Administrative Sanctions, Development Measures, and Subsidies in Public Administration

Posted on Oct 5, 2024 in Law & Jurisprudence

Administrative Sanctions and Their Classes

While attempts to find a qualitative difference between criminal acts and administrative offenses have been unsuccessful, it’s clear that administrative sanctions involving deprivation of liberty are prohibited. Similarly, administrative sanctions involving deprivation or limitation of other fundamental rights are unlawful.

Typical Administrative Sanctions

Typical administrative sanctions include fines and deprivation of rights:

Fines: The fine, or monetary penalty, is the ultimate administrative sanction. Principles of criminality and proportionality are required to determine the amount corresponding to the seriousness of the offense. Rules typically set minimum and maximum penalties for offenses of varying severity. Many sectoral laws do not prefix specific figures as ceilings and refer to procedures that multiply certain assessments made by management. This technique has raised concerns regarding the principles of criminality and legal certainty, which require prior knowledge of the consequences of illegal activity. Notwithstanding, fines should be higher than the profit from the illegal activity.
Deprivation of Rights: This type of sanction, traditional in disciplinary law for civil servants (which does not apply fines), has been adopted by numerous sectoral laws in areas where exercising activity requires an enabling administrative title (authorization, concession). Rescissory sanctions consist of withdrawing that title as punishment for unlawful conduct related to the authorized activity.

Incidental Measures

The following are considered incidental, not actual sanctions:

Confiscation: Under certain sectoral norms, this is the denial of ownership of material goods used in the commission of the offense. Doctrine warns about the need for restricted application, as it sometimes conceals real sanctions or disqualification of fines collected in kind.
Prohibitions: These prevent the sanctioned party from having certain relations with the Administration for a period of time. For example, prohibition for new grants.
Duty of Restoration and Compensation: There is compatibility with the requirement of sanctions for the violator to restore the disturbed situation to its original state, as well as compensation for damages, which may be declared in the resolution terminating the procedure.

Effectiveness of Sanctions and Legal Remedy

The resolution of disciplinary proceedings is enforceable only when “finalized by the administrative authority” and may provide interim provisions required to ensure their effectiveness as non-executive.

There is no concept of ‘firm’ sanctions in administrative proceedings. Sanctions terminate the administrative process, requiring written explanation. Initially, the LPC only provided for an administrative appeal as the ordinary remedy against acts that ended or did not exhaust administrative remedies. Thus, the concepts of firmness and exhaustion of administrative remedies were aligned. This identity was broken to reintroduce the application for reconsideration, enabling a new statement from the Administration on acts that exhaust the administrative route. This forces the understanding that sanctions ending proceedings take effect only when administratively firm, meaning one month after notification without appeal or replacement (as appropriate), or if filed, dismissed expressly or by administrative silence.

However, doubt remains on the legality of execution between the firmness of the administrative penalty and the judge or Administrative Court’s pronouncement on the merits of the suspension. The penalty would only be executed when the judge or court dismisses the appellant’s request for suspension. However, the scope of this rule is unclear: whether it applies only when the Administration positively agrees to suspend the administrative act or extends to sanctions with automatic suspension.

Penalties are prescribed according to the laws establishing them. If no limitation periods are set, sanctions for very serious offenses are barred after three years, serious offenses after two years, and minor offenses after one year.

The limitation period for sanctions begins the day following the decision imposing the sanction becoming final. Initiation of the enforcement procedure, with the subject’s knowledge, interrupts the limitation. The period restarts if paralyzed for over a month through no fault of the offender.

Economic Development Measures

These measures involve directly or indirectly benefiting assets and can be of a real or financial nature.

Real economic advantages involve providing or administering services to beneficiaries. This may consist of the use or enjoyment of public lands and free technical assistance.

Financial economic advantages refer to a range of benefits involving either a financial outlay for certain subjects or the total or partial reduction of their fiscal obligations.

Direct Financial Aid

Direct financial aid involves an actual disbursement of public money to individuals or other administrative bodies:

Grants: The importance and widespread use of grants require more detailed analysis later.
Public Credits: These are cash loans that management provides to facilitate the development of activities of public interest. They can be interest-bearing or interest-free.
Bonuses: These are financial aids offered to individuals related to specific production units in certain sectors, incentivizing increased production of certain goods.
Interest Guarantees: This technique involves the government guaranteeing the capital of a company of public interest at a minimal interest rate. Payment (total or additional) applies when the results of management do not reach the insured benefit.

Indirect Financial Aid

Indirect financial aid represents a loss of profit for the Administration rather than an immediate disbursement.

Tax Exemptions: The assets of those affected by a tax exemption are not diminished by the application of the relevant tax, despite being subject to the same activities.
Allowances and Tax Holidays: These are techniques that reduce financial or defer tax obligations.

Principles of Public Action for Promotion

The legal and constitutional principles justifying promotional action are solidarity and equality, the latter understood materially, not formally, and connected to the idea of “equitable allocation of resources.”

Since government financial resources are limited and collective needs vary in intensity:

Public support should be given according to rules of transparency, openness, and free competition among all interested subjects to ensure that public administration does not act arbitrarily in granting.
Awards must be made through competitive administrative procedures and served to those in need or best able to generate greater collective benefit from the aid.
Obtaining aid must not distort competition rules, putting companies or individuals at an unfair advantage.
Aid allocation must respond to the principles of efficiency and economy, excluding any semblance of liberality or unconditional decisions (which does not mean discretionary decisions are not appropriate).

Concept and Nature of Subsidies

A subsidy is a monetary donation, modal in nature and purpose, to promote activities of public interest.

A donation as the delivery is sunk, with no direct return for beneficiaries.
A cash donation, which may include other benefits or services to promote.
A modal donation, as delivery is subject to compliance with a specific objective, the performance of an activity, or the existence of a situation.
A final donation, as the action, conduct, or financial position should aim to promote an activity of public utility or social interest or a public purpose.

Regarding their legal nature, subsidies straddle conventional or contractual measures and unilateral legal acts. Some subsidies follow the typical pattern of a unilateral act, while others are provided in the form of a contract.

The Parties to the Eligibility Relationship

The administration is one of the necessary parties in the relationship. The following should be noted:

The jurisdiction to grant subsidies lies with the General State Administration, ministers, secretaries of state, and presidents or directors of public bodies and other entities needing to adjust their activities to public law, except when spending over 12 million euros, requiring the Council of Ministers’ agreement.
The regulatory basis of the grant may provide for the delivery and distribution of public funds to beneficiaries through a collaborating entity, public or private.

The counterpart is the beneficiary, the person receiving the grant for “the activity on which the award is based.” There is a wide range of disabling conditions for receiving subsidies, similar to prohibitions for contracting with the Administration (insolvency, commercial fault, resolution of contracts with the administration, tax debt, etc.).

Establishment and Procedures for Granting Subsidies

Establishment of Funding

There are three steps in this procedure:

The adoption of a strategic plan for grants, outlining objectives, purposes, timeframe for achievement, estimated costs, and funding sources.
The advance notification of the proposed grant establishment to the European Commission, in applicable cases. This is a key requirement, meaning the competent authority cannot grant subsidies before the Commission’s express favorable action. If it does, the Commission may order the State to abolish or alter the grant, and if disobeyed, appeal directly to the Court of Justice of the European Union.
The approval and publication of rules for each grant type, eliminating arbitrary improvisation. These rules must establish the grant’s purpose, beneficiary requirements (and associates, if applicable), the award procedure, objective criteria for granting, and the approximate amount or at least the criteria for its determination.

Award Procedures

The ordinary procedure for awarding grants is on a competitive basis, but direct concession granting is also possible.

Stages in a Competitive Bidding Process:

Initiation: Always initiated ex officio, this takes place through a public call outlining the grant’s basic data, applicant requirements, accompanying documentation, assessment criteria, and deadlines for applications and resolution.
Training Phase: This consists of evaluating and ranking applications by an instructor body. It requires a proposed resolution provisionally communicated to applicants, allowing them to make claims before the final decision. Once adopted and notified, the beneficiary must communicate their acceptance.
Termination: This should normally be through a reasoned decision, naming the beneficiaries and explicitly stating the dismissal of remaining claims.

The Procedure for Repayment of Subsidies

Among the beneficiary’s obligations is performing the subsidized activity, the basis of the award, along with ancillary obligations like justifying expenses, announcing other grants received, and repaying unused amounts. This is reinforced by instrumental or auxiliary obligations, such as justifying expenses to the granting Administration, announcing other grants or aid received, and repaying unused amounts.

The general repayment scheme includes those stemming from the annulment of the concession agreement and then addresses reimbursement causes themselves. Inadequate or lacking budgetary provision can be a cause for nullity. Additionally, the grant resolution’s voidability is determined if it breaches the law. In these cases, an automatic review procedure or declaration of harmfulness is initiated, so the grant’s invalidity carries the obligation to repay received amounts.

Withdrawal causes can include: – Obtaining the subsidy by distorting conditions – total or partial breach of the objective.

The repayment obligation is independent of any sanctions imposed on the beneficiary.

The Administration can demand repayment up to 4 years from the grant, after which it prescribes.

The System of State Aid within the Community System

Economic and financial aid or grants for firms or sectors of production, they can distort the principle of free competition and fair competition, this is the essence of the market, and that is why Community law sets limits they could pose an obstacle to achieving the single market.

The regulation of the Treaty is primarily in the control and supervision by the community bodies of the impact on competition and trade in such aid, so that the Community authorities may declare the aid incompatible with the common market .

Regulation of the designated community welcomes the following aspects:

a) In principle, incompatible with the common market of aid granted by States or by tending to favor certain companies or products and distorts or threatens to distort competition.

b) However, the price mechanism alone can not always be certain economic and social developments, which inevitably calls for state intervention as an essential element of structural economic policy, so it provides a number of exceptions. The declaration of support for the Commission.

c) The decision on whether state aid is compatible with the Common Market corresponds in fact to the Commission, subject to review by the Court.