Published on 17 April 2023
SECOND SECTION
Applications nos. 46264/22 and 50184/22
UAB PROFARMA against Lithuania
and UAB BONA DIAGNOSIS against Lithuania
lodged on 16 September 2022 and 18 October 2022 respectively
communicated on 30 March 2023
SUBJECT MATTER OF THE CASE
The applications concern the annulment of a public procurement contract and the order to private companies to return to the State part of the money which they had received as a result of that contract.
UAB Profarma (“the first applicant company”) is a biotechnology and pharmaceutics company established in May 2007. UAB Bona Diagnosis (“the second applicant company”) is a retailer of medical and orthopaedic goods established in March 2020.
In February 2020 the Lithuanian Government declared a national state of emergency in view of the spread of the new coronavirus. On an unspecified date it was decided to carry out a public procurement process for rapid antigen tests. It was conducted by the National Public Health Surveillance Laboratory (“the Laboratory”), a public entity, and supervised by the Ministry of Healthcare, which provided the necessary funds. In March 2020 the Laboratory received bids from various companies. The first applicant company’s bid was declared to be the winner. It signed a contract with the Laboratory, undertaking to deliver 510,000 rapid antigen tests for the total price of 6,050,000 euros (EUR). The first applicant company concluded a sale-purchase contract with the second applicant company and bought the tests from it for EUR 5,904,800. Subsequently the Laboratory confirmed that the first applicant company had fully met its contractual obligations.
In December 2020 the Prosecutor General’s Office (“the prosecutor”) instituted civil proceedings, requesting that the public procurement contract and the sale-purchase contract be annulled and that the applicant companies be ordered to return to the State the difference between the sum which the State had paid for the rapid antigen tests and the market price of such tests. The prosecutor contended that the public procurement process had not been transparent and that its winner had been handpicked by the Ministry of Healthcare, whereas the bids of other companies had not been properly considered. The prosecutor also alleged that the first applicant company had acted in bad faith and that the price of rapid antigen tests which it had proposed had been significantly above the market price of such tests.
On 2 February 2022 the Vilnius Regional Court allowed the prosecutor’s claim in part. It held that the Laboratory had not conducted the procurement process properly because it had not assessed all the bids before accepting that of the first applicant company; it had thereby breached the requirements of transparency and rational use of public funds, enshrined in the law. However, there was no evidence that the applicant companies had in any way contributed to the unlawful conclusion of the contract. The court emphasised that the proper conduct of the public procurement process had been the Laboratory’s responsibility and that it would be disproportionate and contrary to the principles of the free market to shift that responsibility onto private for-profit companies. It imposed a fine of EUR 20,000 on the Laboratory and dismissed the remainder of the prosecutor’s claim.
The prosecutor lodged an appeal and on 16 May 2022 the Court of Appeal quashed the lower court’s decision. It held that entities participating in public procurement processes also had an obligation to act in a socially responsible way and to avoid creating negative consequences for others. It found that the first applicant company, when submitting its bid, had not provided specific information about the tests which it was proposing to deliver and that at the time when it had submitted the bid, it had not had the capacity to deliver the necessary number of tests; thus, it had not acted in a socially responsible way and had misled the Laboratory. The court compared the price proposed by the first applicant company with those proposed in other bids and held that it had been excessive and not properly substantiated. The court further held that the sale-purchase contract between the two applicant companies had not corresponded to typical business practices because the second applicant company had been established very recently, it had not had relevant expertise, staff or proper headquarters, and the first applicant company had paid it a large amount of money without obtaining any guarantee as to the quality of the tests. This, as well as various other available information, indicated that the applicant companies had acted together, seeking to profit from the public health emergency. Therefore, the Court of Appeal ordered the first and second applicant company to pay to the State EUR 145,200 and EUR 3,997,400, respectively, corresponding to the difference between the sum paid by the State for the rapid antigen tests and the market price of such tests at the material time, which was determined by the Court of Appeal.
The applicant companies lodged several appeals on points of law, but the Supreme Court refused to accept them for examination.
Both applicant companies complain under Article 1 of Protocol No. 1 to the Convention that they were made to bear the burden of the unlawful actions of public authorities. The first applicant company submits that it fulfilled its obligations to the Laboratory under the contract – it delivered the agreed number of rapid antigen tests, the Laboratory had not had any complaints regarding their quality, and at the time of the impugned civil proceedings, the majority of those tests had already been used. Despite the fact that the Laboratory had been responsible for conducting the public procurement process, it had not suffered any negative consequences and had kept all the tests, whereas the first applicant company had been retroactively made to sell the tests for a price for which it had never intended to sell them. The second applicant company submits that it did not participate in the public procurement process, was not a party to the contract with the Laboratory, and no unlawful actions on its part had been established, yet, it had been deprived of more than a half of its earnings for the tests.
QUESTIONS TO THE PARTIES
Has there been a violation of the applicant companies’ right to peaceful enjoyment of their possessions, guaranteed by Article 1 of Protocol No. 1? In particular:
(a) Were the decisions of the domestic courts based on domestic legal norms that were sufficiently accessible, precise and foreseeable in their application (see Lekić v. Slovenia [GC], no. 36480/07, §§ 94-95, 11 December 2018)?
(b) Were the applicant companies made to bear an individual and excessive burden for any mistakes made by public authorities in the public procurement process (see Kurban v. Turkey, no. 75414/10, §§ 79-82, 24 November 2020)?