Bird & Bird team wins landmark case on IT litigation before Spanish Supreme Court

01 August 2013

A team from Bird & Bird's Madrid office has obtained a ground breaking decision from the Spanish Supreme Court in a longstanding IT dispute between AUSA and Capgemini.

Representing AUSA, a special steel logistic operator based in Vitoria-Basque country, Bird & Bird successfully appealed the decision on termination of a complex SAP ERP (Enterprise Resource Planning) contract with the IT supplier.

The landmark decision concerns the failed implementation of a SAP R3 system by the IT supplier who took over the implementation work from another provider in 2005. Delays to the project and failure by the parties to achieve a negotiated solution led the supplier to terminate the implementation consultancy agreement for alleged breach by AUSA. The supplier contested primarily that AUSA had failed to observe the scope of its agreement; did not duly fulfil its duty to collaborate; and made it impossible for the supplier to fulfill its contractual obligations, causing it significant losses.

The Supreme Court held that:

  • contrary to the general rules and principles of termination of contracts, in a  situation where a project has already been partially executed (and regardless of which party is in breach), the contractual relationship needs to be unwound on the basis of proportionality: the client shall partially pay or be partially refunded corresponding to the part of the project already executed and usable, without prejudice to the duty of the party in breach to separately pay compensation for damages resulting from that breach; and
  • with regards to damages, AUSA was entitled to recover the price it paid a replacement provider to complete the part-executed agreement even though the costs exceeded what AUSA would have had to pay to its supplier had it not terminated its implementation consultancy agreement.

Javier Fernandez-Samaniego, partner, Bird & Bird said: "I believe this ruling by the Supreme Court will set a precedent for future IT litigation cases. The judgement provides some valuable lessons (both in terms of procedural and substantive law) for those involved in the drafting and management of complex IT agreements and any litigation that arises from such agreements." He continued: "It was a challenging and complex case which has spanned over 10 years but I am very pleased that we have finally brought this to a successful conclusion for AUSA."

The Bird and Bird team was led by partner Javier Fernandez-Samaniego and senior associate Pablo Berenguer.