Companies competing for NHS contracts have been given a boost by a European court victory for Sheffield-based surgical instrument maker Uniplex.

The firm challenged the NHS after it tendered for a supply contract but was turned down in favour of other applicants.

The NHS said the challenge was too late under a three-month time limit for legal claims that tendering rules have been breached.

But the European Court of Justice ruled that it is wrong to start the clock running as soon as the rejected company has been notified. Instead, the judges ruled, the time limit for a challenge to public contract decisions only starts when the rejected company has reason to believe the tendering rules have been breached.

“The fact that a candidate or tenderer learns that its application has been rejected does not place it in a position effectively to bring proceedings,” said the ruling. “Such information is insufficient to enable the candidate to establish whether there has been any illegality which might form the subject matter of proceedings.”

The judgement said a company could only come to an “informed view” about whether there may have been a breach of tendering rules once it has been given full details of why it failed to win the contract. Uniplex submitted a tender to the NHS in July 2007 for the supply of surgical equipment. Four months later the company was notified that it had not been successful.

A request by Uniplex for more information resulted in an NHS reply on 13 December 2007 giving full details of its reasoning for dropping Uniplex. After studying the details Uniplex lodged a claim in January 2008 that there had been breach of the tendering rules, and started High Court proceedings for damages.