The recent judgment of the Supreme Court of April 8, 2022 has established, as a jurisprudential doctrine, the exclusion of lost profits as a compensation concept in cases in which the nullity of the award of a public contract is declared.
The legal reasoning is as follows:
- The jurisprudential doctrine set forth in the ruling of January 11, 2013: “the criterion that invalidity and breach of contract being two different contractual institutions, in light of the regulation established in the Public Sector Contract Law, in relation to With the contractual legislation contained in the Civil Code, the effects of the declaration of nullity of an administrative contract cannot be equated with those derived from the termination of the contract due to non-compliance, since the synallagmatic nature of the contractual obligations would be distorted if the injured party due to the nullity of the contract, he would otherwise receive, as loss of profit, the same benefit as if the contract had been declared valid, without the burden that the fulfillment of the contracted benefits represents.
- It points out that “article 1106 of the Civil Code reserves compensation for loss of profits in cases of termination of the contract due to non-compliance and in the case under trial it is a declaration of nullity of the award when the public contract had only been partially executed”
- Compensation for loss of profits in the alleged case "would de facto mean maintaining the economic effects of the administrative contract for the benefit of the successful bidder regardless of the declaration of nullity decreed"
And, in this way, the Administrative Litigation Chamber concludes as a jurisprudential doctrine that "article 35 of Law 30/2007, of October 30, on Public Sector Contracts, must be interpreted in the sense that in the cases in which the nullity of the act of awarding an administrative contract is declared, the obligation to compensate the damages suffered by the successful bidder does not mean that the damages derived from lost profits are included in the compensation amount.
Concha Serna Sanchez de Mora
Director of the Public Law Department of Carraqu Corporation