Termination of a Public Contract – Lifting the Veil on Art. 73 of 2014/24 Directive

Abstract

The paper examines the termination of a public contract under the Art. 73 of the Directive 2014/24. The contracting authorities may, in accordance with the new directive, terminate a contract for instance, when the contracting parties have agreed upon a change which can be considered substantial. Substantial modifications are considered to constitute illegal direct awards which trigger the applicability of the remedy of contractual ineffectiveness under Remedies Directive 2007/66. The purpose of art. 73 is the same as for contractual ineffectiveness: to bring an end to contracts severely infringing EU law. The rules on termination close the gap between EU law and national contract laws of certain member states which have previously rendered a contract’s termination more difficult. Even though the EU rules currently require a specific termination provision to be incorporated into national law, EU rules remain silent on several details that have significant effects on the practical implementation of these rules.

The purpose of this paper is to analyse in detail the termination of a contract due to a substantial modification of the contract. The contracting authorities are offered a possibility to terminate a contract, when substantial contract modification has been agreed upon. The paper provides a comparative insight to the approaches adopted in the UK as well as in Nordic countries. It reflects on the difficulties a contracting authority and its contractor may be facing in practice after contract’s termination including but not limited to, the scope of termination and possible liability issues arising from contract’s early termination. In addition, the question of how to ensure the supply of goods and services after termination and whether the contracting parties are allowed to agree on termination period are looked into.

Keywords: Public procurement, transposition, Directive 2014/24/EU, termination, public contract, liability, Public Contracts Regulations 2015

JEL Classification: H57, K23