Strasbourg, 30 April 2007

Dear Mr R.,

On 16 July 2004, you submitted a complaint to the European Ombudsman concerning the European Commission's alleged failure to reply to your complaint of 8 March 2004.

On 17 August 2004, I forwarded the complaint to the President of the Commission. The Commission sent the translation of its opinion into Italian on 13 December 2004. I forwarded it to you on 16 December 2004 with an invitation to make observations by the end of January 2005. On 16 January 2005, you contacted my services by telephone and asked whether it would be possible to postpone the deadline for making observations on the Commission's opinions. My services advised you to put your request in writing. You did so on 18 January 2005. By letter of 27 January 2005, I informed you that according to your request, the new deadline for your observations was 15 March 2005. Your observations were received on 29 March 2005.

On 16 November 2005, I informed you that that the examination of your case was still ongoing, that I would let you know as soon as possible of the next step concerning your complaint and that every effort would be made in order to provide you with this information by no later than 31 January 2006.

After having examined the Commission's opinion and your observations, I considered that it was necessary to conduct further inquiries. On 15 February 2006, I therefore wrote to the President of the Commission asking him to comment on your observations. By letter of 6 April 2006, the Commission informed my secretariat of delays in the transmission of its opinion in 17 cases in which the deadline for reply was 31 March 2006. Your case was amongst those 17 cases. By letter of 11 April 2006, I informed the Commission that I granted an extension of the deadline until the end of April 2006. On 12 May 2006, the Commission informed me that it would need some additional time in order to complete its response to my letter of 15 February 2006.

The Commission sent the translation into Italian of its reply on 15 June 2006. I forwarded it to you on 22 June 2006 with an invitation to make observations. No observations were received from you.

I am writing now to let you know the results of the inquiries that have been made. I apologise for the length of time taken in order to conclude the present inquiry.

THE COMPLAINT

According to the complainant, acting the relevant facts are as follows.

On 8 March 2004, the complainant, in his capacity as general manager of the Italian company Stras IS srl International Development (Stras IS), submitted a complaint to the European Commission, which contested a decision, taken by the Joint Technical Secretariat/Managing Authority of the "INTERREG IIIC East", to change the composition of a management team in which Stras IS played a key role.

In his complaint to the Ombudsman, the complainant alleged that the Commission failed to reply to his complaint submitted on 8 March 2004.

THE INQUIRY

The Commission's opinion

The opinion of the Commission can be summarised as follows.

The INTERREG programme is designed to strengthen economic and social cohesion in the European Union by promoting interregional co-operation. It allows regions without joint borders to work together in common projects and to develop co-operation networks. The programme is divided into four different programme areas (IIIC North, IIIC East, IIIC West and IIIC South). Each programme has its own management team, consisting of a Managing Authority(1), a Joint Technical Secretariat (JTS)(2), a Monitoring Committee(3) and a Steering Committee(4). In addition, a Paying Authority is responsible for the payment of the European Regional Development Fund assistance.

In the framework of the INTERREG IIIC programme, each relevant project has a Lead Partner, which takes over the overall responsibility for project management. Projects received on the basis of calls for proposals are submitted to the JTS, which verifies their quality.

After the selection of a specific project, a so-called subsidy contract is signed between the Managing Authority and the Lead Partner. In accordance with Article 86(1) of the standard form of the subsidy contract, the Managing Authority is entitled to terminate a contract, inter alia, if "[t]he operation has not been or cannot be implemented, or it has not or cannot be implemented in due time".

The Province of Teramo was the Lead Partner in a four-member consortium. The other three members of the consortium were the Department of Malaga, West Sweden, and the Region Friuli-Venezia Giulia.

On 30 April 2003, the JTS informed the Lead Partner that the project presented by the consortium "Ecotourism, place and traditions" had been approved.

The Italian company Strat IS International Development, in which the complainant was the general manager, was designated as the overall project manager of the "Ecotourism, place and traditions" project acting on behalf of the Lead Partner.

On 14 October 2003, the Managing Authority sent the subsidy contract to the Lead Partner (the Province of Teramo) and, at the same time, asked it to improve the management of the project.

During its meeting of 19 January 2004, the Steering Committee was informed about the state of play of the relevant project. The minutes of the meeting read as follows:

"The project management has proven to be rather inexperienced and lacking professionalism. Although the JTS spent considerable time to provide technical advice, the management team did not seem to be able to apply the advice appropriately. As a consequence the revised application had to be refused several times and the subsidy contract could not yet be signed. The Managing Authority had, thus, asked the Lead Partner to change or reinforce the project management team with a letter sent on 14 October 2003. However, since then the situation has not improved. The Managing Authority appreciated the offer of the Italian national coordinators to help sorting out the difficulties with the Lead Partner. However, it stressed that it would consider not signing the subsidy contract if the situation would not change. The Managing Authority asked the Steering Committee for a mandate to ask the Lead Partner to change the project management and, in case of non compliance, refuse the signing of the subsidy contract. (...) The Steering Committee approved the report and agreed with the Managing Authority proposal to send an official letter to the Lead Partner informing it about the decision of suspending the subsidy contract until the management is be changed and professionalism guaranteed."

On 30 January 2004, the Managing Authority informed the Lead Partner about the decision taken by the Steering Committee. On 6 February 2004, the Lead Partner, acting in accordance with the request made by the Steering Committee, withdrew the contract with the complainant's company.

On 9 February 2004, the complainant contacted the JTS in Vienna and forwarded certain it some documents designed to prove the quality of his management group.

In his complaint, sent to the Commission on 8 March 2004 the complainant expressed his concerns as to whether the JTS and the Managing Authority were entitled to take the decision to withdraw the contract with the complainant. The complainant also argued that, in its decision, the JTS did not take into consideration the development of the project and the work already done.

As regards the alleged failure by the Commission to reply to the complainant's complaint of 8 March 2004, the Commission recognised this failure and apologised for it. The Commission further stated that a formal reply, including apologies for the inconvenience caused, would be sent to the complainant.

Finally, the Commission emphasised that in its role projects carried out under the INTERREG programmes was that of an observer who is only entitled to comment on the proposals but cannot participate in the decision making procedure, which is the sole responsibility of the designated bodies.

The complainant's observations

The complainant’s observations on the Commission's opinion can be summarised as follows.

Regarding the technical assistance offered by the JTS to Stras IS, the complainant stated that no technical assistance contract was signed by Stras IS and the Lead Partner before 4 November 2003, that is, two and a half months before the decision to discharge him from his duties. Moreover, Stras IS was not responsible for the subsidy contract or for any financial matters. These activities were performed by another company (CISI/Sviluppo Italia Abruzzo).

Regarding the allegedly unsound management of the project and the lack of professionalism invoked by the JTS in its letter of 19 January 2004, the complainant highlighted that JTS failed to give reasons and to submit evidence for its allegations. The complainant added that JTS had never explained what should have been done to improve the management of the project and within which deadline. In particular, the complainant challenged the decision to terminate the contract with Stras IS before the deadline of 28 February 2004 for the presentation of the first report on the management of the project had expired. The complainant considered that the requests made by the JTS in its letter of 19 January 2004 could not be based on objective remarks and that the JTS unduly interfered with the management of a project which was running smoothly and without delays. He went on to point out that, while certain delays might have been due to the subsidy contract, Strat IS was not responsible for these delays.

As a final general comment, the complainant expressed his disappointment with the Commission's attitude. He considered the Commission's behaviour to have been careless and unacceptable for an institution that is expected to ensure the proper management of European funds.

Further inquiries

After careful consideration of the Commission's opinion and of the complainant's observations, the Ombudsman considered that further inquiries were necessary.

The original complaint submitted to the Ombudsman only concerned a procedural issue, that is, the Commission's failure to reply to the complainant's complaint of 8 March 2004. The Ombudsman noted that this aspect appeared to have been solved, since the Commission, in its opinion submitted to the Ombudsman, recognised its failure, offered its apologies to the complainant, and promised to send a formal reply to him.

In his observations to the Ombudsman, the complainant stated that he did not query whether the Commission's role in the meetings of the Steering Committee was only advisory. Nor did he questioned the fact that the Commission had no decision making power, but could only make comments on the proposals made by the Steering Committee. However, the complainant considered that the Commission has a general responsibility as regards the sound management of Community funds and, more generally, that it has to ensure that principles of good administration are followed. He further alleged that the Commission had failed to monitor the proper management of Community funds.

In view of the content of the complainant's observations, and of the fact, that in his complaint to the Commission of 8 March 2004, the complainant had already asked the Commission to take action against the decision of the Steering Committee, the Ombudsman considered that it appeared appropriate to deal also with the substance of the case. Therefore, on 15 February 2006, he asked to the Commission to provide him with a supplementary opinion on the complainant's further allegation that the Commission had failed to monitor the proper management of Community funds, since it had accepted the decision of the Steering Committee, even though: (i) the Committee had apparently not submitted evidence concerning the alleged inexperience and lack of professionalism of the Management Team; and (ii) the request for a change in the composition of the Management team was made one month before the deadline for the presentation of the first report on the management of the project.

The Ombudsman also asked the Commission to forward to him a copy of the letter which, in its opinion to the Ombudsman, the Commission had announced it would send to the complainant.

The Commission's further opinion

In its reply, the Commission made the following points.

Concerning the complainant's point regarding the Commission's responsibilities, the latter argued that its responsibility to ensure the sound financial management of the Structural Funds and the good administration derives from: (i) Article 274 of the EC Treaty; (ii) Chapter 7 of the Financial Regulation(5) defining the principle of sound financial management and the provisions related to shared financial management; and (iii) the provisions of the Structural Funds Regulation concerning the partnership and subsidiarity principles, as well as the legality and regularity of expenditure(6). According to the above rules, sound financial management and good administration are ensured when the expenditure: (i) is in line with the principles of economy and effectiveness; and (ii) complies with the legal provisions governing the implementation of the Structural Funds. In this context, the Commission considered that it is ultimately responsible for the sound financial management of interventions made through Structural Funds and for their legality.

Concerning the complainant's point that the Commission has the responsibility to ensure that the principles of good administration are respected, the Commission argued that this responsibility should be assessed in light of the relevant rules concerning the partnership and the principle of subsidiarity. This implies that the interventions have to be prepared, financed and monitored in co-operation involving the Commission, Member States, and the competent authorities and bodies. In addition, such interventions have to comply fully with each partner’s institutional, legal and financial powers.

The Commission further stated that, taking into account the distribution of tasks among the parties involved, it can intervene: (i) in cases of alleged violations of Community law; (ii) in cases of financial irregularities; and (iii) if the implementation of a specific action is not in line with the objectives of the programme agreed between the Commission and the Member States. The Commission can intervene through the infringement procedure foreseen by Article 226 of the EC Treaty, or through the suspension of payments and/or financial corrections in accordance with the relevant provisions laid down by Regulation 1260/99. The Commission could not, however, intervene in the daily management of the implementation. More specifically, the Commission does not intervene in the selection of final beneficiaries or contractors, or in the implementation of a contract, insofar as these operations are governed by national law. In the present case, the Commission considered that it could not have violated the principle of sound financial management and of good administration since there has been no violation of Community law, or any other irregularity.

Concerning the complainant's allegation that the Commission failed to monitor the proper management of Community funds, the Commission noted that the Steering Committee took its decision on the basis of the report presented by the Managing Authority. In this regard, the complainant had argued that the above failure to manage Community funds was caused by the Commission's acceptance of an unsubstantiated decision of the Steering Committee concerning Stras IS' allegedly poor progress in the implementation of the project and Stras IS' lack of professionalism. The Commission further noted that, from the minutes of the Steering Committee meeting of 19 January 2004, it appeared that the complainant was given a second chance to improve the management of the project. However, there was no improvement in the situation.

Concerning the complainant's request for a change in the composition of the management team, the Commission understood this to mean that the alleged maladministration was the result of the fact that the complainant had not been given the opportunity to be judged on the merits of his report. According to the institution, this argument appeared to be valid, if taken alone. However, in the case in question, there were many indications brought to the attention of the Steering Committee that the implementation of the project was not meeting expectations. The Commission's services had therefore no reasons to consider that the Steering Committee's decision to terminate the contract with the complainant at an early stage was not prudent. On the contrary, taking strictly into account the financial point of view, it would have been less prudent to wait for further developments, and thereby allow for further delay in the implementation of the project.

As requested by the Ombudsman in his further inquiries, the Commission forwarded to him a copy of the letter it had sent the complainant. The Ombudsman notes that this letter was dated 5 April 2006.

THE DECISION

1 The allegation that the Commission failed to reply to the complainant's complaint

1.1 The Province of Teramo, Italy, was the Lead Partner of a consortium that included three other bodies, namely, the Department of Malaga, West Sweden, and the Region of Friuli-Venezia Giulia. On 30 April 2003, the Lead Partner was informed that the project submitted by the consortium in the framework of the INTERREG IIIC programme had been approved. The complainant, the general manager of the Italian company Strat IS International Development (Strat IS), was designated as the overall project manager on behalf of the Lead Partner. However, on 6 February 2004, the Lead Partner withdrew the contract with Strat IS, following a request made by the Steering Committee to build up a new project management. It would appear that the said request emanated from a decision taken by the Steering Committee during its meeting of 19 January 2004.

On 8 March 2004, the complainant submitted a complaint to the Commission concerning the above-mentioned decision.

In his complaint to the Ombudsman, the complainant alleged that the Commission had failed to reply to the complaint submitted to it on 8 March 2004.

1.2 Principles of good administration require that institutions should reply to citizen's correspondence, including complaints, within a reasonable time.

1.3 In its opinion of 13 December 2004, the Commission recognised its failure to reply to the complainant's complaint and apologised for it. The Commission further stated that a formal reply, including apologies for the inconvenience caused, would be sent to the complainant.

1.4 In his further inquires dated 15 February 2006, the Ombudsman asked the Commission to forward to him a copy of the letter which, in its opinion to the Ombudsman, it had announced it would send to the complainant.

1.5 In its further opinion in response to the Ombudsman's further inquires, the Commission forwarded to the Ombudsman a copy of the letter that it had sent to the complainant in reply to his complaint of 8 March 2004. The Ombudsman notes that the letter in question was dated 5 April 2006.

1.6 In its opinion of 13 December 2004, the Ombudsman notes that the Commission recognised its failure to reply to the complainant's initial complaint and made a commitment to send a formal reply, which would include apologies to the complainant for the inconvenience caused. The Ombudsman, however, also notes that a further period of almost 16 months elapsed before the Commission actually sent its reply to the complainant. This reply was made following the Ombudsman's further inquiries, in which the Ombudsman requested the Commission to provide him with a copy of the letter to the complainant. Such a serious delay in complying with a commitment to reply to a complainant, made in an opinion submitted to the Ombudsman, would normally constitute a serious instance of maladministration. However, given that the present inquiry would be further delayed if the Ombudsman were to request an opinion from the Commission in order to clarify if there exists any possible justification for its delay in complying with the commitment made in its opinion of 13 December 2004, the Ombudsman does not consider it appropriate to conduct further inquires into this aspect of the case.

2 The allegation that the Commission failed to monitor the proper management of Community funds

2.1 The Ombudsman notes that, in his observations on the Commission's opinion, the complainant alleged that the institution in question failed to monitor the proper management of Community funds, when it accepted the Steering Committee’s decision to create a new project management team. As a consequence of this decision, the Steering Committee excluded the complainant's company, which had been designated as manager of the project on behalf of the Lead Partner. The decision was taken even though: (i) the Steering Committee had apparently not submitted evidence concerning the alleged inexperience and lack of professionalism of the management team; and (ii) the request for a change of the composition of the management team was made one month before the deadline for the presentation of the first report on the project management.

2.2 The Ombudsman points out that this allegation was submitted for the first time by the complainant in his observations on the opinion submitted by the Commission to the Ombudsman. The Ombudsman notes that the complainant had already asked the Commission to take action against the decision of Steering Committee in the complaint he lodged with the Commission on 8 March 2004. Thus, the Ombudsman considered that, in addition to the allegation of a failure to reply in the present inquiry, it was appropriate to deal also with the substance of the case.

2.3 As the Commission indicated in its opinion, the Ombudsman notes that the INTERREG programme is divided into four different programme areas and that each programme has its own management, consisting of a Managing Authority(7), a Joint Technical Secretariat (JTS)(8), a Monitoring Committee(9) and a Steering Committee(10). The overall responsibility for the management of individual projects was assumed by the Lead Partners, which, in the case in question, was the Province of Teramo, Italy.

2.4 In the present case, it appears that, on 30 January 2004, the Managing Authority informed the Lead Partner that a decision had been taken on 19 January 2004 by the Steering Committee "[s]uspending the subsidy contract until the management will be changed (...)." Consequently, on 6 February 2004, the Steering Committee, acting in accordance with the request made by the Steering Committee to create a new project management team, withdrew the contract with the complainant.

2.5 The complainant referred to the Commission's responsibility to ensure the sound financial management of the Structural Funds, as well as good administration. In this regard, the Commission argued that it fulfils this responsibility when the expenditure is in line with the principles of economy and effectiveness, and when it complies with the legal provisions governing the implementation of the Structural Funds.

Concerning the Commission's responsibility to ensure that the principles of good administration are respected, the institution argued that this responsibility should be assessed in light of the relevant rules concerning the partnership and the principle of subsidiarity. This implies that the interventions have to prepared, financed and monitored in co-operation involving the Commission itself, the Member States, and the competent authorities and bodies. Such interventions have to comply fully with each partner’s institutional, legal and financial powers.

The Commission also stated that, when necessary it can intervene through the infringement procedure foreseen by Article 226 of the EC Treaty, or through the suspension of payments., In accordance with the relevant provisions of Regulation 1260/99, it may also intervene through financial corrections: (i) in cases of alleged violations of Community law, (ii) in cases of financial irregularities, or (iii) if the implementation of a specific action is not in line with the objectives of the programme agreed between the Commission and the Member State. The Commission could not, however, intervene in the daily management of the implementation of the relevant project. In the present case, the Commission considered that it could not have violated the principle of sound financial management and of good administration, since no violation of Community law or any other irregularity had occurred.

The Commission further noted that the Steering Committee took its decision on the basis of the report presented by the Managing Authority and that, according to the minutes of the Steering Committee meeting of 19 January 2004, it appeared that the complainant was given a second chance to improve the management of the project. However, there was no improvement in the situation.

Concerning the complainant's request for a change in the composition of the Management Team, the Commission understood this to mean that the alleged maladministration was the result of the fact that the complainant had not been given the opportunity to be judged on the merits of his report. The Commission took the view that, if taken alone, this argument appeared to be valid. However, in the case in question, there were indications that the implementation of the project was not meeting expectations. The Commission's services had therefore no reasons to consider that the Steering Committee's decision to terminate the contract with the complainant at an early stage was not prudent. On the contrary, taking the financial point of view strictly into account, it would have been less prudent to wait for further developments and allow for further delay in the project implementation.

2.6 The Ombudsman invited the complainant to submit observations on the Commission's reply. No observations were received from the complainant.

2.7 The Ombudsman notes that in accordance with Article 34(1) of Regulation 1260/99 laying down general provisions on the Structural Funds(11), "(...) the managing authority as defined in Article 9(n)(12) shall be responsible for the efficiency and correctness of management and implementation [of the relevant programme]".

Furthermore, the Ombudsman notes that, on the basis of Article 86(1) of the standard form of the subsidy contract, which was signed between the Managing Authority and the Lead Partner after the selection of a specific project, the Managing Authority is entitled to terminate a contract, inter alia, if "[t]he operation has not been or cannot be implemented, or it has not or cannot be implemented in due time."

2.8 The complainant stated that the Commission accepted the decision of the Steering Committee, even though the latter had not submitted evidence concerning the alleged inexperience and lack of professionalism of the Management Team. The Ombudsman notes, in this regard, that the Commission has stated that the Steering Committee had been informed, though a report presented by the Managing Authority, that the project management team had proven to be rather inexperienced and lacked professionalism. Further, although considerable time had been allotted to providing technical advice to the project management team, the latter did not seem to be able to apply the advice appropriately. As a consequence, the revised application had to be refused several times and the subsidy contract could not be signed.

The Ombudsman is not is a position to evaluate the accuracy of the report presented by the Managing Authority. However, he agrees that this report, if accurate, would constitute valid grounds for the recommendation, made by the Steering Committee, that the project management team be changed.

It is the opinion of the Ombudsman that it would go beyond the specific role of the Commission in this context, which is to ensure the sound financial management and legality of interventions made using Structural Funds, systematically to call into question factual evidence brought forward by a Managing Authority, which is the body responsible for ensuring the efficient and correct management of the programme. In view of the above, the Ombudsman considers that there has been no maladministration by the Commission as regards this aspect of the complainant's allegation.

2.9 The complainant also stated that the request for a change in the composition of the management team was made one month before the deadline for the presentation of the first report on the management of the project. This could be understood as implying that the complainant was not given the opportunity to be judged on the basis of that report.

The Ombudsman notes that, in its opinion, the Commission explained why its services considered that there were no reasons for it to oppose the proposal of the Steering Committee to terminate the contract with the complainant at an early stage. The Commission stated that it would not have been prudent to await for further developments, and thus to allow for further delays in the implementation of the project.

The Ombudsman takes the view that the Commission's position appears to accord with its role as provided in the framework of carrying out the relevant project and in line with the relevant legislation. In view of the above, the Ombudsman considers that there has been no maladministration by the Commission as regards this aspect of the complainant's allegation.

2.10 In view of the above, the Ombudsman considers that there has been no maladministration by the Commission as regards the complainant's allegation that the Commission failed to monitor the proper management of Community funds.

2.11 The Ombudsman underlines that the above conclusion only concerns the point of whether or not the Commission carried out its specific role correctly. The Ombudsman's conclusion does not constitute confirmation of the accuracy of the report presented by the Managing Authority. Further, the Ombudsman's conclusion does not affect the complainant's rights, if any, to enforce rights derived from its contract with the Lead Partner before a court of competent jurisdiction, which could, inter alia, verify the accuracy of the report of the Managing Authority.

3 Conclusion

On the basis of the Ombudsman's inquiries into this complaint, the Ombudsman does not consider it appropriate to conduct further inquires into the long delay on the part of the Commission to comply with the commitment, made in its opinion of 13 December 2004, to make a formal reply to the complainant. Further, as regards the additional allegation in relation to the substance of the case, there appears to have been no maladministration by the Commission. The Ombudsman therefore closes the case.

Yours sincerely,

 

P. Nikiforos DIAMANDOUROS

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(1) The Managing Authority is the body responsible for ensuring the efficient and correct management of a programme.

(2) The JTS is the body responsible for the everyday work of the programme's implementation. This involves that is, assistance to project applicants in the development of their projects, and assessment of projects, preparation of decisions to be taken by the Monitoring and Steering Committees.

(3) The Monitoring Committee is the body responsible for the supervision of the INTERREG programme. Members of the Committee are Member State representatives from the programme area. The Commission participates in the work of the Committee in an advisory capacity.

(4) The Steering Committee was set up to take decisions on individual projects, following the programme's implementation. It includes representatives from the Member States. The Commission participates in this Committee as an observer.

(5) Council Regulation No 1605/2002 of 25 June 2002 on the Financial Regulation applicable to the general budget of the European Communities, OJ 2002 L 248, p. 1.

(6) Council Regulation No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds, OJ 1999 L 161, p. 1.

(7) See note 1.

(8) See note 2.

(9) See note 3.

(10) See note 4.

(11) OJ 1999 L 161. p. 1.

(12) Any public or private authority or body at the national, regional or local level designated by the Member State, or the Member State when it is itself carrying out this function, to manage assistance for the purpose of Regulation 1260/1999.