Review of rejected claims against the General Directorate for National Roads and Motorways under the special act for road construction subcontractors

The Supreme Administrative Court of Poland has made it clear that the administrative courts cannot review the road authority’s refusal to recognise a subcontractor’s claim for payment under the “special act.” The subcontractor’s claim may be pursued instead through the civil courts.

Art. 5(3) of the Act on Payment of Certain Unsatisfied Claims of Enterprises for Performance of Public Contracts of 28 June 2012, known as the “special act,” under which the General Directorate for National Roads and Motorways (GDDKiA) notifies enterprises of inclusion in the list of subcontractors whose claims are recognised for payment out of the contract security held by GDDKiA, does not indicate what form this notification should take. Diverging views have thus emerged on whether it is an act of administrative law or civil law.

Proponents of the view that this is an administrative matter argued that inclusion in the list of subcontractors whose claims may be satisfied by GDDKiA creates a right because only those enterprises will be paid out of the security in question. They also pointed out that payment is not due to all creditors, but only those that meet the statutory conditions. Thus this is a mechanism of state aid under the conditions set forth in the special act. The fact that the funds out of which the subcontractors’ claims are paid derive from the National Road Fund also supports the public-law nature of these proceedings, under this view.

Nonetheless, in a resolution issued on 24 February 2014 (Case II GPS 4/2013), a seven-judge panel of the Supreme Administrative Court held that the proceedings in which GDDKiA prepares the list of subcontractors is of a civil rather than administrative nature. The judges followed the statements in the legislative history of the special act and the judgment of the Constitutional Tribunal of 18 June 2013 (Case K 37/12) that the purpose of the regulation is to pay specific principal claims of subcontractors against general contractors arising out of breach of their contract. Under the special act, GDDKiA was required in a way to assume the general contractors’ debt, but the regulation is a one-off measure supplementary to other forms of legal protection. It was intended to resolve a specific social problem connected with non-payment by general contractors on road projects and would not be applicable in the future.

A subcontractor seeking inclusion in the list of enterprises slated for payment must file a declaration with GDDKiA and substantiate its claim with documents showing that it is seeking payment for work performed and delivered in compliance with the civil contract between the subcontractor and the general contractor for the road project. Inclusion in the list does not itself create a right because it does not definitively mean that the specific enterprise is entitled to payment. As the Supreme Administrative Court found, before payment is made it is necessary to provide GDDKiA documents which are not connected with public administrative activity: a legally final court ruling, a judicial settlement with an enforcement clause, or a list of claims from a bankruptcy proceeding (where no objection was made to the claim).

The nature of the payments suggests that they are not a matter of public law, because the amount results from the civil contract between the general contractor and the subcontractor, which GDDKiA is not a party to and does not become a party to pursuant to the special act. This means that the payments are made up to the amount of the security for proper performance of a contract which was not concluded by GDDKiA. The claims of the subcontractors are paid out of the monies of the National Road Fund, but this does not change the nature of the regulation, as the mechanism included there is self-balancing because GDDKiA has a right to seek indemnity from the general contractors. Moreover, the special act does not contain provisions concerning review of its application via the administrative courts or a reference to the Administrative Procedure Code.

The Supreme Administrative Court consequently found that the actions seeking to establish the list of subcontractors under the special act are not acts of public administration, and refusal to include a specific enterprise in the list merely reflects a factual determination that it does not meet the statutory conditions for payment of its claim pursuant to the parties’ civil-law relationship, and does not generate public-law consequences.

This resolution by the Supreme Administrative Court is an important step to clarify the situation of enterprises wishing to take advantage of the relief offered by the special act. Given the constitutional presumption of the jurisdiction of the common courts and the holding by the administrative court system that it does not have jurisdiction in these cases, claims connected with application of the special act should clearly be pursued through the civil courts.

But other doubts remain.

For example, if GDDKiA refuses to include a subcontractor on the approved list, and the subcontractor sues GDDKiA in the civil court, will the contractor be entitled to interim relief in the form of an injunction against payments to other enterprises out of the pool of money for payment under the specific public contract until the court decides the merits of the case? The upper limit of GDDKiA’s liability to subcontractors is the amount of security for proper performance of the contract provided by the general contractor for the specific contract and not refunded to the general contractor by GDDKiA (i.e. a maximum of 10% of the general contractor’s fee), so if other subcontractors are paid in the meantime they may be nothing left for the subcontractor who was omitted from the list.

Nor is it clear what the court would do if a subcontractor were denied inclusion in the list, but before the court issued a judgment the subcontractors on the list were paid and the amount available for payment was exhausted. Should the court deny the claim because the funds are exhausted, or should it rule on the correct proportions under which the claims should be paid? Then the question would arise whether the subcontractors that were already paid would be subject to a clawback so that the omitted claimant could receive its share without exceeding the limit, or instead if GDDKiA would have to pay the claimant the percentage it would have received, thus exceeding the cap on GDDKiA’s liability.

To keep a finger on the pulse, it is necessary to track the extent to which other subcontractors on each project have been paid. The lists of claims paid under the special act are not published, but the data could be sought through a freedom of information request.

Małgorzata Cyrul-Karpińska and Joanna Florecka, Infrastructure & Transport and Public Procurement & PPP practices, Wardyński & Partners