Refunds – common sense or rigour? The Supreme Court responds

Today, the justification of the judgment I CSK 878/14, to which I referred in my previous post, was published on the Supreme Court’s website. This is probably one of the most important judgments in cases concerning European funds that have been made in recent years, so below I will briefly take the liberty to comment on the key theses presented in the justification.

As a reminder, the case concerned the beneficiary’s failure to achieve one of the goals of the project, i.e. an increase in employment, which was the direct cause of termination of the funding agreement and the institution’s pursuit of full reimbursement. The beneficiary undertook to increase employment by 27 new jobs in relation to the existing 453 jobs. The Supreme Court found the findings of the institutions and the lower courts to be correct insofar as they concerned the lack of an increase in employment and concluded that, indeed, the beneficiary had not increased employment.
„The creation of new jobs was one of the important objectives of the project and, as the course of the evidence shows, without the commitment to increase employment beyond the 453 people already employed shown in the application for funding, the defendant’s application would not have been accepted for implementation.„

However, in the opinion of the Supreme Court, the mere failure to achieve this goal did not justify the withdrawal of the entire subsidy, as the project also envisaged the implementation of other goals, which were achieved by the beneficiary.
„However, the allegations of the cassation complaint, in which it is claimed that, despite the material side of the investment having been realised, i.e. the purchase and implementation of the production of the modern heating device, which was accepted by the conducted inspections, the defendant is required to return the entirety of the aid granted, also in this properly realised scope. The applicant’s doubts must be shared and it must be acknowledged that the purpose of the aid to which the provision of financial support from EU funds relates cannot be reduced to the result of an increase in employment alone if, moreover, the question of employment was not the sole reason for concluding the agreement on the provision of financial support, but was, on account of the subject-matter of the funding, an important but additional problem. ”

„The defendant should not be imputed the obligation to return the entire amount of the support provided just because it did not implement the project in its entirety, claiming that this occurred contrary to the actual purpose of the contract and that it used the funds provided to it contrary to the contract for the implementation of the project, i.e. contrary to their purpose. The cited findings point to a different conclusion, i.e. that the basic purpose of the agreement was fulfilled and it would be profoundly unfair to interpret the provisions of the European Union law and the provisions of the Polish law harmonised with them, as well as the ratio legis of the solutions contained therein, in such a way as to drastically burden the respondent Company with the obligation to return the entire subsidy, i.e. also that part of it which was effectively for the economy and correctly used.„

Importantly also, according to the Supreme Court, the question of the reasons for the beneficiary’s failure to maintain the existing employment was not irrelevant. In this regard, in the court’s view, the beneficiary could only be held responsible for the failure to achieve the objectives of the contract for reasons attributable to the beneficiary.

Therefore, in the opinion of the Supreme Court, the Court of Appeal, when reviewing the case, should examine why the employment was not maintained at the indicated level and whether the employees who were to be hired under the project were subject to redundancies that affected the company globally or whether they were still employed at the date of the beneficiary’s audit.

The view presented in the justification for the judgment under comment, which is in a way an emanation of views already presented earlier in the case law of common courts and the Supreme Court, deserves, in my opinion, full approval. I have already pointed out on several occasions that the objectives of a funding agreement also have a certain weight on the public side. Therefore, if a beneficiary contributed to the implementation of strategic objectives of a given programme/measure (e.g. built a scientific and research centre, introduced an innovative solution, commercialised an invention) – it is difficult to speak of withdrawing the entire co-financing, even if there were some failures in the project. Thus, in answering the title question, the Supreme Court unequivocally opted for the criterion of common sense when assessing claims for reimbursement of funding. This is all the more important as such a common sense assessment is also anchored in EU regulations (which I will be mentioning in more detail in the near future). In conclusion, it basically remains for me to give the floor to the Supreme Court again: