Public procurement - repeal of the ban on deducting contractual penalties from the contractor's remuneration

Contractors implementing public procurement contracts will certainly be interested in the information on the change in the provisions on the deduction of contractual penalties and claiming satisfaction from the security of proper performance of the contract.

Ban on deducting contractual penalties during the COVID-19 pandemic. Pursuant to Article 15 r (1) of the Act on special solutions related to the prevention, counteraction and combating of COVID-19 during the period of the epidemic threat or epidemic state announced in connection with COVID-19, and for 90 days from the date of revocation of the state that was last effective, the contracting authority could not deduct the contractual penalty for non-performance or improper performance of a public procurement contract from the contractor's remuneration or other payments due to the contractor, and could not claim satisfaction from the security of the proper performance of the contract, provided that the event for which the penalty was reserved occurred during the period of the epidemic threat or epidemic state.

Repeal of the ban. Despite the fact that the epidemic threat is still in force, on August 24, 2022, the above provisions were repealed and the possibility of deducting contractual penalties calculated on the basis of public procurement contracts from the contractor's remuneration or other payments due to the contractor was restored, and there was also restored the possibility of seeking satisfaction from the security on due performance of the contract.

In accordance with the transitional provisions, in the case of claims arising from events which occurred:

1) until 31 December 2020, the contracting authority may deduct contractual penalties from the contractor's remuneration or other payments due to the contractor, as well as claim satisfaction from the security on the proper performance of the contract, but not earlier than on October 1, 2022;

2) in the period from January 1, 2021 to December 31, 2021, the contracting authority may deduct contractual penalties from the contractor's remuneration or other payments due to the contractor, as well as claim satisfaction from the security on the proper performance of the contract, but not earlier than on January 1, 2023;

3) in the period from January 1, 2022 to August 24, 2022, the contracting authority may deduct contractual penalties from the contractor's remuneration or other payments due to the contractor, as well as claim satisfaction from the security on the proper performance of the contract, but not earlier than on April 1 2023.