Lithuania Tax Disputes: Interim Measures Explained

The essence of these measures is that, in tax disputes, taxpayers often request the application of a measure to secure a claim — for example, to suspend a contested decision by the State Tax Inspectorate until the court’s decision in their tax dispute becomes final, or to suspend the recovery of tax arrears, and so on. Due to the current economic downturn, these issues have, unfortunately, recently become more pressing for many taxpayers.

Legal Standard: When Can a Court Apply Interim Measures?

The Supreme Administrative Court of Lithuania has noted that, for the application of measures to secure a claim, it is sufficient that the applicant’s claim, as formulated in the complaint, is objectively likely to be upheld. Having carried out a preliminary assessment of the merits of the claim, the court may refuse to apply measures to secure the claim only in cases where the claim in the complaint (application) is manifestly unfounded (for example, the applicant has chosen a method of defending their rights or interests protected by law which is impermissible or clearly impossible under the requirements of the law; a request is made to apply measures to secure a claim to secure a claim that is entirely unfounded in the light of the factual circumstances set out in the complaint (application), etc.)

The Two Cumulative Conditions Under Article 70

In its most recent case law, the Supreme Administrative Court of Lithuania has clarified that measures to secure a claim may be applied where two cumulative conditions for the application of such measures, as laid down in Article 70 of the Law on Administrative Proceedings, are met:

1. the party to the proceedings plausibly substantiates the merits of the claim in the complaint (i.e., sets out prima facie arguments regarding the unlawfulness of the contested act);

2. failure to apply interim measures may result in irreparable or difficult-to-repair significant damage

Assessing the Risk of Irreparable Damage

When determining whether the second condition (irreparable or difficult-to-repair damage) is met, the court must take into account the nature of the claims for which interim relief is sought, the factual basis cited for them, the rights and obligations conferred by the contested act and their actual exercise, and whether the application of the interim measure, given the established circumstances, would be proportionate to the objective sought, would not violate the principle of proportionality, the balance of interests of the parties to the proceedings, and the public interest.

Case Study: A Recent LVAT Ruling

In a completely new case before the Supreme Administrative Court of Lithuania, the applicant requested the application of measures to secure the claim until a settlement agreement was signed with the tax administrator or until the administrative case had been examined on its merits in court.

The applicant stated that, following the court’s decision to reject the application, the tax administrator had referred the matter to a bailiff for enforcement. Therefore, in the applicant’s view, he would incur additional costs, regardless of whether he signed a settlement agreement with the tax administrator or the court upheld his appeal. 

It is interesting to note that the Supreme Administrative Court of Lithuania dismissed the applicant’s appeal, stating that, when deciding on the application of the measures to secure claims referred to in Article 70(3) of the Law on Administrative Proceedings, must establish that there is a real risk that, if these measures to secure the claim are not applied, significant damage may be caused which is irreparable or difficult to remedy. Measures to secure a claim may be applied if there are prima facie (at first glance) arguments regarding the validity of the contested act and regarding the fact that the enforcement of the administrative act would cause significant damage, the rectification (compensation) of which would be difficult

Key Principles Governing the Use of Interim Measures

The Supreme Administrative Court of Lithuania (LVAT) has stated that interim measures, as a right granted by law, must be used reasonably and in good faith; they must not be abused or used for purposes other than those for which they are intended. The Supreme Administrative Court of Lithuania noted that the application of measures to secure a claim, in accordance with the established circumstances, must be proportionate to the objective sought, and must not violate the principles of proportionality and the balance of interests between the parties to the proceedings, nor the public interest.

Furthermore, the Supreme Administrative Court of Lithuania has repeatedly held that the basis for applying measures to secure a claim must be real, rather than based on assumptions about possible negative future consequences. The assumption that the applicant may suffer certain adverse consequences is not in itself a basis for applying measures to secure a claim, particularly if the applicant fails to prove that it would be impossible or difficult to remedy such adverse consequences.

Finally, in the opinion of the Supreme Administrative Court of Lithuania, persons requesting the application of a measure to secure a claim must specify the circumstances constituting the basis for securing the claim and submit evidence confirming these circumstances.

Therefore, having assessed the circumstances set out in the applicant’s application for the application of measures to secure the claim and in the separate appeal, on which the necessity of applying the measure to secure the claim is based, as well as the evidence attached to these procedural documents, the panel of judges of the Supreme Administrative Court of Lithuania agreed with the conclusion of the court of first instance that the applicant, who bears the burden of proving the necessity of applying the interim measure, had failed to demonstrate that, at this stage of the proceedings, there were grounds for applying the interim measure sought by the applicant and that the application of this measure would strike a balance between the parties’ interests and the public interest.

Conclusion

It is considered that there is a significant lack of broader information and discussion on such topics; therefore, this article presents an analysis of the latest and most relevant case law of the Supreme Administrative Court of Lithuania on the subject under consideration.