The Malta Public Procurement Regulations (the ‘Regulations’) lists grounds which either require (mandatory) or alternatively permit (discretionary) contracting authorities to exclude an economic operator from participation in public tenders. Mandatory grounds include conviction of the economic operator for participation in a criminal organisation, corruption, fraud and money laundering. Discretionary grounds include the economic operator’s insolvency, grave professional misconduct and failure to pay taxes or social security contributions. These roughly follow the grounds contained in the old EU Public Sector Directive (Directive 2004/18).
The procedure for debarment of an economic operator was complemented in 2015 with a focus on breaches of Maltese labour law. This is very much in line with the trend in public procurement in the EU with a shift towards so-called secondary considerations (social, labour and environmental).
There are a number of additions to the present system of debarment which will be discussed in more detail below. The contracting authority is no longer vested with the sole authority to exclude an economic operator, but rather an independent tribunal, the Commercial Sanctions Tribunal, is to decide on the exclusion following an adversarial procedure.
Economic operators interested in participating in public tendering processes in Malta should be aware of the new changes and how they may affect their chances of participating in and winning tender procedures. The amendments to the Regulations mainly affect economic operators operating in Malta or those which are in one way or another subject to Maltese labour law.
What is the Procedure before the Commercial Sanctions Tribunal?
The procedural mechanics of the new amended debarment are fairly straightforward:
– the Director of Employment and Industrial Relations (the ‘Director’) acts as a prosecutor by bringing an application for debarment of an economic operator (or ‘black-listing’ as labelled in the Regulations) before the Commercial Sanctions Tribunal. The Director is statutorily vested with running the Department of Employment and Industrial Relations which in turn is the authority empowered to monitor and enforce labour rights in Malta.
– the Commercial Sanctions Tribunal is established by the Regulations and is for all intents and purposes an independent adjudicating body composed of three persons appointed by the Prime Minister of Malta on the advice of the Minister for Finance. The first Commercial Sanctions Tribunal was appointed as of 1 September 2015 and has been meeting regularly since.
The Director’s application presupposes that an investigation was carried out and that its main findings are included. The economic operator has the right to counter these findings by submitting a written reply within 20 days from service.
The procedure before the Commercial Sanctions Tribunal is essentially adversarial where the Director has the burden of proving its findings and the economic operator may submit evidence (in the form of witnesses, documents and so on) and put forward pleadings to counter those claims.
The procedure is designed to be an efficient one with the first hearing being appointed 15 days from the date the economic operator submitted its written reply.
To date no applications has been brought forward by the Director.
What are the Grounds for Debarment?
The Director may bring an application for application only if the economic operator:
(a) has been declared guilty by any Court or Tribunal of an offence in terms of Maltese labour law;
(b) has failed to provide its employees with a written contract;
(c) has failed to provide its employees with a detailed pay slip containing all relevant details including amount paid, normal hours worked, overtime hours, hours worked on Sundays and public holidays, hours availed of a leave or sick leave, a breakdown of bonuses and allowances as well as deductions made;
(d) has failed to deposit wages or salaries by direct payment in the employee’s bank account;
(e) has failed to provide the relevant bank statements of wages and salaries’ deposit and copies of the detailed payslips, which are to be made available as and when required by the Director; or
(f) has subcontracted a public contract to another person employing the same employees of the principal contractor to carry out the same or similar duties for the execution of the said public contract.
What is the Maximum Period of Debarment?
The period of debarment is set by the Commercial Sanctions Tribunal after the adversarial procedure is exhausted and the Director’s findings are held to be true. This period can be either between 6 months and 1 year in the case of the grounds (b) to (f) noted above or alternatively 2 years in the case of the ground mentioned in (a) above.
The period of debarment may increase if the economic operator has already committed any of the breaches listed above. It may increase by a period of between 1 year and 3 years in the case of the grounds (b) to (f) noted above or alternatively by a period of between 2 years and 3 years in the case of the ground mentioned in (a) above.
Do I even have a say?
An application based on any of the grounds from (b) to (f) listed above will be naturally contentious and will be fought on the merits. If, on the other hand, the application based on ground (a), that is, declared guilty by any Court or Tribunal of an offence in terms of Maltese labour law will be a bit trickier to challenge. The Commercial Sanctions Tribunal has the discretion to serve the economic operator with a mere warning if:
– the economic operator took measures to remedy the situation; and
– the lesser gravity or the specific circumstances of the situation do not justify debarment.
How does Debarment affect my rights?
A decision delivered by the Commercial Sanctions Tribunal has executive force and may be enforced as if it were a judgment delivered by the Maltese courts. It will come into force following the lapse of 2 months from the date that decision becomes final and definitive (following the expiry of the limitation period to exercise the right of appeal).
There are two main consequences for an economic operator subject to a decision:
– all existing public contracts which are still in force are terminated immediately without any compensation for actual and future losses as of the date on which the decision becomes definitive and final; and
– contracting authorities subject to Maltese public procurements law are prohibited from dealing with a debarred economic operator and any public contracts concluded will be null and void.
Who has the final word?
The economic operator or the Director may appeal to the Court of Appeal (Superior Jurisdiction) within 20 days from the date of the decision. The appeal may be on both points of law and fact—which is very untypical of right of appeals in the realm of public administration in Malta. Both parties may make written and oral submissions before this Court and even present evidence if need be, but it is a general principle of procedural that new evidence should be brought at this stage. This makes it important for economic operators to engage in the process and actively defend themselves.
How can we help you?
We assist private economic operators in all phases of public procurement, including procurement litigation and proceedings that may be brought in front of the Commercial Sanctions Tribunal. Our team also has extensive experience in representing private clients in enforcement exercises and proceedings commenced by public authorities, in particular by the Department of Employment and Industrial Relations.
Our Public Procurement team works closely with our Employment Law team to assist you in such matters.
We can also assist you by running searches to check whether your competitors have been convicted by final judgment of any the mandatory exclusion grounds listed in Article 57 (1) of the new Public Sector Directive (Directive 2014/24) or whether there is evidence of any of the discretionary exclusion grounds listed in Article 57 (4) of the same Directive. This may help your case to exclude a competing bidder from a competitive tender process administered by contracting authorities in the EU.