Electronic Data Systems Ltd v Transport Trading Ltd

Derogations from public procurement competition requirements must be construed strictly, and the party relying on the derogation bears the burden of proof. For the technical-reasons derogation, the technical reasons must relate to the subject matter of the contract and make it absolutely necessary to award the contract to a particular economic operator.

Interim relief under the procurement regulations is governed by conventional domestic principles. The court asks whether there is a serious issue to be tried, whether damages would be an adequate remedy, and where the balance of convenience lies. A proposed contractual undertaking does not necessarily remove the risk of distorted competition or difficult-to-prove loss. The usual cross-undertaking in damages remains appropriate.

Electronic Data Systems Ltd sought interim relief preventing Transport Trading Ltd, a regulated utility, from entering into a proposed future ticketing contract with Cubic without a competitive procurement process.

The claimant alleged that the proposed direct award breached the Utilities Contracts Regulations 2006. The defendant relied on the technical-reasons derogation, argued that the claimant lacked standing, and offered a side letter under which the proposed contract would terminate if the claimant ultimately succeeded.

The central issues were whether there was a serious issue concerning the derogation and standing, whether the side letter adequately protected the claimant, and how the balance of convenience should be assessed.

1. The application for interim relief was granted. The claimant was required to give the usual cross-undertaking in damages. A speedy trial was appropriate.

2. Regulation 17(1)(c) of the Utilities Contracts Regulations 2006 is a derogation from the ordinary requirement of competition and must be construed strictly. Applying Commission v Hellenic Republic Case C-394/02, the party relying on it bears the burden of proof. The technical reasons must be connected with the subject matter of the contract and must make it absolutely necessary to award the contract to a particular economic operator. On the evidence, the defendant had not shown that the alleged lack of access to intellectual property satisfied that test.

3. The claimant had a good arguable case that it was an economic operator which suffered, or risked suffering, loss or damage. The question whether it could realistically submit a credible bid depended partly on the unknown specification of the proposed contract, but it was not appropriate to postpone the issue entirely until trial. The reasoning of the Advocate General in Nachrichtenagentur GMBH Case C-454/06 supported that conclusion.

4. Following Lettings International Ltd v London Borough of Newham [2007] EWCA 1522, conventional domestic principles governed the application: serious issue to be tried, adequacy of damages, and balance of convenience. The side letter did not provide an adequate answer. During the period before any later competition, Cubic could gain information about the defendant’s requirements and future plans. That created a significant risk of distorted competition and loss which would be difficult to substantiate and prove. Leaving the claimant only a damages remedy would not accord with the scheme and purpose of the regulations.

5. The concern about preparatory work and unequal tendering opportunities was supported by Fabricom SA v Belgium Case C-21/03. The defendant’s continuing negotiations with Cubic, together with the proposed side letter and compensation arrangements, increased the risk that future competition would not provide equal opportunities as required by regulation 4(3).