How Does the Substantial Modification of a Public Contract Affect its Legal Regime?

Abstract

This article outlines the fundamental consequences for the legal regime of public contracts which result from the substantial modifications of such contracts within the meaning of EU law. The authors conclude that an EU law-compliant understanding of the term “substantial modification to public contracts” may result, in some national legal systems, in the “privative novation” of the original contract, i.e. in its complete discharge and replacement with a new contract. However, this may be associated with a number of negative implications impairing the principle of legal certainty, thereby indirectly affecting the efficient functioning of the EU’s internal market. This conclusion appears to be contrary to the objectives pursued by the doctrine of indirect effect of EU law. The authors show some viable solutions to this problem, both from the position of contracting authorities and courts, and from the perspective of the member states in the forthcoming implementation of the new EU Public Procurement Directives.

Keywords: Applicable law; EU law; Indirect effect; Novation; Public contracts; Variation