Brent LBC v Risk Management Partners Ltd
[2011] UKSC 7
Independent editorial summary — not the official judgment. Read the full judgment via the source link.
Ratio Decidendi
The Teckal in-house exemption is implied into the Public Contracts Regulations 2006: the Regulations do not apply to a contract between a public authority and a legally distinct entity where the authority (alone or collectively with other authorities) exercises control over it similar to that over its own departments and the entity carries out the essential part of its activities with those authorities. Collective control is enough, and the exemption can apply to insurance contracts.
Facts
A group of London boroughs set up London Authorities Mutual Ltd (LAML), a mutual insurance company, to reduce the cost of insurance premiums. Brent abandoned a tender process and placed its insurance with LAML without competition, and Risk Management Partners, a commercial insurer which had tendered, brought proceedings; the courts below held both that the boroughs lacked statutory power to participate in LAML and that awarding it contracts without a tender breached the Public Contracts Regulations 2006. By the time the case reached the Supreme Court, Brent had settled and legislation had largely superseded the vires question, so the appeal, pursued by Harrow, was confined to whether contracting with LAML breached the 2006 Regulations.
Judgment Summary
The Supreme Court allowed Harrow's appeal. It held that the Teckal exemption applies to the 2006 Regulations, that it can extend to insurance, and that collective control by the participating boroughs suffices: both the control and function tests were satisfied, so Harrow did not act in breach of the Regulations by entering into insurance contracts with LAML without a tender. The Supreme Court did not decide the section 111 ultra vires question, which had been decided against Brent in the courts below and was no longer pursued.
Key Quotes
"Individual control is not necessary. No injury will be caused to the policy objective of the Directive if public authorities are allowed to participate in the collective procurement of goods and services, so long as no private interests are involved and they are acting solely in the public interest in the carrying out of their public service tasks."
— Lord Hope at [53](verbatim, verified against the judgment)
"Collective control over strategic objectives and significant decisions was with the participating members at all times. They controlled a service which was designed exclusively for the performance of their public functions. No private interests whatever were involved."
— Lord Hope at [57](verbatim, verified against the judgment)
Subsequent Treatment
Remains the leading UK authority applying the Teckal in-house exemption to the domestic procurement regulations. The separate vires question decided in the courts below was overtaken by statute expressly empowering local authorities to enter mutual insurance arrangements.
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