State Treasury’s liability for violation of EU regulations
A beneficiary of EU Structural Funds that violates procedures and has to repay the funding because of a failure by Polish state authorities to implement EU regulations properly may seek damages from the State Treasury.
Under Art. 38 of Council Regulation (EC) No 1260/1999 laying down general provisions on the Structural Funds, Poland is responsible for financial control of assistance under Structural Funds. For this purpose, it is required to take measures to assure that assistance is managed in accordance with applicable procedures at both the Community and national levels. One of the Polish authorities authorised to monitor procurements co-financed out of EU funds, alongside such bodies as the tax office and the government audit board, is the Public Procurement Office.
If an inspector has reservations and the beneficiary fails to implement recommendations in the relevant documentation, then there is an “irregularity” for purposes of Art. 2(7) of Council Regulation (EC) No 1083/2006 of 11 July 2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund. This means that the expenditure may be regarded as unqualified. The grounds for disqualification of expenditures may include, more specifically, introduction of public procurement procedures that are inconsistent with Community law (even if they are consistent with national law).
In such a situation, the beneficiary is required to repay the funds received, but that does not mean that liability falls solely on the beneficiary. It should be borne in mind that any person who has suffered a loss as a result of violation of Community law by a member state or its authorities (in particular because of failure to implement EU regulations properly) may seek damages from the member state (ECJ 19 November 1991, Francovich, Joined Cases C-6/90 and C-9/90, Rep. I-5357; ECJ 5 March 1996, Brasserie du pêcheur and Factortame, Joined Cases C-46/93 and C-48/93, Rep. I-1).
A member state may be held liable, among other grounds, under Art. 226 of the Treaty Establishing the European Community for violation of duties imposed by Community law. Under ECJ case law, the clams may be asserted and liability assessed against not only the state itself, but also any other entity to which liability in damages is attributable under national law (ECJ 1 June 1999, Konle, Case C-302/97, Rep. I-3099; ECJ 4 July 2000, Haim, Case C-424/97, Rep. I-5123). This means that Community law lays down the necessary grounds for liability of the member state, but a claim for damages is pursued under the regulations of the given state.
It is clear that under Polish law one such regulation is Civil Code Art. 417, under which liability for a loss caused by an unlawful act or omission in the exercise of public authority is borne by the State Treasury, territorial governmental unit, or other legal person exercising public authority under the law.
According to the European Court of Justice, the scope of liability must correspond to the loss suffered in order to assure effective protection of the individual, and thus damages should cover claims arising out of the violation, such as interest, lost profit, and other elements of damages provided for by the laws of the member state (Brasserie du pêcheur and Factortame).
Przemysław Szymczyk, Infrastructure, Transport and Public Procurement practice group, Wardyński & Partners