Since last year, individual market participants have been forced to face extreme increases in energy prices, which we have not encountered in the past. Contracts for supplies or services are concluded between the contracting parties, the economic equilibrium of which has clearly shifted to the disadvantage of the suppliers due to the drastic increase in energy prices. This fact is all the more fundamental and painful for the supplier in the event that it is a contract for long-term supplies or services and it is therefore not possible for the supplier to terminate the given contractual relationship in the short term.
In this article, we will focus on a brief overview of the possibilities of changes in price conditions in favor of suppliers, which would lead to the restoration of economic balance. As a number of contracts are also subject to public procurement regulations, we will also deal with the limits of changes given by the procurement regulations.
We will be primarily interested in the admissibility of changes to public procurement contracts from the point of view of legal regulations on public procurement and the limits of possible changes to public procurement contracts, as well as the ability of the supplier to demand from the contracting authority such a contract change.
When assessing the issue in question, it is necessary to proceed in particular from the following regulations:
Act No. 134/2016 Coll., on public procurement, as amended (hereinafter referred to as "ZZVZ")
Act No. 89/2012 Coll., Civil Code, as amended (hereinafter referred to as "OZ")
For the purposes of this article, contracts for the performance of public contracts can be divided into two groups:
(i) Contracts concluded following the implementation of the procurement procedure before 1.1.2014 January XNUMX:
- The given contracts were concluded under the regime of Act No. 40/1964 Coll., the "old" Civil Code, or Act No. 513/1991 Coll., commercial Code.
- With regard to the transitional provisions of Section 3073 of the Civil Code, such contracts continue to be governed by the "old" legal regulation of civil law.
- For that reason, the provision on hardship cannot be used in relation to this category of contracts (see below).
(ii) Contracts concluded in connection with the implementation of the procurement procedure after 31.12.2013 are already concluded in the OZ regime, which allows suppliers to invoke the so-called "hardship" clause in the sense of § 1765 OZ.
Permissibility of making changes to public procurement contracts
The admissibility of making changes to the contract for public procurement, in relation to which, compared to the supplier's original offer, there would be an increase in the price for performance must assess according to the rules set out in the ZZVZ.
The issue of changes in obligations from contracts to public contracts is regulated in § 222 ZZVZ. With respect to the provisions of § 174, paragraph 1 of the ZZVZ, the relevant provision of § 222 of the ZZVZ is applicable in its entirety also for concessions.
Provisions of § 222 of the ZZVZ in the matter of changes to obligations from these contracts also apply in relation to contracts concluded before the ZZVZ came into force (i.e. before 1.10.2016 October XNUMX).
According to the transitional provision § 273, paragraph 6 of the ZZVZ, any changes to obligations from contracts for public procurement according to the previous legislation on public procurement are assessed according to the ZZVZ from the date of entry into force of the ZZVZ (i.e. from 1.10.2016 October XNUMX).
The legal regulation of permissible changes to contracts for public procurement is based entirely on EU procurement directives, the regulation of which is based on the jurisprudence of the Court of Justice of the European Union. The Court of Justice of the European Union and, subsequently, the relevant procurement directives, following the above-mentioned decision, defined the types of changes to obligations that are considered a so-called substantial change (prohibited without conducting a new procurement procedure); other changes to the commitment are immaterial and therefore permitted.
The basic provisions of § 222, paragraph 1 of the ZZVZ stipulate:Unless otherwise stipulated further, the contracting authority may not allow a substantial change of the obligation from the contract to a public contract for the duration of its duration without carrying out a new procurement procedure in accordance with this Act."
According to the provisions of § 222, paragraph 3 of the ZZVZ, such a change to the contractual terms is considered a substantial change to the contract, which would:
a) enabled the participation of other suppliers or could influence the selection of a supplier in the original procurement procedure, if the terms of reference of the original procurement procedure corresponded to this change,
b) changed the economic balance of the obligation from the contract in favor of the selected supplier, or
c) led to a significant expansion of the scope of public contract performance.
The above-mentioned provision § 222 paragraph 3 of the ZZVZ thus establishes three general type reasons (facts) for substantial changes to a public procurement contract.
According to these provisions, it is necessary to consider changes to contracts only in those cases where it is not possible to use one of the specific cases defined in one of the provisions of § 222, paragraph 2, or 4 to 7 ZZVZ. These are some kind of "exceptions" from the prohibition of substantial changes to the public procurement contract enshrined in § 222 paragraph 1 of the ZZVZ.
Any other changes to the public procurement contract, other than those in the sense of § 222 paragraph 3 (or also § 222 paragraph 10 ZZVZ) are therefore immaterial changes, and therefore permissible changes to the contract, and for the purpose of their implementation it is not necessary to start a new procurement procedure .
Given that the subject of this article is the assessment of the possibility of amending the contractual terms with regard to the increase in energy prices (i.e. costs on the supplier's side), in the next part we will only pay attention to the exceptions according to the provisions of § 222, paragraphs 2, 4 and 6 of the ZZVZ, whose use in such a case comes into consideration.
Regarding § 222 paragraph 2 ZZVZ:
In the provisions of § 222 paragraph 2 of the ZZVZ it is established that: "The application of reserved changes to the obligation negotiated in the public procurement contract on the basis of the tender conditions pursuant to § 100, paragraph 1, is not considered a substantial change of the obligation from the public procurement contract."
According to the provisions of § 100, paragraph 1 of the ZZVZ, it applies that: "In the procurement documentation, the contracting authority may reserve the right to change the obligation from the contract to a public contract or framework agreement, if the conditions for this change and its content are clearly defined and the change does not change the overall nature of the public contract. Such a change may relate to the scope of supplies, services or construction work, price or other commercial or technical conditions."
The provision of § 100, paragraph 1, in conjunction with § 222, paragraph 2 of the ZZVZ, thus defines the so-called reserved changes of obligations, which the contracting authority can accept without further ado if the conditions specified in the given provisions are met.
This provision will be the basis for changing the contract to a public contract if the actual text of the contract stipulates that the supplier is entitled to increase the prices of its supplies or services in the event of increases in energy prices.
Reserved changes to the contract can be of the nature of ordering the customer to accept the change, or ordering the customer to only discuss the change with the supplier without imposing an obligation to comply with the supplier's request for a change.
In this context, we would in any case point out that such a contractual provision must establish a sufficiently definite and transparent mechanism for increasing the contractual price, so that we can talk about a reserved change of obligation in the sense of § 100, paragraph 1 in conjunction with § 222, paragraph 2 of the ZZVZ.
Regarding § 222 paragraph 4 ZZVZ:
The provisions of § 222 paragraph 4 of the ZZVZ (the so-called de minimis amendment) stipulate:
"A change that does not change the overall nature of the public contract and the value of which is
a) lower than the financial limit for an above-limit public procurement a
b) lower than
- 10% of the original value of the commitment, or
- 15% of the original value of the commitment from a contract for a public works contract that is not a concession.
If multiple changes are made, the sum of the values of all these changes is decisive."
All the above conditions must be met cumulatively.
In compliance with the quantitative or financial limits, and while maintaining the overall nature of the public contract, such changes are possible (as non-essential) without further, without having to examine the fulfillment of other substantive conditions.
A de minimis change can represent a kind of "catch-up" reason that will allow changes to be made that will not be possible under Section 222, paragraph 2 or 6 of the ZZVZ.
Regarding § 222 paragraph 6 ZZVZ:
Finally, the possibility of price changes can be theoretically justified by referring to the provisions of § 222, paragraph 6 of the ZZVZ, which stipulates:
"A substantial change in an obligation from a public procurement contract is not considered a change,
a) the need for which arose as a result of circumstances that the contracting authority, acting with due care, could not foresee,
b) does not change the overall nature of the public procurement a
c) the value of the change does not exceed 50% of the original value of the obligation; if more than one change is made, the sum of the value of all changes under this paragraph is decisive."
The conditions for the application of the mentioned exception must always be met cumulatively.
The permitted value of the change is set at 50% of the original value of the commitment, however, with regard to § 222 (9) ZZVZ, the total price increase may not exceed 30% of the original value of the tendered contract.
In our opinion, the application of an immaterial change of obligation according to § 222, paragraph 6 of the ZZVZ should be possible even for cases of price increases without providing actual compensation, although this opinion has not yet been confirmed by the judiciary.
The provisions of § 222, paragraph 2, § 222, paragraph 4 of the ZZVZ and § 222, paragraph 6 of the ZZVZ are independent of each other, the use of a change according to one of the given reasons does not affect the percentage limitation of another reason. Possible changes can therefore be combined with each other.
The above-mentioned exceptions to the prohibition of substantial changes to public procurement contracts lead to the conclusion that even the legislator does not view all changes to public procurement contracts as something undesirable. On the contrary, the explanatory report on the provisions of § 222 of the ZZVZ explicitly states that the purpose of the provisions enabling the change of the obligation is to ensure an economic approach to public procurement.
Hardship
Contracts for public service contracts are usually concluded for a number of years. Therefore, when concluding them, it is not always possible to predict how the specific situation and conditions under which the contract is concluded will develop further and whether, as a result of an unexpected or unforeseeable change, performance of the contract will become significantly disadvantageous or even economically impossible for one of the parties.
Although the awarding of public contracts is governed by the ZZVZ, the contract for the performance of a public contract is a private law relationship (primarily subject to the OZ), in which the ZZVZ interferes only to a limited extent.
The OZ gives the contracting parties of already concluded public procurement contracts the opportunity to request renewal of contract negotiations in cases where there is a substantial change in circumstances (so-called hardship).
The above is enshrined in § 1765 of the Civil Code, which stipulates: "If there is a change in circumstances so significant that the change establishes a particularly gross disparity in the rights and obligations of the parties by disadvantaging one of them either by a disproportionate increase in the costs of performance, or by a disproportionate reduction in the value of the subject of performance, the affected party has the right to demand from the other party that negotiations be resumed contract, if it proves that it could not reasonably anticipate or influence the change and that the fact occurred only after the conclusion of the contract, or became known to the affected party only after the conclusion of the contract."
According to § 1766 of the Civil Code, the following applies: "If the parties do not agree within a reasonable period of time, the court may decide, on the proposal of any of them, to change the obligation from the contract by restoring the balance of rights and obligations of the parties, or to cancel it on the date and under the conditions specified in the decision. The court is not bound by the proposal of the parties. The court will reject the proposal to change the obligation, if the affected party did not exercise the right to renew negotiations on the contract within a reasonable period of time, after it had to discover the change in circumstances; this period shall be deemed to be two months.'
In order for the provision to be applied and its main effects to be triggered (i.e. resumption of negotiations on the contract, possibly restoration of the balance by the court), the following conditions must be met cumulatively:
a) the existence of a change in circumstances,
b) unpredictability of this change,
c) inviolability of the change,
d) not assuming the risk of change - i.e. the absence of a contractual clause excluding the application of § 1765 with § 1766 of the Civil Code,
e) the emergence of a particularly gross disparity in rights and obligations,
f) the causal link between the change (a) and the emergence of a particularly gross disparity (e)
In our opinion, it is the existence of a change of circumstances more than evident in the given case. It is generally known that in recent months the prices of electricity and gas have risen several times compared to the situation at the beginning of 2021. In addition, this has been accompanied in recent months by the absolute collapse of the market of alternative energy suppliers and the limited capacities of the "surviving" suppliers. Thus, after the sudden termination of supplies from their original energy suppliers, suppliers are forced to conclude contracts for the supply of electricity and gas at prices several times higher than a year ago (or even half a year ago). The situation connected with the war in Ukraine accelerated the growth of energy prices even more.
The extremely high increase in energy prices (electricity and gas), which today are de facto the highest in history, is a completely exceptional phenomenon. For that reason, it was not possible to predict such a significant increase in energy prices for individual procurement procedures (especially those that took place more than six months ago).
Please note that the possibility of applying the provisions of § 1765 and § 1766 of the Civil Code is normally contractually excluded in practice. In the case of the existence of such a contractual clause, the application of the procedure in accordance with the provisions of § 1765 and § 1766 of the Civil Code is of course out of the question.
If it is a condition of the emergence of "Especially gross disproportion", this term is not defined in the law; there is no percentage threshold that clearly determines what is and is not a particularly gross disparity. Likewise, the meaning of this term has not yet been established within the decision-making practice of Czech courts. This point of view must therefore be assessed on a case-by-case basis. However, according to the description above, the situation in question is sufficiently intense (in view of the several-fold increase in electricity and gas prices) and is therefore eligible to establish a "particularly gross" disparity in rights and obligations. As a result of the completely unprecedented jump in energy prices on the market (not only in the Czech Republic, but in the entire EU), there is a disproportionate and completely unusual increase in the operating costs of the supplier.
From the above, it follows that an unpredictable, sudden increase in the prices of electricity and gas can most likely be considered (compared to the initial state) as a substantial change in circumstances, which allows the supplier to demand from the contracting authority the renewal of negotiations on the contract renewal of negotiations on the contract in accordance with the procedure according to § 1765 OZ.
The joint opinion of the MMR and ÚOHS also allows for the potential application of Section 1765 of the Civil Code within the framework of relations established on the basis of a contract for a public order (concession). After all, the ÚOHS already pointed out in its opinion of 8 April 4 the possibility of changing the obligation according to § 2020 of the Civil Code, but at the same time adds that the applicability of the provisions of § 1765 of the Civil Code on changing the circumstances of contracts to public contracts is always limited precisely by the provisions of § 222 ZZVZ – opinion available here.
In any case, the supplier's negotiating position is significantly stronger in the case of the procedure according to § 1765 of the Civil Code than in the case of an ordinary proposal to change the contract according to the procedure according to § 222 ZZVZ.
When proceeding according to § 222 ZZVZ (without the simultaneous application of the provisions of § 1765 NOZ), it is only at the will of the contracting authority whether he will negotiate with the supplier about the change and whether he will finally proceed with the change. In the case of a procedure according to § 1765 of the Civil Code, the contracting authority is obliged to negotiate with the supplier on the change of the contract, in order to carry out such a change.
If the contractor does not agree on a change to the contract within a reasonable period of time, the supplier has the right to go to court. However, it is necessary to keep in mind the two-month period, which, on the basis of a rebuttable presumption, is a reasonable period for starting negotiations with the contracting authority about changing the contract due to hardship. It can therefore be recommended not to delay exercising the right to change the contract if the contracting party foresees that it will subsequently demand the change in court.
The specific procedure and possibilities of the supplier to request a change to the contract will differ from case to case and will always be based on the wording of the given contract and the circumstances under which the given contract was concluded.
We believe that if there are circumstances that allow the supplier to request a change to the contract, and if the application of the provisions of § 1765 and § 1766 of the Civil Code to the given contractual relationship is not contractually excluded, the members of the supplier's statutory body should try to make such a change in order to meet the requirement to maintain care proper householder.
JUDr. Ing. Jan Vych, attorney and partner
