In the framework of Costaș, Negru & Asociații’s practice in the field of European funds, we discuss today Instruction no. 202/12.05.2023 of AMPOR 2014 – 2020 or more precisely on how the principle of security of legal relations in the field of European funds can be thrown into the air in the field of European funds.
1. The context in which Instruction no. 202/12.05.2023
The Instruction of the Regional Operational Program Management Authority (AMPOR) 2014-2020 within the Ministry of Investments and European Projects refers, as its name suggests, to the types of measures that Beneficiaries of financing contracts related to projects selected following calls 2.1 B “incubators ” and 2.2 A “SMEs”, dedicated to the Danube Delta Integrated Territorial Investment area must undertake them until the end of the sustainability period of the financed actions.
The Regional Operational Program (ROP) is a program funded by the European Union that supports the regions of the European Union that have a GDP per capita below 75% of the European average and aims to develop the infrastructure and the business environment.
ROP 2014-2020 has the general objective of increasing economic competitiveness and improving the living conditions of local and regional communities, by supporting the development of the business environment, infrastructure and services, for the sustainable development of regions, so that they can effectively manage their resources and capitalize on its potential for innovation and assimilation of technological progress [1].
Given the fact that competitive advantage represents a set of factors that condition a company’s competitiveness and performance in business, POR aims to support companies that have the potential to develop/maintain their market position by consolidating skills superior to the competition. Thus, it is intended to support companies operating in economic fields in which a competitive advantage can be developed and/or maintained and, in general, the development of their economic activity [2].
Priority axis 2 within the 2014-2020 POR (which is related to the AMPOR Instruction no. 202/12.05.2023) refers to improving the competitiveness of small and medium-sized enterprises.
AMPOR instruction no. 202/12.05.2023 refers to projects that refer to the financing of investments located in the area made up of 38 administrative-territorial units within the Danube Delta Biosphere Reserve, Tulcea County and the north of Constanța County, in the areas identified as priority within the Integrated Development Strategy Sustainable Development of the Danube Delta approved by HG no. 602/2016, area named for short ” ITI DD ” (Danube Delta Integrated Territorial Investments).
According to the Order of the Ministry of Regional Development, Public Administration and European Funds no. 5559/2017 regarding the approval of the support measure, consisting in the granting of state aid and de minimis aid for improving economic competitiveness by increasing labor productivity in small and medium-sized enterprises in the territory covered by the Integrated Territorial Investment of the Danube Delta through the Regional Operational Program 2014-2020, to be eligible for grant funding, projects had to meet several cumulative conditions, such as:
(i) the investment must be made in the territory covered by the ITI DD, in the urban environment (including villages belonging to it) for small and medium-sized enterprises (SMEs), respectively in the rural environment for medium-sized enterprises;
(ii) when submitting the funding application, the applicant must already have the place of project implementation registered as a main or secondary headquarters (point of work), unless the funding application proposes the establishment of a secondary headquarters (point of work) as a result of making the investment;
(iii) the activities proposed by the project, the investment, should target a single field of activity (CAEN class) which is the object of the project;
(iv) the period for carrying out the project activities, after the signing of the financing contract, is a maximum of 36 months, without exceeding the date of December 31, 2023. This can be extended by no more than double the initially provided period, under the conditions mentioned in the financing contract financing;
(v) the amount of non-refundable financing requested for a project is a minimum of 200,000 euros and a maximum of 1,000,000 euros;
(vi) the project must necessarily include an initial investment in tangible assets , financeable through regional state aid, under the conditions provided by the Applicant’s Guide – specific conditions for accessing funds related to the call for projects in which funding is requested. It is optional to include in the project investments in intangible assets financed by regional state aid or investments financed by de minimis aid.
For example, according to the Applicant’s Guide – specific conditions for accessing funds related to the call for projects POR/2018/2/2.2.A/ITI (” Applicant’s Guide “), sections 1.6 (project indicator) and 2.7.1 (regional aid for investments), initial investment means one of the following investment categories:
(i) Creation of a new production/service provision unit, in the field of activity (CAEN class) targeted by the investment;
(ii) Expanding the capacity of an existing unit, by increasing the volume of at least one product/service related to the field of activity (CAEN class) targeted by the investment;
(iii) Diversification of the production of an existing unit, through products/services that were not previously manufactured/provided in the unit, in the field of activity (CAEN class) targeted by the investment.
According to the same guide, in the context of the definition of the initial investment, “unit” means “production/service provision unit”, not a legal entity.
Moreover, the realization of an initial investment represents the project indicator that is the object of monitoring the implementation of the investment proposed by the project.
According to the Applicant’s Guide, the deadline for the achievement of the indicator is the end of the financial year following the year in which the implementation of the project is completed. Failure to comply with the indicator, i.e. failure to make an initial investment, consisting of one of the 3 categories of investments mentioned above, within the previously specified term, leads to the full recovery of the granted financing.
Among the categories of investments financed by state aid according to Order no. 5559/2017 we remind:
(i) construction works and expansion of the production/service provision spaces of SMEs, including related general utilities (water supply, sewerage, natural gas supply, heat agent, electricity, PSI);
(ii) the purchase of technological equipment, machinery, work installations, furniture, computer equipment, office equipment, of the nature of fixed assets;
(iii) the purchase of specific installations/equipment in order to obtain an energy saving, as well as systems that use renewable (alternative) energy sources to make the activities for which funding was requested more efficient.
According to art. 10 lit. b) the second and third sentences of Order no. 5559/2017, the space intended for the implementation of the project is, as a rule, the building (land and/or buildings) where the assets purchased through the project, such as machinery, production lines, etc., are installed, assembled and/or where these goods are used . In the case of those fields of activity that involve the use of equipment, machinery in different places, such as construction activity and the like, the space intended for the implementation of the project will be considered the space where the equipment, machinery is stored, parked.
The list of fields of activity for which non-refundable funding was granted (regional and de minimis state aid) are provided in the annex to Order no. 5559/2017.
The Applicant’s Guide stipulates that the beneficiary will comply, until the end of the project’s sustainability period, with the following conditions for granting financing, under penalty of termination of the contract and full recovery of the financing granted:
a) the beneficiary keeps its form of eligible legal organization, namely company or cooperative society;
b) the financed investment concerns the CAEN class specified as such in the financing request.
2. AMPOR instruction no. 190/23.11.2021 – a “gentle” and non-blunt instruction for beneficiaries
Instruction no. 202/12.05.2023 was preceded by AMPOR Instruction no. 190/23.11.2021 regarding the types of measures that Beneficiaries of financing contracts related to projects selected following calls 2.1 A “micro-enterprises”, 2.1 B “incubators” and 2.2 A “SMEs”, dedicated to the Danube Delta Integrated Territorial Investment area ( ITI DD), must undertake them during the period of implementation and sustainability of the financed actions.
Through the AMPOR Instruction no. 190/23.11.2021, certain obligations were imposed on the beneficiaries of non-refundable financing that did not exist for them at the time of signing the financing contracts according to the Applicant’s Guide and other applicable regulations. Some of these obligations remained in force even after the issuance of AMPOR Instruction 202/12.05.2023.
The obligations imposed by means of Instruction no. 190/23.11.2021 are less restrictive, more “gentle” than those imposed by Instruction no. 202/12.05.2023.
Among the main obligations imposed on project beneficiaries by means of Instruction no. 190/23.11.2021 were also those to undertake all the necessary measures for:
- a) conclude and implement contracts for the development of the activity at the headquarters/workpoint in the ITI DD area, according to the CAEN code for which the funding was granted;
- b) to ensure the taxation of work points established within the projects in the ITI DD area;
- c) to hire staff domiciled/with residence in the ITI DD area, in the context of supporting the functionality of the headquarters/workpoints in this area and the development of the local economy.
It can be seen that from the way these obligations are formulated in Instruction no. 190/23.11.2021 results that these obligations are means, respectively the beneficiary must make efforts to achieve these objectives, without certain results being imposed.
Within the Instruction no. 190/23.11.2021 provides that if the beneficiaries perform activities according to the CAEN code relevant for the project with the equipment/machinery purchased under the ROP projects outside the ITI DD area, they will present to the Intermediate Body (OI) / Management Authority (MA) copies of concluded contracts. It follows from the contents of this instruction that only if it is established that the duration of ongoing contracts outside the ITI area covers the entire duration of the project, sanctioning measures will be taken according to the financing contract.
3. The “turbulences ” brought by AMPOR Instruction no. 202/12.05.2023
Instruction no. 202/12.05.2023 was issued in the context of recommendations formulated by representatives of the European Commission following the conduct of an ITI-DD audit mission aimed at verifying the contribution of the financed projects to the economic development of the ITI DD area and compliance with the legal provisions regulating aid granted, recorded in the thematic audit report no. DAC614RO1394 (REGIO.EMPL.DAC.6/JCB/ic (2023)2767206), official version in Romanian communicated on 16.03.2023 (as it follows from the preamble of this instruction).
Instruction no. 202/12.05.2023 imposes on the beneficiaries of non-refundable financing certain excessive obligations during the sustainability period of the projects. These obligations are excessive because they had not been requested at the time when the conditions under which the grant was granted were established . At the same time, it can be argued that these obligations are established with a lot of delay, i.e. late, because they are established for the sustainability period of the projects.
The sustainability period is the period of maintaining the investment after the completion of the project implementation. Therefore, as a principle, the sustainability period does not imply additional obligations for the beneficiary, but only the maintenance of what was achieved during the implementation period of the project (maintenance of the investment).
Durability period in the case of projects covered by Instruction no. 202/12.05.2023 is 3 years old. Order no. 5559/2017 provides in art. 5 para. (5) that the investment financed by regional state aid must be maintained in the beneficiary region for a period of at least 3 years after the completion of the investments. This condition does not prevent the replacement of an installation or equipment that has become obsolete or has been destroyed during this period, provided that economic activity is maintained in the region concerned for the relevant minimum period.
The obligations imposed on the beneficiaries under Instruction no. 202/12.05.2023 should have been established from the beginning so that the beneficiaries know what they are assuming by participating in the call for projects and by signing the financing contract.
Basically, this instruction is issued with respect to projects that at the time of issuing this instruction were already in the durability period, so the durability period had already started. The issuer is aware of this, even in the name of the instruction being provided that it refers to measures that the beneficiaries of the financing contracts must undertake “until the end of the sustainability period of the financed actions”.
Instruction no. 202/12.05.2023 imposes on the beneficiaries certain obligations aimed at demonstrating the fulfillment of the following two requirements: (a) making an initial investment and (b) maintaining the investment in the ITI DD area.
a) Regarding the requirement to make an initial investment, Instruction no. 202/12.05.2023 stipulates that it is necessary for the newly established unit in the targeted area to demonstrate its autonomous capacity regarding operation in the ITI DD area, being operational in this area. A unit without any activity in the ITI DD area is not considered to have a stand-alone capability.
The autonomy of the newly created unit is demonstrated by the cumulative fulfillment of the following three criteria:
(i) Implementation of at least one economic contract (including purchase contracts) and at least one contract involving mobile equipment (purchased under the project), in the ITI DD area. The object of the contract(s) must correspond to the CAEN code mentioned in the financing contract;
(ii) Employment (in the context of the project) of at least one person domiciled/with residence in the ITI DD area;
(iii) Fiscal registration of unit/work point and mobile equipment/vehicles in ITI DD area.
b) Regarding the requirement to maintain the investment in the ITI DD area for the entire durability period, within the Instruction no. 202/12.05.2023 several obligations are foreseen, such as:
(i) equipment purchased under the project must be maintained in the ITI DD region, with only occasional use outside this area permitted;
(ii) the cumulative duration of contracts involving the use of mobile equipment in the ITI DD area must exceed the cumulative duration of contracts involving the use of equipment outside the ITI DD area, during the 3-year durability period.
Instruction no. 202/12.05.2023 expressly provides in art. V that subject to analysis depending on the specifics of each situation, projects that do not demonstrate the cumulative fulfillment of the two conditions (making an initial investment and maintaining the investment in the ITI DD area), in accordance with the provisions of art. II, III and IV of the instruction (briefly presented above), will return the non-refundable funding granted.
It can be noted that Instruction no. 202/12.05.2023 imposes certain result obligations in contrast to the means obligations provided for in Instruction no. 190/23.11.2021. These obligations represent a change in the rules of the game towards the end of the last half of the game (if we are to find a sporting equivalent of this legal issue). Continuing in the same sports register, obviously those involved in the game will be upset because changing the rules of the game during the game makes the outcome of the game completely unpredictable. They have trained for something and are faced with another reality. In the face of the new reality, the score almost doesn’t matter anymore. Athletes are entitled to dispute the score, they can justify themselves to the coach, the coach can further justify himself, etc.
In the same way, the beneficiaries of the projects in the ITI DD area found themselves during the sustainability period (probably some of them even towards the end of the sustainability period) with additional obligations to fulfill under the penalty of returning the non-refundable financing.
4. Conflict of Instruction no. 202/12.05.2023 with the principle of security of legal relations and with the principle of non-retroactivity
It can be argued that one of the most unpredictable obligations introduced by Instruction no. 202/12.05.2023 is to implement/execute at least one contract involving the mobile equipment purchased within the project in the ITI DD area.
There are situations in which, due to the nature of the activity (CAEN class provided for in the funded project), it is almost impossible to execute in the ITI DD area a contract involving the mobile equipment purchased within the project.
They are activities aimed at clients of public entities. These activities can only be carried out to the extent that the public entity (administrative-territorial unit) decides to contract works or services and the executor is appointed following a competitive procedure (e.g. tender). It is possible that during the implementation period and during the sustainability period of the project:
(i) no relevant contract shall be initiated/awarded in the ITI DD area
(ii) the beneficiary of the financing to participate in the auction/auctions or other competitive procedures without being designated the winning bidder in any procedure (simply another bidder submits a better offer), or
(iii) the beneficiary of the financing has signed the contract involving the equipment purchased within the project but has not been able to execute it during the durability period.
This category includes activities such as: road and highway construction works (CAEN class 4211), surface and underground railway construction works (CAEN class 4212), bridge and tunnel construction (CAEN class 4213), management monuments, historical buildings and other objects of tourist interest (class 9103), waste water collection and treatment (CAEN class 3700), non-hazardous waste collection (CAEN class 3811), hazardous waste collection (CAEN class 3812), treatment and disposal of non-hazardous waste (CAEN class 3821) or the treatment and disposal of hazardous waste (CAEN class 3822). All these activities are found in the list of fields of activity for which state aid is granted according to Order no. 5559/2017 (being provided in the annex to this order).
It can also be argued that although clients are not limited to public entities, it is very difficult to execute in the ITI DD area during the implementation and/or durability period of a contract in the field of repair and maintenance of aircraft and spacecraft (CAEN class 3316) – and this activity is listed in the list attached to Order 5559/2017.
Even if it could be argued that the beneficiaries chose these activities within the funded projects yet these activities were eligible, the funding authority determined that it could grant funding for these activities in the ITI DD area.
We appreciate that at the time of issuing Instruction no. 202/12.05.2023, AMPOR did not take into account that it imposes almost impossible obligations on the beneficiaries who carry out the activities listed above.
In addition, there may be situations in which the beneficiary has executed contracts with equipment purchased within the project both in the ITI DD area but also outside the ITI DD area and the period in which he performed outside the ITI DD area is longer than the one in which performed in the ITI DD area. To the extent that Instruction no. 202/12.05.2023 was issued at a time when the sustainability period of the project is coming to an end, it is possible that the beneficiary will no longer have the physical time to execute contracts with the equipment purchased in the ITI DD area because the period executed in the area ITI DD be greater than the period executed outside the ITI DD area.
In such situations, the beneficiaries are obliged according to Instruction no. 202/12.05.2023 to return the non-refundable funding granted.
This situation is unfair.
Beneficiaries covered by the provisions of Instruction no. 202/12.05.2023 faces a large dose of unpredictability of legal norms as a result of issuing this instruction. Practically, we can talk about the violation of the principle of security of legal relations .
This principle is not expressly regulated in Romanian law but has been recognized by jurisprudence, especially by the Constitutional Court. The constitutional court deduced this principle from the provisions of art. 1 paragraph (5) of the Constitution according to which ” In Romania, compliance with the Constitution, its supremacy and laws is mandatory “. This principle has been developed in the jurisprudence of the European Court of Human Rights and the Court of Justice of the European Union.
The principle of legal security requires that the legal rules are predictable for their recipients [3]. This requirement does not comply with the obligations mentioned above that were imposed on the beneficiaries by Instruction no. 202/12.05.2023.
Instruction no. 202/12.05.2023 violates the principle of security of legal relations and from the perspective of the lack of clarity of the moment in which it entered into force.
At art. XVIII stipulates that Instruction no. 202/12.05.2023 enters into force on the date of publication on the website www.inforegio.ro .
Instruction no. 202/12.05.2023 is published on this website, which can be identified at https://www.inforegio.ro/ro/implementare/instructiuni . However, there is no information on this site about the date of publication of this instruction on the site.
This fact raises questions about the date from which the obligations laid down for the beneficiaries contained in this instruction are applicable, given that the principle is that normative administrative acts enter into force from the date of public notice (publication).
The same uncertainty regarding the date of entry into force hangs over the other instructions published on the website www.inforegio.ro . Even in the case of these instructions, the publication date is not mentioned on the website.
In addition to violating the principle of legal security, certain provisions of Instruction no. 202/12.05.2023 are also susceptible to violation of the principle of non-retroactivity of the law .
Thus, art. VIII of Instruction no. 202/12.05.2023 states that ” Beneficiaries will submit to ADR SE , no later than 30 months from the beginning of the durability period (so that all management checks can be undertaken and the appropriate measures implemented), all relevant documents to verify compliance with the conditions imposed by Commission Regulation (EU) No. 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market in application of Articles 107 and 108 of the Treaty, according to this Instruction , as well as for verifying compliance with the obligations set out in the Instruction no. 190/23.11.2011 .”
Art. XI of Instruction no. 202/12.05.2023 provides that ” In the case of projects in sustainability that have currently exceeded the deadline provided for in Article VIII and do not demonstrate the fulfillment of the obligations to maintain the investment in the ITI DD area and to make an initial investment, according to the provisions of this Instruction , ADR SE has the obligation to draw up an irregularity alert , within a maximum of 30 calendar days from the entry into force of this Instruction, which will be sent to the attention of the Management Authority .”
Therefore, corroborating the provisions of art. VIII and art. XI of Instruction no. 202/12.05.2023 results that if upon the entry into force of Instruction no. 202/12.05.2023 more than 30 months have passed since the beginning of the sustainability period of a project and the beneficiary does not demonstrate that he has fulfilled the requirements for making an initial investment and maintaining the initial investment, according to the requirements of Instruction no. 202/12.05.2023, the beneficiary will be obliged to return the “non-refundable” financing received.
In this case we have an obvious violation of the principle of non-retroactivity of the law provided for in art. 15 para. (2) of the Constitution (” The law disposes only for the future, with the exception of the more favorable criminal or contraventional law “).
AMPOR instruction no. 202/12.05.2023 has the legal nature of a normative administrative act. The normative administrative act has a legal force inferior to the law, having the role of organizing the implementation of the law. That’s why, just like in the case of the law, the normative administrative acts cannot be retroactive either.
5. Conclusions
Beneficiaries dissatisfied with the violation through AMPOR Instruction no. 202/12.05.2023 of the rights acquired following the competitive procedure for submitting investment projects in the ITI DD area and the conclusion of the implemented financing contracts have the right to challenge the provisions of AMPOR Instruction no. 202/12.05.2023.
In addition to the general aspects of illegality of Instruction no. AMPOR no. 202/12.05.2023 presented above, it is necessary to analyze the specific situation of each beneficiary in order to establish both the incidence of the principles of the security of legal relationships and non-retroactivity as well as possible other reasons for illegality (e.g. the provisions of the financing application, the provisions of the contract of financing, the expiry period of durability until the date of issuance of Instruction No. 202/12.05.2023).
Costaș, Negru & Asociații can provide consultancy, assistance and legal representation of injured beneficiaries as a result of the issuance of AMPOR Instruction no. 202/12.05.2023.
This article was drafted, for the Costaș, Negru & Asociații – Lawyers’ Civil Partnership blog, by Dr. Bogdan Ioniță, lawyer, affiliated to the Aradj Bar Association.
Costaș, Negru & Asociații is a lawyers’ civil partnership with offices in Cluj-Napoca, Bucharest and Arad, providing legal assistance, representation and consultancy in a number of practice areas with a team composed of 17 lawyers and consultants. Details regarding legal services and the members of the team can be found on the website https://www.costas-negru.ro. All rights for the materials published on the company’s website and on social media belong to Costaș, Negru & Asociații, their reproduction being allowed only for information purposes and with the correct and complete disclosure of the source.
[1]Source: https://www.fonduri-ue.ro/por-2014
[2] Applicant’s Guide – Specific conditions for accessing funds related to the Call for Projects POR/2018/2/2.2.A/ITI, section 1.2, page 4. This guide is available at https://www.inforegio.ro/ro/ axis-prioritara-2/calls-launched/395-specific-guide-2-2-iti-imm .
[3] For details about the principle of legal security, see the article available at https://costas-negru.ro/se-poate-restrange-dreptul-de-a-profesa-al-medicilor-stomatologi/ .
