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EU funding: a decision refusing a grant for the installation of a household solar power system cannot be based solely on the finding that an applicant does not satisfy the general selection criteria; when administering EU funds, administrative discretion is limited by the duty to provide adequate reasoning, which cannot be reduced to abstract statements.

On 18 March 2026, the Supreme Administrative Court of Lithuania (SACL) ruled that the decision of the Environmental Project Management Agency (EPMA) to refuse a grant to an individual applicant for the installation of a household solar power system was unlawful. Although the applicant had previously been convicted of document forgery, the Court emphasised that this fact alone was insufficient to automatically disqualify the applicant from receiving EU financial support.

SACL held that the administration of EU funding must comply not only with national legislation but also with EU regulations and the fundamental principles governing EU financing, including transparency, proportionality and proper justification. Public authorities may not rely solely on the formal existence of selection criteria; they must assess the specific circumstances of each case, including the nature of the offence, its connection with the financial interests of the European Union, the period that has elapsed, the implementation of the project and any other relevant factors.

The Court also rejected the applicant's argument that the non bis in idem principle had been violated, noting that the refusal to award funding does not constitute a criminal penalty but rather an assessment of whether the applicant satisfies the eligibility conditions for receiving financial support.

Nevertheless, the applicant ultimately succeeded in the case. SACL found that EPMA's decision lacked adequate reasoning. The decision failed to specify the factual information on which it was based, did not assess whether the applicant's criminal offence had affected the financial interests of the European Union, and contained no proportionality assessment. Consequently, the Court declared the decision unfounded and unlawful.

The ruling sends a clear message that decisions concerning EU funding cannot be made by applying selection criteria mechanically. Each application requires an individual assessment based on the specific facts of the case.

EPMA stated in its decision that the applicant's application had initially been included on the list of positively evaluated applications. However, when examining the applicant's request for reimbursement of eligible expenses and after obtaining additional information from another public authority, the Agency concluded that the applicant lacked the organisational and financial capacity to implement the project properly and on time and to ensure the sustainability of its results. This conclusion was based on the fact that the applicant had an unspent or non-expunged criminal conviction or had, within the previous five years, been subject to a final criminal conviction for one of the offences listed in paragraph 4.2.3 of Annex 2 to the Project Administration and Financing Rules, entitled List of General Project Selection Criteria and Their Assessment Methodology.

SACL observed that the programme at issue was financed under the 2021–2027 EU Funds Investment Programme, making the provisions governing EU funds directly applicable. Having examined the relevant provisions of Regulation (EU) 2021/1060 and Regulation (EU, Euratom) 2018/1046 concerning the exclusion of applicants from funding procedures, as well as the rules governing the establishment of selection criteria and the corresponding national legislation implementing those regulations, the Court concluded that the general selection criterion laid down in paragraph 4.2.3 of Annex 2 to the Project Administration and Financing Rules was compatible with EU law and applicable to the applicant.

Having examined the content of EPMA's decision, SACL found that it merely contained a brief description of the facts, quotations from the applicable legal provisions, a general reference to information received from another public authority, and the conclusion that the applicant lacked the organisational and financial capacity to implement the project properly and ensure its sustainability under paragraph 4.2.3 of Annex 2 to the Rules. The decision did not specify what information had been obtained from the other authority or identify the factual circumstances supporting EPMA's conclusions. Nor did it explain the nature of the applicant's criminal offence, including whether it constituted serious professional misconduct or another ground for exclusion under Regulation (EU, Euratom) 2018/1046. Furthermore, EPMA failed to assess other relevant circumstances, including the seriousness of the situation and any impact on the financial interests of the European Union.

SACL also noted that paragraph 4.2.3 of Annex 2 to the Project Administration and Financing Rules refers to unlawful conduct that is detrimental to the financial interests of the Republic of Lithuania and/or the European Union. However, EPMA's decision contained no reasoning addressing this requirement. Responding to EPMA's arguments concerning the application of Regulation (EU) No 1303/2013, the Court emphasised that the applicant was not being sanctioned for the criminal offence but was instead being assessed for compliance with the conditions for receiving financial support.

The Court further referred to the preliminary ruling delivered by the Court of Justice of the European Union on 4 October 2024 in Case C-175/23, which interpreted Regulation (EU) No 1303/2013 as meaning that an "irregularity" within the meaning of Article 2(36) of that Regulation exists only where the infringement has caused, or could have caused, harm to the EU budget.

SACL concluded that EPMA had merely applied the relevant legal provisions formally and had failed to substantiate either its decision to refuse the grant or the proportionality of that decision.

Accordingly, SACL resolved the dispute in favour of the applicant. It set aside the judgment of the court of first instance and adopted a new judgment upholding the applicant's appeal and annulling EPMA's contested decision.

Administrative case No. eA-214-520/2026