The Supreme Court may amend the rules on penalties for bid-rigging
This is discussed in LIGA360’s analytical review of case No. 910/7314/23.
The background to the case
The prosecutor, acting in the interests of the state, applied to the court to have the decision determining the winner of the public procurement tender and the contract for the repair of an infrastructure facility, concluded between a state-owned enterprise and a private company, declared invalid.
The prosecution is also seeking the consequences of the transaction’s invalidity: to recover 679,932 UAH from the private company in favour of the state-owned enterprise, and then to transfer these funds to the state budget.
The basis for the claim was a decision by the Antimonopoly Committee of Ukraine, which established that there had been anti-competitive concerted practices between the tender participants.
Why the lower courts dismissed the case
The courts of first instance and appeal did not uphold the claim.
In their view, the infringement had already been duly assessed under the law. The company had been fined by the Antimonopoly Committee, which had also imposed the sanction provided for by law — a ban on participating in public procurement for three years.
Furthermore, the courts took into account that the contract had been fully performed, the tender bid price was lower than the expected procurement cost, and there was no evidence in the case file that the state had suffered any material losses.
What issue will the Supreme Court decide?
A panel of judges at the Supreme Court concluded that the case raised an important legal issue and therefore referred it to the Grand Chamber for consideration.
The judges noted that, in order to establish anti-competitive concerted practices, it is not necessary to prove that the state has suffered actual losses. The very fact of the distortion of the tender results may in itself indicate a breach of the principles of fair competition, transparency and the effective use of public funds.
The Grand Chamber must now answer the key question: is the mere fact of a tender collusion, established by an AMCU decision, sufficient to declare the contract void under Article 228 of the Civil Code of Ukraine and to apply the consequences in the form of the recovery of the funds received into the state’s revenue?
Why this decision could set a precedent
If the Grand Chamber establishes a new legal approach, this will influence future case law in the field of public procurement.
In effect, the Supreme Court will determine whether companies found guilty of bid-rigging risk not only fines and a three-year ban on participating in public procurement, but also the loss of funds received under public contracts that have already been performed.
It is precisely this legal conclusion that will serve as a guide for the courts when considering similar disputes in the future.
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