The Metropolitan Court of Budapest confirmed the new legal interpretation of the Public Procurement Arbitration Board that the exclusion ground from tenders is applicable to companies participating in cartels according to the decision of the Hungarian Competition Authority, which established this violation of competition law irrespective of any subsequent judicial remedy procedure. Previously, a company excluded from tenders could file an action for lawsuit against the decision of the Hungarian Competition Authority, which meant that any exclusion order did not go into effect until a court rendered its final decision.
According to section 62 (1) n) of the Hungarian Public Procurement Act, economic operators should be excluded from tenders for three years if they committed a cartel infringement established in a final and enforceable decision of the Hungarian Competition Authority, or if they are party to an administrative procedure for challenging the decision of the Hungarian Competition Authority in a final and enforceable court ruling.
Previously, authorities, courts and contracting authorities interpreted the above clause in a way that the three-year tender ban started either with the decision of the Hungarian Competition Authority where there was no judicial remedy, or with the final court decision in the event of a court procedure challenging the decision of the Hungarian Competition Authority.
In 2020, however, a new interpretation gained ground. Upon the ex officio initiation of the Hungarian Public Procurement Authority, the contracting authorities ruled to exclude an entity from ongoing tenders that had committed cartel infringement according to the decision of the Hungarian Competition Authority.
The entity concerned challenged the decision of the Hungarian Competition Authority by initiating a judicial remedy procedure, but this move was insufficient to prevent its exclusion from tenders. The entity concerned further challenged the tender exclusions, but the Public Procurement Arbitration Board upheld the contracting authorities’ decisions. This interpretation was recently confirmed when the Metropolitan Court of Budapest delivered its final judgments reviewing the decisions of the Public Procurement Arbitration Board, and concluded that the latter’s interpretation was correct: the exclusion ground indeed becomes applicable with the delivery of the Hungarian Competition Authority’s decision irrespective of a judicial review against such a decision.
The Metropolitan Court of Budapest argued that section 62 (1) n) of the Hungarian Public Procurement Act should be interpreted together with the Act on General Public Administration Procedures and with the Code of Administrative Litigation, which state that a decision of the authority becomes final upon its delivery and that filing a lawsuit does not have suspensory effect on the administrative act. Consequently, the decision of the Hungarian Competition Authority becomes final and enforceable.
According to this new practice confirmed by the Metropolitan Court of Budapest, filing an action for lawsuit will not be satisfactory to prevent exclusion from tenders, and affected bidders must also file a request for interim relief requesting the court to grant suspensory effect to the submitted action for a lawsuit. The aim of such interim relief is to protect entities from irreversible effects of the administrative acts until the end of the judicial remedy procedure.
According to available case law, courts may grant interim reliefs in the event of a real threat that due to an administrative act, an affected entity will be excluded from tenders and it can be substantiated to a satisfactory level that such exclusion would have irreparable detrimental effect to the given entity. This practice was confirmed by the Curia (i.e. Hungarian supreme court) in a recent decision.
The Metropolitan Court of Budapest also confirmed that if granted, interim relief is effective retroactively (i.e. as of the date when it was submitted to the court).
Although the Curia could overturn this new interpretation and return the previous practice, for the time being potential bidders should be aware that those exclusion grounds arising as a result of an administrative act (e.g. participation in a cartel, unlawful influence of the contracting authority, false declaration) will become effective upon the delivery of the decision by the authority. Considering that filing an action for lawsuit will not have any suspensory effect on such tender ban, bidders must request interim relief to prevent the exclusion ground from becoming applicable or initiate a "self-cleaning process" to be able to participate in tenders.
For further information on competing in tenders in Hungary, contact your CMS client partner or these experts with the CMS Hungarian Public Procurement Team: