Although it is spring outside the windows, for the time being it is a spring of fear and counting losses. Today, the question is no longer whether there will be, but how deep the crisis caused by the coronavirus pandemic will be. All beneficiaries and applicants, as well as EU grant officers, will be affected by the crisis. A number of legal acts are currently being amended as part of the crisis shield. The Ministry of Funds and Regional Policy has also proposed its „special” law on special solutions to support the implementation of operational programmes in connection with the outbreak of COVID-19 in 2020.The law contains a number of solutions to ensure that beneficiaries, but also the institutions themselves, can get through the current epidemic relatively painlessly.The problem is that while the aim of the creators is noble, the implementation can hardly be considered correct. Unfortunately, a large part of the proposed provisions of the fund speculative law falls significantly short of the standards arising from the principle of legal certainty or transparency.
How does the spec law respond to the needs of entrepreneurs implementing EU projects in times of pandemic
The Fund Act is intended to make life easier for beneficiaries and applicants to EU projects (as well as officials) by introducing a number of special rules for implementing projects, as well as for applying for EU funds. The legislator has provided that in cases caused by COVID-19, it is possible, for example, to demand annexing contracts, extending the deadlines for their implementation or extending the deadlines for submitting applications for intermediate payments.
In addition, the law stipulates that beneficiaries are not liable for irregularities related to COVID-19, nor are they liable for failure to achieve the objective of projects caused by COVID-19. If, due to COVID-19, the project selection criteria are not met, they may be amended by the Monitoring Committee. An extension of a number of deadlines and the possibility of their restoration is provided for, among others, as regards the appeal procedure against negative assessments of proposals or administrative proceedings for reimbursement of funds.
"W związku z COVID-19"
The provisions of the speculative fund act theoretically allow beneficiaries of EU funds to avoid liability in situations where failure to comply with obligations from funding agreements has occurred 'in connection with COVID-19′.
The Act provides that an individual irregularity being a direct result of the occurrence of COVID-19 will not result in the beneficiary being held liable – the liability in this respect will be transferred to the State Treasury – if the beneficiary proves that despite exercising due diligence he/she was not able to prevent the occurrence of this irregularity (Article 5 of the Act).
In addition, it is envisaged that expenditure on unrealised project objectives will be eligible if the beneficiary demonstrates that he/she exercised due diligence and took the necessary measures to realise them in due time (Article 6 of the Act).
The majority of the provisions of the Fund Specust Law contain the proviso „in the event that, as a result of the occurrence of COVID-19„. This single proviso contains the dubious sense of some of the provisions of the Act – the application of its provisions e.g. regarding the qualification of irregularities as caused by Covid-19 (Articles 5 and 6 of the specustaw), the extension of the deadline for submitting grant applications (Article 8) protests (Article 18), the annexing of grant agreements (Article 12) or the submission of applications for relief (Article 25) or the suspension of administrative proceedings (Article 20) will each time anyway require a case-by-case analysis. Exactly the same possibility is already available to all beneficiaries under the current legislation.
Force majeure is already there - and in the regulations and funding agreements
While the idea expressed in these provisions is perfectly valid, I do not see any need to enact them. The principle of not holding the beneficiary liable for circumstances beyond his control follows from the very definition of irregularity. According to Article 2(36) of the General Regulation, 'irregularity' means any infringement of Union law or national law concerning the application of Union law resulting from an act or omission by an economic operator involved in the implementation of the EFSI which has, or would have, the effect of prejudicing the Union budget by charging unjustified expenditure to the Union budget
It follows, therefore, from the very definition of irregularity that the beneficiary cannot be held responsible for circumstances not attributable to his/her act or omission, i.e. lying outside him/her. This principle has been confirmed many times in the case law of administrative courts. I have written about it, for example, in the entry Objective liability not so objective. And also civilian reimbursement – common sense or rigour? The Supreme Court responds
Force majeure in funding agreements is understood as:
- an event or combination of events
- objectively beyond the control of the beneficiary,
- which substantially and materially hinder the performance, in whole or in part, of the obligations under the contract,
- which could not have been foreseen by the beneficiary and which he could not have prevented or overcome and counteracted by acting with the due diligence generally provided for in civil law contractual relations.
The jurisprudence of the courts additionally indicates that even circumstances which did not constitute force majeure, but which remain beyond the beneficiary’s control and which he or she – despite exercising the utmost diligence – could not have prevented, relieve him or her of liability for reimbursement. (e.g. Judgment of the Supreme Court of 7 October 2015. I CSK 878/14 or Judgment of the Supreme Court of 21 March 2013. II CSK 241/12). In the latter judgment, the Supreme Court indicated:
The catalogue of reasons listed as force majeure does not exhaust all the reasons justifying exemption from the obligation to reimburse, in whole or in part, the benefit received, as there may be other circumstances, not listed therein, which may also justify exemption from that obligation. Obviously, these must be exceptional circumstances, similar in nature to the categories listed in the aforementioned catalogue, i.e. circumstances which could not be overcome despite the efforts made by the person liable
Does a general reference to COVID-19 get the job done?
Entrepreneurs implementing EU projects must remember to document the impact of COVID-19 on the failure to meet specific obligations under funding agreements. Neither the fund specs nor the force majeure clause exempts them from the obligation to exercise due diligence to prevent the negative effects of COVID-19 on the project.
In specific factual situations, these actions will of course look different. In the case of project purchases and, for example, a lack of bidders coming forward, it may be worth considering awarding the contract in a different way before ultimately abandoning it, e.g. by modifying it or awarding it in a different mode? In the case of obligation to achieve certain indicators, it will be necessary to document responses from potential contractors - purchasers of goods or services showing decrease in demand for project products, as well as to document actions taken by the beneficiary to sell the goods/services
In cases where the beneficiary’s contractors fail to carry out the contracted work/supplies, it is reasonable, for example, to apply for collateral concerning the performance of the contracts or to seek substitute performance. Where the effects of COVID-19 on a project may be of a time-limited nature, it is worth considering whether the time limit proposed in the fund spec (90 days) for the extension of project implementation is sufficient and apply for its possible extension if it is justified by the specifics of the project. It is also worth consulting the institution or the project supervisor every time.
Carefulness first and understanding officials secon
Whatever the case, it must be borne in mind that a beneficiary cannot simply abandon a project and then try to absolve itself of liability for non-compliance by generally invoking the COVID pandemic condition. Each time, it must document that it has tried to counteract the negative effects of COVID-19 on the project. This is because no law or contract can replace the beneficiary in taking care of its own affairs and will not bail it out of its duty of due diligence. Unfortunately, therefore, COVID-19 requires entrepreneurs implementing EU projects to be particularly diligent in documenting their due diligence in order to prevent negative impacts on the project. Failure to do so will result in – in addition to the negative effects associated with the epidemic – the beneficiary being forced to return the grant awarded to it with interest.
Of course, it is also important – or even more important – that, in times of pandemic, the officials overseeing the implementation of EU projects also show a special sense of cooperation with beneficiaries. Even the best diligence will not help if, on the other side, the beneficiary is faced with a wall of incomprehension, fumbling with answers to questions or simply a lack of answers. Practice shows that, so far, official cooperation in implementation has been mixed – it remains to be hoped that, precisely in a crisis situation, many project supervisors and officials will stop being afraid to give guidance to „their” beneficiaries.
About author
Ask the author a question
KRZYSZTOF BRYSIEWICZ
Managing Partner / Legal Counsel
About author
Contact for media
