ECJ: Confidential in Public Procurement

The decision of a contracting authority to classify information of the successful tenderer in the award procedure as confidential and trade secrets must constitute a verifiable measure, the ECJ ruled – with high requirements.

Award procedures of a public contracting authority often cause resentment among the economic operators involved: the basic award criteria are as much subjects of critical enquiry as the description not only of the claimed professional and technical capacity of the successful bidder but also of its financial and economic capacity.

The ECJ has now ruled on a classic case situation: in a public tender, a contracting authority awarded the contract through an international open tender procedure ultimately because of the lower price in the successful bidder’s offer. An unsuccessful bidder requested the inspection and submission of the disputed bid, parts of which were confidential. Inspection of the non-confidential parts of the bid was granted, but this was not sufficient for the losing bidder Ecoservice (Lithuania) and it brought an action. The plaintiff claimed that it doubted the qualifications of the successful bidder and demanded that all evidence be submitted to the court, regardless of its confidentiality. But the lawsuit has failed so far.

In fact, in Lithuania, in public procurement disputes, the unsuccessful bidders have less information than the other parties to these disputes, because in judicial practice confidentiality is always given priority.

EU law on trade secrets – Directive since 2016

But does this comply with EU law on trade secrets? And does it contradict the Public Procurement Law? The Lietuvos Aukščiausiasis Teismas (Supreme Court) from Lithuania referred these questions to the ECJ for a preliminary ruling, which has now ruled on them (‘Klaipėdos’, ECLI:EU:C:2021:700).

Since 2016, Directive (EU) 2016/943 on the protection of trade secrets has been in force in the EU. And Article 9(2) p.3 of Directive 2016/943 emphasises that parties to a lawsuit should not have different information.

On the other hand, however, the ECJ ruled in 2008 on the award of public contracts that such award procedures were based on a relationship of trust between the economic operators and the contracting authorities (decision ‘Varec’, C-450/06). The review body must ensure confidentiality and the right to business secrecy with regard to the content of documents provided to it (e.g. by the contracting authority), the ECJ stated at the time, whereby it may have knowledge of such information and take it into account. According to this Varec decision, the contracting authority must give the economic operator concerned the opportunity to invoke confidentiality or business secrecy before disclosing such information to a party to the dispute.

So how can a Union court fulfil its obligation under Directive (EU) 2016/943 to ensure the right of economic operators to be aware of the trade secrets of a party to the dispute (including, for example, in order to be able to decide whether to bring an action) – and yet prevent the abuse of using the access to the procurement documents only to improve the matching of its own bid?

ECJ connects 2016 with Varec decision 2008

With its current decision, the ECJ builds a bridge between the Varec decision of 2008 and the EU Directive in force since 2016. The court emphasises that the contracting authority must still give the economic operator concerned the possibility to invoke confidentiality or trade secrecy – even before this information is disclosed to other competitors and litigants. Trade secrets are often information on technical and trade-related facts.

However, the ECJ links this to strict requirements for the contracting authority. If a contracting authority refuses to disclose to a competitor of an economic operator “confidential” information of that economic operator, this refusal must comply with the principle of good administration under Union law, the ECJ explained.

In concrete terms this means:

The contracting authority cannot be bound by the mere assertion of an economic operator that the information submitted is confidential; rather, the economic operator must prove that the information whose disclosure it requests is indeed confidential. If there is nevertheless doubt about confidentiality, the contracting authority must request further evidence from the economic operator. The contracting authority has the duty, the ECJ explained, to balance the applicant’s right to proper administration with the right of its competitor to protect its confidential information – and to be able to demonstrate this in court.

If the contracting authority ultimately refuses to disclose information, it must nevertheless communicate the essential content of this information – “in neutral form”, as the ECJ literally clarified. As a practical implementation, the court recommends that the contracting authority should request the successful tenderer to provide it with a non-confidential version of the documents containing confidential information.

Refusal for being confidential: to be examined by national courts

Ultimately, the competent national court – which must necessarily have the confidential information and business secrets at its disposal in order to be able to assess, in full knowledge of the facts, whether that information can be disclosed – must be able to examine all the relevant factual and legal elements, the ECJ stressed, and also the adequacy of the reasons given for a refusal to disclose confidential information.

Moreover, this national court must also be able to annul the refusal decision or the decision rejecting the application for administrative review on the grounds of illegality. In such a case, the case would have to be referred back to the contracting authority, if necessary, or that court could itself issue a new decision if it is empowered to do so under national law. If, on the other hand, it is an error of assessment on the part of the contracting authority, this can only be taken into account ex officio if national law permits this, the ECJ concluded its assessment.

Acts of a consortium

This case also dealt with another aspect of public procurement procedures, as the successful bidder was a consortium. It was precisely the description of the economic and financial capacity of the consortium that was challenged by the applicant Ecoservice.

The ECJ therefore referred to its 2017 judgment ‘Esaprojekt’ (C-387/14), according to which an alleged economic and financial capacity of a consortium must be assessed in relation to the concrete participation of that economic operator and thus its actual contribution to the performance of an activity required by that consortium in the context of a specific public contract.

But what is to be done in case of suspicion of misrepresentation by the consortium? In such a case, Art. 63 of Directive 2014/24 comes into play, according to which it is incumbent on the contracting authority to verify, inter alia, whether there are grounds for exclusion under Art. 57 of the Directive with regard to this economic operator or one of its undertakings. However, the ECJ emphasised that even if the contracting authority suspects such grounds for exclusion, it must give the tenderer and/or the undertaking the opportunity to remedy the irregularity found and, consequently, to prove that it can be regarded anew as a reliable undertaking.

A national rule under which exclusion from any public procurement procedure may be imposed on all members of the consortium if an economic operator, as a member of a consortium, has been guilty of serious deception in the information it has provided (without its partners being aware of that deception) – such a national rule, according to the ECJ, infringes Article 63(1), second subparagraph, of Directive 2014/24 in conjunction with Article 57(4) and (6).

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