PFR Lawsuit After Years – How to Effectively Defend Against Subsidy Repayment Demands?
In recent months, an increasing number of entrepreneurs who benefited from government assistance during the SARS-CoV-2 virus pandemic have been receiving lawsuits demanding the return of financial subsidies granted under the Financial Shield program of the Polish Development Fund (PFR). The number of lawsuits filed by PFR exceeds 16,000, and the claimed amounts often reach several hundred thousand zlotys. However, many of these cases end with judgments dismissing PFR’s claims, with courts ruling in favor of entrepreneurs. In this article, we discuss the basis for PFR’s claims and the arguments that can lead to successful dismissal of the lawsuit.
Why Does PFR Demand Subsidy Repayment?
In lawsuits filed against entrepreneurs, PFR demands the return of all or part of the subsidy paid, claiming alleged failure to meet the conditions for its write-off. PFR most commonly relies on:
- Alleged false data contained in declarations submitted in applications for subsidy grants or write-offs – e.g., lower than declared revenue decline or failure to maintain the employment level required to receive the subsidy;
- Suspected risk of abuse – PFR, acting solely on the basis of a “negative recommendation” from the Central Anti-Corruption Bureau (CBA), which contains no specific information, alleges that there is a justified risk of corruption, economic crimes, or money laundering regarding the given entrepreneur;
- Failure to meet the conditions for subsidy write-off – often these claims are based on laconically formulated information from, for example, the National Tax Administration, concerning individual conditions for subsidy write-off, such as the actual revenue decline of the entrepreneur.
Filing a lawsuit is preceded by PFR issuing a negative decision regarding exemption from the obligation to repay all or part of the subsidy.
What Arguments Support Dismissal of PFR’s Lawsuit for Subsidy Repayment?
1. Failure to Prove the Claim
In many cases, PFR does not present any credible evidence to confirm that the defendant entrepreneur filled out the subsidy application or write-off application untruthfully, or that there are grounds for refusing subsidy write-off. The only “evidence” proposed by PFR often consists of laconic (and frequently anonymous) letters from the National Tax Administration or the Central Anti-Corruption Bureau. These indicate general “negative recommendations” regarding the entrepreneur.
Common courts rightly point out that the burden of proof for demonstrating the grounds for claiming subsidy repayment rests with the plaintiff (PFR). The entrepreneur’s obligation to repay the subsidy cannot be merely presumed based on the aforementioned documents. As long as it has not been proven that a given entrepreneur provided false data in their declarations (e.g., that their revenue decline was actually smaller than declared) or that there is a risk of abuse in their case (e.g., due to prior criminal record), a claim based on the entrepreneur’s obligation to repay the subsidy on this basis should not be granted.
2. PFR’s Inability to Rely on CBA “Negative Recommendations”
In many cases, claiming subsidy repayment based on receiving negative CBA recommendations finds no support in the content of the contract concluded between the entrepreneur and PFR. This is because the original regulations of Financial Shield 1.0 did not provide for this type of condition for refusing to write off the repayment obligation or obligating subsidy repayment. It only appears in later versions of these regulations. A contractual clause authorizing PFR to unilaterally and unlimitedly amend the regulations should be deemed invalid. Such a clause cannot authorize making changes that would violate essential elements of the contract. Therefore, if an entrepreneur concluded a contract with PFR during the period when the original wording of the regulations was in effect, a CBA recommendation should not constitute grounds for obligating them to repay the subsidy.
3. Meeting the Conditions for Subsidy Write-off
It is worth analyzing the subsidy settlement. In many cases, entrepreneurs met all conditions for partial or full subsidy write-off: they conducted business, did not lay off employees, demonstrated losses, etc. Even if errors appeared in the form, such as incorrect marking of some answers, they can be corrected and cannot automatically result in a demand for repayment of the entire subsidy.
4. PFR’s Actions Contrary to Principles of Social Coexistence
According to Article 5 of the Civil Code, one cannot exercise their right in a manner that would be contrary to the socio-economic purpose of that right or to the principles of social coexistence. The Financial Shield program was part of the government’s anti-crisis policy. Its purpose was, among other things, to ensure liquidity and financial stability during serious disruptions in the economy due to the effects of the COVID-19 pandemic.
In many cases, entrepreneurs received subsidies and fulfilled their objectives (maintaining operations and employment). Despite this – after years – they receive demands for full repayment of the aid, often not based on any reliable evidence.
Courts recognize that demanding repayment of a subsidy used in accordance with its intended purpose – without proven violations – may be contrary to the principle of state loyalty to citizens and undermines trust in the reliability of public institutions. Furthermore, courts assess such actions by PFR as contrary to the very idea of the Financial Shield. This results in complete dismissal of the lawsuit.
Summary
PFR’s claims for financial subsidy repayment are not always justified. Many of them, filed en masse years after the aid was granted, are based on questionable factual and legal grounds. Courts are increasingly siding with entrepreneurs who have demonstrated that they acted in good faith and in accordance with the program’s purpose.
When PFR files a lawsuit, the court often issues a payment order in summary proceedings. However, this does not in any way determine the further course of proceedings or its outcome. The entrepreneur has the right to file an objection to such an order. This will result in the order losing its force and the case being heard by the court in “ordinary” proceedings. If an order has not been issued, the entrepreneur is served with a copy of the lawsuit, obligating them to file a response.
It is therefore essential to take action within the appropriate timeframe. As a general rule, within fourteen days, both in the case of service of the lawsuit and the payment order. Failure to file an objection to the payment order will lead to it becoming final. A final payment order, after being granted an enforcement clause, constitutes grounds for enforcement proceedings by a bailiff. In turn, failure to file a response to the lawsuit within the deadline may lead to a default judgment, which is automatically granted immediate enforceability. Consequently – it too can become the basis for enforcement proceedings.
Have you received a lawsuit from PFR for subsidy repayment? Don’t ignore it!
You have only 14 days to respond. Lack of response can result in a final judgment and bailiff enforcement.
Many cases end with dismissal of PFR’s claim – but this requires professional legal defense.
Contact us today and find out how to effectively defend yourself against PFR’s claim.
