Information Note on the Court’s case-law 245
Kurban v. Turkey – 75414/10
Judgment 24.11.2020 [Section II]
Article 1 of Protocol No. 1
Article 1 para. 1 of Protocol No. 1
Peaceful enjoyment of possessions
Disproportionate character of ex tunc annulment of contract and retention of guarantee awarded by mistake due to belated notification about criminal proceedings against procurer: violation
Facts – The applicant and his partner had been granted a public procurement contract for a construction project. The contract was subsequently annulled and the guarantee forfeited on grounds that criminal proceedings had been brought against the applicant for offences relating to previous public procurements. The applicant appealed unsuccessfully against the contract’s annulment.
Law – Article 1 of Protocol No. 1:
(a) Admissibility: Whether the applicant had a “possession”
The Court first had to establish whether the applicant’s procurement contract and the retention of his guarantee had constituted “possessions” within the meaning of the Protocol.
The applicant had been awarded the procurement contract with his partner after the relevant procurement authorities had announced that he and his partner had qualified for and won the tender in question. Under the terms of the procurement contract, the applicant had been jointly and severally responsible for finishing the construction project within budget. He had also given an assurance that the contract would be carried out by giving a guarantee. After the signing of the contract, the applicant and his partner had begun developing the construction site and billed the administration for the progress they had made. This contract until its annulment by the contracting authority had been sufficiently enforceable under domestic law and therefore had constituted an asset protected under Article 1 of Protocol No. 1. While the domestic courts had subsequently upheld the annulment of the applicant’s contract and the forfeiture of his guarantee, this fact was not decisive from the point of view of determining whether at the time the applicant had signed the contract and lodged the guarantee he could have entertained a legitimate expectation that his presumed entitlement to the contract would not be capable of being called into question retrospectively.
Therefore, in the specific circumstances of this case, the applicant had to be regarded as having had at least a legitimate expectation of being able to rely on the contract and complete it and expect the return of his guarantee, and this might be regarded, for the purposes of Article 1 of Protocol No. 1, as attached to the property rights granted to the applicant under the contract.
(b) Nature of the dispute and scope of the Court’s review
The dispute had not arisen out of the interpretation of the contract in accordance with the principles of private law but had stemmed from the application of a mandatory provision of domestic law and the applicant’s being prosecuted for a procurement-related offence. Article 1 of Protocol No. 1 applied to the dispute and the scope of the Court’s review was not therefore limited only to whether the domestic court’s judgments could be considered as arbitrary or otherwise manifestly unreasonable.
(c) Merits: Whether there was a justified interference
There had been an interference with the applicant’s property rights which had been prescribed by law and which had followed the legitimate aims of prevention of collusive practices and the protection of the pubic purse, and promotion of fair competition. It remained to be determined whether the measure had borne a reasonable relationship of proportionality between the means employed and the aim pursued.
A wide margin of appreciation was usually allowed to States when it came to general measures of economic or social strategy. The margin of appreciation was substantially broader when the issues involved an assessment of candidates for public procurement and the policy choices as to mandatory or discretionary exclusion of candidates. Under the European Union Directive 2014/24/EU on public procurement, for instance, conviction for fraud, corruption, terrorist offences, money laundering or participation in a criminal organisation constituted mandatory exclusion grounds of an economic operator from public procurement. Under the same directive, contracting authorities were given the discretion to exclude economic operators who had been proven to be unreliable, for instance, because of violations of competition rules, or other grave professional misconduct. Moreover, a right to terminate the contract was available to member States if it turned out that a contractor had been convicted in a final judgment for a number of listed reasons at the time of the award of the contract. The Directive advised procurement authorities to pay attention to the principle of proportionality in their use of discretion.
Procurement authorities may be required to take measures aimed at correcting their mistakes in the interests of the public. Nonetheless, that principle could not prevail in a situation where the individual concerned was required to bear an excessive burden. Further, it was not the Court’s role to decide in principle whether the existence of criminal proceedings against a person should act as exclusionary grounds and whether such prosecution should serve as justifiable grounds to annul a contract and keep the guarantee.
No assessment of proportionality had been carried out in domestic proceedings, domestic law leaving no room for discretion in that respect. The Court therefore had to assess for itself whether the result had been disproportionate.
The Court highlighted several specificities, in particular:
First, when the invitation to tender had been announced, an indictment accusing the applicant had already been filed with and accepted by the criminal court. Under normal circumstances and in accordance with domestic law, the applicant should never have been allowed to tender. Although domestic law had required the prosecution to inform the public procurement authorities without delay of any person who had been prosecuted in respect of a procurement-related offence, this notice had reached the authorities six months after the indictment had been deposited with the criminal court. Six months could hardly be considered swift in the procurement context, where time was of the essence. Thus, the authorities had acted negligently in communicating crucial information that had affected the qualification of participants in the procurement process.
Secondly, the applicant himself had never been notified of the indictment against him despite domestic law requiring such. The notification of the indictment to the legal aid lawyer whose authority at that point had been limited to assisting the applicant during his police questioning had not been in accordance with the law. Furthermore, the absence of any proof of the applicant’s having been aware of the proceedings against him when he participated in the tender meant that he could not be accused of acting in bad faith when he participated in that process. Lastly, the Court could not subscribe to the reasoning that the applicant should have refrained from participating in the tender by anticipating that a criminal case could be lodged against him following his questioning by the police.
Thirdly, the Court also had regard to the fact that the measure had been applied as an automatic consequence of the fact that the applicant had been indicted; and to the irreversible and permanent nature of the impugned measure with no possibility for the applicant to claim a refund in the event that the criminal proceedings against him had ended with a result other than a conviction.
Having regard to these specific circumstances, which had had a decisive impact on the situation the applicant found himself in, and notwithstanding the margin of appreciation allowed to a State in choosing the most appropriate response in such cases, the annulment of the applicant’s contract with ex tunc effects and the retention of the guarantee had been disproportionate. In particular, even if the termination of the contract had been necessary and unavoidable, the fair balance principle would at least have required that a less severe measure alleviating the financial burden placed on the applicant be applied, such as the return of his guarantee and reimbursement of some or all of his costs.
Conclusion: violation (unanimously).
The Court also found that there had been no violation of Article 6 § 2 on the basis that the domestic courts handling the dispute over the contract annulment had not implied or commented on the applicant’s criminal guilt.
Article 41: Claims in respect of pecuniary and non-pecuniary damage struck out of the list.
(See also Kopecký v. Slovakia [GC], 44912/98, 28 September 2004, Information Note 67; Dzirnis v. Latvia, 25082/05, 26 January 2017; Čakarević v. Croatia, 48921/13, 26 April 2018, Information Note 217; Guide on Article 1 of Protocol No. 1 to the European Convention on Human Rights: Protection of Property)