Ombudsman closes complaint against DG Research for prematurely terminating a contract to develop an eco-car

Strasbourg, 28 January 2002

Decision of the European Ombudsman on complaint 769/2000/BB against the European Commission. Strasbourg, 21 January 2002. Text

Complaint on behalf of Ringsped Ltd. concerning the actions of the European Commission DG Research in the handling and, subsequently, the early termination of EU CRAFT Contract No. BRST-CT98-5453.

In 1980, the complainant started to develop his ideas for a very small robust ecological car. In 1988, the complainant formed a company Ringsped Ltd (hereafter "Ringsped") and with a number of friends financed the building of a first prototype ECO-2 which was presented at the London Motor Show in 1989. In 1992, Somar Transtec Ltd prepared a n° 3 prototype for the United Kingdom. However, Ringsped was unable to raise sufficient funds to complete development and the company was put into liquidation in 1993.

In 1999, the complainant made an application to the CRAFT programme. As Ringsped did not have a workshop facility and would therefore not have been eligible as a SME, the complainant invited Somar Transtec Ltd. to take the role of project co-ordinator. Work on the project programme started on 7 June 1999.

In 2000, the Commission decided to terminate the project before the contractual end-date. This was done after the co-ordinator of the project gave evidence that a majority of the participating SMEs no longer considered the continuation of the project to be of use.

The complainant alleged unfairness in the handling and the early termination of EU CRAFT Contract No. BRST-CT98-5453 by DG Research of the Commission. According to the complainant, the unfairness by the Commission consisted of the following elements:
- lack of assessment of the financial and technical difficulties;
- terminating the contract on false grounds without respecting the project duration and without a warning;
- racial prejudice in the correspondence;
- denying the complainant the right to become a SME partner....

THE DECISION

.... 1.5 The complainant also raised the issue of exclusive design rights to the ECO-2 vehicle. According to the Commission, this was contrary to the standard contract between the Consortium and the Commission for co-operative research contracts. Furthermore, the complainant suggested full SME partnership for his company Ringsped. According to the Commission, Ringsped did not meet the criteria to become a SME partner at the submission date and there was no change in its status during the project lifetime.

1.6 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.

1.7 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.

1.8 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 the institution or body adequately does so, then 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.

1.9 The complainant claimed that the Commission had been informed that three SMEs were willing to continue with a novated project. However, the Commission stated that its role was to see to the fulfilment of eligibility of CRAFT criteria, fulfilment of the contractual obligations and the progress of the research work. According to the Commission, due to an insufficient number of eligible SME partners being willing to continue the project, the Consortium could no longer fulfil its contractual obligations.

1.10 In the present case, the Commission has put forward a coherent and reasonable account of the reasons for its decision to terminate EU CRAFT Contract No. BRST-CT98-5453 before the end-date. Based on the above findings, there appears to have been no maladministration by the Commission.