A recent case has been the first to consider the Concessions Contract Regulations 2016 (‘the CCRs’) in detail. In this case, the Court of Appeal has taken a notably pro-contracting-authority stance.
The recent decision in the case of Ocean Outdoor v London Borough of Hammersmith & Fulham provides fresh guidance on the scope of the CCRs, the extent of the land transaction exemption, and the requirement for claimants must overcome to show a ‘sufficiently serious breach’ in procurement.
Background
The Council owned land containing two towers which supported large digital advertising screens. The two towers had previously been leased by the Council to Ocean Outdoor (‘Ocean’). When the leases lapsed in 2017, the Council invited bids for a new leasing arrangement. Ocean was outbid by another media company, to whom the Council subsequently granted new leases.
Ocean issued proceedings, claiming that the procurement exercise had been unlawful because the CCRs applied and the Council had failed to comply with them.
Decision
The Court found in favour of the Council and ruled that: (1) the new leases were not “service concession contracts” as defined in the CCRs; (2) the new leases were not contracts for pecuniary interest (meaning they were not “public contracts” for procurement law purposes); (3) in any case, the Land Transaction Exemption applied; and, (4) in relation to damages, the loss of chance principle does not relieve the claimant of any obligation to establish even a potential causal connection between breach and loss. Each issue was dealt with by the court as follows.
- The new leases were not service concession contracts under the CCRs
The Court concluded that the new leases were not service concession contracts for the purposes of the CCRs. The CCRs are concerned solely with public bodies and the services in question must be services to or for the public, which the Council would otherwise be legally obliged to provide itself. Here, the Court determined that the Council had no statutory obligation to provide advertising services and the new leases “did not provide a service for the benefit of the Council or its residents”.
- The new leases were not contracts for pecuniary interest
The CCRs define services concession contracts as contracts “for pecuniary interest… by means of which [the] contracting authority entrust the provision and the management of services… to the economic operator”. Ocean provided a generic definition of ‘concession’ and argued that the new leases fell within it. The Court disagreed. Here, the third party advertisers, to whom the advertising services were to be provided by Outdoor Plus, had no connection whatsoever with the Council or its residents, unlike a concession contract where an economic operator provides car parking facilities (where the third parties would be those members of the public for whom the Council would be under a legal obligation to provide such facilities). Also, there was no legally enforceable positive requirement in the new leases for Outdoor Plus to provide the advertising services. An indirect or direct obligation to carry out the services in question was deemed an essential requirement of a contract for pecuniary interest by the Court.
On the basis of these two issues, the new leases were not subject to the CCRs.
- The Land Transaction Exemption applied in any event
The Court judged the land exemption in the CCRs was defined very widely and exempted contracts for the rental of existing buildings, or contracts “which concern interests in or rights over” existing buildings. The new leases fell squarely within this definition. On this basis, they were exempt from public procurement law in any event.
- Damages
In light of the above three points, the issue of Ocean’s entitlement to damages did not arise. Nonetheless, the Court discussed it as a matter of general importance. It was emphasised that a mere breach of the CCRs was not, in itself, sufficiently serious to entitle Ocean to damages for loss of chance. Rather, the specific facts of each case must be considered and a claimant must show a possible causal connection between the breach and the loss. The Court ruled out the loss of chance principle in this case because there was no close comparison between Ocean’s unsuccessful bid (£600,000) and Outdoor Plus’s successful bid (£1.7m). Therefore, “it is plain that the claimant’s bid would have been rejected in any event.”
Comment
The overall tone of the judgment favours local authorities and provides important guidance on both the scope of the CCRs (and when a contract is governed by them) and the land transaction exemption. The CCRs are interpreted very narrowly.
This case is a good example of a deal falling outside the public procurement regime. However, given the fact this was litigated to the highest court, it is worth seeking legal advice before proceeding with a transaction, even where you consider a contract falls outside the public procurement law and/or benefits from the land transaction exemption.
If you require advice in relation to public procurement law, contact our Commercial team.
