In the case of the project not approved by the Rural Support Service, the Department of Administrative Cases of the Senate has decided to refer preliminary questions to the Court of Justice of the European Union (CJEU) regarding the Regulation (EU) No 1306/2013 of the European Parliament and of the Council of 17 December 2013 on the financing, management and monitoring of the common agricultural policy. The proceedings are suspended pending the entry into force of the CJEU ruling.

In the administrative case under review, it is being examined whether the Rural Support Service has reasonably rejected the applicant's project application, substantiating the decision on the grounds that another capital company, the owner of which is also the applicant's owner, has committed violations, and that the insolvency proceedings have been initiated against this capital company.

The decision of the Rural Support Service is based on the Cabinet of Ministers Regulation No 598 of 30 September 2014 on the granting, administration and supervision of State and European Union support for the rural development and the development of fisheries for the 2014–2020 planning period, which provides that the project application is rejected if it is established that the aid applicant has deliberately created conditions to avoid compliance with any of the requirements for receiving the aid. These provisions also reflect the provisions of Article 60 of the Regulation (EU) No 1306/2013 of the European Parliament and of the Council (entitled ‘Circumvention clause’), which provides that no advantage shall be granted to natural or legal persons if it is established that they have artificially created the conditions for gaining such advantage that are contrary to the objectives of this legislation. Consequently, the application of the 'circumvention clause' must be assessed in the present administrative case.

The Senate had doubts as to whether the creation of a new company violated the ‘non-circumvention’ clause of the Regulation (EU) No 1306/2013 of the European Parliament and of the Council merely because the existing company could not be used by its owner to qualify for new support measures due to the insolvency of the previous company.

In its explanations to the court, the Rural Support Service also indicates that Article 60 of the Regulation (EU) No 1306/2013 of the European Parliament and of the Council may be applied even if the violation is committed within the framework of another support measure. Namely, if the owner of the company misuses the funds of the European Union through one company, but in the future establishes a new company, thus avoiding the obligation to pay the debt. In this way, the business owner can avoid the financial consequences of the obligation to make repayments.

The Senate acknowledges that there is a possibility that the owner of the company misuses European Union funds in this way, however, it wants to find out whether, in order to apply Article 60 of the Regulation (EU) No 1306/2013 of the European Parliament and of the Council, it is necessary to establish circumvention of a particular support measure, or the project application may be rejected even if another company of the applicant's owner has committed an infringement, the financial consequences of which have not been duly remedied.

 The Senate does not find in the case law of the Court of Justice of the European Union answers to concerns regarding the interpretation of the applicable provisions of the European Union law, therefore it considers necessary to refer questions to the Court of Justice of the European Union for a preliminary ruling.

Case No SKA-47/2021 (A420255417)

 

Information prepared by

Rasma Zvejniece, the Head of the Division of Communication of the Supreme Court

E-mail: rasma.zvejniece@at.gov.lv, telephone: +371 67020396, +371 28652211