SUCCESS STORY. Subsidies for Preliminary Technical Projects: Favorable Ruling by the TSJA

IMPORTANT: This article analyzes a case decided in accordance with the applicable legal, administrative, and case law framework in effect at the time of its publication. The ruling concerns aid processed under the Order of January 18, 2012. Currently, any claim regarding grants, preliminary technical projects, eligible expenses, supporting documentation, loss of entitlement to payment, or repayment must be analyzed in accordance with the regulatory provisions applicable to the specific call for proposals, Law 38/2003, the General Law on Subsidies, the Consolidated Text of the General Law on Public Finance of the Regional Government of Andalusia, the Decree 282/2010 , and the regulations in force at the time of the specific case.

Abogados IN DIEM secured a favorable ruling from the TSJA, which held that preliminary technical plans for facility upgrades intended to demonstrate the technical and economic feasibility of the project are eligible for funding and, therefore, such funding cannot be denied on the grounds that they are included in the justified budget items.

Issues that arise in connection with preliminary projects often lead to disputes, since, in general, the regulations stipulate that investments may not begin until the applicant has been notified in writing that the project, in principle, meets the conditions set forth in the regulatory guidelines for being considered eligible for incentives, as was the case in the Order of January 18, 2012, Section 3.1.c.

In particular, the ruling of the High Court of Justice of Andalusia, Seville Division, Contentious-Administrative Chamber, First Section, issued in Appeal No . 476/2017, dated December 19, 2017, upheld the corresponding appeal and annulled the contested administrative decision of the Andalusian Agency for Innovation and Development, which had declared the loss of the right to receive the claimed incentive.

The issue centered on determining whether the preparatory technical work necessary to demonstrate the technical and economic feasibility of an investment could be included among the eligible expenses for a grant or whether, on the contrary, it should be considered an early start to the investment project.

The Legal Issue: Previous Projects and Eligible Expenses

When it comes to grants, one of the most sensitive issues is distinguishing between the preparatory expenses necessary to apply for or justify a grant and those actions that could be interpreted as the actual start of the subsidized investment.

This distinction is important because many regulatory frameworks make the grant contingent on the investment not having begun prior to a specific administrative notification. However, for certain business, industrial, or technical projects, it may be essential to have prior studies, documents, or technical plans that allow for defining the project, assessing its feasibility, and specifying the necessary investments.

Therefore, not all prior work can automatically be considered the start of the investment. It is necessary to analyze the nature of the expense, its purpose, the documentation provided, the description on the invoice, and its connection to the incentive application.

Considerations Regarding the TSJA Ruling

The TSJA notes that the subject matter of the dispute is a grant—a donation made for future purposes—and that, therefore:

1st.- The recipient assumes the burden of complying with all obligations established in the governing regulation or carrying out the behavior required by it.

2nd.- The nature of the grant, linked to the activity it aims to promote or subsidize, makes it essential to verify the fulfillment of the requirements that grant the right to its concession and that the purposes for which it is granted are met.

And, for these reasons, this places the recipient of the subsidy in a unique position, which is reflected in General Subsidy Law 38/2003 and in the applicable regional regulations, in that the recipient is required to submit to the relevant audits and, where appropriate, to repay the amounts received if they were obtained without meeting the required criteria.

The ruling states:

“The ruling has understood that invoice 22 was provided with the justification account and paid before the notification of the document referred to in the previously transcribed provision, without it being considered a preliminary feasibility study, as the plaintiff presented it to prove the investment.”

Article 3.1.a) of the Order of January 18, 2012, requires that projects be “technically, economically, and financially viable” in order to qualify.”

And subsequently, it continues:

“In order to submit the application, it was necessary to first prepare a project proposal that identified the investment activity to be carried out and allowed for an assessment of its technical and economic feasibility; however, the preparation of such a proposal cannot be considered the start of the investment activity, as is clear from Article 3.1.c) described above. The description of item 22 as a “general project” should be understood as preparatory work necessary for the submission of the project; otherwise, it would not be possible to determine the necessary equipment or the renovations required to the premises for carrying out the investment in the incentive application.”

The Administration has not proven that said invoice includes fees for project execution activities, nor is it inferred in any way from the documentation in the administrative file.

“Based on the foregoing, the appeal must be granted.”

Preparatory Work and Implementation of the Investment Project

The key to the case lay in determining whether the disputed invoice related to an activity carried out as part of the project or whether, on the contrary, it involved preparatory work necessary to properly submit the incentive application.

The TSJA held that, in order to apply for the grant, it was necessary to first develop a project that identified the investment initiative and allowed for an assessment of its technical and economic feasibility. Otherwise, it would not have been possible to determine the necessary equipment or the renovations to the premises associated with the investment.

This interpretation is important because it avoids an overly rigid reading of the regulatory provisions. If a prior technical expense is essential to defining the investment and does not constitute the physical execution of the project, its preparatory nature—and, where applicable, its eligibility for funding—can be justified, provided that the call for proposals and the documentation in the file allow for it.

Legitimate Expectations, Legal Certainty, and the Assessment of Evidence

The defense in the case was based on the violation of legitimate expectations and legal certainty, as well as on an error in the assessment of the evidence. These principles take on particular importance in administrative proceedings involving grants, where the government must act in a consistent, well-reasoned manner that respects the legitimate expectations of the recipient.

When the Administration initially accepts certain documentation, processes the case, and subsequently declares that the right to collection has been forfeited, it is essential to analyze whether that decision is sufficiently justified and whether it is based on a correct assessment of the facts and the documentation provided.

In this case, the ruling took into account that it had not been proven that the disputed invoice included fees for project implementation activities, nor that such a conclusion could be drawn from the documentation in the administrative file.

Outcome of the procedure

The proceedings were led by our colleague Casimiro Galán Garrido, resulting in the client recovering a significant sum of money that was used to recoup the investment made.

The ruling overturned the administrative decision that had declared the loss of the right to receive the incentive, recognizing that the technical work in question could be considered preparatory and necessary for the submission of the project.

Conclusion: Grants and Eligible Prior Technical Projects

Preliminary technical projects related to grants may be included provided that their necessity for the investment project is demonstrated and they allow for the project’s feasibility to be verified. It is essential to demonstrate that they are considered preparatory work and, under no circumstances, may they include fees for project implementation activities.

In any case, this type of expense—regardless of the applicable regional regulations—will continue to be highly controversial. Therefore, it is recommended that the utmost caution be exercised when considering these expenses as part of the items to be subsidized, justified, or claimed.

If you need legal representation in a dispute involving any grant, loss of entitlement to funds, reimbursement, justification of expenses, or previously eligible technical projects, please contact our team of attorneys specializing in Administrative Law and Administrative Litigation.

Experts in grants, refunds, and administrative appeals

At IN DIEM Abogados, we provide legal advice and representation to companies, professionals, organizations, and individuals in proceedings related to grants, public aid, refunds, loss of entitlement to payment, justification of expenses, and administrative appeals.

Our team handles cases that require a technical assessment of the administrative record, the applicable regulations, the supporting documentation, and the government’s actions. In these types of proceedings, legal counsel helps anticipate risks, organize the evidence, and devise an appropriate defense strategy.

• Defense against decisions ordering the repayment of grants or the revocation of the right to receive grants.
• Challenging Administrative Decisions Regarding Public Aid.
• Advice on documenting eligible expenses and preparing supporting documentation.
• Administrative and judicial-administrative remedies against the government.
• Analysis of regulatory frameworks, calls for proposals, and grant applications.

If you have received an unfavorable administrative decision regarding grants or need to review the justification for public aid, you can contact our team to receive an initial legal assessment.

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