Frostating Court of Appeal defies the EFTA Court

In previous blog posts, I have reported on the EFTA Court's ruling that shook tender law to its foundations. The case has now been decided by Frostating Court of Appeal.

In some cases, errors by the contracting authority may give the supplier a claim for compensation. Compensation for negative contract interest is compensation for expenses incurred by a tenderer. Compensation for positive contract interest is compensation for lost profit if the supplier is not awarded the contract as a result of the error. In its Nucleus judgement from 2001, the Norwegian Supreme Court has previously set a threshold that a «material error» before the public sector can be liable for payment of compensation for positive contract interest.

The exciting thing about the statement from the EFTA Court on 31 October 2017 was that they suddenly lowered the threshold for «A single break on public procurement regulations is enough in itself» to trigger the client's liability for damages.

Frostating Court of Appeal has now heard the case that gave rise to the EFTA Court's opinion. It concerned the award of a tender contract for scheduled ferry transport in Sør-Trøndelag county. The judgement contains a number of discussions, but the most exciting thing is what the Court of Appeal says about who to listen to - the Norwegian Supreme Court or the EFTA Court: Should the threshold for liability be first where a «material error» has been committed, or already where the public sector has made a «simple breach» of the regulations?

The Court of Appeal cites several decisions from the European Court of Justice. They argue that the European Court of Justice is not in agreement with the EFTA Court's opinion either. Furthermore, it refers to the fact that Norwegian courts must listen to the EFTA Court's pronouncements, but not rely on them untested. And further:

«The Court of Appeal concludes that the question of the individual states' right to regulate the contracting authority's liability in the event of claims for serious error has not been unambiguously settled by the European Court of Justice, that there are differing views on the question in countries within the EEA, and that the EFTA Court's advisory opinion on this point does not appear to be clearly correct..» The Court of Appeal finds support for this in two decisions from the European Court of Justice. They further conclude:

«The Court of Appeal will therefore apply the legal interpretation established by the Supreme Court in

Rt-2001-1062 (Nucleus). Regarding compensation for positive contract interest, this means that there must be a material error.»

By maintaining the threshold previously set by the Norwegian Supreme Court in the Nucleus judgement, the balance in Norwegian procurement law has been restored.

When the Court of Appeal argued that the EFTA Court's opinion «does not appear to be clearly correct», it is an exceptionally independent judgement that the court makes. The judgement is not yet final, and it is possible that the last word has not been written in this case.