We successfully represented the city of Rakvere in a lawsuit against the financial correction decision of the State Support Services Centre (SSSC). The SSSC claimed back a 200,000 euro grant from the city of Rakvere in connection with the amendment of the construction contract for building the work and technology centre for basic schools.

The city of Rakvere was forced to extend the public contract in 2021 due to the outbreak of the Covid-19 virus among its staff and the resulting stoppage of the construction work. In addition, the delay in the execution of the contract was caused by the effects of the war in Ukraine, which delayed the delivery of three pieces of equipment ordered.

However, in both cases, the SSSC considered the extension of the public contract illegal.

The pandemic and the effects of the war in Ukraine

However, the Tallinn Administrative Court ruled that the SSSC’s financial correction decision was formally and substantively unlawful. Firstly, the SSSC made a substantive error in changing the legal basis of its decision during the court proceedings.

Regarding the extension of the time limit for the performance of the public contract, the Court found that the contract provided provisions for modifying the contract on the grounds of force majeure, one of which was the global pandemic. The Court also found that the resulting delay in performance was not in any way to the contractor’s benefit since the contractor only received payment once the works under the contract had been carried out.

The modification of the contract due to the delay in the delivery of the equipment was also allowed since the war in Ukraine, which inevitably delayed the delivery of the equipment, was beyond the parties control, and they could not have prevented its consequences.

Objective of the receiver of the grant

Finally, it is also worth noting the summary conclusion of the Administrative Court’s judgment: “In the Court’s view, the applicant has rightly argued that, in a situation where the application of sanctions or remedies does not result in the equipment arriving more quickly, the respondent cannot require the applicant to act in one way or another to avoid the financial correction decision.”

This sentence reflects well the gap between the administrative practice of the SSSC and real life. Thus, in its contested decisions, the SSSC did not want to consider the fact that the receivers of the grants have a primary responsibility towards their projects – to complete the school building, the kindergarten, or another building of public interest. If some things are not delivered for objective reasons even when the grant receiver sanctions the contractor the ordered things will not be delivered any faster.

Fortunately, the courts have mostly based their decisions in the last year on what is within the power of the grant receiver and what is reasonable rather than on a mechanical application of the law by the SSSC.

Our services and client team

The city of Rakvere was represented in the dispute by senior associate Mario Sõrm and partner and counsel Kadri Härginen.