world bank procurement training1. procurement legal framework political situation history economy...

World Bank Procurement Training 1

LEGAL Backgroun

d

Institutions

International

Agreements


PERFORMANC

E

INTEGRITY

INTEGRITY

INSTITUTIONS

INSTITUTION

S

LEGAL

LEGAL

ACTION PLAN/RECOMMENDATIONS

IMPACT of the LEGAL SYSTEM


The impact of the legal background on 1, 2, and 4 will be studied in the following slides

This presentation aims at clarifying the legal context of the countries for a pedagogical purpose. It does not and it can not reflect all the variations and particularities that are the product of each country’s history.

For simplicity, the expression “civil law” system will be used in the following slides even if it is not actually endorsed by many countries which prefer to call it the “romano-germanic” system.


1. ASSESSMENT (CPARs and UCS stage 1)

LEGAL

LEGAL

Civil law systems Common law systems

Common findings:

•Limited scope of application of the procurement legislation;•Limited access to procurement information;• Lack of transparency;•Excessive use of single source/direct contracting;• Lack of complaint mechanism for unsuccessful bidders;•Individual conflict of interests and organizational conflict of interest;•Lack of sanctions;


Is there a regional trade agreement concerning procurement?

Accessing process to a regional trade area?

Impact of bilateral trade agreements? Constitution: Legal force of international

agreements? International arbitration permitted?


Government Procurement Agreement (WTO)

UNCITRAL Model Law Regional Procurement provisions: EU

Directives, WAEMU, COMESA OECD/DAC methodology Working Group on Transparency of WTO Regional Trade agreement: e.g. NAFTA OECD Convention on combating bribery World Bank (& other MDBs) Guidelines


Plurilateral (NOT multilateral) Agreement between 37 WTO countries (over 150 countries are members of WTO)

Treaty Signed in 1994,

renegotiated in 2007 New interest form several

countries in negotiating accession



Albania

Armenia

Negotiating accession

Commitments to access

Georgia Jordan

Kyrgyz Republic Moldova Oman Panama

Chinese Taipei

Croatia

Former Yugoslav Republic of Macedonia

INDIA

Saudi Arabia

Observers

Albania, Argentina, Armenia, Australia, Cameroon, Chile, China, Colombia, Croatia, Georgia, Jordan, the Kyrgyz Republic, Moldova, Mongolia, Oman, Panama, Sri Lanka, Chinese Taipei and Turkey. Three intergovernmental organizations, IMF, OECD and UNCTAD

CHINA Mongolia

No requirement for public bid opening

Late bid possible under specific circumstances “A procuring entity shall not penalize any supplier whose tender is received after the time specified for receiving tenders if the delay is due solely to mishandling on the part of the procuring entity”

Negotiations possibleA Party may provide for its procuring entities to conduct negotiations: A procuring entity shall:

(b) where negotiations are concluded, provide a common deadline for the remaining participating suppliers to submit any new or revised tenders.


GPA (2007)

Article XVTreatment of Tenders and Contract Awards

it shall award the contract to the supplier that … has submitted:(a) the most advantageous tender; or(b) where price is the sole criterion, the lowest price.


EU 2004/18 Article 53Contract award criteria

The criteria on which the contracting authorities shall base the award of public contracts shall be either:

• (a) when the award is made to the tender most economically advantageous…;

or• (b) the lowest price only


2. Identifying the Legal environment of the country

What is the current system?

• What is the Legal framework?

“CIVIL LAW” COUNTRIES“CIVIL LAW” COUNTRIES “COMMON LAW” COUNTRIES“COMMON LAW” COUNTRIES

Strict hierarchy of norms (Constitution, law, Regulation, Circular, order, Individual decision)

Codification Case law ? Administrative

law/private law

Flexible hierarchy ? Guidelines, Guidance,

Waiver No codification Judiciary and Case

law Arbitration and ADR No distinction

between public and private lawWorld Bank Procurement Training 14

The Legal Framework is based on “Administrative Regulations”.

Under that approach, the Ministry of Finance, or other relevant ministries/ organs/agencies, issue regulations, in some cases in the form of a “procurement manual”, pursuant to powers granted by a statute or regulation such as a Finance or Treasury Act.

Fragmentation : In some States that applied such an approach, there is an accumulation of various sets of overlapping and sometimes inconsistent regulations, instructions and circulars modifying earlier texts


Former French, Dutch, German, Spanish or Portuguese colonies or protectorates, including much of Central and South America and many African countries. Also, most of the Central and Eastern European and East Asian countries follow.

The civil law system is a codified system of law taking its origins from Roman law.

There is a written constitution and specific codes (e.g., civil code, codes covering corporate law, tax law and criminal law);

Only legislative/regulatory enactments are considered binding. A civil law system is generally considered more prescriptive

than a common law system Main issues in client countries: Rigidity. Heavy and slow

process to enact the procurement law depending on the political agenda. Minor rules should be kept in the regulations


Administrative law is a branch of public law. It is, in a limited definition, the body of law that governs the

activities of Government administrative agencies (in the US). In an extensive definition it covers almost all the decision-making

process of all administrative units at the national level (Agencies, ministries or even some Presidential decisions) or at the local level (local governments) + all public bodies using public funds. Not only it oversights the making process of individual decision concerning citizens but also of general regulations. It could also concern public contracts (including procurement contracts), contratacion publico in Spanish).

These decisions or regulations are reviewed by the courts (civil courts or sometimes, by specialized courts called Administrative courts).

In some civil law systems, Administrative law is essentially a judge-made law (case law).

+ e.g., Germany, writings of legal scholars have significant influence on the courts


CIVIL LAWCIVIL LAW COMMON LAWCOMMON LAW

References to the Constitution (if applicable) + other laws + regulations in the procurement field

No chapter on definitions. Many legal concepts are already defined (by former laws, case-law or practice). E.g. “Procurement contracts“ (or marchés publics in French), “Concessions” and “affermage”.

Subdivisions: Chapters, Sections, Articles

Introduction No list of other laws Summary Chapter on

definitions Subdivisions:

Chapters/Parts Sections Provisions/”regulations

”


CIVIL LAWCIVIL LAW

“CIVIL LAW” “COMMON LAW”

Public contracts/private contracts

Procurement proceedings heavily regulated

Criterium= Price ; “sealed bidding”

No bid security No performance bond but

warranty Performance and

administration of the contract by Standards clauses/ GCC

No distinction between public and private contracts

Procurement proceedings lightly regulated

Criterium= best value negotiations Bid bond/security Performance bond No standardization (= no

SBDs, no GCC) No specific powers

granted to the Public authority


English Law (contrary to US law) used to require that the promisee himself must suffer the legal detriment (consideration). Since 1999, Right of Third Parties Act, certain third parties can enforce contracts to which they are not parties.

Change in the contract: admitted for long time in US law, more recently in English law because of the consideration doctrine


Consideration

The call for bids = invitation to make an offer

The bidder is the “offeror” Limited power of revocation of the offer =

the bid security is an “option” ( a separate consideration/contract)

No contract exists until the public entity (the “offeree”) accepts one bid.

The acceptance of the offer creates the contract ; but there is no formalization of the acceptance


“Mailbox rule” (British case 1818 Adams v. Lindsell) = an offer is effective when it is received by the offeree while an acceptance is effective on dispatch.

The US-English law does not impose an obligation on a party to volunteer information to the other contracting party, with exception


In English law, intention of the parties: property in goods is transferred when the parties (essentially the seller) to the contract intend it to be transferred.

In French law, the transfer of property is an immediate result of the agreement between the parties and the intention of the parties is irrelevant after that moment, even though the goods are not delivered nor the price paid (Civil Code article 1583). Signature and formalization are required.

In German law, two conditions: the agreement of the parties (legal basis) and the delivery of the goods (article 929 of the Civil Code).


Modification/change clause Differently from the courts in most civil

law countries, under the common law the courts have not the power to adjust or adapt the contract to changing circumstances.

Incidents, contractual events Termination


CIVIL LAW COMMON LAW

This indemnification covers 90-95% of costs incurred between the date on which the economic balance of the contract was disrupted and the date on which the event of « imprévision » disappears or is overcome.

as long as the economic balance of the contract is not disrupted, hardship-related costs are borne by the company.

continuing hardship entitles the State to terminate ongoing payments (except loss of profits) and/or to take over the project.

At best in Common Law, a hardship clause imposes an obligation to meet and to discuss possible re-balancing of contract.

In Common Law:

A contractual term but not a « term of art » by which one or both parties are excused from performance i.e. no contractual term, no excuse.

Burden of proof on party claiming to prove: beyond his control; no reasonable way to avoid or mitigate; impossible (not merely more difficult or expensive); and not necessarily unforeseeable.

Different from « Frustration » whereunder a contract may be discharged if something occurs after formation making it physically or commercially impossible to fulfil the contract (e.g. the building in which the performance is to take place is destroyed).

If the contract contains a force majeure clause then the contract cannot be frustrated as the parties have dealt with the situation.

Principle of privity of contract in both systems

Consequence on the complaint mechanism and actions against the existing contract US law already accepted that Third parties

could enforce contracts to which they are not a party.

“Right of Third parties Act” 1999 WB Audit clause and third party rights?


Registration of companies, commercial law Freedom of information Law Criminal Law Competition Law Public Domain/ ownership of the land Guaranties, legal liabilities Arbitration for public matters Court of Auditors and (public) accounting

mechanisms Civil Servants Law


Consistency between the procurement system and the Constitutional framework, hierarchy of norms

Organization of the country: federalist, decentralized, centralized with deconcentration

Legal background: civil law (emphasis on norms) or common law (emphasis on institutions)

Judicial system: Civil courts Commercial courts? Administrative courts?

Proceedings? Powers? Efficiency? Staffing?

Status of the court of Auditors: established by the Constitution? Independence? Efficiency? What implication in the procurement review

system?/ Audit system?

Anti-trust policy/competition law? Anti-trust Body? Sanction of collusive practices? Sectors

regulations? Civil service law: does it permit to create

a specific position for procurement staff? Requirements for hiring? Specific incentives?

“Revolving door” provision? Code of ethics? Prevention of conflict of interest?

PPP law? Specific or covered by procurement framework? Institutions in charge, methods of

procurement, complaint system, oversight of the performance

Arbitration? Availability of arbitration for public contracts?

Appropriation/ budgetary proceedings Environmental issues

ASSESSMENT (CPARs and UCS Stage 1)

INSTITUTIONS

INSTITUTIONS

Common issues:

Common findings:

•Unclear involvement of several institutions, overlaps•Political interferences; political appointments•Hegemony of certain ministries;• Central Tender Boards responsible of reviewing most of the procurement proceedings;• Conflict of interest between traditional Central Tender Board functions and the review of bidder complaints;• Lack of an independent Review Body;• Lack of material and legal resources for Court of Auditors;

Civil law systems Common law systems



Institutional organization

Justice organization

The institutional model is linked to the Legal system

Emphasis on the Institutions ‘The Commission shall have a distinct

corporate identity with perpetual succession and a common seal and may sue and be sued in its corporate name.’

Government agencies, decentralized bodies What approvals during the tender process are

required and from whom?


CIVIL LAW “COMMON LAW

Regulatory body= Branch of the Executive (e.g. in the MOF)

Procurement entities= permanent committee with civil servants

Deconcentration of the procuring power: pyramidal structure, levels depending on thresholds

Contract signed by the Minister or his delegates (“deconcentred” levels)

Prior control by ministries, internal system and administrative control

Regulatory body established by Statutes (Independent Agencies)

Procurement entities: ad-hoc committee (Procurement Committee, “bid-evaluation panel”, “steering committee”)

Panel shall prepare and submit an evaluation report for the consideration of the Procurement Committee

Term appointed procurement officers + required experts



Prior review is performed by Ministry of Finance or by a centralized body that performs the quality control.

Where there is wider capacity, this responsibility is deconcentred to specific bodies within line ministries/contracting entities.

Efficiency of the system is based on the “independence” of entities.

Performed by the contracting entities themselves.

Efficiency of the system is based on the “independence‘” of the individuals


‘CIVIL LAW COMMON LAW

Protest and complaints : Courts (civil or administrative)

Judges are civil servants+ independent

• Protests: Peer / Administrative• + professional

• Judiciary only for appeal or parallel


ASSESSMENT (CPARs and UCS Stage1)

• Common findings:

•Lack of anti-corruption institutions-sanctions• Limited prosecution of procurement corruption cases;• Deficient post review mechanisms;• Absence of effective appeal mechanism for unsuccessful bidders;•Lack of resources for the judicial system;

3

INTEGRITY

3

INTEGRITY

Civil Law Common Law



Strong emphasis on the judiciary

Reluctance to go for arbitration in public affairs

Case-law?

Precedent : Under the doctrine of Stare Decisis, common-law judges are obliged to adhere to previously decided cases, or precedents.

Critics of the Judiciary


http://legal-dictionary.thefreedictionary.com/Stare+Decisis


“Inquisitorial“ Active role of the Judge Written communication

is prevailing Process of collecting

evidence is a public function conducted by the Court.

The Judge is in charge to find the truth not to decide which argument is stronger.

“Adversarial“, Passive role of the

Judge: oversees the proceedings.

Strong emphasis on the oral argument

Process of discovery is conducted by the parties


Sovereign Act doctrine for the Government decisions. Exception in specific areas.

Judicial review is different from an administrative appeal.

In Judicial review the Court will only look at the method and the proceedings of the decision.

An administrative appeal is performed by a higher body in the agency to assess also the correctness of the decision .


Recommendations


2. ACTION PLAN

RECOMMENDATIONS


Main issues in a civil law system: centralization of the procurement process, lack of external controls,

Targets: independency of the procurement Authority,

Streamline the complaint and review mechanisms

Main issues in a common law system: competition among agencies and procurement bodies, uncertainty of the legal procurement framework

Targets: clarify and rationalize the institutional framework, Secure the legal environment


Court of Auditors Competition/Antitrust Agency or Sector

Agencies Procurement regulatory body should be

involved in negotiations of international trade agreement dealing with procurement


Create a specific delay before contract signature (“Standstill period”)

Screening Non-automatic suspension of the contract

proceedings Access of Third parties? Impact in the existing contract?


Adoption of international treaties, conventions and uniform rules containing elements of both the civil law and the common law.

1980 Vienna Sales Convention. The UNIDROIT Principles for International Commercial

Contracts They are aimed to serve as a model to national legislators and to provide guidance to courts and arbitrators when interpreting existing uniform law and deciding disputes relating to international commercial contracts.

The 2000 INCOTERMS regulate the transfer of risk and costs in contracts of sale.

Soft law: Commission on European Contract Law (the Lando Commission) has prepared the Principles of European Contract Law

There are similar examples in other fields of law, like international carriage of goods, international payments, international commercial arbitration.


WB PROCUREMENT GUIDELINES

OTHER “INTERNATIONAL STANDARDS”

Mandatory provisions for procurement methods,

SBDs, GCC

But they don’t consider: Institutions, Complaint mechanism, arbitration, enforcement of International agreements

UNCITRAL Model Laws International

Procurement Agreements (GPA)

Regional Trade Agreements EU Procurement

Directives WAEMU Procurement

Directives (UEMOA) COMESA procurement

Directive FIDIC + OECD reports

UNCITRAL Model Laws International

Procurement Agreements (GPA)

Regional Trade Agreements EU Procurement

Directives WAEMU Procurement

Directives (UEMOA) COMESA procurement

Directive FIDIC + OECD reports


the UN Convention Against Bribery and Corruption (UNCAC);

the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions;

the OECD Revised Recommendation on Combating Bribery in International Business Transactions.


Procurement model law drafted for countries lacking procurement legal framework

Agreed in 1994 new draft should be adopted in 2011

It is NOT a Treaty but a Model Law

No binding provisions but recommendations

Drafted by an expert group and approved by UNCITRAL Committee (60 countries)


RECOMMENDATIONS

UNCITRAL Model Law 1994

Unrestricted access to bidders: open competition shall be the rule;Comprehensive specifications in bidding documents;Full disclosure of evaluation criteria;Public bid opening;No negotiation for goods and works;

The UNCITRAL Model Law does not provide specific recommendation for Institutions;


1994 VERSION DRAFT

Bid opening (art.33)All suppliers or contractors that have submitted tenders, or their representatives, shall be permitted by the procuring entity to be present at the opening of tenders.

Negotiations (art.35)No negotiations shall take place between the procuring entity and a supplier or contractor with respect to a tender submitted by the supplier or contractor.

Provisions for consultant services

New provisions in draft

More procedures See UNCITRAL web

site under working procurement 1


FRAMEWORK AGREEMENTS

E-PROCUREMENT



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