A supplier who believes they have suffered damage as a result of a procuring organisation being in breach of the procurement legislation, can institute proceedings for damages at the District Court. The court may decide to award damages to the supplier if the procuring organisation has not complied with the procurement legislation and the supplier has suffered damage because of it.
The information on this page concerns procurements in accordance with:
- the Public Procurement Act (LOU)
- the Act on Procurement in the Water, Energy, Transport and Postal Services Sectors (LUF)
About the rules for damages
The rules for damages are drawn up in more or less the same way in both LOU and LUF. The rules regarding damages in the Defence and Security Procurement Act (LUFS) and the Act on Procurement of Concessions (LUK) are also drawn up in approximately the same way as in LOU and LUF. Moreover, the rules are the same above and below the thresholds.
Time limit for claiming damages
A supplier who wishes to claim damages must institute proceedings at the District Court by applying for a summons. The application must have been submitted within one year from when the agreement was entered into. If the agreement has been invalidated by a court of law, the application must instead have been submitted to the court within one year of that adjudication.
Conditions for awarding damages
A contracting authority or entity (procuring organisation) that has not complied with the procurement rules shall compensate for the harm that has thereby been caused to a supplier. The procuring organisation may be obligated to pay damages irrespective of whether the organisation committed the error intentionally or due to negligence. However, the right to damages presumes that a sufficiently clear breach of the law has been committed. Anyone claiming damages must present evidence of the harm caused.
The harm caused refers to both unnecessary costs and loss of profit, so-called positive contractual liability. In order for the supplier to be entitled to compensation for positive contractual liability, they must more or less have lost the contract due to the procurement error. However, it is sufficient for the supplier to show that it is probable that the supplier lost the contract as a consequence of the violation.
The costs for preparing a tender and otherwise participating in a procurement process (negative contractual liability) can be compensated in certain cases. In order for a supplier to be entitled to compensation for negative contractual liability it is sufficient for the supplier to show, aside from proving a violation of the procurement rules, that the supplier had a realistic opportunity of being awarded the contract and that the violation impeded this opportunity. This means that several suppliers may receive damages due to the same breach of the procurement legislation.
In certain instances, damages may include the supplier’s legal expenses in a previous review case of the same procurement, if the supplier won that case.
The right to damages may be contingent on the supplier trying to avoid or mitigate the harm caused, for example by applying for review of the incorrect procurement.
How much will court proceedings cost?
The District Court will charge a small fee for a summons application. Commonly, the losing party also has to bear the costs of the opposing party, such as legal expenses.
How do court proceedings work?
The court commonly adjudicates on the matter after a hearing. The court will only consider circumstances that are presented during the court proceedings. For that reason, it is important for both parties to present their arguments in the case.
- Chapter 20, section 20 of the Public Procurement Act (2016:1145) (LOU)/ the Act on Procurement in the Water, Energy, Transport and Postal
- Services Sectors (2016:1146) (LUF) – rules on damages
- Chapter 20, section 21 of LOU/LUF – time limits for claiming damages
- Chapter, 19 section 2 of LOU/LUF – the provisions on damages also apply to procurements in accordance with chapter 19 of LOU/LUF
- See also the following court decisions:
- NJA 2018 p. 1127 (SV) – a company that submitted a tender in a procurement that was redesigned following a review, but that did not submit a tender in the second procurement, has not been deemed entitled to damages, neither for their costs for drafting a tender nor for their costs for the legal proceedings against the first procurement decision
- NJA 2016 p. 358 (SV) – right to damages in accordance with the Public Procurement Act presumes that a sufficiently clear breach of the law has been committed
- NJA 2016 s. 369 (SV) – damages for loss of profit may be awarded when an incorrect decision to award resulted in the cancellation of the procurement
- NJA 2013 p. 762 (SV) – damages may in certain cases include compensation for legal expenses in a procurement review case