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E- procurement caught up in formalism

The European public procurement system is one of the foundations for the functioning of the common market. The principal task of laws in this area is to enable exercise of freedoms guaranteed in international agreements, being in this case unrestricted access to procurement procedures within the EU for contractors based in various member states. To achieve this, EU law not only requires adherence to the principles of a level playing field, fair competition and transparency; it also aims to remove market barriers, including those that are non-discriminatory, but are disproportionate. Regardless of this objective, interpretation and application of public procurement law leads to excessive formalism, rendering procurement procedures unintelligible, and distorting results around which public procurement law revolves.

As early as 2011, the European Commission said that a European digital single public procurement market would gradually be created (see EC communication: COM/2012/0179final).

The legislative proposals adopted by the EC within the e-procurement legal framework are formulated around a gradual transition towards full use of electronic communications between the contracting authority and the contractor.

The previous Directive 2004/18 only gave the electronic form of communications equal status to traditional communications in writing. Recital 35 of that directive stated that in view of new developments in information and communications technology, electronic means should be put on a par with traditional means of communication and information exchange.

The new Directive, 2014/24, clearly represents a fundamental change of approach, stating in recital 52 that fully electronic communication should be made mandatory, and in Art. 22(1) that member states are required to introduce electronic communications for all stages of a procurement procedure.

Although the directive uses the term “communication”, this term refers to the entire public procurement procedure, which is essentially the provision by electronic means by the parties of information and documents. At the same time, the directive states clearly that the new rules are technical in nature, that with respect to a contractor electronic communications take the form of transmission via electronic means of communication of requests for participation and of tenders, and that a European Single Procurement Document (ESPD) may only be provided in electronic form.

The directive provides for a range of requirements with regard to the tools and devices for the electronic receipt of tenders and requests for participation listed in annex IV to the directive. These requirements, which entail the taking of technical measures, are intended to ensure that procurement procedures conducted using electronic communications comply with the basic procurement principles of equal treatment and fair competition.

Art. 22 of the directive states that additional requirements with regard to tools and devices used for transmission and receipt of tenders and requests may be necessary for security reasons. The level of security required for electronic means of communication used at individual stages of a specific procurement procedure is established by member states or contracting authorities acting within an overall framework established by the member state concerned. This might be for example a requirement for a contractor to use an electronic signature supported by a qualified certificate provided by a certificate services provider, which is on a trusted list provided for in commission decision 2009/767/EC.

The directive states at the same time that the security level established by the member state or contracting authority must be proportionate to the associated risk.

Also, the process of replacing traditional communications with electronic communications takes time, being complicated from the technical and organisational point of view. For this reason, the e-procurement strategy will be divided into stages, which for tenderers are submission of a European Single Procurement Document (ESPD) by means of electronic communication, and submission by means of electronic communication of the ESPD, other notices, a request for participation, and a tender (Art. 10a of the Public Procurement Act and Art. 15 of the 2016 Amendment to the Public Procurement Act).

In other areas of law as well, it has become necessary to consider the effect that the development of electronic information exchange has had on the handling of legal business. Since 8 September 2016, due to an amendment, the Civil Code has contained a broad definition of a document, which is a departure from the traditional meaning, being information recorded solely as correspondence bearing a handwritten signature. As a result, the Civil Code has changed the former classification of forms of declaration of will, and there are now three types of special form for a declaration of will: document form, written form, and electronic form. The categories of qualified written forms remain unaffected.

The original requirements laid down in civil law for particular forms of a declaration of will established a hierarchy from the ordinary written form, through forms requiring certification of a date and signature, to notarised form. These are all essentially the written form, and each form in turn makes use of the specific elements of the preceding one and takes precedence over the preceding form and can substitute it (see Z Radwański: Zarys części ogólnej prawa cywilnego, p. 177).

Currently, the development of technology is hindering establishment of a hierarchy based on elements specific to particular forms of declaration of will. In particular, doubts may arise with respect to the relationship between the ordinary written form and electronic form.

In principle, both of these forms entail signing a declaration in order to identify the person making the submission, while one signature is handwritten and the other a qualified electronic signature. If the forms of declaration of will are considered from a historic point of view, the electronic form requirement takes precedence over the ordinary written form because it requires additional actions, for example obtaining a qualified electronic signature. Alternatively, these can be considered two forms of declaration of will that do not have common features, as neither comprises any elements specific to the other. Lawmakers have resolved this issue by stating that a declaration of will in electronic form is equal in status to a declaration of will in written form. According to the definition given in the PWN Polish dictionary, “równoważny” means “of equal status to something else”. With respect to the written and electronic forms, the Supreme Court interpreted this wording as “równoznaczny” (equivalent) (Supreme Court judgment in case III CSK 384/16 LEX 2522943). This interpretation is in line with Regulation 910/2014 on electronic identification and trust services for electronic transactions in the internal market, under which national law must state that “a qualified electronic signature should have the equivalent legal effect of a handwritten signature”.

At this point, provisions on the form of a declaration of will and transition to e-procurement converge. Under Art. 10a(5) of the Public Procurement Act, tenders, requests for participation, and notices (including the ESPD) are only valid if they are drawn up in electronic form and bear a secure electronic signature. There are no doubts surrounding the requirement for submission of the types of notices listed in the provision described above in electronic form under Art. 78(1) of the Civil Code. Meanwhile, the form of the action in law that results from it, being granting of power of attorney to represent a contractor in a tender, is a hot topic among legal practitioners.

The standpoint adopted by the Public Procurement Office, arguing that the ESPD is not a declaration of will (paper of 6 August 2018, UZP/DP/O/026/500(9)18/RS), does not determine how the law is interpreted in this regard. The Public Procurement Office’s viewpoint is however correct. As a declaration of knowledge of certain facts concerning a contractor, in civil law theory an ESPD is a legal event or legal measure. It is similar to a legal transaction and must be examined in combination with a legal transaction, but cannot be categorised as such. There is no doubt that tenders constitute a declaration of will, which is the sole element necessary in an act in law. The obligation to tender in electronic form will soon be revised.

In the age of e-procurement, how should the issue of proper granting of authorisation be resolved? Most importantly, European laws, i.e. Regulation 910/2014 and the preceding procurement directive, required that the electronic and written forms be treated as having the same legal effect under national law. The equivalent legal effect of an electronic signature and handwritten signature, and thus of the written form and electronic form (because this is a type of signature, and in principle the technical capability to use this signature determines the form of the legal transaction) has to be understood to be reciprocal. From a linguistic point of view, the equivalent effect of an electronic signature / electronic form and written form provided for by law does not follow from the need for equivalence to apply in one direction only, but from the fact that the electronic form, as a new form of declaration of will in technical terms, becomes part of legal transactions on the basis of the written form. From a legal point of view, therefore, the electronic form should be perceived as the same as the written form known under civil law, which can be used in transactions provided that the appropriate technical prerequisites exist. This undermines the argument that authorisation to perform an action in electronic form cannot be granted in written form.

Further, although under Directive 2014/24 individual notices have to be submitted in electronic form, there is no provision addressing the question of a change of the form of legal transactions performed during a tender. In this sense, there are no new requirements under European procurement law for market participants regarding access to procurement. It only requires the technical aspects of a procedure to be designed to force transactions to be conducted in electronic form from a technical point of view. The opposite argument, i.e. that the requirement for electronic communication in procurement modifies the form of all of the legal transactions in a tender, is indefensible even when it is argued that a level of security can be provided above the standard provided for in Directive 2014/24 by requiring use of an advanced electronic signature (see Art. 22(6)(c) of the directive). This is prevented by the principle of proportionality.

Put very simply, this is where contracting authorities have to restrict means employed to achieve the intended goal to those that are appropriate, necessary and least burdensome. When this is applied to the discussion on the form of power of attorney for submitting the ESPD as the law stands at the moment, the ESPD has to be signed using a qualified electronic signature because this is the only means of verifying who signed a notice that has to be submitted using electronic communications. On the other hand, a requirement for electronic signature of power of attorney submitted to the contracting authority in writing would be excessive. A handwritten signature on this kind of power of attorney sufficiently identifies the person submitting the notice of authorisation (see article What is the situation regarding power of representation to file the electronic European Single Procurement Document (ESPD)?).

There is also no basis for the argument that as under the Public Procurement Law electronic form must be observed for documents to be valid, this neutralises the equivalent effect of a signature / written form and electronic form. This is because the argument that a special form is required for legal transactions in a tender, and thus by the same token a special form is needed for ensuing transactions, is formulated solely on the basis of Art. 10a(5). Under linguistic interpretation rules, however, it also has to be considered that in that provision, different terminology is used to that in provisions in the Civil Code on penalties for not observing the stipulated form. In particular, the Public Procurement Law states that tenders and notices “are to be drawn up in electronic form and be signed using a qualified electronic signature”, and not that they are submitted in electronic form. Does this mean that this provision can be the sole basis for requiring a contractor to observe the electronic form (failing which the submission is invalid) when granting power of attorney to sign notices of that kind? There are no arguments supporting this standpoint. When analysing this issue it could even be argued that Art. 10a(5) does not regulate the form for a declaration of will in any way, but clarifies in more of a technical than legal manner how a particular declaration should be drawn up according to the new laws, so that it can be submitted electronically. The requirement that these declarations be submitted in electronic form follows from the obligation under Art. 10a(1) of the Public Procurement Law, and the requirements regarding form are laid down in Art. 78(1) of the Civil Code in conjunction with Art. 139 of the Public Procurement Law. Point 5 was inserted into the Public Procurement Law due to the excessive formalism that is typical for Polish public procurement. For these reasons, an attempt at a systemic interpretation of Polish laws on forms of legal transactions, including the wording, causes these problems.

For a number of years now, it has been an established rule under Polish law that the written form and electronic form are equivalent. Under the Banking Law, which is a law on one of the sectors of the economy undergoing the most rapid electronic transformation, the electronic and written form are entirely equivalent even where the law says that one of these forms has to be observed to ensure validity. Under these provisions, in 2013, a bank guarantee was accepted in Polish procurement practice in the form of SWIFT electronic messaging instead of a bank guarantee issued in written form as required under the Banking Law, being a condition for validity. Therefore, a stipulation of this kind cannot invalidate the primary effect, which is that the law attributes equal status to both forms of declarations of will, the written form and electronic form.

This dualism of the forms for an action in law performed in a tender and the ensuing action, i.e. a declaration granting authorisation, is an unfavourable tendency and should be eliminated. Quite apart from the fact that, as described above, the concept adopted in EU law and the Civil Code that signatures and the electronic form and the written form are equivalent, at least from a legal point of view, excludes this dualism, there are no reasons why that dualism should give way to excessive formalism.

Due to the above, if generally applicable laws require that the equivalent legal effect of transactions performed using the written and electronic form have to be respected, in addition to which the Public Procurement Law does not provide for its own specific requirement that a power of attorney be “drawn up in electronic form”, there are no grounds for denying the legal effect of authorisation granted using the written form. Therefore, until only the ESPD is submitted electronically in proceedings, it will be possible to submit a power of attorney along with other documents and notices in writing. There is nothing to prevent a power of attorney being granted in electronic form and then submitted together with the ESPD by means of electronic communication. During the next stage of e-procurement, a power of attorney will have to be submitted using means of electronic communication. If under public procurement law there continues to be a requirement for a power of attorney submitted during in a tender to be the original or a notarised copy (this is currently the line in case law) then it will be possible to submit a power of attorney granted only in written form to a contracting authority in the form of electronic certification that a copy is a true representation of the produced power of attorney drawn up as required under Art. 97(2) of the Notary Profession Law of 14 February 1991. In this case, the notary places a qualified electronic signature on the document. This will be due however to requirement of communication between a contractor and the contracting authority being solely in electronic form. A view undermining the legal effect of a power of attorney granted in writing without explicit grounds for this in law would make excessive formalism the overriding purpose of public procurement proceedings and would be incompatible with the principle of proportionality.

Mirella Lechna, legal adviser, Infrastructure, Public Procurement & PPP practice, Wardyński & Partners