Local authority – Public procurement – Concession contract – Appellant complaining that procurement exercise for new leases of land with digital advertising screens unlawful – Judge dismissing damages claim on ground that contract not properly classified as service concession to which Concession Contracts Regulations 2016 applied – Appellant appealing – Whether new leases were service concession contracts within Regulations – Whether new leases were contracts for pecuniary interest – Whether land exemption applicable to new leases – Appeal dismissed
The respondent local authority owned either side of the Hammersmith Flyover in West London, on which were situated substantial structures (the Two Towers) which supported large digital advertising screens. The respondent originally leased the land to the appellant. When the leases came up for renewal, the appellant was comprehensively outbid and the respondent entered into new leases with another company.
After failing to secure the new leases, the appellant complained that the procurement exercise (in which it had freely participated) was unlawful, because it was one to which Directive 2014/23/EU (the Concessions Directive) and the Concession Contracts Regulations 2016 applied. If they did apply, it was common ground that the procedural formalities required for any procurement exercise did not occur. The appellant claimed damages.
The High Court held that the lease did not amount to a “concession contract” and the Regulations did not apply to the tender procedure for the new leases. She held, amongst other things, that a contract would only be a concession contract where the services or works provided for by the contract were for the benefit of the contracting authority or its residents, in furtherance of the strategic objectives of the contracting authority, or to satisfy the contracting authority’s statutory obligation. To come within the Regulations, the putative concession contract had to contain a legally enforceable obligation to provide works or services; no procurement process would have been required even if the leases had been concession contracts. Although the objective of the lessee in entering into the leases was to carry out economic activity on the land, the leases were genuine leases and therefore exempted from the Regulations: [2018] EWHC 2508 (TCC). The appellant appealed.
Held: The appeal was dismissed.
(1) The definition of a services concession contract was set out at regulation 3(3). The Concessions Directive and the Regulations were concerned solely with public bodies. The Regulations applied to those contracts into which contracting authorities might enter, pursuant to which they granted a concession to an economic operator to provide the services in question on behalf of the contracting authority. It followed that those services had to be services to or for the public, which the contracting authority would otherwise have to provide itself. There had to be a direct link between the contracting authority’s obligations and the services being provided: the services had to be obviously in the public interest: Gemeente Arnhem v BFI Holding BV [1998] 1-ECR 6821, Helmut Muller [2010] 3 CMLR 18 and Promoimpresa Srl [2017] 1 CMLR considered.
In the present case, the respondent had no statutory or other obligation to provide advertising services for its residents (or anyone else). Accordingly, any advertising services being provided pursuant to the new leases could not be provided on the respondent’s behalf. There was no express request for advertising by the respondent within the new leases, and its income was derived from the appellant’s possession and use of the land, not the nature or quantity of advertising they might sell. That advertising was in any event unrelated to the objectives of the respondent or any of its public obligations. There was no direct benefit to the respondent or its residents as a result of the nature and quantity of the advertising featured on the land. Consequently, the Regulations did not apply to the tender process for the new leases.
(2) It was important to look at the new leases as a whole, and to have regard to their substance rather than their form. There was no direct obligation within the new leases on the part of the appellant to provide any advertising services at all. The rent was the result of the land rights which had been granted by the respondent, not the provision of any advertising services by the appellant. The new leases were not contracts for pecuniary interest by means of which the respondent entrusted to the appellant the provision or the management of advertising services. The appellant had not shown that the new leases came within the definition in regulation 3(3): R (on the application of Faraday Development Ltd) v West Berkshire Council [2018] EWCA Civ 2532; [2019] EGLR 3 followed.
(3) The essential feature of the new leases was that, pursuant to their terms, the appellant obtained exclusive possession of the land and the Two Towers. They paid a fixed rent which was not conditional upon or affected by any particular type or level of advertising sold. Although the appellant had permission to use the Two Towers for the display of static advertising and to sell the advertising space to third parties, that could not change the nature of the underlying transaction: it remained an agreement for the rental of land. That was precisely the sort of situation which the land exemption was designed to cover. In those circumstances also, the Regulations did not apply to the new leases.
(4) Although the appellant’s entitlement to damages did not arise, it would be wrong in principle to hold that a claimant in the position of the appellant was automatically entitled to claim damages as a result of a contracting authority’s failure to follow the Regulations. An award of damages could only be made, in accordance with the principles in Francovich and Bonifaci v Italy (Case C-6/90 and C-9/90), if any breach of the 2016 Regulations was sufficiently serious to merit an award and there was a direct causal link between the breach and the damage sustained. That would always depend on the individual facts of the case. The mere fact of non-compliance with the Regulations, without more, could not be regarded as sufficiently serious. In the present case, the appellant would not have been successful as it underbid so comprehensively. Damages, even calculated by reference to the loss of a chance principle, would never have been recoverable: Francovich and AerCap Partners 1 Ltd v Aviva Asset Management AB [2010] EWHC 2431 (Comm) applied.
Philip Moser QC and Ewan West (instructed by DLA Piper UK LLP) appeared for the appellant; James Goudie QC and Joanne Clement (instructed by Sharpe Pritchard LLP) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Ocean Outdoor Ltd v Hammersmith & Fulham London Borough Council
