8. 6. 2020
Dear Clients and Business Friends,
We would like to inform you about the fundamental decision of the Regional Court in Brno No. 31 Af 70/2018-138 (see here) of 27 May 2020 on the interpretation of Act No. 134/2016 Sb., on Public Procurement (PPA). In its decision, the Regional Court has upheld that (i) the purchase of shares, business shares and businesses does not fall under the PPA, and that (ii) the PPA must be interpreted not purely linguistically, but according to the actual will of the legislators; in principle, an interpretation in conformity with EU law applies – i.e. in accordance with the meaning and purpose of the corresponding provisions of the EU Procurement Directive.
The judgment annulled the decision of the Office for the Protection of Competition (the “Office”), which in 2018 caused a great stir among the professional public in the field of public procurement (for the appellate review decision, see here). Under the annulled decision of the Office, the acquisition of a company’s business share (simply the purchase of shares) should have been considered a public supply contract and carried out in a procurement procedure under the Public Procurement Act (PPA). In assessing the fulfilment of the definition of a public supply contract, the subject matter of which is, inter alia, the procurement of items, the Office opted for a strictly formal interpretation, based on the definition of an item under the Civil Code, which includes, inter alia, shares. In light of the decision, the Office stopped the efforts of the Liberec Region to secure transport services through its own transport company, which it wanted to acquire by purchasing the ČSAD Liberec shares.
The Office’s decision caused a stir in 2018 mainly due to the fact that it is difficult to imagine and conduct a formal procurement procedure under the PPA for the purchase of a business, a business share or shares in an existing company. Tenders are hardly comparable and evaluable according to predetermined, fixed criteria, and also the qualification criteria imposed under the PPA on the participant in the procurement procedure as the tenderer fall short of their aim. At the same time, the contracting authorities awarding public and sector contracts also make such acquisitions legitimately, in the course of their business activities or to meet their legitimate needs.
Involvement of HAVEL & PARTNERS
The idea that the Office’s decision of 2018 will remain final did not give us piece of mind. We have been following the legislative developments in the field of public procurement in detail since 2012, via the participation of our experts in professional associations, in particular the Association for Infrastructure Development (AID) and the Association for Public Procurement (APP). We are pleased that the Liberec Region accepted our proposal for pro bono representation and, in cooperation with the AID and the APP, let us represent them in bringing an action. We based our arguments before the court on detailed knowledge of the legislative developments of the PPA and our experience with foreign interpretation practice, especially in Germany and Austria. We are very pleased that the Regional Court in Brno has agreed to those arguments. We believe that this judgment will become crucial for the future interpretation of the PPA in accordance with the purpose of EU directives and the intention of the legislators.
To be complete, we add that in the prepared amendment to the PPA, which is now after the comment-raising procedure of the Czech Government and which should take effect from 1 January 2021, we supported, for the AID and APP, supplementing the PPA so that the issue of acquiring business shares, businesses and shares was definitely resolved. The Office has commented constructively on this proposal and also supplemented the proposed list with receivables.