Clawback of COVID-19 aid unlawful

The administrative courts of Düsseldorf, Cologne, and Gelsenkirchen have ruled that attempts by the German state of North Rhine-Westphalia to partially reclaim COVID aid are unlawful.

In the wake of the coronavirus pandemic, both the federal and regional governments in Germany sought to support businesses, the self-employed, and freelancers with financial aid as quickly and unbureaucratically as possible. The state of North Rhine-Westphalia, for instance, set up an emergency relief program in the spring of 2010 aimed at providing financial assistance to small and medium-sized businesses, solopreneurs, and freelancers, only to later attempt to partially reclaim this aid. We at the commercial law firm MTR Rechtsanwälte can now report, however, that the administrative courts have since granted the claims brought by the affected parties and declared these efforts to claw back the aid unlawful.

With the priority at the time being to ensure the speedy provision of COVID relief, extensive checks of the claims to this assistance were largely dispensed with. However, the state of North Rhine-Westphalia would later go on to initiate proceedings for obtaining feedback that involved the competent district authorities investigating the alleged cash-flow problems facing aid recipients with reference to their income and expenditure during the period covered by the emergency relief, which, according to the state, was only meant to make up for the liquidity shortage and any excess amounts were supposed to be paid back.

Many of those affected – from a self-employed event technician, to the operators of a beauty salon and a fast-food restaurant, to a firm of tax consultants – fought against these attempts to claw back the aid and were successful in doing so.

The Administrative Court of Gelsenkirchen, for example, found that the provisional nature of the aid payments was not evident from the application form, nor from the approval notice or the relevant state website. Moreover, it was irrelevant whether the funding guidelines of the state of North Rhine-Westphalia stated otherwise, as these were not published until May 31, 2020, i.e., not until after the notices of approval had already been issued. The Court also clarified that while payments can come with a caveat, this must be clearly stated in the notices of approval. According to Cologne’s regional court – the Landgericht (LG) Köln – any ambiguity should be at the expense of the authorities.

The courts also pointed out that the final notices were unlawful, since the state of North Rhine-Westphalia based the calculation of the emergency aid only on the liquidity shortage, whereas the approval notices allowed for the use of the assistance payments to compensate for revenue shortfalls, an assurance the courts concluded the state was bound by.

With hundreds of cases still pending before the courts, these rulings show that the prospects of being able to defend oneself against these clawback efforts are good. Our expert attorneys can assist you to this end.