Mikroregion Porta Bohemica v Odvolací finanční ředitelství (C-539/24)

Contents

Judgment of the Court (First Chamber)27 November 2025^note(Reference for a preliminary ruling — Protection of the European Union’s financial interests — Regulation (EC, Euratom) No 2988/95 — Concept of irregularity — Article 1(2) — Limitation periods — Article 3 — Starting point and duration of the limitation periods — Project co-financed through EU resources)In Case C‑539/24,REQUEST for a preliminary ruling under Article 267 TFEU from the Nejvyšší správní soud (Supreme Administrative Court, Czech Republic), made by decision of 31 July 2024, received at the Court on 7 August 2024, in the proceedingsMikroregion Porta BohemicavOdvolací finanční ředitelství,THE COURT (First Chamber),composed of F. Biltgen, President of the Chamber, T. von Danwitz, Vice-President of the Court, acting as Judge of the First Chamber, I. Ziemele, A. Kumin and S. Gervasoni (Rapporteur), Judges,Advocate General: M. Campos Sánchez-Bordona,Registrar: A. Calot Escobar,having regard to the written procedure,after considering the observations submitted on behalf of:– Mikroregion Porta Bohemica, by J. Sedláček, advokát,– the Czech Government, by J. Očková, M. Smolek and J. Vláčil, acting as Agents,– the European Commission, by J. Hradil and C. Valero, acting as Agents,having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,gives the following

Judgment

1This request for a preliminary ruling concerns the interpretation of Article 3(1) and (3) of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests (OJ 1995 L 312, p. 1).

2The request has been made in proceedings between Mikroregion Porta Bohemica and the Odvolací finanční ředitelství (Appellate Financial Directorate, Czech Republic) (‘the fiscal authority’) concerning the limitation period for irregularities in public contracts awarded in the context of a project financed in part by resources of the European Union.

Legal context

European Union law

3Under Article 1 of Regulation No 2988/95:1. For the purposes of protecting the [European Union’s] financial interests, general rules are hereby adopted relating to homogenous checks and to administrative measures and penalties concerning irregularities with regard to [EU] law.2. “Irregularity” shall mean any infringement of a provision of [EU] law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the [European Union] or budgets managed by [it], either by reducing or losing revenue accruing from own resources collected directly on behalf of the [European Union], or by an unjustified item of expenditure.’

4Article 3 of that regulation reads as follows:1. The limitation period for proceedings shall be four years as from the time when the irregularity referred to in Article 1(1) was committed. However, the sectoral rules may make provision for a shorter period which may not be less than three years.In the case of continuous or repeated irregularities, the limitation period shall run from the day on which the irregularity ceases. In the case of multiannual programmes, the limitation period shall in any case run until the programme is definitively terminated.The limitation period shall be interrupted by any act of the competent authority, notified to the person in question, relating to investigation or legal proceedings concerning the irregularity. The limitation period shall start again following each interrupting act.However, limitation shall become effective at the latest on the day on which a period equal to twice the limitation period expires without the competent authority having imposed a penalty, except where the administrative procedure has been suspended in accordance with Article 6(1).2. The period for implementing the decision establishing the administrative penalty shall be three years. That period shall run from the day on which the decision becomes final.Instances of interruption and suspension shall be governed by the relevant provisions of national law.3. Member States shall retain the possibility of applying a period which is longer than that provided for in paragraphs 1 and 2 respectively.’

5Article 6(1) of that regulation provides:‘Without prejudice to the … administrative measures and penalties [of the European Union] adopted on the basis of the sectoral rules existing at the time of entry into force of this Regulation, the imposition of financial penalties such as administrative fines may be suspended by decision of the competent authority if criminal proceedings have been initiated against the person concerned in connection with the same facts. Suspension of the administrative proceedings shall suspend the period of limitation provided for in Article 3.’

Czech law

6Paragraph 44a(9) of zákon č. 218/2000 Sb., o rozpočtových pravidlech a o změně některých souvisejících zákonů (Law No 218/2000 on budgetary rules and on the amendment of certain related acts), in the version applicable to the dispute in the main proceedings, provided:‘Levies imposed for a breach of budgetary discipline as well as penalties are administered by the fiscal authorities in line with [zákon č. 280/2009 Sb., daňový řád (Law No 280/2009 establishing the Tax Code)]. … An entity that has infringed budgetary discipline has the position of a tax subject in the administration of levies imposed for a breach of budgetary discipline. Upon request, the fiscal authority provides information obtained in the administration of levies to the administrative authority that has decided to grant funds from the State budget, State financial assets, a State fund, or the National Fund, and to the authority entitled to oversee the granting of such funds and also to oversee the utilisation of funds from the State budget or other State resources, provided that the information pertains to the administration of a levy imposed for a breach of budgetary discipline; that applies also to competent EU authorities and to administrative authorities taking part in the administration of such funds granted from abroad. A penalty incurred as a result of a breach of budgetary discipline prior to a payment notice being drawn up is due within 30 days of the delivery of the payment notice. The amount of the levy and penalty can be assessed within 10 years from 1 January of the year following the year in which the breach of budgetary discipline occurred.’

The dispute in the main proceedings and the questions referred for a preliminary ruling

7Mikroregion Porta Bohemica is a voluntary association of municipalities under Czech law with legal personality. By decision of the Ministerstvo životního prostředí (Ministry of the Environment, Czech Republic) of 4 April 2014 and by contract of 15 April 2014, it received financing from various sources for a project aimed at drawing up a digital flood plan and acquiring a reporting and alert system for municipalities within its territorial jurisdiction.

8That financing was to cover 90% of the eligible costs of that project, 85% of those costs (5341 683.05 Czech koruny (CZK), approximately EUR 215000) being financed by EU resources from the Cohesion Fund, and 5% (CZK 314 216.65, approximately EUR 12500) from resources from the Czech National Environment Fund. Mikroregion Porta Bohemica financed the remaining 10% (CZK 628 433.30, approximately EUR 25000) from its own funds.

9Mikroregion Porta Bohemica was the subject of a fiscal inspection between 26 February 2020 and 3 September 2021, which identified various failures in the procedure for the award of a works contract which it had carried out with a view to implementing that project, namely, in particular, the failure to exclude from that procedure several tenders which did not comply with the tender specifications of that contract, the unlawful extension of the period for performance and the failure to publish that contract on its website within the prescribed periods. Following that inspection, the fiscal authority issued, on 10 September 2021, two payment notices for breach of budgetary discipline, ordering recovery from Mikroregion Porta Bohemica of CZK 1259646 (approximately EUR 50500) and CZK 74089 (approximately EUR 3000) respectively, that is to say, a total amount corresponding to 23.58% of the financing received.

10On 9 December 2022, the fiscal authority corrected the wording of one of the payment notices and rejected Mikroregion Porta Bohemica’s complaint challenging the sums charged to it.

11Mikroregion Porta Bohemica challenged the decision rejecting its complaint before the Krajský soud v Ústí nad Labem (Regional Court, Ústí nad Labem, Czech Republic), which annulled that decision on the ground that the time limit for the initiation of proceedings provided for by the first subparagraph of Article 3(1) of Regulation No 2988/95, namely a period of four years from when the irregularity was committed, had expired on the date on which the fiscal inspection began and that, at the time when the amount of the sums to be repaid was established, the time limit for the adoption of a decision on the obligation to repay the aid, referred to in the fourth subparagraph of Article 3(1) of that regulation, had also expired.

12The fiscal authority brought an appeal on a point of law against the judgment of the Krajský soud v Ústí nad Labem (Regional Court, Ústí nad Labem) before the Nejvyšší správní soud (Supreme Administrative Court, Czech Republic), which is the referring court.

13Before that court, the fiscal authority submits, first, that Regulation No 2988/95 does not apply to the irregularity found in full, but only to the part of that irregularity corresponding to the rate of EU co-financing. There is therefore nothing to preclude the application of the period provided for by Paragraph 44a(9) of Law No 218/2000, in the version applicable to the dispute in the main proceedings, in respect of the funds made available to Mikroregion Porta Bohemica by the National Environment Fund. Second, the fiscal authority takes the view that, in accordance with Article 3(3) of Regulation No 2988/95, Paragraph 44a(9), which provides for a period of 10 years for the adoption of a decision establishing the amount due for a breach of budgetary discipline, allows the Czech Republic to apply a longer period than that laid down in Article 3(1) of that regulation.

14On the first point, the referring court is uncertain, in particular, as to the consequences to be drawn from the judgment of the Court of Justice of 13 July 2023, Napfény-Toll (C‑615/21, EU:C:2023:573), delivered in relation to value added tax (VAT), and the fact that the European Union and the Member States exercise shared competence in the field of economic, social and territorial cohesion and environmental matters. It asks, in essence, whether or not, in the case of projects financed from both EU and national resources, Regulation No 2988/95 must apply to the entirety of the financing.

15On the second point, the referring court states that it has doubts, as the Court’s case-law stands, as to whether Article 3(3) of Regulation No 2988/95 allows Member States to provide for a longer limitation period only for the adoption of a decision imposing a penalty and to apply, as to the remainder, the time limits laid down in Article 3(1) and (2) of that regulation. It also asks whether the Member States may amend the starting point of the limitation period for the adoption of such a decision, by providing that that period is to run from the first day of the calendar year following that in which the irregularity was committed, and not from the date on which the irregularity was committed.

16In those circumstances the Nejvyšší správní soud (Supreme Administrative Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:(1) Does [Regulation No 2988/95] permit:(a) National legislation which, within the meaning of Article 3(3) of the [r]egulation, sets a longer time limit for a decision about a case (here of 10 years) than that based on the fourth subparagraph of Article 3(1) of the regulation, without, at the same time, expressly laying down a separate time limit for the initiation of proceedings, as provided for by the first subparagraph of Article 3(1) of Regulation No 2988/95?(b) A Member State to establish, as the start of the time limit for the adoption of a decision, the first day of the next calendar year, instead of the time when the irregularity occurred?(2) If the answer to part (a) of the first question is affirmative, does Regulation [No ]2988/95 permit a Member State that has exercised its right under Article 3(3) of the regulation to commence proceedings within a time limit that is longer than that based on the first subparagraph of Article 3(1) of Regulation [No ]2988/95? Or is it necessary – in the event that national legislation does not provide for a special time limit for the commencement of proceedings – to proceed in line with the first subparagraph of Article 3(1) of Regulation [No ]2988/95 and commence the proceedings within the time limit laid down therein?(3) Where irregularities, within the meaning of Article 1(1) of Regulation [No ]2988/95, have arisen in the financing of projects related to an EU policy and in relation to subsidies provided in part from EU resources and in part from resources of the Member State’s budget, is it necessary to proceed solely in line with Regulation [No ]2988/95 (including the time limits and definitions), and hence, to apply the regulation to the irregularity in full? Or is it necessary to proceed in that way only in relation to a severable portion of the subsidy that is provided from EU resources and, by contrast, to proceed in line with national legislation in relation to the severable portion provided from a Member State’s budget?’

Consideration of the questions referred

The first part of the first question and the second question

17By the first part of its first question and by its second question, which it is appropriate to examine together, the referring court asks, in essence, whether Article 3(3) of Regulation No 2988/95 must be interpreted as meaning that a Member State which has not made use of the option of providing for a limitation period for proceedings which is longer than the four-year period laid down in the first subparagraph of Article 3(1) of that regulation may, for the adoption of a decision imposing a penalty, provide for a period greater than twice that four-year period. If the answer is in the affirmative, the referring court asks what period must, in such a case, be applied by that Member State in relation to the initiation of proceedings.

18The first and second subparagraphs of Article 3(1) of Regulation No 2988/95 provide that the limitation period for proceedings in respect of irregularities liable to affect the protection of the financial interests of the European Union is, in principle, four years from the time when the irregularity was committed or, in the case of a repeated or continuous irregularity, from the day on which that irregularity ceased.

19The fourth subparagraph of Article 3(1) of that regulation imposes an absolute limit applying to the time-bar of legal proceedings in respect of an irregularity, that limitation becoming effective at the latest on the day on which a period equal to twice the limitation period laid down in the first subparagraph of Article 3(1) expires without the competent authority having imposed a penalty, except where the procedure has been suspended in accordance with Article 6(1) of that regulation (judgment of 6 February 2025, Emporiki Serron – Emporias kai Diathesis Agrotikon Proionton, C‑42/24, EU:C:2025:56, paragraph 39).

20That absolute limitation period helps to ensure legal certainty for economic operators by preventing the limitation period of proceedings in respect of an irregularity from being extended indefinitely by repeated interrupting acts (see, to that effect, judgment of 6 February 2025, Emporiki Serron – Emporias kai Diathesis Agrotikon Proionton, C‑42/24, EU:C:2025:56, paragraph 40).

21Lastly, Article 3(3) of Regulation No 2988/95 provides that Member States are to retain the possibility of applying a longer period than those provided for in Article 3(1) and (2).

22It follows from those provisions that the reference to Article 3(1) of Regulation No 2988/95 in Article 3(3) of that regulation allows Member States to apply only a longer period than the four-year limitation period for proceedings set out in the first subparagraph of Article 3(1). Moreover, the latter period is the only one of which the duration is laid down in that paragraph.

23By contrast, Article 3(3) of Regulation No 2988/95 does not authorise Member States to derogate from the rule laid down in the fourth subparagraph of Article 3(1) of that regulation, under which the duration of the limitation period for adopting a decision imposing a penalty is in all cases to be no more than twice the limitation period for proceedings, except where the administrative proceedings have been suspended in accordance with Article 6(1) of that regulation, as a result of the initiation of criminal proceedings.

24In that regard, the Court has already held that, where a Member State makes use of the option provided for in Article 3(3) of Regulation No 2988/95 of applying a longer limitation period than the four-year period for the initiation of proceedings, laid down in the first subparagraph of Article 3(1) of that regulation, the absolute limitation period for the adoption of such a decision must be calculated by reference to that longer period (see, to that effect, judgment of 6 February 2025, Emporiki Serron – Emporias kai Diathesis Agrotikon Proionton, C‑42/24, EU:C:2025:56, paragraphs 41 and 42 and the case-law cited).

25It follows that a Member State cannot lay down a limitation period for the adoption of a decision imposing a penalty of more than twice the four-year limitation period for proceedings, laid down in the first subparagraph of Article 3(1) of Regulation No 2988/95, without first having made use of the option provided for in Article 3(3) of that regulation of providing for a longer period than that four-year limitation period for proceedings.

26In view of the interpretation set out in the preceding paragraph, there is no need to answer the referring court’s questions relating to the duration of the limitation period for proceedings applicable in the event that the national authorities have merely derogated from the duration of the absolute limitation period for the adoption of such a decision.

27Lastly, it must be stated that, in the absence of a determination by the competent national authorities of a limitation period for proceedings distinct from that referred to in the first subparagraph of Article 3(1) of Regulation No 2988/95, proceedings must necessarily be brought within the four-year period laid down in that provision.

28In the light of the foregoing, it follows that the answer to the first part of the first question and the second question is that the fourth subparagraph of Article 3(1) and Article 3(3) of Regulation No 2988/95 must be interpreted as meaning that a Member State which has not made use of the option to provide for a limitation period for proceedings which is longer than the four-year limitation period laid down in the first subparagraph of Article 3(1) of that regulation cannot lay down an absolute limitation period for the adoption of a decision imposing a penalty which is greater than twice that four-year period.

The second part of the first question

29By the second part of its first question, the referring court asks whether Article 3(3) of Regulation No 2988/95 must be interpreted as precluding a Member State from setting, in the event of a one-off irregularity, the starting point of the absolute limitation period for the adoption of a decision imposing a penalty not on the date on which the irregularity was committed, but on the first day of the following calendar year.

30In that regard, the Court has already held that it is apparent from the very wording of Article 3(1) and (3) of Regulation No 2988/95, noted in paragraph 4 above, that, by enacting that provision, the EU legislature intended only to allow the Member States to extend the duration of the limitation period for proceedings in relation to that provided for in Article 3(1) of that regulation, to the exclusion of any amendment of the starting point of that period (judgment of 6 February 2025, Emporiki Serron – Emporias kai Diathesis Agrotikon Proionton, C‑42/24, EU:C:2025:56, paragraph 27).

31That interpretation is also applicable to the starting point of the absolute limitation period for the adoption of a decision imposing a penalty since, under the fourth subparagraph of Article 3(1) of Regulation No 2988/95, the characteristics of that absolute limitation period are determined by reference to the limitation period for proceedings.

32In the light of the foregoing, it follows that the answer to the second part of the first question is that Article 3(3) of Regulation No 2988/95 must be interpreted as precluding a Member State from fixing the starting point of the absolute limitation period for the adoption of a decision imposing a penalty for committing an irregularity on the first day of the calendar year following that in which that irregularity was committed. That period runs in all cases, under the first subparagraph of Article 3(1) of that regulation, from the date on which the irregularity was committed or, in the case of a repeated or continuous irregularity, from the date on which that irregularity ceased.

The third question

33By its third question, the referring court asks, in essence, whether Article 3 of Regulation No 2988/95 must be interpreted as meaning that the limitation periods laid down therein apply to an irregularity affecting the financing of a project linked to an EU policy, including where that irregularity affects or is likely to affect both the financial interests of the European Union and those of a Member State.

34As a preliminary point, although the European Commission casts doubt on the admissibility of the third question on the ground that its wording is too general and that it is hypothetical, it should be noted that the request for a preliminary ruling contains, as a whole, sufficient information to enable the Court to understand the scope of the questions submitted to it, which, moreover, the Commission acknowledges, and that that question does not appear to be manifestly unrelated to the actual facts or subject matter of the dispute in the main proceedings. In those circumstances, the third question is admissible.

35As regards the answer to be given to that question, it should be borne in mind that Article 3 of Regulation No 2988/95 governs the limitation periods applicable to irregularities which may affect the financial interests of the European Union.

36The first subparagraph of paragraph 1 of that article refers, as regards the concept of ‘irregularity’, to Article 1(1) of that regulation, which provides that, ‘for the purposes of protecting the [European Union’s] financial interests, general rules are hereby adopted relating to homogenous checks and to administrative measures and penalties concerning irregularities with regard to [EU] law.’

37Article 1(2) of Regulation No 2988/95 defines the concept of ‘irregularity’ referred to in paragraph 1 of that article as ‘any infringement of a provision of [EU] law resulting from an act or omission by an economic operator, which has, or would have, the effect of prejudicing the general budget of the [European Union] or budgets managed by [it], either by reducing or losing revenue accruing from own resources collected directly on behalf of the [European Union], or by an unjustified item of expenditure’.

38The wording of that provision, which refers to acts or omissions ‘which [have], or would have, the effect’ of prejudicing the budget of the European Union or budgets managed by it, does not limit the application of the rules laid down in Regulation No 2988/95, which include the limitation rules set out in Article 3 thereof, solely to the consequences of irregularities committed in respect of the financial interests of the European Union, but, on the contrary, suggests that those rules apply to all irregularities which might have such consequences, irrespective of the proportion of financing from EU funds.

39Similarly, it is not apparent either from Article 1(2) of Regulation No 2988/95 or from any other provision of that regulation that the fact that the European Union exercises shared competence in the area to which the project in which an irregularity was committed relates is such as to prevent, at least in part, the application of the rules laid down by that regulation.

40The interpretation referred to in the preceding paragraphs is supported by the fact that, in the case of a co-financed project, the same irregularity is liable to affect both the general budget of the European Union or budgets managed by the European Union and national budgets, with the result that it would appear artificial to distinguish between the rules applicable to such an irregularity, which is indivisible, depending on the origin of the financing affected by it.

41Moreover, to hold that Article 3 of Regulation No 2988/95 governs only the consequences of such an irregularity for the financial interests of the European Union would amount to accepting that the same act may fall within different limitation periods simultaneously in so far as it is liable to affect the financial interests of the European Union or national financial interests, which could lead to the adoption of contradictory decisions and would run counter to the objective of legal certainty pursued by that provision (see, to that effect, judgment of 6 February 2025, Emporiki Serron – Emporias kai Diathesis Agrotikon Proionton, C‑42/24, EU:C:2025:56, paragraph 40 and the case-law cited).

42It follows that, as the Court has already implicitly accepted in its judgment of 8 May 2024, Finanzprokuratur (C‑734/22, EU:C:2024:395, paragraph 27 et seq.), Article 3 of Regulation No 2988/95 applies to an irregularity committed in the context of a co-financed project, without it being necessary to apply different limitation rules in so far as that irregularity also affects national financial interests.

43It should also be noted that the judgment of 13 July 2023, Napfény-Toll (C‑615/21, EU:C:2023:573, paragraph 31), referred to by the referring court, cannot call that conclusion into question. Unlike the present case, which arises in the context of an irregularity which gave rise to an unjustified item of expenditure, the case which gave rise to that judgment concerned the separate question of whether or not an irregularity relating to VAT falls within the scope of Regulation No 2988/95 by virtue of ‘reducing or losing revenue accruing from own resources collected directly on behalf of the [European Union]’, within the meaning of Article 1(2) of that regulation.

44In the light of the foregoing, it follows that the answer to the third question is that Article 3 of Regulation No 2988/95 must be interpreted as meaning that the limitation periods laid down therein apply to an irregularity affecting the financing of a project linked to an EU policy, including where that irregularity affects or is likely to affect both the financial interests of the European Union and those of a Member State.

Costs

45Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (First Chamber) hereby rules:

1.The fourth subparagraph of Article 3(1) and Article 3(3) of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interestsmust be interpreted as meaning that a Member State which has not made use of the option to provide for a limitation period for proceedings which is longer than the four-year limitation period laid down in the first subparagraph of Article 3(1) of that regulation cannot lay down an absolute limitation period for the adoption of a decision imposing a penalty which is greater than twice that four-year period.

2.Article 3(3) of Regulation No 2988/95must be interpreted as precluding a Member State from fixing the starting point of the absolute limitation period for the adoption of a decision imposing a penalty for committing an irregularity on the first day of the calendar year following that in which that irregularity was committed. That period runs in all cases, under the first subparagraph of Article 3(1) of that regulation, from the date on which the irregularity was committed or, in the case of a repeated or continuous irregularity, from the date on which that irregularity ceased.

3.Article 3 of Regulation No 2988/95must be interpreted as meaning that the limitation periods laid down therein apply to an irregularity affecting the financing of a project linked to an EU policy, including where that irregularity affects or is likely to affect both the financial interests of the European Union and those of a Member State.