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Let Me Stop You There… The test for lifting injunctions in public procurement challenges

Group M UK Limited v Cabinet Office [2014] EWHC 3659 (TCC)

If you’ve seen an advert in the last few years warning you to submit your tax return on time, telling you not to drink and drive, or asking you to consider joining the armed forces, chances are that the company responsible was Group M UK Limited. That company has been at the heart of an important recent case concerning the test for lifting suspensions of contracts in public procurement challenges.

The facts

Central Government spends a lot of money every year on public service advertising. It awards the contract for providing this advertising by way of a public procurement tender exercise. Group M UK Limited has the contract which expires in December 2014. In March 2014 the Government ran a fresh tender exercise to see who would be contracted to provide the adverts thereafter.  Group M was narrowly beaten in the tender process but felt that it had lost unfairly. It therefore issued legal proceedings to challenge the outcome of the tender.

Under Regulation 47G of the Public Contracts Regulations 2006, where a challenge is brought to a tender exercise, the Government is automatically injuncted from entering into the contract concerned but the courts can lift the automatic injunction (under Regulation 47H).

When English courts decide whether to lift the automatic injunction, they have always used the well-known American Cyanamid criteria (which apply generally to injunctions in English law). However Group M argued that this was wrong, and that instead the courts should apply a simple “balance of interests” test.  In support of this, they relied on a European Directive (the Remedies Directive) which states that the court, when considering interim injunctions in procurement cases:

“…may take into account the probable consequences of interim measures for all interests likely to be harmed, as well as the public interest, and may decide not to grant such measures when their negative consequences could exceed their benefits.”
(Article 2(5))

The issue for the court

The Technology and Construction Court in this case had to decide: when deciding whether to lift an automatic injunction in a procurement case, should the Court use the American Cyanamid criteria or simply weigh up the different interests in the case?

The decision

The Court decided that the American Cyanamid criteria are the correct ones to apply, upholding previous decisions in this direction (NATS (Services) Ltd v Gatwick Ltd [2014] EWHC 3133 (TCC); Letting International Ltd v London Borough of Newham [2007] EWCA Civ 1522). The Court held that there is nothing in Article 2 of the Remedies Directive (see above) which is inconsistent with the American Cyanamid test. 

The Court observed that the American Cyanamid criteria are an important safeguard for preventing interim injunctions which have no merit. After all, the first limb of American Cyanamid requires there to be a “serious issue to be tried”; the Remedies Directive cannot have been intended to allow injunctions to be made where there is no serious issue involved.

The Court pointed out that Article 2 of the Remedies Directive is permissive: it uses the word “may” and therefore does not mandate a particular test for lifting an automatic injunction.

Article 2 requires the court to have regard to “all interests likely to be harmed”.  The Court suggested that this is wide enough to encompass all the limbs of American Cyanamid. In other words, when the Court is considering all the interests likely to be harmed by the automatic injunction, it is perfectly legitimate for it to consider whether there is a serious issue to be tried, whether damages would be an adequate remedy instead of an injunction and whether the Government can give a cross-undertaking in damages (i.e. the other limbs of American Cyanamid).

What the decision will mean

A simple “balance of interests” test (as Group M were arguing for) would probably have made it easier for claimants to argue for an automatic injunction to be maintained. Since the courts have to go through the American Cyanamid criteria explicitly and one-by-one, there will arguably be greater scope for the Government to argue in favour of the injunction being discharged. They may need to persuade the judge on just one of the criteria in order to succeed in getting the injunction discharged. A simple “balance of interests” test would be much vaguer and would leave considerably greater scope for the vagaries of a judge’s own discretion.  That would inevitably lead to less legal certainty, with parties less able to predict the outcome of the litigation – a commercially damaging development.

The American Cyanamid criteria are already sufficiently broad that they allow a court to exercise its informed judgement as to whether an automatic injunction should continue. However they are also sufficiently well-defined as to prevent the parties from being at the whim of a particular judge’s view or in the invidious position of struggling to anticipate the likely outcome of their application to court.

The decision in Group M v Cabinet Office is a welcome one for these reasons.  Those who lament the encroachment of EU legislation into domestic law will also welcome it for the way that it upholds the legal test developed by the English courts rather than suggesting that the Remedies Directive has superseded it (though I fully admit that Mr Justice Akenhead’s judgment is unlikely to form a significant part of UKIP’s general election campaign).  

Ultimately the Court in Group M v Cabinet Office held that the American Cyanamid criteria militated firmly against the automatic injunction continuing, meaning that the Government could award the contract for public service advertising post-December 2014.  So the next time that you see a government advert reminding you to get your tax paid or to cycle safely, just remember that had the decision in Group M v Cabinet Office gone the other way, you might not have been seeing it at all.