EUROPEAN COMMISSION
Brussels, 20.7.2017
SWD(2017) 268 final
COMMISSION STAFF WORKING DOCUMENT
Early Detection and Exclusion System (EDES) - Panel referred to in Article 108 of the Financial Regulation
Accompanying the document
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL
Protection of the European Union's financial interests - Fight against fraud 2016 Annual Report
{COM(2017) 383 final}
{SWD(2017) 266 final}
{SWD(2017) 267 final}
{SWD(2017) 269 final}
{SWD(2017) 270 final}
Table of Contents
1.INTRODUCTION
2.THE PANEL
2.1.The Composition of the Panel
2.2.ROLE OF THE PANEL
2.3.THE RECOMMENDATION OF THE PANEL
3.THE PUBLICATION OF SANCTIONS IMPOSED ON ECONOMIC OPERATORS
4.Overview of CASES
1.INTRODUCTION
From 2004 to 2015, the Commission ran an internal early warning system and an exclusion database in order to protect the Union's financial interests. The aim of the system was to warn about potentially unreliable economic operators and to prevent them from obtaining future EU financing by excluding them or imposing a financial penalty on them. The internal early warning system only covered the Commission and its executive agencies. In its judgment in the Planet case the General Court considered that the early warning system was not purely internal since it affected the rights of the economic operators concerned and that it did not properly ensure the operator's right to be heard. The Commission seized the opportunity of this judgment to propose a substantial revision of the system not only in order to fully ensure the respect of the fundamental rights of the economic operators concerned but also to improve the system in terms of centralised assessment of cases, independence and transparency. As a result a new single Early Detection and Exclusion System (EDES) was put in place as part of the 2015 revision of the Financial Regulation. Articles 105a to 108 provide for rules that centralise the exclusion process for all institutions, EU offices, agencies and bodies. In particular, Article 108(7) establishes a Panel presided over by a standing high-level independent Chair whose role is to issue recommendations on administrative sanctions, i.e. exclusion and/or financial penalties and, where applicable, the publication thereof. These recommendations are addressed to the authorising officers of EU institutions, EU offices, agencies and bodies which remain sole competent to take the decision to exclude an economic operator and/or to impose a financial penalty on it.
2016 constitutes the first year of application of this new system, the “EDES” that entered into application on 1 January 2016: the Panel was established and its Chair and Deputy Chair were selected and appointed by the Commission. In parallel, a new IT tool, the EDES Database, was set up. It lists all cases of early detection of risks threatening the EU's financial interests, exclusion of and imposition of financial penalties on unreliable economic operators and is also operational since 1 January 2016. The Commission also launched a public webpage on the Europa website, which lists the most serious cases sanctioned by exclusion and/or a financial penalty decisions. The purpose of publication is to ensure a deterrent effect in order to better protect the Union's financial interests. The publication is subject to strict conditions, including compliance with the protection of personal data.
2.THE PANEL
The coherence of the administrative sanctions (i.e. exclusion and/or financial penalties and, where applicable, the publication thereof) procedure is ensured by the newly established Panel.
2.1.The Composition of the Panel
As laid down in Article 108(7) of the Financial Regulation, the Panel is composed of:
-a standing high-level independent Chair;
-two permanent Member representatives of the Commission as the owner of the system, who express a joint position for the cases submitted to the Panel; and
-one ad-hoc Member representative of the requesting authorising officer.
The Chair of the Panel and his/her Deputy are appointed by the Commission and are independent in the performance of their mandate. They are chosen from among former members of the Court of Auditors, the Court of Justice or former officials who have had at least the rank of Director-General in an institution of the Union other than the Commission. Their term of office is five years and is not renewable. The Chair is Mr Christian Pennera, former Jurisconsult of the European Parliament and his Deputy is Ms María Isabel Rofes i Pujol, former Member of the Civil Service Tribunal of the European Union.
The two permanent Members of the Panel designated by the Commission are Mr. Hubert Szlaszewski designated ad personam, presently Principal Advisor within the Secretariat General of the Commission, and Mr. Olivier Waelbroeck, Director of the Central Financial Service in the Directorate-General for Budget.
For each case, the additional Member representing the requesting authorising officer is designated in accordance with the rules of procedure and the internal administrative rules of the institution, agency, office or body concerned.
The Panel is assisted by observers and in all cases by a representative of the Legal Service of the Commission. In addition, a representative of OLAF participates in the Panel as observer in the cases referred to the Panel on the basis of an OLAF investigation. This status allows OLAF to present the facts. The active contribution of the Legal Service of the Commission and of OLAF to the work of the Panel has been a key element in providing the Panel with relevant information and allowing it to deliver high quality recommendations in a timely way.
The Panel is supported by a permanent secretariat provided by the Commission and administratively attached to the Directorate-General for Budget.
2.2.ROLE OF THE PANEL
In the absence of a final national judgment or, where applicable, a final administrative decision, authorising officers who would like to exclude and/or fine an unreliable economic operator have to first request a recommendation of the Panel. The grounds for excluding economic operators are the following:
-grave professional misconduct resulting from the violation of applicable laws or regulations or ethical standards of the profession to which the economic operator concerned belongs, or from the engagement in any wrongful conduct which has an impact on the professional credibility where such conduct denotes wrongful intent or gross negligence;
-fraud, corruption, participation in a criminal organisation, money laundering or terrorist financing, terrorist-related offences or offences linked to terrorist activities, and child labour or other forms of trafficking in human beings;
-significant deficiencies in complying with main obligations in the performance of a contract financed by the budget ('serious breach of obligations'), which has led to its early termination or to the application of liquidated damages or other contractual penalties, or which has been discovered following checks, audits or investigations by an authorising officer, OLAF or the Court of Auditors;
-irregularity within the meaning of Article 1(2) of Council Regulation (EC, Euratom) No 2988/95.
In general, each case is examined twice by the Panel in two succeeding meetings. In a first session, the Panel examines the facts and findings and their preliminary qualification in law. It ensures the right to be heard by sending a letter to the economic operator in which the latter is requested to submit written observations. In a second session, the Panel examines the written observations, if any, and adopts its recommendation which is addressed to the requesting authorising officer.
The Panel must adopt this recommendation within 45 calendar days from the referral of the case to the Panel. This deadline starts once the request for referral of a case is complete. Pursuant to the Financial Regulation, the economic operator should at least be granted 15 calendar days, i.e. 10 working days at the most, to present its observations. In practice, despite the tight constraint of the short deadline of 45 calendar days, the Panel grants more time to the economic operator, i.e. at least 11 or 12 working days.
The recommendation of the Panel includes a preliminary classification in law of the conduct referred to above, with regard to established facts or other findings. It is important to recall that the Panel has no investigative powers. It will therefore principally rely on:
a)facts established in the context of audits or investigations carried out by the Court of Auditors, OLAF or internal audit, or any other check, audit or control performed under the responsibility of the authorising officer;
b)non-final administrative decisions which may include disciplinary measures taken by the competent supervisory body responsible for the verification of the application of standards of professional ethics;
c)decisions of the European Central Bank, the European Investment Bank, the European Investment Fund or international organisations;
d)decisions of the Commission relating to the infringement of the Union's competition rules or of a national competent authority relating to the infringement of Union or national competition law.
Where the Panel considers that the economic operator concerned should be excluded and/or that a financial penalty should be imposed on it, its recommendation contains the facts or findings and their preliminary classification in law as well as one or several of the following elements:
a)an assessment of the need to impose a financial penalty and its amount;
b)an assessment of the need to exclude the economic operator concerned and, in that case, the suggested duration of such an exclusion;
c)an assessment of the need to publish the information related to the economic operator who is excluded and/or subject to a financial penalty;
d)an assessment of remedial measures taken by the economic operator, if any;
e)assessment of the proportionality principle as referred to in Article 106(3) of the Financial Regulation so as to retain aggravating or mitigating circumstances.
After an assessment of the remedial measures the Panel may decide to recommend not to impose sanctions on the economic operator. The option to take into account remedial measures was introduced in the 2015 revision of the Financial Regulation, based on the procurement Directives in order to reduce the sanctions imposed on the economic operator or to avoid its exclusion altogether where the economic operator has taken the necessary corrective measures. For this latter case, the measures listed in Article 106(8) of the Financial Regulation must be sufficient to demonstrate the reliability of the economic operator to receive future Union funds.
2.3.THE RECOMMENDATION OF THE PANEL
In the light of the principle of proportionality enshrined in Articles 49 and 52 of the Charter of Fundamental Rights of the European Union and of remedial measures taken by the economic operator concerned, the Panel can recommend:
-The exclusion of the economic operator concerned for up to 3 years (up to 5 years in the case of fraud) from participation in all or part of funding procedures, governed by the Union budget in line with the Financial Regulation and award procedures governed by the European Development Funds;
-The imposition a financial penalty of between 2 % and 10 % of the total value of the contract on an economic operator who has attempted to obtain access to Union funds by participating or requesting to participate in a procurement procedure, without having declared it in one of the following exclusion situations;
(II)as an alternative to a decision to exclude the economic operator, where such an exclusion would be disproportionate;
(III) in addition to an exclusion which is necessary to protect the Union's financial interests, where the economic operator has adopted a systemic and recurrent conduct with the intention of unduly obtaining Union funds.
-In order to reinforce the deterrent effect of the exclusion and/or financial penalty, the publication on the internet site of the Commission information related to the exclusion and, where applicable, the financial penalty.
Even if they have only a non-binding nature, due to the need to respect the administrative autonomy of the Institutions and other EU bodies, the recommendations of the Panel bear a certain weight due to the composition of the Panel and the recognised authority of its high level independent Chair. This is further evidenced by the fact that the Authorising Officer who decides not to follow a recommendation of the Panel in a given case must inform the latter of the reasons which have led him/her to take a different decision.
3.THE PUBLICATION OF SANCTIONS IMPOSED ON ECONOMIC OPERATORS
The publication of the sanctions is a powerful tool to ensure a deterrent effect and to prevent misuse of EU funds. The first publication of information related to sanctions took place on 24 November 2016.
The recommendation to publish must comply with the protection of personal data and be necessary to ensure this deterrent effect. Therefore, the publication will only be recommended in serious cases with aggravating factors. In addition, the publication can only intervene three months after the decision is taken by the economic operator, by which time the decision of the authorising officer may be contested before the General Court. If this is the case then the publication will take place after the judgment of the Court, should the judgment uphold the decision of the Authorising Officer.
4.Overview of CASES
The Panel started functioning at the beginning of 2016 and issued its first recommendation on 15 March 2016. Pending the appointment of the standing high-level independent Chair and his Deputy by the Commission, it was presided on an interim basis by the permanent Member with the highest seniority. The Chair of the Panel took office once he had been appointed and presided his first meeting on 24 November 2016.
In 2016, 21 cases relating to 33 economic operators were addressed to the Panel through its permanent secretariat by different authorising services, including 14 from the Commission, five from executive agencies, one from an office and one from a decentralised agency.
The following table shows an overview of the cases where the Panel issued a recommendation in 2016 and of those cases submitted to the Panel in 2016 and where the recommendation was issued in the first semester of 2017. It contains a summary of facts and findings, their preliminary qualification in law if applicable, the recommended administrative sanction and the date thereof and if a publication on the website of the Commission was recommended. The cases have been anonymised.
|
CASE NUMBER
|
FACTS
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QUALIFICATION IN LAW (exclusion ground)
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SANCTIONS
|
PUBLICATION
|
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Case 2016/1
Date of the Panel recommendation: 16.3.2016
Date of the decision of the authorising officer:
23.6.2016
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The director of a grant beneficiary publicly admitted that he was involved in sharing disreputable information on the director of a competitor entity.
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"Grave professional misconduct" that has an impact on the integrity and professional credibility of the economic operator.
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Exclusion from specific funding programme for 3 years.
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Not recommended.
|
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Case 2016/2
Date of the Panel recommendation: 20.4.2016
Date of the decision of the authorising officer : 19.7.2016
|
The manager of a grant beneficiary misappropriated EU funds;
In another project, the beneficiary did not perform any work;
Prevented the auditors to perform a financial audit;
Declared ineligible costs.
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"Serious breaches of contractual obligations".
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Exclusion of 3 years.
Financial penalty of 10 % of the value of one of the project.
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Recommended based on refusal of audits.
Published on 24 November 2016 on the internet site of the Commission.
|
|
Case 2016/3
Date of the Panel recommendation: 15.6. 2016
Date of the decision of the authorising officer:
25.10.2016
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A patent allegedly owned by the economic operator concerned did not exist;
Alleged existence of another linked entity did not exist.
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"Misrepresentation in supplying the information required by the authorising officer".
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Exclusion for a period of 3 years.
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Not recommended.
|
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Case 2016/4
Case withdrawn on: 20.12.2016
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The grant beneficiary received subsidies based on declaration of overestimated unit costs (average v. actual);
Declaration of ineligible costs.
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Not applicable, case withdrawn by authorising officer.
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Not applicable. Case closed due to withdrawal by authorising officer. Application of contractual measures to protect the EU financial interests so that there is no outstanding impact on the EU budget (including).
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Not applicable (case withdrawn).
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Case 2016/5
Date of the Panel recommendation: 9.1.2017
Date of the decision of the authorising officer:
6.3.2017
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Inflation of costs and unreliable recording system of a grant beneficiary;
Undeclared subcontracting;
Plagiarism.
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"Serious breaches of contractual obligations"
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Exclusion for a period of 2 years.
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Recommended based on the recurrence of the conduct.
Published on 14/06/2017 on the internet site of the Commission.
|
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Case 2016/6
(up to 9 economic operators potentially concerned)
Panel reply to the requesting authorising officer on 23.6.2016
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As part of a procurement procedure, the evaluation Committee identified 2 tenders (consortia) with identical parts in the replies to certain questions;
Potential alleged plagiarism made by one of the consortia and/or the companies of this consortium.
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Not applicable. Case closed: facts and findings not established.
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Not applicable (case inadmissible due to the non-establishment of the facts).
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Not applicable (case inadmissible due to the non-establishment of the facts).
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Case 2016/7/a
Case 2016/7/bis
Case 2016/7/ter
(3 economic operators concerned)
Date of the Panel recommendations: 28.2.2017 (a)
16.3.2017 (bis and ter)
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Three beneficiaries of grants were involved in a fraudulent scheme with an intermediary company, while all of them were owned or controlled by the same natural person.
The mechanism resulted in inflated costs claimed in the EU projects.
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"Serious breaches of contractual obligations".
The legal qualification of fraud has not been retained since the competent national authorities closed the judicial proceedings.
|
Recommendation not to exclude by application of remedial measures sufficient to ensure the economic operators' liability:
- no financial prejudice remained due to the reimbursement of all funds in the perimeter of the established serious breach of contractual obligations;
- no use of the fraudulent scheme since 2007.
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Not applicable (recommendation not to sanction – remedial measures).
|
|
Case 2016/8/a
Case 2016/8/bis
(2 economic operators concerned)
Date of the Panel recommendations (a and bis): 28.3.2017
Date of the decision of the authorising officer (a and bis): 11.04.2017
|
Attempts of 2 economic operators to influence the procurement evaluation procedure.
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"Grave professional misconduct"
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Exclusion of each of the 2 economic operators for 1 year.
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Not recommended.
|
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Case 2016/9
Date of the Panel recommendation: 9.1.2017
Date of the decision of the authorising officer:
7.3.2017
|
As part of a contract of works, the contractor concerned did not fulfil its obligations in the deadline set (extended several times), it resulted in the termination of the contract;
The contractor submitted a performance guarantee of a guarantor blacklisted by the central national central bank. The guarantor went bankrupt and the contractor did not replace the guarantee, despite being required to do so.
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"Serious breaches of contractual obligations".
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Exclusion of 2 years.
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Recommended based on the misleading depiction of the solvability of the contractor due to the default of its guarantor.
Publication postponed due to legal action introduced by the operator.
|
|
Case 2016/10a
Case 2016/10bis
(2 economic operators concerned)
Date of the Panel recommendations:
6.2.2017 (a)
24.3.2017 (bis)
Date of the decision of the authorising officer:
24/03/2017 (a)
16/05/2017 (bis)
|
Submission of report on the implementation of the action which did not reflect reality (by the 1st economic operator concerned only);
Non-compliant procurement procedure and inflation of staff expenses claimed ( by the 1st economic operator concerned only);
Submission of fake documents to auditors (2nd economic operator only).
|
"Serious breach of obligations" and "grave professional misconduct" (1st economic operator)
"Grave professional misconduct linked to breach of procurement procedure" (2nd economic operator)
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Exclusion for 2 years (1st economic operator)
Exclusion for 1 year (2nd economic operator
|
Recommended for the first economic operator recommended based on two distinct grounds of exclusion.
Yet to be published on the internet site.
Not recommended for the second operator.
|
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Case 2016/11
Date of the Panel recommendation: 25.1.2017
Date of the decision of the authorising officer:
05.04.2017
|
Auditors prevented to perform a financial audit;
Non-completion of work to be performed in the context of a grant agreement and non-participation in the meetings concerning the supervision, monitoring and evaluation of the project.
|
"Serious breaches of contractual obligations"
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Exclusion for 3 years.
|
Recommended based on:
- serious breaches of contractual obligations in two distinct grant agreements
- refusal of audit.
Yet to be published on the internet site
|
|
Case 2016/12
Reply of the Panel to the requesting authorising officer on 2.2.2017
|
Irregularity consisted in conclusion of a contract with another company for assistance in the preparation of a tender and falsification of document. This company irregularly obtained the Terms of Reference of the Contract prior publication.
|
"Grave professional misconduct".
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State of play on the further implication of the alleged fraudulent scheme and companies involved to be presented.
|
Not applicable, awaiting state of play of further implication and companies involved.
|
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Case 2016/13
Date of the Panel recommendation: 24/05/2017
Date of the decision of the authorising officer:
29/06/2017
|
Unreliability of the beneficiary's time recording system, declaration of non-incurred costs;
Lack of operational capacity;
Irregular subcontracting;
Unjustified payments to a foreign bank account of a company led by the same director.
|
"serious breaches of contractual obligations and grave professional misconduct"
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Exclusion for 2,5 years
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Not recommended.
|
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Case 2016/14
Panel reply: 30.06.2017
|
Unreliability of the beneficiary's time recording system, lack of information in timesheets with regard to non-EU projects;
Declaration of non-incurred costs;
Identified transactions, with a separate company, to which the operator had transferred a significant part of the pre-financing it had received, raising doubts as to the actual work of the beneficiary in the project.
|
"serious breaches of contractual obligations"
|
Case closed: Company dissolved.
|
Not applicable, company dissolved.
|
|
Case 2016/15
Date of the Panel recommendation:
26/04/2017
Date of the decision of the authorising officer:
21/06/2017
|
Inaccurate time recording;
Irregular subcontracting;
Unreliable travel and subsistence costs;
Personal involvement of the manager
|
"serious breaches of contractual obligations"
|
Exclusion of 2 years
|
Not recommended.
|
|
Case 2016/16
Date of the Panel recommendation:
26/04/2017
Date of the decision of the authorising officer:
15/06/2017
|
No audit could be performed due to the absence of reply to letter of announcement of audit and several attempt to reach the operator;
Contested payment of part of pre-financing by the grant coordinator; proof of payment was submitted and no reply was provided.
|
"serious breaches of contractual obligations"
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Exclusion of 2 years
|
Recommended based on refusal of audit.
|
|
Case 2016/19
Date of the Panel recommendation: 28/06/2016
|
Unreliable time recording system; lack of alternative evidence supporting the claimed personnel costs;
Non-compliance with the specific eligibility criteria for in-house consultants;
Absence of costs recorded in the contractor's profit and loss statement.
|
"serious breaches of contractual obligations"
|
Exclusion of 18 months
|
Not applicable, facts committed before publication rules entered into force.
|
|
Case 2017/02
|
Final judgement concerning agreement with other operators with the aim of distorting competition
Remedial measures.
|
No preliminary classification: the limitation period lapsed.
|
No recommendation.
|
Not applicable.
|
|
Case 2017/04
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Lack of preventive measures to avoid conflict of interest and late disclosure.
|
No preliminary classification.
Case withdrawn.
|
No recommendation. Case withdrawn by Authorising Officer based on further analysis.
|
Not applicable (case withdrawn)
|
Number of Panel cases received
01/01/2016 - 30/06/2017
(accumulated figures)
Sanctions recommended by the Panel
01/01/2016 - 30/06/2017
Panel cases classified per category of sources
01/01/2016 - 30/06/2017
Panel cases classified per spending area
01/01/2016 - 30/06/2017
