Legal Updates

One may not submit a tender offer with a straw-man when the one to perform the tender work does not fulfill the preconditions of the tender

December 19, 2017
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Two parties established a joint company to submit an offer for a tender of the Israeli National Security, which threshold conditions thereof only one side was able to meet. After a number of years the parties separated and the separation agreement established a stipulation of non-competition between the parties, so that each party deals with a particular area and can not deal with the areas that the other received within the framework of the separation. When one of the parties began competing with the other, the other demanded an injunction preventing it from doing so.
The Court refused to issue an injunction and held that the unlimited limitation of competition is a restrictive arrangement within the meaning of Section 2 of the Restrictive Trade Practices Law, and therefore will not be enforced. With regard to the National Insurance tender, the Court repeated the Supreme Court holding that such an arrangement undermines the principles of tender law. When a public authority prepares a tender and presents threshold conditions, the bidder, who claims to be the one to carry out the work, must meet the threshold conditions and not participate in a "masquerade ball" in which it serves as a straw-man for someone else to whom it only "lends" the terms for meeting the threshold conditions. This is not only a violation of equality with other proposers and other entities that could have entered the tender, but also the principle of efficiency when the actual operator of the tender does not meet the threshold conditions, which is intended to maximize the chances of executing the project as required; and the principle of decency and integrity.