# Decision of the European Ombudsman on complaint 278/2003/JMA against the European Commission
- Author: European Ombudsman
- Date: null
- [URL](https://www.ombudsman.europa.eu/en/decision/en/1859)
---
Strasbourg, 2 December 2004   

Dear Mr X.,

On 6 February 2003, you lodged a complaint with the European Ombudsman
against the European Commission on behalf of the organisation Y. Your
complaint concerned the Commission's decision of 12 August 2002 refusing
to provide financial assistance to Y in the framework of the Community
action programme for the promotion of non-governmental organisations (NGOs).

You had sent a previous complaint to the Ombudsman concerning the same
subject matter on 23 December 2002, which was declared inadmissible on
10 February 2003.

On 18 March 2003, I forwarded your new complaint to the President of
the European Commission. The Commission sent its opinion on 12 June 2003,
and I forwarded it to you with an invitation to make observations. You
sent me your observations on 24 and 30 July, 30 September and 21 October
2003. I requested further information from the Commission on 18 February
2004. I received the Commission's second opinion on 14 April 2004 and
forwarded it to you. You sent me your observations on the Commission's
second opinion on 29 May 2004.

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

THE COMPLAINT
-------------

On 23 December 2002, the complainant had first lodged a complaint with
the Ombudsman against the Commission, on behalf of the organisation Y.

The facts of that case were, in summary, as follows:

Y submitted a request for financial assistance in the framework of the
Call for Submissions of Proposals pertaining to a Community action programme
for the promotion of NGOs. On 8 April 2002, the Commission acknowledged
receipt of the complainant's request. On 12 June 2002, the institution
informed the complainant that following a first screening of all applications,
Y had met the admissibility criteria set out in the Notice to the Action
Programme. On 12 August 2002, however, the Commission notified the complainant
that his application had not been selected on the grounds that some doubts
regarding the legal standing of Y had arisen. In its letter, the Commission
stated that there appeared to be some uncertainty concerning the nature
of Y's relationship with another organisation named Z. The Commission
argued that the national public prosecutor had begun an inquiry into allegations
that Y forged and illegally amended its statutes, as a result of which
he had brought the matter to the attention of the responsible criminal
court.

On 30 August 2002, the President of Y wrote to the Commission and explained
the legal status of Y and its co-operation agreement with Z. He emphatically
refuted the accusations concerning both the validity of the organisation's
by-laws and the falsification of a public document. He described the legal
structure of Y as certified under the relevant national law. On the basis
of that information, he asked the Commission to reconsider its decision
to refuse Y's request for financial assistance in 2002.

In a letter to the complainant dated 7 October 2002, the Commission
informed him that the preliminary selection of beneficiaries had been
concluded and the list of beneficiaries established. The institution noted
that the 2002 period was closed and therefore, there appeared to be no
reason for any further discussion.

The complainant alleged that the Commission failed to identify the source
of the allegations and to take account of his arguments before making
its final decision. He also argued that the Commission's reasoning found
no legal basis in the Call for Submissions of Proposals of the Action
Programme.

As regards the alleged uncertainty surrounding the relationship between
Y and Z, the complainant pointed out that the Commission was well aware
of the nature of the co-operation agreement between the two organisations.

In the complainant's view, the inquiry pursued by the national public
prosecutor, came as a result of a slander campaign launched by a former
Y employee who had been laid off. The complainant underlined that the
legal proceedings involving his organisation had been brought to a close
by the judge in charge of the inquiry on 7 October 2002. The magistrate
concluded that there was no incriminating evidence against the complainant.

In view of the available information, the Ombudsman considered that the
complaint had not been preceded by the appropriate administrative approaches
to the institution concerned as required by Art. 2 (4) of his Statute.
Accordingly, the Ombudsman declared the complaint inadmissible.

On 6 February 2003, the complainant forwarded additional information,
including correspondence with the Commission services regarding the subject
matter of his complaint. Taking into consideration this new evidence,
the Ombudsman decided to register the complainant's letter as a new complaint
and started a new inquiry.

On 4 June 2003, a third party requested access to all the documents pertaining
to the complaint. Since the complainant had not requested that his complaint
be treated confidentially, the Ombudsman granted the request for access
on 16 June 2003 in accordance with Article 14 (4) of the Decision of the
European Ombudsman adopting implementing provisions[(1)](#(1)){#Footnote1}.
Having been informed of the Ombudsman's decision by letter of 23 June
2003, the complainant then requested that his complaint be classified
as confidential. In conformity with Article 10 (1) of his implementing
provisions[(2)](#(2)){#Footnote2}, the Ombudsman declared
the complaint confidential.

In summary, the complainant alleges (i) that the Commission's decision
of 12 August 2002 is not based on the provisions of the Call for Submissions
of Proposals setting out the legal basis of the action programme, and
(ii) that he was not given the opportunity to be heard before the decision
was taken. He therefore claims that the Commission should reconsider its
position and grant the complainant the requested assistance.

THE INQUIRY
-----------

**The Commission's opinion**   

In its opinion, the Commission first described the factual and legal
aspects of the case. It explained that Y's request for financial assistance
was made in the framework of a Community action programme promoting NGOs.

The complainant's organisation had previously received assistance from
similar programmes. In the course of a routine audit involving a previous
grant, a problem regarding the organisational structure of Y was discovered.
The Commission then decided to suspend both further assistance to the
organisation as of the year 2000, and to request the reimbursement of
part of the funds already granted. At that time, the Commission became
aware of a number of internal legal problems affecting Y, which reaffirmed
its position not to award further grants to this organisation. From the
point of view of the work performed by Y, however, the Commission stressed
that it had always been satisfactory.

The Commission noted that it had never sought to become involved in
Y's internal problems. Accordingly, in all its correspondence, the institution
had never passed judgement on these matters.

As for the complainant's allegation that the Commission's decision was
not based on the legal provisions governing the 2002 Call for proposals,
the institution argued that decisions on grants are consistent with the
provisions laid down in the pertinent legal decision, the relevant call
for proposals, and the information dossier published with it. However,
when entering into a legal obligation, the Commission must also be satisfied
with the legal and financial standing of the beneficiary, as well as of
his/her overall integrity, as a matter of sound financial management.
In the case of Y, the Commission considered that there were sufficient
grounds to assume that these general conditions were not met, since the
organisation's structure and internal decision-making process were unclear.
It stated that the decision not to grant financial assistance until confidence
in the organisation would be restored was taken on a risk-management basis,
in full consultation and agreement with the Internal Audit Capability
unit of the responsible DG.

The Commission rejected the allegation that it had breached the complainant's
rights of defence. The institution explained that it has the prerogative
to decide on the allocation of grants on the basis of all the information
available. Within the framework of the NGO's funding programme, meetings
with beneficiaries to discuss the outcome of their application are not
foreseen. The information dossier published with each call for proposals
explicitly states that the Commission's decision on the grants is final.
This policy is consistent with the notion that Community grants are to
be considered gifts which should be employed to achieve a number of pre-determined
objectives. However, further written clarification of the reasons for
rejection may be given when requested.

In view of the Commission's serious concerns resulting from Y's internal
legal problems, the institution considered that the potential beneficiary
should have convincingly proved that no illegal situation existed and
that its institutional stability had been restored. In the Commission's
view, no such substantial evidence had been presented.

The Commission therefore concluded that it was not in a position to reconsider
its decision and to grant the complainant the requested assistance.
**The complainant's observations**   

The complainant argued that Y met all the criteria spelled out in both
the Call for Submissions of Proposals and in the relevant decision. He
insisted that the decision to reject Y's application for funding in 2002
had not been based on the criteria set out in any of the previous legal
instruments, but rather on the concern of its services about Y's legal
status. These reservations were unknown to the complainant who never had
the opportunity to refute them.

As regards the Commission's claims regarding potential financial irregularities
in the use of grants by Y during the 1998, 1999 and 2000 periods, the
complainant found them ungrounded. He referred to the findings of the
audit which the Commission carried out between September 2001 and April
2002 on the actions by Y. These controls did not find any irregularity,
and subsequently, the institution had to withdraw its requests for the
reimbursement of the 1998 grant and for the suspension of the 2000 and
2001 assistance. The complainant noted, however, that the grounds for
the Commission's audit were unrelated to those given by the institution
in support of its decision to reject the complainant's 2002 application.

The complainant rebutted the existence of any internal problems involving
Y's structure. He added that the organisation has always enjoyed the support
of its members, as illustrated by the resolution of its recent general
assembly. The legal actions against Y were the result of a slander campaign
orchestrated by a former employee.

The complainant noted that the legal action against Y was merely a preliminary
inquiry launched by a national public prosecutor and, in no way connected
to the nature of the statutes or the structure of the organisation. As
regards this aspect, the Commission should have been well aware of Y's
legal structure, since it had maintained a regular working relationship
with the organisation since 1996. The institution kept a wealth of information
on Y including its official statutes, which had been certified by the
national authorities.

In the complainant's view, the Commission's argument that the fact that
serious allegations against Y were being pursued in court placed on him
the burden to prove the soundness of his organisation, ignored fundamental
legal principles and infringed his basic rights. The complainant underlined
that everyone charged with a criminal offence shall be presumed innocent
until proven guilty, as recognised in Article 11 (1) of the Universal
Declaration of Human Rights, Article 14 (2) of the International Covenant
on Civil and Political Rights, and Article 6 (2) of the European Convention
on Human Rights.

FURTHER INQUIRIES
-----------------

In view of the observations submitted by the complainant, the Ombudsman
wrote to the Commission on 18 February 2004. In his letter, the Ombudsman
noted that the Commission appeared to have based its decision on the existence
of a criminal inquiry against the complainant. In order to assess the
reasoning given by the Commission, the Ombudsman requested further clarification
concerning: (i) whether in this particular case, the Commission took properly
into account, not only the need to protect the Community's financial interests,
but also the complainant's right to be treated both fairly and with due
respect to the presumption of innocence; and (ii), if in general cases
involving on-going judicial or administrative inquiries regarding the
legal and financial standing of potential beneficiaries of Community assistance,
the institution has given any guidance or instructions to its departments
on how to respect a fair balance between the interests of private persons
and the general public interest.
**The Commission's second opinion**   

In its second opinion, the Commission stressed that sound financial management
is an essential principle in its management of the Community budget. Accordingly,
an important concern is to minimise the risk that taxpayers' money is
not well spent.

The Commission recalled that grants under the programme concerned are
awarded on a yearly basis, once the institution has assessed the proposals.
It explained that the award of grants is subject to the principles of
transparency and equal treatment. These general principles were already
spelled out in the "Vademecum on Grant Management" of 1999, and were subsequently
included in the new Financial Regulation, which entered into force in
January 2003. The Commission services must ensure the application of these
principles.

The Commission underlined that everybody is innocent until proven guilty.
In this case, however, because of the sources and the gravity of the allegations,
the Commission felt compelled to take a cautious stance, leading to the
decision not to include Y among the successful candidates. Under the circumstances,
the Commission judged that it would not be sound financial management
to grant a subsidy to this particular applicant where such clear doubts
existed.

The Commission explained that, as mentioned in its opinion, a problem
with the organisational structure of Y was discovered during a routine
audit of the 1998 expenditure carried out in February 2001. The problem
concerned the non transparent relationship between Y and Z, one of its
founders. Much of the expenditure for Y's activities was actually incurred
by Z which then billed Y for the corresponding amounts. This constituted
sub-contracting which was not allowed without the permission of the Commission.
After further audits and internal discussions, a decision was taken to
try to find a pragmatic solution to the problem. As the work had been
carried out and no intentional fraud seemed to have taken place, the Commission
accepted the expenditure incurred by Z on behalf of Y, except for some
personnel costs. This solution applied only to the past and did not constitute
the Commission's approval to this non-transparent organisational structure.

In order to find out the real situation, the Commission has asked the
European Anti-Fraud Office (OLAF) to investigate Y. OLAF is in the process
of finalising its inquiry. At the end of this process, and on the basis
of its findings, the Commission will decide whether to resume a normal
relationship with the organisation.

In reply to the specific information requested by the Ombudsman, the
Commission explained that it has not issued any general guidance for its
services on how to behave in similar situations. It is the responsibility
of the Authorising Officer by sub-delegation to make a judgement on a
case by case basis. The Commission wishes to stress however that in the
process of awarding grants, it has to evaluate all applications fairly
and in respect of the principle of sound financial management. Therefore,
in serious cases of allegations of fraud or mismanagement, the precautionary
principle would apply as long as the situation is not clearly established.
**The complainant's observations on the Commission's second opinion**   

In his observations on the Commission's second opinion, the complainant
reaffirmed his previous arguments.

The complainant pointed out that the Commission has kept on repeating
the same incriminating arguments against his organisation, regardless
of the evidence he has furnished and which proves the inconsistency of
these claims. He noted that the institution has used these arguments to
reject a request by the complainant for financial assistance in 2002 and
2003, and most recently in 2004. Even though he has repeatedly requested
to know the charges against him, and to be heard before a decision is
taken, the institution has ignored his right of defence.

The complainant referred to the satisfactory relationship between the
Commission and Y between 1996 and 2000. Y's sound financial management
was illustrated by the findings of the Commission's audit of 28 January
2002 concerning the 1998, 1999 and 2000 periods. The audit concluded that
no irregularity on the part of Y had been discovered despite the auditors'
intensive scrutiny.

As regards the information requested by the Ombudsman in his letter
to the Commission, the complainant believed that the institution had not
provided any further details and therefore that it had failed to reply
to the Ombudsman's requests.

THE DECISION
------------

**1 Alleged lack of legal basis for the Commission's decision**   

1.1 The complainant alleges that the Commission's decision of 12 August
2002 rejecting Y's request for financial assistance in 2002 under the
Community action programme for the promotion of non-governmental organisations
(NGOs) was not based on the provisions of the Call for Submissions of
Proposals which set out the programme's legal basis and that he was not
given the opportunity to be heard before the decision was taken.

The complainant argued that the Commission based its decision to reject
Y's application for funding in 2002 on a number of allegations which were
unknown to him, and that he never had the opportunity to refute.

In his observations, the complainant argues that the justification given
by the Commission for the exclusion of Y, namely the existence of a legal
action against the organisation which was pursued at the time before the
national courts, was groundless since such action merely involved a preliminary
inquiry carried out by a public prosecutor. The Commission should have
been well aware of the sound legal structure of the organisation, having
held a continuous working relationship with it since 1996.

1.2 The Commission argues that, when entering into a legal obligation,
it must ensure, as a matter of sound financial management, the legal and
financial standing of the beneficiary, as well as his/her overall integrity.
The Commission takes the view that there were sufficient grounds to assume
that these general conditions were not met in this case.

The Commission argues that it has the prerogative to decide independently,
on the basis of all the information available, on the allocation of grants.
Within the framework of the NGO funding programme, meetings with beneficiaries
to discuss the outcome of their application are not foreseen. The information
dossier published with each call for proposals explicitly states that
the Commission's decision on the grants is final. This is in line with
the notion that Community grants are to be considered gifts which should
be employed to achieve a number of pre-determined objectives.

In view of the seriousness of the allegations which were being pursued
at the time before the national courts, the Commission considers that
the potential beneficiary should have convincingly proved that no illegal
situations existed. In the institution's view, no such substantial evidence
has been submitted.

In its second opinion, the Commission argues that because of the sources
and the gravity of the allegations, it felt compelled to take a cautious
stance, leading to the decision not to include Y among the successful
candidates.

In reply to a request from the Ombudsman, the Commission stated that
it has not issued any general guidance for its services on how to respect
a fair balance between the interests of private persons and the general
public interest in cases involving on-going judicial or administrative
inquiries regarding the legal and financial standing of potential beneficiaries
of Community assistance. It is the responsibility of the Authorising Officer
by sub-delegation to make a judgement on a case by case basis. The Commission
wishes to stress however that in the process of awarding grants, it has
to evaluate all applications fairly and in respect of the principle of
sound financial management. Therefore, in serious cases of allegations
of fraud or mismanagement, the precautionary principle would apply as
long as the situation is not clearly established.

1.3 The Ombudsman notes that the Commission's reasoning to reject the
complainant's application as stated in its letter of 12 August 2002 was
as follows:
> *"I am sorry to have to tell you that your application was one
> of those, which was not successful in this process for the following
> reason:*
>
> *With reference to the remaining uncertainty concerning Y's independence
> from Z, grave accusations of falsification of signature of a document
> and allegedly illegal amendments to the Statutes of the organisation
> now being pursued by a public prosecutor \[...\], the Commission will
> not reconsider an application from Y until it gets sufficient evidence
> of the legal standing of the organisation."*

From the information submitted in the course of the inquiry, it appears
that at the time the Commission was assessing the complainant's application,
a preliminary inquiry into an alleged forgery on the part of the complainant's
organisation was being pursued by a national public prosecutor. Moreover,
the closing of the Commission's selection procedure took place before
the magistrate responsible for the inquiry cleared the complainant's organisation
on 7 October 2002.

1.4 The Ombudsman finds that in reviewing applications for Community
funding, the Commission not only has to take into account the specific
rules which govern that funding programme, but also any rule or principle
which is binding upon it. As set out in Article 274 of the EC Treaty,
one of the general rules applicable to any initiative involving the use
of Community funds is the obligation of sound financial management.

The Ombudsman notes that the interpretation of the principle of sound
financial management cannot be reduced to a purely accounting definition.
According to the Community courts, its correct interpretation must include
a concern for the practical consequences of the acts of financial management[(3)](#(3)){#Footnote3}.

1.5 In view of the above, the Ombudsman finds it reasonable that before
requests for financial assistance are awarded, the Commission consider
whether or not the legal and financial standing of potential beneficiaries
as well as their overall integrity appear to be sufficiently reliable.
The Ombudsman is not aware of any legal rule or principle that would prevent
this.

1.6 The Ombudsman considers, however, that in taking measures to protect
the Community's financial interests the Commission should seek to strike
a fair balance between the interests of private persons and the general
public interest, so that potential beneficiaries of its financial assistance
are treated both fairly and with due respect to the presumption of innocence[(4)](#(4)){#Footnote4}.
The Ombudsman also points out that it is difficult to envisage how the
Commission could strike a fair balance unless it communicates to an applicant
for a grant any doubts that it may have as to the applicant's legal standing
and is then prepared to listen and respond to information provided by
the applicant in order to clarify those doubts.

1.7 In the present case, the Ombudsman notes that the only argument in
support of the Commission's decision of 12 August 2002 was the existence
of a criminal inquiry against the complainant. In its decision, the Commission
did not refer to any type of supporting evidence, which may have given
weight to its negative assessment of the complainant's application. The
institution limited itself to taking account of the formal existence of
a criminal inquiry and the allegations made thereupon, without seeking
to verify that information.

The Ombudsman notes that, notwithstanding the invitation made to the
complainant in the Commission's decision of 12 August 2002 to provide
evidence on the legal standing of his organisation, once the complainant
did so by letter dated 30 August 2002, the institution does not appear
to have responded to that evidence and merely stated in its letter of
7 October 2002 that the beneficiaries of the 2002 Action Programme had
already been established.

1.8 Having reviewed the facts of the case, the Ombudsman finds that the
Commission has not been able to show that, in this instance, it struck
a fair balance between the need to pursue sound financial management of
its grants, and the complainant's right to be treated both fairly and
with due respect to the presumption of innocence. By exclusively relying
on the formal existence of a legal inquiry against the complainant without
further verifying that information, the Commission did not treat the complainant
fairly, in breach of Article 6 (2) of the European Code of Good Administrative
Behaviour. This constitutes an instance of maladministration. A critical
remark will be addressed to the Commission.

1.9 The Ombudsman wishes to draw the Commission's attention to the fact
that similar types of problems could be averted if the institution were
to take the initiative to provide its services with guidance or instructions
on how to respect a fair balance between the interests of private persons
and the general public interest in cases involving on-going judicial or
administrative inquiries regarding the legal and financial standing of
potential beneficiaries of Community assistance.

The Ombudsman will address a further remark to the Commission to this
effect below.
**2 Reconsideration of the assistance requested by the complainant**   

2.1 The complainant claims that the Commission should reconsider its
position and grant Y the requested assistance.

2.2 The Commission argues that it is not in a position to reconsider
its decision and to grant the complainant the requested assistance. The
institution noted, in its exchanges with the complainant, that its 2002
budget period was closed and that Y's request could therefore not be revisited.

2.3 The Ombudsman takes note of the Commission's statement that its 2002
budget period is closed, and therefore applications made at that time
cannot be reviewed. As a result, the reconsideration of the complainant's
request for financial assistance under the 2002 Community action programme
for the promotion of non-governmental organisations (NGOs) does not seem
feasible any longer.

In view of the above, the Ombudsman considers that the complainant's
claim cannot be met as regards the 2002 budget. The Ombudsman points out,
however, that he is not aware of anything to prevent the complainant from
submitting an application for funding in respect of any grant round that
is still open.
**3 Conclusion**   

On the basis of the European Ombudsman's inquiries into this complaint,
it appears necessary to make the following critical remark:
> The Ombudsman considers that in taking measures to protect the Community's
> financial interests the Commission should seek to strike a fair balance
> between the interests of private persons and the general public interest,
> so that potential beneficiaries of its financial assistance are treated
> both fairly and with due respect to the presumption of innocence. The
> Ombudsman also points out that it is difficult to envisage how the Commission
> could strike a fair balance unless it communicates to an applicant for
> a grant any doubts that it may have as to the applicant's legal standing
> and is then prepared to listen and respond to information provided by
> the applicant in order to clarify those doubts.
>
> Having reviewed the facts of the case, the Ombudsman finds that the
> Commission has not been able to show that, in this instance, it struck
> a fair balance between the need to pursue sound financial management
> of its grants, and the complainant's right to be treated both fairly
> and with due respect to the presumption of innocence. By exclusively
> relying on the formal existence of a legal inquiry against the complainant
> without further verifying that information, the Commission did not treat
> the complainant fairly, in breach of Article 6 (2) of the European Code
> of Good Administrative Behaviour. This constitutes an instance of maladministration.

Given that these aspects of the case concern 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 Commission will also be informed of this decision.

FURTHER REMARK
--------------

The Ombudsman wishes to draw the Commission's attention to the fact that
similar types of problems could be averted if the institution were to
take the initiative to provide its services with guidance or instructions
on how to respect a fair balance between the interests of private persons
and the general public interest in cases involving on-going judicial or
administrative inquiries regarding the legal and financial standing of
potential beneficiaries of Community assistance.

Yours sincerely,

P. Nikiforos DIAMANDOUROS

*** ** * ** ***

[(1)](#Footnote1){#(1)} *"Applications for access
to the following documents shall be granted automatically, except in relation
to complaints that are classified as confidential in accordance with Article
10.1 above:
(b) complaints and documents annexed thereto by the complainant"*   

Adopted on 8 July 2002 and amended by decision of the Ombudsman of 5 April
2004, available on the Ombudsman's website: <http://www.ombudsman.europa.eu>.

[(2)](#Footnote2){#(2)} *"If the complainant so
requests, the Ombudsman classifies a complaint as confidential"*.

[(3)](#Footnote3){#(3)} Case T-105/99 *Conseil des
communes et régions d'Europe (CCRE) v Commission* ECR \[2000\] II-4099,
par. 73.

[(4)](#Footnote4){#(4)} See Article 6 (2) of the European
Code of Good Administrative Behaviour, available on the Ombudsman's website:
<http://www.ombudsman.europa.eu>.