What the provincial governor (or, in fact, the provincial executive) is allowed to do…

On 5 December 2016. The Supreme Administrative Court, at the request of the President of the Supreme Administrative Court, has already adopted its second resolution in cases concerning EU funds – this time concerning the important issue of maintaining impartiality in the examination by the provincial boards of the requests for reconsideration in cases in which decisions on the reimbursement of funds have been issued.

The resolution was adopted in response to a question from the President of the Supreme Administrative Court concerning the following legal issue: „Does Article 24(1)(5) in conjunction with Article 27(1) of the Act of 14 June 1960. – Code of Administrative Procedure (Dz. U. of 2013, item 267, as amended) shall apply to a member of the voivodship management board, which body performs the function of a managing authority within the meaning of Article 5(2) of the Act of 6 December 2006 on the principles of development policy (Dz. U. of 2009, No. 84, item 712, as amended), participating in the proceedings conducted following the submission of an application for reconsideration of the case referred to in Article 207(12) of the Act of 27 August 2009 on Public Finance (Dz. U. of 2013, item 885, as amended, in the wording in force until 12 September 2014), in a situation where he or she participated in the issuance of the impugned decision?”
The NSA held that the above provision does not apply to a member of the provincial board participating in the reconsideration of the case on the basis of a request submitted pursuant to Article 207(12) of the Public Finance Act. Thus, the fact that the members of the voivodeship board taking part in the re-examination of the case also took part in the examination of the decision on the reimbursement of funds issued at first instance does not constitute a failure justifying the revocation of the decision.
What were the motives behind such a decision? First of all, it is worth noting that the issue resolved by the resolution turned out to be highly controversial within the Supreme Administrative Court itself, which issued at least a dozen divergent judgments, in some of which it stated that the provision of Article 24(1)(5) of the CAP would apply to members of the provincial board reconsidering the case (and thus considered such a reconsideration to be defective), while in others it opined that a member of the provincial board could rule again in a case concerning reimbursement of funds that it had previously considered.

Roma locuta…
The NSA’s arguments in favour of allowing a board member to rule again on the same case were as follows:

firstly, the NSA took the view that the provision of Article 207(12) of the Public Finance Act [„In the case of a decision in the first instance being issued by a managing institution, an application for reconsideration of the case is made to that institution.”] excludes the application of Article 24 § 1(5) of the CAP [„An employee of a public administration body is subject to exclusion from participation in proceedings in a case in which he or she participated in the issuance of an appealed decision.”]
secondly, in the NSA’s view, the Local Government Appeal Board (an appeal body against, inter alia, decisions of voivodship boards) is not a body participating in the system of management of EU funds. from decisions of voivodship boards) is not a body participating in the system of management of EU funds (it is not a managing institution within the meaning of the Implementation Act and Council Regulation 1083/2006), and thus cannot consider appeals from decisions of voivodship boards which, unlike the Self-Government Board of Appeal, participate in the implementation of EU programmes as managing institutions;
thirdly, as a consequence of the above, the NSA stated that there is no other body which could consider the application for re-examination of the case – for, taking into account the fact that the voivodship board, as a result of the application of Art. 24 § 1 point 5 of the KPA would be excluded from the possibility to review the case due to the fact that the Act on Provincial Self-Government does not allow for the appointment of a second management board, and the Self-Government Appellate Board would also be excluded for the reasons referred to above – this would thus lead to decision-making paralysis.

The NSA, taking the above position, also referred to the principle of effectiveness of EU law, and – referring once again to the indication of the SKO as the body competent to recognise requests for reconsideration – to the principle of legality and legalism in support of the thesis that the competence of the body cannot be presumed.

…causa finita?
The NSA’s resolution, however, was not unanimous, the dissenting opinion to it being submitted by Judge Zbigniew Czarnik. The bone of contention within the panel of judges turned out to be a fundamental issue, namely the hierarchy of principles stemming from constitutional law. In contrast to his colleagues on the bench, the judge placed the principle of the rule of law, from which stems, inter alia, the right to an impartial hearing of an administrative case, above the principle of legalism, which the NSA used to motivate the SKO’s inability to hear the case in the second instance.
Judge Czarnik pointed out that the procedural understanding of impartiality in administrative procedure is the exclusion of an employee, body or member of that body, which is supposed to provide the subject with a sense of a „fair” handling of the case, detached from individual and personal entanglements of the subject deciding the case. A consequence of this understanding of the principle of impartiality is the conclusion that possible conflicts with this principle may even lead to the exclusion of the authority’s jurisdiction, which is expressly provided for by the provisions of the PAC. The above led the judge to a diametrically opposite conclusion to that of the other members of the panel, namely, the judge considered that it was the solution that made it impossible to transfer a case to the jurisdiction of another authority that should be deemed unconstitutional – 'the effects of the exclusion of an authority may be manifold, but they can never be impermissible for the protection of values other than the impartiality of the proceedings conducted’. The judge also referred to examples of other regulations similar to Article 207(12) ufp, where the legislator explicitly excluded the application of Article 24 § 1(5) KPA, which was not the case in the Public Finance Act. Finally, in the last part of the argumentation, the judge referred to Regulation 1083/2006, which was also referred to by the other members of the bench, indicating that it stipulates that the obligations related to the repayment of funds are imposed on the Member State and not only on the Managing Authority, while in the catalogue of its tasks (Article 60 of Regulation 1083/2006), the task related to the repayment of funds is not explicitly indicated.

A free voice insuring
The resolution in question resolves a very important problem for the correctness of the spending of European funds, but in my opinion it does not resolve it well. I understand the arguments of the Supreme Administrative Court, in particular the argument referring to the linguistic interpretation of Article 207(12) of the CFA, but I am strongly inclined towards the view of Judge Zbigniew Czarnik presented in the dissenting opinion – for even if it were to be assumed that in this case there is a collision between two principles of procedure, the interpretation of provisions may not lead to such a result that the principle of impartiality is compromised even at the expense of, for example, the principle of legalism.
The values behind this principle are one of the key standards of administration and the judge rightly, in my view, draws attention here to issues relating to the need for the administration to provide a sense, not only to the individual concerned, but also in the public perception, of a maximum level of impartiality and therefore a sense of fairness in the consideration of the case. Already from this point of view, the NSA’s reference to the linguistic interpretation of Article 207(12) ufp as one of the essential arguments for excluding, in this particular case, Article 24 of the Code of Administrative Procedure, which is a procedural guarantee of impartiality, seems insufficient. I would only add that, from my legal practice, it is apparent that decisions under motions for reconsideration considered pursuant to Article 207(12) ufp in the vast majority end up up up upholding the original decision. This does not mean, of course, that there is a violation of the principle of impartiality in each and every one of these cases, nevertheless official statistics of the adjudication of such cases would probably give much food for thought….

However, irrespective of the arguments of a systemic and equitable nature, in my opinion also the reference by the NSA to the provisions of EU law as support for the adopted concept that the SKO is not included in the structure of institutions involved in the disbursement of EU funds and therefore should not exercise control over the disbursement of these funds is not accurate.

It is undoubtedly the case that the SKO is not a managing institution within the meaning of national law, but in my view this does not preclude it from examining appeals against decisions on the reimbursement of funds issued by provincial boards as managing institutions. It is in fact clear from the provision of the second sentence of Article 59(3) of Regulation 1083/2006, also cited by the NSA, that the performance of a Member State’s tasks provided for by that regulation takes place in accordance with the institutional, legal and financial system of the Member State concerned (and thus within the framework of the legal structures and procedures already in place). This provision, which establishes the principle of so-called procedural autonomy (for more on this topic, e.g. in the article by Dr. R. Poździk, Principles for the implementation of EU funds 2014-2020, EPS 4/2014) in practice leaves the Member State considerable freedom to adopt appropriate procedures relating to, inter alia, the manner of recovery of funds paid. However, as noted by the Constitutional Court in its judgment P 1/11:

Needless to say, the aforementioned principle finds broad support in the case law of the Court of Justice. A correct interpretation of EU regulations thus leads to an extremely different conclusion from the one adopted by the NSA in its resolution. If entities benefiting from EU subsidies, in the case of imposing on them the obligation to return them under the Public Finance Act, may find themselves in a potentially worse situation (i.e. without the possibility to apply for re-examination of the case to a body other than the one that should be excluded pursuant to Article 24 of the CAP) than other entities under national law benefiting e.g. from domestic funds, the above-described principle of equivalence is undoubtedly violated here. The above, taking into account the obligation of pro-EU interpretation of national provisions, leads to the conclusion that the reasoning adopted in the resolution under discussion may not necessarily be correct.
Irrespective of the above, it is worth noting that Regulation 1083/2006 makes the Member State responsible for the recovery of recoverable amounts in general, without specifying its particular institution, and mentions it on several occasions as being responsible for recovering amounts and imposing financial corrections (e.g. Article 98 or Article 100). Consequently, even if it were to be assumed that the catalogue of tasks of the managing authority set out in Article 60 of Regulation 1083/2006 includes the task of recovery (e.g. under the term 'management and control’), this does not mean that this task is exclusively assigned to that single institution. At first glance, the consequences of such an interpretation are illogical, as they lead to the conclusion that institutions such as courts, tax offices or public prosecutor’s office should be excluded from the procedure of recovering amounts subject to reimbursement, not to mention such offices as e.g. UOKIK or the President of the Public Procurement Office – as national entities, not included in the catalogue of institutions indicated in the Regulation 1083/2006. However, these entities are not only actively involved in recovery procedures, but often play a key role in them.

Notwithstanding this, it is worth noting the blanket nature of the norms of Regulation 1083/2006, most of which are addressed to the Member State, leaving it with considerable discretion in shaping the system for the allocation and reimbursement of funds transferred by the Union. The argumentation, which from time to time is attempted to be applied on the national grounds and referring to the binding character of the norms of this regulation and thus the necessity of shaping the distribution system in such a way and not in any other way in the acts of national law, was discredited by the Constitutional Tribunal in the P 1/11 judgement, indicating that the specific form of the implementation system, as a set of principles and rules not supported by generally binding acts of law, was not connected with the necessity of ensuring implementation of the provisions of EU law. On the contrary, a Member State is free to choose the most appropriate legal form of the rules establishing the foundations of its national management and control system, albeit it should choose a form that is compatible with its legal system.

Dr Jekyll and Mr Hyde?
A separate commentary is required, in my opinion, on the lack of any reference in the resolution in question to the previous resolution of the Supreme Administrative Court concerning EU funds (which I have written about here), i.e. Resolution II GPS 2/2014, in which the Supreme Administrative Court dealt with the evidently related issue of the relationship between the provisions of Regulation 1083/2006 regarding financial correction and the Public Finance Act regarding reimbursement. In this resolution, the NSA came to the conclusion, which is correct in my opinion, that there is no competition between the two institutions and that the financial correction itself is a stage of recovery. Significantly, in the resolution, the NSA also interpreted the provisions of Regulation 1083/2006, stating that it does not indicate in what manner such a correction should be imposed by the Member States, and therefore recognising that this issue is left to national law in line with the principle of procedural autonomy of the Member States: „Union law does not, however, specify the ways in which these corrections are to be determined and enforced, leaving this to the national legislator.”

One of the main arguments of the proponents of the view that the financial correction is in fact an instrument separate from the decision on reimbursement was to refer to the provision of national law describing the tasks of the managing authority in the Act on the Principles of Development Policy (the predecessor of the Implementation Act), i.e. Article 26(1)(15a) of the Act on the Principles of Development Policy (the predecessor of the Implementation Act), which indicated as a task of the managing authority separate from reimbursement (Article 26(1)(15) of the Act on the Principles of Development Policy) the task of determining and imposing financial corrections. However, the NSA considered that the content of these provisions alone is not enough to assume that we are dealing with two competing procedures. Taking into account the subject matter of the previous resolution, as well as the above-mentioned conclusions, it is puzzling that in its subsequent resolution concerning European funds, the NSA did not refer in any way to the previous ruling. Finally, as a curiosity, it is worth mentioning that the two resolutions were adopted with completely different membership.

Summary
The most recent resolution of the Supreme Administrative Court perfectly illustrates that recognition of the meaning and significance of the provisions of EU law in the field of European funds and their correct interpretation under national law still poses great difficulties not only for institutions involved in implementation of the funds or even the legislator, but also for top-class specialists such as the judges of the Supreme Administrative Court.

Particular reservations are aroused by referring to acts of EU law in order to justify different and less favourable treatment of beneficiaries on the grounds of national provisions than, for example, other subjects of national law – this tendency initiated even by the administration (vide e.g. the argumentation of the Ministry of Regional Development in the proceedings before the Constitutional Tribunal concluded with the P 1/11 judgment) is exceptionally harmful and deserves strong criticism.

In this context, it is worth paying particular attention to the principle of equivalence; the directive flowing from it should be taken into account not only when drafting the law, but undoubtedly also when interpreting it, especially as the provisions of Regulation 1083/2006 have been largely duplicated in the new Regulation 1303/2013. I have written more extensively on this subject, inter alia, here.