Brussels, 03 February 2023
WK 7470/2022 REV 1
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FIN
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MEETING DOCUMENT
From:
General Secretariat of the Council
To:
Budget Committee
N° Cion doc.:
8910/22 + ADD 1 (COM(2022) 223 final + ANNEXES 1 to 2)
Subject:
Financial Regulations (recast): Amendments related to the Early-Detection and
Exclusion System (EDES) (Fiche No 8)
Delegations will find attached a revised version of the Commission's Fiche No 8 regarding the
amendments related to the Early-Detection and Exclusion System (EDES). The changes mainly concern
Articles 131 and 134(4). The other changes are minors ones (e.g. changes in formatting or correction of
cross references).
WK 7470/2022 REV 1
ECOFIN.2.A GT/ML/ab
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EN
Fiche1 n° 8
February 20232
Financial Regulation recast
(COM(2022)223 final)
Amendments related to the Early-Detection and Exclusion System (EDES)
This fiche presents the proposals for a
targeted and proportionate extension of the Early-
Detection and Exclusion System’s scope,
both
ratione materiae and
ratione personae,
to further
enhance the protection of the EU financial interests in light of the lessons learnt over the first years
of activity of the EDES Panel which is in place since 2016.
The following amendments are considered necessary to enhance the effectiveness of the system:
1. Reinforcement of the exclusion system at EU level under, on the one hand, shared
management and, on the other hand, direct management where funds are disbursed as
financial contributions to Member States, e.g. under the Recovery and Resilience Facility;
2. Introduction of an expedited procedure, where the nature or the circumstances of the case
requires it;
3. Possibility to exclude beneficial owners and affiliated entities, when the requirements to
impute liability are considered fulfilled;
4. Introduction of a new non exhaustive list of misconduct under the existing ground of
exclusion for grave professional misconduct, including for (i) the breach of conflict of
interest provisions and (ii) the incitement to discrimination and hatred; and a new
autonomous ground of exclusion for (iii) the refusal to cooperate in investigations, checks or
audits carried out by an authorizing officer, OLAF, EPPO or the Court of Auditors;
Finally, the following amendments are also proposed as they would improve the EDES system
from a technical/procedural point of view in light of the case practice and judgement of the
Court of Justice, and to ensure consistency in the Financial Regulation (FR) by updating legal
reference:
5. Exclusion of unreliable guarantors;
6. Establishment of a legal presumption of notification of adversarial letter and administrative
decisions (expiry of period for collection by the postal office or automatic receipt reply of the
transmission by email);
7. Proof of remedial measures (independent audit or decision of a European/national authority);
8. Vice-Chair of the Panel (introduction in the FR and voting right);
9. Clarification on the composition of the Panel in the case of financial irregularities on the part
of a staff member;
10. Update of legal references in respect of terrorist offences or offences linked to terrorist
activities;
11. Update of legal references in respect of data protection.
1 This fiche is a non-paper prepared by the responsible Commission department to facilitate the decision making process.
Fragments of the Commission proposal have been inserted in Annex for ease of reference only. The authentic text of the
proposal is the one published in th
e Official Journal of the European Union.
2 This version contains minor additions/corrections in the Annex as compared to the version of 25 May 2022.
1
A. EDES and shared management
1. Scene setter
The Early-Detection and Exclusion System (EDES) is a system operated by the Commission in order
to protect the Union’s financial interests.
Currently, EDES only applies directly and mandatorily to direct and indirect management (see list of
persons and entities concerned in Article 135(2) FR). However, roughly 75% of the EU funds are
disbursed under shared management. The Commission remains ultimately responsible for budget
implementation in accordance with Article 317 TFEU, including under shared management.
The current legal framework
The current legal framework at national and EU level does not fully address certain challenges as
regards exclusion from EU funds :
- Member States do not have the obligation to set up a fully-fledged exclusion system
(blacklisting) at national level.
- Pursuant to Article 57 of the Public Procurement Directive 2014/24/EU, contracting
authorities must exclude economic operators in case of serious misconduct (e.g. corruption,
fraud, conflict of interest, money laundering, terrorism). However, one exclusion does not
bind other contracting authorities in the same Member State and there is no database.
Furthermore, Member States do not have the competence to take exclusion decisions at EU
level.
- Under Directive (EU) 2017/1371 on fight against fraud to the Union's financial interests by
means of criminal law, Member States may exclude legal persons “from entitlement to public
benefits or aid” or temporarily or permanently “from public tenders procedures” in case of
criminal offences listed under the Directive (See Article 9 (a) and (b)). As above, these
exclusions are not listed in a database.
- Under the current EDES rules, the Member States’ authorities in shared management, when
awarding contracts, need to merely take into account EU exclusion decisions ‘
as appropriate
and on their own responsibility’ (Article 142(5) FR)
- Against this background, entities involved in a serious misconduct might apply for and
receive EU funding in other Member States and under other programmes/management
modes.
Comparison with the exclusion rules in Indirect Management
It should also be recalled that EDES rules are already applicable in the context of indirect
management with entrusted entities or beneficiary/partner countries. While the differences between
the management modes are acknowledged, shared and indirect management are comparable for the
purposes of exclusion from EU funding as there is no direct (contractual) relationship between the
Commission and the beneficiaries.
2
Under indirect management, where the Commission is not the contracting authority, the partners
entrusted with the implementation of the Union budget shall inform the Commission when an entity
is in a situation of exclusion. This information can be used by the Commission to impose
administrative sanctions according to the EDES rules. The obligation for the implementing partners
to inform the Commission is detailed in the general conditions of the contribution agreement or
financing agreement.
Moreover, in the latest version of the financing agreements, where a beneficiary/partner country
becomes aware of an exclusion situation, it shall, under the conditions of its national legislation,
impose upon the entity or person, an administrative sanction that may be either an exclusion from its
future procurement or grant award procedures and/or a financial penalty proportional to the value of
the contract concerned.
For what concerns indirect management with entrusted entities, the Commission is not bound by
exclusion decisions which the entrusted entity adopts pursuant to its internal rules. It may however
take into account the facts referred to in such decisions as established facts and findings, based on
which it may refer the case to the EDES Panel.
Finally, according to the current Financial Regulation, the Commission shall operate according to its
own rules and may refer the case to the EDES Panel despite the fact that it has no contractual
relationship with the person or entity concerned. In such cases, the responsibility to exclude lies with
the Commission’s authorising officer. The preliminary classification in law of the facts must be then
carried out by the EDES Panel.
A similar approach may well apply
mutatis mutandis to shared management too.
Example of an EDES case in indirect management
In 2019-2020, a DG referred a case to the EDES Panel concerning facts and findings established in an
OLAF report against the entity (X) implementing funds in indirect management in the partner country
(Y).
More specifically, two contracts were awarded to (X) under an external action instrument. Both
contracts were signed between (X) and the Ministry of Finance of (Y). The EU contribution paid under
the contracts was of a significant amount.
The referral to the EDES Panel was made on the grounds of (a) corruption and (b) grave professional
misconduct based on findings contained in an OLAF report.
The entity was excluded from ongoing and future procurement and award procedures for 4 years.
Aggravating circumstances such as the seriousness of the misconduct and the duration were taken into
account by the EDES Panel.
The EU contribution paid under the contracts was declared ineligible by the Commission. The partner
country (Y) was anyhow entitled to recover the money directly from (X).
In 2021, (X) has been found guilty of active corruption by a national court. The final judgment in first
instance confirmed the preliminary classification in law made by the Panel.
3
2. Proposed modifications in the Financial Regulation
In light of the above, it is proposed to reinforce EDES in shared management. One of the main topics
of this targeted amendment of the Financial Regulation is precisely the enhanced protection of the
Union’s financial interests.
The new exclusion rules
The reinforcement of EDES in shared management would concern only the following
exhaustive list
of the most serious misconduct: fraud, corruption, criminal organisation, money laundering,
terrorism, child labour/human trafficking, conflict of interests. The extension would not target the
other grounds of exclusion: grave professional misconduct, serious breach of contracts, shell
companies, and any other form of non-fraudulent irregularities.
In particular, the proposal identifies three situations and the relevant actors:
(i) Exclusion on the basis of
a conviction with a sanction determining the duration of the
exclusion:
➢ The Member State shall notify the Commission via the Irregularity Management
System (IMS);
➢ On the basis of such information, the Commission (DG BUDG) will take the exclusion
decision and notify it to the person or entity concerned;
➢ The exclusion of the person or entity concerned and the information thereof would be
registered in the EDES database;
(ii) Exclusion on the basis
a conviction without a sanction determining the duration of the
exclusion:
➢ The Member State shall notify the Commission via IMS;
➢ The Commission’s authorising officer shall refer the case to the Panel prior to taking
an exclusion decision;
➢ In the context of an
expedited procedure, the Panel carries out the contradictory
procedure with the entity and sets the duration of the sanction in compliance with the
principle of proportionality;
➢ The Commission will take the exclusion decision and notify it to the person or entity
concerned;
(iii) Exclusion on the basis of
findings at EU level (e.g. OLAF reports, EPPO investigations,
ECA/EU audits):
➢ Once the Commission’s authorising officer becomes aware of such findings, it shall
immediately refer the case to the Panel;
➢ The Panel carries out the contradictory procedure with the person/entity and – where
necessary – liaises with the relevant Member State;
➢ The Panel issues a recommendation of exclusion and address it to the authorising
officer;
4
➢ The Commission will take the exclusion decision, having regard to the
recommendation of the Panel, and notify it to the person or entity concerned;
➢ The exclusion decision is reviewed if and as soon as a competent Member State’s
authority has issued a final judicial or administrative decision;
As shown above, both the Member State and the responsible authorising officer would have the
obligation to act depending on the type of exclusion.
The EDES Panel, prior to making a preliminary classification in law, would carry out (i) a
contradictory procedure with the person or entity and, where necessary, (ii) a consultation with the
Member State. The EDES Panel will also take into consideration any measure already adopted by the
Member State against the person or entity, as well as any other mitigating or aggravating
circumstance pursuant to the principle of proportionality. Although the authorising officer is a
member of the EDES Panel, the collegiality of the procedure ensures a correspondent reduction of
the overall administrative burden.
The exclusion would be included in the EDES database as every other exclusion under the current
legal framework. The Member States’ authorities would then have the obligation to take the
exclusion into account by rejecting persons or entities from being selected to implement EU funds
(i.e. to enforce the exclusion decision).
Finally, the new rules would apply also in the case of unreliable persons or entities receiving Union
funds through financial contributions to Member States (e.g. RRF funds).
Other measures
The proposal is without prejudice to Article 63 FR whereby it is for the Member States to take all the
necessary measures, including legislative, regulatory and administrative measures, to protect the
financial interests of the Union, including by preventing, detecting and correcting irregularities and
fraud. Member States “shall also recover funds unduly paid and bring legal proceedings where
necessary in that regard” and “shall impose effective, dissuasive and proportionate penalties on
recipients where provided for in sector-specific rules or in specific provisions of national law”
(Article 63(2) second and third subparagraph).
Considering the current measures of financial corrections carried out by Member States and the
Commission, the proposal also provides for an additional measure whereby Member States would be
informed by the Commission that it will not reimburse payment claims related to an entity that is
excluded and listed in the EDES Database.
The Member State’s authorities would have the obligation to consult the EDES database and take
into account the information therein on exclusion decisions prior to awarding EU funds.
Impact on number of cases Concerns as to the administrative burden have been duly taken into account.
It is expected that the main source for exclusion cases under shared management would be OLAF
reports. At this stage, it is difficult to predict what would be the impact of the EPPO’s investigations.
EU audits
per se will not serve as a basis for a preliminary classification in law on those misconducts
having criminal elements, so they will mainly be used as a source of findings in respect of conflict of
interests.
5
In terms of identified serious misconduct, currently, there is an average of 25 judicial
recommendations per year sent by OLAF to the competent authorities of the Member States in the
context of shared management (figures of the last 5 years are presented in the table below). If these
trends remain stable these figures are a reasonable proxy for the estimated extent of the
Commission’s future intervention.
OLAF judicial recommendations issued by year and current result in shared management cases*
information provided by OLAF on 12 October 2021
Issue year
No result yet
Indictment
Dismissal
Total
2016
15
10
12
37
2017
13
7
17
37
2018
12
2
7
21
2019
15
1
4
20
2020
28
1
1
30
Total
83
21
41
145
3. Details of the proposal
Case scenario - Application of the revised EDES rules to shared management
Case scenario: an OLAF investigation concludes that an entity in a Member State has misrepresented
information and forged CVs of experts during a procurement procedure, with respect to EU regional
funds awarded under shared management.
Under the current rules:
The Commission may take measures to protect the EU budget:
• Ask the Member State authorities to suspend the submission of payment requests relative to the
companies in question;
• Suspend payments if such requests are submitted;
• Based on the final audit report, after a contradictory procedure with the Member State
authorities, impose financial corrections;
The effects of the audit conclusions and of the measures to protect the EU budget are limited to the
Member State in question and to the companies established there.
Under the proposed EDES rules:
• EDES would apply to beneficiaries under shared management involved in fraud as per the facts
and findings established in the OLAF report
• Fraud is one of the most serious misconduct as per Article 139(1)(d);
• When the authorising officer responsible becomes aware of the conclusion of the OLAF report,
it should refer the entity for exclusion before the EDES Panel;
• The EDES Panel could recommend and the Commission can exclude the entity from EU
funded procedures, at EU level.
A new Article 131 should be added to extend the exclusion system to shared management. A new
paragraph should be added under (new) Article 139 to set out the targeted and proportionate
conditions for the exclusion in the context of shared management.
6
B. EDES in the context of direct management with contributions to Member
States
1. Scene setter
Currently, EDES applies mandatorily to direct management where persons or entities are the
applicants or recipients of EU funds (see Article 135(2) FR).
The system should be strengthened in order to apply also in the context of direct management in
respect of Union funds disbursed to the Member States, such as those under Regulation (EU)
2021/241 of the European Parliament and of the Council of 12 February 2021 establishing the
Recovery and Resilience Facility, where the Commission has residual responsibilities. This is
another measure aiming at even better protection of the Union’s financial interests.
2. Proposed modifications
In order to respect the
sui generis nature of such funds, the extension of EDES should be kept
targeted and proportionate. Therefore, the obligation for the responsible authorising officer to refer a
case to the EDES Panel for the purpose of exclusion should only apply in the case he or she becomes
aware of serious misconducts through final judgments and administrative decisions or facts and
findings established in the context of audits or investigations carried out concerning those funds by
European Anti-fraud Office (OLAF), European Public Prosecutor Office (EPPO), the European
Court of Auditors (ECA) or any other check, audit or control performed under the responsibility of
the authorising officer.
Without prejudice to this residual responsibility of the Commission, the Member State remains
responsible to verify the information on decisions of exclusion registered in the EDES database, and
to enforce such decisions and to ensure that no payment application is submitted related to a person
or entity that is in such an exclusion situation.
3. Details of the proposal
The proposed rules and targeted conditions concerning the extension of EDES to shared management
(point A above) would apply also in the case of unreliable persons or entities receiving Union funds
through financial contributions to Member States (e.g. RRF funds).
C. Expedited procedure
1. Scene setter
Currently, the procedure for imposing administrative sanctions under the Financial Regulation does
not provide for an expedited procedure where the nature of the case requires a swift treatment. More
specifically, in case of (i) a final judgment or a final administrative decision of a third country; (b) a
final judgment or a final administrative decision of a Member State that does not set the duration of
exclusion, or (c) an administrative sanction of another international organization, where the facts are
established and a classification in law has already been made, the regular administrative procedure
before the EDES Panel, needs to take place, with the plausible risk of putting the Union interests at
risk, due to the inherent length of that procedure. In some cases, this might even lead to impunity
(e.g. by virtue of rules on time-limitation).
The above calls for the introduction of an expedited procedure:
7
(i)
to uphold and enforce final judgments or final administrative decisions of third countries
fulfilling certain conditions related to the respect of due process and rule of law;
(ii)
to uphold and enforce the sanctioning decisions issued by organisations that have in place an
equivalent sanction mechanism (including the full respect of the rights of defence) and a
common set of definitions of misconducts;
(iii)
to allow the authorising officer responsible to adopt, as soon as possible, an exclusion
decision against the person or entity when the facts and findings related to the misconduct are
already established;
2. Proposed modifications
At the request of the authorising officer, the EDES Panel may decide that a recommendation should
be issued in an expedited procedure, where the nature of the case requires it, and in particular where
- a final judgment or a final administrative decision has been issued by a Member State’s
authority and the case must therefore be submitted to the Panel for the determination of the
length of the exclusion, in application of the principle of proportionality;
- a final judgment or a final administrative decision has been issued in a third country which is
subject to the jurisdiction of the European Court of Human Rights and which provides
sufficient guarantees as regards effective and efficient protection of the rule of law;
- a sanction has been already imposed on the person or entity by virtue of a decision of (i)
international organisations or their agencies, (ii) EIB, (iii) EIF, where these organisations
have been considered to apply equivalent sanction procedures under Article 154 FR
Such cases would benefit of a fast-track assessment, subject to the holding of a simplified
contradictory procedure that would be limited to the essential points of law raised by the referral.
3. Details of the proposal
The amendment would consist in the addition of a new paragraph under (new) Article 139.
D. Beneficial owners and natural persons
1. Scene setter
The current legal framework does not foresee the possibility to exclude (or even flag as early
detection cases) parent or sister companies of an excluded entity, or their beneficial owners. The
application of the EDES rules in practice, however, demonstrated this weakness of the system, given
the possibility for excluded persons or entities of circumventing the law by applying for EU funds
through “alter-egos”.
As the legal framework is silent on the issue, companies controlled by the same parent or having the
same beneficial ownership can apply for EU funding instead of (
i.e. replacing) the excluded entity.
This has proved to be an area of growing risk insofar as cases submitted to the EDES Panel over the
last years often concern (i) findings against interlinked companies, set up by the same manager,
where the affiliate is just used to facilitate the misconduct of the primary entity (e.g. by paying the
expert hired in breach of conflict of interest provisions; by gathering confidential information on the
relevant tender, and so forth); (ii) judgments or administrative decisions issued against large
corporates where the parent company of the excluded entity had an active or passive involvement in
the primary entity’s wrongdoing. In the cases above, the authorising officer does not have any legal
basis to exclude the affiliate that is not already a recipient or participant under direct or indirect
management.
8
Once again, the consequences of such limitation is that a person or entity that has been excluded
from being selected to implement Union’s funds could continue to participate in procurement and
award procedures, through a new company or existing affiliated entities.
Against this background, there is therefore a need to increase the effectiveness of EDES by tackling
the ‘alter-egos’ of the primary sanctioned economic operator which might continue to bid for public
contracts and ultimately obtain EU funds. The rationale justifying the exclusion of affiliated entities
and/or beneficial owners is essentially the same as for the system of sanctions that applies to the
primary excluded entity. Where the administrative sanctions exist for policy and financial reasons
such as protecting the Union’s budget, addressing fraud and corruption, increasing transparency
amongst stakeholders, the sanctioning of affiliated entities and beneficial owners will avoid
contracting with an unreliable supplier and the entities related to it.
The possibility to exclude beneficial owners and affiliated entities may also be intended to secure
equal treatment of contractors and increase transparency in public procurement.
For instance, the US and the World Bank Group follow a similar approach, although in their system
the disqualification of a parent company is not based on the parent’s participation/knowledge of the
misconduct but is a matter of objective assessment once it is established that the parent wields the
required control over the subsidiary.
In addition, the current EDES legal framework does not allow for the possibility to impose a sanction
on natural persons that have been involved in the misconduct of the excluded company. The
provisions imputing the conduct of a company to a natural person are intended to prevent persons
who have participated in sanctionable practices or have powers of control or management over the
company from escaping the consequences of their actions by hiding behind the corporate veil.
The approach is to sanction the natural persons who are deemed responsible for the misconduct in a
company, so that they are unable to obtain public contracts either in a personal capacity or through a
new corporate identity. This would enhance the effectiveness of the EDES system as a whole.
2.
Proposed modifications
The proposed improvements would first and foremost entail the amendment of (new) Article 138(2)
FR to include in the scope of the EDES rules also beneficial owners, affiliated entities and natural
persons with powers of control or management over an entity.
The definition of beneficial owners stems from point (6) of Article 3 of Directive (EU) 2015/849 of
the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the
financial system for the purposes of money laundering or terrorist financing.
The notion ”affiliated entities” refers to any legal or natural person that controls, is controlled by, or
is under common control with, the person or entity in the exclusion situation.
Article 136(2) FR would also be revised in order to allow for the exclusion of entities in the absence
of final decisions in cases of Article 136(4) FR, and a new paragraph should be added after Article
136(4) FR to adapt the language to the inclusion of beneficial owners, affiliated entities and ‘persons
of interest’ and non-final decisions.
While the sanctioning of beneficial owners, affiliated entities and persons of interest is intended to
increase the effectiveness of the measure, the administrative procedure must be conducted in a way
that is proportionate and does not result in punishing companies and their employees for offences
that they have not committed. That is why the respect of due process and the right of defence have to
be ensured at all times.
9
As regards the criteria to impute liability to the beneficial owners or to the affiliates, it is suggested to
differentiate, for instance based on the degree of control. Exceptions may be introduced in case e.g.
the excluded entity has a functional independence from its parent and from the beneficial owner. In
other words, if it can be demonstrated that the excluded entity is independent from its parent or that
the misconduct of the controlled entity is not due to a failure to supervise or maintain adequate
controls, it should not be excluded. Similarly, where it is proven that the controlled entity has taken a
commercial decision without the influence of the parent company or the beneficial owner, we could
envisage an ad hoc exception to these new rules, i.e. beneficial owners or affiliated companies would
not be affected (see the concepts on “single economic entity” and/or “parent liability” in competition
law).
In light of the above, two amendments are proposed:
- The first would extend the possibility to recommend the exclusion also of beneficial owners
and affiliated entities related to the sanctioned economic operator from participating into
procurement and award procedures funded under the EU budget.
- The second would include within the scope of EDES sanctioning also the natural persons
with power of control or management being in an exclusion situation.
3.
Details of the proposal
The amendment consist in adding the above-mentioned categories under (new) Article 138(2). A
paragraph is also added under Article 139 to lay down the conditions for exclusion of the beneficial
owners and affiliated entities.
E. Conflict of interests as separate ground for exclusion: alignment with the EU
Public Procurement Directive
1. Scene setter
All grounds for exclusion under EDES are listed under Article 136(1) FR and “conflict of interests”
is not an explicit exclusion ground. Situations of conflict of interests can currently be covered under
the exclusion ground of grave professional misconduct that is broadly defined and covers various
situations (Article 136(1)(c) FR).
This insertion would align the FR with the EU Procurement Directive where the conflict of interest is
explicitly listed as a (non-automatic) ground for exclusion under Article 57(4)(e). As any other
exclusion, the exclusion for reasons of conflict of interests will be made on the basis of a
recommendation of the EDES Panel. It would be an autonomous but (as all other grounds) non-
automatic ground for exclusion.
2. Proposed modifications
The proposed modification would provide for a targeted reference to those situations in which the
person or entity has influenced or attempted to influence the decision-making process of procurement
and award procedures, through misrepresentation, of a conflict of interest involving any financial
actors or other persons referred to in paragraph 1 of Article 61.
3. Details of the proposal
The introduction of a new indent under (new) Article 139(1)(c) FR.
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F. Refusal to cooperate in an investigation, check or audit carried out by the EU
bodies as an explicit ground for exclusion
1. Scene setter
The grounds for exclusion under EDES are listed under Article 136(1) FR and the refusal to
cooperate in the context of investigations, checks or audits carried out by an authorising officer,
OLAF, EPPO or the Court of Auditors is not explicitly listed therein. Such misconduct can currently
be covered under the concept of grave professional misconduct or significant deficiencies in the
compliance of contractual obligations, laid down, respectively, in Article 136(1)(c) and (e) FR. The
Commission considers that an autonomous ground with an appropriate penalty range, consistent with
the seriousness of the misconduct, should be added. In fact, the deliberate or sometimes even
reckless failure to cooperate may have severe implications on the protection of the Union’s financial
interests. Thus, the sanction for such misconduct should be up to 5 years.
2. Proposed modifications
The modification would entail the explicit introduction of an additional ground in the case where the
a person or entity has resisted an investigation, check or audit carried out by an authorising officer or
its representative or auditor, OLAF, EPPO, or the Court of Auditors.
The maximum length of exclusion for such ground would be 5 years.
3. Details of the proposal
The amendment would be made in:
- (new) Article 139(1) FR; and,
- (new) Article 142 for what concerns the duration of the exclusion.
G. Incitement to discrimination, hatred or violence
1. Scene setter
The current exclusion rules do not provide for a specific exclusion ground in the case of wrongful
conduct that is incompatible with the values enshrined in Article 2 of the Treaty on European Union
and the Charter of fundamental rights of the EU, such as incitement to discrimination, hatred or
violence against a group of persons or a member of a group, where the conduct may negatively affect
the performance of the contract.
It is therefore proposed to introduce such ground to enhance the effectiveness of the EDES system.
2.
Proposed modifications
The new exclusion ground should fall into the broader notion of grave professional misconduct
(Article 139(1)(c)) and be linked to concrete wrongdoings that can have an impact on the entity’s
professional credibility and reliability when implementing EU funds.
3.
Details of the proposal
11
A new indent should be added under Article 139(1)(c) to reflect the proposal of a new ground.
H. Engaging in illegal trade practices
1. Scene setter
The current exclusion rules do not explicitly refer to exclusion based on acts condemned in
international trade law. For transparency, it should be clarified that such misconduct can be
sanctioned
via the ground of grave professional misconduct.
2.
Proposed modifications
It is therefore proposed to refer in the recital concerning the grounds of exclusion under EDES to
unreasonably injurious acts condemned in international trade law where they involve grave
professional misconduct. This is a mere clarification that does not need to be replicated in the
corresponding provisions.
3.
Details of the proposal
The relevant wording is added in recital (112).
I. Exclusion of unreliable guarantors
1. Scene setter
The proposed modification extends the scope of exclusion from EU financing to unreliable
guarantors, and prevents them from lodging guarantees.
It is first necessary to clarify that unreliable guarantors which do not to meet their professional or
contractual obligations have to be sanctioned. This is all the more important since this situation bears
the additional risk of collusion between some guarantors and unreliable economic operators. In
particular, the latter may obtain for a cheaper price fake guarantees placing them in a more
financially advantageous position than their competitors for EU funds.
The established case-by-case interpretation of the existing FR rules as allowing the exclusion from
EU financing of unreliable guarantors lodging ‘on demand’ guarantees should be duly reflected in
the FR. Moreover, the exclusion of unreliable guarantors lodging ‘at first call’ guarantees is not
possible currently (see case T-672/19 where the General Court upheld the exclusion decision adopted
by the Commission against a guarantor).
Furthermore, because the business of those unreliable entities does not normally call for or rely
significantly on EU financing, their exclusion from EU funds is not deterrent enough. Therefore,
unreliable guarantors should also be barred from covering operations related to EU financing-.
This is a technical amendment that aligns with the current interpretation of the EDES rules
confirmed by the case-law of the European Court of Justice.
2. Proposed modifications
12
The proposed modifications will clarify that the scope of EDES covers also guarantors of EU funds’
beneficiaries.
3. Details of the proposal
The category of guarantors is added under (new) Articles 138(2).
J. Presumption of notification of adversarial letter and administrative decisions
1. Scene setter
Currently, there is no provision on notifications to the entities concerned in the context of EDES.
This is used by unreliable entities which regularly engineer the absence of notification to elude
possible adverse consequences of their misbehaviours. This is also the reason for the only annulment
of an EDES case and according to settled case-law (see case C-326/16 P), it is not possible to make a
reference to national law for establishing presumption of notification. The proposal therefore
provides for such a presumption under EU law.
2. Proposed modifications
The proposal includes (i) the establishment of a legal presumption that the act has been notified or
that an automatic receipt reply by email of the transmission of such acts can constitute proof; (ii) the
obligation for the participant to inform the Authorising Officer of any change in their postal or
electronic address; (iii) the extension of the use of electronic exchange systems in the context of
administrative procedures.
3. Details of the proposal
The amendment consists in:
- the introduction of a new Article (now Article 147);
- the addition of a paragraph under Article 134;
- the addition of a paragraph under (new) Articles 152 and 153.
K. Proof of remedial measures
1. Scene setter
Persons or entities excluded can submit remedial measures for the review of an exclusion decision or
Panel recommendation. There is a case-by-case evaluation as to whether remedial measures are
sufficient. The EDES Panel or authorising officers are not well equipped for the primary assessment
of the remedial measures submitted. More rigorous and structured evidence should therefore be
provided.
2. Proposed modifications
It is proposed that the remedial measures submitted are based on an external independent audit
and/or the decision of a competent national or EU authority concluding that such measures are
sufficient.
3. Details of the proposal
13
The amendment is made in (new) Article 139(10) FR.
L. Panel’s vice-chair role
1. Scene setter
Article 143 FR lays down the composition of the Panel with, currently, a standing high level
independent Chair, two permanent members representing the Commission, and one representative of
the responsible authorising officer. Given its key role, the vice-chair should be listed in the relevant
Article and not just in the rules of procedure of the Panel.
2. Proposed modifications
The amendment -consists in including the vice-chair in the list of permanent members of the EDES
Panel.
3. Details of the proposal
The amendment is made in (new) Article 146(2) FR.
M. Update of legal references in relation to terrorist offences/offences linked to
terrorist activities
1. Scene setter
The grounds for exclusion in relation to terrorist offences or activities in Article 136(1) FR refer to
Council Framework Decision 2002/475/JHA. This Council Decision is no longer in force and has
been replaced by Directive (EU) 2017/541 of the European Parliament and of the Council of 15
March 2017 on combating terrorism (OJ L 88, 31.3.2017, p. 6–21).
2.
Proposed modifications
This amendment is a pure technical update.
3.
Details of the proposal
The reference in the (new) Article 139(1) FR is updated to Directive (EU) 2017/541.
N. Clarification on the composition of the Panel in the case of financial
irregularities on the part of a staff member
1. Scene setter
The composition of the Panel referred to in Article 143 of the Financial Regulation, where it gives
the opinion referred to in Article 93(1), should be up-dated as far as the additional members referred
to in Article 93(4) are concerned.
Where the case is referred to by the appointing authority in charge of disciplinary matters, it should
be made clear that the authorising officer cannot be a member of the Panel, since, in most cases,
14
he/she may not have any longer any budgetary or legal links with the member of staff concerned at
the time of the referral. Even if this is already the only reasonable interpretation of the current rules,
this should be expressly specified for reasons of legal certainty.
Conversely, where the case is referred to by the authorising officer responsible, the appointing
authority in charge of disciplinary matters should not be a member of the panel, since such a request
is not made in the context of a disciplinary procedure.
In addition, this clarification and this amendment would allow to discard any possible asymmetry in
the number of votes cast by the members of the Panel, depending on whether an authorising officer is
a member of the Panel or not.
If these changes are adopted, the Commission would amend the rules of procedure of the Panel to
allow, where a case is referred to by the appointing authority in charge of disciplinary matters, the
authorising officer responsible to be an observer, and vice versa, where a case is referred to by an
authorising officer.
2. Proposed modifications
It is proposed to replace the participation as a member of the Panel of the appointing authority in
charge of disciplinary matters by the participation of the authorising officer responsible, where the
latter refers the request for opinion to the Panel.
3. Details of the proposal
This amendment is included under Article 93(4).
O. Update of the legal reference in relation to data protection
1. Scene setter
Article 140 FR refers to Regulation (EC) No 45/2001 which is no longer in force and has been
replaced by Regulation (EU) 2018/1725.
2.
Proposed modifications
This a pure technical update of a legal reference.
3.
Details of the proposal
It is proposed to update the reference under the (new) Article 143 and 152(2)(h) FR to to Regulation
(EU) 2018/1725.
15
Annex: Relevant parts of the proposal
No. Art
Current FR
Proposed change
Comments/
Explanations
Recital 103
In order to enhance the protection of the Union financial Point A of the
interests the early detection and exclusion system should fiche
be reinforced. It is important to avoid that a person or
entity in an exclusion situation is able to apply to, or to be
selected for implementing funds, or to receive such funds
under a programme in shared management. Where there
is a final judgment or a final administrative decision, the
authorising officer responsible should be able to exclude a
person or entity, provided that the latter is in an exclusion
situation and deemed as not reliable by having engaged in
certain serious misconducts referred to in Article 139(1).
In the absence of a final judgment or a final administrative
decision, the authorising officer responsible should be able
to exclude, on the basis of a preliminary classification in
law made by the Panel referred to in Article 146, having
regard to facts and findings established in the context of
audits or investigations carried out by European Anti-
fraud Office (OLAF), European Public Prosecutor Office
(EPPO), the European Court of Auditors (ECA) or any
other check, audit or control performed under the
responsibility of the authorising officer. Such exclusion
should be registered in the early-detection and exclusion
system database established under Article 138(1). Member
States’ authorities should take it into account by rejecting
such persons or entities from receiving or from being
selected to implement Union funds or from receiving such
funds. Payment applications from Member States under
shared management, including expenditure related to a
person or entity that has been excluded, should not be
reimbursed. Where funds are disbursed to Member States
under performance-based frameworks, specific rules shall
apply, as set out in sector-specific legislation.
Recital 104
It is important to underline that the EDES system should Point B of the
16
only apply in respect of Union funds disbursed to the fiche
Member States under direct management, such as those
under Regulation (EU) 2021/241 of the European
Parliament and of the Council 3, where Member States
have the responsibility to take all the appropriate
measures to protect the financial interests of the Union, to
the extent that the Commission has relevant
responsibilities under the respective legal framework and
with due regard to the sui generis nature of the funds.
Therefore, the responsibilities of the Commission should
be limited to the obligation to refer a case to the panel for
the purpose of excluding a person or entity if the
authorising officer becomes aware of serious misconducts
through final judgments and administrative decisions or
facts and findings established in the context of audits or
investigations carried out concerning those funds by the
European Anti-fraud Office (OLAF), the European Public
Prosecutor Office (EPPO), the European Court of
Auditors (ECA) or any other check, audit, or control
performed under the responsibility of the authorising
officer. Without prejudice to these responsibilities of the
Commission, the Member States remain responsible to
verify the information on decisions of exclusion registered
in the EDES database, to enforce such decisions and to
ensure that no payment application is submitted related to
a person or entity that is in such an exclusion situation.
Recital 108
In order to align the early detection and exclusion system Point E of the
to public procurement rules and to enhance its fiche
effectiveness, attempting to influence the award of Union
funds or unduly obtaining Union funds including in
relation to conflicts of interests should be explicitly
included as a specific situation of exclusion under the
ground of grave professional misconduct with a
proportionate penalty, consistent with the seriousness of
the misconduct.
3 Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021 establishing the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17).
17
Recital 109
Having due regard to the principle of proportionality, the Point G of the
authorising officer responsible should exclude a person or fiche
entity when it has shown lack of integrity by having
engaged in any wrongful conduct that is incompatible with
the values enshrined in Article 2 of the Treaty on
European Union and the Charter of fundamental rights of
the European Union, such as incitement to discrimination,
hatred or violence against a group of persons or a member
of a group, where the conduct may negatively affect the
performance of the contract.
Recital 110
An autonomous ground of exclusion with a proportionate Point F of the
penalty, consistent with the seriousness of the misconduct, fiche
should be added in the case of unjustified lack of
cooperation in the context of investigations, checks or
audits carried out by an authorising officer, OLAF, EPPO
or the European Court of Auditors as this may have severe
implications on the protection of the Union’s financial
interests.
Recital 112
A person or entity should be excluded by the authorising
A person or entity should be excluded by the authorising Point H of the
officer responsible where it has been established by a final
officer responsible where it has been established by a final fiche
judgment or a final administrative decision that the person or
judgment or a final administrative decision that the person or
entity is guilty of grave professional misconduct, of non-
entity is guilty of grave professional misconduct, of non-
compliance, whether intentional or not, with the obligations
compliance, whether intentional or not, with the obligations
relating to the payment of social security contributions or
relating to the payment of social security contributions or
taxes, of the creation of an entity in a different jurisdiction
taxes, of the creation of an entity in a different jurisdiction
with the intent to circumvent fiscal, social or any other legal
with the intent to circumvent fiscal, social or any other legal
obligations, of fraud affecting the budget, of corruption, of
obligations, of fraud affecting the budget, of corruption, of
conduct related to a criminal organisation, of money
conduct related to a criminal organisation, of money
laundering or terrorist financing, of terrorist offences or
laundering or terrorist financing, of terrorist offences or
offences linked to terrorist activities, of child labour or other
offences linked to terrorist activities, of child labour or other
offences concerning trafficking in human beings or of the
offences concerning trafficking in human beings or of the
commitment of an irregularity. A person or entity should also
commitment of an irregularity. A person or entity should also
be excluded in the event of a serious breach of a legal
be excluded in the event of a serious breach of a legal
commitment or of bankruptcy.
commitment or of bankruptcy
or in cases of refusal to co-
operate in investigations, checks or audits. In assessing
these grounds for exclusion, unreasonably injurious acts
condemned in international trade law could be considered
a relevant factor, where they involve grave professional
18
misconduct.
Recital 115
In order to further enhance the protection of the Union’s Point D of the
financial interests, it should be possible for the authorising fiche
officer to exclude or impose a financial penalty on
beneficial owners and affiliated entities of the excluded
entity that were involved in the misconduct of the excluded
entity. The possibility to exclude beneficial owners and
affiliated entities is intended to prevent that a person or
entity that has been excluded from being selected to
implement Union’s funds could continue to participate in
procurement and award procedures, through a new
company or existing affiliated entities.
Recital 116
In order to increase its effectiveness, the early-detection Point D of the
and exclusion system should also apply to natural persons fiche
who are deemed responsible for the misconduct of an
entity, so that they are unable to participate in award
procedures or selected to implement Union funds either in
a personal capacity or through a new corporate identity,
without prejudice to the right to be heard.
Recital 117
At the request of the authorising officer, the panel of the Point C of the
early-detection and exclusion system should have the fiche
ability to issue its recommendations by means of an
expedited procedure, without prejudice to the right to be
heard. Such procedure should be used when the
circumstances or the nature of the case requires so, for
instance where a final judgment or a final administrative
decision has been issued by a Member State’s authority
but the duration of the exclusion is not set; or a final
judgment or a final administrative decision has been
issued by a third country; or a sanction equivalent to an
exclusion has been already imposed on the person or entity
by virtue of a decision of international organisations.
Recital 130
In order to address attempts by entities to elude possible Point J of the
adverse consequences of their misconduct, rules of fiche
notification should be established under precise conditions
in the context of early detection and exclusion procedures.
Furthermore, the use of electronic exchanges system
should apply to such procedures.
19
Art. 93(4)
Where the panel gives the opinion referred to in paragraph 1 Where the panel gives the opinion referred to in paragraph 1 Point N of the
of this Article, it shall be composed of the members referred of this Article, it shall be composed of the members referred fiche
to in Article 143(2) as well as the following three additional to in Article 14
6, subparagraph (1) point (a) and (b), as well
members, which shall be appointed taking into account the as the following
three additional members, which shall be
need for avoiding any conflicts of interests:
appointed taking into account the need for avoiding any
conflicts of interests:
(a) a representative of the appointing authority in charge of
disciplinary matters of the Union institution, Union body, (a) a representative of the appointing authority in charge of
European office or body or person concerned;
disciplinary matters of the Union institution, Union body,
European office or body or person concerned
when the case
[…]
in referred in accordance with Article paragraph 1(a)
or a representative of the authorising officer
responsible when the case is referred in accordance
with paragraph (1)(b);
Art. 131
Partial applicability of the exclusion system to shared
Point A of the
(new)
fiche
management
The exclusion system shall be applicable in the context of
Union funds disbursed pursuant to Article 62(1)(b), with
regards to any person or entity applying for or receiving
these Union funds, under the conditions set out in Article
139(2) of Section 2 of Chapter 2 of Title V.
Art. 134(4)
Record-keeping
and updating of postal and electronic
Point J of the
fiche
addresses by recipients
4. Recipients shall inform the Authorising Officer of any
change in their postal and electronic addresses. This
obligation shall continue to apply in the period of five
years following the payment of the balance or, in the
absence of such payment, the transaction. This period
shall be three years where the funding is of an amount
lower than or equal to EUR 60 000.
Art. 138(2)
2. In direct and indirect management, the early-detection and Point A of the
20
exclusion system shall apply to :
fiche
[…]
(i) any person or entity receiving funds through any forms,
including non-repayable financial support or loans or both,
where the budget is implemented pursuant to Article 62(1), first
subparagraph, point (a), with Member States. In such case,
Article 139(2) shall apply.
For the purpose of the first subparagraph, point (i), persons or
entities receiving funds shall include final recipients of funds,
contractors, sub-contractors and the beneficial owners.
This is without prejudice of Article 158(7) and the rules laid
down in contribution agreements, financing agreements and
guarantee agreements, in the case of persons or entities receiving
Union funds where the budget is implemented pursuant to
Article 62(1), first subparagraph, point (c).
In shared management, the exclusion system shall apply to:
(j) any person or entity applying for funding under a
programme in shared management, selected for such funding, or
receiving such funding;
(k) entities on whose capacity the person or entity referred to in
point (j) intends to rely, or subcontractors of such person or
entity;
(l) beneficial owners and affiliated entities of the person or entity
referred to in point (j).
Art. 138(2) – (d)
any person or entity receiving Union funds under
(d)
any person or entity receiving Union funds under Point I of the
(d)
financial
instruments
exceptionally
implemented
in
financial instruments exceptionally implemented in fiche
accordance with point (a) of the first subparagraph of Article
accordance with point (a) of the first subparagraph of
62(1);
Article 62(1);
21
(d) guarantors;
Art. 138(2) – The early-detection and exclusion system shall apply to:
(g) beneficial owners and any affiliate of the person or Point D of the
new (h) and
entity excluded as referred to in Article 139(6);
fiche
(i)
[…]
(h) natural persons as referred to in Article 139(5), points
(a) to (c);
Art. 139(1)
The authorising officer responsible shall exclude a person or
The authorising officer responsible shall exclude a person or Point A of the
entity referred to in Article 135(2) from participating in award entity referred to in Article
138(2) from participating in award fiche
procedures governed by this Regulation or from being
procedures governed by this Regulation or from
being
selected for implementing Union funds where that person or
selected for implementing Union funds where that person or
entity is in one or more of the following exclusion situations:
entity is in one or more of the following exclusion situations:
Art.
The authorising officer responsible shall exclude a person or
The authorising officer responsible shall exclude a person or Point E of the
139(1)(c)(iv) entity …where that person or entity is in one or more of the
entity …where that person or entity is in one or more of the fiche
following exclusion situations: ... (c) it has been established
following exclusion situations: ... (c) it has been established
by a final judgment or a final administrative decision that the
by a final judgment or a final administrative decision that the
person or entity is guilty of grave professional misconduct …
person or entity is guilty of grave professional misconduct …
including, in particular, any of the following:
including, in particular, any of the following:
(iv) attempting to influence the decision making of the
(iv)
unduly influence or attempting to
unduly influence the
authorising officer responsible during the award procedure.
decision making
of the authorising officer responsible
during the award procedure process to obtain Union funds
by taking advantage, through misrepresentation, of a
conflict of interest involving any financial actors or other
persons referred to in paragraph 1 of Article 61.
Art.
The authorising officer responsible shall exclude a person or Point G of the
139(1)(c)-
entity …where that person or entity is in one or more of the fiche
new (vi)
following exclusion situations: ... (c) it has been established
by a final judgment or a final administrative decision that the
person or entity is guilty of grave professional misconduct …
including, in particular, any of the following:
(vi) incitement to discrimination, hatred or violence
against a group of persons or a member of a group where
such misconduct has an impact on the person or entity’s
integrity which negatively affects or concretely risks
affecting the performance of the legal commitment.
22
Art.
1) (…)
(1) (…)
Point N of the
139(1)(d)(v)
fiche
(d) (…)
(d) (…)
(v) terrorist offences or offences linked to terrorist activities,
(v) terrorist offences or offences linked
related to terrorist
as defined in Articles 1 and 3 of Council Framework Decision activities, as defined in Articles
3 and 12 of Council
2002/475/JHA( 7 ), respectively, or inciting, aiding, abetting
Framework Decision 2002/475/JHA( 7 ) Directive (EU)
or attempting to commit such offences, as referred to in
2017/541 of the European Parliament and of the Council4,
Article 4 of that Decision
respectively, or inciting, aiding, abetting or attempting to
commit such offences, as referred to in Article 14 of
that
Decision the Directive.
Footnote (7)
Footnote (83)
Council Framework Decision 2002/475/JHA of 13 June 2002
Directive (EU) 2017/541 of the European Parliament and
on combating terrorism (OJ L 164, 22.6.2002, p. 3).
of the Council of 15 March 2017 on combating terrorism and replacing Council Framework Decision 2002/475/JHA
and amending Council Decision 2005/671/JHA (OJ L 88,
31.3.2017, p. 6–21).
Article
(i) the entity or person has resisted an investigation, check Point F of the
139(1) - new
or audit carried out by an authorising officer or its fiche
(i)
representative or auditor, OLAF, EPPO, or the Court of
Auditors. It shall be considered that the person or entity
resists an investigation, check or audit when it carries out
actions with the goal or effect of preventing, hindering or
delaying the conduct of any of the activities needed to
perform the investigation, check or audit. In particular,
among others, when it intentionally and without proper
justification refuses to grant the necessary access to its
premises or any other areas used for business purposes,
conceals or refuses to disclose information or provides
false information.
4
23
Article
The authorising officer responsible shall exclude a person Point A of the
139(2)
or entity referred to in Article 138(2)(i), (j), (k) and (l) fiche
where that person or entity is in one or more of the
exclusion situations referred to in point (iv) of Article
139(1)(c) or points (d) of Article 139(1). In the absence of a
final judgment or a final administrative decision, the
decision shall be taken on the basis of a preliminary
classification in law of a conduct as referred to in those
points, having regard to the established facts and findings
under Article 139, paragraph 2, fourth subparagraph,
points (a) and (d) contained in the recommendation of the
panel referred to in Article 146.
Before making the preliminary classification in law, the
panel referred to in Article 146 shall give the Member
State the opportunity to submit observations.
Without prejudice to Article 63(2), the Member State shall
ensure that payments applications related to a person or
entity that is in an exclusion situation, established in
accordance with Article 139(1), point (a), are not
submitted to the Commission for reimbursement.
Art. 139(3)
In the absence of a final judgment or, where applicable, a final In the absence of a final judgment or, where applicable, a final Point F of the
administrative decision in the cases referred to in points (c),
administrative decision in the cases referred to in points (c), fiche
(d), (f), (g) and (h) of paragraph 1 of this Article or in the case (d), (f), (g) and (h) of paragraph 1 of this Article, or in the case
referred to in point (e) of paragraph 1 of this Article, the
referred to in point
s (e)
and (i) of paragraph 1 of this Article,
authorising officer responsible shall exclude a person or entity the authorising officer responsible shall exclude a person or
referred to in Article 135(2) on the basis of a preliminary
entity referred to in Article 138(2) on the basis of a
classification in law of a conduct as referred to in those points, preliminary classification in law of a conduct as referred to in
having regard to established facts or other findings contained
those points, having regard to established facts or other
in the recommendation of the panel referred to in Article 143.
findings contained in the recommendation of the panel
referred to in Article 146.
Art.
Information transmitted in accordance with point (d) of
(d) information transmitted in accordance with point (d) of Point A of the
139(3)(d)
Article 142(2) by entities implementing Union funds pursuant Article 145142(2), point (d) ,
as well as facts and findings fiche
to point (b) of the first subparagraph of Article 62(1).
established in the context of administrative or judicial
proceedings at national level as to the presence of the
exclusion situations referred to in point (iv) of Article
139(1), point (c), or Article 139(1), points (d), by entities
24
implementing Union funds pursuant to point (b) of the first
subparagraph of Article 62(1), first subparagraph, point (b).
Art. 139(4)(f)
the measures taken by the Member State against the Point A of the
- new (iii)
person or entity pursuant to Article 63(2).
fiche
Article
The authorising officer responsible shall exclude a person or
The authorising officer responsible shall exclude a person or Point F of the
139(5)
entity referred to in Article 136(2) where:
entity referred to in Article 138(2) where:
fiche
(a) a natural or legal person who is a member of the
(a) a natural or legal person who is a member of the
administrative, management or supervisory body of the person administrative, management or supervisory body of the person
or entity referred to in Article 135(2), or who has powers of
or entity referred to in Article 138(2), or who has powers of
representation, decision or control with regard to that person
representation, decision or control with regard to that person
or entity, is in one or more of the situations referred to in
or entity, is in one or more of the situations referred to in
points (c) to (h) of paragraph 1 of this Article;
points (c) to
(h) (i) of paragraph 1 of this Article;
[…]
[…]
(c) a natural person who is essential for the award or for the
(c) a natural person who is essential for the award or for the
implementation of the legal commitment is in one or more of
implementation of the legal commitment is in one or more of
the situations referred to in points (c) to (h) of paragraph 1 of
the situations referred to in points (c) to
(h) (i) of paragraph 1
this Article .
of this Article.
Art. 139(5)
The authorising officer responsible shall exclude a person or
The authorising officer responsible shall exclude a person or Point D of the
entity referred to in Article 138(2) where:
entity referred to in Article 138(2) where:
fiche
(a) natural or legal person who is a member of the
(a) natural or legal person who is a member of the
administrative, management or supervisory body of the person administrative, management or supervisory body of the person
or entity referred to in Article 135(2), or who has powers of
or entity referred to in Article 135(2), or who has powers of
representation, decision or control with regard to that person
representation, decision or control with regard to that person
or entity, is in one or more of the situations referred to in
or entity, is in one or more of the situations referred to in
points (c) to (h) of paragraph 1 of this Article;
points (c) to (h) of paragraph 1 of this Article;
(b) a natural or legal person that assumes unlimited liability
(b) a natural or legal person that assumes unlimited liability
for the debts of the person or entity referred to in Article
for the debts of the person or entity referred to in Article
135(2) is in one or more of the situations referred to in point
135(2) is in one or more of the situations referred to in point
(a) or (b) of paragraph 1 of this Article;
(a) or (b) of paragraph 1 of this Article;
(c) a natural person who is essential for the award or for the
(c) a natural person who is essential for the award or for the
implementation of the legal commitment is in one or more of
implementation of the legal commitment is in one or more of
25
the situations referred to in points (c) to (h) of paragraph 1 of
the situations referred to in points (c) to (h) of paragraph 1 of
this Article.
this Article.
The authorising officer responsible shall ensure that the
natural person that is in one or more of the situations
referred to in the first subparagraph, is excluded.
Art. 139(6)
When a person or entity referred to in Article 138(2), Point D of the
points (a) to (f) and (h) to (k), is excluded, the authorising fiche
officer responsible may also exclude or impose a financial
penalty on the beneficial owner or any affiliate of the
excluded entity. Any decision of the authorising officer
responsible or, where applicable, any recommendation of
the panel referred to in Article 146, shall take into
consideration whether (i) the excluded entity has a
functional independence from its affiliate and from the
beneficial owner; (ii) the misconduct of the excluded entity
is not due to a failure to supervise or to maintain adequate
controls; (iii) the excluded entity has taken a commercial
decision without the influence of any affiliate or of the
beneficial owner.
Art. 139(8)
At the request of the authorising officer, and where the Point C of the
nature or the circumstances of the case requires it, a fiche
referral for a recommendation of the panel referred in
Article 146 may be treated by means of expedited
procedure, without prejudice to the right to be heard of
the person or entity concerned.
Art. 139(10)
The remedial measures referred to in point (a) of the first
The remedial measures referred to in point (a) of the first Point K of the
subparagraph of paragraph 6 shall include, in particular:
subparagraph of paragraph 6 shall include, in particular:
fiche
(a) measures to identify the origin of the situations giving rise
to exclusion and concrete technical, organisational and
personnel measures within the relevant business or activity
[…]
area of the person or entity referred to in Article 135(2),
appropriate to correct the conduct and prevent its further
In order to comply with the requirements of paragraph 6
occurrence;
of this Article, the person or entity shall submit remedial
measures that have been assessed by an external
(b) proof that the person or entity referred to in Article 135(2)
independent auditor or be considered sufficient by a
has undertaken measures to compensate or redress the damage
26
or harm caused to the financial interests of the Union by the
decision of a national or \union authority. This is without
underlying facts giving rise to the exclusion situation;
prejudice to the assessment of the panel referred to in
Article 146.
(c) proof that the person or entity referred to in Article 135(2)
has paid or secured the payment of any fine imposed by the
competent authority or of any taxes or social security
contributions referred to in point (b) of paragraph 1 of this
Article
Article
The duration of exclusion shall not exceed any of the
The duration of exclusion shall not exceed any of the Point F of the
142(1)(b)
following:
following:
fiche
[…]
[…]
(b) in the absence of a final judgment or a final administrative (b) in the absence of a final judgment or a final administrative
decision:
decision:
(i) five years for the cases referred to in point (d) of Article
(i) five years for the cases referred to in Article 139(1), point
s
136(1)
(d)
and (i) ;
Art. 143(1)
Where personal data are concerned, the authorising officer Where personal data are concerned, the authorising officer Point O of the
responsible shall in accordance with Regulation (EC) No responsible shall in accordance with Regulation (EC) No fiche
45/2001 inform the person or entity concerned, as referred to 45/2001
(EU) 2018/1725 (EC) No 45/2001 inform the person
in Article 135(2) of this Regulation, of their rights under the or entity concerned, as referred to in Article 135(2) of this
applicable data protection rules and of the procedures Regulation, of their rights under the applicable data protection
available for exercising those rights
rules and of the procedures available for exercising those
rights
(2)(c) where a natural person is concerned, unless the (2)(c) where a natural person is concerned, unless the
publication of personal data is justified by exceptional publication of personal data is justified by exceptional
circumstances, inter alia, by the seriousness of the conduct or circumstances, inter alia, by the seriousness of the conduct or
its impact on the financial interests of the Union. In such its impact on the financial interests of the Union. In such
cases, the decision to publish the information shall duly take cases, the decision to publish the information shall duly take
into consideration the right to privacy and other rights into consideration the right to privacy and other rights
provided for in Regulation (EC) No 45/2001.
provided for in Regulation
(EC) No 45/2001 (EU) 2018/1725.
Art. 145(5)
All persons and entities involved in budget implementation in
All persons and entities involved in budget implementation in Point A and B
accordance with Article 62 shall be granted access by the
accordance with Article 62 shall be granted access by the of the fiche
Commission to the information on decisions on exclusion
Commission to the information on decisions on exclusion
pursuant to Article 136 to enable them to verify whether there pursuant to Article 139
136 to enable them to verify whether
27
is an exclusion in the system with a view to taking this
there is an exclusion in the system with a view to taking
information into account, as appropriate and on their own
this information into account, as appropriate and on their
responsibility, when awarding contracts in budget
own responsibility, when awarding contracts in budget
implementation.
implementation.
Except where the budget is entrusted to persons or entities
in Article 62, paragraph 1, point (c), according to the
modalities referred to in Article 158(4), all persons and
entities involved in budget implementation shall enforce
such decisions with regards to the person or entity
applying for, selected or receiving Union funds.
Art. 146(2)
The panel shall be composed of:
The panel shall be composed of:
Point L of the
fiche
(a) a standing high-level independent chair appointed by the
(a) a standing high-level independent chair appointed by
Commission;
the Commission;
(b) a standing high-level independent vice-chair
[…]
appointed by the Commission, who shall deputise
for the chair;
[…]
Art. 147
“Communication in the context of early detection and Point J of the
exclusion procedures”
fiche
1.
All communication, in particular notification of
decisions, letters, documents or information related to
early detection or exclusion procedures shall be made in
writing in paper or electronic format.
2.
Notifications for communications which create
legal effects or trigger time limits shall be made on paper
by registered post with acknowledgement of receipt or by
courier service with proof of delivery, though a secure
electronic exchange system pursuant to Article 152, or by
email or other electronic means.
3.
Communications shall:
a)
When made on paper, be considered notified when
28
they have been delivered to the latest available postal
address indicated by the recipient party. Notifications by
registered post with acknowledgement of receipt or by
courier service with proof of delivery shall be considered
to have been received either on the delivery date registered
by the postal service or by courier service or after the time
limit for collection at the post office, or, in the absence of
such time limit, three weeks after the attempted delivery,
provided that the notification has been sent a second time
and announced electronically to the latest available e-mail
address indicated by the recipient party.
b) When made through a secure electronic exchange
system referred to in Article 152 , be considered to have
been notified on the date and time they are accessed, as
indicated by the time logs in the system. Notifications that
have not been accessed within 10 days after sending, shall
be presumed to have been accessed.
c) When made by email or other electronic means, be
deemed to be notified on the day of dispatch of the e-mail,
provided that it is sent to the latest available e-mail
address indicated by the recipient party and the sending
party does not receive a non-delivery report.
Where the addressee can demonstrate that he or she has
been prevented by circumstances outside his or her control
from accessing a communication, the legal effects of the
communication shall start running from the moment on
which the addressee can demonstrate that he or she has
gained access to its content.
Art. 152(1)
Electronic exchange systems
1. All exchanges with recipients
and participants, including Point J of the
and (3)
the entering into legal commitments and any amendments fiche
1. All exchanges with recipients, including the entering into
29
legal commitments and any amendments thereto, may be done thereto, may be done through electronic exchange systems.
through electronic exchange systems.
[…]
[…]
3. The electronic exchange system may also be used by the
authorising officer responsible to communicate with
participants, recipients or other persons or entities set out
in Article 138(2):
(a)
of their inclusion in the early detection and
exclusion system database in the cases referred to in
Article 138(1), point (a);
(b)
the content of adversarial letters and other
information or requests issued by the Panel referred to in
Article 146, in order to safeguard the rights referred to in
Article 146(5), and in the exercise of the competences
under this Regulation;
(c)
the content of decisions and other information or
requests by the authorising officer responsible, in the
exercise of the competencies under Articles 138 to 148 of
this Regulation.
[…]
Art.
(h) the protection of personal data in accordance with
(h) the protection of personal data in accordance with Point O of the
152(2)(h)
Regulation (EC) No 45/2001 is ensured.
Regulation
(EC) No 45/2001 (EU) 2018/1725 is ensured.
fiche
Article
[…]
Point J of the
153(7)
fiche
7
. Participants or recipients or any other persons or
entities included in Article 138(2), accept to receive
notifications in the terms of the specific legal commitment
or concession contract, including any notification
30
concerning the application of any of the measures referred
to in Article 138(1). Where persons of entities referred to
in Article 138(2), point (b), are concerned, the applicant
shall be responsible for communicating to the contracting
authority the address of the entity concerned.
Unless exchanges are made through the electronic
exchange system referred to in Article 152, where the
person or entity has been notified by electronic means to
the address indicated in the application, and failing the
express acknowledgement of receipt of the electronic
notification, it shall be presumed that the person of entity
has been put in a position to take cognisance of the content
of the exchange and therefore it shall be considered as
notified.
[…] ”.
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Document Outline
