Procurement Damages: Supreme Court Issues Landmark Judgment

The Supreme Court has unanimously held that damages should only be awarded where the breach of the procurement rules is "sufficiently serious". It further ruled that a damages award is not precluded on the ground that a claim is not issued before the contract is entered into.

The latest ruling adds to the significant judicial analysis that has emerged from this long-running dispute.

Nuclear Decommissioning Authority v Energy Solutions EU Ltd [2017] UKSC 34: Facts and background

On 11 April 2017, on an appeal from the Court of Appeal, the Supreme Court issued its judgment on certain preliminary issues in dispute between ATK Energy EU Ltd (formerly Energysolutions EU Limited) and the Nuclear Decommissioning Authority (NDA). The dispute concerned the award of a 14 year contract for the decommissioning of 12 Magnox power stations (the Magnox Contract).

In the underlying litigation between the parties, two judgments, handed down in July 2016 and December 2016, respectively held that the NDA had breached The Public Contracts Regulations 2006 (PCR2006) in failing to award the contract to the most economically advantageous tender and that the NDA's breach was "sufficiently serious" to merit damages within the Francovich principles. Prior to the Court of Appeal hearing of the NDA's application to appeal these two judgments, the NDA settled the underlying litigation and announced that the Magnox Contract was to terminate early. The parties requested that this Supreme Court judgment on the preliminary matters was issued, despite the settlement on liability.

Supreme Court Decision

On the preliminary issues before it, the Supreme Court held that:

the Remedies Directive (Council Directive 89/665/EEC as amended) only requires damages to be awarded where a breach of the Public Procurement Directive (2004/18/EC) is "sufficiently serious" within the meaning of the Francovich conditions for state liability under EU law; the PCR2006 had not gone further than EU law required, there was no "gold-plating" and that damages for a breach of PCR2006 should only be awarded where the breach is "sufficiently serious"; and an award of damages cannot be refused or reduced due to a claim not being brought during the standstill period before the contract is entered into, where...