THE BACKGROUND TO THE COMPLAINT

1. The complainant is a lawyer representing the firm DG ENTREPRISE ('the firm').

2. On 11 December 1998, the firm signed a contract with Parliament for construction work to be carried out in Parliament's building in Brussels ('the Contract'). According to the Contract, the firm had to build an area, referred to as the 'Info centre', composed of different items. The Contract was supplemented with four annexes, including Annex II entitled "Cahier des clauses et conditions particulières".

3. On 13 December 2000, after the work had been completed, the firm sent Parliament a detailed account of the work carried out which totalled EUR 78 960.76. In that account, each task performed was described and the firm's price for each item was indicated. Among these item was no 50168 related to the installation of a fire system[1] and amounted to EUR 3 122.76.

4. On 16 January 2001, the firm forwarded to Parliament invoice number 2001.005 for the sum of EUR 78 960.76 ('the initial invoice'), which bore the same date.

5. Parliament refused payment arguing that the quality of some of the work performed was poor. It also pointed out that some other items contained in the initial invoice were not provided for in the Contract. Parliament did not accept the firm's reasons for the performing works linked to such items, except for one, namely, the fire system.

6. By letter of 23 April 2001, the firm demanded payment and asked for interest for the delay[2].

7. Parliament still refused to pay, except for the fire system. In this respect, it asked the complainant to provide an invoice referring only to this item.

8. The firm replied that "[Parliament was] asking for an invoice concerning an amount which had already been the object of an invoice. It [was] therefore out of question to issue such an invoice."[3]

9. Since no agreement could be reached between the two parties, the dispute was referred to a Conciliation Panel composed of two experts chosen by the parties.

10. In the course of the conciliation procedure, Parliament reiterated several times that it was ready to pay for the fire system which amounted to EUR 3 122.76[4], but could not do so on the basis of the initial invoice, because this concerned all of the work performed. As a result, partial payment was impossible according to Parliament's internal rules. Parliament therefore requested the firm either (i) to issue a credit note for the other items included on the initial invoice, thereby cancelling them and leaving only the fire system, or (ii) to issue a separate invoice for an amount of EUR 3 122.76 only. However, the firm issued neither a credit note nor an invoice concerning this matter.

11. On 12 April 2004, the experts of the Conciliation Panel delivered their conclusions. They recommended, on the one hand, that, with the exception of the fire system, the firm should drop its claims for reimbursement of additional items which had been carried out and to which the initial invoice referred. On the other hand, they recommended that Parliament should settle the outstanding sum of EUR 3 122.76 concerning the fire system. The Panel also recommended that Parliament pay interest for late payment, with an annual rate of 7% as from 23 April 2001, that is, the date of that payment which was communicated to Parliament to the date of the actual payment.

12. In September 2006, the complainant telephoned Parliament's services responsible for this matter. He stated that the firm had decided to drop its claims as regards reimbursement of additional works which had been carried out, but still sought payment of the undisputed sum of EUR 3 122.76 for the fire system.

13. In a further letter dated 7 September 2006, the firm demanded payment of interest for delay as from 23 April 2001.

14. Parliament maintained its position: though it did not dispute that it owed the sum in question, it argued that, in the absence of a credit note or an invoice referring exclusively to this sum, it was unable to effect payment. It also refused to pay the interest to the firm on the grounds that its services "last requested the invoice on 17 December 2001 and had been waiting for it since then. Considering the strict accountability rules that they had to respect, they took the view that if the payment had not been made on the relevant dates, this could not be attributable to Parliament."[5]

15. On 5 December 2006, Parliament received from the firm the credit note in which the disputed items had been removed from the total amount of EUR 78 960.76 and the undisputed sum of EUR 3 122.76 was indicated separately as the difference to be paid.

16. On 26 January 2007, Parliament paid EUR 3 122.76 to the firm. It did not pay any interest for the delay.

17. On 29 April 2008, the complainant turned to the Ombudsman.

THE SUBJECT MATTER OF THE INQUIRY

18. In his complaint, the complainant alleged that Parliament had unfairly refused to pay the firm DG ENTREPRISE interest for late payment amounting to  EUR 1 235.50.

19. The complainant claimed that Parliament should pay interest to the firm for late payment.

THE INQUIRY

20. On 23 May 2008, the Ombudsman opened an inquiry into the complainant's above-mentioned allegation and claim.

21. On 18 July 2008, Parliament sent its opinion. The Ombudsman forwarded it to the complainant with an invitation to make observations, which he sent on 30 September 2008.

22. After a careful consideration of Parliament's opinion and of the complainant's observations, on 25 February 2009, the Ombudsman made a provisional finding of maladministration and, in accordance with Article 3(5) of his Statute, proposed a friendly solution to Parliament.

23. By letter of 6 April 2009, Parliament accepted the proposal for a friendly solution. On 17 April 2009, the Ombudsman's services contacted the complainant by telephone regarding this matter.

THE OMBUDSMAN'S ANALYSIS AND CONCLUSIONS

A. Alleged refusal to pay interest for late payment and related claim

Arguments presented to the Ombudsman

24. The complainant alleged that Parliament unfairly refused to pay the firm DG ENTREPRISE interest for late payment amounting to EUR 1 235.50. He claimed that that Parliament should pay the firm such interest.

25. In support of his allegation and claim, the complainant referred to the Conciliation Panel's recommendation that Parliament should pay the firm the sum of EUR 3 122.76, plus interest, as from 23 April 2001.

26. The claim was based on the following considerations:

27. The firm sent an initial invoice concerning this matter on 16 January 2001. On 23 April 2001, it notified Parliament of its request for payment amounting to EUR 3 122.76 for the fire system. In accordance with the provisions of the Contract, Parliament had 60 days to pay the firm[6]. Failing that, interest for late payment on the amounts to be paid had to be granted to the firm. Parliament only paid on 26 January 2007. Thus, the period to be taken into consideration for the calculation of interest extended from 23 April 2001 to 26 January 2007. The interest for late payment to be paid to the complainant therefore amounted to EUR 1 235.50, based on an annual rate of 7% calculated as from 23 April 2001.

28. Parliament stated that its objection to settling the initial invoice was based on good faith and was justified "since the experts appointed by the parties concluded that all the claims made by the firm, with the specific exception of the request for payment of the sum of EUR 3 122.76, which was not disputed by Parliament, should be rejected."

29. Moreover, Parliament explained to the complainant on several occasions[7] that its accounting rules do not allow it to settle only part of an invoice if there was no accounting document, such as a credit note or invoice, referring to it, and justifying a partial payment.

30. Parliament made several requests to the firm to issue such a credit note or invoice, but neither the firm nor the complainant responded until September 2006, when the complainant contacted Parliament's services. Only a month later did the firm issue a credit note, as required by Parliament. Parliament did not see why this credit note could not have been issued before, for instance in January 2001.

31. Accordingly, since Parliament could not be held responsible for the resulting delay, the request for late-payment interest made by the firm could only be rejected.

32. In his observations, the complainant stated that the internal rules of Parliament, pursuant to which a partial payment could not be issued on the basis of a global invoice, were not applicable to the firm because they were not mentioned in the Contract. Parliament should have asked for an amendment to the Contract, which would enable it to ask for a partial invoice. It was not for the firm to ensure that the internal rules of Parliament were reflected in the Contract.

33. Moreover, the Conciliation Panel did not consider that the payment of the undisputed sum plus the interest for delay required a separate credit note or a new, different invoice than the initial one.

34. In addition, the relevant provision of Belgian law which governs the Contract (Article 15 of the Cahier general des Charges de l'Etat annexé à l'Arrêté Royal of 26 September 1996), provides that the Contractor (the firm) had to submit a signed invoice and enclose a detailed account of the work for which it demanded payment. The firm complied with these requirements.

The Ombudsman's preliminary assessment leading to a friendly solution proposal

35. In the Ombudsman's understanding, an institution can, pursuant to contractual terms and conditions, make payments to its Contractors on the basis of invoices they submitted which refer to goods and services rendered and accepted.

36. The complainant required Parliament to make the payment of EUR 3 122.76 on the basis of the invoice dated 16 January 2001, for the amount of EUR 78 960.76 "for the works and supplements as stipulated in the detailed account dated 13 December 2000."[8] These works and supplements were not, however, accepted by Parliament because, with the exception of one item of that work, the fire system, which amounted to EUR 3 122.76, they did not comply with the complainant's contractual obligations.

37. It was therefore reasonable to consider that, on the basis of the initial invoice, Parliament could not make any payment.  It could not be excluded, however, that in the absence of precise contractual provisions in this respect, there were rules of Belgian law governing the Contract which may result in a different interpretation.  In accordance with the Contract, only a Court of competent jurisdiction, to which the complainant and Parliament may submit any dispute resulting from the Contract, could authoritatively decide about this issue[9].

38. Regardless of whether the amount of EUR 3 122.76 was payable on the basis of the invoice in question under Belgian law, it should be noted that in 2001, as soon as the firm submitted that invoice, Parliament expressed its readiness to pay the amount of EUR 3 122.76 and asked the firm to submit an invoice or credit note referring to this sum. Parliament also explained that its internal accounting rules required an invoice or credit note to make the payment possible.

39. Although the complainant was right in stating that the internal rules of Parliament were not referred to in the Contract, there were also no contractual provisions which prevented Parliament from asking the firm to submit a credit note or an invoice in compliance with such rules. The firm could be reasonably expected to do so in the spirit of fair contractual dealing or at least to explain the reasons why it could not do so.

40. The Ombudsman noted in this respect that, in its letter of 14 December 2001 to Parliament, the firm stated that it was not able to issue an invoice on work for which an invoice had already been produced[10].

41. However, even if the argument that it was impossible to issue a "new" invoice were valid, it should be noted that, already in 2001, Parliament proposed that the complainant could issue a credit note as an alternative solution to issuing a new invoice, which the firm finally did.

42. The complainant only submitted such a credit note in November 2006, referring to the remaining sum of EUR 3 122.76, and asked at the same time for the interest on that sum to be calculated as from 2001[11] to the moment when Parliament made the payment, in 2007. The interest amounted to EUR 1 235.50, calculated on the basis of an annual rate of 7% as from 23 April 2001.

43. In light of the above, the Ombudsman was not convinced that the fact that the sum of EUR 3122.76 was only paid to the complainant in 2007, after the latter submitted the credit note complying with Parliament's accounting rules, resulted from Parliament's bad faith.

44. On the other hand, the Ombudsman pointed out that, on 12 March 2004 and following an analysis of the dispute between the complainant and Parliament (including the subject of the present complaint to the Ombudsman), the Conciliation Panel recommended that Parliament should, without further delay, pay the sum of EUR 3 122.76 plus interest, in line with the annual rate of 7% as from 23 April 2001.

45. In this context, the Ombudsman referred to his own-initiative inquiry OI/1/2006/TN concerning the European Commission, which he launched in order to promote the use of alternative methods of dispute resolution (ADR) concerning Contracts financed by the Commission. The Ombudsman took continuously the view that ADR may provide a useful means of attempting to settle a dispute before turning to a court or, if appropriate, to an Ombudsman.

46. Moreover, the Ombudsman pointed out that the Contract between Parliament and the firm explicitly foresaw ADR for any dispute concerning its execution[12].

47. The Ombudsman therefore wondered why, if the present dispute was submitted to the Conciliation Panel which Parliament and the complainant had convoked together in accordance with the Contract, Parliament did not respect the recommendation made by the Panel.

48. Moreover, in its opinion on the present complaint, Parliament not only failed to explain why it did not respect this recommendation, but also neglected to address the complainant's main argument in support of his allegation. In this regard, Parliament, when quoting the Panel's recommendation, only referred to the first part of it, which was addressed to the firm. Parliament did not at all mention the other parts of the same recommendation at all, which were addressed specifically to it and referred to the interest to be paid for delay[13].

49. In light of the above, the Ombudsman made the preliminary finding that, by failing to respect the Conciliation Panel's recommendation or, alternatively, to explain why it could not do so, Parliament committed an instance of maladministration.

50. The Ombudsman therefore made the following proposal for a friendly solution:

"Taking into account the Ombudsman's above findings, Parliament could pay, in line with the Conciliation Panel's recommendation, the firm interest for late payment amounting to EUR 1 235.50, calculated as from 23 April 2001."

The arguments presented to the Ombudsman after his friendly solution proposal

51. In its reply, Parliament stated that, in a spirit of conciliation, it had decided to follow the Ombudsman's proposal and to pay the complainant interest amounting to EUR 1235.50.

52. The complainant informed the Ombudsman's services by telephone that he was satisfied with the outcome of the case and thanked the Ombudsman for his successful intervention.

Conclusions

The Ombudsman concludes that a friendly solution has been achieved and that the complainant's allegation and claim have therefore been settled by Parliament.

In light of the above, the Ombudsman closes the case.

The complainant and Parliament will be informed of this decision.

 

P. Nikiforos DIAMANDOUROS

Done in Strasbourg on 23 April 2009

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[1] The fire system related, among other things, to the building's electrics and the dispatching of firemen in the event of fire.

[2] The Ombudsman notes that this letter was not enclosed with the complaint.

[3] See the French original

"En effet, vous demandez de refacturer une somme qui a déjà été facturée. Il ne peut donc en être question."

[4] Parliament stated in its letter of 29 April 2001:

"As a conclusion, we inform you that the arguments put forward by DG ENTREPRISE do not justify any payment, except for the fire system." Translation from the French original.

[5] Translation from the French original.

[6] See Article 3(1) of the Contract: "The European Parliament reserves a period of time for payment amounting to 60 days."

[7] Parliament referred, for instance, to its letter of 10 July 2003 to the complainant:

"Actually, the European Parliament has to respect strict rules of accountability and can, under no circumstances settle an amount without receiving beforehand a corresponding invoice." Translation from the French original.

[8] Translation from the French original version: "Facturation contre travaux et suppléments suivant décompte du 13 décembre 2000".

[9] Article 1 of Annex II of the Contract ("Cahier des clauses et conditions particulières") provides that:

"Contractual relations between European Parliament and the contractor fall under Belgian Law, to which the parties shall refer concerning questions which are not covered by these provisions (...)

3. In the event of disagreement between the two experts, the dispute is referred to the Court of Justice of the European Communities in Luxembourg, pursuant to Article 181 of the EC Treaty (...)"

[10] See footnote 4 above.

[11] The notification for payment which the firm sent to Parliament is dated 23 April 2001.

[12] Article 1 of Annex II to the Contract provides the following:

"Each dispute occurring between the two parties concerning the implementation of the present contract is settled in the following way:

1. The challenging party first submits a letter of dispute  by registered post to the other party and gives it a period of 15 days to reply, unless an extension of this period is mutually agreed;

2. If no agreement is reached between the two parties before this period of time elapses, the dispute is submitted to two experts, each party choosing its own expert." (emphasis added)

[13] In its opinion, Parliament stated that the following:

"It has been shown that Parliament's objection to settling the invoice issued by DG ENTREPRISE was raised in good faith and was, moreover, justified since the experts appointed by the parties concluded that all the claims made by the firm, with the specific exception of the request for payment of the sum of EUR 3 122.76 which was not disputed by Parliament, should be rejected."