Revo­ca­tion of sub­si­dies — objec­tive breach of con­tract is suf­fi­cient

On Decem­ber 11, 2023, the Giessen Admin­is­tra­tive Court ruled (case no.: 4 K 1641/22) that the sub­jec­tive ideas of the par­ties involved regard­ing com­pli­ance with fund­ing require­ments are not rel­e­vant. An objec­tive breach of pub­lic pro­cure­ment law is suf­fi­cient for the revo­ca­tion of a fund­ing approval.

Our video dis­cussing the judg­ment:

Facts of the case

The plain­tiff received insti­tu­tion­al fund­ing from the defen­dant for 2017. At the end of 2017, the plain­tiff’s gen­er­al meet­ing decid­ed not to apply for any fur­ther insti­tu­tion­al fund­ing. Short­ly there­after, the plain­tiff com­mis­sioned a third GmbH — with­out con­duct­ing a pro­cure­ment pro­ce­dure — to car­ry out press work from Jan­u­ary 1, 2018.

In Octo­ber 2018, the plain­tiff sub­mit­ted an appli­ca­tion for rein­state­ment of insti­tu­tion­al fund­ing with retroac­tive effect for the entire year 2018. After pre­lim­i­nary dis­cus­sions between the plain­tiff and the defen­dant, the plain­tiff received pos­i­tive news: The defen­dant approved the appli­ca­tion with a deci­sion dat­ed Decem­ber 19, 2018. The dis­burse­ment of the funds was sub­ject to the “Gen­er­al ancil­lary pro­vi­sions for grants for insti­tu­tion­al fund­ing” (ANBest‑I for short).

In 2020, the proof of use was reviewed by the defen­dant. In July 2022, the author­i­ty par­tial­ly revoked the approval notice and demand­ed a refund of around EUR 13,700. The rea­son for this was, among oth­er things, the direct com­mis­sion­ing of the GmbH with­out a com­pet­i­tive pro­ce­dure. The plain­tiff then filed an action against the repay­ment notice.

Key point of the deci­sion

The VG Gießen rec­og­nized the objec­tive vio­la­tion of the pub­lic pro­cure­ment law pro­vi­sions of ANBest‑I as suf­fi­cient for a revo­ca­tion. The court clar­i­fied:

• The ANBest‑I also apply retroac­tive­ly, as the fund­ing was approved for the entire year.
• The fail­ure to car­ry out a pro­cure­ment pro­ce­dure by direct­ly com­mis­sion­ing the GmbH was a seri­ous breach of the applic­a­ble pro­cure­ment reg­u­la­tions.
• The revo­ca­tion was time­ly, as the one-year peri­od pur­suant to Sec­tion 49 (3) sen­tence 2 in con­junc­tion with Sec­tion 48 (4) HVwVfG only begins after the hear­ing pro­ce­dure has been com­plet­ed.
• The author­i­ty had exer­cised its dis­cre­tion with­out error of law.

Sub­jec­tive cul­pa­bil­i­ty is not required for the revo­ca­tion to occur. The revo­ca­tion is based on the objec­tive breach of duty. The prin­ci­ple of good faith (Sec­tion 242 BGB) also does not lead to the revo­ca­tion being invalid in this case, as the author­i­ty had express­ly reserved the right to a final review in the approval notice and it could not be con­clu­sive­ly clar­i­fied whether the author­i­ty was aware of the direct com­mis­sion­ing of the GmbH pri­or to the approval of the fund­ing.

Tips for pub­lic clients

• Ensure that ANBest‑I are ful­ly and clear­ly includ­ed in the case of retroac­tive approval
• Care­ful­ly doc­u­ment the audit pro­ce­dure and con­sul­ta­tion Ensure com­pli­ance with the over­rid­ing bud­getary prin­ci­ple of effi­cien­cy and econ­o­my

Tips for bid­ders and fund­ing recip­i­ents

• Pay atten­tion to pos­si­ble retroac­tive effects even when tem­porar­i­ly with­draw­ing from fund­ing
• Ensure com­pli­ance with pub­lic pro­cure­ment law even in the case of sup­pos­ed­ly “free” com­mis­sions if fund­ing is not ruled out in the long term
• Ensure doc­u­ment­ed con­sent of the spon­sor, do not assume tac­it accep­tance
• Sub­mit where-used lists in good time and in full