Decision of the European Ombudsman on complaint 1253/2005/GG against the European Commission

Strasbourg, 17 January 2006

Dear Mr X.,

On 21 March 2005, you made, on behalf of your client, IPK International - World Tourism Marketing Consultants GmbH, a complaint against the European Commission to the European Ombudsman. This complaint concerned financial aid that the Commission had decided to grant, on 4 August 1992, to a project concerning the creation of a databank on ecological tourism in Europe and more particularly the handling of this matter by the Commission after the final judgment of the Court of Justice in Cases C-199/01 P and C-200/01 P handed down on 29 April 2004.

On 4 May 2005, I forwarded the complaint to the President of the European Commission, asking for its opinion to be submitted by 31 July 2005.

On 5 August 2005, the Commission asked for an extension of time. In my reply of 31 August 2005, I granted an extension until 15 September 2005. You were informed accordingly on the same day.

The Commission sent its opinion on 14 November 2005. I forwarded it to you on 15 November 2005 with an invitation to make observations, if you so wished.

On the occasion of a telephone conversation with my Office on 6 December 2005, you informed my services that you did not intend to make observations and that you were expecting my decision closing the inquiry.

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

THE COMPLAINT

The present complaint was lodged by a German company, IPK International - World Tourism Marketing Consultants GmbH ("IPK").

The relevant facts until the conclusion of the court proceedings

The relevant facts are set out in the judgment of the Court of Justice of 29 April 2004 in Joined Cases C-199/01 P and C-200/01 P IPK München GmbH v Commission(1) (concerning appeals brought by both the complainant and the Commission):

"The facts

3 (...)

4 On 26 February 1992, the Commission published a call for proposals in the Official Journal of the European Communities with a view to supporting projects in the field of tourism and the environment (OJ 1992 C 51, p. 15).

5 On 22 April 1992 IPK, an undertaking active in the field of tourism, submitted a proposal to the Commission concerning the creation of a databank on ecological tourism in Europe (‘the proposal’). That databank was to be called ‘Ecodata’ (‘the project’). The proposal, which stated that there were seven stages in the project, specified that IPK was to be responsible for coordinating the project and that, in order to carry out the work, it would be assisted by three partners, the French undertaking Innovence, the Italian undertaking Tourconsult and the Greek undertaking 01-Pliroforiki.

6 By letter of 4 August 1992, the Commission informed IPK of its decision to grant financial aid for the project of ECU 530 000, which represented 53% of the expenses envisaged for the project, and invited it to sign and return the declaration by the beneficiary of the aid (‘the declaration’), which was annexed to that letter and contained the conditions for receipt of the aid.

7 The declaration stipulated that 60% of the aid would be paid when the Commission received the declaration, duly signed by IPK, and that the balance was to be paid when the Commission had received and accepted the reports on the performance of the project, namely an interim report to be submitted within three months of the project commencing and a final report, accompanied by accounts, to be submitted within three months of completion of the project and by 31 October 1993 at the latest.

8 The declaration was signed by IPK on 23 September 1992 and was received at the Directorate-General for enterprise policy, trade, tourism and social economics (DG XXIII) at the Commission on 29 September 1992.

9 By letter of 23 October 1992 the Commission informed IPK that it expected to receive the first report by 15 January 1993. In the same letter, the Commission also asked IPK to submit two additional interim reports by 15 April 1993 and 15 July 1993. Finally, it repeated that the final report was to be presented by 31 October 1993 at the latest. The Commission also suggested to IPK that a German undertaking, Studienkreis für Tourismus (‘Studienkreis’), participate in the project.

10 On 24 November 1992, the Head of Division within DG XXIII invited IPK and 01-Pliroforiki to a meeting, which took place in the absence of Innovence and Tourconsult. He is alleged to have required during that meeting that the majority of the work and the funds be allocated to 01-Pliroforiki. IPK objected to that requirement.

11 The first instalment of the aid, namely ECU 318 000 (60% of the total subsidy of ECU 530 000), was paid in January 1993.

12 During a meeting which took place at the Commission on 19 February 1993, Studienkreis’ participation in the project was discussed. Several days after that meeting, the project case was withdrawn from the Head of Division in DG XXIII. A disciplinary procedure was subsequently initiated against him, which resulted in his dismissal.

13 In the end, Studienkreis did not take part in the project. On 29 March 1993, IPK, Innovence, Tourconsult and 01-Pliroforiki entered into a formal agreement on the distribution of tasks and funds within the project. That distribution was explained in IPK’s initial report which was submitted in April 1993.

14 IPK submitted a second report in July 1993 and a final report in October 1993. It also invited the Commission to a presentation of the work which had been completed, which took place on 15 November 1993.

15 By letter dated 30 November 1993 the Commission informed IPK that it considered that the work completed by 31 October 1993 did not satisfactorily correspond with what was envisaged in the proposal and that it should not pay the outstanding 40% of its proposed contribution of ECU 530 000 for the project. The Commission set out the reasons which had led it to adopt that decision in paragraphs 1 to 5 of that letter as follows:

‘1. The project is nowhere near complete. Indeed the original proposal provided for a pilot phase as the fifth stage of the project. Stages six and seven respectively were to be System Evaluation and System Expansion (to the 12 Member States) and it is clear from the timetable set out on page 17 of the proposal that these were to be completed as part of the project to be co-financed by the Commission.

2. The pilot questionnaire was manifestly over-detailed for the project in question having regard, in particular, to the resources available and the nature of the project. It should have been based on a more realistic appraisal of the principal information needed by those dealing with questions of tourism and the environment ... .

3. The linking together of a number of databases to establish a distributive database system has not been achieved at 31 October 1993.

4. The type and quality of data from the test regions is most disappointing, particularly as there were only 4 Member States with 3 regions in each. A great deal of such data as there is in the system is either of marginal interest or irrelevant for questions relating to the environmental aspects of tourism, particularly at the regional level.

5. These reasons, and others which are also apparent, sufficiently demonstrate that the project has been poorly managed and coordinated by IPK and has not been implemented in a manner which corresponds with its obligations.’

16 Furthermore, in that letter the Commission informed IPK that it had to be satisfied that the 60% of the aid already paid, ECU 318 000, had been used, in accordance with the declaration, only for realising the project and made, in paragraphs 6 to 12 of that letter, some observations on IPK’s report relating to use of the funds.

17 IPK expressed its disagreement with the contents of the letter of 30 November 1993, in particular in a letter to the Commission dated 28 December 1993. On 29 April 1994 IPK met with representatives of the Commission in order to discuss their differences.

18 By the contested decision, the Director of DG XXIII informed IPK that there was nothing in its letter of 28 December 1993 which would lead the Commission to change its opinion. He confirmed that, for the reasons set out in the letter of 30 November 1993, the Commission would not make any further payment in respect of the project. Furthermore, it would continue to review with the other services whether or not it should ask for a refund by IPK of part of the 60% aid already paid.

Procedure

19 By application lodged at the Registry of the Court of First Instance on 13 October 1994, IPK brought an action seeking annulment of the contested decision.

20 By judgment of 15 October 1997 in Case T-331/94 IPK v Commission [1997] ECR II-1665, the Court of First Instance dismissed that application.

21 In paragraph 47 of that judgment, the Court of First Instance held:

‘... [IPK] cannot claim that the Commission caused the delay in the completion of the project. [IPK] waited until March 1993 before starting discussions with its partners concerning the distribution of tasks with a view to completing the project, even though it was responsible for coordination of the project. Thus, [IPK] allowed one-half of the time envisaged for completing the project to elapse before it was reasonably able to commence proper work. Even though [IPK] has provided some evidence that one or more officials of the Commission did interfere in the project between November 1992 and February 1993, it has not established at all that this interference prevented it from engaging in proper cooperation with its partners before March 1993.’

22 By application lodged at the Registry of the Court of Justice on 22 December 1997, IPK brought an appeal pursuant to Article 49 of the EC Statute of the Court of Justice against the judgment of the Court of First Instance of 15 October 1997 in IPK v Commission.

23 In its judgment of 5 October 1999 in Case C-433/97 P IPK v Commission [1999] ECR I-6795, the Court of Justice held:

‘15

... it should be observed that, as appears from paragraph 47 of the judgment [of the Court of First Instance of 15 October 1997 in IPK v Commission], [IPK] did provide some evidence of the Commission officials’ interference in the management of the project, particulars of which are given in paragraphs 9 and 10 of [the judgment of the Court of First Instance in IPK v Commission]. That interference was likely to have had an impact on the smooth running of the project.

16

In circumstances such as those, it was for the Commission to show that, notwithstanding the interference in question, [IPK] continued to be able to manage the project in a satisfactory manner.

17

It follows that the Court of First Instance erred in law by requiring [IPK] to furnish proof that the Commission officials’ actions made it impossible for it to engage in proper cooperation with its partners in the project.’

24 Consequently, the Court of Justice set aside the judgment of the Court of First Instance of 15 October 1997 in IPK v Commission and, in accordance with the first paragraph of Article 54 of the EC Statute of the Court, it referred the case back to the Court of First Instance.

25 Following that referral, IPK raised two pleas for annulment before the Court of First Instance, alleging infringement of a number of general legal principles and of Article 190 of the EC Treaty (now Article 253 EC).

Judgment under appeal

26 As regards the subject-matter of the dispute, the Court of First Instance found, in paragraph 35 of the judgment under appeal, that the letter of 30 November 1993 was in two parts. The first part, namely points 1 to 5 of the letter, concerned the Commission’s refusal to pay the second instalment of the aid and therefore contained the grounds on which the contested decision was based. The second part, points 6 to 12 of the letter, concerned the possible recovery of 60% of the aid that had already been paid.

27 The Court of First Instance held, in paragraph 36 of the judgment under appeal, that, as the Commission acknowledged at the hearing, points 6 to 12 of the letter of 30 November 1993 were not among the grounds on which the contested decision was based. Since those points were raised merely in the context of a possible future Commission decision requiring repayment of the instalment of the aid that had already been paid, the Court of First Instance held that the arguments advanced by IPK in its application relating to points 6 to 12 of the letter of 30 November 1993 had to be held to be inadmissible.

28 As regards the first plea raised by IPK, on the alleged infringement of several general legal principles, the Court of First Instance first summarised, in paragraphs 42 to 55 of the judgment under appeal, the parties’ arguments on the time-limit provided for the completion of the project. It concluded that the decision to grant the aid of 4 August 1992 and the declaration attached to it required IPK to complete the project by 31 October 1993 at the latest and that on page 89 of its final report, IPK acknowledged that that was the date for completion of the project.

29 Second, in paragraphs 56 to 63 of the judgment under appeal, the Court of First Instance examined the parties’ arguments on the state of the project on 31 October 1993, before concluding that it was not disputed that at that date the project did not fulfil the conditions of IPK’s proposal, at least in so far as concerned the seventh stage.

30 Third, in paragraphs 64 to 75 of the judgment under appeal, the Court of First Instance considered the justifications put forward by IPK for exceeding the time-limit of 31 October 1993, namely the late payment of the first instalment of the financial aid, the meeting of 24 November 1992 and the Commission’s attempts to involve Studienkreis in the implementation of the project. According to the Court of First Instance, it is clear from the file that from the summer of 1992 until at least 15 March 1993, the Commission continued to exert pressure on IPK to involve Studienkreis in the project.

31 Fourth, in paragraphs 76 to 85 of the judgment under appeal, the Court of First Instance considered whether the Commission had produced evidence that, in spite of the interference designed to bring about Studienkreis’s involvement in the project, IPK continued to be able to manage the project in a satisfactory manner (see the judgment of the Court of Justice of 5 October 1999 in IPK v Commission, paragraph 16). If account is taken of the fact that the Commission’s interference delayed the project until March 1993, the Court of First Instance held, in paragraph 84 of the judgment under appeal, that it cannot be inferred that the fact that the project was only partially performed by 31 October 1993 is also attributable to IPK’s alleged incompetence.

32 In the judgment under appeal, the Court of First Instance held, inter alia, the following:

‘85

In those circumstances and since the Commission has failed to put forward any other arguments, it must be held that the Commission has not shown that, in spite of its interference, in particular that intended to involve Studienkreis in the … project, “[IPK] continued to be able to manage the project in a satisfactory manner”.

86

Therefore, given that, first, from the summer of 1992 until at least 15 March 1993 the Commission insisted that [IPK] involve Studienkreis in the … project (even though [IPK’s] proposal and the decision granting the aid did not provide for that undertaking’s participation in the project), – something which necessarily delayed realisation of the project – and that, second, the Commission has not shown that, in spite of its interference, [IPK] continued to be able to manage the project in a satisfactory manner, it must be held that the Commission acted in breach of the principle of good faith by refusing to pay the second instalment of the aid on the ground that the project was not completed on 31 October 1993.’

33 The Court of First Instance therefore accepted that plea, without there being any need to examine the Commission’s other actions.

34 In paragraphs 88 and 89 of the judgment under appeal, the Court of First Instance set out the Commission’s argument alleging unlawful collusion between the Head of Division of DG XXIII, Mr Tzoanos, referred to in paragraph 10 of the present judgment, 01-Pliroforiki and IPK. It went on to dismiss that plea in the following terms:

‘90

… there is no mention in either the contested decision or the letter of 30 November 1993, to which the [contested] decision refers, of collusion between Mr Tzoanos, 01-Pliroforiki and [IPK], which prevented payment of the second instalment of the aid to IPK. The [contested] decision and the letter of 30 November 1993 do not, furthermore, give any indication that the Commission considered that the way in which the aid had been granted to IPK was irregular. In those circumstances, the Commission’s explanation concerning the alleged existence of collusion between the parties concerned cannot be regarded as clarifying in the course of the proceedings the reasons stated in the contested decision (see, to that effect, Case 195/80 Michel v Parliament [1981] ECR 2861, paragraph 22; Case T-16/91 RV Rendo and Others v Commission [1996] ECR II-1827, paragraph 45; and Case T-77/95 RV Ufex and Others v Commission [2000] ECR II-2167, paragraph 54).

91

If account is taken of the fact that, under Article 173 of the EC Treaty (now, after amendment, Article 230 EC), the Court of First Instance must confine itself to a review of the legality of the contested decision on the basis of the reasons set out in that measure, the Commission’s argument concerning the principle fraus omnia corrumpit cannot be upheld.

92

It must be added that if the Commission, having adopted the contested decision, had taken the view that the evidence mentioned in paragraph 89 above was sufficient to conclude that there was collusion between Mr Tzoanos, 01-Pliroforiki and [IPK] which had vitiated the procedure by which aid was allocated to the … project, rather than pleading in the present proceedings a ground which was not mentioned in the contested decision, it could have withdrawn that decision and adopted another decision not only refusing to pay the second instalment of the aid but also ordering repayment of the instalment that had already been paid.

93

Accordingly, the contested decision must be annulled without there being any need to consider the other plea advanced by [IPK].’

35 The Court of First Instance therefore annulled the contested decision and ordered the Commission to bear its own costs and to pay the costs incurred by IPK before the Court of First Instance and the Court of Justice."

The appeals brought against this judgment by both the complainant and the Commission were rejected by the Court of Justice in its above-mentioned judgment of 29 April 2004.

Events subsequent to the final judgment of the Court of Justice
The Commission's letter of 30 September 2004

In a letter of 30 September 2004, the Commission informed Mr F., the chairman of the complainant, that since its original decision of 3 August 1994 not to pay the second instalment for the project concerned, in-depth investigations had been carried out in relation to Mr Tzoanos. According to the Commission, evidence had been found indicating that Mr Tzoanos had established a fraudulent scheme which allowed him to obtain personal, illegal benefits from many of the subsidy contracts for which his unit had been responsible. As a consequence, criminal proceedings had been instituted in France and Belgium. In France, Mr Tzoanos had been found guilty of corruption by a decision of the Paris Court of Appeal of 30 April 2003; the proceedings in Belgium were ongoing at the time of writing. The Commission added that it had been found in this context that Mr Tzoanos had had a practice of assigning contracts to projects in which Greek companies proposed by him participated as partners and through which he drew benefits from the projects.

The Commission pointed out that, under these circumstances, it had re-examined the process by which the subsidy in the present case had been awarded, so as to verify its legality and regularity.

According to the Commission, a number of reasons (which were set out in the letter) had led it to the conclusion that the award of the subsidy project had been illegal and irregular inasmuch as it had been procured by collusion between Mr Tzoanos and the complainant.

The Commission pointed out that it therefore intended to take a decision cancelling the prior decision to award a subsidy of EUR 530 000 to the project concerned. The result of such a decision would be that the Commission would refuse to pay the second instalment of the subsidy amounting to EUR 212 000 as well as the complainant's request for interest. Secondly, the Commission would also request the complainant to reimburse the advance payment of EUR 318 000, possibly with interest charges.

The Commission added that before doing so, it wished to allow the complainant to exercise its right to be heard.

The complainant's reaction

In its lawyer's letter of 26 November 2004, the complainant took the view that the Commission's contentions were libellous and unfounded. It pointed out that it was involved in countless tourism projects all over the world and that none of these projects had ever resulted in any claims of collusive agreements.

The complainant also took the view that the Commission was time-barred from cancelling the award decision of 4 August 1992 and from ordering the repayment of monies already paid thereunder, pursuant to Article 3 (1) of Regulation No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests(2). According to this provision, the limitation period is four years as from the time that the (alleged) irregularity was committed.

The complainant made detailed comments in order to show that the allegations set out in the Commission's letter of 30 September 2004 were unfounded. It also referred to certain demands for access to documents that it had made.

It appears that, on 9 December 2004, the Commission sent the complainant some of the documents that had been requested.

In its reply of 23 December 2004, the complainant confirmed the arguments it had set out in its letter of 26 November 2004 and commented on the documents to which it had been given access.

The complaint

In its complaint to the Ombudsman, the complainant alleged that the Commission's accusations and allegations were completely unfounded. The complainant claimed that the Commission should act lawfully and that it should pay the second instalment of the grant which amounted to EUR 212 000.

THE INQUIRY

The Commission's opinion

In its opinion, the Commission made the following comments:

On 2 August 2004, the complainant had sent a new request to pay the second instalment plus interest for late payment. The Commission had replied on 30 September 2004 that it intended to take a new decision annulling the award of the grant on the basis that it had been irregular since it had been tainted by collusion. Following an exchange of notes and the sending of documents from the Commission's files, the Commission had studied the arguments put forward by the complainant but had finally come to the conclusion that the indications of collusive behaviour were sufficiently strong to take the decision to annul the award of the grant.

On 13 May 2005, the Commission had sent the decision annulling the grant and announcing the recovery of the advance payment to the complainant. This decision was in full compliance with the judgment handed down by the Court of Justice in Joined Cases C-199/01 P and C-200/01 P IPK München GmbH v Commission.

On 29 July 2005, the complainant had filed an application against the decision of 13 May 2005 (Case T-297/05 IPK International World Tourism Marketing Consultants v Commission(3)).

The present complaint aimed at requiring the Commission to pay the outstanding 40 % of the grant (amounting to EUR 212 000). The application in Case T-297/05 concerned the Commission's decision of 13 May 2005 to annul the award of that grant. It was clear that both cases concerned the same subject-matter, namely the question of whether the Commission was obliged to pay the outstanding part of the grant.

Although the Commission was able to justify and document in detail on what basis the letter of 30 September 2004 had been written, it considered that this was no longer appropriate since the complainant had brought an action against the Commission before the Court of First Instance.

According to Article 2 (7) of the Statute of the European Ombudsman and Article 10 (3) of the European Ombudsman's Implementing Provisions, the Ombudsman had to declare inadmissible or close an ongoing inquiry if "legal proceedings are instituted in relation to matters under investigation by the Ombudsman".

As a result of the close relation between both cases, the Ombudsman should consider closing the inquiry.

The complainant's observations

The Commission's opinion was sent to the complainant for its observations. On the occasion of a telephone conversation on 6 December 2005, the complainant's lawyer informed the Ombudsman's Office that he did not intend to make observations and that he was expecting the Ombudsman's decision closing the inquiry.

THE DECISION

1 Alleged maladministration concerning the handling of a grant

1.1 In March 2005, IPK International - World Tourism Marketing Consultants GmbH ("IPK"), a German company, submitted a complaint against the European Commission to the European Ombudsman. This complaint concerned financial aid amounting to EUR 530 000 that the Commission had decided to grant, on 4 August 1992, to a project concerning the creation of a databank on ecological tourism in Europe and, more particularly, the handling of this matter by the Commission after the final judgment of the Court of Justice in Joined Cases C-199/01 P and C-200/01 P IPK München GmbH v Commission(4) handed down on 29 April 2004. The Commission only paid the first 60 % of the grant (EUR 318 000). In a letter of 30 September 2004, the Commission submitted that a number of reasons (which were set out in the letter) had led it to the conclusion that the award of the subsidy project had been illegal and irregular inasmuch as it had been procured by collusion between Mr Tzoanos (the Commission official in charge of the matter at the relevant time) and the complainant. The Commission pointed out that it therefore intended to take a decision cancelling the prior decision to award a subsidy of EUR 530 000 to the project concerned. The result of such a decision would be that the Commission would refuse to pay the second instalment of the subsidy amounting to EUR 212 000 (as well as the complainant's request for interest). Secondly, the Commission would also request the complainant to reimburse the advance payment of EUR 318 000, possibly with interest charges.

In its complaint to the Ombudsman, the complainant alleged that the Commission's accusations and allegations were completely unfounded. The complainant claimed that the Commission should act lawfully and that it should pay the remaining 40 % of the grant amounting to EUR 212 000.

1.2 In its opinion, the Commission pointed out that on 13 May 2005, it had sent the decision annulling the grant and announcing the recovery of the advance payment to the complainant and that on 29 July 2005, the complainant had filed an application against this decision (Case T-297/05 IPK International World Tourism Marketing Consultants v Commission(5)).

The Commission submitted that the present complaint aimed at requiring it to pay the outstanding 40 % of the grant (to the amount of EUR 212 000). It added that the application in Case T-297/05 concerned the Commission's decision of 13 May 2005 to annul the award of that grant. According to the Commission, it was clear that both cases concerned the same subject-matter, namely the question of whether the Commission was obliged to pay the outstanding part of the grant.

The Commission therefore suggested that the Ombudsman should consider closing his inquiry.

1.3 The Commission's opinion was sent to the complainant for its observations. On the occasion of a telephone conversation on 6 December 2005, the complainant's lawyer informed the Ombudsman's Office that he did not intend to make observations and that he was expecting the Ombudsman's decision closing the inquiry.

1.4 According to Article 1 (3) of the Statute of the European Ombudsman(6), the Ombudsman may not intervene in cases before the courts. If legal proceedings are brought regarding the facts that have been put forward in a complaint, the Ombudsman therefore has to terminate his inquiry. In such a case, the outcome of the inquiries that have been carried out up to that date have to be filed without further action in accordance with Article 2 (7) of the said Statute.

1.5 The Ombudsman takes the view that the subject-matter of the present complaint and that of the application filed by the complainant with the Court of First Instance (Case T-297/05) are indeed closely linked and that the present inquiry therefore ought to be terminated.

2 Conclusion

Given that the complainant has introduced an action before the Court of First Instance, the Ombudsman decides to terminate his inquiry and to file the outcome of the inquiries that have been conducted so far.

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

Yours sincerely,

 

P. Nikiforos DIAMANDOUROS

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(1) Joined Cases C-199/01 P and C-200/01 P IPK München GmbH v Commission [2004] ECR I-4627. The Court of First Instance decision, which is the subject of this appeal, is Case T-331/94 IPK-München v Commission [2001] ECR II-779.

(2) OJ 1995 L 312, p. 1.

(3) Cf. a summary of the case is available at OJ 2005 C 257, p. 13.

(4) Joined Cases C-199/01 P and C-200/01 P IPK München GmbH v Commission [2004] ECR I-4627. The Court of First Instance decision, which is the subject of this appeal, is Case T-331/94 IPK-München v Commission [2001] ECR II-779.

(5) Cf. the summary of the case is available at OJ 2005 C 257, p. 13.

(6) Decision 94/262 of 9 March 1994 of the European Parliament on the Regulations and General Conditions Governing the Performance of the Ombudsman’s Duties, OJ 1994 L 113, p. 15.