Technology, Media and Telecoms | 01 December 2010

The Court of Appeal has upheld the recent High Court decision in Softlanding Systems, Inc v KDP Software Ltd & anor [2010]. The High Court had rejected Softlanding’s claim that KDP was in breach of its contractual obligations by failing to supply the required technical support post termination, and granted an injunction in favour of KDP, restraining Softlanding and its acquirer, Unicom, from using KDP’s software.

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TMT | 01 November 2010

In SAS Institute Inc v World Programming Ltd [2010], the High Court had to consider whether the production of software that emulates the functionality of an earlier software program, but without there being any copying of the source code, amounts to copyright infringement. Following its judgment in July 2010, the High Court has referred several questions to the European Court of Justice (ECJ) concerning interpretation of the Software Directive (Council Directive 91/250/EEC) and the Information Society Directive (European Parliament and Council Directive 2001/29/EC). The decision of the ECJ is probably a couple of years away but it will provide much-needed clarity on various key issues relating to so-called ‘software clones’ or ‘drop-in replacement’ programs. [Continue Reading]

Technology, Media and Telecoms | 01 October 2010

On 21 May 2010, the EU’s General Court ruled that statements made by the French Minister of the Economy in July 2002 to the French press, pledging financial support from the French state to struggling public company France Telecom (FT), and the government’s subsequent offer of a €9m shareholder loan to the company, did not constitute illegal state aid. The judgment overturns a European Commission decision from August 2004, which held that the loan the French government offered FT six months after the Minister’s initial public statements, was illegal state aid. The Commission and French operator Bouygues Telecom challenged the General Court’s ruling by lodging an appeal at the European Court of Justice (ECJ) in August 2010.

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Technology, Media and Telecoms | 01 September 2010

In recent months we have assisted on several high-value software licensing transactions, all of which involved long debates about the ‘perpetual’ nature of the licences granted. This prompted us to revisit the important lessons to be learned from the judgment recently handed down in BMS Computer Solutions Ltd v AB Agri Ltd [2010], which all customers should be aware of when purchasing perpetual licences for their business-critical software.

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TMT | 01 July 2010

On 8 June 2010, the European Court of Justice (ECJ) rejected the attempt by various leading European mobile network operators (MNOs) to challenge the validity of a cap imposed by the EU on the roaming fees they can charge customers travelling overseas. From the point of view of these providers, price-capping regulation has effectively curbed a lucrative market that was worth approximately €8.7bn at the time the regime came into force in 2007. [Continue Reading]

Technology, Media and Telecoms | 01 June 2010

In IHL169 we wrote of the effect of the House of Lords judgment in Transfield Shipping Inc v Mercator Shipping Inc [2008] (also referred to as The Achilleas), which cast some doubt on the application of the traditional rule on remoteness set out in Hadley v Baxendale (1854).

In short, Transfield found that types of loss arising from a breach of a commercial contract were not recoverable, even though reasonably foreseeable, if the parties did not intend the party in breach to have assumed liability for them when the contract was formed. This led to some confusion as to how Hadley was to be applied going forward and was of particular interest in the IT industry where liability is often a critical issue.

However, the recent Sylvia Shipping Co Ltd v Progress Bulk Carriers Ltd [2010] has considered the judgment in Transfield and has clarified the law in this area. Although a shipping case (like Transfield), the principles apply equally to IT contracts.

Facts

Sylvia Shipping Co, the owners of the vessel ‘Sylvia’ (the owners), chartered the vessel to Progress Bulk Carriers (the charterers) in an agreement dated 22 February 2000. The agreement was initially for two to four months, but was later extended. The last extension was dated 13 June 2003, under which the charter period was extended for a further period of 11 to 13 months, at the charterers’ option, at a hire rate of $5,900 per day.

On 11 March 2004, the vessel loaded with cargo in Anacortes, Washington, for discharge at Port-Alfred in Quebec. On 30 March, the charterers entered into a sub-charter with a company called Conagra for the carriage of a cargo of wheat from Baie-Comeau (in Quebec) to Casablanca, with a start date of between 14 and 22 April.

The vessel arrived at Port-Alfred on 14 April. On 15 April, a Port State Control (PSC) inspection was carried out, which found three structures in the holds to be wasted. Discharge and cleaning of the holds was completed on 16 April and, on the same day, the Canadian Food Inspection Agency rejected four of the vessel’s five holds for the loading of grain and grain products. In response, the owners appointed the contractors who had cleaned the holds to carry out descaling work.

On 19 April, the vessel arrived at Baie-Comeau. The holds were inspected again by the PSC and were found to still be unsafe. The PSC then issued a detention order due to structural wastage. Repairs were started and, on 22 April, Conagra cancelled the sub-charter.

The next day, the charterers entered into a substitute arrangement with York Ltd (York) for a one-time charter trip to Lome (in Togo), which was due to leave between 29 April and 3 May.

Hold repairs were accepted as complete on 26 April 2004 and the charterers were able to make the York arrangement. They subsequently brought a claim against the owners for the losses arising from not being able to complete the Conagra fixture (which had a higher value than the York fixture).

An arbitration tribunal found in favour of the charterers. It held that the owners had not exercised due diligence in ensuring that the steel work within the hold was suitably maintained and that, had the owners taken appropriate steps in time, the Conagra fixture could have been met by the charterers. As such, the tribunal considered the loss of the Conagra fixture to be a reasonably foreseeable result within the first limb of Hadley and awarded the charterers $273,706.12. This was the value of the Conagra contract (held to be worth $804,222.05) less the amount the charterers earned under the York contract over the number of days that the Conagra contract would have run for (calculated at $530,515.93).

The owners appealed, arguing that, pursuant to Transfield, loss of a sub-charter was too remote and that the recoverable damages were limited to the difference between the charter and the market rate during the period of delay.

Judgment

Hamblen J, in finding in favour of the charterers and upholding the arbitration tribunal’s decision, gave a useful summary of the issues and judgments of the five law lords in Transfield, and concluded that there were two approaches taken.

The first, the orthodox approach, was taken by Lord Rodger and Baroness Hale, and followed the principles laid down in Hadley. The second, the so-called ‘broader approach’, was taken by Lords Hoffmann and Hope (and supported to some extent by Lord Walker, the fifth law lord), and this added another layer onto the traditional rules on remoteness. The question, they held, was not only whether the parties must be taken to have had this type of loss within their contemplation when the contract was made, but also whether they must be taken to have assumed liability for this type of loss.

Hamblen J held that Transfield had resulted in an amalgam of the orthodox and broader approaches. He stated that:

‘The orthodox approach remains the general test of remoteness applicable in the great majority of cases. However, there may be “unusual” cases, such as The Achilleas itself, in which the context, surrounding circumstances or general understanding in the relevant market, make it necessary specifically to consider whether there has been an assumption of responsibility.

This is most likely to be in those relatively rare cases where the application of the general test leads or may lead to an unquantifiable, unpredictable, uncontrollable or disproportionate liability, or where there is clear evidence that such a liability would be contrary to market understanding and expectations.

In the great majority of cases it will not be necessary specifically to address the issue of assumption of responsibility. Usually the fact that the type of loss arises in the ordinary course of things or out of special known circumstances will carry with it the necessary assumption of responsibility.

The orthodox approach, therefore, remains the “standard rule” and it is only in relatively unusual cases, such as The Achilleas itself, where a consideration of assumption of responsibility may be required.’

Hamblen J was keen to stress that there was no new generally applicable legal test on remoteness in damages. It has, according to his judgment, been argued on several occasions recently, and has resulted in confusion and uncertainty.

Comment

Although not the first case to consider the application of Transfield, this judgment is a useful summary of its application going forward and gives comfort that the broader approach taken by Lords Hoffmann and Hope (and supported by Lord Walker) will only apply in very limited circumstances.

In IHL169, we suggested that it would be dangerous for suppliers to rely on Transfield as customers and suppliers, and the courts, have never doubted that all reasonably foreseeable losses that are not expressly excluded are recoverable. Further, in IHL179, we noted that an argument based on Transfield in GB Gas Holdings Ltd v Accenture (UK) Ltd & ors [2009] had been rejected on similar grounds.

The judgment in Sylvia Shipping confirms that the traditional approach to remoteness, as per Hadley, will apply in all but the most exceptional of cases. It seems, therefore, that the rule set out over 150 years ago remains alive and well.

Technology, Media and Telecoms | 01 May 2010

On 24 March 2010, the Office of Government Commerce (OGC) published guidance (‘Implementing e-tendering’ (the Guidance)) on the implementation of e-tendering as part of the public procurement process. The release of the Guidance comes at a time when, in light of the current economic climate, Alistair Darlings’ spending cut targets in the 2010 Budget and the recent general election, saving money is a priority for the government.

E-tendering is one way in which the public sector can reduce the costs of the procurement process and drive down costs of government suppliers by promoting competition among tenderers. However, the benefits of e-tendering may be limited by European legislation, which aims to promote an open and competitive supply marketplace, but contains strict rules that govern the procedures concerning the award of public contracts.

The release of the Guidance comes in the wake of the Glover Review, which recommended that:

  • the government should issue all tender documentation electronically by 2010;
  • businesses should be permitted to tender electronically for all public sector contracts by 2010; and
  • the whole tendering process should be electronic by 2012.

Further, the use of e-tendering solutions is an enabler of the European i2010 eGovernment Action Plan, which aims to ensure all public administrations across Europe have the capability of carrying out 100% of their procurement electronically (where legally permissible). Member states are committed to this target.

What is e-tendering?

At a basic level, e-tendering solutions provide a platform for suppliers to access invitations to tender (ITT) and other associated tender documents electronically, and allow them to return their completed bid documents securely. Returned tender documents are then automatically released to authorised staff in the procuring organisation, after the closing date for submission.

More complex e-tendering solutions offer the capability to assist in contract notice creation, foster collaborative work in producing ITTs and associated documents, and provide a forum for suppliers and the procuring organisation to request and clarify information. Some platforms host evaluation tools that can assist in the management and control of the tender evaluation and award process, which arguably pushes the boundaries of e-tendering towards a complete e-procurement solution.

benefits of e-tendering

The Guidance advises that procuring public organisations should see several benefits in using e-tendering, which offers advantages over the traditional procurement process, with the ultimate aim of securing value for money from goods and services purchased. Further, in the current economic climate, the advantages of e-tendering for both the public sector and potential suppliers are more pertinent than ever.

Public organisations

Advantages include reductions in:

  • tender cycle times;
  • timescales under public procurement rules;
  • time and cost of distributing tender documents; and
  • time and cost of receipt, recording, and distribution of tender responses.

Improvements will be found in:

  • speed and accuracy of prequalification and evaluation;
  • speed and ease of response to queries from all suppliers during the tendering process;
  • transparency and integrity of audit trail;
  • provision of management information; and
  • storage and archiving of tender documentation.

Suppliers

Advantages include reductions in:

  • tendering costs;
  • time on completing tender responses;
  • overheads on printing, copying, collating and postage services;
  • lead times; and
  • response times for sharing information with the procuring authority.

Such perceived benefits and savings should enable the government to achieve some of the £11bn savings in public spending across Whitehall that was announced in the 2010 Budget.

Public procurement rules

The level of savings may, however, be limited by the rules governing public sector procurement. Directive 2004/18/EC, which outlines the procedures for the award of public sector contracts, has been implemented in England and Wales by the Public Contract Regulations 2006 (the 2006 Regulations), and many public sector contracts will be governed by them.

E-tendering is subject to the same requirements under the 2006 Regulations as procurement activities carried out through traditional paper-based methods (Regulation 44 (1)). The 2006 Regulations require that, if an e-tendering solution is used, tenders submitted electronically must be stored in a way that ensures the integrity of the data is maintained and that the tender can only be accessed after the time limit for the submission of tenders has expired (Regulation 44 (3)). Submission of a tender by e-mail will not conform to the 2006 Regulations unless technical means are implemented to stop those with access to the receiving electronic mailbox from opening tenders before time limits have expired.

The 2006 Regulations also provide that, where a public sector procurer requires bidders to use an e-tendering solution, the equipment used must be non-discriminatory, generally available, and interoperable with information and communication technology products in general use (Regulation 44 (4)). Although the 2006 Regulations provide no definition as to the meaning of ‘generally available’ or information technology ‘in general use’, the Guidance advises that this could be achieved through use of passwords and/or token-protected access to a secure internet site, only requiring the supplier to need internet access from a standard computer.

Contracting authorities are required to ensure that:

  • any e-tendering system will not allow tender material to be accessed before the due date and time;
  • only authorised persons can access the material;
  • any authorised access is detected and recorded; and
  • the opening of tenders requires more than one authorised person (Regulation 44 (5)).

It is these requirements that prevent a public body from merely requesting bidders to submit tenders by e-mail, as most e-mail platforms do not provide these extra tracking and security capabilities. Therefore, when implementing an e-tendering solution, public bodies should be careful to ensure it meets the criteria laid out in the public procurement rules.

The Public Contracts (Amendments) Regulations 2009, which came into force in the England and Wales on 20 December 2009, implement the European Remedies Directive 2007/66/EC by amending the 2006 Regulations in relation to the process for notifying bidders after a procuring authority has decided which supplier should be awarded a contract. The new provisions in the 2009 Regulations, which apply to contract award procedures that commenced after 20 December 2009, state that contracting authorities must issue an award decision notice to tenderers that includes:

  • the award criteria;
  • the reasons for the decisions, including the characteristics and relative advantages of the successful tender;
  • the score obtained by the recipient and the operator to be awarded the contract; and
  • the successful operator’s name.

Public sector authorities will therefore need to consider the requirements of the 2009 Regulations and ensure that an e-tendering solution meets these provisions, so that they are not susceptible to challenges relating to unfair contract awards.

Comment

While the advantages of rolling out e-tendering across the public sector in terms of the efficiencies and savings it will enable cannot be underestimated, the public procurement rules will need to be observed, and the additional hurdles could inhibit the adoption and impact of e-tendering solutions.

To comply with the legislation, contracting authorities will have to implement specialised e-tendering platforms and not just maintain an ‘electronic mailbox’. Whether such platforms need to be bespoke or an ‘off-the-shelf’ solution will depend on the requirements of the public body involved.

The Guidance is available on the OGC’s website at http://www.ogc.gov.uk/documents/e-tendering_guidance.pdf.

Technology, Media and Telecoms | 01 April 2010

On 1 March 2010, the European Commission conditionally cleared the proposed merger between Orange UK Ltd (Orange) and T-Mobile (UK) Ltd (T-Mobile), during phase one of its investigation. To resolve the Commission’s competition concerns, the parties have agreed to amend an existing network sharing agreement with Hutchison 3G UK Ltd (H3G) and to divest a quarter of their combined spectrum in the 1800 MHz band, which could be used by rivals to run faster mobile broadband services. [Continue Reading]

Technology, Media and Telecoms | 01 March 2010

On 26 January, Ramsey J handed down a 468-page judgment in BSkyB Ltd & anor v HP Enterprise Services UK Ltd (formerly Electronic Data Systems (EDS) Ltd) & anor (Rev 1) [2010]. The decision, awaited since July 2008, saw Ramsey J uphold (in part) BSkyB’s claim that EDS had won the contract to supply BSkyB’s new customer relationship management (CRM) system by mis-selling its capabilities. HP, which took over EDS, has allegedly been ordered to pay £200m in interim damages, although the company is reported to be seeking leave to appeal. [Continue Reading]

Technology, Media and Telecoms | 01 February 2010

Although many definitions exist, broadly speaking ‘cloud computing’ is the outsourcing of specified IT functions via the internet (the cloud) to provide or receive services that would otherwise only be available if the end user had installed the appropriate hardware and/or software on desktops, or on local networks controlled by that organisation itself. Such services may include the use of software over the internet or remote storage of business data by a third-party provider. One benefit of this is that businesses can structure payment for these services differently (for example pay-as-you-go or on a subscription basis), rather than having to pay large sunk costs for long-term software licences, and the purchase and installation of IT infrastructure necessary to support the services locally. [Continue Reading]