Proportionality and Discretionary Exclusion Grounds: Insights from the KIO Rail Baltica Judgment

Legal experts examine how the principle of proportionality must govern discretionary contractor exclusions, analyzing a recent Polish National Appeals Chamber ruling concerning the Rail Baltica project.

The Principle of Proportionality as an Assessment Standard

The principle of proportionality, derived from Article 5(4) of the Treaty on European Union, is codified in public procurement law under Article 18(1) of Directive 2014/24/EU, requiring contracting authorities to act transparently and proportionately. Its domestic equivalent is Article 16 point 3 of the Public Procurement Law, supported by the constitutional principle of proportionality from Article 31(3) of the Polish Constitution and Article 52(1) of the EU Charter of Fundamental Rights.

The role of this principle emerges with particular intensity regarding discretionary exclusion grounds. Unlike mandatory grounds based on clear external criteria, discretionary grounds use vague concepts, leaving the authority a margin of appreciation. The case law of the Court of Justice of the European Union has established a clear standard: the application of these grounds cannot be characterized by automatism. In the judgment of December 13, 2012, in Case C-465/11 Forposta, regulations mandating exclusion based on rigid criteria without individual assessment of the gravity and intentionality of the breach were questioned. In the judgment of December 14, 2016, in Case C-171/15 Connexxion Taxi Services, it was indicated that even upon formal fulfillment of a criterion, the authority must have the actual ability to examine the proportionality of exclusion in light of all circumstances. This line was confirmed in the judgment of January 30, 2020, in Case C-395/18 Tim SpA, deeming any automatism incompatible with Article 57(4) and (6) of the directive, and subsequently in the judgment of June 3, 2021, in Case C-210/20 Rad Service, and December 21, 2023, in Case C-66/22 Infraestruturas de Portugal, emphasizing the requirement for a specific, individualized assessment of contractor behavior.

Proportionality Test and Article 109(1)(10) of the Public Procurement Law

The ground under Article 109(1)(10) of the Public Procurement Law, corresponding to Article 57(4)(i) of Directive 2014/24/EU, requires the cumulative fulfillment of three conditions: presenting misleading information, doing so as a result of recklessness or negligence, and the capacity of such information to exert a material influence on the decisions of the contracting authority. The absence of any of these precludes the application of the provision.

The material influence condition constitutes a proportionality test sensu stricto built into the provision, functioning as part of a three-step proportionality test alongside the criteria of suitability and necessity. The EU legislator did not use the criterion of the mere fact of non-disclosure, but rather the requirement that information could objectively and materially influence decisions made in the procedure. This corresponds to recital 101 of the preamble to Directive 2014/24/EU, stating minor irregularities should lead to exclusion only in exceptional circumstances.

Rail Baltica Case – Factual Background and Resolution

The above found practical reflection in the judgment of the National Appeals Chamber of January 19, 2026 (KIO 4908/25, 5105/25, 5144/25, 5152/25), concerning a PKP Polskie Linie Kolejowe S.A. procurement for sections of line E 75 (Rail Baltica) Białystok–Ełk. The Chamber established that by a decision of May 26, 2022, upheld on October 28, 2022, MIRBUD S.A. was imposed a PLN 15,000 fine for violating environmental decision conditions. Calculating the three-year exclusion period under Article 111 point 2(b) of the Public Procurement Law, the Chamber found it expired on October 28, 2025, prior to the selection of the most advantageous bid on November 6, 2025, thereby dismissing the allegation based on Article 109(1)(2)(c) of the law.

Despite this, the Chamber ruled that the contractor should be excluded under Article 109(1)(10) of the Public Procurement Law due to the non-disclosure of this fine in subjective documents submitted with the bid. Simultaneously, it was accepted that the proportionality assessment mechanism from Article 109(3) of the law, literally limited to cases from points 1-5 and 7, does not apply to this ground, and the justification indicated that practically in every case of unintentional submission of false information, the contractor should be excluded.

Critical Evaluation of the Omission of the Proportionality Principle

The Chamber’s stance raises fundamental doubts. Firstly, narrowing the scope of Article 109(3) of the Public Procurement Law cannot be equated with excluding the general obligation of proportional action arising independently from Article 16 point 3 of the law and Article 18(1) of Directive 2014/24/EU. Secondly, the Chamber failed to examine whether the material influence condition was met—an element constituting the built-in proportionality test.

The internal inconsistency of the argumentation deserves emphasis. Since the Chamber itself recognized that by the bid selection date the exclusion period regarding the fine had already expired, it is difficult to reconcile this finding with the simultaneous acceptance that prior non-disclosure had an automatically disqualifying character. The sanction proved more severe than the effect that disclosing truthful information would have produced, contradicting the necessity test. Additionally, the economic dimension is notable: the application of the discussed ground resulted in rejecting a bid cheaper by over PLN 410 million, remaining in glaring disproportions to the weight of an infraction valued at PLN 15,000.

Significance of the Supreme Administrative Court Judgment of April 21, 2026

An element shedding new light on the matter is the Supreme Administrative Court judgment of April 21, 2026 (III OSK 2111/23), revoking the Voivodeship Administrative Court in Warsaw judgment of April 14, 2023 (IV SA/Wa 2644/22), which had dismissed MIRBUD S.A.’s complaint against the decision upholding the disputed fine, and referring the case back for re-examination.

The Supreme Administrative Court did not resolve the merits of the case. It deemed justified the allegation of failure to clarify the factual state, indicating the first-instance court did not examine whether MIRBUD S.A. was even an entity bound by the environmental decision’s conditions. This holds significance for the Rail Baltica case both procedurally and materially, strengthening arguments challenging the assumption of an unequivocal violation upon which the Chamber relied.

Summary

Three conclusions emerge from this analysis. First, the principle of proportionality constitutes a necessary assessment standard for every discretionary exclusion ground, as confirmed by established CJEU case law. Second, Article 109(1)(10) of the Public Procurement Law contains its own mechanism directly referencing the proportionality principle in the form of the material influence condition, the omission of which violates the content and purpose of the provision. Third, in the Rail Baltica case, the National Appeals Chamber omitted the obligation of individualized proportionality assessment, leading to a result grossly disproportionate to the weight of the original infraction. Prof. UMK dr hab. Paweł Nowicki, attorney-at-law, member of the Public Procurement Council.