Policy paper

Procurement Bill: European Convention on Human Rights Memorandum

Published 25 January 2023

Introduction

1 - This memorandum addresses issues arising under the European Convention on Human Rights (ECHR) in relation to the Procurement Bill. This memorandum deals only with those parts of the Bill which raise ECHR issues.

2 - The memorandum has been prepared by the Cabinet Office. The Minister for the Cabinet Office has made a statement under section 19(1)(a) of the Human Rights Act 1998 that in his view the provisions of the Bill are compatible with the Convention rights.

Part 3, Chapter 6 - Debarment

The relevant provisions

3 - Clause 62 of the Bill provides a power for a Minister of the Crown to add a supplier to a published debarment list where the supplier is an “excluded supplier” or an “excludable supplier”. These terms are defined in clause 57. A supplier is an excluded supplier where a mandatory ground for exclusion applies to the supplier (or a person connected to it), whereas a supplier is an excludable supplier where a discretionary ground for exclusion applies and, in both cases, the decision-maker considers that the circumstances giving rise to relevant exclusion ground are likely to occur again.

4 - Schedules 6 and 7 set out the mandatory and discretionary grounds for exclusion. This covers some criminal offences but also some conduct which falls short of a criminal offence, such as regulatory misconduct and circumstances such as insolvency.

5 - Where a supplier is added to the debarment list for a mandatory exclusion ground, they are automatically excluded from bidding for any future public contract until removed from the list. If the exclusion ground is discretionary, contracting authorities have a discretion to exclude the supplier but must accept that an exclusion ground applies and that there is sufficient evidence that the circumstances giving rise to the ground will happen again.

6 - Contracting authorities also have a right to terminate public contracts already awarded to a supplier that is or become subject to exclusion under terms implied into such contracts by clause 77. They are also able to exclude such a supplier from selection processes for the award of future contracts under frameworks by virtue of terms implied into frameworks by clause 48. A framework is defined in clause 45 as a contract which provides for the future award of contracts.

7 - Clause 64 gives suppliers a right to appeal a Minister’s decision to enter their name on the debarment list (or not to remove it) in accordance with Regulations to be made by a Minister of the Crown. The Government has now tabled amendments which amend this clause (and others) to make substantive provision for appeals on the face of the Bill. These set out a supplier’s right to appeal against a Minister’s decision to enter their name on the debarment list, to indicate a particular date when their name is expected to be removed from the list and not to remove their name from the list following an application to do so on grounds that the Minister has made a material mistake of law. The appeal can be made by way of civil proceedings to the High Court in England, Wales and Northern Ireland or the Court of Session in Scotland.

8 - If the Minister’s decision is found to be unlawful, the Court can make an order setting aside the decision. Where the supplier has been excluded from procurements in consequence of the mistake, the Court can also make an order to compensate the supplier for its costs in bidding for procurements.

9 - Amendments to clause 62 provide that the Minister must not put a supplier’s name on the debarment list during a standstill period of 8 working days after the supplier is notified of the decision. A new clause entitled “debarment appeals: interim relief” allows the supplier to apply for interim relief in the form of a suspension of the Minister’s decision to enter the supplier’s name on the debarment list during this standstill period. In considering an application for suspension, the Court must balance the public interest, including that public contracts are not awarded to suppliers that pose a risk, with the interest of the supplier, including any likely financial impact on the supplier.

10 - The debarment regime sits alongside the exclusions regime, under which contracting authorities consider on a case by case basis for each procurement whether any supplier in respect of which the Minister has not made a debarment decision is an excluded or excludable supplier and, consequently, whether they must or may be excluded from bidding for contracts.

11 - Suppliers can challenge exclusion decisions by contracting authorities on particular procurements in civil proceedings provided for in Part 9 of the Bill. Amendments to clause 97 provides that such proceedings cannot be brought on grounds for which there is a separate right of appeal against the Minister’s decision under amendments tabled to clause 62.

Article 1 of Protocol 1

12 - Article 1 of Protocol 1 provides that:

Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.

The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.

13 - The removal of a right to participate in procurements and to be awarded public contracts do not amount to “possessions” protected by Article 1 of Protocol 1. In these cases, there is no enforceable claim, or legitimate expectation, to bid for or to be awarded a contract.

14 - Rights to receive incurred expenditure that suppliers might be deprived of if a contracting authority terminates a contract or or contractual rights to bid for contracts which a supplier is deprived of by being excluded from selection processes under a framework following a debarment decision are in some circumstances capable of engaging Article 1 of Protocol 1. For example, the supplier may benefit from enforceable claims to be paid for work undertaken by not yet paid or where the supplier has incurred costs in pursuit of obligations under the contract. In addition, the supplier may in certain circumstances have contractual rights to bid in a selection process under a framework.

15 - Loss of goodwill as a result of the removal of such rights may, in limited circumstances, also engage Article 1 of Protocol 1. This is likely to be restricted to a limited number of cases where a debarment decision effectively excluded a supplier from all public sector contracts where that supplier’s workstream is limited to or heavily reliant on public sector contracts.

16 - To the extent that there is any residual interference, and in the limited circumstances where there is loss of goodwill, the Government is content that the interference serves the public interest, complies with conditions provided for by law and passes the fair balance test.

17 - The debarment regime’s purpose is to protect public bodies and the public purse from exposure to suppliers whose past activities would mean there is a risk that they will have a detrimental effect. This is overlaid with an objective of Ministerial consideration of suppliers which give rise to the greatest risks and a consistent approach to the exclusion of such suppliers by contracting authorities, all of which serves the public interest.

18 - Debarment decisions will be based on domestic law which sets out the basis on which suppliers can be added to the debarment list, the grounds which can give rise to a debarment decision, the self-cleaning test by which suppliers can avoid being put on the debarment list and the consequences of debarment. In addition, suppliers afford suppliers the opportunity to have a debarment decision suspended pending an appeal. These provisions are accessible, precise and foreseeable and therefore compatible with the rule of law, and not arbitrary.

19 - As regards the fair balance test, suppliers are afforded an opportunity to make representations before a debarment decision is made, including putting forward evidence of self-cleaning to avoid debarment altogether. Suppliers whose names are put on the debarment list are able to appeal that decision and, in any event, can apply to be removed from the list if circumstances change or they present new evidence of self-cleaning. The right to apply for interim relief is also an important safeguard.

20 - Whilst the Bill confers a right on contracting authorities to terminate, it is silent as to the consequences of termination and those will need to be given effect in accordance with the normal rules of contract law. Where a debarment decision is found to be unlawful and the supplier has been excluded from procurements as a result, the Court can order the Minister to reimburse lost bid costs.

Article 6

21 - Article 6 provides that:

In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law.

22 - Since public contracts are in most cases openly tendered and offers may never be accepted, procurement does not generally give rise to civil rights for the purposes of Article 6. Nevertheless, there are circumstances in which a supplier whose name is added to the debarment list, and therefore deprived of, or at least potentially deprived of, the opportunity to bid for and be awarded public contracts, might be entitled under Article 6 to a fair and public hearing within a reasonable time by an independent tribunal established by law.

23 - As explained above, suppliers will have a right to appeal certain decisions made by the Minister in relation to debarment to the Court in civil proceedings. This includes a right to appeal a decision to enter a supplier’s name on the debarment list and a decision not to remove it following a review by the Minister.

24 - The grounds of appeal are limited to material mistakes of law. Consideration of debarment decisions by a Minister will be a mix of fact and policy, for example fact-based considerations of whether an exclusion ground exists and of self-cleaning evidence and policy consideration of whether self-cleaning evidence is sufficient.

25 - The Bill provides for significant procedural safeguards built into the debarment decision-making procedure. These include the need for a prior investigation, which the supplier must be notified of, during which the supplier can make representations and after which must be provided with a report. In addition, the Minister is under a duty to notify the supplier of a debarment decision before the supplier is put on the debarment list, to publish the list, to keep the list under review and to consider applications from suppliers to remove their name from the list where there are changed circumstances or new information.

26 - The grounds on which a decision can be appealed enable the Court to make factual findings in certain circumstances. In particular, the Court will be able to make factual findings which go towards a finding that an exclusion ground applies and which go to mixed questions of fact and policy, such as whether a supplier’s self-cleaning evidence is sufficient. This includes, for example, a finding of fact by the Minister that is unsupported by any evidence or which is based upon a view of the evidence which could not reasonably be held, as well as any misunderstanding or ignorance of an established and relevant fact that gives rise to unfairness.

27 - The Government is content that civil proceedings through the Courts on grounds of material mistake of law provides for sufficiency of review for the purpose of Article 6. To the extent that appeal rights are limited, this is a proportionate means of pursuing the legitimate aim of protecting public bodies and the public purse from exposure to suppliers whose past activities would mean there is a risk that they will have a detrimental effect.

28 - The Government is also content that the right for the supplier to apply for a debarment decision to be suspended pending an appeal provides an effective means of interim relief for suppliers where their right to bid for a contract might otherwise be removed by a contracting authority in a particular procurement acting on the basis of a debarment decision.

29 - In some cases the interim proceedings will be decisive of the supplier’s right to bid in particular procurements. For example, where the Court determines that the debarment decision should not be suspended and the supplier is on the debarment list for a mandatory exclusion ground, a contracting authority is required to exclude the supplier from a procurement that is ongoing at that point or that commences after the Court’s determination of the interim proceedings. This is not always the case, however, as contracting authorities retain a discretion not to exclude a supplier notwithstanding their name being on the debarment list for a discretionary exclusion ground.

30 - To the extent that the interim proceedings are decisive of a civil right, the Government considers that such proceedings are compatible with Article 6. The Court considering interim relief will consider the merits of the substantive appeal. Although the interim relief proceedings are not expected to be as thorough as the substantive hearing, the legitimate objectives of interim relief, ie the need for a rapid decision on whether the supplier should be entitled to continue to bid for procurements whilst a debarment decision is appealed, would be compromised if all of the procedural safeguards of Article 6 were applied. In any event, the Court considering the application for interim relief would have to act in a manner that is compatible with Article 6 by virtue of section 6 of the Human Rights Act 1998.

Schedules 6 and 7 - Excluded matters

The relevant provisions

31 - As described above, schedules 6 and 7 to the Bill set out conduct or circumstances which are to give rise to, respectively, mandatory and discretionary exclusions. The conduct or circumstances may relate to a supplier or to certain persons connected to it. Where such conduct or circumstances apply and the circumstances giving rise to it are likely to occur again, the contracting authority either must or may exclude the supplier from being able to bid for certain contracts under the Bill regime. The Minister can also add a supplier to the debarment list (see further above). The grounds for exclusion cover some criminal offences but also some conduct which falls short of a criminal offence.

32 - Paragraphs 43 of Schedule 6 and 16 of Schedule 7 make provision for the relevant conduct or circumstances to be taken into consideration where it took place before the coming into force of the Schedules themselves.

33 - In relation to Schedule 6, paragraphs 43(2) and (4) list the matters to which regard may be had where conduct occurred before the coming into force of that Schedule. The matters listed in paragraph 43(2) are all the same as or substantially the same as matters which are capable of giving rise to mandatory exclusion under the existing regime, whereas the matters listed in paragraph 43(4) are the same as or substantially the same as matters which are capable of giving rise to discretionary exclusion under the current regime. These matters are all subject to a longstop period of 5 years before the date of consideration and the matters listed in paragraph 43(4) are subject to a longstop period of 3 years before the coming into force of the Schedule.

34 - In relation to Schedule 7, there can be no such effect in relation to the matters set out in paragraph 16(4). For the remainder of the conduct covered by Schedule 7 these are matters that are either the same or substantially the same as matters which are capable of giving rise to discretionary exclusion under the current regime. All matters listed in Schedule 7 are subject to a longstop period of 5 years before the date of consideration. In addition, other than the matters listed in paragraph 16(4), a contracting authority cannot take into account any conduct that takes place more than 3 years before the coming into force of the Schedule.

35 - So any retrospectivity is limited to 5 years or 3 years, in all cases reflecting the current time period applicable to the relevant matters. In practical terms, any retrospectivity will be considerably more limited than that as the Government has already committed to a period of at least 6 months before the Act will be commenced and has stated that the Bill will not come into force before 2024.

Article 7

36 - Article 7 provides that:

No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national or international law at the time when it was committed. Nor shall a heavier penalty be imposed than the one that was applicable at the time the criminal offence was committed.

37 - As explained above, some of the conduct that may be considered by a contracting authority when deciding whether to exclude suppliers can be taken into consideration even where that conduct took place before the Schedule came into force. The Government is content that exclusion does not amount to a conviction for a criminal offence and that even if it was, the exclusion provisions are not a “penalty” within the meaning of Article 7. The Government is therefore of the view that these provisions are consistent with Article 7.

38 - It is well established that “criminal offence” has an autonomous meaning and that consideration must be given to three factors: domestic law classification, the nature of the transgression and the degree of severity of the penalty. Exclusion is not classified as a criminal offence.

39 - In the majority of circumstances described in Schedules 6 and 7, the conduct giving rise to exclusion will be that the supplier has been convicted of a criminal offence. The nature of the transgression in question therefore cannot itself be described as a criminal offence. In respect of several of the circumstances described in Schedule 7, and some of the circumstances described in Schedule 6, where the conduct described does not necessarily require a conviction for a criminal offence, it is likely to be that the supplier has committed a significant breach of acceptable standards, including professional or regulatory standards (see for example, paragraph 11 of Schedule 7). This conduct cannot be considered to be criminal in its own right.

40 - Lastly, the effect of an exclusion decision is that the individual supplier cannot bid for that particular procurement (though a decision by the Minister for the Cabinet Office to list a supplier on the debarment register could be based in part on such conduct and will be of general effect). The purpose of exclusion is not punitive, but the protection of public bodies and the public purse from exposure to suppliers whose past activities would mean there is a risk that they will have a detrimental effect.

41 - It is important to note that where a supplier has committed conduct which amounts to exclusionary behaviour, it is open to them to demonstrate that they have “self cleaned”, ie that they have taken action to reduce the risk of the misconduct reoccurring. The length of the longstop date is a standard period of time and not calculated by reference to the severity of the offence, indicating this is not a penalty. In addition, exclusions are enforced through the procurement remedies regime, which can result in a decision being overturned and/or damages being awarded to the supplier. This is indicative of preventative measures and not punitive ones. The sanction is therefore inherently civil and not criminal in nature and consistent with the well-established principle that preventative measures are not penalties for the purposes of Article 7.

42 - Even if there was a chance that the exclusion regime could be in some way viewed as criminal in nature, the Government is also content that exclusion in such circumstances would not constitute a heavier penalty than was applicable at the time of the commission of the offence. As has been set out above, the effect of exclusion is not a “penalty” for the purposes of Article 7 so cannot be considered to be a heavier penalty.

43 - In any event, the effect of the paragraphs set out above is that all of the circumstances in which a contracting authority could exclude a supplier for conduct carried out before the commencement of these Schedules are covered by circumstances in which it would already be open to a contracting authority to exclude them under the existing procurement regime. Therefore, even if this was to be considered a “penalty” there would be no increase in the severity of the penalty as a result of the new regime.