EU budget — Early Detection and Exclusion System (EDES)

 

SUMMARY OF:

Regulation (EU, Euratom) 2015/1929 — early detection and exclusion system to ensure sound financial management

WHAT IS THE AIM OF THE REGULATION?

It amends the EU’s basic financial rules and establishes an early detection and exclusion system, operated by the European Commission, to protect the EU’s financial interests against unreliable economic operators (i.e. businesses, companies and non-commercial organisations).

KEY POINTS

• The system aims to ensure the:
  • early detection of risks threatening the EU’s financial interests
  • exclusion of an economic operator from receiving EU funds
  • imposition of a financial penalty on economic operators breaking EU rules.
• The Commission or other contracting authority must exclude economic operators from obtaining EU funds through, for example, EU procurement or grant procedures for:
  • being bankrupt, subject to insolvency procedures or if their business activities are suspended;
  • non-payment of taxes or social security contributions;
  • grave professional misconduct, such as violating intellectual property rights or entering into agreement with other operators with the aim of distorting competition;
  • fraud, corruption, participation in a criminal organisation, money laundering, terrorist-related offences, child labour or trafficking in human beings;
  • serious breach of a contract or irregularity.
• In order to ensure the coherent operation of the system, decisions on exclusions and financial penalties are taken on the basis of a recommendation of an independent panel. This panel provides a preliminary classification in law in the absence of final judgment or final administrative decision and in cases related to a serious breach of contract.
• Decisions on whether to exclude economic operators or to impose penalties are based on:
  • facts from audits or investigations carried out by the European Court of Auditors, the EU’s anti-fraud office or internal checks and controls;
  • final and non-final judgments and administrative decisions;
  • decisions of the European Central Bank, the European Investment Bank, the European Investment Fund or international organisations;
  • Commission decisions on the EU’s competition rules.
• Any decision on the sanction is based on the:
  • principle of proportionality;
  • seriousness of the situation;
  • impact on the EU’s finances and image;
  • period since the relevant conduct, its duration and repetition;
  • intention or degree of negligence;
  • mitigating circumstances, such as degree of collaboration by the economic operator.
• Economic operators may not be excluded from participating in a procurement procedure if:
  • they have taken corrective measures, thus demonstrating their reliability;
  • it is necessary to ensure continuity of service for a limited period;
  • exclusion would be disproportionate.
• Financial penalties may be between 2 % and 10 % of the total value of the contract and the exclusion duration may be between 3 and 5 years.
• Information relating to the early detection and exclusion system is entered in a centralised Commission database.
• The Commission, or the relevant contracting authority, decides whether or not to impose a financial penalty for any fraud or misdemeanours

FROM WHEN DOES THE REGULATION APPLY?

It applies from 1 January 2016.

BACKGROUND

The Early Detection and Exclusion System (EDES) is designed to protect the EU’s financial interests and to ensure sound financial management. It replaced the previous Early Warning System and the Central Exclusion Database from 1 January 2016.

It was established by Regulation (EU, Euratom) 2015/1929 which amended the EU’s Financial Regulation.

For more information, see:

• ‘Protecting EU interests’ on the European Commission's website

MAIN DOCUMENT

Regulation (EU, Euratom) 2015/1929 of the European Parliament and of the Council of 28 October 2015 amending Regulation (EU, Euratom) No 966/2012 on the financial rules applicable to the general budget of the Union (OJ L 286, 30.10.2015, pp. 1-29)

last update 05.10.2016