Exhaustion of allocation before the Constitutional Tribunal

Some time ago, in the post Exhaustion of allocations as a reason for refusal of funding, I signalled the topic of potential unconstitutionality of the provisions of the Implementation Act. As it turns out, the topic may be prophetic;) For it so happens that the issue of exhaustion of allocations will be dealt with by the Constitutional Court. I had the pleasure of filing a constitutional complaint on behalf of a client some time ago, which precisely concerns the constitutionality of provisions that allow an institution to leave a protest during an appeal procedure unprocessed and a court to declare only the assessment unlawful without referring the case for reconsideration. In the summer of this year, the Constitutional Court finally accepted it for examination.

The facts of the case were as follows in a nutshell: the client’s protest was left unprocessed precisely because the allocation had been exhausted, and the court confirmed the illegality of the evaluation, but did not refer the case for re-examination. Of course, the allocation was exhausted in the course of the appeal procedure, and I should add that if it had not been for the flawed project assessment – which was eventually confirmed by the court – the Client’s project would have had a good chance, bordering on certainty, of signing the contract for co-financing, as the flaws concerned the final stage of substantive assessment.

Doubts about the constitutionality of the regulations have already been shared by one of the constitutional bodies – the Ombudsman, who in his position shared all the allegations raised in the complaint. The Constitutional Court itself has also signalled in one of its decisions that it sees a constitutional problem in the provisions applied in the applicant’s case. Interestingly, the fact that the problem may be of a constitutional nature was already communicated to us at the stage of the judicial-administrative proceedings by requesting the NSA to ask the Court a legal question on the subject. Unfortunately, however, at that stage the NSA did not decide to refer the case to the TC. The entire case file is available on the website of the Constitutional Court.

What is the problem?
As I signalled in the previous post, the key problem, in my opinion, is first and foremost the disadvantaging of those applicants whose applications have been badly assessed by the institutions and who have been forced to use the appeal procedure in relation to those applicants who have received a positive assessment straight away. From the outset, the legislator has prioritised, and continues to prioritise, the speed with which funds are disbursed over the correctness of their disbursement, as the situation just discussed demonstrates. It is not difficult to imagine a good project, which as a result of an error of the evaluators does not receive a positive assessment right away, and an inferior project, which at the same time receives such an assessment, closing de facto the way for the first one to get co-financing.

As a reminder, the problem of exhausting the allocation refers to the inability to sign a grant agreement with a beneficiary who obtained (or would have obtained) a positive project assessment as a result of the appeal procedure, but due to exhausting the allocation for a measure or priority could not sign the agreement. Such a situation is allowed by the provisions of the current implementation act, Article 65 of the implementation act – in accordance with which the appeal procedure does not hold up the signing of agreements with other applicants and Article 66, in accordance with which, in a situation where the allocation is exhausted during the appeal procedure, the applicant’s protest is left without consideration and the administrative court may not refer the case for reconsideration, but only to a possible statement of the assessment’s non-compliance with the law. Thus, a possible appeal and judicial-administrative procedure in the event of exhaustion of the allocation may end at most only in a moral victory for the applicant. The constitutional complaint here relates to the provisions of the previous Implementation Act, but the provisions of the new Act quoted above are essentially identical in content.

On at least a few occasions on the blog, I have already discussed the views of the courts from which it was clear that speed of action is not a value for which other cardinal values, especially constitutional ones, can be sacrificed. In the case of exhaustion of allocations, the problem is all the more important because not only is the concept itself vague, but the condition associated with exhaustion of allocations is variable and in no way explains the refusal to grant funding to a good project. Moreover, in my view, this is yet another statutory regulation which is designed to make life easier for the institutions only by shifting the burden of errors and irregularities on the part of the experts assessing the applications entirely onto the applicants.

In my opinion, this last issue deserves special emphasis – shifting the entire burden of error of the competition organiser (and a faulty negative evaluation of a project should be regarded as such) on the participant could be compared to the situation of a lottery player who chose the right numbers, but did not win the draw only because one of the balls was badly balanced or the draw was rigged, etc. The argumentation of the institution in such a situation boils down to the situation of a person who was not able to make the right choice. The institution’s argument in such a situation, on the other hand, boils down to saying – it doesn’t matter that he should have won the first one and so in the meantime the other player has already got the money and we have to rush to spend it. In my opinion, reducing the problem to such a simple example shows that we are clearly dealing here with an extreme injustice, potentially leading to the thwarting of another, far more important value than the speed of spending, namely the selection for funding of the genuinely best projects. Unlike a lottery player, applicants put a lot of work into preparing their projects, and this work is not only related to the preparation of the competition documentation itself, but also to making often strategic or business decisions regarding further development of the enterprise. Importantly, such a solution as the one proposed by the legislator is not at all imposed by EU regulations.

Court to the rescue
The fact that the problem may not be marginal is convinced by statistics from the previous programming period, which I mentioned in my previous post on the exhaustion of allocations. According to the Ministry of Development, around 5,000 protests were left unprocessed between 2008 and 2014. The question, of course, is how many of them due to the exhaustion of allocations. Nevertheless, it is an open secret that the problem grew significantly towards the end of the previous perspective, when the rule of speed made the organisers spend the last funds, and due to the large number of protests, many of them were simply held until the allocation was exhausted…
In any case, the statistics indicate that we are not dealing with only a marginal problem, and if so, one may be tempted to ask whether such a regulation is not by any chance a systemic problem justifying the imposition of a correction on the whole programme.

The allegations of the complaint focus on the pre-protest stage, i.e. the decision of the institution to leave the protest unprocessed at the stage of examining the protest. In this situation clearly there is no double substantive examination of the case, where substantive examination of the case means also the right to direct the given measure to a further stage of assessment and possibly opening the way to signing the contract for co-financing. A similar situation takes place at the court stage, where the legislator stated that – in the case of exhausting the allocation – the administrative court may assess whether the assessment was lawful, but in the case of its non-compliance, it may no longer refer the case to the institution in order to sign the agreement. Such a court decision therefore has only a symbolic dimension, and the applicant concerned – for reasons completely beyond its control and attributable entirely to the institution – is in effect deprived of an effective remedy. An effective remedy is undoubtedly one that not only allows the assessment to be challenged, but also achieves the stated goal – the protesters’ goal, on the other hand, is not to win a moral victory before the court, but to bring about the conclusion of a contract. The latter aspect seems to have completely escaped the legislator in the construction of the contested provisions. The right to a substantive hearing of a case or the right of access to a court consists primarily of the right to an effective remedy – and this aspect has been completely neglected by the legislator by creating provisions whose significance is only of a facade nature.