Dear Mr D.,

On 3 May 2001, you made a complaint to the Belgian Ombudsman on behalf of "Imprimerie Les Éditions européennes S.A." concerning the non-payment by the Commission of three bills (98/274, 98/521 and 98/575) for the amount of € 48.869,85. On 14 May 2001, the Belgian Ombudsman transmitted your complaint to my office, as it was not within his competence.

On 31 May 2001, I forwarded the complaint to the President of the Commission. The Commission sent its opinion on 5 October 2001. I forwarded it to you with an invitation to make observations, which you sent on 27 November 2001.

On 13 February 2002, I wrote to the President of the Commission proposing a friendly solution to your complaint. You were provided with a copy of this letter. On 14 May 2002, the Commission rejected the proposal for a friendly solution. I forwarded the Commission's letter to you with an invitation to make observations which you sent on 19 July 2002.

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

THE COMPLAINT

According to the complainant, the relevant facts were as follows:

In the framework of the Leonardo da Vinci programme, the complainant "Imprimerie Les Éditions européennes S.A." carried out printing works on behalf of the Commission (DG XXII). This was done in 1998 via Agenor, a company which acted as the Technical Assistance Office (TAO) of the Commission. The complainant printed two series of works in English, French and German and sent the invoices (98/274, 98/521 and 98/575) to the Commission's Technical Assistance Office on 25 May, 30 November and 31 December 1998.

However, on 11 February 1999, the Commission unilaterally terminated the contract with Agenor with effect from 31 January 1999. This provoked the bankruptcy of the Technical Assistance Office which could therefore not pay the invoices anymore. The latter thus had a debt towards the complainant for a total amount of 1.971.405 BEF or € 48.869, 85.

The complainant sent a registered letter to the Commission on 28 April 1999, asking the Commission to proceed with the settlement of the invoices. The complainant noted that DG XXII approved the complainant's offer even though it had been aware for several months that serious irregularities and fraud existed within its Technical Assistance Office.

In this context, the complainant referred to paragraphs 5.3.1, 5.3.3 and 5.8.5 of the report by the Committee of Wise Men (Committee of Independent Experts) created in 1999 to investigate various irregularities. The complainant annexed parts of this report to his complaint. According to this report, the Commission knew from 1997 onwards about fraud and irregularities within Agenor, but failed to take any measure.

The Commission finally terminated the contract which provoked the bankruptcy of the Technical Assistance Office, and thus the non-payment of the outstanding invoices. The Commission did not reply to the complainant's letter of 28 April 1999. On the telephone, the Commission replied that the complainant had first to wait for the bankruptcy procedure to be terminated. However, the liquidator informed the complainant that the bankruptcy procedure was not ready to be closed.

On 3 May 2001, the complainant therefore wrote to the Ombudsman claiming that the Commission is responsible for the non-payment by its Technical Assistance Office "Agenor" of the three invoices for a total amount of € 48.869,85 because 1) the publications concerned were produced on behalf of the Commission, 2) the Commission approved the offers before the complainant carried out the works and 3) the Commission did not take any measure when it knew from 1997 onwards about the irregularities and fraud within Agenor.

THE INQUIRY

The Commission's opinion

In its opinion, the Commission pointed out that in the framework of the assistance it was providing to the Commission for the management of the Leonardo da Vinci programme, the company Agenor ordered printing works from the complainant. After the bankruptcy of Agenor, the complainant filled in a recovery declaration. However, according to information provided by the liquidator, the bankruptcy would not be closed within a short deadline, and as a consequence, three invoices from the complainant remained unpaid.

The Commission has no contractual relation whatsoever with the complainant and can therefore not be held responsible for the situation in which the complainant finds himself as a result of his commercial relations with the bankrupt company.

The complainant puts forward three grounds on the basis of which the Commission would be responsible for the non-payment of the three invoices. In this regard, the Commission made the following comments:

Agenor provided technical assistance to the Commission in the framework of the Leonardo da Vinci programme. In order to implement the work programme which was an integral part of its contract with the Commission, Agenor concluded contracts (including employment contracts). Part of the works which Agenor delegated to the complainant was included in this work programme together with all the other tasks for which Agenor was responsible in the framework of its contract with the Commission. The delegation of certain tasks was carried out through contracts concluded between Agenor and its providers.

The fact that only Agenor and the complainant were parties to the contract is not put in question by the fact that the Commission would have approved the specifications concerning the works which Agenor delegated. This approval has to be seen in the strict framework of the relation between the Commission and Agenor. The Commission has installed a system of a priori control of the costs made by Agenor. This explains why a series of specifications were previously submitted for the Commission's approval, exclusively for reasons of financial control in the framework of the execution of the Leonardo da Vinci programme.

The analysis of the various audit reports within the Commission's services did not make them consider to terminate the contractual relation with Agenor. As regards the reference to fraud activities, it was only in February 1999 that is was established that certain irregularities could eventually be categorised as penal. In the interest of the programme and of its beneficiaries, the Commission considered that it was preferable to maintain its contractual relations with Agenor, however with additional conditions in order to avoid a repetition of the irregularities. The renewal of the contract from 1 February 1999 on, presupposed a convincing restructuring of the Technical Assistance Office, the conditions of which had been communicated to Agenor. Given that the necessary changes had not been implemented, the Commission concluded in February 1999 that it was not able to pursue its contractual relation with Agenor and announced that it would not renew the contract which expired on 31 January.

The complainant's observations

The complainant maintained that the Commission's responsibility for the non-payment of the invoices is directly engaged. He referred again to the report by the Committee of Wise Men (Committee of Independent Experts) which he had mentioned in his initial complaint.

As regards the Commission's argument that no contractual relation existed with the complainant and that therefore it was not responsible for the payment of the invoices, the complainant stated that, in its report, the Committee of Wise Men observed that in principle, the Commission should not delegate to private firms the management of Community programmes with objectives of general interest. The Commission itself, and not Agenor, should therefore have entered in a contractual relation with the complainant.

The complainant rejected the Commission's argument that the publications would not have been made on behalf of the Commission, but on behalf of Agenor: the publications which are the subject of the unpaid invoices were approved by the Commission, they were made on its behalf and they were delivered directly to DG XXII and to the Office for Official Publications of the EC. Moreover, the orders to the complainant were made on headed paper with the Leonardo da Vinci programme mentioned on it, the sender being identified as the "Technical Assistance Office of the Commission for the Leonardo da Vinci Programme". It appears therefore highly unlikely that the Commission was not responsible, or at least substantially concerned, by the printing works made in the framework of the Leonardo da Vinci programme.

The complainant also indicated that the fact that Agenor had systematically to obtain the prior approval of the Commission's services before engaging costs above a certain amount, and the fact that the Commission and the Court of Auditors had access to all documents detained by Agenor only reinforced the impression that the Commission was doing more than simply supervising the activities of its Technical Assistance Office.

The complainant referred to the principle of legitimate expectations: the Commission, by maintaining its relation with Agenor, created the legitimate expectation that Agenor possessed the necessary organisation and rigor for assuming its obligations towards third parties. Given the information over which the Commission disposed, the Commission should not have created this expectation.

As regards the Commission's argument that it took sufficient measures to put an end to its contractual relation with Agenor given the numerous irregularities, the complainant observed that the contract with Agenor could have been terminated long before February 1999. A first audit report realised by DG XXII between 1 June 1996 and 31 May 1997 already pointed out several anomalies in the management of the Leonardo da Vinci programme. This was confirmed in a second examination of July 1997. Also, an official audit of February 1998 carried out jointly by DG XX and UCLAF on the bad management of the Technical Assistance Office, confirmed once again the allegations of fraud and corruption revealed earlier. However despite the remarks made in the various audit reports, the Commission services did not take any measure to tackle the problems. Had the Commission done so in 1997, when it was necessary, the Technical Assistance Office would not have been able to conclude the contract with the complainant which gave rise to the unpaid invoices. There exists therefore an immediate causal link between the non-payment of the invoices of the complainant and the Commission's delay in reacting on the fraud and irregularities in the management of Agenor.

Further information from the complainant

On 21 January 2002, the Ombudsman's office contacted the complainant in order to inquire about the situation with the liquidation procedure of Agenor. The complainant stated that the case was still in the hands of the liquidator and that the whole procedure would probably take several more years to be completed. The complainant confirmed that he had filed a recovery declaration with the liquidator.

OMBUDSMAN'S EFFORTS TO ACHIEVE A FRIENDLY SOLUTION

After careful consideration of the opinion and observations, the Ombudsman considered that there could be an instance of maladministration by the Commission. In accordance with Article 3(5) of the Statute(1), he therefore wrote to the President of the Commission on 13 February 2002 to propose a friendly solution on the basis of the following analysis of the issue in dispute between the complainant and the Commission:

1.1 The complainant claims that the Commission is responsible for the non-payment by its Technical Assistance Office "Agenor" of the three invoices for a total amount of € 48.869,85 because 1) the publications concerned were produced on behalf of the Commission, 2) the Commission approved the offers before the complainant carried out the works and 3) the Commission did not take any measure even though it knew from 1997 onwards about the irregularities and fraud within Agenor. The Commission, on the contrary, stated that it had no contractual relation whatsoever with the complainant and that it cannot, therefore, be held responsible for the situation in which the complainant finds himself as a result of his commercial relations with the bankrupt company.

1.2 The Ombudsman notes that, in their First Report on Allegations regarding Fraud, Mismanagement and Nepotism in the European Commission, the Committee of Independent Experts(2) ("Committee of Wise Men") closely analysed the Commission's responsibilities in relation to Agenor in the framework of the Leonardo da Vinci programme.

1.3 As regards the chronology of the case, the Committee's report stated that "DG XXII, which is responsible for the programme, had already found indications of irregularities as early as 1994 when it conducted an internal audit of the implementation by Agenor of a predecessor programme (…). It should have acted accordingly, if not in the selection of Agenor as TAO for Leonardo, then at least in the supervision of its activities, once selected. As DG XXII's own audit reports show, many irregularities and fraudulent practices were detected in 1997 (…). In DG XX's internal draft audit report of 20 July 1998, allegations of numerous frauds and irregularities were confirmed. It revealed important deficiencies in the control of the Leonardo/Agenor TAO by DG XXII and came to the conclusion that it was not always clear who controlled whom, DG XXII or the TAO. It was not until the beginning of November 1998 that action was taken on the final audit report, that it was officially submitted to DG XXII and thereafter to the other Commissioners" (points 5.8.4 to 5.8.6).

1.4 The claim of the complainant has to be evaluated in the framework of the report by the Committee of Independent Experts. At the time the complainant was selected by Agenor to proceed with the publication, namely on 20 May 1998, the Commission had already been aware for a long time about the fraud and irregularities within its Technical Assistance Office Agenor but had not taken any measures.

1.5 In the present case involving the ordering of publications from the complainant and the subsequent delivering of them, the Ombudsman notes that the Commission's Technical Assistance Office was acting completely on behalf of the Commission, which was the ordering body and the de facto recipient of the publications. This appears from the following elements:

1.6 It was on behalf of DG XXII that the publications had been ordered. It was the Commission which approved the final version of the publications. This appears from the note of 27 November 1998 from the Office for Official Publications of the European Communities to DG XXII/C/3 delivering the "approval for printing".

1.7 The publications were delivered to the Commission, some directly to DG XXII, others to the Office for Official Publications. This is mentioned explicitly in an order of 23 December 1998 from Agenor to the complainant, specifying that the address of delivery was the "Centre de diffusion de l'O.P.O.C.E., (…) Gasperich, L- 1225 Luxembourg". The Commission thus received the publications without having to bear the costs of them.

1.8 All letters sent by Agenor to the complainant were made on headed paper mentioning "Programme Leonardo da Vinci, Bureau d'Assistance Technique à la Commission européenne pour le programme Leonardo da Vinci".

1.9 Under these circumstances, the fact that the Commission denies all responsibility for the non-payment of the three invoices of the complainant does not appear to be reasonable. The Ombudsman's provisional conclusion is that this could constitute an instance of maladministration.

The proposal for a friendly solution

On the basis of the above considerations, the Ombudsman proposed a friendly solution between the complainant and the Commission which could consist in the Commission's acceptance of its responsibility for the non-payment of the three invoices amounting to € 48.869,85 and its proceeding with the payment thereof. The Commission was requested to reply by 30 April 2002.

The Commission's response

The Commission maintained that it could not be held responsible for the payment of the bills which have their origin in the contractual relation between the complainant and the bankrupt company Agenor. In the respect of bankruptcy law, the claim of the complainant should enter in the general body of creditors and find its settlement in the framework of the liquidation of the bankrupt company. The complainant has in fact transmitted a claim declaration to the guardianship.

The fact that certain aspects of the contract to which the Ombudsman drew attention (the orders concerned publications requested by the Commission, the "good for printing" were signed by the Commission, the publications were delivered to the Commission) does not invalidate the fact that the Commission was not a party to the contract.

From this point of view, the complainant is in the same situation as all the creditors of Agenor. The Commission cannot adopt a position which infringes bankruptcy law and the equality of creditors. The Commission can therefore not reply favourably to the Ombudsman's proposal for a friendly solution.

The complainant's observations

The complainant observed that he could not accept the Commission's reasoning which consisted in completely rejecting its responsibility for the payment of the bills, considering especially that the letters sent were with headed paper mentioning the Commission's TAO, that the publications had been approved by the Commission, realised on behalf of the Commission and delivered directly to the Commission's services.

The complainant further observed that he had lodged a complaint with the Commission for non respect of the Commission's Code of Good Administrative Behaviour for relations with the public, and that, if no friendly solution could be found, there would be no other alternative than bringing the Commission to court.

THE DECISION

1 The alleged responsibility of the Commission for the non payment of the outstanding bills by its Technical Assistance Office

1.1 The complainant claims that the Commission is responsible for the non-payment by its Technical Assistance Office "Agenor" of the three invoices for a total amount of € 48.869,85 because 1) the publications concerned were produced on behalf of the Commission, 2) the Commission approved the offers before the complainant carried out the works and 3) the Commission did not take any measure even though it knew from 1997 onwards about the irregularities and fraud within Agenor.

1.2 The Commission argues that it has no contractual relation whatsoever with the complainant and that it cannot, therefore, be held responsible for the situation in which the complainant finds itself as a result of its commercial relations with the bankrupt company. The Commission has also rejected the Ombudsman’s proposal for a friendly solution to the case on the grounds that it cannot be held responsible for the payment of bills which have their origin in the contractual relation between the complainant and its Technical Assistance Office. The Commission added that the complainant's claim could find its settlement in the framework of the liquidation of the bankrupt company.

1.3 The Ombudsman notes that Agenor acted on behalf of the Commission in administering a Community funded programme. The Commission remains responsible for the quality of the administration in organisations managing programmes on its behalf (Technical Assistance Offices - TAOs). Furthermore, principles of good administration require that the Commission should take adequate steps to verify the reliability and performance of TAOs. The latter requirement is particularly important from the point of view of third parties providing goods and services to the Commission. Such third parties may reasonably suppose that, in making contracts necessary for the management of a Community funded programme, the TAO acts on behalf of the Commission and enjoys its full confidence.

1.4 In the present case, it appears from the Committee of Wise Men's Report of 15 March 1999 that, as early as 1994, the Commission was aware of irregularities within its Technical Assistance Office Agenor. Further irregularities and fraudulent practices were discovered in 1997 and confirmed in an audit report of July 1998. However, it was only on February 1999 that the Commission decided to terminate its contract with Agenor. In the meantime - namely in May 1998 - the complainant had already been selected by Agenor to proceed with the printing of the publications for the Commission. At that time, the complainant was not aware of these irregularities and fraud and acted as if Agenor was still a reliable contractual partner having the Commission's full confidence.

1.5 In the light of the above, the Ombudsman considers that the Commission appears to have delayed unduly in tackling the identified problems of irregularities and fraudulent practices within its TAO, Agenor. The effect of this delay was that the Commission in effect continued to represent Agenor to third parties as a fit person to act on behalf of the Commission in managing a Community funded programme when the Commission knew that this was not the case. If the Commission had acted promptly to terminate its contract with Agenor, there would never have been question of the complainant concluding the contract which led to its invoices remaining unpaid. Therefore, the situation in which the complainant finds itself now is a consequence of the Commission's failure to act promptly in taking the appropriate measures to deal with the irregularities and fraudulent practices that it knew existed within Agenor.

1.6 The Ombudsman considers that the Commission was the de facto client of the complainant. This is evidenced by the following facts : It was on behalf of the Commission, namely DG XXII, that the publications were ordered. It was the Commission which approved the final version of the publication. This happened in a note of 27 November 1998 from the Office of Official Publications to DG XXII/C/3 delivering the "approval for printing". At that time, the irregularities and fraud within Agenor had already been reported several times within Commission. Furthermore, the publications were delivered directly to the Commission, as the address of delivery was the "Centre de diffusion de l'OPOCE".

1.7 Finally, the Ombudsman notes the following important element, which is that the Commission appears to have received the publications and thus benefited from them, without having to bear any of the costs of them. The Commission did not contradict this fact in its opinion on the proposal for a friendly solution. This gives the impression that there was unjust enrichment of the Commission, which would be contrary to the general principles of Community law(3).

1.8 Considering that the situation in which the complainant finds itself now is a consequence of the Commission's failure to act promptly in taking the appropriate measures to deal with the irregularities and fraudulent practices that it knew existed within Agenor, that the Commission was the de facto client of the complainant, and that there might be unjust enrichment of the Commission contrary to the principles of Community law, the Ombudsman takes the view that the Commission's refusal to take responsibility for the payment of the complainant's unpaid invoices constitutes an instance of maladministration.

2 Conclusion

On the basis of the Ombudsman's inquiries into this complaint, it is necessary to make the following critical remark:

Principles of good administration require that the Commission should take adequate steps to verify the reliability and performance of Technical Assistance Offices. The latter requirement is particularly important from the point of view of third parties providing goods and services to the Commission. Such third parties may reasonably suppose that, in making contracts necessary for the management of a Community funded programme, the TAO acts on behalf of the Commission and enjoys its full confidence.

Considering that the situation in which the complainant finds itself now is a consequence of the Commission's failure to act promptly in taking the appropriate measures to deal with the irregularities and fraudulent practices that it knew existed within Agenor, that the Commission was the de facto client of the complainant, and that there might be unjust enrichment of the Commission contrary to the principles of Community law, the Ombudsman takes the view that the Commission's refusal to take responsibility for the payment of the complainant's unpaid invoices in this case appears to be unreasonable which constitutes an instance of maladministration.

In his observations, the complainant stated that if no friendly solution could be found he would have no alternative but to take the matter to court. In view of the fact that the Commission has rejected a friendly solution, the Ombudsman therefore closes the case with the above critical remark.

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

Yours sincerely,

 

Jacob SÖDERMAN

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(1) "As far as possible, the Ombudsman shall seek a solution with the institution or body concerned to eliminate the instance of maladministration and satisfy the complaint".

(2) Committee of Independent Experts, First Report on Allegations regarding Fraud, Mismanagement and Nepotism in the European Commission, 15 March 1999.

(3) On the principle prohibiting unjust enrichment, see Case T-171/99, Corus UK Ltd v Commission, ECR 2001, II-02967, par. 55; Case C-259/87, Greece v Commission, ECR 1990, I - 2845.