Poland: The freedom of the ordering party in shaping the contractual relationship has its limits. A significant judgement of the Regional Court
In the proceedings held before the Regional Court in Warsaw, a significant—from the point of view of the contractors—judgment on the interpretation and application of the Public Procurement Law Act was issued. The dispute between the ordering party and the contractor pertained to the terms of reference and contractual provisions drawn up by the ordering party, which forced the contractor to incur risks which the contractor had not been able to evaluate at the tender stage. The Regional Court in Warsaw confirmed the position of the National Appeals Chamber, expressly indicating that there is certain limit to the ordering party’s freedom of shaping the contractual relationship, and that the performance received by the contractor must be of an equivalent character.
On 1 October 2019, the Regional Court in Warsaw delivered a significant judgement regarding the interpretation and application of the Public Procurement Law Act. In the proceedings based on a dispute between SPIE Elbud Gdańsk S.A. (contractor) and Polskie Sieci Elektroenergetyczne S.A. (ordering party), the contractor was represented by BSJP law firm. The dispute was also joined, on the contractor’s side, by ELTEL Networks Energetyka S.A. and Valard Polska Sp. z o.o.
The axis of the dispute run along the provisions of the terms of reference, in particular the material contractual provisions drawn up by the ordering party, which provisions obliged the contractor to assume (and include in the tender price) the risks which the contractor had not been able to calculate at the tender stage—as the management of a given risk remained beyond the contractor’s control. In the case in question, it all boiled down to changes (often exceeding one year) in the timetable for the performance of the subject of contract due to reasons not attributable to the contractor, and causing at the same time an increase in contract performance costs on the contractor’s side. The contractor therefore accused the ordering party of having violated Article 353(1) of the Polish Civil Code in conjunction with Article 29 of the Public Procurement Law by shaping the contract in a manner contrary to the principles of community life and the nature of the contractual relationship to be established as a result of the award of a public procurement, due to having burdened the contractor with risks which could not be predicted and estimated at the tender stage, in view of the imprecise and ambiguous description of the subject-matter of the contract by the ordering party.
In the appeal lodged with the National Appeals Chamber, the contractor argued that the documents prepared by the ordering party, both the ToR and the proposed terms of contract, should be constructed in such way as to enable the contractors to prepare their bids reliably and calculate the price taking into account all the factors (risks) that may affect it. If the tenderer does not know what elements the public contract consists of and what resources will be required to perform it, and in what period of time it will be performed, the bids submitted by individual contractors will be incomparable and the remuneration received will be inequivalent.
In its ruling of 10 May 2019 (case file No. KIO 693/19, KIO 694/19), the National Appeals Chamber backed the arguments of the contractor. As a consequence, the Chamber ordered the ordering party to introduce into the draft contract a mechanism addressing the issue of settling the costs incurred by the contractor in connection with the extension of the contract for reasons not attributable to the contractor (while leaving certain freedom to the contractor when it comes to the details of shaping such a mechanism).
The ordering party lodged an appeal with the Regional Court against the ruling of the National Appeals Chambers, claiming among others that the issue of examining the standard contract established by the ordering party is beyond the cognisance of the NAC. The statements made by the ordering party in the complaint were also supported by a relevant notion expressed in writing by the General Prosecutor’s Office of the Republic of Poland. In the judgment of 1 October 2019, the Regional Court, however, disagreed with the objections raised by the ordering party. The Regional Court confirmed that the actions of the ordering party must comply with the public procurement law and thus with the relevant standards of civil law. The standards in question limit at the same time the freedom and discretion vested in the ordering party as regards the shaping of the provisions (actually having an adhesive character) of the contract to be concluded as a result of the award of a public procurement. In an oral justification of the ruling, the Court confirmed that such limits are set by Article 5 and 353(1) of the Polish Civil Code, and if these provisions are breached, they can be challenged by the contractors.
This is an extremely important judgment. It confirms the cognisance of the National Appeals Chamber to examine the material contractual provisions from the perspective of the Polish Civil Code, to which the Public Procurement Law Act in many cases refers. Also, the judgement of the Regional Court clearly indicates that the ordering party’s freedom in shaping the contractual relationship has its limits, and that the performance received by the contractor must be equivalent.
In the proceedings held before the National Appeals Chamber and the Regional Court, the contractor was represented by legal counsel Jarosław Sroka and legal counsel Grzegorz Wąsiewski, PhD. Legal counsel Marta Drela was also involved in the work on the appeal and response to the complaint.
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