France: Unpredictability and conditions of modification of public contracts

On 15 September 2022, the French Conseil d’Etat, issued an opinion regarding the possibilities for the parties to modify the price or tariffs of public procurement contracts and on the conditions of application of the theory of unforeseeability in a context of high inflation. The Directorate of Legal Affairs (DAJ) also published guidelines detailing the practical modalities of the opinion issued by the Conseil d’Etat which takes up the opinion of the members of the Council of State step by step.

Regarding the modification of financial clauses or the duration of a contract

The Conseil d’Etat considers that it is possible, to only amend the financial clauses of a public procurement contract and of a concession contract, in accordance with grounds mentioned in the French Public Procurement Code.

Firstly, the event of "unforeseen circumstances", i.e. circumstances which a diligent authority could not foresee, a party may request a modification that may not exceed 50% of the original contract amount. The modifications "must be directly attributable to the unforeseeable circumstances and may not exceed what is necessary to meet them". Finally, "the contracting authority must ensure compliance with the general principles of equality before public charges, proper use of public funds and prohibition of liberalities".

Secondly, a party may request a modification on the grounds of the "small amount" modifications, which must be less than 10% of the initial contract for service and supply contracts and concessions, and 15% for works contracts. It is possible for the parties to combine this ground and the above-mentioned ground for requesting an amendment of a public contracts. successively these two mentioned solutions.

Thirdly, the Conseil d’Etat specifies that a party may request an amendment of a public contract on the ground of the compensation of additional costs. It means that the party will request for a simple extension of the contract’s duration to cover its additional costs. As well as the basis for However, the Conseil d’Etat specifies that party may not invoke the non-substantial modifications, in order to change the price or duration of a procurement contract in case of unforeseen circumstances. The Conseil d’Etat reminds that the contracting authority "is in no way obliged" to initiate or agree such amendments proposed by its contractual counterpart.

Regarding the application of the theory of unforeseeability to public contracts

The compensation for unforeseen circumstances which purpose is to ensure the continuity of the public service, presupposes that the co-contractor continues to perform its contractual obligations and suffers an operating deficit, in case of disruption of the contractual balance. However, the contractor may be compensated with an indemnity. For concession contracts, which have the particularity of involving a substantial operating risk, reference should be made to the terms of the contract and the intention of the parties to determine the threshold below which a disruption of the contractual balance is recognized. Contrary to the modifications grounds of a public contract mentioned above, the private operator real right to compensation which he can invoke before the administrative judge in the absence of an agreement.