WRITTEN QUESTION E-1751/99

by Herbert Bösch (PSE) to the Commission

(1 October 1999)

Subject: The Fléchard case are there other such cases in the Commission?

In the Fléchard case, a case of fraud connected with butter exports to the former Soviet Union, European Commission officials, in contravention of Community law, had the prescribed penalty of 17,6 million reduced to 3 million. Responsibility for the case was assumed by the cabinet of President Delors, the then President of the Commission. In his letters of 28 July 1999 and 27 August 1999 to the rapporteur for the Committee on Budgetary Control, Commissioner Fischler gave no clear answer to the question whether or not this case had been an isolated occurrence. In a hearing in the Committee on Budgetary Control, senior Commission officials said that the handling of the case had been in no way unusual and alluded to the existence of similar cases.

Can the Commission give a complete list of all such cases that have occurred over the past ten years and indicate in which of them recovery was waived and what amounts were involved on each occasion?

Can the Commisison say whether, as in the Fléchard case, the minutes of the relevant meetings have disappeared in these cases?

Would the Commission indicate up to what level decisions in such cases are made by officials and starting from what amount the decision is made by the College of Commissioners? Can the Commission say whether in future it will be left to the discretion of its officials to decide whether Community law is to be applied or whether as happened in the Fléchard case it is not?

Answer given by Mr Fischler on behalf of the Commission

(22 December 1999)

1. With regard to the specific instance of the Fléchard case, the Commission would refer the Honourable Member to its answers to the questions asked by Mr Mulder and to those given to the Committee on Budgetary Control at its meetings devoted to this matter.

2. The Honourable Member's question concerns the arrangements under which a Member State releases or recovers a guarantee given by a firm.

Commission departments may intervene at various points in the recovery procedures at which the principle of proportionality is or may be taken into account, as appropriate.

In the case of the EAGGF Guarantee Section and indirect expenditure, the accounting and management of debts are devolved to the various paying agencies in the Member States, which are required to keep a master book of debtors in accordance with accepted accounting principles. They are also required to notify the Commission regularly of the position regarding debts to be recovered under the procedure for the clearance of the EAGGF Guarantee Section accounts.

Member States have the option of consulting the Commission before renouncing debts which have been established, especially those entailing difficulties in appraisal.

There are three main scenarios possible:

- the problem raised involves a question of principle (which may, in extreme cases, reveal shortcomings in the rules in force). In such a case, Commission staff may, following consultations with and after receiving the agreement of the departments concerned, decide to prepare a Commission decision on the subject. That decision will cover not only the case referred by the Member State to the Commission but also any similar cases which may arise. That decision is binding on the Member States;

- the problem raised concerns an individual case. In such circumstances, following consultations with and after receiving the agreement of the other departments involved, the Commission department concerned normally issues an interpretive opinion on how the Member State should deal with the debt in question. Such an opinion is not, however, binding on the Member States, which retain their responsibility for management and may decide whether or not to follow the opinion;

- the problem is one of irregularity or fraud, in which case it is dealt with by the procedure set out in Article 5 of Regulation (EEC) No 595/91.

In the case of own resources, this may taken the form of a dispensation from making available the traditional own resources established but not recovered and entered in a so-called separate account (mainly customs duties and sugar levies) where recovery proves impossible for reasons which cannot be considered the fault of the Member States. Cases notified by the Member States under this heading are considered by the Commission, which has six months in which to make any comments to the Member State concerned.

In any case and in other circumstances, Article 29 of the Financial Regulation lays down a specific procedure for renouncing a debt which has been established. This entails inter-departmental consultations resulting, where agreement is reached, in approval by the Financial Controller and registration by the Commission's Accounting Officer.

During the three years from 1996 to 1998 (figures for ten years are not available), about 1 900 debts to the Community budget totalling EUR 1 337 million were cancelled under this procédure.

Of the amount cancelled:

- EUR 900 million concerned compensations, i.e. recovery, in respect of EAGGF expenditure forming part of expenditure not falling under the indirect management of the Guarantee Section;

- EUR 38 million concerned a number of recovery orders under the ERDF which were cancelled to be consolidated in a new single recovery order;

- about EUR 4 million related to rent guarantees for Commission Delegations; some 350 recovery orders were cancelled because of duplication (duplicated entries in the off-budget accounts).

The remaining cancellations (almost EUR 400 million) were carried out after the debtors had submitted justifications which were accepted by the Commission (calculation errors, judgements cancelling fines, etc.), because recovery was impossible (the debtors had disappeared or were insolvent or bankrupt with no dividend, etc.) or because the small amount involved did not justify legal proceedings (after reminders from the Accounting Officer had produced no result).

The Commission is sending the Honourable Member a separate summary list of the cases where debts have been renounced in the last three years.

3. The Commission is not aware that any reference documents relating to the procedures to recover debts referred to above have disappeared.

4. The designation of the Authorising Officer empowered to renounce a debt is governed by the internal rules on the implementation of the budget, which set out the Authorising Officer for each budget heading the Authorising Officer responsible. The principle is that the Commission is (Article 274 of the EC Treaty), and, in the vast bulk of cases, delegates its power to a Director-General (the delegated Authorising Officer), who may himself subdelegate to one or more officials in his Directorate-General. The mandate given to an Authorising Officer by delegatation may specify the acts to implement the budget to which it applies (e.g. it may be restricted to payments or recovery).

5. The renunciation of a debt does not entail a personal appraisal by officials of whether Community law should or should not be applied. It first of all requires the Authorising Officer to take a position on the merits of a recovery procedure in terms of cost/effectiveness and the principle of proportionality. This is then submitted for approval by the Financial Controller and, where appropriate, to the other departments

concerned, if necessary including the Legal Service. In the case of direct expenditure or revenue, an approved proposal is then registered by the Accounting Officer.

The Commission will continue to ensure strict compliance with its internal rules, without prejudice to the considerations on administrative reform which it has begun.