Success of the Law Firm’s Client – a landmark court rulin

Thanks to the work of the Law Firm’s team, the Client, a leading manufacturer of paving blocks in Poland and Europe, signed a funding agreement with an institution which had so far consistently refused to conclude it. As a result of a positive verdict of the Supreme Administrative Court (NSA) (case no. I GSK 1019/22), upholding the verdict of the Voivodship Administrative Court in Warsaw (case no. VIII SA/Wa 185/22), the institution backed down from its previous position and concluded a co-financing agreement with the Client. The case deserves special attention because, to our knowledge, it represents the first practical application in Poland of the judgment of the EU Court in the Kerkosand case (T-745/17), which made a turnaround in the previous interpretation regarding the rules for maintaining SME status in the situation of changes in the shareholding structure of a company.

In the present case, the client submitted an application for funding in a competition in which one of the access criteria was that the company should have SME status. In the application, the company indicated that it had the status of a medium-sized enterprise. After the date of filing the application, the Customer acquired 100% of shares in another company, with which it was not associated as at the date of filing the application for co-financing. The project was selected for co-financing, but after verification of the documents submitted by the Customer in order to sign the co-financing agreement, the institution deemed the company not to meet the criteria for participation in the competition due to not having the status of an SME. In doing so, the institution pointed out that the two financial years rule set out in Article 4(2) of Annex I to the GBER (according to which SME status is lost or regained only after the employment or financial ceilings set for a large enterprise have been reached for two consecutive financial periods) does not apply to situations involving a change in the ownership structure of the enterprise, which it justified by previous CJEU case law and Commission decision-making practice.

The institution therefore argued that the loss of SME status of an entrepreneur takes place immediately, i.e. on the date of the acquisition of the business. In the court proceedings, however, the Firm’s lawyers successively pointed out the necessity to apply the latest jurisprudence in the case, initiated by the judgment of the EU Court in the Kerkosand case, which departs from the previous interpretation.

The above view was fully shared by the WSA in Warsaw, indicating that ‘the Authority cannot trivialise the Kerkosand judgment, considering it to be an individual judgment, issued in a specific case, moreover not containing a change in the interpretation of the law’. The judgment of the WSA was upheld by the Supreme Administrative Court, which dismissed the institution’s cassation appeal.

“The decisions of the Polish courts confirm that the acquisition of the majority of shares of an SME beneficiary by a large entity does not – contrary to the existing rules – result in an immediate change of SME status and therefore cannot lead to the loss of a subsidy or the refusal to grant it. These rulings are of key importance for all those who plan to acquire enterprises implementing projects with EU subsidies,” comments attorney-at-law Krzysztof Brysiewicz.

The case involved the Law Firm’s team consisting of attorney Krzysztof Brysiewicz, attorney Magdalena Porzeżyńska, apl. adw. Małgorzata Woźniak, apl. adw. Katarzyna Anioł and apl. r. Marek Kononowicz.