Our Dispute Resolution team represented the client in litigation before the Court of Appeal of Lithuania. The dispute arose as Kaunas City Municipal Administration imposed a fine of 3’266’314 EUR on the concessionaire due to the delay of the time limits stipulated in the concession agreement.
The Court of First Instance partially upheld the claim of the Kaunas City Municipal Administration and awarded 600’000 EUR in fines from the client. The penalties were reduced on the grounds that the client fulfilled the contract in full and Kaunas City Municipal Administration did not prove that it suffered any real losses as a result of the time delay. Both parties appealed this judgment.
The Court of Appeal annulled the judgment of the Court of First Instance and referred the case to a retrial. The Court of Appeal stated that the Court of First Instance failed to assess a series of circumstances which may eliminate the client’s civil liability for non-compliance with the time limits of the contract or provide a basis for calculating the time limits of the concession contract not in accordance with the procedure laid down in the contract but from the expiry of certain circumstances. The Court of Appeal also found that the Court of First Instance had not correctly applied the rules governing the limitation period of the action – the Court of First Instance wrongly awarded the penalties for a longer period than that provided for by the law, and had not correctly applied the consequences of the expiry of the limitation period of the action.
Consequently, the case has been referred back to the Court of First Instance for further reduction of the fine which was imposed on the client.
The present case was significant in that part that the opposite party invoked non-standard arguments of unlawful state aid to defend itself against the rules on limitation period or reduction of penalties. Opponents have taken the view that any reduction of penalties or rejection of the claim due to the limitation period of the claim would constitute unlawful state aid to the client. However, neither the Court of First Instance nor the Court of Appeal confirmed these opponents’ motives.