Modification of government contracts under judicial control – Government contracts, procurement and PPP

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In the judgment delivered on July 5, 2022 on behalf of ‘356 Holdings Limited v Assocjazzjoni tal-Kunsilli Lokali and‘, the First Chamber Civil Court, presided over by the Honorable Judge Anna Felice, preliminarily upheld the validity of an action for judicial review and upheld among others that a decision by a public authority to modify and extend a concession contract awarded in 2001 constituted an “administrative act” within the meaning of article 469A of the code of organization and civil procedure. Furthermore, the Court reaffirmed the principle in the Supreme Travel case: a declaration of ineffectiveness before the Public Procurement Review Board may be filed within six months of the person concerned becoming aware of the conclusion of a contract.

The facts of the case were as follows:

  1. an agreement (the ‘Original ACL concession‘) was concluded between the Association of Local Councils (the ‘Respondent association‘), 59 local councils (the ‘Respondent local councils‘) and Faces Consultants Limited (the ‘Respondent company‘) in March 2001 by which the respondent company was granted by the former a concession for the installation and operation of 250 bus shelters, the consideration for which consisted of a posting right on the awnings;

  2. fifteen years later, in October 2016, Transport Malta published a ‘Request for Proposals for the design, supply, installation and maintenance of advertising bus shelters in Malta and Gozo and maintenance of existing advertising bus shelter canopies‘ (the ‘TM Concession‘). The applicant, who had submitted a proposal, obtained the TM concession.

  3. in June 2018, the Defendants entered into an Amendment to the Initial ACL Grant (the ‘ACV addendum‘) concluded in 2001 to extend its duration and provide for the installation of additional bus shelters;

  4. furthermore, the Respondent Company filed two restraining orders in April 2019 (the ‘First injunction‘) and September 2019 (the ‘Second injunction”) respectively to prevent Transport Malta from carrying out infrastructure works on two separate bus shelters. A redacted copy of the ACL addendum omitting identifying details of the parties involved was presented to the court as part of the first injunction. A complete copy of the LCA addendum was only submitted to the court by the respondent company in its second injunction.

  5. After becoming aware of these facts, the Claimant immediately proceeded to file the following:
    1. proceedings before the Public Procurement Review Commission (the ‘Plank‘) for a declaration of ineffectiveness of the Initial Concession of the LCA and/or of the Amendment to the LCA. It is interesting to note that these proceedings were suspended by the Commission at the request of the respondent company and the respondent association until a decision of this Court on its jurisdiction is rendered;

    2. a legal protest in October 2019 challenging the legality of the LCA Addendum on the grounds that the material changes contained therein could not have been agreed upon without the implementation of the appropriate concession procedure; and

    3. Since no response was received from the Respondents, the Plaintiff filed this lawsuit (the ‘Action under Section 469A‘) by which it requested the Court to exercise judicial review within the meaning of Article 469A of the Code of Organization and Civil Procedure (the ‘COCP‘) (Chapter 12 of the Laws of Malta) and declare that:
      1. the respondents acted ultra vires and in violation of the law with respect to the Initial ACL Concession and/or the ACL Addendum; and or

      2. the original ACL Grant and/or ACL Addendum are null and void.

  1. The respondents raised a number of preliminary grounds, among othersthis:
    1. the original ACL Grant and the ACL Addendum did not meet the definition of an “administrative act” under Section 469A;

    2. pursuant to sub-section 3, any action for judicial review must be commenced within six months of the date the Claimant knew or could have known of the agreements, whichever comes first; and

    3. the Claimant could have obtained redress from the Public Procurement Review Board.
      (the preliminary means described in paragraphs (a) to (c) above are collectively referred to as the “Preliminary pleas‘).

At the outset, it is important to note that under article 469A, paragraph 2, of the COCP, an “administrative act”includes the issuance by a public authority of any order, license, permit, warrant, decision or refusal at any request of an applicant, but does not include any measures intended for the internal organization or administration within the said authority‘.

In ruling on the preliminary rulings, the Court rejected all of the arguments raised by the Respondents. In fact, the Court disagreed with the Defendants’ argument that the Initial LCA Concession and the LCA Amendment did not constitute administrative acts. The law clearly refers to “any decision”, “any” being the determining term. The Court cited a judgment rendered on October 27, 2017 on behalf of ‘Dragonara Gaming Limited vs Minister of Finance and‘ (the ‘Dragonara case‘) whereby the Court of Appeal declared that the nature of a lawsuit derives from its material qualities, including the nature of the claim, the nature of the act complained of and the nature of the relief sought. The Court of Appeal then determined that the government department’s decision to select a preferred bidder and enter into contract negotiations to award a concession with that bidder amounted to an “administrative act” within the meaning of Section 469A.

The Court also examined the question of the proceedings pending before the Council. As already explained above, the Claimant requested a declaration of ineffectiveness of the Initial LCA Concession and the LCA Addendum under Regulation 113 of the Regulation on Concession Agreements (the ‘Regulations‘).1 In addition, Rule 52 of these Regulations expressly confers jurisdiction on the Board to deal with questions and disputes regarding Concessions. However, since the Commission had suspended the proceedings pending before it until the judgment of this Court was delivered, this same Court declared that the interests of justice dictated that it should continue to hear the case.

The Court also disagreed with the defendants that the action under Section 469A was not filed within the six-month period provided for in Section 469A(3). The Defendants have provided no evidence of the Plaintiff’s knowledge of the Initial LCA Concession and the LCA Addendum by April 2019 at the latest. In any event, the Court agreed with the Plaintiff that it does not could have sued only when the full copy of the ACL addendum was filed in the second injunction proceedings in September 2019.

In this regard, the Court also considered the obligation to file any declaration of ineffectiveness no later than six months from the conclusion of the contract, under the terms of Article 118 of the Rules. In this case, the ACL addendum was concluded in June 2018 but the Commission procedure for ineffectiveness was not filed until October 2019. However, no official notice was ever published and therefore it was impossible for the applicant to read the ACL addendum through the mandated channels. Indeed, it was not until following the events of the second injunction that the plaintiff became aware of the LCA Addendum and the parties thereto. The Court noted that a strict interpretation of Regulation 118 would have meant that Claimant had to file its declaration of ineffectiveness with the Board by December 2018. The Court found that such an interpretation, however, would have been misleading and unfair to the Applicant. In doing so, reference was made to “Supreme Travel Limited v Awtorita ghat-Trasport f’Malta and‘ rendered on August 31, 2021 by which the Court of Appeal applied the general principle of administrative law according to which any remedy provided by law must be real and effective and must receive a functional interpretation.

Such a peremptory time limit of six months for filing a declaration of ineffectiveness under Article 118 of the Rules must therefore be interpreted in such a way that it begins to run from the day on which the person concerned could have become aware of it.

By pronouncing a judgment in part, the Court dismissed all of the respondents’ preliminary arguments. Judgment on the merits is reserved for a later date.

This judgment confirms the principle of administrative law according to which any legal remedy must be interpreted: (a) in the interests of justice and (b) in such a way that it can be invoked by the interested party. Any non-functional interpretation will not be viewed favorably by the courts of Malta. In this case, the Court rejected once and for all the argument that the time limit for filing a declaration of ineffectiveness should be interpreted narrowly so that the six-month time limit only begins to run from the moment the interested party becomes aware of the conclusion of the contract, and not before.

This article first appeared in the Malta Independent.

Footnote

1. Regulation 113 of the Concession Agreements Regulation, ‘an interested party or a bidder may file a petition with the Public Procurement Review Board to declare that a concession contract whose estimated value meets or exceeds the threshold established in Annex 3 is of no effect‘.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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