Brent London Borough Council and others v Risk Management Partners Ltd

Factual and Procedural Background

In 2006-2007 several London local authorities created a mutual insurance scheme designed to reduce premium costs and improve risk management. Insurance was to be provided by Company A, a company limited by guarantee. One participating borough (“Other Local Authority”) invited tenders for insurance under the Public Contracts Regulations 2006 but later abandoned the process and placed the contracts with Company A. A commercial insurer (“Appellee”) challenged the arrangement.

The challenges followed two tracks: (1) judicial review alleging that participation in Company A was beyond local-authority powers, and (2) a damages action alleging breach of the 2006 Regulations. The High Court (Judge Stanley Burnton) upheld both claims; the Court of Appeal affirmed. After legislative changes and settlement with Other Local Authority, the appeal to the Supreme Court proceeded only on the damages action, with another borough (“Appellant”) defending the mutual-insurance model.

Legal Issues Presented

1. Whether the “Teckal” exemption formed part of the Public Contracts Regulations 2006.
2. If so, whether the exemption can apply to insurance contracts.
3. Whether the Teckal “control test” requires control by each contracting authority individually, or whether collective control suffices.
4. If collective control is sufficient, whether it existed on the facts.
5. Whether the Teckal “function test” was satisfied.
6. Whether a reference to the Court of Justice of the European Union was required on any of the above issues.

Arguments of the Parties

Appellant's Arguments

• The Teckal exemption is implicitly incorporated into the 2006 Regulations because those Regulations implement EU procurement law.
• Insurance contracts are not excluded from the exemption merely because risk is transferred; the key is whether control and function tests are met.
• Collective control by all participating authorities is sufficient; individual control is not required.
• Company A was wholly owned and controlled by public authorities, serviced only those authorities and their affiliates, and therefore satisfied both Teckal tests.
• No reference to the CJEU was necessary because existing jurisprudence clearly resolved the issues.

Appellee's Arguments

• The 2006 Regulations are drafted in domestic-law terms and contain no Teckal exemption; therefore all insurance contracts should have been tendered.
• The nature of insurance necessarily involves two distinct parties, precluding any “in-house” character.
• Even if Teckal applied, the required level of authority control was absent because Company A enjoyed significant independence.
• Collective control cannot substitute for the individual control contemplated in Teckal.

Table of Precedents Cited

Court's Reasoning and Analysis

1 — Teckal Exemption Incorporated. Judge Hope held that because the 2006 Regulations were enacted to implement EU directives, they must implicitly include the Teckal exemption even though it is not expressly mentioned. A literal domestic-contract approach would defeat the harmonising purpose of EU procurement law.

2 — Applicability to Insurance. The Court rejected the contention that insurance is inherently external. The exemption assumes a contract exists; the critical inquiry is control and functional orientation, not the nature of the service.

3 — Collective Control Suffices. Surveying EU case-law (especially Coditel and Asemfo), the Court concluded that decisive influence can be exercised jointly by several authorities; individual dominance is unnecessary.

4 — Control Test Met. Participating members owned 100% of voting rights, could direct Company A by 75% special resolution, and limited its business to member-approved insurance lines. These mechanisms constituted decisive influence over strategic objectives despite day-to-day managerial autonomy.

5 — Function Test Met. Company A wrote insurance solely for participating authorities and their public affiliates; it had no private capital or external customers. Therefore the essential part of its activities was with the controlling authorities collectively.

6 — No Need for Reference. Existing CJEU jurisprudence provided clear guidance, so no preliminary reference was required.

Holding and Implications

Holding: APPEAL ALLOWED

Direct procurement obligations under the Public Contracts Regulations 2006 did not apply to the insurance contracts because the arrangement satisfied both limbs of the Teckal exemption.

Implications: Local authorities may lawfully form and use wholly public mutual-insurance vehicles without tendering, provided collective control and exclusivity of activity are maintained. The decision alleviates concerns that compliance with procurement rules would impede the practical operation of future mutual-insurance schemes and similar inter-authority collaborations.