Dear Mr L.,
On 19 August 1997 you made a complaint to the European Ombudsman concerning allegedly unfair contract terms used by the European Commission.
On 16 September 1997 I forwarded the complaint to the President of the European Commission. The Commission sent its opinion on 18 December 1997 and I forwarded it to you with an invitation to make observations, if you so wished. No observations have been received.
I am now writing to let you know the results of the inquiries that have been made.
I apologise for the length of time that it has taken to deal with your complaint.

THE COMPLAINT

The complainant alleged that the European Commission uses unfair terms in its contracts for supply of goods and services. He referred to the Commission's general terms and conditions applicable to contracts, and submitted the following four points of complaint:

i) Articles 24 and 30 of the general terms provide that the Commission has a sixty day period to pay its contractors. The complainant put forward that a sixty day payment period seemed inconsistent with a recent Commission recommendation which advocates shorter payment periods in commercial transactions.

ii) There are no rules which oblige the Commission to pay interests on payments in arrears.

iii) Article 6 of the general terms seemingly excludes any Commission liability for damages.

iv) Articles 22 and 28 of the general terms provide the Commission with an excessive degree of protection vis-a-vis defaulting contractors. These provisions give the Commission a one year guarantee in respect of supply contracts, and entitle the Commission to withhold 10% of the contract amount until expiry of this guarantee period. The complainant also considered that these provisions represented an inconsistency, since the Commission would appear to provide for itself a higher level of protection than that recommended by the Commission for ordinary consumers.

THE INQUIRY

The Commission's opinion
The Commission provided the following observations on the complaint:

- The Commission fully appreciated the problems caused by long payment periods, and measures had already been taken to improve the practices in this respect.

- The rules on payment on interests in arrears were formally regulated in June 1997. Thus, all contracts concluded after 1 October 1997 contain a clause which entitle creditors to interest on payment in arrears.

- Regarding liability under Article 6 of the general terms, the contracts are covered by the legal system adopted in the relevant contracts. Contractors who consider that they have suffered damage are free to bring cases before the relevant national court.

- Regarding the allegation that the Commission secures an improper degree of protection for itself, the Commission stated that it is acting under an obligation to protect the Community's financial interests. Furthermore, the complainant's analogy with ordinary consumer contracts appeared inadequate, as in any case the Commission should be considered the "consumer" in the contracts and that there is nothing wrong with consumers trying to secure a better legal position for themselves than what follows from the applicable rules.

THE DECISION

1. The present complaint concerns the fairness of standard contract terms adopted by the Commission in respect of contracts for supply of goods and services. The European Ombudsman is competent to deal with complaints which relate to contractual relationships, although normally he will not determine whether there has been a breach of contract in separate cases. The inquiries into contractual matters are primarily aimed at ensuring that the institution or body in question is able to provide coherent reasons for its positions in the case in question.
2. As concerns the complainant's first allegation, the Commission has stated that it is aware of the problem, and that administrative measures have already been taken to speed up payments. It shall also be noted that the general terms would not appear to be inconsistent with the Commission's current initiatives to harmonise payment periods in commercial and public contract relationships(1). The Ombudsman therefore finds that it is not justified to inquire further into this allegation.
3. The complainant's second allegation concerns the lack of an obligation for the Commission to pay interest on payments in arrears. The Ombudsman notes that contracts concluded with the Commission after 1 October 1997 now contain clauses which entitle creditors to interest on payment in arrears. The Ombudsman therefore finds that it is not justified to inquire further into this allegation.
4. As concerns the third allegation, it appears that Article 6 of the general terms merely excludes Commission liability in respect of the contract relationship between the immediate contractors and the sub-contractors of the latter. Such clauses are common in contract relationships, and would not appear to confer an excessive degree of protection on the Commission.
5. The complainant's fourth allegation concerns an allegedly excessive self-protection by the Commission in respect of contractual guarantees. Through Articles 22 and 28 of its general terms the Commission has ensured that it will have a one year guarantee for supply under goods and services contracts, and that 10% of the contract amount can be withheld until expiry of that period. The Commission has pointed out that it is under an obligation to safeguard the legitimate interests of the Community, which in the present context implies the duty to protect the Community finances. It has also conceded that this interest must be balanced with the interest of good administration. The Ombudsman finds that there is nothing to suggest that this balancing has been carried out in an improper way.

CONCLUSION

6. On the basis of the European Ombudsman's inquiries into this complaint, there appears to have been no maladministration by the Commission. The Ombudsman has therefore decided to close the case.
The President of the Commission will also be informed of this decision.
Yours sincerely
Jacob Söderman

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(1) Proposal for a European Parliament and Council Directive combating late payment in commercial transactions, COM(98) 0126 final, OJ 1998 C 168/0013, Chapter II Article 8 (1).