Background to the complaint

1. The complainant, a Lebanese association[1], received a grant from the Delegation of the European Union to Lebanon (the Delegation) for a project concerning cultural activities[2].

2. After the implementation of the project, the Delegation carried out an ex post check of the association’s expenses[3]. As it turned out, through a procurement procedure, the association had hired its president and his wife to work for the project as project manager and financial manager, respectively. The Delegation considered that this was not in line with the grant agreement and decided to recover part of the funds.

3. The complainant did not agree with that decision and turned to the Ombudsman on 27 March 2018.

The inquiry

4. The Ombudsman opened an inquiry into the fairness of the Delegation’s decision to recover funds.

Arguments presented to the Ombudsman

5. The Delegation based its decision to recover the funds in question on the lack of independence of the evaluation committee involved in the procurement procedure. It argued that the evaluation committee was chaired by the treasurer of the association, who answered to the president. Concerning the president’s wife, the Delegation noted that she was a family member of the president and stated that her CV showed no “experience in the financial field”.

6. The complainant contended that the Delegation was aware of the positions held by the president and his wife during the implementation of the project. Moreover, the president and his wife had held the same positions in previous EU-funded projects. Had the Delegation considered that there was a conflict of interest, it should have addressed the issue during the implementation of the project, not after.

7. The complainant stated that the treasurer was free to object to any operation that was not in line with ethical rules and the applicable procedures. It added that the association’s bylaws do not prohibit the recruitment of members of the board of directors and/or family members in projects carried out by the association. In any event, the Delegation had no proof that the president had used his “presidential influence” to alter the outcome of the procurement procedure.

The Ombudsman's assessment

8. According to the grant agreement’s rules on procurement, the Commission “will carry out ex post checks on the Beneficiary’s compliance with the rules”[4]. Failure to comply with these rules renders the related expenditure ineligible. One of these rules is that the recipient of the grant needs to take all necessary measures to prevent conflicts of interest[5], including in procurement procedures[6].

9. A conflict of interest occurs when an individual is in a position to exploit his or her professional or official capacity for personal or corporate benefit[7]. Thus, it is not necessary for an individual to have actually exerted influence to be in a conflict of interest situation.

10. In this case, the complainant has not provided sufficient evidence that its treasurer could act as chair of the evaluation committee free from any undue pressure by the president of the association. In the absence of such evidence, the fact that the treasurer was in a subordinate position to the president of the association is sufficient to call into question the fair and equal treatment of the rest of the candidates.

11. Moreover, the complainant has not provided any proof that it had informed the Delegation of its intention to hire its president and his wife through a procurement procedure. Although the project proposal mentioned that the president’s previous experience was necessary for the project, it did not refer to the possibility of subcontracting these tasks to the president and his wife.

12. Even if the Delegation had known about the positions held by the president and his wife during the implementation of the project, this would not have given the complainant any legitimate expectation that their appointment was in line with the grant agreement. Three cumulative conditions must be satisfied for a legitimate expectation to exist. First, an authorised and reliable source must give precise, unconditional and consistent assurances. Second, such assurances must comply with the applicable rules. Third, those assurances must be such as to give rise to a legitimate expectation on the part of the person to whom they are addressed[8].

13. There is nothing to suggest that the Delegation gave the complainant precise, unconditional and consistent assurances regarding the selection, through a procurement procedure, of the two individuals in question[9]. Such assurances would not have been in line with the applicable rules either; as the ex post check carried out by the Delegation showed, serious concerns were raised regarding the independence of the evaluation committee.

14. Against this background, the Ombudsman concludes that there was no maladministration in this case.

 

Conclusion

Based on the inquiry, the Ombudsman closes this case with the following finding:

The Ombudsman finds no maladministration by the Delegation of the European Union to Lebanon.

The complainant and the Delegation will be informed of this decision.

 

Lambros Papadias

Head of Inquiries - Unit 3

Strasbourg, 23/07/2019

 

 

 

[1] The Ombudsman decided to carry out this inquiry on her own initiative because the complainant does not have a registered office in an EU country and its representatives are not EU citizens or residents (Article 228 of the Treaty on the Functioning of the EU).

[2] EuropeAid/136-940/DD/ACT/LB, available at: http://eeas.europa.eu/archives/delegations/lebanon/documents/related_links/20150519_2_en.pdf.

[3] Ex-post checks are controls made to verify the operations after they are finalised.

[4] Article 1 of Annex IV to the grant agreement. A model of the grant agreement and its annexes can be found at: http://ec.europa.eu/europeaid/prag/document.do?nodeNumber=6.11.

[5] Article 4.1 of Annex II ‘General conditions’ to the grant agreement.

[6] Article 1 of Annex IV to the grant agreement.

[7] Bribery in Public Procurement: Methods, Actors and Counter-Measures, OECD, 2007, Paris.

[8] See Judgment of the General Court of 26 June 2019, Vialto Consulting v. Commission, T-617/17, ECLI:EU:T:2019:446, paragraph 114. Available at: http://curia.europa.eu/juris/document/document.jsf?text=&docid=215507&pageIndex=0&doclang=FR&mode=lst&dir=&occ=first&part=1&cid=3186750  

[9] The complainant argued that the president participated in two meetings with the Delegation in his role as project manager. Even if this were the case, this could not constitute proof of ‘precise, unconditional and consistent’ assurances given by the Delegation regarding the complainant’s selection as project manager through a procurement procedure.