On 26 and 27 May 2025. The Ombudsman reported his participation in 2 proceedings pending by the Provincial Administrative Court in Warsaw and before the ultimate Administrative Court, which concern decisions issued by the Agency for Restructuring and Modernisation of Agriculture refusing farmers to grant agricultural payments due to the creation of ‘artificial conditions for gaining benefits’.
The current prevailing practice of the ARiMR (supported by administrative courts) is to completely exclude farmers from the payment strategy in a given calendar year, should they establish artificial conditions to get benefits.
Artificial conditions
The word ‘artificial conditions’ is simply a general clause contained in EU regulations on the financing of the common agricultural policy (which includes agricultural aid schemes). The general clause does not contain a definition which has been developed by the case law of the Court of Justice of the European Union. It follows from the caselaw of the TEU that erstwhile examining the existence of artificial conditions, authorities and courts must examine whether an nonsubjective and subjective component exists. The nonsubjective component is to mean the existence of specified circumstances as to show that the nonsubjective pursued by Union support schemes cannot be achieved. By the subjective element, the authority or court considers these nonsubjective circumstances by the prism of whether the creation of artificial conditions has been made in order to get an advantage contrary to the objectives of the payment scheme.
As the ECJ pointed out in its judgement of 7 April 2022 in Case C-176/20: ‘The facts which may be taken into account in this way include the conclusion, in breach of the applicable national law, of a contract of usage or the content of lending contracts which are the subject of the main proceedings, in peculiar if they consequence in that the grazing of the animals utilized is not carried out by Avio Lucos but by the owners of those animals.“
In this condition, the artificial conditions were to conclude a pasture usage contract for grazing cattle on it and to lend it to farmers to graze their cattle on it. The company then applied for reimbursement. The CJEU considered that the company’s conduct was intended to make artificial conditions to benefit from subsidies.
In its judgement of 12 September 2013, the C-434/12, in turn, considered that the artificial conditions were that 3 operators were directing applications for subsidies for the construction of PV farms on adjacent plots, in view of the personal, functional and economical links connecting those entities, which make the division of this task into 3 smaller, in fact an artificial division aimed at gaining benefits:
‘It follows from the order for mention that the task of the photovoltaic centre proposed by the celebrated Force was not taken into account for the purposes of EAFRD financing on the ground that, in the light of the circumstances of the main case, the competent national authority considered that it intended to circumvent the restrictions laid down in national government by agreeing with 3rd parties who themselves had submitted applications for assistance from the EAFRD support strategy in question, on the making an artificial breakdown of 1 task into 3 smaller projects.“
The ultimate Administrative Court, in its judgement of 5 July 2016 in Case II GSK 14/16, concluded that the artificial conditions were to apply for backing from associated entities which together exceed the legal area of land. In another situation, i.e. if 1 entity applied for funding, the backing would not be granted.
‘The submission by the set-up of respective twelve separate applications and the submission of agricultural parcels, which, together, would not qualify for aid due to over 300 hectares or would entitle to a simplification of payments, is the creation of artificial conditions, within the meaning of Article 5(3) of Regulation No 1975/2006.’
In conclusion, it can be said that ‘artificial conditions’ mean a situation in which a farmer or another entity (on paper) has fulfilled the conditions for payment or co-financing, but after examining its situation it turns out that it does not actually meet the conditions, but simply created its formal situation to get funding.
Where the Authority finds that artificial conditions have been created, the Authority shall impose sanctions in the form of ‘not granting any/any benefit’. This phrase is besides a general clause which does not have a definition but is defined in the case law.
The decisions of the authorities and the rulings of the Polish courts state in the majority that in the case of artificial conditions, the absence of any benefit means that the farmer is completely excluded from the strategy of all payments and subsidies in a given year (the alleged sanction mechanism). In turn, the case law, for example German, considers that the absence of any benefit means that payments and grants are available, but to a ceiling which the farmer would have reached if he had not created artificial conditions (the alleged correction mechanism). The approach of the German courts is more comparative to farmers in this regard, as it does not completely deprive them of subsidies.
On the occasion of the dispute, the Ombudsman referred 2 questions for a preliminary ruling to the Court of Justice of the European Union on what ‘any benefit’ meant. In the assessment of the RPO, differences in the explanation of the rules by the courts of different associate States lead to harm to Polish farmers and, in addition, creates disunity in the application of EU law between EU members. The RPO so asked the TEU to interpret these provisions and to find whether a sanctioning mechanics or a correction mechanics should apply in specified a situation. The intervention of the RPO in this respect and the favourable judgement of the TEU could bring tangible benefits to Polish farmers.
If you have any questions or doubts about the matter, delight contact our expert, Mr Piotr Włodawce: wlodawiec[at]procurent.com.pl
Authors:
Piotr Włodawiec – elder Partner, manufacture Lawyer
Mariusz Bonisławski – Legal Advisor
