CEDH · CASELAW;CLIN;ENG — 7 janvier 2025

.s3ABFC313 { font-size:10pt } .sD4B5322E { margin-top:12pt; margin-bottom:12pt; text-align:justify } .sBB9EE52A { font-family:Arial } .sA241FE93 { margin-top:0pt; margin-bottom:18pt; text-align:justify; page-break-after:avoid; border-bottom:0.75pt solid #000000; padding-bottom:1pt } .s2EF62ED2 { margin-top:0pt; margin-bottom:0pt; font-size:12pt } .s4DDA3AA3 { font-family:Arial; font-weight:bold; font-style:italic } .s29100277 { font-family:Arial; font-weight:bold } .s32563E28 { margin-top:0pt; margin-bottom:0pt } .s8F2B0B1B { margin-top:12pt; margin-bottom:12pt; page-break-after:avoid; font-size:12pt } .s65B66A85 { margin-top:12pt; margin-bottom:12pt } .s97EB40D9 { margin-top:12pt; margin-bottom:14pt; page-break-after:avoid } .sA36B60A1 { font-family:Arial; font-style:italic } .s5F48796F { margin-top:12pt; margin-bottom:0pt; text-align:justify } .s7ED160F0 { text-decoration:none } .s3DC36BA9 { font-family:Arial; text-decoration:underline; color:#0069d6 } .s8B6C6D43 { margin-top:0pt; margin-bottom:0pt; border-bottom:1pt solid #000000; padding-bottom:1pt } .sDF790F1E { margin-top:12pt; margin-bottom:0pt; text-align:center } Legal summary January 2025 UAB Profarma and UAB Bona Diagnosis v. Lithuania - 46264/22 and 50184/22 Judgment 7.1.2025 [Section II] Article 1 of Protocol No. 1 Article 1 para. 1 of Protocol No. 1 Peaceful enjoyment of possessions Annulment of contracts between private companies and the State for the purchase of COVID-19 tests and restitution by the companies of a substantial part of the sum received as being overpaid by the State: no violation Facts – In March 2020, during the national state of emergency declared in Lithuania in view of the spread of COVID-19, the first applicant company was awarded a procurement contract by the Ministry of Health and the National Public Health Surveillance Laboratory (NVSPL), whereby it undertook to deliver 510,000 rapid tests for the total price of EUR   6,050,000. The procurement contract was awarded following a negotiated procedure directly with the first applicant company without publication. On the same day of the award of the contract, the first applicant company signed a sales and purchase agreement with the second applicant company, whereby the latter undertook to deliver to the former 510,000 rapid tests for the total price of EUR   5,904,800. Subsequently the second applicant company sub-contracted several other companies to help it obtain the requisite quantity of tests, eventually purchasing the tests for EUR   1,135,360. The prosecutor opened a pre-trial investigation on the suspicion of abuse of office by certain public officials, and fraud and legalisation of property acquired by criminal means by, among others, the heads and employees of the two applicant companies. At the same time, the prosecutor instituted civil proceedings against the applicant companies, seeking the annulment of the procurement contract and the sales and purchase agreement. The prosecutor contended that the State had overpaid for the rapid tests, which had resulted in the applicant companies’ unjust enrichment, and thus that they should be ordered to return the overpaid amount. The first-instance court dismissed the prosecutor’s claim, but that decision was quashed on appeal. Both the procurement contract and the sales and purchase agreement were declared null and void: the former for non-compliance with imperative legal norms as the principles of transparency and the rational use of public funds had been breached and the latter as being contrary to good morals. The Court of Appeal also held that restitution in kind was not possible because the majority of the rapid tests had already been used and the remainder could not be returned to the seller for various reasons. Therefore, it considered that the State should be allowed to keep the tests but that the applicant companies should return to the State the amount which had been overpaid, namely EUR   4,142.600 with a default annual interest of 5%. The Supreme Court refused to accept the applicant companies’ appeals on points of law for examination. Law – Article   1 of Protocol No.   1: (a) Applicability – The Court found that the amounts which the applicant companies had received under the contracts at issue had constituted their “possessions” within the meaning of Article   1 of Protocol No.   1, regardless of the subsequent annulment of those contracts. Both applicant companies had been paid under the procurement contract and under the sales and purchase agreement respectively and had fulfilled the obligations which they had undertaken thereunder. Furthermore, it had not been alleged either in the domestic proceedings or in the proceedings before the Court that there had been any reasons for the applicant companies to question the validity of those contracts prior to their annulment. Conclusion : Article   1 of Protocol No.   1 applicable. (b) Merits – (i) Existence of an interference and the applicable rule – The order for the applicant companies to return part of the money which they had received under the respective contracts had amounted to an interference with their right to peaceful enjoyment of their possessions. Further, the Court considered that the case should be examined in the light of the general principle laid down in the first rule of Article   1 of Protocol No.   1 which enunciated the principle of peaceful enjoyment of property. (ii) Whether the interference was provided by law and pursued a legitimate aim – The annulment had been provided by law and the manner of restitution chosen had had a legal basis which had been sufficiently accessible, precise and foreseeable in the circumstances. Thus, the impugned interference had been lawful. It had also pursued the legitimate aim of preventing collusive practices and protecting public funds. (iii) Whether the interference was proportionate to the aim pursued – A wide margin of appreciation was available to the legislature in implementing social and economic policies. The margin of appreciation was substantially broader when the issues involved an assessment of candidates for public procurement and the policy choices as to mandatory or discretionary exclusion of candidates. That margin must also be deemed to be wide in cases which, like the present one, concerned the choices facing the Contracting States with regard to the obligations imposed on participants in public procurement procedures and the consequences of failures to fulfil those obligations. Furthermore, procurement authorities might be required to take measures in the public interest aimed at correcting their mistakes. Nonetheless, the correction of such mistakes should not lead to a situation where the individual concerned was required to bear an excessive burden. In the present case the Court found no grounds to question the interpretation and application of the domestic law by the domestic courts or their assessment and conclusions. In particular, the Court noted the following. Firstly, the domestic courts had established that the public procurement procedure had not been conducted in accordance with the relevant legal requirements: although the NVSPL had had the right to conduct procurement by a negotiated procedure without publication in view of the extraordinary circumstances created by the COVID-19 pandemic, it had nonetheless been required to comply with the principles of transparency and the rational use of public funds. It had failed, however, to carry out an assessment of the offers made by different suppliers and had awarded the procurement contract to the supplier handpicked by the Ministry of Health. It had been the contracting authority’s responsibility to conduct the public procurement procedure and ensure compliance with the relevant legal requirements and the general principles of public procurement. At the same time, domestic civil law established certain general obligations which were also applicable to suppliers in the context of public procurement and the imposition of which fell within the national authorities’ wide margin of appreciation in that field. Moreover, under domestic law, the obligations and responsibilities incumbent on the contracting authority as regards the conduct of the procurement procedure did not override or supersede the general norms and principles governing the contractual and pre-contractual relationship between a supplier and a contracting authority as set out under the applicable civil law. Secondly, the domestic courts had found that the applicant companies had acted in bad faith and had sought to take advantage of the public health emergency in order to make an excessive profit. In that connection they held that they had provided the authorities with inaccurate information regarding the manufacturer of the tests. The manufacturer’s identity and the country in which the manufacturer was based had been an important feature of the tests, as it had an impact on their price. Furthermore, the Court of Appeal had found that the first applicant company had proposed a price which had not been reasonable and had exceeded the market price of such tests and the two applicant companies had acted jointly in their pursuit of an unreasonably high profit during a time of emergency. It was not the Court’s role to determine what the market price of rapid tests had been at the relevant time or to assess whether or not the price that had been proposed by the first applicant company had been excessive. The Court of Appeal’s findings in that respect, which had been based on tenders involving similar tests made by other companies, including a tender involving tests produced by the same manufacturer, and on the assessment of the market conducted by the Ministry of Defence could not be considered arbitrary or manifestly unreasonable. The Court of Appeal’s finding that the first applicant company had acted in bad faith had not been based solely on the fact that the price of its tests had been higher than that proposed by other companies but had assessed the first applicant’s tender in the light of the entirety of the relevant circumstances, including the overall conduct of the applicant companies in the extraordinary situation created by the public health crisis. Accordingly, the Court of Appeal had not established an obligation for suppliers to propose a “reasonable” price and it had not shifted the obligation to use public funds rationally from the authorities onto private entities. Moreover, given the circumstances, although the second applicant company had not participated in the public procurement procedure, the applicant companies had acted together and in concert. Consequently, the reasons justifying the procurement contract’s annulment had equally been relevant for the annulment of the sales and purchase agreement between the applicant companies, by which the first applicant company had transferred to the second applicant company most of the funds received under the procurement contract. It was not the Court’s role to determine what the consequences should be of a procurement contract and/or any related contracts being declared null and void but rather whether the domestic courts’ decisions when seeking to correct the mistakes made in the public procurement procedure had imposed an individual and excessive burden on the applicant companies. The Court found that in the present case they had not. The domestic courts had acknowledged that, in the circumstances, it had not been possible to apply restitution in kind and restore the situation which had existed before the impugned transactions because the procurement contract had been entirely fulfilled and the State had already used the majority of the tests received under that contract. The Court of Appeal held that maintaining the contracts at issue would have been contrary to public interest and ordered the applicant to repay to the State the amount it had overpaid for the tests. The Court reiterated in that connection that the good faith of the parties to a contract was a relevant factor when determining any compensation to be awarded after the annulment of a contract. Although the public authorities had not acted in compliance with their administrative obligations under public procurement law, in the circumstances of the present case, this could not justify exonerating the applicant companies from the breach of obligations imposed on them by the applicable civil law, so that they would have been entitled to retain the excessive profit made at the expense of the public purse. The context in the present case was characterised by the concurrence of an administrative procedure for the selection of a supplier on the one hand, and a contractual transaction between the selected supplier and the contracting authority on the other hand. The procurement procedure, which was the responsibility of the relevant public authorities, concerned the search for potential suppliers and the selection of the supplier, while ensuring transparent and competitive access to the procurement process. At the same time, however, it was necessary to consider the fact that the suppliers bidding for public contracts were economic operators actively pursuing their own commercial interests. Accordingly, the contractual relations between suppliers and contracting authorities in the public procurement filed could not be assimilated to situations in which public authorities exercised administrative powers entrusted to them in relation to persons or entities in a subordinate position. The Court took note of the applicant companies’ argument that the NVSPL, which was responsible for ensuring compliance with the law but had failed to do so, did not have to bear the consequences of its own failure, since the fine imposed on it by the first instance court had been subsequently annulled by the Court of Appeal. In that connection, the Court considered it important to point out that the public procurement procedure at issue had taken place during the COVID-19 pandemic, when the need for the authorities to act with particular expediency had increased the likelihood of mistakes being made. In any event, having regard to its findings as to the applicant companies’ conduct, the Court was unable to conclude that the absence of financial consequences for the NVSPL was in itself sufficient to render the interference with the applicant companies’ property rights disproportionate. Accordingly, it found that the domestic authorities had not overstepped the wide margin of appreciation afforded to them in the present context. Conclusion : no violation (unanimously). (See also Kurban v.   Turkey , 75414/10, 24   November 2020, Legal Summary )   © Council of Europe/European Court of Human Rights This summary by the Registry does not bind the Court. To access legal summaries in English or French click here . For non-official translations into other languages click here .