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Automatic suspension maintained pending expedited trial

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14/03/2022

In Vodafone Ltd v Secretary of State for Foreign, Commonwealth and Development Affairs and another [1] the court held that the balance of convenience lay in maintaining an automatic suspension pending the expedited trial of a preliminary issue to take place in January 2022. The Secretary of State applied to lift the automatic suspension under public procurement regulations of the power to award a contract for the provision of a replacement secure electronic communications system to the successful tenderer, Fujitsu. Vodafone, one of the unsuccessful tenderers, applied to the court for a direction that there should instead be an expedited trial of a preliminary issue, i.e. whether the defendants acted unlawfully in abridging the timetable of the public procurement exercise and awarding the contract on the basis of initial tenders only, without further negotiation.

The well-known American Cyanamid tests [2] applied to whether the automatic stay should be lifted. The defendants accepted that there was a serious issue to be tried as to whether the decision to appoint Fujitsu was, in some way, unlawful. The court decided it would not be just to confine Vodafone to its remedy in damages in light of the unquantifiable loss of opportunities to bid for and win other contracts on the back of this one.

If it were just a matter of money, damages pursuant to Vodafone’s standard undertaking might well have been adequate to compensate the defendants if it turned out that the automatic stay was wrongly kept in place. The court was inclined to conclude that damages would not be an adequate remedy for the defendants – the sooner the replacement system was implemented, the safer the country would be, and the security and reputation of the UK could not be measured in money terms.

However, the evidence of perceived threat levels and on timing had to be taken into account. It was striking that there was no evidence that any specific security threat had been linked to the outdatedness of the current system. If the preliminary issue was a viable solution, prejudice to the defendants arising from the automatic stay would be time limited, since it would be lifted if Vodafone lost on the preliminary issue. The defendants would be adequately protected by Vodafone’s undertaking in damages, if but only if the preliminary issue trial was a viable proposition.

While the preliminary issue was not a perfect solution, it was a viable one, and the one causing the least irremediable injustice. The matter was fit for expedition and the balance of convenience and justice came down in favour of maintaining the automatic stay until the preliminary issue had been tried.

Having considered its powers under the regulations, the court also made an interim order modifying the requirement not to enter into a contract, so that the defendants, in advance of the preliminary issue trial, might enter into a conditional contract with Fujitsu. The court accepted that this provided them with only limited comfort during the period leading up to the trial in January 2022 and that Fujitsu might not be willing to enter into such an agreement.

[1] [2021] EWHC 2793 (TCC)

[2] Recently formulated in the Draeger case (see our previous update): When determining an application to lift the automatic suspension in a procurement challenge case, the court must consider the following issues:

(i) Is there a serious issue to be tried?

(ii) If so, would damages be an adequate remedy for the claimant if the suspension were lifted and they succeeded at trial; is it just in all the circumstances that the claimant should be confined to its remedy of damages?

(iii) If not, would damages be an adequate remedy for the defendant if the suspension remained in place and it succeeded at trial?

(iv) Where there is doubt as to the adequacy of damages for either of the parties, which course of action is likely to carry the least risk of injustice if it transpires that it was wrong, that is, where does the balance of convenience lie?

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