THE CASE WAS WON IN MOSCOW ARBITRATION COURT: THE СOURT REFUSED TO SATISFY THE PLAINTIFF’S CLAIMS TO RECOVER GRANT IN THE AMOUNT OF ABOUT 20 MILLION RUBLES FROM OUR PRINCIPAL

State Agency (hereinafter referred to as the Plaintiff) has filed a claim against our Principal (hereinafter referred to as the Defendant) for the recovery of funds in the amount of about 20 million rubles to the budget of Moscow.

In support of the stated requirements, the Plaintiff referred to the fact that the Principal did not confirm the targeted expenditure of funds allocated by the Plaintiff from the budget of Moscow for the purposes established by the agreement concluded between the parties (hereinafter – the agreement).

Lawyers of MCBA “Bureau of Lawyers “De jure” fully studied the case materials of our Principal, developed the tactics of defense for the present dispute and submitted the necessary documents to the court, including an out-of-court audit report on the intended use of the grant.

In the course of consideration of the present case, we proved that the agreement does not provide for a mandatory list of documents provided together with the financial report on the intended use of grant funds, and does not provide for their mandatory form and content, and therefore does not contain any specific requirements for their quantity, content and form.

The proper execution by the Principal of obligations under the agreement is confirmed by the fact that the excess of the limit of the received grant was not allowed by the Principal, as well as all the budget funds received were spent by him according to their intended purpose for the implementation of the program (projects) for information support of foreign citizens regarding issues arising in connection with their labor activities in Moscow.

In the first instance court session we proved that the most important condition for classifying costs as intended use is the fact that the costs are consistent with the goals of the grant itself.  Discrepancy of expenses concerning one item of the estimate and allocation of these costs to another budget line (i.e., their redistribution), but in accordance with the objectives of the grant, does not entail negative consequences for the recipient of such a grant and, accordingly, these costs are recognized as targeted.

In accordance with sections 14 and 23 of the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation of June 22, 2006  N 23 “ABOUT SOME QUESTIONS OF APPLICATION  by the ARBITRATION COURTS OF NORMS OF THE BUDGET CODE of the Russian Federation”, if it is established by the court that, based on the contents of the lists, names of articles and sub-articles of classification, it is impossible to establish with certainty  the article (in the case when the article is not detailed by sub-articles) or the classification of sub-item, the Participant of the budget process should include the expenses incurred by him (i.e., when these expenses could be equally allocated to  various items and sub-articles), the financing of these costs at the expense of funds allocated to any of the potential for use of articles and sub-articles of classification is not considered misuse of budgetary funds.

The participants in the budget process, within the framework of the implementation of the tasks set for them and within the budget allocated for specific purposes, independently determine the need, feasibility and economic justification of a specific expenditure transaction.

In this regard, a specific expenditure operation can be recognized as inefficient spending of budget funds only if the authorized body proves that the tasks set for the participant in the budget process could be performed using a smaller amount of funds or that with using the amount of funds determined by the budget, the participant in the budget process could achieve a better result.

The Plaintiff did not provide evidence in the materials of the present case that the allocated funds were spent on purposes not related to the purpose of the grant.  All expenses incurred by the Principal are directly related to the objectives of the project.

During the consideration of the case at our request, a forensic examination was carried out, which additionally confirmed our arguments that the expenses incurred by the Principal are consistent with the objectives of issuing a grant for the implementation of programs (projects) for information support of foreign citizens regarding issues arising in connection with their employment  activities in Moscow and the terms of the agreement on the provision of targeted budget funds in the form of a grant concluded between the parties.

03.12.2018 Moscow Arbitration Court refused to satisfy the Plaintiff’s requirements for the return of the grant in the amount of about 20 million rubles.

N.V.Filippov, Head of MCBA “Bureau of Lawyers  ”De jure”, and lawyer of it  J.M.Martynenko  represented the Defendant’s (our Principal) interests  in the court of the first instance.