Supreme Court of Kosovo | E.Rev.nr.13/2025 | 27.02.2025

What’s the case about?

This Supreme Court ruling addresses a classic dilemma in contract law: can a public authority be held liable for construction-related debts incurred by a private operator when no direct contract exists between the contractor and the municipality?

The issue is both practical and theoretical, as it touches on the intersection of procurement law — an administrative sub-branch — and the law on obligations, a traditional branch of private law. In principle, claims for loss of profit or undefined damages are often murky, particularly when it is unclear at what legal point a party acquires the right to sue a public authority for harm caused through indirect action.

In this case, the claimant, C.B.C. Sh.A, sought to recover over €100,000 for works it carried out on a Technology Park in Shtime. However, these works were performed under a contract with a private company, P.T.T. Sh.P.K., not with the Municipality of Shtime. After the private company went bankrupt, C.B.C. sought compensation from the municipality, arguing that it had regained control of the land and had indirectly benefited from the construction.

What did the court decide?

All three levels of jurisdiction — the Commercial Court (First and Second Instance) and ultimately the Supreme Court — rejected the claim.

The Supreme Court held that:

• There was no contractual relationship between the contractor and the municipality; thus, non-contractual liability could not be invoked, especially since the municipality had exercised no discretion in awarding the subcontract to the claimant.
• The principle of subjective rights in contract law limits liability to parties who have legally consented to be bound; transferring obligations from a party contracted under public law to a subcontractor under private law is not recognized.
• The municipality was not a co-signatory, guarantor, or third-party beneficiary in the construction contract.
• Even if the municipality ultimately benefited from the infrastructure or repossessed the land, this does not retroactively create liability.

As a result, the absence of passive legitimacy (legal standing to be sued) meant that the municipality could not be held liable for debts owed by a third-party operator — even if that operator failed to fulfill obligations under procurement law.

Why is this ruling practically important?

This decision sends a clear message to contractors involved in publicly procured projects in Kosovo:

1. Risk Allocation: If you’re a contractor working with a private operator on municipal land, ensure the municipality is either involved in the contract or that the procurement terms formally recognize the subcontractor’s role. Without this, you’re assuming substantial financial risk.
2. Post-bankruptcy vulnerability: If a private partner collapses (as P.T.T. Sh.P.K. did here), the lack of contractual ties to the public authority means you’ll have no legal recourse — even if the public authority benefits from the project.
3. Formalism in Contract Law: The ruling highlights the strict application of contractual privity in Kosovo. Broader considerations like public interest, economic development, or municipal benefit do not override legal limitations under the law on obligations.
4. Judicial Consistency: The aligned reasoning across all three judicial levels reinforces legal predictability and reaffirms the doctrinal separation between contractual claims and those arising under public procurement law.

Bottom Line

This case reaffirms a fundamental rule of commercial law: no contract, no liability. In public procurement awarded projects — particularly in infrastructure and construction — the procurement ToRs  must explicitly bind the public authority for losses incurred by a sub-contractor. Without this, recovery attempts are likely to fail — even at the Supreme Court level.