High Court Rules on EU Funding Clawback Limits in Riverside Park Ltd Case

Introduction

In the High Court of Justice case “Riverside Park Ltd v Secretary of State for Levelling Up, Housing and Communities,” the key topics encompass EU funding clawback rules, the discretionary powers of domestic authorities in clawback matters, and the principles of EU regulation continuity post-Brexit. Justice Fordham J examines the interplay between EU law and national agreements, the duty to adhere to previously established policies, and the administration of justice in relation to clawback provisions.

Key Facts

Riverside Park Ltd received EU funding for an office building project with a 20-year economic lifespan under the ERDF. Due to a proposed shift from office use to housing, which was not part of the initial funding agreement, the Department considered clawing back some of the funds. The key legal questions involved the interpretation of EU law on fund retention, the contractual clawback provision validity, and whether the refusal to provide relief from clawback was lawful.

Legal Principles

EU Clawback Provisions vs. Domestic Clawback Provisions

The judgment scrutinized whether UK authorities are entitled to exercise domestic clawback provisions that exceeded the five-year period stipulated by EU Regulations 1260/1999 and 1083/2006, which formed part of UK law. The principles from the CJEU cases “Ancona,” “Järvelaev,” and “Achilleion” were invoked, establishing that EU law “exclusively determines” the conditions for retaining EU funding and precludes national legislation and practices that impose additional durability constraints.

Policy Adherence and Decision-Making Discretion

The ruling underscored the importance of adhering to established internal policies when making discretionary decisions, referencing the “Lumba” and “Mandalia” principles. It considered whether the May 2011 policy decision required ongoing consideration, and whether the Department’s divergence from this position in the 2022 Decisions was justified.

Method of Calculating Clawback Quantum

The judgment also addressed the legality of using a ‘Straight-Line Method’ for determining clawback amounts, weighing its reasonableness against alternative methods like the ‘sum of the years digits method’, considering asset depreciation and the purpose of the grant funding.

Outcomes

EU-Legality Issue

The court found the Department’s interpretation of the EU Regulations as allowing for a longer national clawback period than specified by EU law to be incorrect, thus rendering the UK’s 20-year clawback provision unenforceable against Riverside.

Delay Issue

Fordham J rejected the Department’s argument that Riverside was out of time for challenging the clawback provision, upholding the principle that legal validity can be contested when enforceability of the provision is actually at issue.

Unreasonableness in Refusal of Relief Issue

While the potential unreasonableness of the refusal to provide relief from clawback due to inconsistent policy application and fettering of discretion were contemplated, these points were found not determinative due to the case’s resolution on other grounds.

Straight-Line Method Issue

The court deemed the use of the ‘Straight-Line Method’ a matter of evaluative judgment within the Department’s reasoned discretion, supporting its use for calculating partial clawback.

Conclusion

The “Riverside Park Ltd v Secretary of State” case represents a critical examination of how domestic legal provisions correlate with EU law requirements, the boundaries of discretionary powers in executing contracts, and the adherence to both express and implied internal policies. The judgment reinforces the principle that EU Regulations have primacy over national provisions which are deemed incompatible, and it underscores the procedural importance of reasonably engaging with established policies. The case offers significant guidance on the continued application of EU law in UK after Brexit, and the potential pitfalls of ignoring internal policies when making administrative decisions.