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Exclusion from future tenders due to your joint-venture partner default – European court clarifies position

The Court of Justice of the European Union (the “CJEU”) has recently opined on the exclusion from participation in future public procurement procedures of economic operators participating in a public contract as a group of economic operators / joint venture, where that contract is terminated early due to deficiencies by the group / joint venture. [1]

The CJEU firstly noted that it is permissible for a Member State to provide for a presumption that any economic operator de jure responsible for the proper performance of a public contract is deemed to have contributed to the significant or persistent deficiencies which resulted in the early termination of that contract (the joint and several liability of members to a public contract for the breaches of one of the members, therefore, is not contrary to EU procurement law).

However, the CJEU stated that this presumption must be rebuttable when the contract has been awarded to a group of economic operators whose individual contributions to the deficiencies and any efforts to remedy them are not necessarily identical. It cannot, it clarified, be accepted that an economic operator is automatically categorised as unreliable and is temporarily excluded from participating in future tenders, without a “specific and individual” assessment first being undertaken on the operator’s conduct.

In other words, the application of a temporary exclusion must be based on the wrongful and negligent conduct of the individual operator, who shall be given an opportunity to demonstrate that the deficiencies which led to the early termination of that contract were unrelated to its individual conduct. Where it transpires that that operator was not the cause of the deficiencies recorded and it could not reasonably be required to do more than it did in order to remedy those deficiencies, Directive 2014/24 precludes that operator from being entered on the list of unreliable suppliers, the CJEU concluded.

Additionally, the CJEU noted that any economic operator alleging an infringement of its rights by virtue of its placement on a temporary exclusion list must have an effective remedy. The possibility of bringing an action against the early termination of the public contract giving rise to its entry on an unreliable economic operators list does not constitute an effective remedy, the CJEU noted – rather, national law must provide an opportunity for each member of the group of economic operators / joint venture to bring an action to challenge its entry on the list.

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[1] Case C-682/21 HSC Baltic and Others

For further information, or to discuss your procurement-related queries, kindly get in touch with Katya Gatt (katya.gatt@camilleripreziosi.com) or Steve Decesare (steve.decesare @camilleripreziosi.com).