On July 8, the Department of Administrative Cases of the Senate left unchanged the judgment of the Administrative Regional Court, by which the Applicant – SIA "Piltenes meži" – was refused a compensation payment for encumbrance of a micro-reserve on the forest land.

In the pending case, there was a dispute about whether the Applicant can receive compensation for the forest land located in the micro-reserve, if the Applicant has been found to be a company in difficulty.

The property owned by the Applicant consists of a plot of land in which there is a micro-reserve territory for a specially protected species of birds – the capercaillie, for which a micro-reserve buffer zone of 59.5 ha has been established. The micro-reserve area is a forest area that is not part of the Natura 2000 area. The Applicant addressed the Rural Support Service with a request to grant a support payment, stating that compensation payments for Natura 2000 forest areas can be granted for micro-reserves located outside Natura 2000 areas. The Rural Support Service refused to grant support to the Applicant for the forest land containing micro-reserve, because it found the Applicant to be a company in difficulty, that is, the Applicant's losses amount to more than 50% of the share capital.

When examining the case, the Senate saw the inconsistency of the restriction applied to the company in difficulty with the nature of the compensation for the preservation of biological diversity, so it appealed to the Court of Justice of the European Union.

The Court of Justice of the European Union, in response to the questions asked by the Senate, stated in the judgment that Regulation No 702/2014 should be interpreted in such a way that support for forestry and, more specifically, support which, based on Regulation No 1305/2013, Article 30, regarding the micro-reserve located on the forest land, in order to implement objectives of Directive No 2009/147, has been requested by a company in difficulty within the meaning of the mentioned Article 2, Clause 14, cannot be recognized as compatible with the internal market, based on Regulation No 702/2014.

Although member states have the right to grant support co-financed from the European Agricultural Fund for Rural Development (EAFRD), based on Regulation No 1305/2013, Article 30, member states are not obliged to do so, but, on the contrary, they have freedom of action in this regard. Such discretion must be exercised in accordance with the provisions of this Regulation and in accordance with the general principles of EU law.

The Senate acknowledges that the Regional Court has rightly concluded that the regulations of the Cabinet of Ministers comply with the regulations of the European Union. The Regional Court has concluded that the Applicant has been found to be a company in difficulty. 

What regards the Applicant's arguments regarding the limitation of property rights, the Court of Justice of the European Union has indicated that a specific regime, which as stated in Regulation No 702/2014 concerns specifically the companies in difficulty, it cannot be considered in itself to be in conflict with the right to property guaranteed in Article 17 of the Charter of Fundamental Rights of the European Union or the general principles of equal treatment and proportionality.

Judgment of the Senate, case No SKA-4/2022 (A420284716).


Information prepared by Baiba Kataja, the Press Secretary of the Supreme Court

Tel.: +371 67020396; e-mail: baiba.kataja@at.gov.lv