THE BACKGROUND TO THE COMPLAINT

1. The complaint was submitted on behalf of company X and concerned the European Commission's monitoring of the implementation of a contract entered into by it with the authorities in a non-EU country (country Y) following the Commission's publishing of a EuropeAid call for tender.

2. The contract was implemented under a decentralised implementation system, whereby the contracting authority in charge of the tendering, contracting and payments was a public authority in country Y (authority Y).

3. Company X contacted the Delegation of the European Commission to country Y during the early stages of the implementation of the contract to inform it of an alleged breach of contract and alleged unfair treatment by both authority Y and the beneficiary of the contract, Z. In sum, the complainant was of the view that authority Y and Z were requiring more from company X than what was set out in the tender.

4. During November-December 2006, company X and authority Y agreed to refer the conflict to the Delegation for conciliation. Mr A. was involved in the conciliation process.

THE SUBJECT MATTER OF THE INQUIRY

5. The Ombudsman opened an inquiry into the allegations that the Commission:

1. allowed authority Y to launch a Call for tender with an undefined scope;
2. failed to act on authority Y's contract violations at an appropriately early stage; and
3. failed to carry out the conciliation procedure in a transparent, objective and fair manner.

The Ombudsman understood the second allegation to refer to the period in time before the conciliation procedure was initiated.

6. The inquiry also covered the claims that the Commission should:

1. carry out the conciliation procedure again in a fair and objective manner and in full compliance with the applicable provisions and legislation; and
2. ensure that EU legislation is respected in the implementation of the contract in question.

7. The Ombudsman, in his letter opening the inquiry, asked the Commission to answer the following questions:

1. Does the Commission have a general policy document on conciliation?
2. How was the conciliation procedure organised in the present case?
3. How and when did the Commission inform company X of these organisational aspects of the conciliation procedure?
4. Who was the conciliator?
5. Did the Commission ask company X to agree to the proposed conciliator and did company X agree to the proposed person?
6. What was the role of Mr A.?
7. Could the Commission please comment on company X's concern that Mr A. had a conflict of interests, especially since company X argued that Mr A. had worked for authority Y?

THE INQUIRY

8. On 12 October 2007, the Commission submitted an opinion. The opinion was forwarded to the complainant with an invitation to make observations. On 26 February 2008, the complainant submitted his observations.

THE OMBUDSMAN'S ANALYSIS AND CONCLUSIONS

A. The alleged undefined scope of the Call for tender

Arguments presented to the Ombudsman

9. According to the complainant, EU law requires the scope of a Call for tender to be clear and well defined (see, for instance, Article 131 of Council Regulation 2342/2002 laying down detailed rules for the implementation of Council Regulation 1605/2002 on the Financial Regulation applicable to the general budget of the European Communities[1]). According to the complainant, the Commission allowed authority Y to launch the Call for tender in question, and agreed to finance it, despite the scope of the tender not being well defined.

10. The Commission argued that the scope of the tender procedure was properly defined. It pointed out that the contract was result-oriented. This means that, in addition to covering the delivery of some goods, it aimed at achieving a clear result. To accomplish this result, the companies invited to submit tenders could reasonably expect that there would be complementary tasks, which were not explicitly mentioned in the Terms of Reference of the contract, but which would be deemed necessary to produce the final output. According to the Commission, such a situation does not make the scope of the contract "undefined". It noted that it is nearly impossible to specify each and every detail in a contract for the provision of IT services, beyond defining the general parameters of the expected and necessary requirements and results.

11. Furthermore, none of the companies invited to submit a tender, including company X, claimed or commented on the allegedly undefined scope of the contract at the clarification session. Company X also did not refer to the allegedly undefined scope of the contract in its technical offer. In contrast, its technical offer showed its understanding of the possible need to deliver additional requirements during the implementation of the contract in order to achieve its intended results.

12. In his observations, the complainant agreed that the requirements in the Terms of Reference sufficiently documented the level of complexity of the work to be performed, as well as the volume of work to be carried out. The Terms of Reference also described the scope of the work and the activities expected to be performed. Furthermore, an appendix made a detailed presentation of the requirements to be covered.

13. However, after the launch of the project, company X realised that the Terms of Reference of the tender were very old and did not reflect the current situation. For example, they did not reflect the expectations Z presented to company X's consultants. However, Z and authority Y never informed company X that the scope of the project had changed. Nor did they offer company X the chance to renegotiate the terms of the contract, with a view to making the appropriate changes to it. It was only the abusive behaviour of Z and authority Y which revealed that: (a) the scope of the contract was not properly defined; and (b) no one had invested the necessary time and effort to adapt the Terms of Reference.

14. The complainant argued that, although the tender specifications turned out to be incorrect, a tenderer, when submitting a bid, could have understood them to be up-to-date and without "traps". In reality, however, the Terms of Reference were "hiding" additional requirements, which could not be identified by tenderers when preparing their bids. These additional requirements were reported by company X at an early stage and should have been addressed by the Commission. However, the Commission only progressively admitted that the additional requirements were abusive and it did not fully admit all the mistakes.

15. The complainant further argued that the Commission presented a particularly misleading interpretation of the facts and of well-known practices when it argued that the companies invited to submit tenders could reasonably expect that there would be complementary tasks. For all EuropeAid actions, the contracting authority presents a detailed enumeration of the beneficiary's needs in the tender specifications. The enumeration is prepared either by the beneficiary, or by an external expert selected through a separate Call for tenders. Accordingly, such detailed specifications had to be available in order for the Commission to authorise the Call for tender in question. A comparison with other EuropeAid tender specifications[2] showed that the specifications in question were misleading and wrong, thus making the scope of the contract undefined.

The Ombudsman's assessment

16. The complainant alleged that the Call for tenders was not sufficiently specific. It is not disputed that the Call for tenders did not cover each and every detail of the IT system to be built. The Ombudsman, however, considers reasonable the Commission's explanation that it is nearly impossible to specify each and every particular detail in a result-oriented contract for the provision of IT services. The Ombudsman notes that too specific tender specifications could even risk excluding potential tenderers that would have been able to achieve the same end result using alternative technical solutions.

17. According to the complainant, the abusive behaviour of Z was itself evidence that the scope of the project was not properly defined. However, the Ombudsman considers that, when making this assertion, the complainant is referring to the alleged attempt by Z to require from company X duties which went beyond the scope of the contract. This statement by the complainant should therefore be understood as referring to the eventual contractual dispute, and not the scope of the Call for tenders.

18. On the basis of the above, the Ombudsman finds no maladministration by the Commission as regards this aspect of the complaint.

B. The alleged failure to act on authority Y's contract violations at an appropriately early stage

Arguments presented to the Ombudsman

19. According to the complainant, company X faced, from the beginning of the project, a hostile attitude from Z and authority Y officials due to the fact that Z wished to use another type of technology and the services of another contractor offering this technology. Z requested company X to base its deliverables on a technology different from the one specified in its tender. Company X communicated its serious concerns about the progress of the project to the Commission on 27 February 2006 and 21 August 2006. However, the Commission, which was the supervising authority responsible for the enforcement of the applicable legislation (Regulation 1605/2002), failed to take the necessary remedial measures. On 10 May 2006, company X informed the Commission about Z and authority Y refusing to submit to the relevant customs authorities the documents required to clear equipment that constituted part of the deliverables. The Commission again failed to take action to safeguard the successful implementation of the project.

20. The Commission argued that company X first informed it about the problems with the implementation of the contract on 29 May 2006. According to company X, certain equipment for the implementation of the contract had been held by the customs since 1 May 2006. The Commission reacted promptly to the concerns by conveying them to authority Y on 1 June 2006. In doing so, the Commission asked authority Y to treat the problems related to the clearance of the equipment concerned "in line with the provisions of the Contract, including International Commercial Terms and Practices INCOTERMS issued by ICC as referred to in the Contract". On 2 June 2006, the Commission informed company X that it had contacted authority Y regarding the matter. The Commission also explained that the contract was implemented under the decentralised implementation system and that, therefore, "problems should be solved by the contracting parties according to the procedures set therein". The Commission's reply to company X's concerns must be considered rapid, proportionate and fully compliant with the decentralised implementation system.

21. The responsibilities of the Commission under the decentralised implementation system are set out in the Practical Guide to contract procedures for EC external relations ('the Practical Guide'). According to the Practical Guide, the obligations of the Commission during the implementation of contracts under the decentralised implementation system consist of, on the one hand, authorising the financing of contracts once the procedures established in the Practical Guide are respected and, on the other hand, intervening (at the request of both parties) as a conciliator in respect of any problem arising from a contract. The decentralised implementation system is designed to allow three ways of settling disputes, each of which enters into play in a "cascade system". First, the contracting parties must try to reach an agreement to the dispute. If the parties cannot reach an agreement, they can agree to transfer the matter to the Commission, which will try to find a settlement to the dispute by conciliation. Finally, if the Commission cannot settle the dispute through conciliation, or if one of the contracting parties refuses to refer the matter to the Commission, then either one of the parties to the contract can bring the dispute before the national courts. The Commission's normal approach under this system is that when a contractor complains to it about a problem relating to the implementation of the contract, it first encourages the contractor to try and find an agreement with the other contracting party.

22. In the present case, company X only contacted the Commission again on 21 August 2006 (regarding, in any event, another matter). In the meantime, the equipment concerned by the letter of 29 May 2006 was delivered to Z on 25 July 2006.

23. Company X's letter of 21 August 2006 to the Commission concerned a disagreement with Z concerning the interpretation of some clauses contained in the contract. Z had asked company X to carry out some activities that company X considered were not covered by the contract. Company X informed the Commission that the matter had been brought to the attention of authority Y, which had invited company X and Z to find an amicable solution. Company X argued that this had not been possible and asked the Commission for "protection and mediation to make sure that [Z] and [authority Y] accept to implement the contract by respecting its terms and [company X's] rights". The Commission replied on 6 September 2006, proposing a solution to bring together the divergent views of company X and Z. The Commission thus actively cooperated to settle the dispute in a way that was proportionate in view of the gravity and early stage of the dispute. The Commission noted in this respect that the dispute was at the stage between company X and Z, which was not a party to the contract, and it was clear that the contracting parties had not yet exhausted all the means of reaching an amicable solution. As proposed by the Commission, both company X and Z sent their respective interpretation of the contract to authority Y, which sent its conclusions on the disputed issues on 2 October 2006. These conclusions were rejected by company X on 11 October 2006. Company X then "officially ask[ed] for the intervention of the EC Delegation". The Commission replied on 15 November 2006, explaining that if company X had failed to reach an amicable settlement with authority Y, it could refer the case to the Commission for conciliation, provided that authority Y agreed to this. If that was not the case, company X could bring the matter before the national courts. Again, the Commission thus acted in a timely manner and in accordance with the relevant provisions of the contract regarding the settlement of disputes. On 30 November 2006, company X proposed to authority Y to refer the matter to the Commission for conciliation. Authority Y agreed to the proposal on 5 December 2006.

24. In his observations, the complainant argued that company X informed the Commission, by registered letter, of the problems it was already facing before the project started to be implemented. The Commission simply ignored this letter. Since the beginning of the project, company X had copied to the Commission all its correspondence with Z and authority Y, in which it referred to various problems and deviations from the terms of the contract. The problems faced by company X were documented in detail in a report of 22 May 2006. Company X continued to document the situation in the monthly progress reports (from May 2006 and onwards), raised the issue in the monthly progress meetings (from 11 May 2006 and onwards) and documented it in the minutes of all these meetings. The Commission received the monthly progress reports and participated in the monthly progress meetings. However, it did not react on any of these occasions, despite company X's repeated requests for intervention. It is thus not true that company X brought the matter to the Commission's attention for the first time on 29 May 2006. Company X had already sent the Commission letters regarding the issue on 9 and 19 May 2006. Furthermore, the Commission was part of the Project Steering Committee and should, according to the contract, receive all the project deliverables and all project information, and attend all periodical progress meetings. According to the Tender Specifications as specified in the Terms of Reference, the Steering Committee was to meet "every three months to monitor the project in general." However, the parties agreed to organise progress meetings on a monthly basis with the presence of the Commission. Thus, although no Steering Committee meetings took place, the members of the Steering Committee had, as agreed by all parties, to attend the monthly progress meetings. However, no Commission representative participated in four consecutive meetings from May to August 2006. The Commission therefore failed to show the right interest, as it was obliged to do in accordance with the terms of the contract. Furthermore, during the three-month delay caused by authority Y in clearing the equipment at the customs, company X had to take numerous actions and exchange long communications with authority Y in order to solve the problem. Company X kept the Commission continuously informed of this fact. The Commission's action was thus not enough to solve the problem. It merely remained a passive observer. At the stage when company X, following the Commission's proposal, sent its interpretation of the contract to authority Y, the Commission refused to examine company X's position and to form its own opinion.

25. According to the complainant, the Commission's references to the decentralised implementation system were abusive. First, the problem with the customs clearance was not an ordinary dispute concerning the implementation of a contract between two parties. Second, the problems encountered by company X should have alerted the Commission to the fact that the decentralised implementation system did not function properly. Furthermore, company X wrote numerous letters to the Commission drawing its attention to the fact that the Practical Guide is an obsolete and outdated document. It does not even appear to comply with the EuropeAid Regulation because the Regulation stipulates that all public procurement has to be implemented in compliance with EU legislation. The Practical Guide imposes a distorted approach, which was defined 20 years ago and blatantly violates EU law by failing to take into account the EU legislation applicable today. However, even the rules of the Practical Guide were violated in the present case, taking into account the attitude of authority Y and its inability to implement the decentralised implementation system in an efficient manner. The Commission's reaction was not proportionate to "the gravity and early stage of the dispute". Furthermore, it did not comply with the European Code of Good Administration because most of company X's letters were not replied to at all.

The Ombudsman's assessment

26. The Ombudsman underlines that the present allegation concerns the Commission's failure to act on authority Y's contract violations at an appropriately early stage. The Ombudsman finds it necessary to point out at this stage that his mandate empowers him to conduct inquires in relation to the actions of Community institutions and bodies, such as the Commission. He is not empowered to conduct inquiries in relation to the actions of other parties, such as authority Y's possible violation of the Practical Guide. The Ombudsman would also like to point out that the functionality of the decentralised implementation system and the legality of the Practical Guide, which were questioned by the complainant in his observations, are not issues that are covered by the present inquiry.

27. Examining the evidence provided to him by the parties during the course of the inquiry, the Ombudsman notes the following time-line. Company X first wrote to the Commission on 27 February 2006, stating that it had "serious reasons to suspect that the implementation of the project may not be a smooth operation", but that it would "try to face this situation and will keep [the Commission] informed on our progress". European Dynamics also asked the Commission "to make sure that the EUROPEAID program is implemented in [country Y] in full compliance with the applicable EU legislation in the field of public procurement". Accordingly, the letter did not refer to any concrete contract violations by authority Y. The Commission was put in copy of company X's letters of 9 and 19 May 2006 to authority Y concerning problems having equipment cleared at the customs. However, on the basis of the available evidence, the Ombudsman notes that it was only on 29 May 2006 that company X asked the Commission to address the problem. On 2 June 2006, the Commission explained the procedures under the decentralised implementation system for solving contractual problems.

28. In accordance with the decentralised implementation system, the Commission then referred the complaint to authority Y "in order to urge it especially to consider the legal points ... with a view to finding a solution to the problem". The Ombudsman thus concludes that the Commission responded expeditiously to the issues raised by the complainant in its letter of 29 May 2006.

29. Company X then continued corresponding with the authorities in country Y regarding the matter. The Commission was only put in copy of a letter dated 22 June 2006, in which authority Y was again asked to take action (or company X would consider seeking legal redress). Company X only wrote directly to the Commission on 21 August 2006. It can be deduced from that letter that the equipment had been released by the customs.

30. In its letter of 21 August 2006 to the Commission, company X argued that Z kept asking for additional requirements that were outside the scope of the contract. Company X therefore "officially ask[ed] for [the Commission's] protection and mediation". The Commission replied on 6 September 2006, stating that it was its "understanding that there [was] a dispute in the interpretation of the Terms of Reference (TOR). As the TOR are key for the successful implementation of a project, conflicts over the TOR need to be resolved immediately." The Commission again explained that under the decentralised implementation system, authority Y as the contracting authority must find a solution to contractual problems in line with the provisions of the contract. The Commission therefore suggested that company X, as the contractor, and Z, as the beneficiary, should present their respective interpretations of the Terms of Reference to authority Y, which could then try to reach a common understanding. The Commission also explained that, if the problems were to remain unsolved, it could get involved as a conciliator. On 18 September 2006, company X explained to the Commission that it did not trust authority Y to handle the matter impartially. It therefore asked for the Commission's intervention.

31. The Ombudsman notes that authority Y agreed to analyse the dispute. It communicated its conclusions on 2 October 2006. The Commission was put in copy of company X's letter of 11 October 2006, by which it informed authority Y that it did not agree with the conclusions. On 2 November 2006, company X asked the Commission to intervene. In its reply of 15 November 2006, the Commission explained that, if authority Y agreed to it, the matter could be referred to the Commission to be settled through conciliation. Both parties agreed to such conciliation. On 18 December 2006, the Commission explained that it would invite the parties to a conciliation meeting.

32. On the basis of the above, the Ombudsman finds that the Commission has acted on company X's requests for intervention in an exemplary manner and in accordance with the applicable procedure. He therefore finds no maladministration by the Commission as regards this aspect of the complaint.

C. The alleged failure to carry out the conciliation procedure in a transparent, objective and fair manner

Arguments presented to the Ombudsman

33. The complainant stated that company X requested a clear description of the conciliation methodology, as well as information about the chosen conciliator, from the Commission. According to the complainant, the Commission refused to provide the requested information.

34. The complainant stated that company X, nevertheless, later managed to find out that Mr A., the person chosen by the Commission to be the conciliator, was not an IT expert. Rather, he was a consultant in the Energy field. Company X also discovered that Mr A. had worked for authority Y. Company X therefore called into question whether Mr A. had no conflicts of interest.

35. Company X also noted that according to the applicable rules for conciliation, company X had to approve the conciliator. Company X communicated its concerns to the Commission, which failed to provide it with well-founded arguments. Instead the Commission tried to change the stated role of Mr A. by referring to him as a "legal advisor" or "technical advisor".

36. According to the complainant, Mr A. made it clear to company X during the conciliation that, even before hearing company X' arguments, he had taken a decision in favour of the authorities of country Y. Mr A. did not meet with company X and refused to hear its arguments. He submitted a report based only on the contacts he had had with Z and authority Y.

37. According to the complainant, the Commission invited company X to attend a meeting with Z and authority Y on 26 February 2007. Since the meeting was to take place in the context of the conciliation process, company X requested, by e-mails of 9 February 2007 and 12 February 2007, detailed information on the conciliation procedure, as well as a copy of the report and the draft settlement agreement drawn up by Mr A. However, the Commission refused to provide company X with the requested information. Company X therefore informed the Commission that it could not participate in the meeting. The Commission replied that if company X still wished the conciliation procedure to continue, it could provide company X with a copy of the settlement agreement. Company X replied that it wished the conciliation process to continue. The Commission provided a copy of the settlement agreement on 12 March 2007. However, according to the complainant, the proposed settlement agreement was biased. It ignored fundamental aspects of the case and was contrary to the contract between company X and authority Y, as well as to the applicable legislation.

38. In its opinion to the Ombudsman, the Commission stated that it has no general policy document on conciliation for contracts financed from the general budget of the European Communities. It stated that the procedural rules on conciliation and arbitration of contracts financed by the European Development Fund[3] are not applicable to the contract in question, since the contract is financed by the general budget and not by the European Development Fund. Instead, Article 40, paragraph 3, of the General Conditions to the contract in question constitutes the single legal framework on the settlement of disputes by conciliation. That Article stipulates that "[i]n the absence of a amicable settlement, the parties may agree to the settlement of the dispute by conciliation by the European Commission in the case of contracts for which the Contracting Authority is not the European Commission. If no settlement is achieved within 120 days of the start of the conciliation process, each party to the contract has the right to proceed to the next stage in the dispute settlement procedure." According to this Article, the conciliator is the Commission. By concluding the contract, company X and authority Y accepted this. It underlined that, in accordance with these rules, there was no need to seek again the agreement of the parties as regards the conciliator.

39. The Commission argued that once the parties had agreed to refer the dispute to conciliation, the Commission informed them, on 18 December 2006, that it would invite them to a conciliation meeting. The exact time would be communicated to the parties in January 2007. On 12 January 2007, the Commission informed both parties that that Mr A. would provide external technical assistance to the Commission within the conciliation procedure. On the basis of information provided by company X and authority Y, Mr A. elaborated a report including recommendations for a mutually satisfactory resolution of the dispute. The Commission meticulously analysed the report and found it to be in line with its general assessment of the dispute. Based on its own analysis, and Mr A.'s report, the Commission drafted a proposal for the settlement of the dispute. On 7 February 2007, the Commission invited the parties to a meeting on 26 February 2007, during which it would submit to them the proposed settlement agreement. The Commission's letter also contained an indicative timetable detailing the proposed steps to be taken to resolve the dispute. The Commission, as the conciliator, refrained from submitting the proposed settlement agreement to the parties before the scheduled meeting on 26 February 2007. In an effort to avoid any misunderstanding, the Commission wanted to provide the parties with the document at the meeting (in order to explain it in detail and respond to questions). The parties had enough time to reflect on the proposal since the deadline for a reply would have been 15 March 2007. The Head of the Finance and Contracts Section of the Commission Delegation was due to chair the conciliation meeting. However, company X did not participate in the meeting because the Commission had not accepted its pre-conditions set out in a letter of 16 February 2007. In that letter, company X required the Commission to send the proposed settlement agreement to company X at least three days before the scheduled meeting and to recognise that Z and authority Y had repeatedly breached the contract. However, it would have been contrary to the spirit of the conciliation procedure for the Commission to take a position in favour of one of the parties before it presented the draft settlement agreement.

40. On 27 February 2007, the Commission asked company X if it was still interested in continuing the conciliation process. On 5 March 2007, company X confirmed that it was. On 12 March 2007, the Commission sent the parties its own analysis of the dispute, a draft settlement agreement, as well as draft Terms of Reference for the activities to be delivered. The draft settlement agreement foresaw significantly less activities than those requested by authority Y, although company X was still required to do some additional work. The Commission provided detailed reasoning for its proposal, which company X subsequently rejected on 21 March 2007. The Commission then declared the conciliation process terminated and informed the parties of the possibility to take the matter to court.

41. As regards the role of Mr A. in the conciliation process, the Commission argued that he was selected on the basis of his technical background and experience to provide external expertise in view of the technical nature of the contract. The task of Mr A. was to elaborate a preliminary report (a) identifying the issues in dispute, (b) assessing them and (c) giving recommendations to the Commission for a mutually satisfactory and amicable solution to the dispute. To this end, Mr A. assessed the situation on the basis of the Terms of Reference, the information provided by authority Y, Z, company X and the Commission. Mr A. also gathered further information from the parties by means of e-mail exchanges and conference calls, which were recorded with the agreement of company X. He also held short meetings with representatives of authority X and Z, which took place in the presence of Commission staff involved in the conciliation process. Mr A. repeatedly declared his availability to meet company X in city Y. However, company X clearly stated that it would not meet him unless the meeting took place in country X. Mr A.'s preliminary report, together with the contract, the tender dossier and the documentation submitted by company X, authority Y and Z constituted the elements on the basis of which the Commission assessed the dispute and prepared the objective draft settlement agreement.

42. Regarding the alleged conflict of interest, the Commission explained that Mr A. provided short-term technical assistance as an external expert to authority Y during 10 working days in 2006. Mr A. provided his services as an external expert engaged by the economic operator that was awarded the service contract covering the technical assistance and which had the contractual relationship with authority Y. Mr A. thus had no contractual relationship with authority Y, and the technical assistance provided in 2006 was not in any way connected with the contract between company X and authority Y. Accordingly, there was no conflict of interests.

43. In his observations, the complainant argued that, by e-mail of 19 January 2007, Mr A. explained that "[t]he conciliation process suggested by [the Commission], and of which [he was] in charge, follows the [rules in the Practical Guide] and in particular the general rules set out in Annex V to Decision No 3/90 of the ACP-EEC Council of Ministers of 29 March 1990." According to the complainant, on 21 February 2007, more than one month later, the Commission changed its position on what rules applied to the conciliation procedure. It mentioned, for the first time, that "there is no particular EC legislation guiding the procedure for the conciliation under an EC external actions contract financed from the general budget." In the same letter, the Commission also threatened to stop the conciliation unless company X accepted a "blind procedure" where it would be invited to a meeting to hear the Commission's "conclusions" (which were the result of an unknown process during which company X was not even allowed access to Mr A.'s preliminary report).

44. Furthermore, according to the complainant, company X's right to be heard was not respected during the conciliation process. This, in company X's view, did not comply with any known arbitration-conciliation procedure, such as the conciliation procedure of the International Chamber of Commerce.

45. According to the complainant, the Commission had no right to impose a conciliator on the parties. All arbitration and conciliation fora use three conciliators and allow the parties to consent to, or raise objections in respect of, the proposed persons. The process for selecting Mr A. was, however, not communicated to company X. Company X was not even allowed to know who Mr A. was and whether he had the right skills for the task.

46. According to the complainant, Mr A. does not have any IT experience. Furthermore, he did not have any previous experience of conciliation. Moreover, during a 30-day period, the Commission referred to Mr A. as having three different positions: First it was announced that he was the conciliator, then he became a legal advisor, and finally he became a technical advisor.

47. The complainant argued that Mr A. is on a list of international experts who provide their services in country Y. As such, Mr A. could not act in a manner that would harm the interests of his potential clients, that is, Z and authority Y. Accordingly, the complainant argued, Mr A. was in a conflict of interests.

48. According to the complainant, the Commission admitted to having based its conciliation process on Mr A.'s document, which it endorsed completely. However, the Commission was not in a position to "analyse meticulously" Mr A.'s report. Furthermore, the proposal presented by the Commission was simply a roadmap for the continuation of the project. In the proposal, the Commission accepted a considerable number of company X's positions, thus showing that company X was right. However, the Commission still rejected a number of other elements where company X was also right. Moreover, the Commission invited company X to undertake new tasks not initially covered by the contract. Company X's understanding of a conciliation process compliant to EU values is that an independent and qualified conciliator has to analyse and study the situation with a view to assisting the parties to understand which position is correct, that is, which position is compliant with the terms of the contract. In the present case, however, the Commission considered that its role was to find an average intermediary solution somewhere between the positions expressed by the parties. Such an approach was unfair, wrong and infringed the applicable EU law.

The Ombudsman's assessment

Objectivity and fairness

49. The complainant argued that the procedural rules on conciliation and arbitration of contracts financed by the European Development Fund[4] were applicable to the contract in question. However, the Ombudsman considers reasonable the Commission's explanation that these rules were not applicable, since the contract was financed from the general budget and not from the European Development Fund.

50. The complainant further argued that it would be discriminatory not to apply to the case at hand the rules on conciliation and arbitration of contracts financed by the European Development Fund. The Ombudsman notes, however, that discrimination occurs when identical or comparable situations are treated in an unequal way and without any objective justification. He does not consider contracts financed by the European Development Fund and EuropeAid contracts to be comparable. The complainant has not explained in what precise way the Commission's decision (that is, its decision not to use the procedural rules on conciliation and arbitration of contracts financed by the European Development Fund also in the context of EuropeAid contracts) would be discriminatory.

51. The Ombudsman considers that the reference by Mr A. to the procedural rules on conciliation and arbitration of contracts financed by the European Development Fund in his e-mail of 19 January 2007 was wrong, and thus unfortunate. However, such an erroneous reference was not the fault of the Commission given that Mr A. was an external expert and did not speak on behalf of the Commission. Furthermore, Mr A.'s statement does not bind the Commission. The Ombudsman, therefore, does not find any evidence to suggest that the Commission changed its position on what rules applied to the conciliation procedure.

52. Notwithstanding the above, the Ombudsman considers that the absence of already established procedural rules (such as, for example, the procedural rules on conciliation and arbitration of contracts financed by the European Development Fund) for the conciliation process in question did not relieve the Commission of the responsibility to act in accordance with principles of good administration when deciding how to carry out the conciliation process in question. In particular, this did not relieve the Commission of the responsibility to carry out the conciliation procedure in a transparent, objective and fair manner.

53. The Ombudsman first notes that the Commission was free to decide whether it would carry out its role as conciliator using only its own staff or whether external experts would assist it to carry out the conciliation procedure.

54. The complainant does not appear to question, as such, the use of an external expert to assist in the conciliation process. Rather, the complainant questions the specific choice of Mr A. as an external expert on the basis that he did not have the skills required for the task. The Ombudsman, however, notes that the Commission has a broad margin of discretion regarding who it chooses to assist it in its role as a conciliator. The Ombudsman could only call into question the choice of the Commission if the choice reflected a manifest error of assessment by the Commission. The role of Mr A. was to create a preliminary report (a) identifying the issues in dispute, (b) assessing them and (c) giving recommendations to the Commission for a mutually satisfactory amicable solution of the dispute. The Commission considered that on the basis of his technical background and experience, he was able to carry out these tasks adequately. The Ombudsman is of the view that the fact that Mr A. was not a technical expert specifically in the IT field does not automatically imply that the he could not provide useful advice to the Commission. Thus, on the basis of the information provided to him, the Ombudsman does not consider that the choice of Mr A. constituted a manifest error.

55. As regards whether Mr A. was in a conflict of interests, the Ombudsman underlines that the present inquiry concerns the question whether the conciliation procedure was carried out in an objective manner. The Ombudsman underlines that it was the Commission that carried out the conciliation procedure and not Mr A. In that context, the Commission decided whether and to what extent it should take account of Mr A.'s report. In this regard, the complainant has provided no evidence in support of his argument that the Commission was not in a position to analyse meticulously Mr A.'s report.

56. In any case, the Ombudsman does not consider that Mr A. was in a conflict of interests. A conflict of interest is possible when a person is in a situation in which his or her interests could prevail over the interest of a 'client', which in Mr A.'s case would be the parties to the conciliation procedure. A basic component when determining whether such a situation is at hand is transparency, meaning that the person concerned has to be open about all his or her professional connections. In the present case, Mr A. submitted his CV to the Commission, showing that he had already worked in country Y. On the basis of this transparent information, an evaluation of the situation can be made. In the present case, Mr A.'s CV showed that, during the ten years preceding the conciliation procedure in question, he worked on projects in at least 15 countries. During this period, he worked in country Y only once. In the Ombudsman's view, there is thus nothing to indicate that Mr A., who is neither a national of, or based in, country Y, was dependent on the authorities of country Y to give him work. Mr A. cannot be presumed to have been in a conflict of interests.

57. However, even if it cannot be concluded that the conciliation procedure was not carried out in an objective manner, the Ombudsman is of the view that the possibility of the conciliation procedure being accepted by both parties was clearly affected by the perception of one of the parties that there was a conflict of interest. The Ombudsman therefore considers that it would be useful for the Commission to request external experts, who give technical assistance to the Commission in the context of a conciliation process, to provide the Commission with an explicit declaration that they have no interests relating to either of the parties in dispute. The Commission could perhaps draw inspiration from Article 52(2) of Regulation 2342/2002, which defines a situation involving a conflict of interests, when formulating such a declaration. The Ombudsman will make a further remark in this regard.

58. As regards the complainant's argument that company X's right to be heard was not respected during the conciliation process, the Ombudsman again notes that the complainant recognises that, in the settlement proposal, the Commission accepted a considerable number of company X's positions. Company X thus appears to have had the possibility to express its positions during the process.

59. The complainant further appears to argue that, in order for a conciliation process to be compliant with EU law and values, it should conclude who is 'right' and who is 'wrong'. The Ombudsman notes that conciliation is one of many so-called alternative methods of dispute resolution (ADR). There is no exact definition of conciliation as an ADR. However, it is clear that the aim of conciliation in the context of an ADR is to settle the differences between the parties, not to adjudicate on the merits of the dispute. If the aim of company X was to obtain adjudication on the merits, it would have been more appropriate to bring the matter before a competent court. However, in order to avoid possible misunderstandings of the aim of the conciliation process, the Ombudsman considers that it would be useful for the Commission to clarify the issue to the parties to any future conciliation procedures. The Ombudsman will make a further remark in this regard.

60. On the basis of the above, the Ombudsman finds no reason to question the objectiveness and fairness of the conciliation procedure.

On transparency

61. The Ombudsman would first like to commend the Commission for having, as part of the General Conditions of contracts under the decentralised implementation system, a clause on conciliation, as well as for taking on the role as conciliator in case of disputes. The Ombudsman considers this to be perfectly in line with his conclusions and remarks following his own-initiative inquiry into the Commission's actions to promote the availability of ADR in relation to contracts financed by it[5].

62. The Ombudsman considers that, in order to settle a difference between parties to a contractual dispute by using ADR, it is of paramount importance that the parties have confidence in the procedure. Through his work in dealing with complaints against the EU public administration, the Ombudsman has learnt that one of the basic conditions for creating confidence in any procedure is that the procedure is transparent. The Commission has made a general commitment to transparency, acknowledging that high standards of transparency are part of the legitimacy of any modern administration[6]. Furthermore, in the context of the programme to improve consumer access to justice, the Commission has adopted two recommendations[7] establishing the principles applicable to out-of-court procedures for the resolution of consumer disputes, which both include the principle of transparency[8].

62. In the present case, it has already been concluded that there are no detailed procedural rules applicable to the conciliation process under EuropeAid contracts. Nevertheless, in order for the Commission to respect its commitment to transparency and, above all, take seriously its role as a conciliator in disputes such as the one in question, it has to provide the parties with relevant information regarding the conciliation process.

63. The Ombudsman notes the following time-line in respect of the information provided to the parties by the Commission regarding the conciliation process. On 18 December 2006, the Commission informed company X that it would invite the parties to a conciliation meeting and that the date of the meeting would be communicated in January 2007. In a letter of 12 January 2007, addressed to authority Y with company X put in copy, the Commission explained that Mr A. would provide external technical assistance within the conciliation process. Shortly thereafter, Mr A. appears to have started gathering information from the parties by way of, for instance, conference calls. On 31 January 2007, the Commission informed company X that it was "forming [its] opinion in the basis of the information gathered from the related parties" and that it was "about to finalise [its] final recommendation for the conciliation process, which will be communicated ... in the following days." On 7 February 2007, the Commission informed company X that it had assessed the dispute and that it was inviting the parties to a meeting on 26 February 2007. During the meeting, a settlement agreement would be presented. The deadline for signing the settlement agreement was set as 15 March 2007. By e-mail of 9 February 2007, the Commission explained that there would be a letter inviting the parties to "the meeting for conciliation" and that this letter would also "present the basic structure of the conciliation process"[9].

64. The Ombudsman concludes from the above time-line that the parties were indeed provided with the relevant information and that the procedure was sufficiently transparent.

65. On the basis of the above, the Ombudsman finds no maladministration by the Commission as regards this aspect of the complaint.

66. The Ombudsman notes, however, that the information to the parties was provided in a slightly unstructured manner. It would have been preferable for the Commission to inform the parties at the outset about the structure and details of the conciliation process. This lack of structure could have been avoided if the Delegation had had at its disposal procedural rules for conciliation under contracts not funded by the European Development Fund. The Commission could consider adopting such rules, for the benefit of not only the contracting parties, but also its delegations. The Ombudsman will also make a further remark in this regard.

D. The complainant's claims

The Ombudsman's assessment

66. As stated in paragraph 60 above, the Ombudsman finds no reason to question the objectiveness and fairness of the conciliation procedure. Nor has he found, within the remits of his investigatory powers and within the limits of the present complaint, evidence of any breach of EU legislation. The complainant's claims must therefore fail.

E. Conclusions

On the basis of his inquiry into this complaint, the Ombudsman closes it with the following conclusion:

There has been no instance of maladministration in relation to the present complaint.

The complainant and the Commission will be informed of this decision.

FURTHER REMARKS

The Commission could consider adopting procedural rules for conciliation under contracts not funded by the European Development Fund.

It would be useful for these rules to include:

a) a requirement to obtain conflict of interest declarations from any external experts engaged to assist in the conciliation procedure; and

b) a clarification that the aim of the conciliation procedure is to settle the differences between the parties, not to adjudicate on the merits of the dispute.

 

P. Nikiforos DIAMANDOUROS

Done in Strasbourg on 20 August 2009

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[1] Council Regulation No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities, OJ 2002 L 248, p. 1.

[2] The complainant referred to EuropeAid/120184/D/SV/BG, EuropeAid/123970/D/SER/RO and EuropeAid/124378/D/SER/TN.

[3] OJ 2001 L 382, p. 95.

[4] Decision No 3/90 of the ACP-EEC Council of Ministers of 29 March 1990 adopting the general regulations, general conditions and procedural rules on conciliation and arbitration for works, supply and service contracts financed by the European Development Fund.

[5] Case OI/1/2006/TN. The decision is available at the Ombudsman's website: http://www.ombudsman.europa.eu.

[6] See, for example, the Green Paper on the European Transparency Initiative, COM(2006) 194 final.

[7] OJ 1998 L 115, p. 31 and OJ 2001 L 109, p. 56.

[8] Green Paper on alternative dispute resolution in civil and commercial law, COM(2002) 196 final, pages 16-17.

[9] The Ombudsman notes that this e-mail must have been sent to company X before it received the Commission's letter of 7 February 2007.