Cancellation of a public contract and withholding of the guarantee due to pending prosecution of the applicant. Serious negligence of the competent body and violation of the right to property
JUDGMENT
Kurban v. Turkey 24.11.2020 (app. no. 75414/10)
SUMMARY
Right to property, public procurement and proportionality between the means and the intended purpose.
The applicant participated in a tender for the execution of a construction project in which his bid prevailed and a public contract was signed. He paid a guarantee of 6% on the value of the contract. The contract was canceled because the State was subsequently informed of the existence of a pending criminal prosecution against the applicant relating to public procurement. The guarantee was withheld by law. He filed a complaint for violation of the presumption of innocence and his right to property.
The ECtHR found that the commercial court adjudicating its objection to the annulment of the contract was limited to the provisions of the law relating to public procurement and did not use any reasoning to imply the applicant’s guilt. He therefore considered that his presumption of innocence had not been violated (Article 6§2 of the ECHR).
With regard to the right to property, Strasbourg pointed out that for any intervention in the property there must be a reasonable relationship of proportionality between the means used and the aim pursued.
It considered that the cancellation of the contract and the subsequent withholding of the guarantee were disproportionate because the State should have cooperated with the prosecution in order to ascertain any obstacles of the candidates while on the contrary the plaintiff was not aware of the criminal prosecution against him. In addition, the contested measure was permanent, despite the fact that there was no irrevocable conviction and placed too much burden on the applicant. There has therefore been a violation of Article 1 of the First Additional Protocol.
PROVISIONS
Article 6§2
Article 1 of the First Additional Protocol
PRINCIPAL FACTS
The applicant, Dursun Ali Kurban, is a Turkish national who was born in 1947 and lives in Trabzon
(Turkey).
The case concerned the annulment of a public procurement contract and the refusal to return the
applicant’s guarantee as a consequence of the authorities’ subsequent discovery of the fact that the
applicant had been indicted for a procurement-related offence at the time of his participation in the
tender.
In 2006 the applicant was questioned and later indicted in connection with manipulating public
procurement contracts. He claims he was not informed of the indictment. The criminal proceedings
were still pending when the applicant made submissions to the European Court.
Later in 2006 the applicant and his partner successfully tendered to carry out a construction project
for the State agency responsible for hydropower. They deposited a guarantee amounting to 6% of
the contract’s value.
In 2007 the Trabzon Governor’s Office informed the hydropower agency that people who were
being prosecuted for offences related to public procurement could not be involved in public tenders.
When the agency found out about the applicant’s prosecution, it cancelled the contract, refusing to
return the deposit, in accordance with the relevant provisions of the Public Procurement Act and the
Public Procurement Contracts Act. The applicant challenged that decision in the courts. He argued
that he would not have tendered had he been aware of the impending prosecution. The Trabzon
Commercial Court stated that as a person with experience of public contracts, he should have taken
the possibility of a case been brought against him into account before tendering. It found against
him. That decision was upheld on appeal.
The relevant provisions of the Public Procurement Act and the Public Procurement Contracts Act
were found to be in accordance with the Constitution by the Constitutional Court on 14 January
2010.
Relying on Article 6 § 2 (presumption of innocence) of the European Convention and on Article 1 of
Protocol No. 1 (protection of property) to the Convention, the applicant complained that the
annulment of the contract and retention of his guarantee had been unlawful and had infringed his
rights.
THE DECISION OF THE COURT…
Article 6§2
The principle of presumption of innocence will be violated if a judicial decision concerning a person charged with a criminal offence reflects an opinion that she or he is guilty before she or he has been proved guilty “according to law”.
The Court notes at the outset that the subject matter of the dispute before the Trabzon Commercial Court was limited to whether the annulment of the applicant’s procurement contract had complied with the legal conditions set out in domestic law. In that connection, the Court agrees with the Government that the examination carried out by the Trabzon Commercial Court did not go beyond determining whether the applicant had been charged with a procurement-related offence at the time of his participation in the tender. There is no statement or reasoning used by the domestic court that implies that the court regarded him as being guilty of the charges when it upheld the annulment of the contract. Similarly, the domestic court did not comment on whether the applicant was or should be found guilty on the charges in the criminal proceedings. Having regard to the foregoing, the Court considers that the applicant’s right to be presumed innocent has not been violated in the present case.
There has accordingly been no breach of Article 6 § 2 of the Convention in this connection.
The Court reiterates that the first and most important requirement of Article 1 of Protocol No. 1 is that any interference by a public authority with the peaceful enjoyment of possessions should be lawful. As to the requirement of lawfulness, the Court observes that the applicant’s procurement contract was annulled on the basis of section 59(2) of Law no. 4734 and section 21(1) of Law no. 4735. Section 59(2) provides that the existence of pending criminal proceedings against a bidder should constitute exclusionary grounds from the tender process until the criminal proceedings are final. Accordingly, the interference with the applicant’s peaceful enjoyment of his “possessions” had a legal basis which was not declared unconstitutional by the Constitutional Court. The Court therefore notes that the impugned interference was “lawful” for the purposes of the analysis under Article 1 of Protocol No. 1.As to the proportionality of the measure, Article 1 of Protocol No. 1 requires of any interference that there should be a reasonable relationship of proportionality between the means employed and the aim pursued. This fair balance will be upset if the person concerned has to bear an individual and excessive burden.
The Court would reiterate at this juncture that it has held in the context of social security payments that the authorities should not be prevented from correcting their mistakes, even those resulting from their own negligence, because holding otherwise would be contrary to the doctrine of unjust enrichment . Concerning the case at hand, the same principle equally holds true, and the Court does not question that procurement authorities may be required to take measures aimed at correcting their mistakes in the interests of the public. Nonetheless, the above general principle cannot prevail in a situation where the individual concerned is required to bear an excessive burden .
The Court further notes that it is not its role to decide in principle whether the existence of criminal proceedings against a person should act as exclusionary grounds and whether such prosecution should serve as justifiable grounds to annul a contract and keep the guarantee. Under the Court’s well-established case-law, its task is not to review domestic law in abstracto, but to determine whether the manner in which it was applied to, or affected, the applicants gave rise to a violation of the Convention
Turning, therefore, to the question whether the domestic authorities engaged in the balancing of interests in the case as required by the Convention, the Court observes that the domestic legislation did not appear to leave any latitude to the procurement authorities in the matter when they were notified of the charges against the applicant. It therefore follows that no assessment of proportionality as required by the Convention was carried out in the domestic proceedings. The Court will therefore have to assess for itself whether the result had been disproportionate.
The Court finds it useful in that connection to highlight a number of specificities arising in the case and the conclusions it draws from them. In the present case, this notice by the criminal court reached the authorities six months after the indictment had been deposited with the criminal court. Six months can hardly be considered swift in the procurement context, where time is of the essence. Thus, the Court notes that the authorities acted negligently in communicating crucial information that affected the qualification of participants in the procurement process.
Secondly, the applicant himself was never notified of the indictment against him despite the explicit provision in the CPP requiring that the accused be notified of the indictment and the the assignment of defence counsel. It seems to the Court therefore that the notification of the indictment to the legal aid lawyer whose authority at that point had been limited to assisting the applicant during his police questioning was not in accordance with the law. Furthermore, the absence of any proof of the applicant’s having been aware of the proceedings against him when he participated in the tender leads the Court to conclude that the applicant cannot be accused of acting in bad faith when he participated in that process. Lastly, for the same reasons set out in the Supreme Administrative Court’s General Assembly of Administrative Proceedings Divisions , the Court cannot subscribe to the reasoning that the applicant should have refrained from participating in the tender by anticipating that a criminal case could be lodged against him following his questioning by the police.
Having regard to the specific circumstances, the Court finds that the annulment of the applicant’s contract with ex tunc effects and the retention of the guarantee was disproportionate. In particular, the Court considers that even if the termination of the contract had been necessary and unavoidable, the fair balance principle would at least require that a less severe measure alleviating the financial burden placed on the applicant be applied, such as the return of his guarantee and reimbursement of some or all of his costs.
Having regard to (i) the fact that the applicant was not notified properly of the indictment so that he could refrain from participating in the tender, (ii) the negligence on part of the procurement authority or the absence of coordination with the public prosecutor’s office to verify whether there were any circumstances that would exclude the applicant from entering into a contract, (iii) the fact that the measure was applied as an automatic consequence of the fact that he had been indicted, (iv) and the irreversible and permanent nature of the impugned measure with no possibility for the applicant to claim a refund in the event that the criminal proceedings against him ended with a result other than a conviction, the Court concludes that the interference with the applicant’s right was disproportionate to the aim pursued, in that he had to bear an individual and excessive burden.
Therefore, it finds that there has been a violation of Article 1 of Protocol No. 1 to the Convention.
