Decision of the European Ombudsman on complaint 992/2000/ADB against the European Commission

Dear Mr S.,

On 31 July 2000, you made a complaint to the European Ombudsman on behalf of Eurosud Capital, concerning the management by the European Commission of the ECIP programme. On 19 September 2000, you submitted supporting documents.

On 3 October 2000, I forwarded the complaint to the President of the European Commission. The European Commission sent its opinion on 20 December 2000. I forwarded it to you with an invitation to make observations, which you sent on 7 May 2001.

I am writing now to let you know the results of the inquiries that have been made.

THE COMPLAINT

Eurosud Capital is a group of capital investment companies. In June 1998, it became a financial intermediary institution approved by the European Commission for the E.I.C.P. (European Community Investment Partners) programme. Eurosud Capital consequently started to promote the programme.

Eurosud Capital presented two applications under E.C.I.P. Facilité 1, one of which in September 1998 (Marseille Innovation). It was considered eligible for funding by the Steering Committee in October 1998, but the contracts were never established. A second application was sent in July 1999 ("Agence pour le Vietnam d’Etudes économiques et de Conseil" - AVEC). Two E.C.I.P. Facilité 2 applications were sent in December 1999.

Eurosud Capital sent several letters to the Commission to complain about the length of time it took to deal with its applications. The Commission never replied. Eventually, on 14 January 2000 the Commission informed Eurosud Capital that the E.C.I.P. programme had expired. No further contract would be signed or further application examined. Eurosud Capital contacted the Commission on several occasions to complain about the situation. Given that it considered the Commission's replies to be unsatisfactory, it complained to the Ombudsman and made following allegations.

1. The Commission failed to sign a funding contract for a project already approved on 27 October 1998 (ECIP 3551 Fac 1 – Tunisie Marseille Innovation). Furthermore, the complainant considers that a financing decision (as mentioned in article 1(2) of the proposal for a regulation transmitted by Mr. Legras on 14 April 2000) has been taken for this project.

2. The Commission failed to examine several applications submitted by the complainant within the 60-day period foreseen in the framework contract.

3. The financial institutions involved in the programme suffered prejudice as a result of by the lack of transparency in the selection procedure, especially during the period of time leading up to the cancellation of the programme.

THE INQUIRY

The Commission's opinion

The validity of Council Regulation (EC) 213/96 on which the financial instrument E.C.I.P. was based expired on 31 December 1999. On 31 January 2000, a new Regulation was adopted in order to finance the costs linked to the expiry of the programme and the projects carried out under E.C.I.P.

Regarding the complainant's allegations, the Commission in summary stated the following :

1. By letter of 15 December 1998, the Commission informed Eurosud Capital that the project "Tunisie Marseille N°3551" was eligible for financing. It was however mentioned that this letter did not commit the Commission until the signature of a contract. Due to a heavy workload and a lack of Commission staff no such contract was signed before the expiry of the E.C.I.P. legal basis on 31 December 1999.

In respect of the project "Tunisie Marseille N°3551", the Commission will pay a 2500€ "front end fee" in accordance with the provisions of framework agreement for approved projects for which no contract had been signed because of the Commission's "own policy grounds which are beyond the control or possible knowledge of the financial institution".

The complainant's interpretation that a financing decision for the project "Tunisie Marseille N°3551" has been taken and that therefore, pursuant to article 1(2)(1) of the proposal for a Regulation (COM (1999)726 final), the project should be financed, is incorrect. The regulation was only to concern already signed contracts.

2. Because of the excessive workload and the lack of staff, two of the applications submitted by Eurosud Capital (AVEC, 12 August 1999 and STC, 27 December 1999) could not be examined before the expiry of the E.C.I.P. programme. A third project (Rhum & Coco) was handed in after the expiry.

3. The selection procedure was clearly set out in the framework agreement. The Commission and the technical assistance had regular contacts with Eurosud Capital up to the expiry date as well as afterwards. Finally, Eurosud Capital was treated as all other financial intermediaries. All were informed that generally the Commission did not sign any E.C.I.P. financing contracts for applications sent in 1999.

The complainant's observations

The European Ombudsman forwarded the European Commission's opinion to the complainant with an invitation to make observations. In his reply, the complainant underlined that his complaint was not directed against the expiry of the E.C.I.P. programme but against the functioning of the latter before 31 December 1999. The lack of information about the difficulties in the programme caused financial losses as well as a loss of credibility and of public image to Eurosud Capital.

Regarding the first and the second allegation, the complainant held that he failed to understand why, given the Commission's alleged difficulties to cope with the workload, the institution continued to enlarge its network of financial intermediaries and thereby the number of applications.

Furthermore, in its opinion, the Commission mentioned a lack of staff. However, the first check of the applications was contracted out to a Technical Assistance Unit selected further to a call for tenders. In that connection, the complainant fails to understand what the role of this unit was if the insufficient staff of the Commission had to carry out the work, and why this unit continued to work until July 2000.

Finally, the complainant underlines that the fact that the Commission can decide not to sign contracts approved by the Steering Committee out of "own policy grounds which are beyond the control or possible knowledge of the financial institution" jeopardises the legal certainty of a contract. The latter can be discontinued without informing the other party. This in turn raises the question of the credibility of the financial intermediaries in their relations with development organisations or small and medium size enterprises.

As to the third allegation, given the delays noted by Eurosud Capital in relation to its applications it wrote to the Commission on several occasions. These letters remained unanswered. Therefore Eurosud Capital continued to promote the programme until it was informed of its expiry by a letter of 14 January 2000.

The Commission or the Technical Assistance Unit should have informed the financial intermediaries in writing of the difficulties of the programme. Neither of them did. The fact that all the other financial intermediaries were treated in the same way is not an excuse.

As regards the financial losses, the complainant confirms that 2,500€ were paid for the project "Tunisie Marseille N°3551" which had been approved by the Steering Committee. The complainant however considers that 2,500€ should have been paid for each project which were not presented to the Steering Committee due to excessive delays attributable to the Commission. Furthermore, Eurosud Capital spent about 25,000€ to promote the E.C.I.P. programme. It organised seven seminars and meetings were held with over fifty companies. Finally, Marseille Innovation will have to evaluate its own losses. The losses in terms of image and credibility have not been evaluated.

The complainant considers that the Commission cannot claim to support small and medium size enterprises and at the same time penalise them when they participate in Commission programmes which are not properly run.

THE DECISION

1 Failure to sign a contract and to finance an approved project

1.1 According to the complainant, the Commission failed to sign a funding contract for a project already approved on 27 October 1998 (ECIP 3551 Fac 1 – Tunisie Marseille Innovation). Furthermore, the complainant considers that a financing decision (as mentioned in article 1(2) of the proposal for a regulation transmitted by Mr. Legras on 14 April 2000) has been taken for this project.

1.2 The Commission rejects this interpretation. The letter informing Eurosud Capital that the project was approved by the Steering Committee made clear that only a contract would commit the Commission. For this project a 2500€ "front end fee" was paid.

1.3 The Ombudsman notes that the letter informing Eurosud Capital of the Steering Committee's approval did not commit the Commission. The formal decision to co-finance a project is embodied in a contract. In the present case, the contract was never signed. The Ombudsman therefore considers that the Commission did not have an obligation to finance the project under Regulation EC 213/96 before or after its expiry. The Ombudsman finds that there is no instance of maladministration in relation to this aspect of the case.

2 Failure to examine applications in due time

2.1 The complainant alleged that the Commission failed to examine several applications submitted by the complainant within the 60-day period foreseen in the framework contract.

2.2 According to the Commission, two of the applications submitted by Eurosud Capital could not be examined before the expiry of the E.C.I.P. programme because of the excessive workload and the lack of staff. A third project was handed in after the expiry.

2.3 The Ombudsman notes that the Commission's announced intention was to make a decision within 60 days, however, the contract also foresaw that the Commission might not respect this timetable. Therefore the Commission was not legally bound by it.

2.4 In the present case, the Commission gave a reasonable explanation as to why the 60-day time limit for the decision on applications could not be respected. Therefore, the Ombudsman finds that there is no instance of maladministration in relation to this aspect of the case. However, if such delays occur in future, it would be good administrative behaviour for the Commission to inform promptly the citizens involved that the time limit cannot be respected and of the reasons for that situation.

2.5 The Ombudsman therefore considers it appropriate to make a further remark below.

3 Lack of transparency

3.1 The complainant alleged that the financial institutions involved in the programme suffered prejudice as a result of the lack of transparency in the selection procedure, especially during the period of time leading up to the cancellation of the programme.

3.2 The Commission held that the selection procedure was clearly set out in the framework agreement. The Commission and the technical assistance had regular contacts with Eurosud Capital up to the expiry date as well as afterwards. Finally, Eurosud Capital was treated as all other financial intermediaries. All were informed that generally the Commission did not sign any E.C.I.P. financing contracts for applications sent in 1999.

3.3 The Ombudsman notes that in 1999, Eurosud Capital addressed the Commission on several occasions to inquire about its projects and the future of the programme. There is no indication in the file that the Commission ever replied to these letters, nor has Eurosud Capital ever been informed in writing of the difficulties of the E.C.I.P. programme prior to its expiry on 31 December 1999.

3.4 Principles of good administration require that the Community institutions and bodies reply to the letters of citizens. In the present case the Commission did not reply to Eurosud Capital's letters and thereby failed to inform it of major difficulties which were likely to affect the financial intermediary's interests. This constitutes an instance of maladministration.

4 Conclusion

On the basis of the Ombudsman's inquiries into this complaint, it is necessary to make the following critical remark:

Principles of good administration require that the Community institutions and bodies reply to the letters of citizens. In the present case the Commission did not reply to Eurosud Capital's letters and thereby failed to inform it of major difficulties which were likely to affect the financial intermediary's interests. This constitutes an instance of maladministration.

Given that this aspect of the case concerns procedures relating to specific events in the past, it is not appropriate to pursue a friendly settlement of the matter. The Ombudsman therefore closes the case.

The President of the European Commission will also be informed of this decision.

FURTHER REMARK

In the present case, the Commission gave a reasonable explanation as to why the 60-day time limit for the decision on applications could not be respected. Therefore, the Ombudsman finds that there is no instance of maladministration in relation to this aspect of the case. However, if such delays occur in future, it would be good administrative behaviour for the Commission to inform promptly the citizens involved that the time limit cannot be respected and of the reasons for that situation.

Yours sincerely,

 

Jacob SÖDERMAN

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(1) Article 1- COM/99/0726 final - COD 2000/0034 OJ C 150 E , 30/05/2000 P. 0079 - 0079 1. The Commission shall take the steps needed to close and liquidate the projects adopted under Council Regulation (EC) No 213/96 of 29 January 1996 on the implementation of the European Communities investment partners financial instrument for the countries of Latin America, Asia, the Mediterranean region and South Africa. 2. Those steps shall include any project required, pursuant to Council Regulation (EC) No 213/96 of 29 January 1996 and with the aim of liquidating the existing portfolio, to provide monitoring, management and auditing of operations for which the Commission has already adopted a financing decision, including the amendment of contracts already signed and the use of outside technical assistance.