Regulation on the Protection of Subcontractors Must Be Amended

We proposed to improve the regulation on the protection of subcontractors in the draft act, because in its current form, it significantly violates the rights of subcontractors and places unreasonable administrative burden on the parties.

We do not support protecting the rights of subcontractors in the manner that in practice jeopardises the timely performance of the entire procurement contract, limits the legal remedies of tenderers and forces the contracting entity to administer justice over a contractual relation between the tenderer and subcontract that is not related to the contracting entity. We have highlighted three problems in the subcontractors regulation before and we consider it necessary to solve them.

1. According to the draft act, the contracting entity is required to disclose information to the subcontractor on if and how much they have paid to the tenderer for the performed works. In our opinion, this requirement may be in contradiction with the obligation to keep business secrets, due to which we proposed to leave subcontractors the right to ask from the contracting entity information only on whether the tenderer has received a fee for the works, not a specific sum.
2. The draft act gives the contracting entity the role of administer of justice between two private legal entities or the tenderer and subcontractor. In our opinion, this requirement might not be in line with the constitution, because the disputes between private legal entities are usually settled by the court. Generally, carrying out of public procurements or administering justice is not the principle activity of Estonian contracting entities. In terms of the role that is additionally given to the contracting entity, there is no consideration or assessment of the impact and quality of the consideration decisions of the contracting entities with respect to the applications of the subcontractors. Considering that these consideration decisions will have a direct impact on the working processes of companies as well as (due) performance of contractual obligations, it would be extremely necessary to consider establishing of such regulations very carefully.
3. The draft act takes from tenderers the right to use legal remedies against the activities of the contracting entity, because failure to pay to the tenderer is not considered as the contracting entity’s violation of the procurement contract. This means that if the contracting entity withholds the main contractor’s money on the basis of an unfounded application of a subcontractor, the main contractor has no right to apply legal remedies, including request a fine for delay. As a result of applying such measures, the main contractor may end up in difficult financial situation, which may jeopardise the completion of the object and sustainable business activities. Furthermore, according to the constitution, everyone has the right to turn to the court in order to protect their rights and liberties. This right cannot be restricted with the Public Procurement Act, due to which we proposed to leave this provision out from the draft act.

In conclusion, we consider it necessary to process the subcontractors regulation as a separate draft act, due to the fact that it contains amendments that were added to the draft act in the last minute – during the meeting of the Parliament’s Economic Affairs Committee that took place on 10 April. These amendment proposals need additional analysis of the impact they have if implemented.

Read the Chamber’s full proposals here.