BGH decides on the block­ing of pro­cure­ment*

The Fed­er­al Court of Jus­tice (rul­ing of June 3, 2020, Ref.: XIII ZR 22/19) has tak­en a clear posi­tion: Any­one who is exclud­ed from pro­cure­ment pro­ce­dures has legal pro­tec­tion. Regard­less of whether the exclu­sion is ordered in a spe­cif­ic pro­cure­ment pro­ce­dure or applies gen­er­al­ly and for the future. The sec­ond impor­tant point is that in the event of con­flicts of inter­est, the con­tract­ing author­i­ty should put its own house in order first.

Ini­tial sit­u­a­tion

A Berlin case. The plain­tiff is a reg­is­tered asso­ci­a­tion that con­ducts eco­log­i­cal stud­ies and pre­pares sci­en­tif­ic reports. An employ­ee of this asso­ci­a­tion is mar­ried to a par­tic­u­lar­ly high-rank­ing employ­ee of the client and defen­dant, name­ly the Sen­a­tor for Envi­ron­ment, Trans­port and Cli­mate Pro­tec­tion. The State Sec­re­tary of the Sen­ate Depart­ment for the Envi­ron­ment, Trans­port and Cli­mate Pro­tec­tion, so to speak the num­ber 2, now issued a fate­ful direc­tive. By e‑mail, he instruct­ed the depart­ment heads to no longer com­mis­sion the asso­ci­a­tion in order to avoid a con­flict of inter­est and to exclude offers from the asso­ci­a­tion as unsuit­able.

The asso­ci­a­tion did not put up with this and sued to have the ban on pro­cure­ment lift­ed. After the dis­trict court upheld the action, the Court of Appeal issued a strange sen­tence. …

Keynote 1: Legal pro­tec­tion is also avail­able against gen­er­al blocks on pro­cure­ment

The Fed­er­al Court of Justice’s core state­ment No. 1, which was per­haps delib­er­ate­ly pro­voked by the Court of Appeal, is as fol­lows: There is legal pro­tec­tion against blocks on the award of con­tracts, even if they are imposed out­side con­crete award pro­ce­dures, i.e. as it were in the abstract for the future. The bid­der con­cerned can bring an action in civ­il court to have such blocks lift­ed. This key state­ment is impor­tant. This is because blocked bid­ders very often do not even learn about small­er award pro­ce­dures. They are removed from the list of bid­ders and no longer called. So how are they sup­posed to seek legal pro­tec­tion in a spe­cif­ic pro­cure­ment pro­ce­dure that is cur­rent­ly ongo­ing? This is not pos­si­ble, and the Fed­er­al Court of Jus­tice has also rec­og­nized this. This means for all com­pa­nies affect­ed by pub­lic pro­cure­ment blocks: They do not have to wait until they pos­si­bly learn of an award or par­tic­i­pate in an award on the off chance and then take action against the exclu­sion deci­sion. Instead, they can sim­ply sue to have the award block lift­ed if they are of the jus­ti­fied opin­ion that the award block is unlaw­ful. For all con­tract­ing author­i­ties, this means: Be care­ful with the out­ward­ly announced state­ment that a bid­der is no longer to be involved in the future. The lack of a time lim­it for such a block, and pos­si­bly also the lack of a restric­tion in terms of con­tent, means that legal action must be expect­ed. You should there­fore think care­ful­ly about whether and how you bar a com­pa­ny from par­tic­i­pat­ing in pro­cure­ment pro­ce­dures.

Keynote 2: The client must clean up its own back­yard first (and no facts are ever the same)

A sig­nif­i­cant rea­son for exclu­sion for all prac­ti­cal pur­pos­es is the con­flict of inter­est of per­sons involved in the award­ing of con­tracts. Here, a sim­ple ques­tion arose: Does the sen­a­tor real­ly have any­thing to do with award­ing rather insignif­i­cant con­tracts to an asso­ci­a­tion in which her hus­band works — pos­si­bly also in a com­plete­ly dif­fer­ent field?

The legal hitch is Sec­tion 124 (1) No. 5 GWB. Accord­ing to this, the con­tract­ing author­i­ty can exclude a com­pa­ny from the award if there is a con­flict of inter­est in the imple­men­ta­tion of the award pro­ce­dure which can­not be elim­i­nat­ed by oth­er, less dras­tic mea­sures. Accord­ing to the Fed­er­al Court of Jus­tice, this pro­vi­sion must also apply out­side of spe­cif­ic award pro­ce­dures. It can be added that many fed­er­al states have also issued cor­re­spond­ing reg­u­la­tions for the area “below the EU thresh­olds”. I.e., the prin­ci­ple is gen­er­al­iz­able. Any­one with a con­flict of inter­est may not par­tic­i­pate unless the con­flict of inter­est can be elim­i­nat­ed by oth­er, less dras­tic mea­sures.

The deci­sive ques­tion here was whether a con­flict of inter­est already exist­ed if one spouse had some­thing to say at the con­tract­ing author­i­ty while the oth­er worked in a bid­ding com­pa­ny. The law is tough on this point. Pur­suant to Sec­tion 6 (4) in con­junc­tion with (3) No. 3a VgV, it is pre­sumed that the con­tract­ing author­i­ty employ­ee in ques­tion has a con­flict of inter­est if his or her spouse is employed for remu­ner­a­tion by a can­di­date or bid­der.

But does that lead to manda­to­ry exclu­sion? The ulti­ma ratio in such cas­es is to exclude the appli­cant or bid­der. But only if the con­flict of inter­est can­not be resolved in any oth­er way. It is pre­cise­ly a last resort. In con­trast, the BGH states that the con­tract­ing author­i­ty is ini­tial­ly required to exclude bod­ies or employ­ees with a con­flict of inter­est from par­tic­i­pat­ing in the award pro­ce­dure. This must of course, it may be added, also be prop­er­ly doc­u­ment­ed.

In the Berlin case, the BGH ruled accord­ing­ly. The sen­ate admin­is­tra­tion should ensure that the sen­a­tor does not par­tic­i­pate in pro­cure­ment pro­ce­dures in which her husband’s employ­er will par­tic­i­pate. That was quite suf­fi­cient. Espe­cial­ly since the senator’s hus­band had no right of direc­tion, let alone per­son­nel man­age­ment.

Con­clu­sion

Pub­lic-sec­tor clients are famil­iar with the fac­tu­al prob­lem from a wide vari­ety of con­texts. In every local coun­cil, there are mem­bers who do not vote one time or anoth­er because of a con­flict of inter­est. So noth­ing new under the sun? Not quite. The prac­tice — of impos­ing a ban on pro­cure­ment regard­less of a spe­cif­ic award — has come under fur­ther pres­sure.

Bid­ders can rejoice. They do not have to fear “in-house” injunc­tions. If a bid­der learns that he is on a “black­list” of some kind, the mot­to is “attack is the best form of defense”. The Fed­er­al Court of Jus­tice has pushed this door wide open.

*This legal tip is not a sub­sti­tute for legal advice in indi­vid­ual cas­es. By its very nature, it is incom­plete, nor is it spe­cif­ic to your case, and it also rep­re­sents a snap­shot in time, as legal prin­ci­ples and case law change over time. It can­not and does not cov­er all con­ceiv­able con­stel­la­tions, serves enter­tain­ment and ini­tial ori­en­ta­tion pur­pos­es and is intend­ed to moti­vate you to clar­i­fy legal issues at an ear­ly stage, but not to dis­cour­age you from doing so.