Since Hungary’s accession to the European Union, Cohesion Fund support has been the most significant source of development for businesses in Hungary. Although the EU’s multiannual budget for 2021-27 is now being spent, there are still a number of projects underway that were funded by Hungary or directly by the European Union from the 2013-20 budget.
Projects typically consist of two phases: the implementation phase and the maintenance phase. The latter means that the supported enterprise has to commit to exploit the results of the project for a period specified in the call for proposals, usually 3-5 years, thus maintaining jobs, increasing tax revenues or otherwise benefiting the country. And an annual report on the results of the maintenance, showing how the monitoring indicators were achieved in the previous year, i.e. what the company has done to fulfil the commitments it made when it was awarded the grant.
The majority of the proposals awarded under the 2013-20 budget have already been implemented and are currently in the maintenance period. In our experience, the attitude of the granting authority (formerly the Ministry of National Economy, then the Ministry of Finance, now the Prime Minister’s Office) has changed in recent years and in many cases, the company is asked to repay the full amount of the grant, which it has used in the course of a project that has already been successfully completed, retrospectively, citing minor shortcomings or irregularities detected during the maintenance period.
Our client was in the same situation. After the successful completion of the R&D project, the court ordered the liquidation of one of the consortium partners during the maintenance period. Despite the fact that this company no longer had any tasks during the maintenance period, the Ministry considered that the successful completion of the project was at risk and decided to repay the full amount of the grant. On behalf of our client, we filed a declaratory action at the court seeking a declaration that the company was not liable to repay the money and that the Ministry’s withdrawal from the support was not in line with the contract, the GTC, Hungarian and EU legislation on subsidies and the Civil Code.
Since the use of EU funds was transferred to the Prime Minister’s Office in the summer of 2022, the control of the maintenance has become much stricter. It seems that the primary objective is not to ensure the successful implementation of the tenders, but to recover as much of the funds as possible. The calculation of the monitoring indicators has been amended and more companies are telling us that the maintenance reports already adopted in previous years are being re-examined to see whether they comply with the new calculation principles. It is possible that the number of irregularities detected and aid recoveries ordered will increase sharply compared to the previous situation.
Kálmán & Partners Law Firm has extensive experience in EU funding litigation. Our team has in-depth knowledge not only of the relevant Hungarian and European Union legislation, but also of the functioning of the funding authorities and is well prepared to represent the companies implementing the project in litigation against the funding authority.