About how NCBR suspended competitions, or who gives and takes away, and who suffers as a result.

How did this happen and why such consequences?

Well, the projects submitted under the Fast Track competition were supposed to be completed by the end of 2023, due to the deadline for the eligibility of expenditure set for 31 December 2023. Each of the projects submitted at the end of last year therefore assumed a tight schedule from the start.

At the end of 2022. NCRD settled a competition in which more than 100 projects were selected to receive more than PLN 800 million in funding. The list of selected projects is available here.

At the same time, after the adjudication of the competition, applicants who had received a positive assessment began to receive invitations to sign subsidy agreements, on the basis of which the funds were to be paid out. Some of them actually signed such agreements. Last week, entrepreneurs received the following message from NCRD:

While the doubts related to the submission of applications by two applicants with personal links to persons holding important positions in NCRD are indeed serious, in my opinion the subsequent action of „suspending” the signing of contracts with the remaining entrepreneurs should be considered scandalous and outside the canons of good administration. Applying collective responsibility in such a situation has no grounds.

Especially as it is difficult – judging the case reasonably – to reasonably assume that in a competition in which several hundred entrepreneurs took part, all those who received a grant were relatives and friends of the rabbit and received positive assessments by its setting.

This decision has no justification, either substantive or legal. Moreover, it can hardly be regarded as justified also in the context of the possible safeguarding of the public interest related to the transfer of public funds. Why? Well, the public’s interest in this type of project can be safeguarded and is generally done so by establishing various types of security, such as bills of exchange, sureties, mortgages or guarantees.

Why do I believe that the action of 'suspending’ the signing of contracts is unlawful? For a simple reason – such an institution is not provided for in the Implementation Act (i.e. the Act on the Principles of Implementation of Cohesion Policy Programmes Financed in the Financial Perspective 2014-2020). Despite the attempt to dilute the responsibility of the institution for signing the agreement, in a situation where a given project is recommended for co-financing after a competition, which I wrote about in the entry Favelisation of the law – or the 'new – old’ implementation act, after a positive outcome of the competition the institution is obliged to sign an agreement with a given beneficiary.

What is more, failure to sign such an agreement gives rise to the possibility for the beneficiary to pursue claims against the institution, including claims for damages. This is something that the courts are increasingly commenting on. As the Warsaw Court of Appeal notes in its judgment of 24 November 2020:

’the said action of the respondent undoubtedly prevented the conclusion of the grant agreement for reasons on its side which did not concern the claimant. It is undisputed that the claimant successfully passed all stages of the assessment of the application. On her part, a state similar to a maximally formed expective right arose, which should be understood as a situation where all material prerequisites for the acquisition of a right are fulfilled, and only activities of a formal nature (here – the conclusion of a funding agreement) are lacking, despite the fact that the entity aimed at fulfilling this prerequisite. It can be assumed with full conviction that if it had not been for the unlawful action of the respondent, the funding agreement would have been concluded on the terms set out in the application, and the claimant would have obtained the necessary funds from the European funds. The above conclusion is all the more justified as the claimant was in the first place of the reserve list, and the evidence gathered in the case clearly shows that the funds released at the end of the programme were sufficient to cover the requested co-financing. The failure to conclude this agreement in due time was therefore in an adequate causal relationship (Article 361 § 1 of the Civil Code) with the damage suffered by the claimant.

In this particular case, the would-be beneficiary of the EU funds implemented the project with his own funds, which allowed him to subsequently recover, as compensation, an amount corresponding to the value of the grant he was to receive. It is debatable whether it is possible to claim damages equivalent to the value of the grant in the event that the project fails to be implemented with its own funds. In my opinion, many arguments can also be found in favour of such an approach, nevertheless, if any entrepreneur wants to fight not only for the compensation of expenses incurred (costs of employees, fixed assets, consultants involved), but for the unobtained grant, it will certainly be easier to do so from the position of an already executed project.

Entrepreneurs subject to a 'presumption of fraud’ should not wait for the situation to develop. No problem has ever been solved in this way. First and foremost, the question has to be answered as to whether the entrepreneur in question can afford to wait until May (or even longer) before starting the project. Will they be able to tighten the schedule in such a way that the project can be completed in a much shorter time. If the entrepreneur does not see such a possibility now, it is necessary to directly inform NCBR about it. Similarly, if there is already a high risk that such a project will not be realised.

What else? Entrepreneurs should carefully recalculate the costs they have already incurred/are incurring for an ongoing project and make an important decision. Whether to carry out the project entirely on their own / with the help of capital from other sources or to abandon the project altogether.

There are further two possibilities – depending on whether NCBR will or will not sign the agreement and when it will do so.

In the case NCBR does not sign the agreements and, for example, annuls the competition, the entrepreneurs will be able to claim compensation – its value will depend on whether they have finished the project or not – assuming that the project will be implemented with their own resources/financing from other sources, it is possible to claim compensation covering the granted grant, in the variant in which the beneficiaries abandon the project, the compensation may cover at least the amount of expenses incurred for the preparation of the project – consultants/hired personnel/ fixed assets purchased for the project, etc. (the latter variant is theoretically also possible to claim the lost grant, but it will be more difficult). (in the latter option, theoretically, it is also possible to claim the lost grant, but it will be more difficult).

If, for example, one of the entrepreneurs already states that he or she will not be able to implement the project due to a too short implementation period (other than the one for which he or she originally agreed with NCRD), he or she will also be able to claim such compensation – however, it will additionally be necessary to prove that during this shortened period he or she would not have been able to physically implement the project.

This problem perfectly illustrates how much catching up our administration has yet to do in its dealings with citizens. Adopting the principle of collective responsibility and treating all entrepreneurs on the basis of the presumption of guilt is a simple road to nowhere. EU and other public funds will continue to be lost and irregularities will continue to proliferate in competitions if the administrative culture continues in this way.

However, in order to speak of a high administrative culture, the administration should treat the entrepreneur as a client and not as a supplicant.

The way to remove irregularities should not be to suspend or cancel entire competitions and thus punish entrepreneurs who prepared their applications correctly. I have written about this in more detail in the entry Subsidy fraud, or who will watch the watchdogs.

If, by the way, this were the right way to go, one could suggest even more far-reaching solutions – not holding any competitions at all, then there would never be any irregularities.

Concerns about the misspending of public funds have been, are and will continue to be there, but the state cannot refrain from acting on the basis of this concern alone. All the more so because the public interest can always be safeguarded – even in an additional way. Already today, projects have in-kind and personal safeguards in place, such as bills of exchange, sureties, mortgages, guarantees, etc. Concerns about misspending funds can easily be allayed in this way.