Bidding Appeals to FAS Russia: Challenging Tender Violations under Law on Protection of Competition

 

January 27, 2022

BRACE Law Firm ©

 

Federal Law No. 135-FZ dated July 26, 2006, On Protection of Competition (the "Law No. 135-FZ" or the "Law on Protection of Competition"), in Article 18.1, establishes the procedure for appealing to the Antimonopoly Authority regarding violations of bidding procedures and contracts concluded based on their results. This complaint procedure serves as an alternative to judicial challenges of bidding and contracts and provides a more streamlined method for protecting the rights of applicants during the bidding stage. It allows for the suspension of proceedings and enables the Antimonopoly Authority to issue an order to the bidding organizer to remedy violations without necessarily canceling the current bidding process or requiring a re-run, provided that such remedies are feasible.

Scope of the Appeal Procedure

Article 18.1 of the Law on Protection of Competition governs the legal framework for filing complaints with the Antimonopoly Authority. Additionally, special legal regulations apply, including Federal Law No. 223-FZ dated July 18, 2011, On Procurement of Goods, Works, and Services by Certain Types of Legal Entities (the "Law No. 223-FZ") [1], Federal Law No. 113-FZ dated July 21, 2005, On Concession Agreements [2], and others. In these instances, the appeal must comply with the rules established by special legislation and, supplementally, the norms of the Law on Protection of Competition.

However, the requirements of Article 18.1 of Law No. 135-FZ do not apply to complaints filed under the legislation governing the contract system for the procurement of goods, works, and services for state and municipal needs. Federal Law No. 44-FZ dated April 5, 2013, On the Contract System in the Sphere of Procurement of Goods, Works, and Services for State and Municipal Needs (the "Law No. 44-FZ"), provides a separate procedure for reviewing such complaints.

Pursuant to Part 25 of Article 18.1 of Law No. 135-FZ, this article applies to relations regulated by Federal Law No. 178-FZ dated December 21, 2001, On the Privatization of State and Municipal Property. The specific features of legal regulation in this case include:

• The applicant must file the appeal within five business days.
• The review period for the complaint is also limited to five business days.

Appeal rules apply to situations where a complaint concerns bidding that was mandatory under the law, or where such bidding was declared failed, except for complaints reviewed under the legislation on the contract system. In such cases, this norm applies only to instances expressly listed in Law No. 223-FZ.

According to Clause 4.2 of Part 1 of Article 23 of the Law on Protection of Competition, the Antimonopoly Authority is authorized to review complaints regarding violations of bidding procedures that are mandatory under Russian legislation, including the sale of state or municipal property. The term "Russian legislation", the norms of which regulate bidding procedures that may be appealed under Article 18.1 of the Law on Protection of Competition, should be interpreted broadly. This includes federal laws, secondary legislation, regional laws of the subjects of the Russian Federation, and corresponding secondary acts. Consequently, a violation of not only federal laws but also secondary acts regulating bidding procedures may serve as grounds for a complaint.

Under the rules of Article 18.1 of the Law on Protection of Competition, bidding typically held in the form of a tender or auction (Article 447 of the Civil Code) may be appealed. Furthermore, if a federal law or a law of a subject of the Russian Federation expressly provides for another form of bidding — such as the sale of a debtor's property through a public offer during bankruptcy — the Antimonopoly Authority also reviews complaints against such bidding under Article 18.1 of the Law on Protection of Competition.

When utilizing the appeal procedure provided by Article 18.1 of Law No. 135-FZ, the following should be considered:

• The Antimonopoly Authority reviews only the disputes specifically named in the article. Other disputes falling under the violations listed in Article 10 of Law No. 135-FZ are reviewed according to the procedure set forth in Chapter 9 of Law No. 135-FZ.
• The appeal procedure must strictly follow the legal norms. For example, the procedure for reviewing cases provided by Chapter 9 of the Law on Protection of Competition does not apply to violations of Law No. 44-FZ, except for cases exhibiting signs of a violation of Article 17 of the Law on Protection of Competition.
• When determining the competence of antimonopoly authorities, one must also follow Paragraph 45 of the Resolution of the Plenum of the Supreme Court of the Russian Federation No. 2 dated March 4, 2021, On Certain Issues Arising in Connection with the Application of Antimonopoly Legislation by Courts. According to this resolution, when deciding on the competence of such bodies, one must consider which functions the Antimonopoly Authority was performing and which legislative requirements it was following when adopting the relevant acts.

Failure by the Antimonopoly Authority to comply with the legally prescribed procedure for exercising its powers may serve as grounds for declaring its acts invalid if this led or could have led to a violation of the rights and legitimate interests of the relevant person.

If the Antimonopoly Authority receives a petition containing data indicating an administrative offense, the authority must review the submission not only as a complaint but also as an application regarding a committed administrative offense.

What can be challenged?

First, a complaint may be filed against the actions (omissions) of a legal entity, bidding organizer, electronic platform operator, or a tender or auction committee:

• During the organization and conduct of bidding, the conclusion of contracts based on bidding results, or in cases where bidding is mandatory under the law.
• During the organization and conduct of procurement in accordance with Law No. 223-FZ.

Thus, a complaint may be filed against entities that organize and conduct bidding at all stages, including the conclusion of contracts based on the results of such bidding. The conduct of such bidding must be mandatory.

By express provision of the law, complaints are only possible in situations where Law No. 223-FZ itself provides for their review under Article 18.1 of Law No. 135-FZ. A bidder may appeal the actions (omissions) of the Customer during the procurement of goods, works, and services to the Antimonopoly Authority in the cases listed in the named norm. This norm is mandatory, and the list of grounds for appealing the Customer's actions (omissions) to the Antimonopoly Authority is exhaustive.

Consequently, both the established appeal procedure and the exhaustive list of procurement procedure violations that grant a bidder the right to an administrative appeal have legal significance [3]. Any violation of the Antimonopoly Authority's competence when reviewing a complaint will serve as grounds for declaring the decision issued based on that review illegal.

In a specific case [4], involving a procurement not related to public interests (and therefore not falling under Part 3 of Article 10 of Law No. 223-FZ), the court emphasized that Article 18.1 of Law No. 135-FZ does not grant the Antimonopoly Authority additional powers. Due to its procedural nature, this norm cannot be viewed as expanding the list of grounds upon which the Antimonopoly Authority holds jurisdiction to review complaints. Furthermore, the court stressed that the primary goal of Law No. 223-FZ is to create conditions for the timely and full satisfaction of customers' needs for goods, works, and services with the required price, quality, and reliability. This implies a relative degree of freedom for customers in determining procurement terms and the inadmissibility of interference by any party based on an assessment of the expediency of the terms and procedures. Thus, the legislator did not intend to provide the Antimonopoly Authority with the same scope of powers for rapid intervention in procurement as it possesses regarding procurement for public needs under Part 1 of Article 99 and Part 1 of Article 105 of the Law No. 44-FZ, and Clause 4.2 of Part 1 of Article 23 of the Law on Protection of Competition.

Within the administrative procedure for reviewing bidder complaints, the Antimonopoly Authority may issue decisions only regarding those violations listed in Part 10 of Article 3 of Law No. 223-FZ [5]. If a violation is not included in the list of grounds for an appeal to the Antimonopoly Authority, such a violation cannot serve as the basis for filing a corresponding complaint.

Second, a complaint may be filed regarding adopted acts or committed deeds (actions or omissions) of authorized bodies during the implementation of a capital construction project with respect to the list of specified actions and issued acts.

This list is exhaustive and covers both procedural matters (deadlines for decision-making, acceptance of documents) and substantive points (requirements to carry out activities during a construction project not provided for by Article 5.2 of the Town Planning Code of the Russian Federation) [6]. This norm defines the stages of implementing a capital construction project and specifies the activities for each stage.

This norm establishes the rules for:

• Accepting an application from a developer for a construction permit and the documents required to obtain said permit, the list of which is exhaustive.
• Filing a notice of planned construction.
• Accepting an application from a developer for a permit to commission a capital construction object and the documents required to obtain said permit, the list of which is exhaustive.
• Filing a notice of completion of construction.
• Filing a notice of the planned demolition of a capital construction object.
• Filing a notice of completion of the demolition of a capital construction object.
• Filing an application for the issuance of a town planning land plot plan.

The detailed elaboration of these stages indicates an intent to prevent authorized bodies from unjustifiably obstructing a developer during construction activities, delaying decision-making, and generally optimizing the timelines for construction projects.

A common practice for filing complaints involves the violation of deadlines for issuing town planning plans and other aforementioned restrictions.

However, one must consider that the powers of the Antimonopoly Authority when reviewing complaints in this category are limited [7] to merely establishing the presence or absence of violations by the authorized body during a specific construction procedure. These powers do not permit the Antimonopoly Authority to draw conclusions on matters outside its competence. Thus, upon identifying relevant violations, the control body must issue an order to remedy them without substituting itself for the entity authorized to provide a legal assessment of the applicant's requirements (e.g., the completeness and accuracy of documents submitted for state or municipal services).

It appears that this method of protection will not lead to any significant restoration of rights. For instance, in a complaint regarding a violation of the deadline for reviewing a construction permit application, the control body's order may only require the authorized body to review the application, rather than to actually issue the construction permit.

Third, complaints are reviewed regarding the actions (omissions) of a territorial grid organization providing electricity transmission services, organizations providing cold water supply and/or wastewater disposal, organizations providing hot water supply, gas distribution organizations, or heat supply organizations when they carry out construction project activities involving legal entities and individual entrepreneurs. Specifically, actions (omissions) established by the list of procedures in the sphere of residential construction, approved by Resolution of the Government of the Russian Federation No. 403 dated April 30, 2014, may be subject to appeal.

Eligible Appellants

First, persons who have submitted applications to participate in the bidding.

Second, other persons whose rights or legitimate interests may be infringed or violated as a result of a violation of the organization and conduct of bidding.

Depending on the legal relationship within which the need to protect rights arises, the following circles of subjects can also be identified:

• Complaints filed by any person. A complaint against the provisions of procurement documentation may be sent by any person to the Antimonopoly Authority before the deadline for submitting applications to participate in the procurement expires [8].
• Complaints filed by a participant in town planning activities and a developer, including after the commissioning of a building. Generally, appeals within construction projects are available only to subjects of town planning activity. Previously, it was believed that once a building was commissioned, the Developer ceased to be such a participant. According to the findings of a territorial Office of the Federal Antimonopoly Service, an applicant can only be a participant in town planning relations. This, however, does not preclude a subject (e.g., a developer) from filing a complaint if the building has already been commissioned and the developer is formally no longer a participant in such relations, provided their rights and legitimate interests have been violated. Terminating the review of a complaint on the aforementioned grounds is unjustified [9].
• Complaints may only be filed by a special subject if the bidder must meet specific requirements. ВIn cases provided by law, a bidder may engage in certain types of activities only on the basis of a special permit (license) or if they hold membership in a self-regulatory organization [10].

Deadlines for Appeals

When filing a complaint, the following deadlines must be observed:

• 10 days – to appeal the actions (omissions) of a bidding organizer, electronic platform operator, or a tender or auction committee, starting from the day the bidding results are finalized or, if the results must be posted on a website, from the day of such posting.
• 3 months – if a contract is not concluded based on bidding results, or if the bidding is declared failed, an appeal against the actions (omissions) of the bidding organizer, electronic platform operator, or the tender or auction committee to the Antimonopoly Authority under this article is permitted within three months from the day the results are finalized or posted on the website.
• 3 months – to appeal the acts and/or actions (omissions) of an authorized body and/or a grid utility organization, starting from the day the act was adopted or the action (omission) occurred.

A violation of the three-month deadline for filing a complaint with the control body is not grounds for returning the complaint to the applicant. If the applicant violates the three-month deadline, the control body must still review the complaint.

If the applicant violates the 10-day deadline:

• If the Federal Antimonopoly Service (FAS) body knows for a fact that a contract has been concluded based on the bidding results before the complaint is reviewed on its merits, the complaint is reviewed according to the procedure established by the administrative regulations [11].
• If, before the complaint is reviewed on its merits, the control body is unaware that a contract has been concluded, the complaint must be reviewed under Article 18.1 of the Law on Protection of Competition [12].

Venue for Filing Complaints

When determining the appropriate territorial office of FAS Russia for filing a complaint, one should be guided by the place where the challenged action occurred or the challenged act was issued. However, filing a complaint with the wrong territorial office is not grounds for returning it.

The responsible structural unit (or authorized employees) of the control body determines the jurisdiction for reviewing the complaint. Territorial offices of FAS Russia review complaints against the actions (omissions) of a legal entity, bidding organizer, or a tender or auction committee during bidding organized by territorial bodies of Federal Executive Authorities, regional state authorities, local governments, and other persons.

Complaints regarding the actions (omissions) of a legal entity, bidding organizer, electronic platform operator, or a tender or auction committee during bidding provided for by Federal Law No. 127-FZ dated October 26, 2002, On Insolvency (Bankruptcy), must be reviewed by the territorial office at the location of the bidding organizer.

If a complaint that should be reviewed by a territorial office is filed with FAS Russia, FAS Russia shall transfer it to the appropriate territorial office within three business days of receipt for review on its merits. FAS Russia, however, reserves the right to review any complaint that falls under the jurisdiction of a territorial office.

If a complaint that should be reviewed by FAS Russia or another territorial office is filed with a territorial office, it shall be transferred to FAS Russia or the appropriate office within three business days of receipt, with a copy sent by fax or email.

A decision to return the complaint to the applicant is made if the complaint lacks mandatory information, is not signed, or is signed by an unauthorized person. It may also be returned if there is a legally binding court act containing findings on the presence or absence of a violation in the challenged acts, or if the control body has previously issued a decision on the challenged acts, or if the act was challenged under the law on the organization of state and municipal services. The Antimonopoly Authority must decide within three business days whether to return the complaint or schedule it for review. If the complaint is returned, the petitioner must be notified in writing of the reasons for the return.

Complaint Requirements and Consequences of Non-Compliance

Requirements for the content of a complaint are established in Part 6 of Article 18.1 of Law No. 135-FZ, which stipulates that a complaint must contain:

1. The name, location, mailing address, and contact telephone number of the bidding organizer, electronic platform operator, authorized body, and/or grid utility organization whose acts and/or actions (omissions) are being challenged.
2. The name and location (for a legal person) or the full name and place of residence (for an individual) of the applicant, as well as their mailing address, email address, contact telephone number, and fax number.
3. Identification of the challenged bidding; if the law requires bidding information to be posted on a website, the address of that website must be provided (this information is not required when challenging the acts or actions/omissions of an authorized body or grid utility organization).
4. Identification of the challenged actions (omissions) of the bidding organizer, electronic platform operator, tender or auction committee, or the acts/actions (omissions) of the authorized body or grid utility organization, as well as the regulatory act establishing the procedure for construction project activities involving subjects of town planning relations, along with relevant arguments.
5. A list of documents attached to the complaint.

The applicant or an authorized person acting under a power of attorney must sign the complaint. Requiring a digital signature for a complaint submitted electronically is illegal [13]. A complaint may be filed via mail, fax, email, or other methods.

Failure to comply with these requirements is grounds for returning the complaint. A complaint may also be returned if a legally binding court act exists containing findings on the presence or absence of a violation in the challenged acts, or if a decision has already been made regarding the challenged actions (omissions) of the bidding organizer, electronic platform operator, tender or auction committee, authorized body, or grid utility organization. The Antimonopoly Authority must decide within three business days whether to return the complaint or schedule it for review. If the complaint is returned, the petitioner must be notified in writing of the reasons for the return.

Procedure for Reviewing Complaints Regarding Bidding Violations and Contract Conclusions

The review process involves the following stages:

1. Acceptance of the complaint for review. The period for accepting a complaint is three business days. Once accepted, the Antimonopoly Authority posts information about the complaint on the official bidding website or the FAS website. It also sends a notice of the complaint and the suspension of the bidding process until the merits are reviewed. Upon receiving this notice, the bidding organizer may not conclude a contract until the Antimonopoly Authority issues a decision. Any contract concluded in violation of this requirement is void [14]. The notice is sent via mail, fax, or email.

Within one business day of receiving the notice, the bidding organizer, electronic platform operator, or tender or auction committee must notify all bidders of the complaint, its content, and the time and place of its review.

2. Filing of objections. The bidding organizer, electronic platform operator, tender or auction committee, authorized body, grid utility organization, applicant, and bidders may file objections or supplements to the complaint and participate in the hearing in person or through representatives. Objections must be submitted at least two business days before the hearing date.

3. Review on the merits by the Antimonopoly Authority Commission. The failure of properly notified persons to appear does not prevent the hearing. However, a failure to properly notify participants serves as grounds for a court to invalidate the commission's decisions [15].

According to Clause 3.1.2 of FAS Russia Letter No. IA/12337/15 dated March 16, 2015, the review on the merits includes:

• Opening of the commission meeting.
• Verification of the representatives' powers.
• Presentations by the parties.
• Examination of the case circumstances and submitted materials by the commission members.
• Deliberation and decision-making.
• Announcement of the decision.
• Explanation of the procedure for appealing the decision or order [16].

Results of Complaint Reviews

Following the review, the commission adopts one of the following decisions:

• To declare the complaint justified and issue an order.
• To declare the complaint justified without issuing an order.
• To declare the complaint unjustified while issuing an order (if the complaint's arguments were not confirmed, but the commission identified other violations not subject to the appeal).
• To declare the complaint unjustified without issuing an order.
• To terminate the proceedings on the complaint.

An order to remedy violations is issued:

1. If the complaint is declared justified.
2. If other violations were identified that were not part of the appeal.

Such orders are mandatory and may require the bidding organizer, electronic platform operator, or committee to:

1. Take actions to remedy violations of bidding procedures or contract conclusion procedures, including orders to cancel protocols drafted during the bidding.
2. Amend the bidding documentation or the notice of bidding.
3. Annul the bidding.

An order to annul bidding may only be issued until a contract is concluded with the winner [17]. Once a contract is concluded, an applicant who believes their rights were violated may seek a remedy by challenging the contract in court.

Proceedings are terminated if a court decision exists on the matter, or if other decisions have been issued regarding the challenged actions, omissions, or regulatory acts.

The commission notifies the applicant and the respondent of the decision. Copies of decisions and orders are sent within three business days. Information regarding the decision is also posted on the bidding website or the Antimonopoly Authority's website.

Appealing the Results

According to Paragraph 18 of the Review of the Presidium of FAS, decisions and orders issued by FAS are not subject to review by the collegiate bodies of FAS Russia under the procedure established by Article 23 of the Law on Protection of Competition [18]. FAS Russia does receive complaints seeking the review of decisions and orders issued under Article 18.1 of the Law on Protection of Competition.

The content of Part 4 of Article 23 of the Law on Protection of Competition indicates that collegiate bodies of FAS Russia review decisions and orders in cases involving violations of antimonopoly legislation.

However, the procedure for reviewing complaints under Article 18.1 of the Law on Protection of Competition does not involve the initiation and review of a case regarding a violation of antimonopoly legislation. Consequently, decisions and/or orders of a territorial office are not subject to review by a collegiate body of FAS [19].

Therefore, any interested party who disagrees with a decision (or order) of the Antimonopoly Authority may appeal to a court in accordance with the jurisdictional rules established by procedural legislation.

_____________________

References

1. Under Part 10 of Article 3 of Law No. 223-FZ, complaints filed within procurement conducted in accordance with said law are carried out in the manner provided for by Article 18.1 of Law No. 135-FZ.
2. The applicability of the complaint procedure to relations arising from concession agreements follows from Letter of FAS Russia No. IA/74481/20 dated August 28, 2020, On the Application of Antimonopoly Legislation when Concluding a Concession Agreement.
3. Clause 25 of the Review of Judicial Practice of the Supreme Court of the Russian Federation No. 3 (2017), approved by the Presidium of the Supreme Court of the Russian Federation on July 12, 2017.
4. Determination of the Judicial Collegium for Economic Disputes of the Supreme Court of the Russian Federation No. 305-KG17-8138 dated October 13, 2017, in case No. A40-93344/2016.
5. Determination of the Supreme Court of the Russian Federation No. 305-KG17-8138 dated October 13, 2017.
6. Article 5.2 of the Town Planning Code of the Russian Federation was introduced by Federal Law No. 275-FZ dated July 1, 2021, On Amending the Town Planning Code of the Russian Federation and Certain Legislative Acts of the Russian Federation, and entered into force on September 1, 2021.
7. Resolution of the Arbitration Court of the Moscow District No. F05-15339/2021 dated July 21, 2021, in case No. A40-176384/20-145-1239. This dispute was reviewed by the court under the old version of Article 18.1 of Law No. 135-FZ, but the general logic expressed by the court in the resolution applies to the current version.
8. Letter of FAS Russia No. ME/53183/19 dated June 25, 2019, On the Acceptance by the Antimonopoly Authority of a Complaint for Review filed by a Person who is not a Bidder, in accordance with Article 18.1 of Federal Law No. 135-FZ dated July 26, 2006, On Protection of Competition.
9. Letter of FAS Russia No. RP/9241/18 dated February 13, 2018, Information on the Review by Territorial Offices of FAS Russia of Complaints against Authorized Bodies and Grid Organizations.
10. Letter of FAS Russia No. IA/47916/17 dated July 13, 2017, On Issues of Accepting Complaints from Individuals for Review.
11. Order of FAS Russia No. 339 dated May 25, 2012, On Approval of the Administrative Regulations of the Federal Antimonopoly Service for the Performance of the State Function of Initiating and Reviewing Cases on Violations of the Antimonopoly Legislation of the Russian Federation.
12. Letter of FAS Russia No. IA/12337/15 dated March 16, 2015.
13. Resolution of the Arbitration Court of the North-Western District No. F07-13743/2016 dated February 6, 2017, in case No. A56-13072/2016.
14. Review of Judicial Practice on Issues Related to the Application of Federal Law No. 223-FZ dated July 18, 2011, On Procurement of Goods, Works, and Services by Certain Types of Legal Entities, approved by the Presidium of the Supreme Court of the Russian Federation on May 16, 2018.
15. Resolution of the Arbitration Court of the East Siberian District No. F02-2176/2021 dated May 24, 2021, in case No. A19-10558/2020.
16. Letter of FAS Russia No. IA/12337/15 dated March 16, 2015.
17. Resolution of the Arbitration Court of the Volga-Vyatka District No. F01-9688/2020 dated June 17, 2020, in case No. A43-35747/2019.
18. Review of the Practice of Applying Antimonopoly Legislation by the Collegiate Bodies of FAS Russia (for the period from January 5, 2016, to July 1, 2018), approved by the protocol of the Presidium of FAS Russia No. 10 dated October 3, 2018.
19. Paragraph 18 of the Review of the Practice of Applying Antimonopoly Legislation by the Collegiate Bodies of FAS Russia (for the period from January 5, 2016, to July 1, 2018), approved by the protocol of the Presidium of FAS Russia No. 10 dated October 3, 2018.