In public procurement competitions, there is potential for a legal challenge from an unsuccessful bidder to trigger an automatic injunction on awarding the contract. If proceedings are issued within the standstill period, an 'automatic injunction' comes into force, and with it, the potential of a lengthy delay in the contract being awarded. This can have serious consequences for all parties concerned and it may fall to the courts to determine if the injunction can be lifted before reaching trial.
The recent case of Kellogg Brown & Root Ltd v Mayor's Office for Policing and Crime delivered by the High Court of England and Wales in November 2021 provides some valuable guidance for contracting authorities and bidders when navigating the implications of the automatic injunction.
What is an automatic injunction in public procurement?
Under the UK's public procurement regime, when an unsuccessful bidder issues a Claim Form (or Writ of Summons in Northern Ireland) to challenge the award of a contract within the statutory standstill period, the contracting authority must immediately refrain from entering a new contract with the successful bidder. This injunction must remain in place at least until a court makes an interim order to lift it or until the matter is determined at trial.
As per Regulation 87 of the Public Contract Regulations 2015 (as amended) the mandatory standstill period is 10 days from the date that the standstill letter is issued (subject to some exemptions). Unsuccessful bidders must therefore move quickly to protect their legal interest when notified that they have been unsuccessful when bidding for a contract.
The test for lifting automatic injunction
On an application to have the automatic injunction lifted by interim order, it is now well established that the courts will consider the four principles of the American Cyanamid test:
1. Is there a serious issue to be tried?
2. If so, would damages be an adequate remedy for the claimants if the injunction were lifted and they succeeded at trial?
3. If not, would damages be an adequate remedy for the contracting authority if the injunction remained in place and it succeeded at trial?
4. Where there is doubt as to the adequacy of damages for either of the parties, which course of action is likely to carry the least risk of injustice if it transpires that it was wrong, that is, where does the 'balance of convenience' lies?
The application of the American Cyanamid principles
1. The first limb of test is generally viewed as a low barrier to overcome, indeed a defendant contracting authority may even concede that there is a serious issue to allow more time to argue on the other principles, unless the claimant's case appears plainly spurious.
2. Trends in case law over the last number of years have shown that claimants have used a variety of arguments to prove that damages are an insufficient remedy in their case, for example:
Existential threat to business' survival
Potential reputational damage
Loss of knowledge or expertise
The judgement in the Kellogg Brown & Root case has provided some guidance on the application of this limb, in particular, that the evidence presented to support these arguments should be sufficiently strong and that the availability of an expedited trial alone may not be enough to justify the maintenance of the automatic injunction as it had been in previous cases.
3. In cases where damages for the claimant are deemed to be insufficient, the courts then look at whether damages would be adequate for the contracting authority. A key issue is the delay in service provision.
4. Ultimately, courts may well have to consider whether the 'balance of convenience' favours the lifting of the injunction or keeping it in place until trial. This typically requires an examination of all the circumstances.
From the perspective of a contracting authority or a successful bidder, having an automatic injunction imposed can be incredibly disruptive and while early case law tended to favour the lifting of such injunctions, the courts have been seen to take a more nuanced approach when strong arguments are made by claimants, particularly on the second limb of American Cyanamid above. Nevertheless, the judgment in Kellogg Brown & Root underlines that no two cases are the same and each should still be decided on its own facts.
Looking forward, the proposed reforms to the regime as outlined in the 'Transforming Public Procurement' green paper may see a radical overhaul of the procedure of lifting automatic injunctions in the coming years. The proposals may lead to the adaptation of a bespoke test for procurement challenges and the potential introduction of fast-tracked court procedures which would allow automatic injunctions to remain in place pending the outcome of the hearing.
For further information in relation to this topic, please contact any member of ALG's Belfast Public Procurement team.