Risk Management Partners Ltd v The London Borough of Brent

The Teckal exemption is narrowly construed. A public authority must establish both that it exercises control similar to that over its own departments and that the separate entity carries out the essential part of its activities with the controlling authority or authorities. In a jointly owned entity, the necessary control may be exercised collectively by the public authorities. The exemption can apply to insurance contracts and forms part of the domestic procurement regime where the Regulations are construed consistently with the Directive. However, contractual and managerial arrangements showing substantial operational independence may defeat the first condition. For a damages claim based on an actual breach, time under regulation 47(7) begins when the breach occurs, not when it was merely apprehended.

Risk Management Partners Ltd claimed damages from Brent for awarding insurance contracts to The London Authorities Mutual Ltd without conducting the tender process required by the Public Contracts Regulations 2006. The parties accepted that Brent was a contracting authority, that the contracts were Part A services contracts, that RMP was an economic operator, and that the express procurement requirements had not been followed.

Brent relied on the Teckal exemption, contending that LAML was sufficiently controlled by its public authority members. It also argued that RMP’s claim was out of time under regulation 47(7). The central issues were whether the exemption formed part of domestic law, whether it could apply to insurance, whether its conditions were satisfied, and when time began to run.

1. Teckal exemption. The exemption is a strict exception to the procurement rules. Brent had to establish both conditions: control similar to that exercised over its own departments, and the essential part of LAML’s activities being carried out with the controlling public authority or authorities. The control assessment required consideration of all relevant legislative provisions and circumstances, including whether the authority had decisive influence over strategic objectives and significant decisions.
2. Joint ownership. In a company owned by several public authorities, it was sufficient in principle for the authorities collectively to exercise the requisite influence. Brent did not have to show that it alone controlled LAML’s insurance decisions. The question had been raised in the pending reference in Coditel Brabant v Commune d’Uccle, but the judge considered the existing authority sufficient for the present case.
3. Domestic implementation and insurance. The Regulations could lawfully have excluded the exemption, but they were to be construed in the light of the intention to implement the Directive. Accordingly, “contract” did not include an arrangement satisfying the Teckal conditions. The exemption was capable of applying to insurance; there was no inherent reason why a public authority could not establish a captive insurer.
4. Application to LAML. LAML’s constitutional documents, the powers of its Board, the power to terminate participating membership, the claims provisions, the appointment of private managers and the commercial form of its policies indicated substantial independence. Those features were inconsistent with the first condition. Brent therefore failed to establish the exemption, and its awards to LAML breached regulation 47(1)(a).
5. Limitation. For a claim for damages based on an actual breach, the grounds for proceedings under regulation 47(7) first arose when the breach occurred. The breach occurred when Brent abandoned the tender process and awarded the contracts to LAML in March 2007. RMP was therefore entitled to damages.