Alstom Transport v Eurostar International Ltd and Another
| Jurisdiction | England & Wales |
| Judge | Mr Justice Mann |
| Judgment Date | 13 July 2011 |
| Neutral Citation | [2011] EWHC 1828 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: HC10C03303/HC11C01788 |
| Date | 13 July 2011 |
[2011] EWHC 1828 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Mann
Case No: HC10C03303/HC11C01788
Sarah Hannaford QC and Jessica Stephens (instructed by Hogan Lovells International LLP) for the Claimant
Michael Bowsher QC and Ewan West (instructed by Burges Salmon LLP) for the First Defendant
John Howell QC and Rob Williams (instructed by Freshfields Bruckhaus Deringer LLP) for the Second Defendant
Hearing dates: 14 th & 15 th June 2011
Introduction
This is an application to strike out part of a claim in these proceedings, which turn on the regulations governing public procurement exercises. That part is a claim for a "declaration of ineffectiveness". The claim concerns tenders for a new generation of trains to run under the English Channel. The first defendant (Eurostar) is the train operator and it invited the claimant (Alstom) and the second defendant (Siemens) to tender for those trains. The contract is a valuable one. In October 2010 Eurostar announced that Siemens was the successful tenderer. Alstom objected to that decision and on 19 th October 2010 commenced proceedings (action no HC10C03303—the 2010 action) in which it sought inter alia an injunction to restrain Eurostar from contracting with Siemens. Vos J dismissed a claim for an interim injunction restraining Eurostar from contracting on 29 th October ( [2010] EWHC 2747 (Ch)); reference should be made to that decision for the history of the matter up until then. Eurostar entered into a contract (actually 2 contracts, but I can treat them as one for these purposes) with Siemens on 3 rd December 2010 and announced to Alstom on that date that the contract had been entered into.
The action at that time was also a claim for damages and a claim for a declaration of ineffectiveness (a remedy given by regulations which brings an offending contract to an end—see below) in relation to a preliminary contract with which I am not presently concerned. Originally Siemens was not a party to it, but it was subsequently joined. Then on 4 th May 2011 Alstom sought to amend its claim to introduce new material and in particular a new claim for a declaration of ineffectiveness in relation to the final contract. The defendants objected to the amendments on various grounds and court time availability meant that the application could not be dealt with then. In order to crystallise certain limitation arguments, and preserve possible rights for limitation purposes, it was agreed that it would be more convenient to raise the new points in a separate action which incorporated the amended claim, and that what were originally objections to an amendment would be taken in the form of an application to strike out made in the new action. That was duly done. It is that application which is now before me.
The principles on which I should act in considering such a striking out action are clear. I should only strike the claim out if it is clear, at this stage, that the claim cannot succeed, and that a trial will add nothing material to the debate. That is the test I shall apply.
Outline of the basis of the application and its significance
Before turning to the applicable regulations it will be useful to outline the basis on which the striking out application is made. It is twofold:
(a) First, it is said that the necessary grounds do not exist for the application of the remedy of a declaration of ineffectiveness. The regulations in question prescribe certain grounds which have to be fulfilled before the remedy is available, and it is said that none of them apply.
(b) Second, if that is wrong, it is said that the claim is made out of time. The regulations prescribe certain limited time periods within which any claim for a declaration of ineffectiveness must be made, and it is said that this claim falls outside the applicable period.
For the purposes of this application a number of assumptions are made in favour of Alstom. The first is that the regulations relied on by Alstom apply. The defendants both vigorously contest their applicability to the relevant contract procedure, but for the purposes of this application they assume that they apply. The second is an assumption about the contract entered into when compared with the previous tendering process. Alstom's claim is dependent on an allegation that the contract entered into by Eurostar and Siemens departs from the contract sought by the tender process to such an extent that it is a materially varied contract which was not actually the subject of the previous tender process and would have required a fresh process in order to fall within the regulations in question. This, too is assumed to be correct.
The significance of the application is that, if successful, it will remove Siemens from the fray, or largely from the fray and remove the commercial uncertainty arising from the threat of the remedy to the contract. The main reason for Siemens being a party at all is because it is a necessary party to the ineffectiveness claim. If that claim goes then Siemens will cease to be a relevant party to the second action, and the claim overall will be a damages one. That means that Eurostar and Siemens can continue to implement their contract in the knowledge that it cannot be upset, and a large degree of commercial uncertainty will be removed.
The principal legislative provisions
For the purposes of this application it is accepted that I should assume that the Utilities Contracts Regulations 2006 SI2006/5, as amended in 2009, should apply in their current amended form. There are two elements built into that assumption, neither of which will apply if and insofar as there is a trial of these matters. The first is that any regulations apply at all; and the second is that, if they do, they apply in their current amended form. That puts the case on the applicability of the Regulations at its highest so far as the claimant is concerned.
The Regulations set out a number of procedural requirements relating to the inviting of tenders for public procurement projects, the consideration and evaluation of those tenders, the determination as to how to award the resulting contract procedures for notifying unsuccessful parties, and remedies for breach of the Regulations. The essential relevant provisions are as follows.
An amendment of the 2006 Regulations in 2009 introduces the remedy of "ineffectiveness". It is now contained in Reg 45J:
"(1) Paragraph (2) applies if –
a. the Court is satisfied that a decision or action taken by a utility was in breach of the duty owed in accordance with Regulations 45A or 45B; and
b. the contract has already been entered into.
(2) In those circumstances, the Court –
(a) must, if it is satisfied that any of the grounds for ineffectiveness applies, make a declaration of ineffectiveness in respect of the contract unless Regulation 45L requires the Court not to do so…"
Reg 45M provides that, where a declaration of ineffectiveness is made, the contract is to be considered prospectively, but not retrospectively, ineffective. Reg 45L must be assumed not to apply for the purposes of this application.
Reg 45B has no relevance to this case. Reg 45A (which is referred to in Reg 45J(1)(a)) provides:
"45A(1) This Regulation applies to the obligation on a utility to comply with –
the provisions of these Regulations, other than Regulations 30(9) and 38…
(2) That obligation is a duty owed to an economic operator."
Thus the declaration is to be granted on the footing of a breach of obligation contained in the Regulations. However, there are three further "grounds for ineffectiveness", one of which has to exist for the remedy to be available. They are contained in Reg 45K. That Regulation contains a number of provisions which have no bearing on the present matter, and I do not set them out. So far as material it reads:
"45K – grounds for ineffectiveness
(1) There are three grounds for ineffectiveness.
The first ground
(2) Subject to paragraph (3), the first ground applies where the contract has been awarded without prior publication of a notice in the Official Journal in any case in which these Regulations require the prior publication of such a notice.
…
The second ground
(5) The second ground applies where all the following apply –
(a) the contract has been entered into in breach of any requirement imposed by—
(i) Regulation 33A (the standstill period)…
(b) there has also been a breach of the duty owed to the economic operator in accordance with regulation 45A or 45B in respect of obligations other than those imposed by regulation 33A (the standstill period) and this Part;
(c) the breach mentioned in sub-paragraph (a) has deprived the economic operator of the possibility of starting proceedings in respect of the breach mentioned in sub-paragraph (b) or, pursuing them to a proper conclusion, before the contract was entered into;
(d) the breach mentioned in sub-paragraph (b) has affected the chances of the economic operator obtaining the contract."
There is a third ground which has no relevance in this case.
Alstom relies on each of those two grounds in the alternative. A consideration of the second requires an understanding of the reference to the standstill period (Reg 33A). The preceding Reg 33 provides for notice to be given after an award decision, and Reg 33A requires a standstill period after that notification.
"33—Information about contract award procedures
(a)…a utility shall, as soon as possible after the decision has been made, inform the tenderers and candidates of its decision to award the contract, and shall do so by notice in writing by the most rapid means of communication practicable.
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