Dear Mr P.,

On 12 September 2001, you made a complaint on behalf of your company Sviluppo s.r.l to the European Ombudsman concerning the Commission's alleged failure to pay the outstanding balance due under a supply contract financed by the European Development Fund, project ACP-GRED-013 - Farm Road Rehabilitation.

On 23 October 2001, I forwarded the complaint to the President of the European Commission. The Commission sent its opinion on 11 February 2002. I forwarded it to you with an invitation to make observations, which you sent on 27 March 2002. I am writing now to let you know the results of the inquiries that have been made.

THE COMPLAINT

The complainant, a company, complains that the Commission has failed to help it obtain the outstanding payment due to its company in the context of an ACP supply contract in Grenada (Project ACP-GRED-013 - Farm Road Rehabilitation) financed by the European Commission under the European Development Fund (EDF). The complainant signed a contract with the Ministry of Agriculture in Grenada and it was agreed that it would supply trucks, a personnel vehicle and concrete mixers in three separate deliveries. The conditions for payment as set out in the special and general conditions for the supply contract financed by the EDF were as follows. The complainant was paid an lump-sum advance of 60% of the contract price, which was to be followed by a second instalment, a 30% interim payment, on provisional acceptance of the goods and a final third instalment corresponding to the remaining 10% of the contract price upon final acceptance by the contracting authority, the National Authorising Officer (NAO) in Grenada. The complainant however never received payment of the remaining 40% of the contract value (the second and third instalments) to which it considers itself entitled and asked the Ombudsman for assistance to obtain the amount due to it including interest on account of late payment.

The complainant alleges that the Commission failed to reply to its letter of 25 October 1999 in which it claims that it is entitled to the final payment under the contract.

The complainant claims that the Commission should order the National Authorising Officer in Grenada to pay the remaining amount due and pay interest on account of late payment.

THE INQUIRY

The Commission's opinion

In its opinion, the Commission made the following comments.

The Commission's position is that contracts financed by the EDF remain national contracts concluded between the Contracting Authority of the ACP state, the NAO, and the contractor and that the Commission's role is necessarily limited to assess whether the financing conditions under the EDF are met. The ACP state and its NAO are responsible for preparing, negotiating and concluding contracts in accordance with Lomé IV Convention and in the present case the financing Regulation under the seventh EDF. In this context, the Commission considers it correctly concluded that the financing conditions in the present case were not met as far as the outstanding payment of 40% of the contract price was concerned.

The Commission explains that on 20 September 1993, the contract was signed between the NAO, the Ministry of Agriculture of Grenada, and the contractor Sviluppo s.r.l. The advance corresponding to 60% of the contract value was paid on 11 January 1994. Under the special conditions in the tender dossier, the complainant's company committed itself to deliver the agreed goods within three months as from the signing of the 'letter of contract'. Following failure to deliver on time and one incomplete delivery, the NAO decided to apply liquidated damages corresponding to 15% of the contract price for every day which elapsed between the initial delivery date and the date of completion of the delivery(1) and informed the complainant of this by letter of 29 April 1994. The NAO informed the complainant by letter of 7 April 1995 that the provisional acceptance certificate (needed for the second payment of 30%) would not be issued, as the latter had not informed it of when the missing spare parts would be delivered. By letter of 21 September 1995, the NAO informed the DG Development of the Commission via the EC Delegation in Grenada that the government of Grenada wanted to know whether termination of the contract could be considered under the General Conditions of the EDF for non-performance of the contract.

The Commission services informed the NAO by fax of 9 November 1995 that under Article 21 of the General Conditions, the NAO was entitled to terminate the contract after giving notice to the supplier besides the liquidated damages and damages, that is other costs incurred due to the delay and non-performance on the part of the contractor. Having assessed the financial issues, the Commission services also informed the NAO that the outstanding balance of 40% of the contract did not cover the necessary deduction of the liquidated damages of 15% on the contract price, the cost for the non-delivered missing spare parts and other costs incurred because of the delay.

Following the delayed delivery of the missing spare parts on 17 October 1995, the NAO however informed the Commission services (the EC Delegation in Grenada) by letter of 17 January 1996 that he no longer wished to apply liquidated damages or to terminate the contract on the basis of non-performance on the part of the complainant whilst providing a copy of the issued provisional acceptance certificate and the payment order. The NAO also informed the complainant by letter of the same date, 17 January 1996, that despite the delays his government would pay him fully on receipt of a spare parts manual.

In view of the bad contract performance, the EC Delegation however informed the NAO by letter of 28 February 1996 that the conditions for Community financing of the payment request were not met. Under the contract, liquidated damages, penalties, and other costs and additional damages should be deducted from the final payment order of 40%. The NAO was therefore asked to approve this position and submit a revised payment order indicating the reduced amount. The Commission services did however not receive any revised payment order from the NAO who, by letter of 10 May 1996, informed the complainant that full payment could not be made and apologised for any inconvenience this might cause. The payment order was suspended on 29 May 1996 by the Commission services. The programme "Farm and Road Rehabilitation" was closed in October 1998 following approval by the NAO in July 1997.

By letter of 6 March 1998, the Commission services informed the complainant that the conditions for EDF financing of the outstanding 40% of the contract were still not met due to various non-performances on his part and that any further queries as to the status of his claim should be addressed to the Ministry of Agriculture of Grenada, since the Commission itself was not a party to the contract.

Regarding the alleged failure to reply to the complainant's letter of 25 October 1999, the Commission searched their archives for it and found a letter from the company of that date but with slightly different contents compared to the one presented by the complainant. The Commission can therefore not confirm that it has received the same document. The Commission stresses nevertheless that following verification of the file, it considers that the letter of 25 October 1999 contained the same claims as in the complainant's letter of 8 January 1998 to which the Commission replied by letter of 6 March 1998 setting out its position and inviting the complainant to address the NAO for further action.

The Commission finally reiterates that the complainant should address his outstanding claims to the Ministry of Finance in Grenada.

The complainant's observations

The complainant maintains his claim in his observations.

He considers that the advance payment of 60% of the contract price should have been paid within 60 days which was not the case. Because of a lack of information in this respect by the Contracting Authority, the NAO in Grenada, the complainant had to cancel the shipping of the goods which at that time were ready at the suppliers' premises. To his great surprise, the complainant received the advance payment on 28 February 1994.

The complainant finally points out that considering the 90 day delivery deadline under the contract, there was only a twenty day delay which in turn was due to the delayed payment from the NAO and that he consequently should not be blamed for any delays incurred.

THE DECISION

1 Alleged failure to reply to letter of 25 October 1999

1.1 The complainant alleges that the Commission failed to reply to its letter of 25 October 1999 regarding its claim for payment in the amount of 40% of the contract price in the context of project ACP-GRED-013 - Farm Road Rehabilitation financed by the EDF.

1.2 The Commission argues that the substance of the letter of 25 October 1999 was the same as in the complainant's letter sent to the Commission on 8 January 1998. It therefore considers that it has replied in substance to the complainant's claims by letter of 6 March 1998 setting out its position and inviting the complainant to address its claims to the Contracting Authority, the NAO, in Grenada for further action.

1.3 The Ombudsman notes it is good administrative practice to reply to letters without delay. In the present case, it appears that the Commission did not reply to the letter from the complainant of 25 October 1999. It is noted however that the Commission replied in substance to the complainant's claims by letter of 6 March 1998 setting out its position and informing it of the possibility of addressing the Contracting Authority in Grenada. It is moreover noted that the Commission subsequently has taken measures to ensure that letters are replied to under its Code of Good Administrative Behaviour, which is applicable since 1 January 2001(2). In these circumstances, there appears to be no maladministration by the Commission as regards this aspect of the complaint.

2 Claim to order the National Authorising Officer in Grenada to pay the outstanding amount due and pay interest on account of late payment

2.1 This claim concerns the obligations arising under a contract concluded between the Ministry of Agriculture in Grenada and the complainant's company, Sviluppo s.r.l., financed by the Commission under the European Development Fund. The complainant claims payment of the outstanding 40% of the contract price from the government in Grenada and interest on account of late payment. The Commission's position is that the EDF financing conditions in the present case were not met and that payment therefore not can be made from the EDF funds. The Commission also considers that the complainant should address its claim to the contracting authority in Grenada for further action.

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

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

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

2.5 In the present case, the Commission has put forward a coherent and reasonable account of the reasons for which it believes that the financing conditions under the EDF are not met.

2.6 In these circumstances, there appears to be no maladministration on the part of the Commission.

3 Conclusion

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

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

Yours sincerely,

 

Jacob SÖDERMAN

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(1) Part A of the Special Conditions applicable, paragraph VIII.1.

(2) OJ L 308/32 of 8.12.2000.