Contractual Penalty vs. ESPD (European Single Procurement Document) – Supreme Court Ruling

The Supreme Court upheld the position of the Law Firm’s lawyers in a case concerning the exclusion of a Client from a tender procedure worth nearly 200 million PLN, due to misleading the contracting authority by concealing information about allegedly imposed contractual penalties.

The case addressed a significant issue in the public procurement sector concerning the obligation to disclose, in ESPD, contractual penalties imposed in connection with the execution of a previous public project.

In previous posts (see: ESPD – When to disclose a penalty? and Success in the Appeal Against the KIO Ruling on a Tender Worth Nearly 200 Million), we described our success in this case before the Regional Court in Warsaw, which upheld the appeal against the KIO ruling prepared by the firm’s attorneys and legal advisors.

The case reached the Supreme Court because a competing contractor, who had also participated in the tender, filed a cassation appeal against the aforementioned judgment.

However, the cassation appeal proved to be unfounded, as both the Regional Court in Warsaw and the Supreme Court agreed with the arguments presented by the Law Firm’s lawyers, emphasizing in the reasoning for the judgment issued in the case, among other things, that:

• Article 109(1)(7) of the Public Procurement Law as a ground for the contracting authority to exclude a contractor from a procurement procedure is not so much the emergence of a claim for payment of a contractual penalty (the fulfillment of the contractual conditions for imposing the penalty) as the actual imposition of the contractual penalty, which occurs at the moment the contracting authority issues a unilateral declaration of intent;
• Only when the contracting authority issues a unilateral declaration of intent to impose a contractual penalty does the contractor’s obligation to disclose this circumstance in the ESPD form arise (and this obligation arises regardless of whether the bidder believes the contractual penalty was imposed justifiably or disputes the grounds for its imposition).

Thanks to our effective representation, the client is executing a public procurement contract worth approximately 200 million PLN, and the reasoning behind the subsequent favorable judgments rendered in the case provides important guidance for future tender proceedings.