Latvia's Supreme Court asks EU Court to clarify exclusion of cartel members from public procurement
The Senate of Latvia's Supreme Court has referred questions to the Court of Justice of the European Union about excluding cartel members from procurement. The case tests whether Latvia's self-cleaning process complies with EU law.
In June this year, the Senate of Latvia's Supreme Court stayed proceedings and referred three preliminary questions to the Court of Justice of the European Union (CJEU). The case concerns a company that took part in a municipal tender for vehicle rental. The Competition Council (CC) had previously punished the company for a horizontal cartel agreement, and the contracting authority excluded it after the bidder failed to prove its reliability.
The Senate seeks to determine whether Latvia's self-cleaning mechanism complies with EU law, in particular Directive 2014/24. Under the Public Procurement Law, a contracting authority must exclude a bidder if a final, unchallengeable decision or ruling finds it guilty of a horizontal cartel. It may also exclude a bidder when there are sufficient indications of such an agreement, including a non-final competition authority decision. The exclusion lasts three years, though the starting point varies depending on the legal basis.
Article 43 of the law allows a company to restore its reliability by showing that it has remedied the situation, for example by compensating damage, cooperating with investigators and adopting technical, organisational or staffing measures. The contracting authority must allow at least ten days for explanations and evidence and may request an opinion from the CC.
The questions to the CJEU ask whether exclusion is permissible when a CC decision is not yet final and the authority has not examined the infringement itself; whether a six-year exclusion for the same facts is lawful when the directive sets a maximum of five years; and whether challenging a decision and failing to pay the fine can block self-cleaning. The case raises concerns about the presumption of innocence and the contracting authority's discretion.
Although CC opinions are not legally binding, they are often decisive in practice. Contracting authorities tend to rely on them completely, making it almost impossible for a company without a positive opinion to prove its reliability. Self-cleaning must be substantive: companies may need to introduce internal controls, train staff, sever ties with people involved in the infringement and take other measures. But the measures should be proportionate – in a small firm where the person involved is the sole owner, dismissing them may amount to selling or liquidating the business. Experts recommend seeking legal assistance to prepare a well-founded submission and build a real compliance programme.
