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Alstom Transport UK Limited v London Underground Limited: Automatic suspension lifted

  • United Kingdom
  • Competition, EU and Trade
  • Public procurement
  • Diversified industrials
  • Transport

11-07-2017

On 27 June 2017, the court ordered the lifting of the automatic suspension in the case of Alstom Transport UK Limited v London Underground Limited [2017] EWHC 1521 (TCC).

The resulting judgment includes some interesting comments on the correct test to be applied when considering applications to lift and the extent to which certain common factors should weigh in the “balance of convenience”.

Facts of the case

When London Underground announced its intention to award a contract to supply a new traction system to Bombardier Transportation (UK) Limited (‘‘Bombardier’’), Alstom Transport UK Limited (‘‘Alstom’’) issued a claim in the Technology and Construction Court seeking an order setting aside the decision to award the contract to Bombardier and a declaration that it should be awarded the contract. It also sought damages to cover its tender costs and lost profits on the anticipated contract.

The issuing of Alstom’s claim had the effect of automatically suspending the award process, thereby preventing London Underground from awarding the contract to Bombardier absent an order from the Court lifting the suspension.

London Underground successfully applied to have the automatic suspension lifted, with the Court accepting that, in all of the circumstances, it would not be unjust to confine Alstom to a remedy in damages. In essence, the Court did not accept Alstom’s evidence that losing the contract would force Alstom to shed key employees at its "centre of expertise" in traction technology, thereby depriving Alstom of its competitive advantage in relation to possible future opportunities. The Court also found that the balance of convenience favoured lifting the automatic suspension.

The court’s decision

The judgment contains interesting comments on the test to be applied, and the factors to be taken into consideration, when considering applications to lift the automatic suspension:

Test to be applied and the adequacy of damages

  • The court determined the application by applying the well-known test set out in American Cyanamid Co v Ethicon Ltd [1975] AC 396.
  • The American Cyanamid test is a two stage test which applies when determining whether the court should grant interim relief: the first question is whether there is a serious issue to be tried and the second is whether the balance of convenience lies in favour of granting or refusing the interim relief (i.e. maintaining the automatic suspension in procurement cases). It is only where the court considers that there is a serious issue to be tried that it will consider whether the balance of convenience lies in favour of granting interim relief (i.e. maintaining the automatic suspension).
  • When considering the balance of convenience, the courts will start by considering whether an award of damages would be an adequate remedy for the claimant. If so, interim relief should normally be refused (i.e. the suspension should be lifted). If there is doubt as to the adequacy of damages for the claimant, the balance of convenience will be considered. The matters which may need to be taken into consideration in deciding where the balance lies, and the relative weight to be attached to them, will vary from case to case.
  • Although the applicability of the American Cyanamid test was confirmed, Stuart-Smith J also confirmed that in procurement cases, the correct test is not simply whether damages are an adequate remedy for the claimant but rather whether it is just, in all the circumstances, that the claimant be confined to a remedy in damages.
  • In practice, there is likely to be little difference between the two tests. In this case, Stuart-Smith J considered that Alstom had not demonstrated that it would suffer irremediable and uncompensatable loss if it was confined to a remedy in damages. Further, Alstom had not shown that there was any significant risk that it would lose its competitive edge if it lost the contract.

Public interest and the balance of convenience

  • The court confirmed that although it is a factor to take into consideration when assessing where the balance of convenience lies, the undoubted public interest in procurements being carried out properly does not, of itself, support the maintenance of the automatic suspension. This is a factor which weighs in the balance of convenience but the significance of this factor should not be overstated.
  • The court also confirmed that the potential for a defendant to pay twice if the suspension is lifted but the claim is ultimately successful should not weigh too heavily in the balance of convenience. The potential for double payment should encourage authorities to act properly in the first place, it does not necessarily support a conclusion that the suspension should be maintained. This would of course be different if there was any suggestion that corruption was involved – i.e. if there were reasonable grounds to suspect that the authority acted improperly on purpose to award a contract to its preferred supplier irrespective of the possibility of double payment.

Comments

As always, each case turns on its own facts. In this case, the Claimant failed to convince the Court in relation to certain key aspects of its case, including that there would be difficulty in calculating damages or that in lifting the automatic suspension Alstom would suffer irremediable loss, with the Court commenting that some of the arguments put forward by the Claimant were “barely credible” and that the picture painted in evidence was partial so that both scrutiny and scepticism were justified.

However, it is also the case that the outcome of an application such as this would also depend on (a) the principles by reference to which the Court will determine whether it is appropriate to grant or refuse that application (in this case the well-established American Cyanamid principles), but also (b) the interpretation of those principles.

For example, in this case, the Court took the view that the “undoubted” public interest in procurements being carried out properly did not, of itself, support the maintenance of the automatic suspension. Similarly, the Court was of the view that the risk of a public body (and by extension the taxpayer) having to pay a contract sum to the successful tenderer as well as damages to the Claimant was not, again, of itself, a reason for maintaining the suspension. At the same time, the Court considered relevant the public interest in not delaying the award of the contract, indicating that the Claimant had not shown “that the speed of the court process” supported the maintenance of the automatic suspension.

In this regard it is relevant to note that the way in which applications for the lifting of automatic suspensions are assessed by judicial and other authorities in EU Member States differs, in some cases, substantially so. The European Commission has indicated that it will issue guidance on the criteria to be applied for the purposes of determining whether to lift an automatic suspension following legal action against a contract award decision. It would be interesting to consider the extent to which such guidance would be consistent with, or divergent from, the general approach to applications for the lifting of automatic suspensions by courts in the UK.

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