For tenderers engaged in large-scale projects such as construction or infrastructure works, knowing the extent of their obligations at the time of preparing their tenders is key to setting prices. The duration of the warranty period is especially critical for energy and infrastructure contracts, such as Engineering, Procurement and Construction (EPC) contracts. In a recent judgment, the European Court of Justice confirmed the importance of this principle and held that legal certainty over the applicable obligations for tenderers takes precedence over national contract law, if the obligations contained in national contract law are not foreseeable by a reasonably informed and diligent tenderer.
Disputed warranty period under Polish law for a sludge thermal treatment plant
The case that formed the basis of the ECJ's judgment involves a public works contract to modernise and extend the Czajka sewage sludge thermal treatment plant in Poland. Following the completion of the plant, a dispute arose between the Polish contracting authority and the consortium of tenderers from different EU Member States (one of which established in Poland) about the warranty period of works contract.
The two recuperators and waste incineration lines built by the tenderer were subject to a warranty period of 36 months after acceptance of the works. The warranty card also provided that 'where this warranty card is silent, the relevant provisions of Polish law, including in particular the Civil Code, shall apply mutatis mutandis'. Both recuperators broke down during the warranty period and were repaired. The recuperators subsequently broke down again after the expiration of the (initial) 36-month warranty period.
However, based on the contract clause referring to the application of the Civil Code, the contracting authority argued that the works were still under warranty. For that, the contracting authority relied on an interpretation by analogy of the rules governing guarantees for contracts of sale under the Polish Civil Code, which provide that the warranty period starts again from the moment of delivery of the item free from defects or from the return of the repaired item.
It is evident that the tender documents and the provisions of Polish Civil law do not explicitly state that the provision applying to contracts of sales apply by analogy to contracts for works. This question has been the subject of debate in both the case-law of Polish courts and among legal scholars. Therefore, the Polish court asked the ECJ, seeking clarification on whether the principles of equal treatment and the obligation of transparency preclude the application by analogy to a works contract, pursuant to a judicial interpretation, of provisions of national law governing guarantees in respect of contracts for sale, the content of these provisions was not expressly stated either in the tender documents or in that works contract.
The European Court of Justice's assessment
The ECJ ruled that the principle of equal treatment in EU procurement law means that the tenderers must have an equal opportunity to formulate their tenders, which implies that all competitors must be subject to the same conditions. Such a position of equality between tenderers promotes a healthy and effective competition between undertakings taking part in a public procurement procedure.
The corollary of such equal treatment is the obligation of transparency, which aims to avoid any form of favoritism or arbitrariness on the part of the contracting authority. This principle of equal treatment and the transparency obligation that flows from it must also be observed during the performance of the contract. For instance, a contracting authority is prohibited from unilaterally amending one of the essential conditions of the invitation to tender during its performance, if such change would have led tenderers to submit a substantially different tender.
The Court concludes that the warranty period and the essential conditions for its implementation must be clearly defined in advance and made public. Only then can tenderers understand exactly the legal and economic conditions to which the award of the contract in question and the detailed rules for its performance are subject, which ensures that the same requirements apply to all competitors.
A key consideration in the judgement is that the level of knowledge of national law and its interpretation, and of the practice of the national authorities, of tenderers established in another Member State are likely to be different from that of national tenderers. Therefore, a reasonably well-informed tenderer exercising ordinary care should be able to identify, at the award stage, the events that could lead to an extension of the warranty period during the performance of the contract.
In this case, the warranty card expressly provided the duration and starting point of the warranty period (36 months from acceptance of the works). The contract referred to the application of the relevant provisions of Polish law only for matters not provided in that card. Therefore, the reference made to national law does not appear to have enabled a reasonably well-informed tenderer exercising ordinary care to identify sufficiently clearly the extent of their obligations. Under such circumstances, applying a controversial interpretation of Polish contract law would run counter to the principles of equal treatment and transparency.
Equal treatment requires contractual clarity
The implication from this judgment is that contracting authorities cannot rely on unclear or contested interpretations of national law to impose additional obligations on contractors, unless those obligations are clearly stated in the tender documents.
Guaranteeing equal treatment between and transparency towards tenderers means that contractual provisions should be interpreted from the perspective of a reasonably well-informed tenderer, including any interpretation of national law supplementing those contractual provisions. The Court also implies that the nationality of the tenderer is relevant to considering what is to be considered a 'reasonably well-informed tenderer' when assessing the foreseeability and legal certainty surrounding a legal provision mentioned in a public contract.
Taken together, this judgment is another step towards favoring contractual clarity and the foreseeability of legal obligations over the imposition of (contested) interpretations of national law.
Key takeaway: no hidden obligations
The judgment confirms that contracting authorities cannot impose
obligations based on unclear or disputed interpretations of
national law unless these are explicitly stated in the tender
documents. Contract terms must be understandable to a reasonably
informed tenderer, considering their nationality and legal
background. This reinforces the need for legal certainty and
transparency in public procurement.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
