On June 21, the Department of Administrative Cases of the Senate stayed the proceedings in a dispute between passenger carriers and the Procurement Monitoring Bureau regarding the determination of compensation, announcing an open tender and envisaging the conclusion of a procurement contract with public transport service providers for the term of 10 years. In order to determine the applicability of the European Union rules on the determination of the amount of compensation, the panel of senators decided to refer a matter to the Court of Justice of the European Union for a preliminary ruling.

In the present case, the State-owned limited liability company “Autotransporta direkcija” announced an open tender, which envisaged the conclusion of the procurement contract with public transport service providers for the term of 10 years. Applicants – “Nordeka” JSC, “Tukuma auto” LTD, “DOBELES AUTOBUSU PARKS” LTD, “CATA” JSC, “Jelgavas autobusu parks” LTD, “Jēkabpils autobusu parks” LTD, “Daugavpils autobusu parks” LTD, “Talsu autotransports” JSC and “Sabiedriskais autobuss” LTD – challenged the provisions of the procurement regulation. The applicants stated that the procurement regulations and the draft procurement contract do not provide for an appropriate compensation mechanism, as applicants must be able to forecast the price of the offered service for the next 10 years, however, the procurement contract does not provide for a comprehensive procedure for reviewing the price of the service if the costs that affect this price change. The Procurement Monitoring Bureau rejected the applicants' objections.

In its decision, the Senate refers to the European Union rules (Regulation No 1370/2007), which establishes the obligation of the state to provide a system of public transport services that would be aimed at receiving the highest quality service by providing appropriate financial support to transport service providers.

In the opinion of the Senate, it could be concluded from the legal framework that the state is not obliged to cover all the costs of public transport service providers, regardless of the efficiency of public transport service providers. However, according to the Senate, it can be agreed with the applicants that at present it is not possible to predict precise energy (fuel) prices, average wages in the respective sector and state social insurance contributions in the 10-year perspective. In the case of a compensation scheme under which it is only possible to recalculate prices appropriately at intervals of several years, and only for part of the costs, even in the case of efficient economic activity there is a risk that rising costs could be detrimental to the contractor. Whereas, difficulties encountered during the performance of the contract may have to be remedied by reducing the availability or quality of the service.

Consequently, the Senate had doubts as to whether in the present case the price review mechanism guaranteed by the contracting authority ensures the compensation mechanism that is sufficient and in line with the purpose of Regulation (EC) No 1370/2007.
Decision of the Senate in the case No SKA-253/2022 (A420300719).


Information prepared by Baiba Kataja, the Press Secretary of the Supreme Court

Tel.: +371 67020396; e-mail: baiba.kataja@at.gov.lv