Contracting authority’ – definition difficulties

A blog by Ruth McNaught for the Government Opportunities website (www.govopps.co.uk)

Ruth McNaught – Solicitor at Harper Macleod

The High Court’s 20 January 2012 judgment in Alstom Transport v Eurostar International Limited, [2012] EWHC 28 (Ch), considered as a preliminary issue whether the defendant, Eurostar International Limited (‘Eurostar’), fell within the definition of a ‘contracting authority’ for the purposes of the Public Contracts Regulations 2006 (the ‘Regulations’).

The claimant (‘Alstom’) was unsuccessful in its tender for the design, supply and maintenance contract for a new generation of trains. Alstom claimed that the tender process conducted by Eurostar breached the EU procurement regime.

Alstom’s primary claim was under the Utilities Contracts Regulations 2006 (the ‘UCR’) on the basis that Eurostar is a utility. In addition, on the basis that Eurostar was held not to be a utility, the claimant also sought clarification of Eurostar’s status as a ‘contracting authority’ under the Regulations.

The UCR and the Regulations give effect to the EU Procurement Directives in the UK (excluding Scotland) and, although the implementing Regulations should be interpreted in the light of the Directives, the two regimes are mutually exclusive.

Under the Regulations, a ‘contracting authority’ can only be a body within the UK. The equivalent EU Directive, on the other hand, applies the definition to a body within any Member State.

When passenger train services through the Channel Tunnel commenced in 1994, they were branded ‘Eurostar’ and operated by a consortium comprising Société Nationale des Chemins de fer Français (‘SNCF’, the company operating French railways), Société Nationale des Chemins de fer Belges (‘SNCB’, the company operating Belgian railways) and the company now called Eurostar International Limited which was then wholly owned by the British Railways Board (‘BR’).

In June 1996, BR’s interest in Eurostar International Limited was sold to London and Continental Railways Ltd (‘LCR’). In 2010, a radical restructuring of Eurostar International Limited took place, and it became a joint venture company involving SNCF and SNCB, and assumed the operation of the Eurostar service. Its shareholding was (and remains) as follows: SNCF: 55%; LCR: 40%; and SNCB: 5%.

Eurostar International Limited is an English company; SNCF is a French company with public law status, wholly owned by the French State; LCR is wholly owned by the Secretary of State for Transport; and SNCB is a Belgian company with public law status, wholly owned by the Belgian State.

Alstom argued that Eurostar was a contracting authority since it: (i) has legal personality; (ii) is established for the specific purpose of meeting needs in the general interest, not having an industrial or commercial character; and (iii) is subject to management supervision by other bodies subject to public law.

The first submission was uncontroversial. The second submission made two assertions, but it was the second of the two assertions that drew the court’s particular attention. Case law around the question of whether activities are of an ‘industrial or commercial character’ places considerable importance on the extent of competition.

Eurostar argued (in response to the submission that it was the sole operator through the Channel), that not only were there other options open to passengers for crossing the Channel, but from 2013 Deutsche Bahn would be running a service through the tunnel. Indeed the services Eurostar was seeking in relation to the new generation of trains related to their future operations in the context of heightened competition. The court agreed and found that Eurostar’s activities were of an industrial/commercial character.

The judge also went on to consider whether Eurostar was subject to management supervision by other bodies subject to public law. It was without doubt that all of the joint venture partners (SNCF, SNCB and LCR) were owned or controlled by the governments of Member States. Under the terms of the Directive, this would be sufficient to evidence management supervision by other bodies subject to public law. The court took the view, however, that the UK Regulations had expressly implemented the Directive in such a way that meant only UK bodies could be considered contracting authorities. Once SNCF was taken out of the equation, it was not possible to argue that Eurostar was subject to management supervision by other bodies subject to public law in terms of the Regulations.

Accordingly, the submission that Eurostar fell within the definition of ‘contracting authority’ failed.

Link to the original Blog

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