Precedent set as court rules municipality need not return EU funds to state

Rõuge Municipality signage and accordion player.
Rõuge Municipality signage and accordion player. Source: Mana Kaasik

A South Estonian municipality won a recent court case against a state agency over the confiscation of over €300,000 in European Union funding after the municipality delayed on a procurement project in 2020, ETV news show "Aktuaalne kaamera" (AK) reported Saturday.

The cause of the delay was the arrival of winter, in November that year, which, the municipality adjudged, made it irrational to press on with asphalting work done as part of a sports center development.

The case is one of several where the state, more specifically through the  State Shared Service Center (RTK), is claiming back significantly-sized EU grants to local projects.

Mayor of Rõuge Britt Vahter (Loome Koos electoral alliance) said that: "Fundamentally, Rõuge municipality has the right to retrieve the €320,000,  but this was not obtained, something which has played an important role in [the municipality's] difficult economic situation, as our budget is very, very small."

Rõuge Municipality was ordered to recover 25 percent of the subsidy, due to the violation of procurement conditions.

Meanwhile RTK subsidy development department chief Urmo Merlia told AK that: "The first-tier court judgment did not deal with the limitation of the EU competitiveness in great detail. Our goal here is to get legal clarity."

Mayor Vahter called the stated going to court against the RTK and therefore the Estonian state a situation which "doesn't seem normal", adding that the case acts as a disincentive to local governments to apply for EU funding, should they subsequently be penalized for changes made to a funded project.

In the Rõuge case, the local government decided pressing on with asphalting work in November, by which time the snow had arrived, did not make sense, prompting it to extend the procurement project, Mayor Vahter said.

In 2020, Rõuge requested EU funding to build an asphalt rollerblading track and artificial snow production facility at the Haanja recreation and sports center, 15km south of Võru city.

The disputed tender however meant work got delayed until August, it started in earnest, while asphalting work did not start until November, by which time it had started snowing.

The Rõuge Municipality says it had repeatedly asked the RTK for advice on whether the project could be extended, but did not get a clear response.

 Urmo Merila  was unable to comment on the specific case, but told AK he thought the municipality would have received an answer.

In the meantime the municipality went ahead with the delayed project, but in May 2021 the RTK announced the municipality had been at fault for doing so in that way.

The municipality then appealed; the first-tier Tallinn Administrative Court found that Rõuge Municipality had not been in violation of the Public Procurement Act in extending the procurement terms, thus setting a precedent.

The RTK is likely to appeal this decision, however, AK reports, to the second-tier circuit court.

The RTK is currently involved in 24 pending court cases, with a local municipality being the other party in nine of these cases, all in relation to procurement conditions.

Other examples include the development of a central square in the town of Valga-Valka, on the Estonian-Latvian border, the University of Tartu's Delta building, and the Ida-Viru Central Hospital.

The RTK has financed over 5,000 projects all told, AK reports.

Rõuge Rural Municipality includes the town of the same name, and had as of 2019 a population of 5,427, across an area of 933 sq km.


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Editor: Andrew Whyte, Marko Tooming

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