Dear Mr O.,

On 2 February 2002, you made a complaint to the European Ombudsman, concerning payment problems in regard to Technical Assistance Contract no: 6948, in Programme no: 186/LI, Financing Agreement no: 186/LI (SEM 04/604/001A).

On 18 February 2002, I forwarded the complaint to the President of the European Commission. The Commission sent its opinion on 6 June 2002. I forwarded it to you with an invitation to make observations, which you sent on 29 July 2002.

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

THE COMPLAINT

In February 2002, the complainant, an IT consultant, submitted allegations against the European Commission, concerning payment problems with regard to a technical assistance contract related to an EU programme. The background to the case was, according to the complainant, the following:

The complainant carried out work under a contract with a Lebanese public authority, which received funding from the European Commission under a financing agreement with the latter. The payments to the complainant were made by the Commission.

Following submission of his final activity report and requests for payment to the Lebanese authority in March 2000, the complainant received a payment from the Commission which was € 5 000 less than foreseen in the contract. It appeared that the Lebanese authority had instructed the Commission to deduct this amount from the final payment to the complainant. The complainant considered that this constituted a breach of contract by the Commission because the Lebanese authority had made no objections to his work, reports or bills within the 90-day delay stipulated in the contract (Article 6).

The Commission informed the complainant that he should address himself to the Lebanese authority. According to the Commission, the complainant's contract partner was solely the Lebanese authority, not the Commission. The complainant disagrees, arguing that the Commission co-signed the contract. In his view, therefore, the Commission was acting in breach of contract when it reduced the final payment by € 5 000.

Presenting his grievances to the Commission, the complainant also argued that there had been payment delays. He asked the Commission to pay interest and costs resulting from these delays, such as loss on exchange rates.

Thus, the complainant made the following allegations and claims against the Commission:

1) The final payment that he received was € 5 000 less than he is entitled to.

2) The payments that he received under the contract were delayed.

The complainant claims an amount of € 15.477,00, consisting of the € 5 000 referred to above, as well as interest, loss on exchange rates due to payment delays, and other expenses.

THE INQUIRY

The Commission's opinion

The complaint was forwarded to the European Commission, which submitted, in summary, the following opinion.

The complainant signed a contract on technical assistance on 18 November 1998 in connection with the Community project "Senior Management Information System" (SMIS) in Lebanon. The contract was entered into with a Lebanese authority, Council for Development and Reconstruction (CDR), within the framework of finance agreement no. 186/LI (SEM 04/604/001A), which was entered into between the Commission and the Lebanese government in 1993.

The European Commission's Delegation in Lebanon endorsed the contract on 30 October 1998. The contract period was set to 18 months. The maximum payment was set at € 60 000.

On 31 March 2000, the complainant submitted his final activity report and requests for payment to the Lebanese authority.

On 15 May 2001, the Commission received a payment instruction from the Lebanese authority, dated 10 May 2001, concerning the complainant's two final payment requests, totalling € 24 000. The Lebanese authority instructed the Commission to make a deduction of € 5 000. On 18 May 2001, the Commission Delegation received a translation of a letter by the Lebanese authority, dated 12 April 2001, which set out the reasons for the € 5 000 deduction. The reasons indicated that there had been a lack of contractual performance by the complainant. On 18 July 2001, the Commission paid the € 19 000 as instructed by the Lebanese authorities.

As for the complainant's allegations and claims, the Commission had the following comments:

As regards payment delays, the Commission examined the matter, and concluded that this allegation was not justified. It pointed out that its services in Brussels received the payment order from its Delegation in Lebanon on 18 May 2001.

As regards the allegation of wrongful deduction of payment, and the claim for full payment and compensation, the Commission noted that it was not party to the contract. The Commission merely endorsed the contract. The duty of the Commission concerns the co-financing, not the contractual duties between the Lebanese authority and the complainant. Interventions by the Commission are only made to ensure that the conditions for this co-financing are fulfilled. The Commission cannot replace any decisions taken by the Lebanese authorities. It simply executes payments as instructed by the Lebanese authorities.

Nevertheless, the complaint prompted the Commission to ask the Lebanese authorities to re-examine the case. The Commission did so to ascertain if a solution could be found. The Commission received the Lebanese authority's reply, which maintains its position. The Commission has not found reason to dispute the substance of the Lebanese authority's view concerning lack of contractual performance. A solution was therefore not found.

In case the complainant is still not satisfied, the Commission advised him to use the procedure referred to in the Financing Agreement, according to which the dispute could be dealt with by application of the Rules of Arbitration of the International Chamber of Commerce (Article 11 of Agreement).

Thus, the Commission concluded that there was no maladministration on its part.

The complainant's observations

The opinion was forwarded to the complainant, who maintained his allegations and claims. In particular, the complainant insisted that the Commission was in fact party to the contract. He stated that it was agreed that he should carry out various tasks for the Commission Delegation itself, but that this was regrettably never formally included in the contract.

THE DECISION

1 Deduction of € 5 000

1.1 The complainant carried out work under a contract with a Lebanese authority which received funding from the European Commission under a financing agreement with the latter. The complainant received his payments directly from the Commission, which made its payments on the basis of payment orders from the Lebanese authority.

The complainant alleges that the final payment he received from the Commission is € 5 000 less than he is entitled to. He argues that this is a breach of contract by the Commission, because it co-signed the contract. In his observations, the complainant furthermore appears to argue that the Commission was party to the contract because it was agreed that he should provide services directly to the Commission Delegation itself. However, no evidence submitted in this inquiry refers to any such agreement.

1.2 According to Article 195 of the EC Treaty, the European Ombudsman is empowered to receive complaints "concerning instances of maladministration in the activities of the Community institutions or bodies". The Ombudsman considers that maladministration occurs when a public body fails to act in accordance with a rule or principle binding upon it. Maladministration may thus also be found when the fulfilment of obligations arising from contracts concluded by the institutions or bodies of the Communities is concerned.

However, the Ombudsman considers that the scope of the review that he can carry out in such cases is necessarily limited. In particular, the Ombudsman is of the view that he should not seek to determine whether there has been a breach of contract by either party, if the matter is in dispute. This question could be dealt with effectively only by a court of competent jurisdiction, which would have the possibility to hear the arguments of the parties concerning the relevant national law and to evaluate conflicting evidence on any disputed issues of fact.

The Ombudsman therefore takes the view that in cases concerning contractual disputes it is justified to limit his inquiry to examining whether the Community institution or body has provided him with a coherent and reasonable account of the legal basis for its actions and why it believes that its view of the contractual position is justified. If that is the case, the Ombudsman will conclude that his inquiry has not revealed an instance of maladministration. This conclusion will not affect the right of the parties to have their contractual dispute examined and authoritatively settled by a court of competent jurisdiction.

1.3 The Commission has stated that it was not party to the contract - which it merely endorsed - and therefore the only contractual parties were the complainant and the Lebanese authority. The Commission submits that its duty solely concerns the co-financing, not the contractual duties between the Lebanese authorities and the complainant.

Nevertheless, the present complaint prompted the Commission to ask the Lebanese authorities to re-examine the case, to see if a solution could be found. A solution was not found. On this basis, the Commission advises the complainant to use the procedure referred to in the Financing Agreement, according to which the dispute could be dealt with by application of the Rules of Arbitration of the International Chamber of Commerce (Article 11 of Agreement).

1.4 The Ombudsman has thoroughly examined the materials submitted by the complainant and the Commission. The Commission's understanding of the contractual documents appears to be correct. As regards the services that the complainant claims to have agreed to provide to the Commission Delegation itself, no evidence has been submitted in this respect.

Thus, the Ombudsman considers that the Commission has provided a coherent and reasonable account of the legal basis for its actions and why it believes that its view of the contractual position is justified. The present inquiry has therefore not revealed an instance of maladministration on the part of the Commission with regard to this aspect of the complaint.

2 Payment delays

2.1 The complainant alleges that some payments that he received under the contract had been delayed. The Commission has rejected this allegation. It refers to the fact that it was only obliged to make payments once it had received the payment orders from the Lebanese authority.

2.2 It appears that the complainant did not take into account that the Commission's obligation to make payments arose upon receipt of payment orders from the Lebanese authority. It appears, therefore, that no payment delays have been established on the part of the Commission.

2.3 On this basis, it appears that there has been no maladministration on the part of the Commission with regard to this aspect of the complaint.

3 Claim for payment and compensation

3.1 On the basis of his allegations, the complainant claimed in his complaint of 2 February 2002 an amount of € 15.477,00, consisting of the € 5 000 referred to above, as well as interest, loss on exchange rates due to payment delays, and other expenses.

3.2 In light of the Ombudsman's above findings on the allegations, further inquiries do not appear to be justified.

4 Conclusion

On the basis of the Ombudsman's inquiries into this complaint, there appears to have been no maladministration by the European Commission. The Ombudsman therefore closes the case.

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

Yours sincerely,

 

Jacob SÖDERMAN