Nuclear Decommissioning Authority v EnergySolutions EU Ltd

Under EU public procurement law, damages against a contracting authority are required only where the three Francovich conditions are satisfied. The breach must therefore be sufficiently serious, although domestic law may create wider liability.

The Public Contracts Regulations 2006, as amended in 2009, did not create wider liability. Damages under regulation 47J(2)(c) require satisfaction of the Francovich conditions, despite the domestic characterisation of the claim as breach of statutory duty.

An unsuccessful tenderer which begins proceedings within the prescribed 30 days does not fail to mitigate merely by awaiting execution of the contract. It may choose to pursue damages without seeking or maintaining a pre-contract suspension.

Nuclear Decommissioning Authority v EnergySolutions EU Ltd concerned the award of a major nuclear decommissioning contract. EnergySolutions, subsequently called ATK Energy EU Ltd, belonged to an unsuccessful consortium. For this appeal it was assumed, consistently with Fraser J's later findings in [2016] EWHC 1988 (TCC), that the authority had committed manifest evaluation errors and should have awarded the contract to that consortium.

ATK issued proceedings within the 30-day period prescribed by the Public Contracts Regulations 2006, but only after the authority had entered into the contract with its competitor. Preliminary issues were decided in the High Court, [2015] PTSR 1106, and on appeal by the Court of Appeal, [2015] EWCA Civ 1262; [2016] PTSR 689. The parties subsequently compromised the damages claim but asked the Supreme Court to give judgment.

The issues were whether EU law required damages only for a sufficiently serious breach; whether the domestic Regulations imposed liability for less serious breaches; and whether damages could be denied because ATK had not begun proceedings before the contract was executed.

1. Disposition. The authority's appeal was allowed on the domestic-law issue and dismissed on the mitigation issue. The Court of Appeal's conclusion on the EU-law issue was affirmed. Lord Mance gave the judgment, with which Lord Neuberger, Lady Hale, Lord Sumption and Lord Carnwath agreed.

2. The Remedies Directive requires a damages remedy against a contracting authority only where the three Francovich conditions are satisfied: the infringed rule must confer rights on individuals, the breach must be sufficiently serious, and the breach must directly cause the loss. The judgment in Combinatie Spijker Infrabouw-De Jonge Konstruktie v Provincie Drenthe [2010] ECR I-12655 clearly applied those conditions to an awarding authority. Stadt Graz v Strabag AG [2010] ECR I-8769 was consistent with that conclusion: a fixed requirement of fault is impermissible, although fault-related matters may inform whether a breach was sufficiently serious. The position was acte clair and required no reference to the Court of Justice.

3. The Public Contracts Regulations 2006, as amended in 2009, should be read as providing damages only when the Francovich conditions are met. EU law did not compel that construction because those conditions prescribed only minimum protection. Nevertheless, the implementation materials showed that the legislator intended a minimalist transposition without relevant gold-plating. The word “may” in regulations 47I(2) and 47J(2)(c) was consistent with conditional liability. Characterising the claim in domestic law as breach of statutory duty did not remove the conditions governing the underlying EU liability. The contrary reasoning in Matra Communications SAS v Home Office [1999] 1 WLR 1646 was wrong.

4. Domestic law may in principle treat reasonable use of available legal remedies as an aspect of mitigation. The procurement breach occurred when the wrongful award decision was made; execution of the contract was its consequence. Nevertheless, an economic operator was entitled to await execution and claim damages. It was not obliged to obtain a suspension, offer a cross-undertaking or provide security for the contracting authority's benefit. The authority could protect itself by postponing execution until the 30-day claim period expired. ATK therefore could not be held to have acted unreasonably merely by failing to prevent the authority from implementing its own wrongful award decision.

• United Kingdom Supreme Court: In Nuclear Decommissioning Authority v EnergySolutions EU Ltd [2017] UKSC 34, the appeal was allowed on the construction of the domestic damages provisions and dismissed on mitigation. The Court of Appeal's EU-law conclusion was affirmed.
• Court of Appeal: [2015] EWCA Civ 1262; [2016] PTSR 689. The court held that EU law required a sufficiently serious breach, but that the Public Contracts Regulations 2006 allowed damages for any breach. It rejected the proposed mitigation defence.
• High Court: The preliminary issues were determined by Edwards-Stuart J in [2015] PTSR 1106. He treated damages as available without a sufficiently serious breach and regarded mitigation as fact-sensitive, while expressing views discouraging the proposed defence.