Member Article

The Norwegian Supreme Court delivered its judgement in the so-called Fosen-Linjen case 27 September 2019 (HR-2019-1801-A). The Fosen-Linjen case has been much debated the latter years, inter alia because it has been the only Norwegian case to have been subject to two EFTA Court referrals, cf. the decisions of the EFTA Court in cases E-16/16 (Fosen-Linjen I) and E-7/18 (Fosen-Linjen II).

The Supreme Court was asked to decide Fosen-Linjen's claim for damages resulting from a terminated tendering procedure governed by public procurement law. Fosen-Linjen claimed that the termination of the procedure was a breach of public procurement law, and claimed damages for the loss of profits (the positive contract interest). Fosen-Linjen claimed that they should have been awarded the contract had it not been for AtB's termination of the procedure.

In the alternative, Fosen-Linjen claimed damages for the bid costs (the negative contract interest).

The positive contract interest

In its deliberations on the positive contract interest, the Supreme Court does not explicitly set out what is the correct norm for deciding whether an error is sufficient to lead to damages. Previously, the Supreme Court had concluded that there was a requirement of a «material error», cf. Rt. 2001 p. 1062 (Nucleus). However, when the deliberations regarding the negative contract interest are taken into account, it now seems that the relevant Norwegian norm is that there must be a sufficiently serious breach of public procurement law, cf. the EFTA Court in Fosen-Linjen II (E-7/18).

The Supreme Court concluded that AtB's termination of the procedure was correct and that Fosen-Linjen therefore could not be awarded damages for the positive contract interest. Here, the Supreme Court concluded that a contracting authority is entitled to terminate a procedure where there is a real uncertainty regarding the legality of the procedure.

AtB had also argued that AtB had the right to terminate the procedure because its award criterion «Environment» was illegal. The basis for this was that AtB had not requested sufficient documentation from the suppliers in regard of this award criterion. Here, the Supreme Court stated that an award criterion that does not have a documentation requirement, making it possible to perform an effective control of the tenders, is in breach of EEA law.

The negative contract interest

The question the Supreme Court assessed in regard of Fosen-Linjen's claim for the negative contract interest, was if AtB's application of the illegal award criterion «Environment» and the subsequent termination, was sufficient as a basis for AtB to be liable for damages.

Here, the Supreme Court concludes that the relevant norm is that there must be a sufficiently serious breach of procurement law. The Supreme Court points out that the complexity in the public procurement rules entails that courts should be somewhat restrictive in awarding damages for this type of breaches.

Still, the Supreme Court concludes that there was a basis for damages in this case, because AtB received two questions during the tender procedure regarding the operation of this exact award criterion.

As regards the norm for finding causation between the breach and the damage, the Supreme Court's majority concluded that the question is whether the supplier would have participated in the procedure if the supplier had known about the future error. The Supreme Court also assessed whether Fosen-Linjen should lose the right to damages because AtBs error was apparent for Fosen-Linjen, but this line of argument did not succeed.

The outcome of the case and its importance

The outcome of the case was that AtB is liable for damages towards Fosen-Linjen for the negative contract interest, but not for the positive contract interest.

The judgement contains several important statements that will be thoroughly examined in the time to come. In particular, this regards the statements on the basis for damages, causation, the requirement for sufficient grounds for termination of a procedure and in regard of documentation requirements for award criteria.

Simonsen Vogt Wiig represented Fosen-Linjen in the cases.