insolvency & restructuring.

Disputes in public tendering are significantly widespread in the Romanian litigation environment and are primarily triggered by opposing views as to how the assessment of the awarding procedure has been conducted and whether an appropriate and justified mark has been allocated.

In an effort to reduce the number of frivolous challenges that resulted in undue delays in the competitive bidding procedures, the Romanian legislator brought significant amendments to the public procurement legislation (“PPL”) and to the grievance redressal mechanism thereto, which allows disappointed tenderers to take legal action.

Although the amendments aim to eliminate the problems and failures encountered in the public procurement process since the enactment of the 2016 PPL and to fast-track the award procedure, they nonetheless lead to procedural hurdles for any potential claimant. A key difficulty is that the schedule within which a challenge may be submitted is extremely tight, notwithstanding the deposit bond for the claims brought before the National Council for Solving Complaints (“NCSC”) and the courts of law.

The cost and risk of filing a claim must be judiciously considered before the initiation of any challenge against an act of a contracting authority, as the commencement of the challenging proceedings does not trigger an automatic suspension of the award procedure or of the conclusion of the contract. The NCSC and the courts of law can decide the suspension of the award procedure or of the execution of the contract only in duly justified cases and in order to prevent imminent damage. Other significant hindrances in the challenging proceedings are the limitation deadline and the requirement for contracting authorities to protect the confidentiality of the submissions and documents that are classified or protected by an intellectual property right.

The present article deals mainly with the amendments recently brought to the grievance redressal mechanism in public tendering. Additionally, a concise overview of the present Romanian PPL framework is provided.

Romanian Public Procurement Legislation – Historical Overview

Following the EU public procurement reform in 2014, Romania transposed the Directive 2014/24/EU, Directive 2014/25/EU and Directive 2014/23/EU into a new package of laws. As a result, from 23 May 2016, the core Romanian PPL consists of Law no 98/2016 on public procurement (“Public Procurement Law”), Law No 99/2016 on utilities procurement (“Utilities Procurement Law”) and Law No 100/2016 on work concession contracts and services concession contracts (“Concession Law”). Secondary legislation was also adopted for the application of the PPL, such as Government Decision (“GD”) 395/2016, GD 394/2016 and 867/2016.

Furthermore, a remedies law was also enacted, namely Law No 101/2016 on remedies and review procedures regarding the award of public procurement contracts, sectorial contracts and works and services concession contracts, as well as for the organisation and functioning of the National Council for Solving Complaints (“Remedies Law”). The Remedies Directive for the utilities sector (Directive 92/13/EEC) and the Remedies Directive for the public sector (Directive 89/665/EEC), as substantially amended by Directive 2007/66/EC were transposed into the domestic remedies law.

The Remedies Law was supplemented by GD No 1037/2011 on the approval of the Regulation on organisation and functioning of the NCSC, by Emergency Government Ordinance (“EGO”) No 13/2015 on the setting, organisation and functioning of the National Agency for Public Procurement (“NAPP”), by GD No 634/2015 on the organisation and functioning of the NAPP. 

The Remedies Law expressly provides that the disputes related to the interpretation, entering into, execution, amendment and termination of the public procurement contracts, sectorial contracts and works and services concession contracts can be subject to arbitration. Disputes related to the contract awarding procedures are only subject to the jurisdiction of CNSC or the courts.

The Remedies Law sets the following review standards:

  • prior notice submitted to the contracting authority regarding the presumed unlawful acts as a condition of admissibility for the claim filed with the CNSC;
  • detailed provisions governing the right of the aggrieved party to choose between submitting claims to the CNSC or courts of law;
  • an accelerated procedure before the courts of law;
  • suspension of the awarding procedure and/or contract if special conditions are fulfilled and a bond of 2% from the estimated or established contract value is paid.

The 2017 Adjusting Legislation

The year 2017 brought a number of significant changes in the PPL environment, following the lawmaker's initiative to enhance and improve the public procurement practice. Accordingly, the Government of Romania adopted EGO No 98/2017 on the ex ante control function of award of public procurement contracts/framework agreements, of sector contracts/framework agreements and works concession and service concession contracts (“EGO 98/2017”), as well as EGO No 107/2017 for the amendment and supplementation of PPL (“EGO 107/2017”).

Under EGO 98/2017, NAPP becomes the public institution responsible for fulfilling the ex ante control of the contract-awarding process. In fulfilling its mission, NAPP performs quality and compliance control throughout the entire public procurement award procedure starting with the publication of the awarding documentation in the Electronic System for Public Procurement (“SEAP” is the Romanian acronym) and until the communications on the outcome of the award procedure. NAPP also oversees the amendments brought to the contracts and verifies the application of the selection methodology, as well as the contracting authority's proposal for answers to the clarification requests. The entire control process was designed to decrease the number of challenges against the irregularities and unlawful acts in public procurement procedures and to expedite the award procedure.

As to EGO 107/2017, the changes brought to the existing PPL aimed at correcting some legal inconsistencies with EU procurement directives, at rectifying some lapses and drafting errors, and at clarifying some legal concepts that were ambiguous in the procurement practice.

All these amendments were absolutely necessary in order to avoid the initiation of infringement procedures by the European Commission against Romania, but also to comply with the requirements of the Partnership concluded between the Government of Romania and the European Commission on 6 August 2014 regarding the development and implementation of the National Public Procurement Strategy.

The 2018 Amending and Supplementing Legislation

However, the goals of EGO 107/2017 were not fully attained, and on 4 June 2018 new amending and supplementing legislation was passed, namely Emergency Government Ordinance 45/2018.

The main goal of EGO 45/2018 was to curtail the timeframe for completion of public procurement procedures and to restrain the challenge options which appeared as one of the major obstacles to an expeditious award procedure. The law was also intended to bring the Romanian PPL in line with the EU regulations regarding the thresholds applicable in public procurement procedures.

The most significant changes brought by EGO 45/2018 to the Remedies Law will be summarised below.

Repeal of the prior notification procedure

EGO 45/2018 repeals the provisions regarding prior notice submitted to the contracting authority. Consequently, any claim will be submitted by the aggrieved party directly before the NCSC or the courts of law.

If it deems necessary, the contracting authority may take any measures of redress within three days following the receipt of the complaint. The measures shall be communicated to the plaintiff, to the other economic operators involved in the procurement procedure, as well as to NCSC in one working day as of the date they were adopted.

Relevant deadlines for challenging the acts of the contracting authority related to the contract-awarding procedures

Any challenge against an act of a contracting authority issued in the awarding procedure must be filed before the NCSC or the court of law: (i) within ten days from the date on which the potential claimant first became aware of the presumably illegal act for the contracts having a value over the thresholds provided by the PPL; (ii) within five days as of the acknowledgement of the presumably illegal act for the contracts having a value under the thresholds provided by the PPL.

Deposit bond for the challenges before the NCSC and courts of law

Any challenge against an act of a contracting authority issued in the public procurement procedure can be resolved only after a deposit bond of 2% from the estimated or established value of the contract is posted. In the event the plaintiff does not submit the bond, the claim will be rejected.

The value of the deposit bond is capped as follows:

  • RON35,000 (approximately EUR7,500) or RON88,000 (approximately EUR19,000) for contracts having an estimated or established value under the thresholds provided by the Public Procurement Law, as subsequently amended;
  • RON220,000 (approximately EUR47,500) or RON880,000 (approximately EUR189,000) for contracts having an estimated or established value over the thresholds provided by the Public Procurement Law, as subsequently amended.

For the framework contracts, the deposit bond is established based on the estimated value of the largest subsequent contract intended to be awarded.

The bond will be returned, upon request, after the final determination of the challenge.

Confidentiality aspects

The contracting authority has the obligation to publish the challenge against the acts issued in public procurement procedure in the SEAP. In any event, the information which the economic operator deems confidential, classified or protected by an intellectual property right will not be published.

Amendments to the deadlines related to the NCSC procedure

The deadline for the contracting authority to respond to the NCSC’s request and to produce certain documents for use as evidence has been curtailed to three days as of the receipt of the request, instead of five days.

The deadline for the NCSC to decide on the challenge has been shortened to 15 days (instead of 20 working days) as of the receipt of the public procurement file, respectively to five days (instead of ten working days) in case of a preliminary issue that can be determined before considering the challenge on merits.

Relevant deadlines for challenging the NCSC decision

The aggrieved person must submit the challenge against the NCSC decision within ten working days as of the communication to the parties to procedure and, respectively, as of the date of acknowledgement for the other interested parties. The first trial date will not exceed 20 days as of the submission of the challenge; the following trial dates cannot exceed 15 days. The court must decide the case within 45 days as of the submission of the challenge.

The statement of defense must be submitted within five days as of the receipt of the challenge from the competent court.

The provisions regarding the bail for the request to suspend the award procedure and the performance of the contract were repealed.

Amendments to the deadlines related to court procedure

The statement of defence must be submitted and communicated to the plaintiff within five working days as of the communication of the challenge by the court of law.

The plaintiff must submit a reply in three working days as of the statement of defence.

The deadline for the court of law to decide on the challenge remained unchanged, namely 45 days as of the submission of the challenge.

Solutions that can be rendered by the NCSC or the courts of law

In case the NCSC or the competent court compels the contracting authority to issue an act or to adopt specific measures, the aforementioned duties must be clearly and precisely indicated.

NCSC and the court can decide to award a contract to a specific economic operator when the quality of a winning bidder results from the decision of the contracting authority or from the information contained in the challenge file.

In the event the NCSC or the court orders the re-evaluation of the award procedure, the order must clearly and precisely indicate: the limits of such re-evaluation; the identity of the bids subject to re-evaluation; the stages of the award procedure subject to the re-evaluation; the concrete measures to be adopted by the contracting authority within the re-evaluation.

Conclusion

The amendments brought to the PPL aimed inter alia at curtailing the grievance redressal mechanism in public tendering. Notwithstanding the importance of an expedited award procedure, the amendments brought to the limitation period and to the deposit bond result in significant hindrances to any person having an interest in being awarded a particular public procurement contract, and who has been or is likely to be harmed by an alleged infringement of the PPL during public tendering.

Suciu Popa

15 B/C Mareșal Alexandru Averescu Blvd.,
6th Floor 1st District,
Bucharest,
România

+40 374 494 944

+40 374 094 490

office@suciupopa.ro www.suciupopa.ro
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Authors



Suciu Popa Suciu Popa is a top full-service Romanian business law firm with a reputation built during 20 years of acting for major strategic investors and investment funds, local entrepreneurs and foreign corporations, public authorities and international financial institutions. Its lawyers have an exceptional track record in complex transactions, with high levels of expertise that have proved critical in helping clients achieve their business goals in a market of constant change and complexity. Suciu Popa represents clients in all industries and has particularly strong capabilities in mergers & acquisitions, energy & natural resources, litigation, international arbitration, capital markets, infrastructure, PPP & public procurement, construction, real estate, competition and IP, insolvency & restructuring.

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