European Ombudsman
Related documents
Mr President,
According to Article 195 of the Treaty establishing the European Community, the European Ombudsman is empowered to conduct inquiries on his own initiative in relation to possible instances of maladministration in the activities of Community institutions and bodies.
By letter of 13 January 2006, I informed you that I had decided to open an inquiry, by virtue of the above provision, into the extent to which the Commission has acted to promote the availability of alternative methods of dispute resolution ("ADR"), and in particular mediation(1), in relation to contracts financed by the Commission.
The Commission sent its reply on 31 May 2006.
I am writing now to let you know the results of the inquiries that have been made.
In 2002, the Commission presented a Green Paper on alternative dispute resolution ("ADR") in civil and commercial law(2), pointing out that "ADR is a political priority, repeatedly declared by the European Union institutions, whose task is to promote these alternative techniques". In its Green Paper, which aimed at gathering views to be used as input for the general lines of the Commission's policy to be conducted in its role as promoter of legislative and operational initiatives, the Commission pointed out that the European Union is endeavouring to facilitate access to justice and that ADR is an integral part of the policies aimed at improving such access.
In 2004, the Commission made a Proposal for a Directive of the European Parliament and of the Council on certain aspects of mediation in civil and commercial matters(3). The objective of the proposal was to ensure better access to justice, namely, that individuals and businesses should not be prevented or discouraged from exercising their rights by the incompatibility or complexity of legal and administrative systems in the Member States. More specifically, the proposed Directive aimed at increasing the use of mediation in the EU.
In its proposal for a Directive, the Commission pointed out that the concept of access to justice should include promoting access to adequate dispute resolution processes for individuals and businesses, and not just access to the judicial system. The Commission referred to mediation as a quicker, simpler and more cost-effective way of solving disputes, which makes it possible to take into account a wider range of interests of the parties, provides a greater chance of reaching an agreement which will be voluntarily respected, and preserves an amicable and sustainable relationship between them. The Commission stated that it believes that mediation holds an untapped potential as a dispute resolution method and as a means of providing access to justice for individuals and business.
Furthermore, already in 2003, the Commission launched self-regulatory initiatives in order to develop a European plan for best practice in mediation. Further to the Commission's initiatives, a "European Code of Conduct for Mediators"(4) was developed by a group of stakeholders with the assistance of the services of the Commission and the Code was launched at a conference on self-regulation of mediation held in Brussels in July 2004. Organisations that have decided to commit themselves to asking mediators acting under their auspices to respect the code may inform the Commission services about this decision(5).
The Ombudsman receives a significant number of complaints every year which are directed against the Commission and concern contractual disputes either between the Commission and its contractors, or between the Commission's contractors and their sub-contractors. In most such cases, the complainants are individuals, SMEs or other small organisations that opt to have recourse to the Ombudsman instead of bringing the matter before a court, which would prove too costly. In these cases, the Ombudsman, using the powers that his Statute puts at his disposal, carefully examines whether the contractual dispute brought before him entails an instance of maladministration by the Commission, and, if that is the case, tries to suggest suitable remedies. However, the Ombudsman is rarely able to achieve a satisfactory solution in cases where the problem concerns relations between a contractor and a sub-contractor, since he has no jurisdiction to deal with a complaint made by a sub-contractor directly against a contractor(6). Moreover, the Commission's response to complaints directed against itself by a sub-contractor is often to point out, correctly, that it has no contractual link to the complainant and to deny responsibility in the matter.
Furthermore, although the possibility of bringing court proceedings in respect of breach of contract, or to complain to the Ombudsman against maladministration, constitute essential guarantees for the rights of contractors, neither the courts nor the Ombudsman should normally be the first instance of resort when problems arise in the Commission's contractual relationships. As pointed out by the Commission itself (see point 1.1 above), ADR allows a wider range of interests of the parties to be taken into account than do the procedures available through the judicial system. The Ombudsman takes the view that ADR, and mediation in particular, may also allow for a broader range of constructive approaches to problem solving in a contractual relationship than are possible within the framework of an inquiry into possible maladministration.
The Ombudsman welcomed the Commission's actions referred to in point 1.1 above, the aim of which was to enhance access to justice for individuals and businesses, particularly by promoting the use of mediation in the EU. The Ombudsman had consistently expressed the view that access to non-judicial remedies constitutes an important feature of a democratic society. The Ombudsman considered that access to mediation could enhance the efficiency of such remedies.
It was clear that the Commission considered that ADR, and in particular mediation, was worth promoting and that greater use should be made of it. The Ombudsman further noted that the kind of disputes that the Commission had in mind as suitable for resolution through ADR and mediation could also occur in the Commission's own sphere of actions. This was shown not least by the number of complaints received by the Ombudsman, including complaints from SMEs, that concerned contractual disputes directly or indirectly involving the Commission. The Ombudsman therefore wondered whether ADR, and in particular mediation, could also be used to good effect in relation to contracts financed by the Commission, thereby ensuring greater access to justice for individuals and businesses within the EU in that important area as well.
The Ombudsman therefore asked the Commission to inform him (i) whether it has already considered the potential usefulness of ADR, and in particular mediation, in its own sphere of activity; (ii) what the results of any such considerations have been; (iii) whether it proposes to become active in that regard, both in its own contractual relations and in relations between its contractors and sub-contractors; and (iv) whether it sees any potential problems or drawbacks in this regard.
The Commission's opinion was as follows:
The Commission has already considered the potential usefulness of ADR in contractual relationships, from the perspective of ensuring fair information and communication between the Commission and its contractors or beneficiaries of grants, and of promoting an amicable settlement of disputes before taking court actions as a last remedy. In some specific cases, other forms of ADR (arbitration) have also been used.
However, the Commission has not, up to now, considered the generalised use of external mediation as such, that is, as an intermediary step between an amicable settlement of disputes and recourse to the judicial system.
Current procedures established in the area of contractual relationships and grant management have been designed taking into account the need to give the interested parties (applicants, tenderers, beneficiaries and contractors) ample opportunities to communicate with, and to present observations to, the Commission before it takes any final decision. These procedures include the following:
The standard procurement contracts, adopted in December 2003 and June 2004, expressly mentioned the amicable settlement as a first mandatory step before resorting to the national courts.
Procurement contracts are usually subject to national law and national courts (usually those of the place of employment of the competent authorising officer) and this contractual provision implies that an amicable settlement must first be sought by the parties.
In the field of humanitarian operations involving a large number of NGOs as beneficiaries of Community grants, the previous Framework Partnership Agreement foresaw, first, recourse to an amicable settlement of disputes and, if unsuccessful, recourse to an arbitration panel.
With regard to disputes arising between the Commission's contractors and their sub-contractors, the Commission has, as the Ombudsman had pointed out, no contractual link with the latter. Hence the Commission could only recommend to its own contractors to envisage recourse to amicable settlement and other ways of ADR in their relations with their sub-contractors. It is not, however, in a position to impose such recourse.
Since disputes avoided by information or communication procedures and disputes solved following amicable settlements are not, and to a great extent could not be, recorded, no specific record of disputes settled through these procedures has been established. Taking into account also that these practices have been introduced progressively and that their purpose is precisely to avoid the occurrence of disputes, it is not possible to quantify the results.
It can nevertheless be considered that they play a substantial role in avoiding or limiting complaints and litigation, and in ensuring that, if disputes do eventually arise, they have been thoroughly examined by the Commission services before reaching such a stage.
As for the above-mentioned experience of arbitration in the field of humanitarian aid, following the absence of any recourse to the arbitration panel during the five-year period of application of the previous Framework Partnership Agreement, it was decided to repeal reference to this alternative method. The current system retains the primary obligation of both parties to endeavour to settle amicably any disputes between them, and then, where unsuccessful, to consider the possibility of bringing an action before the Court of First Instance.
As indicated above, various procedures already exist to ensure, as a first step, greater communication between parties linked by contractual arrangements and to encourage an amicable settlement of disputes.
Moreover, the Commission favours further developments in this regard, notably the provision of an optional clause in procurement contracts, whose purpose is to render possible recourse to mediation, that is, after an attempt to reach an amicable settlement has been tried and failed.
With regard to disputes that could arise between contractors and sub-contractors, as already mentioned in reply to question 1, the Commission cannot commit itself to the use of ADR, since no contractual link exists between the Commission and the sub-contractors. These disputes are to be settled between the contractors and their sub-contractors according to the relevant provisions included in their contracts. The Commission could only recommend to parties recourse to amicable settlement and other ways of ADR, but it would not be in a position to impose such recourse.
There are certain limits to the sphere of application of ADR. ADR cannot modify, limit or replace the right provided by Article 230 of the EC Treaty for natural or legal persons to institute proceedings against a decision taken by the Commission concerning either the procedure for awarding contracts or grants, or the management of grant agreements. As the EC Treaty stipulates that such proceedings have to be initiated within two months of the notification of the decision and recourse to ADR cannot have a suspensive effect on this deadline, recourse to mediation for dispute resolution becomes practically impossible in those cases.
As far as grants are concerned, the Commission holds the position as "public donor". Furthermore, as a general rule, the Community Courts have jurisdiction in grant agreements governed by Community rules. Therefore, in this context, the Commission is obliged to be very cautious not to relinquish its prerogatives as a public authority resulting from the EC Treaty, notably in order to protect its financial interests, and thus to protect taxpayers' money.
As far as individuals and small entities are concerned, it has to be considered that ADR, and in particular mediation, are not without cost for the parties involved. At the same time, they are not certain to lead to an agreement.
The Commission considers that recourse to ADR can be valuable for the resolution of disputes that could arise in the context of the execution of procurement contracts governed by national law. For this reason, the Commission intends to insert optional clauses on mediation in its standard procurement contracts and to promote its use by its services. A follow-up of such clauses should then be undertaken to see to what extent they are used and what the concrete results are.
1.1 On the basis of the information provided in the European Commission's opinion, the European Ombudsman notes and acknowledges the Commission's willingness and efforts to provide information to, and to communicate with, interested parties in the area of contractual relationships and grant management in order to avoid that disputes arise. The Ombudsman clearly agrees that a lack of understanding by the interested parties of applicable rules and procedures, as well as a lack of transparency as regards actions taken by the Commission, may cause disputes to arise.
1.2 The Ombudsman also acknowledges that the Commission has inserted, in procurement contracts, a provision intended to settle disputes amicably.
1.3 However, despite such provision of information to, and despite communication with interested parties, disputes will inevitably arise from time to time. Although the Commission has the laudable intention of settling disputes amicably, without involving any third party, this is not always possible. In some cases, ADR, and particularly mediation, could provide a useful means of trying to settle the dispute, before turning to a court or, if appropriate, to an ombudsman.
1.4 In its opinion, the Commission distinguished three areas of contractual relationships, and provided its views as to whether mediation would be a suitable means of solving disputes in such situations. These three areas are procurement, sub-contracting and grants. The Commission's comments as regards the three areas in question will be analysed in points 2-4 below.
1.5 The Ombudsman's conclusions can be found in point 5.
2.1 In view of the conclusions made in point 1.3 above, the Ombudsman welcomes the Commission's statement that it favours further developments to encourage amicable settlements of disputes, notably its intention to introduce an optional mediation clause in its standard procurement contracts and to promote the use of the clause by its services. The Ombudsman also welcomes the Commission's intention to make a follow-up of the use of the mediation clause, with an eye to ascertaining what the concrete results are.
2.2 The Ombudsman sees the Commission's statement favouring further developments to encourage amicable settlements of disputes and its intention to introduce an optional mediation clause in its standard procurement contracts as an important and positive commitment towards further use of ADR and mediation in its own sphere of activity. The Ombudsman considers this evolution to be in line with the Commission's statements and conclusions in its Proposal for a Directive on certain aspects of mediation in civil and commercial matters(8).
2.3 The Ombudsman understands the fact that the Commission wishes to explore the possibilities in this regard step by step, in order to evaluate and, if necessary, make adjustments to the scheme. However, as will be shown below, the Ombudsman considers that the potential problems and drawbacks put forward by the Commission regarding the use of mediation as regards procurement contracts appear to be surmountable.
2.4 The Commission has submitted that the deadlines for natural and legal persons to institute court proceedings, in accordance with Article 230 of the EC Treaty, against Commission decisions concerning the awarding of contracts would make it practically impossible to use mediation in such cases, since recourse to ADR and mediation does not have suspensive effect on these deadlines. As regards this argument, the Ombudsman first recalls that the Commission has already expressed its intention to introduce an optional clause giving recourse to mediation in procurement contracts. Furthermore, the Ombudsman recalls the Commission's reference to procedures giving interested parties ample opportunities to communicate with and to present observations to the Commission before it takes any final decision. In this regard, the Commission made reference, for instance, to sending out prior notifications, or to allowing for a reasonable amount of time to present comments or to take remedial actions, before drawing up an order to recover sums unduly paid or to terminate a contract. The Ombudsman notes that the Commission makes efforts to provide information to, and to communicate with, contractors before taking any decision in the sense of Article 230 of the EC Treaty. The Ombudsman takes the view that these efforts should make clear whether there is a dispute between the parties already at this stage of the procedures. A dispute could then be brought to mediation before the Commission takes a decision, that is, before the time-limit for instituting court proceedings starts to run. The deadlines for bringing a matter before the Community courts would therefore appear to come into play only at a later stage and would thus not constitute an impediment to mediation.
2.5 The Ombudsman would also like to acknowledge, in this context, the Commission's remark that ADR, and in particular mediation, are not without cost for the parties involved. However, the Ombudsman considers that as long as this fact is clear to the parties, it is up to them to make a well-considered decision as to whether to bring the dispute to mediation. The Ombudsman would also like to recall that a contractor could decide to bring an unsolved dispute before the Community courts, which may prove to be even more costly for the parties.
2.6 The Ombudsman notes that the Commission's concern pertaining to its role as a "public donor" does not appear to be relevant as regards procurement contracts.
2.7 Finally, the Ombudsman considers it useful to receive from the Commission the outcome of its follow-up of the use of the mediation clause in its standard procurement contracts. The Ombudsman will make a further remark to this effect below.
3.1 As regards disputes relating to sub-contracts, the Ombudsman notes the Commission's statement that it cannot commit itself to the use of ADR in such cases, since it has no contractual link with sub-contractors. Disputes between its contractors and sub-contractors are thus to be settled in accordance with the relevant provisions included in the contract drawn up between the parties. The Commission states that it can only recommend to the parties that ADR be used in sub-contracting disputes, but that it cannot impose such recourse.
3.2 As noted in the letter opening the present inquiry, the Ombudsman acknowledges that the Commission has no contractual relationship with sub-contractors and therefore has no direct responsibility pertaining to disputes between contractors and sub-contractors. Nevertheless, on the basis of complaints received by the Ombudsman from sub-contractors to Commission contractors, it can be noted that sub-contractors often count on the Commission, acting as a public authority for the good of the Community, to provide assistance if a dispute arises. These sub-contractors are greatly disappointed when the Commission does not intervene, leaving them with a feeling that the Commission has washed its hands of the problem.
3.3 Although the Commission is acting in conformity with the law when it does not intervene in disputes between contractors and sub-contractors, the Ombudsman considers that the impression that the sub-contractors are left with should not be underestimated. In line with the Commission's endeavours to bring Europe closer to citizens and to inspire them with confidence in the EU and its institutions, the Ombudsman considers it useful for the Commission to take whatever measures possible in order to avoid situations that leave citizens with an unjustified negative impression of the EU institutions. The use of ADR, such as mediation, in disputes between Commission contractors and their sub-contractors appears to be a possible way of solving such conflicts and of preventing the sub-contractors from turning to the Commission for assistance that it is not in a position to provide.
3.4 The Ombudsman notes in this regard the Commission's statement that since it has no contractual link with the sub-contractors of its contractors, it could only recommend to its own contractors recourse to ADR in their relations with their sub-contractors, but it is not in a position to impose such recourse. The Ombudsman thus perceives a certain cautiousness from the Commission as regards its role in promoting the use of ADR and mediation in this area. However, the Ombudsman notes that the Commission is referring to the possibility of recommending such recourse and that it thus does not exclude any possibilities in this regard. In light of the above reasoning pertaining to the citizens' impression of the EU institutions, and in view of the Commission's statement in its Proposal for a Directive(9) that mediation holds an untapped potential as a dispute resolution method, the Ombudsman considers that it could be both logical and appropriate to extend the promotion of the use of ADR and mediation to the sub-contracting area.
3.5 As regards the general potential problems and drawbacks put forward by the Commission regarding the use of mediation in its own sphere of activities, the Ombudsman would like to recall his conclusions in point 2.5 above, that is, that as long as it is clear to the parties, in this case a Commission contractor and its sub-contractor, that bringing a dispute to mediation is not without cost, it is up to them to make a well-considered decision as to whether to do so or not. The Ombudsman further notes that the Commission's concern pertaining to its role as a "public donor" does not appear to be relevant as regards sub-contracts. Nor does the issue of the deadlines for natural and legal persons to institute court proceedings against Commission decisions appear to be relevant, since any decision directly affecting a sub-contractor would be taken by a Commission contractor and not by the Commission itself.
3.6 In view of the above, the Ombudsman would appreciate it if the Commission could communicate to him any future considerations as regards the possibilities of recommending to its contractors recourse to mediation in their relations with their sub-contractors. The Ombudsman will make a further remark to this effect below.
4.1 As regards EU grants, the Ombudsman notes the Commission's argument that it has to be cautious, acting as a public donor, not to relinquish its prerogatives under the EC Treaty, notably in order to protect its financial interests and, in the end, taxpayers' money. The Commission also points out that, as a general rule, the Community courts have jurisdiction over grant agreements governed by Community rules.
4.2 The Ombudsman would like to recall, in this regard, that the nature of mediation means that, if the mediation is successful, the parties come to a voluntary agreement on how to solve their dispute. No solutions are imposed on either party. Accordingly, bringing a dispute related to a grant agreement to mediation does not in any way imply that the Commission would risk being forced to agree to a solution that would be contrary to Community law or the Community's financial interests.
4.3 Furthermore, the Ombudsman would like to emphasise, as already noted in point 2.5 above, that bringing a grant dispute arising from a contract with the Commission directly before the Community courts, without first having had the possibility of solving the problem with the assistance of a mediator, may not necessarily be the most cost effective way of solving a dispute and protecting the taxpayers' money. It should also be recalled that as long as it is clear to the parties that bringing a dispute to mediation is not without cost, it is up to them to make a well-considered decision as to whether or not to do so.
4.4 The Ombudsman would also like to take the opportunity to address here the Commission's remark that the deadlines for natural and legal persons to institute court proceedings, in accordance with Article 230 of the EC Treaty, against Commission decisions concerning the awarding of grants, as well as concerning the management of grant agreements, would make it practically impossible to use mediation in such cases, since recourse to ADR and mediation does not have suspensive effect on these deadlines. The Ombudsman first of all recalls that the Commission has already decided to introduce an optional clause giving recourse to mediation in procurement contracts (see part 1 above). Furthermore, as regards grants, the Ombudsman recalls the Commission's reference to procedures giving the interested parties ample opportunities to communicate with and to present observations to the Commission before it takes any final decision. In this regard, the Commission referred to (a) notifying the debtor before recovering unduly paid sums, thereby allowing for mutual agreement on the sums to be paid; (b) informing the beneficiary before terminating a grant agreement, thereby allowing for remedial actions or observations designed to avoid the termination procedure; and (c) notifying the beneficiary of a grant about the final amount, in order to enable him or her to ask for further information or contest the final amount within a certain time period. The Ombudsman notes, as already done in point 2.4 above concerning procurement contracts, that the Commission makes efforts to provide information to, and to communicate with, recipients of grants before taking any decision in the sense of Article 230 of the EC Treaty. The Ombudsman takes the view that these efforts should make clear whether there is a dispute between the parties already at this stage of the procedures. A dispute could then be brought to mediation before the Commission takes a decision, that is, before the time-limit for instituting court proceedings starts to run. The deadlines for bringing a matter before the Community courts would therefore appear to come into play only at a later stage and would thus not constitute an impediment to mediation.
4.5 In view of the above, the Ombudsman would greatly appreciate it if the Commission could communicate to him any future plans it may have to also extend the use of mediation to grant agreements, perhaps in light of the outcome of the follow-up of the application of the mediation clause in its procurement contracts. The Ombudsman will make a further remark to this effect below.
The Ombudsman acknowledges the Commission's efforts to provide information in order to avoid disputes as well as its endeavours to settle disputes amicably. The Ombudsman further notes and welcomes a general willingness by the Commission to further promote the availability of ADR, and in particular mediation, in contracts financed by the Commission.
The Ombudsman welcomes in particular in this regard the Commission's intention to introduce an optional mediation clause in its standard procurement contracts and to encourage use of the clause by its services, as well as its intention to follow-up the use of the mediation clause and the concrete results arising from such use.
The Ombudsman further notes the Commission's statement that it could only recommend to its own contractors recourse to ADR and mediation in their relations with their sub-contractors, but that it is not in a position to impose such recourse. The Ombudsman considers that this statement allows for further developments in the area.
The Ombudsman notes the Commission's concerns as regards the use of mediation in disputes related to grant agreements. However, the Ombudsman hopes that he has been able to show that the problems referred to by the Commission do not appear to be insurmountable and that, in any event, they do not apply to all three areas discussed.
In view of the above, the Ombudsman finds no maladministration by the Commission regarding the matter. The Ombudsman therefore closes the case.
The Ombudsman considers that it would be useful if the Commission could communicate to him:
The Ombudsman would welcome receiving the Commission's comments on the above further remarks by 30 June 2007.
Yours sincerely,
P. Nikiforos DIAMANDOUROS
(1) The Ombudsman considers the following definition of mediation to be useful for the purposes of the present inquiry: "a non-binding dispute resolution process in which an independent third party assists the parties to settle their differences but does not advise them of his or her own opinion as to the issues and merits of the dispute". Philippa Rowe, Resolving your Disputes by Mediation: The Academy of Experts: 2004, p. 72.
(2) Green Paper on alternative dispute resolution in civil law and commercial law, COM(2002) 196 final.
(3) Proposal for a Directive of the European Parliament and of the Council on certain aspects of mediation in civil and commercial matters, COM(2004) 718 final.
(4) The European Code of Conduct for Mediators is available on the Commission's website (http://ec.europa.eu/civiljustice/adr/adr_ec_code_conduct_en.pdf).
(5) The Commission stated that the names and contact details of the organisations in question would be added to a list that is available on the Commission's website (for information purposes only) (http://ec.europa.eu/civiljustice/adr/adr_ec_list_org_en.pdf).
(6) Article 2(1) of the Statute of the European Ombudsman states that "[w]ithin the framework of the Treaties (...) the Ombudsman shall help to uncover maladministration in the activities of the Community institutions and bodies (...). No action by any other authority or person may be the subject of a complaint to the Ombudsman."
(7) Commission Regulation No 1261/2005 amending Article 149(3) of Regulation No 2342/2002 laying down detailed rules for the implementation of the Financial Regulation, OJ 2005 L 201, p. 3.
(8) Proposal for a Directive of the European Parliament and of the Council on certain aspects of mediation in civil and commercial matters, COM(2004) 718 final.
(9) Proposal for a Directive of the European Parliament and of the Council on certain aspects of mediation in civil and commercial matters, COM(2004) 718 final.
