The five-year clock: limitation of damages claims against the EU

A tenderer that has been unlawfully rejected by an EU institution rarely wants to litigate immediately. It may hope to win the next call, it may be waiting for the outcome of an action for annulment, or it may simply not know how badly it was treated until the debriefing arrives. The judgment of the Court of Justice of 8 November 2012 in Case C-469/11 P Evropaïki Dynamiki v Commission, in which JuriSpectrum's founding partner represented the appellant, is a reminder that none of these reasons stops the clock. The five-year limitation period for damages claims against the EU runs from the moment the tenderer learns of the rejection, and it is counted strictly.

The rule

Article 46 of the Statute of the Court of Justice of the European Union provides that proceedings against the Union in matters arising from non-contractual liability are barred after a period of five years from the occurrence of the event giving rise to them. The period is interrupted if proceedings are instituted before the Court or if the aggrieved party first applies to the relevant institution; in the latter case the action must be brought within the two-month period laid down in Article 263 TFEU. Under settled case law the period begins to run when all the conditions governing liability are satisfied and, in particular, when the damage to be compensated has materialised.

The case

The Commission had rejected the appellant's tender in a 2004 procurement procedure; the rejection was notified in September 2004. The appellant sought compensation just over five years later, in the autumn of 2009. The General Court dismissed the action as time-barred by order (Case T-409/09). On appeal the appellant argued, in substance, that the limitation period could not have started before it was in a position to assess the unlawfulness of the decision, that is, when it received the reasons for the rejection and information about the successful tender, and that in any event the ten-day extension on account of distance provided for in the Rules of Procedure should have been added to the five years.

The Court of Justice dismissed the appeal on both points. The damage suffered by an unsuccessful tenderer, whether framed as the loss of the contract or of the chance of obtaining it, is caused by the rejection decision and materialises when that decision is communicated to the tenderer. Knowledge of the grounds of the decision is not a condition for the running of the limitation period: from that moment the tenderer knows that it has been harmed and can ask for the reasons, seek annulment, or bring a damages action and develop its case as the facts emerge. As to the extension on account of distance, the Court held that it belongs to the procedural time-limits of the Rules of Procedure and does not apply to the limitation period in Article 46 of the Statute, which is a rule of substantive law defining the period within which the right may be exercised.

Why it matters

Three consequences follow, and the third is the one most often overlooked.

First, the period runs even when the tenderer has already brought an action for annulment. Annulment and damages are separate remedies. A tenderer should not assume that a pending action for annulment protects a later, separate claim for compensation; procurement litigation before the General Court routinely lasts more than two years, and a tenderer that waits for the annulment judgment before claiming damages may find that a substantial part of the five years has gone.

Second, the period is not extended by correspondence. A request for compensation addressed to the institution interrupts the period only if it is followed by an action within the time-limit that Article 46 lays down; requests for reasons, complaints to the European Ombudsman and negotiations with the contracting authority do not stop the clock.

Third, the day count is exact. Five years from a rejection notified on a given date expires on the corresponding date five years later. No allowance is made for distance, for postal delays, or for the time taken to translate or analyse the debriefing.

A bidder's checklist

1. Record the date of notification. Keep the rejection letter or e-mail, with its receipt date, in the tender file. That date starts the five-year period for damages and the two-month period for annulment.
2. Diarise both deadlines on the day the rejection arrives: two months, plus the ten-day extension for distance, for annulment; five years, without any extension, for damages.
3. Request the reasons immediately, in writing, under the Financial Regulation. The answer will shape the case; it will not move the deadline.
4. Decide early whether damages are in play. If so, lodge the claim together with the action for annulment or well within the five years, even while annulment proceedings are pending; the amount can be refined later.
5. Do not rely on a prior application to the institution unless you are ready to bring the action within two months of its reply, or within the further period the Statute allows if the institution does not reply.
6. Gather the evidence of loss now: the bid's cost and margin data, the ranking and scores, and the value of the contract as awarded. A claim for loss of opportunity will need all of it.
7. Treat framework rankings like rejections. A decision ranking your bid second or third in a cascade starts the same clocks as an outright rejection.

The limitation period protects the institution's legal certainty. It does not wait for the tenderer to understand what went wrong.

This article is provided for general information only and does not constitute legal advice. It reflects the law and the authors' views at the date of publication. For advice on a specific situation, please contact the firm.