The Public Procurement Law regulates the method of eliminating contractors who do not meet the requirements for such things as integrity (no criminal convictions). The sanction of exclusion from a tender may be imposed on a contractor not for acts committed by the entity, but for acts committed in relation to the activity of a collective entity by natural persons acting on its behalf or in its interest.
According to Art. 57(1) of Directive 2014/24, a contractor (including both natural and legal persons, as well as entities without legal personality and groups of entities) who has been convicted by a final judgment of offences listed in the directive shall be excluded from the proceedings.
Art. 24(1)(13) of the Public Procurement Law is a direct implementation of this provision into Polish law and defines the grounds for exclusion of a contractor who is a natural person, repeating the catalogue of offences listed in the directive. On the other hand, Art. 24(1)(21) of the law defines the ground for exclusion in terms of punishability for companies and other collective entities, referring to the Act on Liability of Collective Entities for Punishable Acts of 28 October 2002 and the ban on competing for a public contract issued on the basis of that act.
The directive also provides that a contractor who has been excluded from participation in procurement procedures by a final judgment cannot benefit from the advantages of the “self-cleaning” defence during the period of exclusion resulting from that judgment in the member states where such a judgment is in force (Art. 57(6)(4) of the directive).
Awaiting amendment of the act
According to the Act on Liability of Collective Entities, the ban on bidding for public contracts is a sanction which, in addition to a pecuniary penalty and forfeiture of a financial benefit (or property) derived from a prohibited act, is applied on an additional and optional basis.
Under the current regulations, in order to attribute liability to a collective entity for a prohibited act, it is necessary to have a predicate offence, i.e. a conviction of a natural person for a crime, a judgment conditionally discontinuing proceedings against the person, or a decision accepting the person’s voluntarily submission to punishment. This requires, first of all, attribution of guilt to the person as defined in the Criminal Code and the actual possibility of his/her conviction, which ceases for example in the event of the death of a natural person. The current act also lists in detail the acts which, if committed by a natural person, may give rise to the liability of a collective entity. This way, it limits the scope of offences for the purposes of criminal proceedings against a collective entity in relation to the catalogue listed in the Criminal Code.
The Ministry of Justice has indicated such solutions as one of the reasons for the ineffectiveness of the current regulations. The system of penalties and measures was assessed as not severe enough. According to the ministry’s statistics, the number of proceedings instigated against collective entities per year has ranged from 14 to 31, meaning that such proceedings are rare. This has created an incentive to amend the Act on Liability of Collective Entities. So far there is a draft by the Ministry of Justice dated 5 September 2018, which surprisingly provides for retroactive application of the newly introduced liability rules for offences covered by the current act and committed before the date of the amendment. This issue is controversial, which in turn may have an impact on the legislative process.
Absence of predicate
Today, it is impossible to predict the final form of the new law on the liability of collective entities and the date of its entry into force. However, some of the concepts can already be considered a foregone conclusion. This has an impact on contractors’ rights of access to public procurement.
The main change adopted in the new law will be the concept of liability attributed directly to a collective entity if the offence is committed by its management or other persons who represent or work for the entity, or by a contractor or subcontractor of the collective entity.
As a result of this change, the liability of a collective entity ceases to be derivative (i.e. predicated on the conviction of the individual perpetrator) and proceedings against a collective entity may be initiated and conducted separately from the prosecution of a natural person. The court conducting proceedings against a collective entity will assess the prerequisites for its liability (i.e. the fact of commission of a prohibited act by a person affiliated with the collective entity). Therefore, prior conviction of a natural person will not be necessary.
From the point of view of Art. 24 of the Public Procurement Law, this change essentially affects the access of contractors to the contract award procedure. This is because under current law, a ban on competition referred to in Art. 24(1)(21) could be imposed on contractors after the final conclusion of criminal proceedings against a natural person (which may last for years), provided that the individual is convicted or the court issues a ruling finding the guilt of the person. By contrast, under the proposed new act, a contractor which is a company may be blocked from taking part in a tender much faster.
Second, the proposed new act introduces an obligation to prohibit competition for public contracts in respect to offences listed in Art. 24(1)(13) of the Public Procurement Law. This means that if those acts are committed, depriving a company of the possibility of taking part in a tender will be considered a foregone conclusion.
The new act would also make it mandatory to prohibit an entity from competing for public contracts in cases listed in Art. 24(1)(13) of the procurement law, which consequently extends the sanction of exclusion from tender procedures to offences not included in Art. 57 of Directive 2014/14.
The periods of prohibition from taking part in tendering will also change. At present, this may be a period defined in years (from 1 to 5 years). After the amendment, this period may also be defined in months and will range from 6 months to 10 years.
Currently, the criminal sanctions against a collective entity affect only its situation in public procurement procedures and not the performance of an already awarded contract. This is also due to change, as a consequence of the amendment of the system of penalties and measures. The draft provides for a new penalty in the form of dissolution or liquidation of a collective entity and a new measure in the form of a ban on certain types of economic activity. Therefore, the contractor will be deprived of the possibility of completing an already awarded contract.
The provisions on the statute of limitations on the punishability of a collective entity will also change in favour of contractors, as in the new act the ten-year statute of limitations will start from the date of committing the act (currently from the date of the final decision convicting a natural person, i.e. only after a lengthy criminal trial). In general, however, the number of contractors excluded from public procurement procedures is expected to increase.
Mirella Lechna, attorney-at-law, Infrastructure, Transport, Public Procurement & PPP practice, Wardyński & Partners