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Annex A
CONSULTATION ON THE APPROACH TO IMPLEMENTATION OF THE EU REMEDIES DIRECTIVE
INITIAL REGULATORY IMPACT ASSESSMENT

1. Title of proposal

Transposition of EU Directive 2007/66/EC ¹ (The Remedies Directive) in Scots law.

2. Purpose and intended effect

Objectives

The Remedies Directive introduces changes to the legal remedies available to suppliers for breaches of EU procurement law. The Directive addresses two main problems: the difficulty of challenging a direct award on the basis that there has been no prior advertising and no competition; and the difficulty of ensuring that a contract award decision can be set aside before the contract comes into effect.

The Directive provides that contracts which should have been advertised in the Official Journal of the European Union but which are instead awarded directly should be deemed ineffective. It also provides for a harmonised standstill period between the contract award decision and the conclusion of the contract, to allow for challenges to the contract award decision. In addition, where a contract award decision is challenged in court, the contracting authority cannot conclude the contract before the court has taken a decision on the application.

The Remedies Directive seeks to improve the rules governing the remedies available to aggrieved bidders, to make the procurement process more transparent, to further deter contracting authorities from awarding contracts in breach of EU procurement law and to satisfactorily address situations where such awards are made.

EU Member States must implement the Remedies Directive in national legislation by 20 December 2009.

Background

Member States have a responsibility to ensure that effective and rapid remedies are available against decisions taken by public sector contracting authorities. The European Commission has examined the review mechanisms in place in Member States and has identified a number of weaknesses. The purpose of the Remedies Directive is to improve the effectiveness of Member States' procedures for reviewing the award of public contracts.

At present, the Scottish Regulations ² allow suppliers to bring proceedings in the Sheriff Court or the Court of Session against contracting authorities which have infringed their obligations to comply with the Regulations, or any other enforceable Community obligation which may be relevant to awarding a public contract.

Under the Scottish Regulations, the Sheriff Court or the Court of Session may: make an interim order suspending the procedure leading to the award of the contract; order the contracting authority to amend any document forming part of the procurement process or to set aside any decision, including its decision to award a contract; award damages.

It will be necessary to amend the Scottish Regulations to implement the provisions in the Remedies Directive.

Rationale for Government intervention

Government intervention is necessary to transpose the Directive by the European Commission's deadline of 20 December 2009.

3. Consultation

Within government

The following government agencies and departments have been consulted in the preparation of this initial RIA:

Constitution, Law and Courts Directorate, Scottish Government

Office of Government Commerce

Scottish Government Legal Directorate

Public consultation

Public consultation will be in two parts:

• A consultation on implementation of the Remedies Directive in Scotland and this initial RIA will take place from August to November 2008. Where authorised to do so, we will publish the responses to the consultation; we will also publish a summary of the responses.
• We will publish draft amendments to the Scottish Regulations and a revised RIA for consultation in Spring 2009.

4. Options

Option 1 - do nothing

Non-implementation of the Directive would trigger infraction proceedings and the UK could be liable for substantial penalties. The Scottish Ministers are obliged by the terms of the Scotland Act to fulfil their obligations under EU law. We therefore intend to implement the Directive in line with our EC Treaty obligations and the Scotland Act.

Option 2 - implement the Directive into national law

It will be necessary to amend the Scottish Regulations to implement the provisions in the Directive relating to review procedures, the standstill period, ineffectiveness and other sanctions.

The options for implementation are constrained by the requirements of the Directive, which has already been adopted at the European level. The majority of the provisions in the Directive are mandatory. However, Member States have a choice as to how certain provisions in the Directive are implemented. For example, in relation to ineffectiveness, Member States 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. The first stage of the public consultation highlights all new provisions in the Directive, as well as explaining those provisions which have not changed. In particular, the consultation seeks feedback on implementation of the optional elements in the Directive.

The preferred options for implementation will emerge from analysis of the consultation responses.

5. Costs and benefits

Sectors and groups affected

The following are likely to be affected by changes to the legal remedies available to suppliers for breaches of EU procurement law: public sector procurement organisations must ensure that they comply with the rules governing remedies; suppliers and service providers will have greater opportunity to challenge in court the procedures adopted by public sector procurement organisations and the decisions they make. We anticipate that there may be an increase in the number of legal challenges in the Sheriff Court and Court of Session.

Benefits

Implementation of the Directive in Scotland will ensure that effective legal remedies are available to suppliers and service providers for breaches of EU procurement law. It will further deter contracting authorities from awarding contracts in breach of EU procurement law. Greater compliance with EU procurement law will result in savings to the public purse.

Costs

In our view, the implementation of the Directive will not make a significant impact on costs to business, the third sector or the public sector. We would welcome feedback on the potential costs to these groups, which will, of course, depend on the preferred options for implementation. We will undertake a more detailed cost analysis once the preferred options have been identified.

6. Small/Micro Firms Impact Test

It is not anticipated that implementation of the Directive will have any impact on small or micro businesses. However, we would welcome feedback on possible impacts.

7. Legal Aid Impact Test

The majority of those seeking remedies for breach of EU procurement law will be doing so on behalf of businesses, in which case legal aid will not be available. There will therefore not be a significant impact on the legal aid fund.

8. "Test Run" of business forms

Implementation of the Directive will not introduce any statutory business forms.

9. Competition assessment

EU procurement legislation is intended to facilitate greater competition by opening up markets. The Remedies Directive binds only the public sector but beneficial effects are shared with private sector suppliers and service providers.

10. Enforcement, sanctions and monitoring

The European Commission will review Member States' implementation of the Remedies Directive and report to the European Parliament and the Council of Europe before 20 December 2012.

11. Declaration and publication

Consultation

This initial RIA and the proposals contained in the accompanying consultation paper are now produced for comment. It has been distributed to a range of key stakeholders with an interest in public procurement.

It is also available on the Scottish Government website consultation page.

Contact

Any queries about this RIA should be addressed to:

Jessie Laurie

Tel: 0141 242 5672
Fax: 0141 244 5599
E-mail: procurementremedies@scotland.gsi.gov.uk

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