Made in accordance with Article 3(5) of the Statute of the European Ombudsman[1]

The background to the complaint

1. The complainant is a non-profit NGO whose mission is "empowering young people". The complaint to the Ombudsman was submitted by the Chairman of the complainant's Board of Trustees.

2. On 29 September 2009, it applied for an EU grant in the framework of the call for proposals EACEA/12/09, 'Youth in Action' Programme, Action 4.4 - Projects encouraging creativity and innovation in the youth sector[2]. The project was entitled "E-VOLUTION-Globalising E-Youth Work". The application contained several more or less detailed descriptions of the project activities[3]. They were listed as: (i) virtual activities using web tools; (ii) seminars; (iii) training courses; (iv) creation and production of innovative audiovisual and multimedia tools; (v) awareness-raising campaigns; (vi) networking activities; (vii) exchange of best practices; (viii) building organisational and management coherence; and (ix) promoting youth-led innovations[4]. The complainant was to recruit a task force of young Europeans, mentored by experts, who would brainstorm and create the "Planet Dashboard web-space", with an online future projection game[5].  In all, 15 activities to be carried out were detailed, including recruitment; research; brainstorming; training; online construction of the E-Volution platform; meeting in the framework of a World Youth Congress, in order to organise training and promotions as well as to  receive feedback on the work done to date; technical implementation; and the launching of the website[6].  A table on page 22 of the application specified that the total number of participants would be 1 676.

3. On 10 December 2009, the complainant (acting as a coordinator of a consortium of several organisations) concluded a Grant Agreement (the 'Agreement') with the Education, Audiovisual and Culture Executive Agency (the 'Agency')^[7]. Article I.1 of the Special Conditions of the Agreement specified, inter alia, that the action to be carried out was entitled "E-VOLUTION-Globalising E-Youth Work" (the 'Action') and that the complainant and its partners undertook to do everything in their power to carry out the Action as described in Annex I.

4. Annex I specified that the grant aimed "at implementing the activities as they are described in the application form submitted" by the complainant. It was further provided that any change to the activities was to be explicitly authorised by the Agency. Pursuant to Articles I.2.2 and I.6 of the Special Conditions of the Agreement, the action and period of eligibility of costs were to start on 1 March 2010 and to end on 31 August 2011, and the final technical implementation report and financial statement (hereafter jointly the 'final report') were to be submitted by 31 October 2011.

5. Pursuant to Article I.9 of the Special Conditions of the Agreement, the grant was governed by the terms of the Agreement and by the applicable Community rules. Pursuant to the same provision, the Agency's decisions relating to the application of the Agreement could be challenged by the complainant before the then Court of First Instance.

6. As regards the Agency's financial contribution, Article I.4.3 of the Agreement provided that the Agency was to contribute a maximum of EUR 92 428.82. Of that amount, 80% was to be paid as pre-financing within 45 days of the day on which the last party signed the Agreement[8]. Article I.5.4 of the Special Conditions of the Agreement and Article II.15.4 of the General Conditions of the Agreement dealt with the payment of the balance[9]. Pursuant to Article I.5.4 of the Special Conditions, the request for payment of the balance was to be accompanied by the final report. The Agency then had 90 days to approve or reject the final report and to pay the balance, or to request additional supporting documents or information under the procedure laid down in Article II.15.4. Article II.15.4 of the General Conditions provided, inter alia, that the complainant was to submit a request for payment of the balance together with a final report on the implementation of the action, a final financial statement and several other documents by the deadline indicated in Article I.6 of the General Conditions (that is to say, originally, 31 October 2011). The Agency then had the period specified in Article I.5 of the Special Conditions (that is to say, 90 days): (i) to approve the final report, (ii) ask the complainant for supporting documents or any additional information necessary which would allow the reports to be approved, or (iii) reject the report(s) and ask for the submission of (a) new report(s). It was specified that "failing a written reply from the Agency within the time limit for scrutiny … the reports shall be deemed to have been approved". Approval, however, "shall not imply recognition of their regularity or of the authenticity, completeness and correctness of the declarations and information they contain".

7. On 13 December 2010, the complainant asked the Agency to authorise the replacement of a project partner. A corresponding amendment to the Agreement was signed on 18 January 2011. Subsequently, on 28 June 2011, the complainant made a request to the Agency for a three-month extension of the duration of the Action and the eligibility period under the Agreement. That request was approved on 10 August 2011, when the parties signed a second amendment to the Agreement. The duration was thus extended to 30 November 2011, and the complainant's final report was expected by 31 January 2012.

8. At the latest, on 22 February 2012, the complainant submitted its final report to the Agency[10]. In the final report, the project was summarised as follows: "The Objective of this project is to awaken young Europeans not normally interested in global issues like sustainability to the Future global Challenges that await them in their lifetimes through a fun computer game. A secondary objective is to link theory to youth for sustainability and human survival ... A Task Force developed the initial ideas which were presented to a global youth audience at the World Youth Congress in Istanbul - who rejected it as boring and no fun ... At a partners meeting in the Netherlands, a new approach was thrashed out for a Facebook game, Sustainaville - very different from the original concept but fulfilling the same objectives: raising awareness about global issues, and linking ideas to action through a 're-design' function using Google-earth...". It was further explained that: "The original Task Force changed the Planet Dashboard approach [... The complainant's] management objected - and fought for the original concept - but youth-led means what it says, and the youth ... were firm ... So - the game you will see at www.sustainavillethegame.com is very different to the original concept ... The reason is: youth empowerment...". The report further mentioned that the only product of the project was the game at the above-mentioned webpage and a Facebook recruitment page. Moreover, in reply to the question: "Which practical and logistical improvements you would make if you were to repeat the experience?", it stated as follows: "A DG EACEA official famously compared a Youth in Action project proposal as similar to an Architect's plans for your house, saying: "You wouldn't be very pleased if the architect changed your plans in the course of the building...". The [President of the complainant] was NOT very pleased by the youth changes to his brilliant concept and, if he were to do this project again, he would greatly want to play the role of the 'Architect Dictator' - demanding that every youth involved execute his orders precisely according to the original Planet Dashboard proposal. But that flies in the face of every tenet of youth participation, youth empowerment and non-formal learning that DG EACEA's Youth in Action programme exists to promote...".

9. On 30 May 2012, the Agency sent to the complainant a letter about the final financial situation. It stated that the final report could not be approved as it no longer corresponded to the project that had been submitted. Thereby, the Agency claimed full reimbursement of the pre-financing payment (EUR 73 943.06). It referred to Article 1 of the Grant Agreement (purpose of the grant) and to Annex 1 (description of the action). The complainant was informed that it could request reconsideration within 30 days of the date of the letter.

10. On 8 June 2012, the complainant's president contacted the European Commission (DG EACEA) and asked for an extension of the deadline by 15 days and to be informed about the reasons why the report had not been found satisfactory. He explained that, without that information, he could not judge what additional information should be provided.

11. On 11 June 2012, the Agency informed the complainant that an appeal would be exceptionally accepted until 13 July 2012. Its letter further stated that the claim for the full reimbursement was based on the non-respect of the Agreement. The final report of the project no longer corresponded to the project that had been submitted.

12. On 13 July 2012, the complainant submitted a letter of appeal to the Agency. The complainant admitted that there was a certain difference between the initial project and the result. Nonetheless, it considered in substance that this was natural, given the mission concerned, which was essentially "to empower young people". One could not require full participation of young people in decision-making and at the same time expect that the end result would perfectly correspond to the initial project. Moreover, the EU was aware of the change of direction in the project, from e-mails sent by the complainant, and had not objected. Lastly, the complainant emphasised that some of its best projects had been created with the EU's financial support. A full recovery would almost certainly imply the complainant's closure, which could not be a result wished by the EU. Therefore, it hoped that a solution could be found to this problem.

13. On 7 November 2012, the Agency sent to the complainant a letter on the final financial situation after appeal and confirmed its recovery order.

First, it maintained that the content, objectives and work programme implemented differed significantly from the original project, as presented in the complainant's application. In fact, the complainant essentially undertook to create 'the Planet Dashboard web-space' with the participation of young Europeans, mentored by experts, teachers and youth workers. Instead, the complainant created a Facebook recruitment page and a game called 'Sustainaville', which it, itself, described in the final report as very different from the original concept. Its objective was described by the complainant as to awaken young Europeans not normally interested in global issues like sustainability to the future challenges that await them in their lifetimes through a fun computer game. At the time the applications were submitted, they were examined on the basis of the objectives and priorities defined by the European Commission. However, sustainability was neither an objective nor a priority for the call. Later, the applications were examined by independent experts on the basis of the quality of the activities' content. In the course of the project, no changes could be adopted to the project, without informing the Agency. Referring to Article I.1.2^[11] and I.3.1 a)^[12] of the Agreement, the Agency considered that the fact that the programme concerned promoted the full and active participation of young people in decision-making did not imply that an approved project could be completely altered, so that, in terms of work plan, impact and final products, it no longer corresponded to what was initially assessed and contractually agreed.

Second, these fundamental changes were not the subject of any request for amendment. Yet, Article II.13^[13] of the Agreement required that any substantial change should be requested in good time before it was due to take effect. Moreover, the complainant informed the Agency, on 12 May 2011, that nothing would be changed in the project.

Third, the total number of effective participants in the projects was eight times lower than the one initially foreseen in the application.

Fourth, the prototype of the game was not achieved at the end of the eligibility period, and the internet site mentioned by the complainant was not functioning. The product realised was not verifiable. The only "tangible" element available was a video of a few seconds on YouTube, with no mention of the Youth in Action Programme. Therefore, the publicity clause was not respected.

Fifth, the complainant's intention, as clearly mentioned in the final report, was to present the results of the project under the framework of another project financed by the Youth in Action Programme. This had a high potential of creating a situation of confusion and misunderstanding at both the operational level and the budgetary level (double financing).

14. On 20 November 2012, a debit note was issued specifying that the outstanding amount should be paid no later than 4 January 2013. The debit note contained the following justification: "Action non implemented. The project realized does not correspond anymore to the selected application." On 3 January 2013, the complainant sent its complaint to the Ombudsman (received by him on 14 January 2013). On 4 January 2013, the complainant repaid the Agency the amount it claimed.

The subject matter of the inquiry

15. In its original complaint to the European Ombudsman, the complainant alleged that the Agency did not act in accordance with the principles of good administration. In support of the allegation, it submitted a number of arguments to show that the Agency (i) acted unlawfully and unfairly by rejecting the complainant's final report and by proceeding with recovery, and (ii) failed to respect its procedural rights. The complainant claimed that the Agency should enter into a non-adversarial discussion with it with a view to agreeing on an appropriate financial settlement, including (i) reducing the amount to be recovered and (ii) defining a payment scheme to alleviate the financial pressure on the complainant.

16. In its observations on the Agency's opinion, the complainant explained that, given that, in the meantime,  it had repaid the Agency the amount claimed, its above claim should be modified, in that the Agency should offer (i) a financial benefit, through rescission of the full repayment order, or its replacement by a partial repayment order, and (ii) a reputational benefit through some form of recognition by the Agency that the complainant acted responsibly and in good faith, and that the Recovery Order does not constitute an indictment of the complainant's work as a whole for Youth in Action.

17. Given that this modification is rather formal and that the content of the Agency's opinion is sufficient to deal with the modified claim, the Ombudsman decides to include this new claim into his inquiry and to take it into account for the purposes of the present Proposal for a Friendly Solution, without it being necessary to invite the Agency to submit a complementary opinion.

18. In its observations on the Agency's opinion, the complainant also made a number of submissions which, being rather systemic in nature, could be better dealt with in the framework of an own-initiative inquiry rather than in that of the present inquiry. The Ombudsman will thus consider launching an own- initiative inquiry into the following issues raised by the complainant: (i) introduction of interim reporting into grant agreements which are comparable to the one used in the present case, and (ii) revision of the Agency's guidance to grant beneficiaries, in order to reduce the financial risk placed on them.

The inquiry

19. On 14 January 2013, the Ombudsman received the complainant's complaint. The complainant submitted evidence on 4 February and 1 March 2013.

20. On 1 March 2013, the Ombudsman opened an inquiry and invited the Agency to submit an opinion on the allegation and claim.

21. On 30 April 2013, the Ombudsman received the Agency's opinion.

22. On 6 May 2013, the Ombudsman forwarded the Agency's opinion to the complainant.

23. On 28 June 2013, the Ombudsman received the complainant's observations on the Agency's opinion. On 1 July 2013, the Ombudsman received complementary observations, signed by the former president of the complainant.

The Ombudsman's analysis and provisional conclusions

Preliminary remarks

24. The present Friendly Solution Proposal deals exclusively with the relevant arguments relating to the alleged unfair and unlawful rejection of the complainant's final report and the subsequent recovery. The remaining issues will be analysed at a later stage in light of the outcome of the present Friendly Solution Proposal.

A. Allegation that the Agency did not comply with the principles of good administration in that the recovery was unfair and unlawful

Arguments presented to the Ombudsman

25. In its complaint, the complainant contended, inter alia, that the Agency's letter of 30 May 2012, in which the Agency rejected the final report and claimed recovery of the pre-financing payment, was sent four months after the complainant had submitted the final report. This was contrary to Article I.5.4 of the Agreement, which provides for a 90-day time limit.

26. In its opinion on the complaint, the Agency refused to reconsider its request for recovery. As regards the applicable time limits, it explained that the final report had been sent by the complainant only on 20 February 2012, that is to say, 20 days after the extended deadline, and was received by the Agency on 22 February 2012. This did not allow the evaluation of the report to be integrated into the initial planning. Moreover, the fact that the report did not correspond to any of the expected results meant that an ad hoc in-depth content and financial evaluation needed to be carried out. Therefore, the pre-information letter was sent on 30 May 2012, that is to say, three months and six calendar days after the final report had been received. In its opinion, the Agency acknowledged those six days of delay and apologised for the inconvenience.

27. In its observations on the Agency's opinion, the complainant, inter alia, welcomed the Agency's recognition that the pre-information letter had been sent outside the relevant contractual period. It appreciated the Agency's apology but refused to accept it as sufficient. In the complainant's view, the expiry of the 90-day time limit was not trivial or a mere detail of formal procedure. Indeed, the Agreement already allowed the Agency 90 days for reflection. The complainant pointed out that freely negotiated arms'-length contracts did not usually provide the customer with 90 days in which to accept or refuse an invoice. The Agency, having asserted its power to contract on its own terms, should be required to respect its obligations and to pay in full after 90 days of silence. Given that the recovery order threatened the very existence of the complainant, the complainant stated that it had no other choice but to insist that the Agency was in clear breach of the Agreement.

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

28. At the outset, the Ombudsman notes that the Agency acknowledged that it belatedly rejected the complainant's final report and the implemented project described therein. However, the parties disagree as to the legal effects of the Agency's late rejection. The Ombudsman is of the view that this issue, which concerns the validity of the recovery, needs to be examined before examining the remaining arguments which the parties raised in their submissions.

29. The materials submitted by the parties show that the Agency undertook to pay to the complainant a maximum contribution of EUR 92 428.82[14]. Of that amount, 80% was paid to the complainant as pre-financing. The balance was to be paid by the Agency following the complainant's request, accompanied by the final report[15]. Pursuant to Article I.5.4 of the Special Conditions of the Agreement, the Agency had 90 days from the day of submission of the final report by the complainant to approve or reject it and to pay the balance, or to request additional supporting documents or information. Article II.15.4 of the General Conditions provides, inter alia, that "[f]ailing a written reply from the Agency within the time limit for scrutiny [… that is to say, the 90 days mentioned above], the reports shall be deemed to have been approved."

30. It is not entirely clear from the parties' submissions on which date the complainant submitted the request for the payment of the balance and the final report. However, even assuming that the date of submission was the latest of the two set out above, that is to say, 22 February 2012, the Agency acknowledged in its opinion that it had exceeded the 90-day time limit by six days[16].

31. The Ombudsman welcomes the Agency's apology for that delay. Nonetheless, he shares the complainant's view that this delay was not "trivial" in the given contractual context[17]. In fact, by virtue of the above-mentioned Article II.15.4, on 23 May 2012, the final report was deemed to have been approved. Therefore, the Agency was no longer entitled to reject it several days later and was required to proceed as if it had expressly approved the final report. In the Ombudsman's understanding of the provisions of Article II.15.4 of the Agreement, the implicit approval of the final report means that the project implemented by the complainant, as described in the final report, was thereby also approved by the Agency.

32. In this regard, the Ombudsman notes that the Agency did not argue in the proceedings before the Ombudsman that its implicit approval of the final report did not cover the description of the implemented project in that report, or that the stipulation in Article II.15.4, which sets out that approval "shall not imply recognition of their regularity or of the authenticity, completeness and correctness of the declarations and information they contain" would authorise it to reverse its implicit approval of the project implemented, as described in the final report, on the ground that it did not correspond to the project initially submitted.

33. The Ombudsman further notes that the grant agreement that was used did not make sufficiently clear the exact meaning of the "approval" of the final report and its scope. The lack of clarity is, to a certain extent, due to the fact that Article II.15.4 contains the above stipulation, whose wording is not sufficiently clear. In this light, the Ombudsman takes the view that, given that the Agency drafted the Agreement, which is a standard model, and that the terms of the Agreement could not be freely negotiated by the complainant, its terms, which are unclear, need to be interpreted in the complainant's favour (the principle of contra proferentem). Moreover, given that the above stipulation is a limitation of the scope and thus, by its very nature, constitutes an exception, it needs to be interpreted as such, that is to say, restrictively.

34. In the light of the above principles, the Ombudsman takes the view that the above stipulation - which seems to address two issues, that is to say, (i) the regularity of the final report, and (ii) the authenticity, completeness and correctness of the declarations and information contained therein - needs to be interpreted as a whole in light of its second part, which essentially addresses the issue of incomplete, inaccurate, incorrect or false statements contained in the final report. As regards the notion of regularity, it cannot be interpreted extensively so as to authorise the Agency not to respect the 90-day time limit and to reverse its approval - implicit and explicit - of the final report at any time and according to its will. The approval as such would thus lose its effective purpose and would become merely illusory, which runs counter to the principle of legal certainty and the legitimate expectations of the grant beneficiary. As rightly pointed out by the complainant, the purpose of the 90-day period for a decision on approval or rejection is to provide the Agency's contractors with legal certainty and to make the Administration act.

35. Moreover, the Ombudsman takes into account the remaining provisions of the Agreement which provide, inter alia, that the Agency has 90 days to approve or reject the final report and to pay the balance. It cannot be said that the 90-day period would be insufficient for the Agency to reject a final report, especially where it considers that it should be rejected on a ground such as the one in the present case.

36. In consequence, the Ombudsman considers that, on 30 May 2012, the Agency was no longer entitled to reject the report and the implemented project as described therein and to claim reimbursement of the pre-financing payment on this sole ground. Moreover, the Ombudsman considers that the Agency was obliged, under Article I.5.4 of the Agreement, to pay the balance to the complainant[18].

37. The Ombudsman is therefore of the view that the recovery of the amount claimed on the above ground was ab initio in breach of the Agreement and thereby unlawful. The Agency's explanation, that is to say, the complainant's alleged late submission of the final report, is not relevant since it does not absolve the Agency from having to respect the Agreement and, in particular, the 90-day time limit. The Agency could have reacted to the alleged delay on the part of the complainant by considering other possibilities provided for by the Agreement, such as suspension of the period for payment, termination of the Agreement or a financial penalty. It was, however, not authorised by the Agreement not to respect the aforementioned time limit. As to the Agency's assertion that the complainant's alleged late submission of the final report, combined with the alleged deficiencies in that report, complicated its internal treatment, the Ombudsman is of the view that these circumstances are not relevant. The principles of good administration require the Agency to abide by the Agreement, which it had itself drafted, and to organise its internal procedures in such a way as to be able to comply with its commitments. This is all the more true if the Agency considered the project as described in the final report to be deficient. For such assessment, even 90 days do not appear to be necessary.

38. In light of the above preliminary findings, the Ombudsman would appreciate it if the Agency could accept that it was not entitled to reject the final report and could therefore annul the recovery order and reimburse the amount recovered to the complainant, as well as default interest. In addition, the Agency could enter into negotiations with the complainant with a view to ascertaining the value of the non-implemented activities, in order to determine the value of the balance to be paid to the complainant, if any.

39. For all the above reasons, the Ombudsman makes, in accordance with Article 3(5) of the Statute of the European Ombudsman, a corresponding proposal for a friendly solution.

B. The proposal for a friendly solution

The Agency could accept that it was not entitled to reject the final report and could therefore annul its recovery order and reimburse the amount recovered, as well as default interest.

Moreover, the Agency could enter into negotiations with the complainant with a view to ascertaining the value of the non-implemented activities, in order to determine the value of the balance to be paid to the complainant, if any.

P. Nikiforos Diamandouros

Done in Strasbourg on 11 September 2013