On recognition as illegal and cancellation of the protocol on the results of the public procurement tender
No.6001-23-00-6ap/8 dated 07/13/2023
Plaintiff: LSI LLP
Defendants: State Institution "Public Procurement Department", State Institution "Department of Internal Construction".
State Interested party: KES LLP. Audit Department
The subject of the dispute is the recognition of the protocol on the results of the public procurement tender as illegal and cancellation, the compulsion to review the results of the public procurement tender, the invalidation of the public procurement contract, and the recognition of illegal actions to underestimate work experience.
Review of the cassation appeal of the Office.
PLOT: The Department's organizer announced a public procurement tender No. 7156874-1 "Construction of water supply networks in the village of Moyyldy.
Stage 3" by way of an open tender for the lot "Works on the construction of facilities /systems / water supply, water supply networks". The customer of the purchase is the Construction Department. According to the protocol on the results of public procurement No. 7156874-OK1 68 dated May 19, 2022, KES LLP was identified as the winner of the competition, KAZHOLD LLP was recognized as the potential supplier who took the second place. On June 10, 2022, based on this protocol, a standard contract for public procurement of construction works No. 87/22 (hereinafter referred to as the contract) was concluded between the Construction Department and KES LLP.
Having disagreed with the results of the competition, the plaintiff filed a complaint with the Department. On June 9, 2022, the Department replied that no violations had been found in the actions of the competition commission, in terms of incorrect calculation of the conditional discount for work experience.
The plaintiff's Complaint Committee replied that his conditional work experience discount should be 5%, and therefore the Department was instructed to consider the plaintiff's appeal and, if the arguments are confirmed, take appropriate measures. The Committee's recommendations have not been implemented by the Department.
Judicial acts: 1st instance: the claim is partially satisfied. It was decided to declare illegal and cancel the protocol on the results of public procurement No. 7156874-OK1 dated May 19, 2022 for the tender "Construction of water supply networks in the village of Moyyldy.
Stage 3"; oblige the Department to review the results of public procurement No. 7156874-OK1 dated May 19, 2022 for the tender "Construction of water supply networks in the village of Moyyldy. Stage 3", taking into account the legal position of the court; to invalidate the standard contract on public procurement of works in the field of construction No. 87/22 dated June 10, 2022, concluded between the Construction Department and KazEvroStroy LLP.
The rest of the claim was denied.
Appeal: the court's decision is upheld.
Cassation: judicial acts are cancelled, the claim is denied.
Conclusions: The local courts, partially satisfying the claim, were motivated by the fact that the competition commission illegally failed to take into account information from the electronic depository, which led to the determination of a conditional 0% discount for the plaintiff's work experience. The judicial board does not agree with these conclusions of the local courts due to the following.
The courts did not take into account that on February 22, 2021, LLP "E" was reorganized by allocating LLP "C" and experience in performing construction and installation work was transferred to the latter.
On March 16, 2021, C LLP was reorganized by joining LSI LLP.
In turn, LSI LLP was previously transformed from PS LLP, which had a license to store and sell alcoholic beverages, respectively, significant cash turnover and tax deductions.
Thus, the Partnership, which previously had no personal experience in the construction industry, had higher indicators of financial financial stability (34.274%), unlike other participants in the Competition, including those who had their own experience in the construction industry.
It was established from the case file that the founder of LLP "E", LLP "C" and LLP "LSI" is one individual. At the same time, on November 26, 2021, January 18, and March 16, 2022, E LLP was recognized as an unfair participant in public procurement.
The Judicial Board concluded that the use of work experience in construction obtained by the plaintiff from an unscrupulous participant in public procurement, combined with the fact that the latter, having no personal experience in this field and possessing high financial stability indicators unrelated to construction activities, violates the imperative requirement of paragraph 1 of Article 8 of the Entrepreneurial Code of the Republic. Kazakhstan prohibits unfair competition.
It was established in the case and the plaintiff does not dispute that part of the work experience he claimed to participate in the competition was simultaneously listed in the electronic depository for E LLP. On August 18, 2022, at the request of the Office, information on the plaintiff's work experience received from E LLP in the electronic depository as part of the reorganization was blocked.
In accordance with paragraph 1 of Article 3 of the Law of the Republic of Kazakhstan "On Public Procurement" (hereinafter referred to as the Law), legislation in this area is based on the Constitution and consists of the norms of the Civil Code of the Republic of Kazakhstan (hereinafter referred to as the Civil Code), the Law, and other regulatory legal acts of the Republic of Kazakhstan.
Within the meaning of Parts 4-7 of Article 8 of the Civil Code, legal entities must act in good faith, reasonably and fairly in exercising their rights, observing the requirements contained in the legislation, the moral principles of society, and entrepreneurs, as well as the rules of business ethics; this obligation cannot be excluded or limited by contract.
Good faith, reasonableness and fairness of the actions of participants in civil law relations are assumed; actions of legal entities aimed at harming another person, abuse of the right in other forms, as well as the exercise of the right in contradiction with its purpose are not allowed; no one has the right to take advantage of his unfair behavior; in case of non-compliance with these requirements, the court may refuse the person in defense of his right.
According to article 4 of the Law, public procurement is based on principles, including: providing potential suppliers with equal opportunities to participate in the public procurement procedure, except in cases provided for by this Law; fair competition among potential suppliers, and avoiding collusion between procurement participants.
The above circumstances of the case indicate that the plaintiff's actions violate principles in the field of public procurement, as well as abuse of law, which is the legal basis for the court to deny him judicial protection.
Article 8 of the CPC establishes that if the law or the agreement of the parties to the dispute provides for the resolution of relevant issues by the court, the court is obliged to resolve these issues based on the criteria of fairness and reasonableness.
Considering that no claims were filed against the winner of the competition, and also taking into account the circumstances indicating abuse of law on the part of the plaintiff, the judicial board, based on the principles of fairness and reasonableness, came to the conclusion that it was necessary to cancel the contested judicial acts with a new decision to dismiss the claim of LSI LLP.".
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