Dear Dr D.,

On 11 March 2002, you complained to the European Ombudsman that the European Commission had failed to pay the balance of a grant that the Commission had accepted to provide.

On 8 April 2002, I forwarded the complaint to the President of the Commission. The Commission sent its opinion on 5 July 2002 which I forwarded to you on 15 July 2002.

On 15 July 2002, I informed the Commission that I considered it necessary to inspect its file. The inspection of the file took place on 19 September 2002. On 26 September 2002, I asked the Commission to provide information as to the contents of the Commission’s file. You were informed accordingly by a letter sent the same day.

The Commission replied to my request for information on 18 November 2002. On 19 November 2002, I forwarded a copy of this reply to you, with an invitation to make observations, both on this reply and the Commission’s opinion, which you sent on 9 December 2002.

On 16 December 2002, I submitted a proposal for a friendly solution to the Commission. A copy of this proposal and later on a translation into German were forwarded to you.

On 14 March 2003, the Commission sent its opinion regarding the said proposal, and I forwarded it to you on 17 March 2003 with an invitation to make observations, if you so wished. On 20 March 2003, you informed my services by telephone that a friendly solution could be considered as having been brought about.

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

THE COMPLAINT

The complainant is the director of the « Europäisches Kultur- und Informationszentrum in Thüringen », an association that has its seat in Germany (« the association »).

On 31 May 1998, the association submitted an application for a grant amounting to 90 000 Ecu to the European Commission. The various activities to be financed by this grant were to take place in September and October 1998. The person in charge of the matter on the Commission’s side was Mr H., Adviser in Directorate-General X (now DG Education and Culture).

According to the complainant, the association had tried to obtain, as from July 1998, clarification as to whether the Commission would accept the application, given that in the absence of other funds the proposed activities would otherwise have to be cancelled. The complainant alleged that Mr H. had assured the association several times over the telephone that the amount requested would be granted. Still according to the complainant, Mr H. had informed the association towards the end of July 1998 (the latest date by which the activities could have been cancelled) that the application had been accepted and that the relevant document would be signed at the first meeting of the Commission after the summer break. The complainant alleged that Mr H. had advised the association that it could begin to implement its project. He further claimed that in September 1998, Mr H. had informed the association that due to an overly charged agenda it had not yet been possible for the Commission to sign the document in question but that it would do so within the coming two weeks. According to the complainant, it had been on the basis of these assurances that the association had begun to realise its project.

The complainant claimed that since then there had been nearly daily contacts by telephone with Mr H. who had always confirmed that the letter granting the money was imminent. In November 1998, the association had applied to its bank for a credit. It appears that the bank insisted on obtaining written confirmation that the Commission would provide the grant. The complainant therefore turned to the Commission’s representation in Germany. In a letter of 25 November 1998, Dr. B. (at that time the acting head of the Commission’s representation in Germany) confirmed that the Commission had approved the grant of 90 000 Ecu and that the relevant formalities would be finalised before the end of the year.

However, in a letter dated 23 December 1998 the Commission informed the complainant that a grant of only 20 000 Ecu had been approved by the Commission.

According to the complainant, Mr H. thereupon advised the association to submit a new application for a grant in 1999 that should cover the balance of 70 000 Ecu. This application was lodged in February 1999. However, in its decision of 28 January 2000 the Commission rejected the application. It appears that this decision was based on the consideration that funds provided in 1999 could not be used to finance activities carried out in 1998.

Several contacts took place subsequently between the complainant, his local MEP, the member of the Commission in charge and the Commission’s services. On 30 June 2000, the Director-General of DG X informed the complainant that on the basis of the assumption that Dr. B.’s letter of 25 November 1998 had given rise to legitimate expectations, the Commission was ready to cover expenditure that had occurred between that date and 5 January 1999 (the date of receipt of the Commission’s letter of 23 December 1998). The Commission argued, however, that this should only cover expenditure in relation to contracts that contained a ‘risk clause’, i.e. a clause to the effect that payment should only become due when the Commission decided to provide its grant. The Commission also accepted to cover arrears of salaries of employees of the association, provided that payment had been made within the said period. On this basis, the Commission calculated that a sum of € 21 988.54 could be paid to the complainant on account of the extracontractual liability to which the letter of 25 November 1998 had given rise. The sum of € 20 000 was to be deducted from this amount.

The complainant objected to this proposal and insisted that the full balance of € 70 000 should be paid out. Several further efforts to make the Commission change its mind were unsuccessful, however. The complainant then turned to another MEP who forwarded the complaint to the Ombudsman.

In his complaint to the Ombudsman, the complainant pointed out that all the grants it had received from the EU so far had been based on good faith. The complainant alleged that when the association had applied for a grant for a project in 1995, it had been informed orally that the money had been granted and that the association had begun to carry out its concomitant obligations whilst the written confirmation was received months later when the project was long terminated. According to the complainant, the same pattern had prevailed with regard to later applications for grants.

The complainant thus claimed that the Commission had failed to pay the balance of a grant that in his view the Commission had accepted to provide to the association. He basically alleged that the association had been entitled to rely on the assurances that he claimed had been made by Mr H. of the Commission’s services.

The complainant added that the association had no other funds and that if no solution could be found, it would have to cease its activities.

THE INQUIRY

The Commission's opinion

In its opinion, the Commission gave a detailed description of the sequence of events and actions, in particular in so far as the period after the dispatch of the letter of 23 December 1998 was concerned. With specific regard to the allegation made by the complainant, the Commission made the following comments:

On 31 May 1998, the association had applied for a grant of € 90 000 under budget line A-3024. The project had been preselected for a grant of € 20 000 by the competent selection committee in the autumn of 1998. During that period, the complainant had frequently telephoned with the official in charge of that budget line, Mr H. According to the complainant, Mr H. had promised him over the telephone that a grant of € 90 000 would be provided. Given that Mr H. had died in November 1999, it was no longer possible to verify what had in fact been said. The file of DG X did however not contain any trace of these promises.

After having consulted the Commission’s Legal Service, DG Education and Culture had taken the position that over and above the amount of € 20 000 already paid, the Commission was legally obliged to cover only those financial commitments that had been entered into by the association between 25 November 1998 and 5 January 1999. On 22 June 2000, the Director-General of DG Education and Culture had received the complainant and explained that the DG would cover the expenses incurred between 25 November 1998 and 5 January 1999. In a letter of 30 June 2000, the Director-General had explained that the sum that could be taken in charge amounted to € 1 988.54.

Further inquiries
Inspection of the Commission’s file

In the light of the Commission’s opinion, the Ombudsman considered that he needed further information to deal with the complaint. He therefore wrote to the Commission on 15 July 2002 to ask for access to the Commission’s file. On 19 September 2002, the Ombudsman’s services inspected the file of DG X as well as the file of the Commission’s representation in Germany.

It emerged that the file of DG X did not contain any originals of documents for the period up to 23 December 1998. As a matter of fact the only document from this period that seemed to be available was a copy of the application of 31 May 1998.

The file of the Commission’s representation in Germany appeared to be well-kept and complete. It contained the correspondence between the representation and the complainant, including a letter from the complainant dated 2 July 1998 and a copy of the letter of 25 November 1998. This copy contained a manuscript note by its author according to which the wording of the letter had been "agreed with Mr [H.]" ("mit H. [H.] abgestimmt").

Request for further information

In a letter sent on 26 September 2002, the Ombudsman informed the Commission that the file of DG X appeared to be incomplete. He therefore asked the Commission to ascertain the location of the missing parts of the file and to grant him access to the complete file. In case the Commission should be unable to find the missing parts of the file, the Ombudsman asked for written confirmation to this effect.

On 8 November 2002, the Commission informed the Ombudsman that to its regret it had been unable to find any other documents in relation to the complainant’s application. The Commission asked the Ombudsman to consider this deplorable situation with leniency.

The complainant's observations

In his observations on the Commission’s opinion and its letter of 8 November 2002, the complainant maintained his complaint and made inter alia the following comments:

In its opinion, the Commission first noted that DG Education and Culture had taken the position that it was legally obliged to cover only those those financial commitments that had been entered into by the association between 25 November 1998 and 5 January 1999. It then confirmed, however, that the Director-General of DG Education and Culture had informed the complainant that the DG would cover the expenses incurred between 25 November 1998 and 5 January 1999. These statements were contradictory. The result of the discussion with the Director-General on 22 June 2000 had indeed been that the latter accepted that the Commission should take in charge the expenses incurred between 25 November 1998 and 5 January 1999.

In 1998, the association had applied to work as an info point for the Commission. On 20 February 1998, it had submitted a declaration according to which it would comply with its contractual obligations, nothwithstanding the fact that at that time there were only oral agreements and no written contract. The association had however relied on oral assurances that this contract would be signed. On 26 June 1998, the association was informed by the Commission that the file in Brussels was considered to have been lost and that therefore the application had not been processed for some time. Given that these events confronted the association with a dilemma similar to the one in the present case, the association asked the Commission’s service in charge of matters relating to info points to provide advance confirmation of the contract that was to be concluded. This confirmation was provided on 17 September 1998. The relevant contract was signed on 16 September 1998 and formally notified to the association on 5 October 1998. The association thus never had reason to doubt the assurances that had been given to it in both matters.

THE OMBUDSMAN'S EFFORTS TO ACHIEVE A FRIENDLY SOLUTION

After careful consideration of the opinions and observations, the Ombudsman was not satisfied that the Commission has responded adequately to the complainant's allegation.

The proposal for a friendly solution

In accordance with Article 3 (5) of his Statute, the Ombudsman therefore made the following proposal for a friendly solution to the Commission:

The European Commission should consider reviewing its decision to refuse to pay the Europäisches Kultur- und Informationszentrum in Thüringen the full sum of € 90 000.

This proposal was based on the following considerations:

1. The complainant was the director of a German association that had applied to the Commission for a grant of € 90 000. In the end, only an amount of € 21 988.54 had been granted. The complainant claimed that the Commission had failed to pay the balance of the grant that in his view the Commission had accepted to provide to the association. He basically alleged that the association had been entitled to rely on the assurances that he claimed had been made by Mr H. of the Commission’s services and according to which the full amount of € 90 000 would be granted. The complainant stressed that it was on this basis that the association had begun to realise its project and incurred expenditure or entered into financial commitments.

2. The Commission accepted that the complainant had frequently telephoned with Mr H. during the relevant period. It took the view, however, that since Mr H. had died in November 1999, it was no longer possible to verify what had in fact been said. The Commission added that the file of DG X did not contain any trace of the promises to which the complainant had referred.

3. The Ombudsman noted that the complainant argued that the Commission had refused to provide the association with the full amount of € 90 000 it had requested although the association had incurred expenditure or entered into financial commitments on the basis of assurances that this amount would be granted. The complainant was thus in effect relying on the principle of the protection of legitimate expectations. According to the case-law of the Community courts, however, a breach of this principle cannot be invoked unless the administration has given precise assurances to the person concerned(1). In the present case, the complainant submitted that the Commission’s case-handler had assured him that the Commission would grant the full amount of € 90 000 that the association had requested. This would appear to be a precise assurance. It had to be noted, however, that the Ombudsman was unable to verify this allegation with the means that the Statute of the Ombudsman(2) put at his disposal. The Commission’s file that had been inspected by the Ombudsman’s services did not contain any trace of such assurances. The only person that could probably have shed light on the issue and that could have been heard as a witness by the Ombudsman, i.e. Mr H. himself, was dead.

4. The Ombudsman considered, however, that this lack of corroborative evidence coul not be held against the complainant in the present case. The Commission accepted that there had been numerous contacts over the telephone between the complainant and Mr H. It would therefore have been appropriate for the official concerned to make a record of these conversations or at least of the most important points that had been discussed on these occasions. The Ombudsman considered that in the absence of such records lesser demands had to be made in so far the need for the complainant to establish his allegation was concerned.

5. The Ombudsman considered that there were at least three elements that would appear to support the complainant’s case. First, given that the project had been due to start in September 1998, the association obviously had a vital interest to learn in good time (and at the latest at the beginning of September 1998) whether the Commisssion would provide the grant it had requested. This was confirmed by the complainant’s letter of 2 July 1998 to the Commission’s representation in Germany. The complainant there noted that in the case of a negative reply, the association would have to cancel the project since it was unable to compensate amounts not granted by funds from other sources. Since the project was not cancelled but carried out the complainant’s allegation that he obtained satisfactory assurances from Mr H. appeared to be credible. Second, the complainant had explained that already in the past the association had implemented (and had had to implement) projects on the basis of merely oral assurances. The Ombudsman noted that the Commission had not made any comments on this aspect of the case. Third, the fact that the complainant had obtained and relied on assurances from Mr H. was given added credibility by the fact that other Commission officials themselves had relied on the word of this person. The letter of 25 November 1998 sent by the Commission’s representation in Germany had, as the inspection of the file had shown, been based on information by Mr H.

6. The Ombudsman noted that the Commission had not put forward any arguments to establish why the complainant should not have been entitled to rely on such assurances by the Commission’s case-handler.

7. In the light of these circumstances, the Ombudsman considered that the Commission’s refusal to pay the association the full amount of € 90 000 that the latter had applied for on 31 May 1998 could be an instance of maladministration.

The Commission’s opinion

In its opinion, the Commission pointed out that the Ombudsman’s conclusions were not based on facts that had been clearly established by tangible evidence, but only on assumptions and deductions arrived at by way of analogy to other situations. The Commission also stressed that the position it had maintained so far simply reflected its obligation to comply with the principle of sound financial management. In this context, it appeared useful to reiterate that the Commission could only be bound to provide financial assistance by a written commitment to the future beneficiary that had been drawn up in accordance with the relevant rules.

The Commission added, however, that in order to preserve the image of the European institutions in the eye of the citizen and to avoid causing damage to the beneficiary in the present case, it was by way of exception ready to accept the Ombudsman’s proposal.

It would therefore check the account of expenses linked to the relevant project as quickly as possible in order to ascertain the expenses that were eligible and, consequently, the balance due to the beneficiary. The Commission pointed out, however, that the complainant had to be aware of the fact that the final amount of the subsidy would not necessarily correspond to the sum of 90 000 € that had been claimed.

The complainant’s observations

On 20 March 2003, the complainant informed the Ombudsman’s services by telephone that a friendly solution could be considered as having been brought about.

THE DECISION

1 Failure to pay balance of grant

1.1 The complainant was the director of a German association that had applied to the Commission for a grant of € 90 000. In the end, only an amount of € 21 988.54 had been granted. The complainant claimed that the Commission had failed to pay the balance of the grant that in his view the Commission had accepted to provide to the association. He basically alleged that the association had been entitled to rely on the assurances that he claimed had been made by Mr H. of the Commission’s services and according to which the full amount of € 90 000 would be granted.

1.2 In its opinion, the Commission basically took the view that there was no evidence to support the complainant’s claim.

1.3 After careful examination of all the relevant facts and arguments, the Ombudsman submitted a proposal for a friendly solution to the Commission according to which the latter should consider reviewing its decision to refuse to pay the full sum of € 90 000.

1.4 In its opinion, the Commission informed the Ombudsman that it was, by way of exception, ready to accept the Ombudsman’s proposal. It would therefore quickly check the eligibility of the expenses declared by the complainant. The Commission pointed out, however, that the complainant had to be aware of the fact that the final amount of the subsidy would not necessarily correspond to the sum of 90 000 € that had been claimed.

2 Conclusion

Following the Ombudsman's initiative, it appears that a friendly solution to the complaint has been agreed between the European Commission and the complainant. The Ombudsman therefore closes the case.

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

Yours sincerely,

 

Jacob SÖDERMAN

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(1) See for example Case T-72/99 Meyer v Commission [ECR] 2000, II-2521 paragraph 53.

(2) Decision 94/262 of 9 March 1994 of the European Parliament on the Regulations and General Conditions Governing the Performance of the Ombudsman’s Duties, OJ 1994 L 113, p. 15.