Ryanair Ltd -v- Minister for Transport & Another
High Court: Commercial Court
Judgment was given by Ms Justice Finlay Geoghegan on April 2nd 2009.
Judgment
A decision by the Minister for Transport to award a contract for the Knock-Dublin route to Aer Arann, following the withdrawal of CityJet from the contract, was not ultra vires the Minister’s powers, and was not in breach of the relevant European Community law principles.
Background
EU law permits member states to make special provision for public service obligations necessary for the maintenance of adequate air services to national regions, and Council Regulation No 2408/92 (EEC) lays down the conditions for imposing a public service obligation and reimbursement for it. This requires public tendering.
The routes involved were Dublin-Kerry, Dublin-Knock, Dublin-Galway, Dublin-Derry, Dublin-Sligo and Dublin-Donegal.
Ryanair tendered successfully for the Dublin-Kerry route in January 2008. It did not tender for the Dublin-Knock route. Aer Arann successfully tendered for the Dublin-Derry, Dublin-Donegal and Dublin-Sligo routes. Both it and CityJet tendered for the Dublin-Knock route.
Aer Arann put in three tenders, a solo bid seeking PSO compensation of €5,902,827 and two combined tenders including the Derry route and seeking sums of €12,996,094 and €13,389,255 in PSO compensation. Cityjet offered the Dublin-Knock route for €4,965,373.
In May Aer Arann was informed it was unsuccessful in its bid for the Knock route. On the same day, May 12th, the department wrote to CityJet stating that it was prepared to offer it the contract, and stating that it would arrange for the execution of the contract documents if the offer was accepted. CityJet replied that it accepted the offer.
However, on July 8th CityJet wrote to the department stating that it would be unable to take up the contract. On July 14th Ryanair wrote to the Minister saying it had heard that CityJet had decided not to take up the offer, and that Ryanair would now be prepared to offer a service on the Knock route, even though it had not originally tendered for it. The department replied that it could not consider Ryanair’s proposal as it had not originally tendered for the route.
Meanwhile the department had been in contact with Aer Arann, as the second preferred tenderer, asking it if the company could supply the service, and how soon it could do so.
Aer Arann responded that it would be difficult given the short notice, but in August was able to say that it could do so in the near future for the compensation referred to in its first tender, that is €5,902,827. The department then asked if it could do so on the basis of the combined Knock and Derry routes, for €12,996,094, and it confirmed that it could.
However, it sought additional compensation for any shortfall for the month of October. On September 2nd the Minister announced the award of the contract to Aer Arann, as the second bidder on the route. It commenced the route on October 1st, and the contract was executed on 24th of that month.
Ryanair sought and was granted leave to challenge this decision on the grounds that the tender process had come to a conclusion with the offer to CityJet, and the Minister should have invited new tenders; if the tender process had not been concluded with the offer to CityJet, the Minister was obliged to offer the tender to Aer Arann on the basis of its tender, but not to negotiate; the contract that was offered to Aer Arann did not comply with the route specification in the relevant Notice, and/or the invitation, because of the potential payment of additional compensation for October.
The Minister objected that Ryanair lacked locus standi to bring the application, as it never tendered for the Knock route; he said the tender process would only have concluded with the acceptance of the contract in writing; he also said he did not negotiate outside the terms of the tender and there were only minor modifications of the contract to take account of unforeseeable changes, which were signalled in the Regulation.
Decision
Dealing first with the issue of locus standi, Ms Justice Finlay Geoghegan, citing The State (Lynch) -v- Cooney , said that the question of whether a person had sufficient interest must depend on the circumstances of each particular case. In a judicial review, the question must also relate to the grounds for seeking the review.
If Aer Arann was not prepared to accept the contract, the Minister would have been obliged to issue a new invitation to tender, in which Ryanair could have participated.
It was a potential tenderer in the summer of 2008 and therefore had locus standi.
Turning to the issue of whether the tender process had concluded when initially accepted by CityJet, she said that the procedure envisaged by the invitation to tender, in the context of the Regulation, meant that until the contract was executed the tender process could not be regarded as concluded.
Neither the Regulation nor the invitation to tender expressly provided the procedure to be followed if, following acceptance of the award, but prior to entering into the contract, a successful tenderer withdrew.
But to conclude that the Minister was not then entitled to offer the tender to the next tenderer was absurd, and would render the whole process potentially useless.
As to whether the Minister acted in breach of the relevant Community law, she said the relevant principles were those of equal treatment and non-discrimination on grounds of nationality and an obligation of transparency. There was no breach of these principles, and the negotiations held with Aer Arann fell within those envisaged by the Regulation concerning amendment of the contract “to take account of unforeseeable changes”.
This allowed the Minister to pay additional compensation for the month of October, because of the late withdrawal of CityJet. Tenderers were warned that they would have a maximum period of 11 weeks to make arrangements for start-up, but the contract was only awarded to Aer Arann on September 2nd and it was required to commence the service on October 1st.
The new term of the contract providing for additional compensation was not a material amendment requiring a new invitation to tender. The amount involved was relatively small.
On the issue of route specification, Ryanair claimed that passengers from both Knock and Dublin should be able to make the round trip on the same day. The schedule only allowed passengers from Knock to do so.
Ms Justice Finlay Geoghegan said that when reading the Regulation in its totality, she was satisfied it meant that passengers commencing either in Dublin or in Knock should be able to make the round trip in a day.
Otherwise more than one return flight would be necessary, which was not consistent with the minimum requirement in Par 2.1 of the Regulation.
She was satisfied, therefore, that Ryanair failed in each of the grounds of its challenge, and dismissed its application.
Martin Hayden SC and Frank Beatty BL, instructed by A L Goodbody, for Ryanair; Anthony Collins SC and Niamh Hyland BL, instructed by the Chief State Solicitor, for the Minister for Transport