Judicial review in respect of academy sponsor
The Court of Appeal has dismissed an appeal against the Secretary of State for Children,
Schools and Families in connection with an academy which is to be set up in Camden.
The appeal was brought by a Camden parent who purported that the Secretary of State
had failed to comply with the public procurement regime when approving the expression
of interest for the Camden academy by University College London's (UCL's).
The government, academy sponsors and other local authorities involved in similar
programmes will be sighing in relief at the decision to dismiss the appeal.
The facts in this case were that on 21 November 2007 the authority approved a proposal
for a new academy to be built in the borough. The authority also approved UCL as
the preferred academy sponsor. On 29 February 2008, the Secretary of State approved
UCL's formal Expression of Interest for the academy proposal.
This resulted in two judicial reviews applications being brought by a Camden parent,
Gillian Chandler. The first Judicial Review challenge brought against the authority
maintained that an open competition should have been held to decide the type of
secondary school to be built in the area, while the second Judicial Review was brought
against the Secretary of State challenging the decision to approve UCL's Expression
of Interest. The High Court dismissed both applications.
This appeal concerns the challenge against the Secretary of State. The claimant
argued that a competition should have been held to determine who should act as the
academy sponsor and as such the Secretary of State had failed to comply with the
public procurement regime.
The two issues contested at the appeal were:
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Does the public procurement regime apply to the expression
of interest by UCL? |
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Does the claimant have the required standing to content that the public procurement
regime is applicable? |
Looking in turn at these two questions the court noted that UCL as an academy sponsor
is precluded from gaining a profit from their sponsorship of the academy. Therefore
in determining whether an organisation which is unable to make a profit could still
be subject to the public procurement procedures, the court considered Directive
2004/18 (the Directive) and the Public Contract Regulations 2006 (The Regulations).
These govern the procedures and principles for the award of public contracts by
contracting authorities.
The court emphasised that the fundamental points to address were: “Did UCL make
an offer on the market to act as a sponsor of the Camden Academy?” and “Will the
funding arrangements be for pecuniary: interest”.
Taking these two points in turn, firstly when considering “pecuniary interest” the
court gave regard to the case of Commission v Italy. In this case the Court
of Justice held that irrespective of whether a service provider is a not-for-profit
organisation it can still be caught within the public procurement regime, and such
organisations can therefore distort the market if they provide services more cheaply
than others. However, in the Commission v Italy case it was also found
that a contract for no remuneration merely for the reimbursement of costs is not
for pecuniary interest.
In applying the Commission v Italy case the court considered whether the
sponsor had a pecuniary interest or was only receiving a reimbursement of costs.
The court found that in accordance with the pro forma for the academy's funding
agreement the academy trust would only receive a reimbursement. The court's conclusion
was therefore that philanthropic arrangements which are made on the basis that no
remuneration or benefit is given by the contracting authority to the service provider
will not be within the Directive or the Regulations.
The claimants proposal that UCL may obtain a reputation benefit from their involvement
with the academy programme was further dismissed by the court as it could not be
classed as a “pecuniary benefit”. Furthermore the court dismissed as too remote
and indirect the claimants argument that UCL's involvement may allow UCL to show
a “public benefit”, and thus contribute to the retention of its charitable status.
Secondly, the court considered whether UCL's offer was on “the market”. The court's
view was that on the market required participants in the market to be intending
to make a profit from contracting services offered by them. It was therefore held
that in this case, the “on the market” definition could not be met as there was
not an intention to make a profit.
The court also noted that if an organisation's offer to sponsor an academy is an
aside to its commercial activities in another field, these commercial activities
are irrelevant for the purposes of determining whether the procurement regime applies.
An alternative argument put forward by the claimant, was that a contract for the
provision of educational services could be of interest to suppliers established
in other member states, and therefore must comply with the requirements of non-discrimination
and transparency. The court however expounded the view that a contracting authority
is not bound to comply with the obligations of the Treaty simply because there is
a possibility that an economic operator from another member state might be interested.
On the facts the court found that there was no interest from potential sponsors
from outside the UK and so dismissed this argument.
The court in considering whether the claimant had the required standing, noted that
it could be possible for an individual who is affected in an identifiable way by
a body's non-compliance with the public procurement regime to have sufficient standing
to bring a judicial review, even if they are not an 'economic operator'. The court
stated that this may be the case if an individual could show that performance of
the competitive tendering procedure under the Directive might have led to a different
outcome that would have a direct impact on him.
However, the court found that the claimant did not have sufficient standing to pursue
a judicial review as the claimant's challenge was not because of an interest under
the public procurement procedure, but because of an opposition of academies.
According to the court it would be unlikely that arrangements for the provision
of services for nil consideration or on reimbursement terms would be of cross border
interest and so subject to competitive tendering, although, given the increasingly broad application of the Regulations in the courts this position may change in due
course.
The court left open the issue of whether the provision of expertise in running schools
could ever be subject to the public procurement regime. The Education Act 1996,
S.482 does not expressly prevent a sponsor being remunerated for their contribution
to an academy, and if such a payment was to occur. The reasoning of the judgment
may alter.
As more sponsors are being encouraged to get involved with the academy programme, the dismissal of the appeal will be relief to the government, although academy opponents
will be disappointed that academy sponsors can continue to become involved in the
provision of education without a public consultation over the identity of the sponsor.
This case does raise the question of whether educational providers that do make
profit in future, will need to be more aware of the need to comply with the procurement
regs.
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For More Information Contact:
Tarmina Dent
TPP Law Limited
53 Great Suffolk Street
London SE1 ODB
t 020 7620 0888
f 020 7620 0778
e info@tpplaw.co.uk
Email: Tarmina
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