Liikanen to crack the whip over late payers

Date: 01/05/1997

By Simon Coss

STUNG by accusations of hypocrisy, the European Commission is set to crack down on departments which fail to pay their bills on time by fining them for missing the deadline.

In an unprecedented move, Budget Commissioner Erkki Liikanen is calling for financial penalties to be imposed on units which break the institution's guidelines on the prompt payment of bills. The money would be used to compensate firms affected by the delays.

“The idea is to introduce fines for any services which delay payments. These fines would have to be covered from the departments' operational budgets which will hopefully provide a good incentive for swift action,” explained a Liikanen aide.

The move comes five months after a European Voice investigation revealed that some firms were still experiencing long delays in receiving payment for work carried out on behalf of the Commission, 18 months after it called on public institutions and large companies to settle their debts within 60 days.

In one case, Newscom, a Belgian television production company working with the Directorate-General for information, communications and culture (DGX) was driven to within two weeks of bankruptcy by unpaid bills of more than half a million ecu.

Liikanen was originally due to present his proposals for a system of internal fines to fellow Commissioners this week. But queries raised by the institution's legal services over the precise wording of the document have delayed its adoption until some time next month.

Officials insist that other Commissioners have already indicated they will support the move. “There are no political problems with this,” said one.

Union Ombudsman Jacob Söderman welcomed Liikanen's initiative. “It is a good sign that they are tackling this. From my point of view, it is important that people are paid on time,” he said.

Söderman's office was set up in 1995 specifically to handle allegations of maladministration in the EU institutions. During his first year in office, a large number of the complaints landing on Söderman's desk were concerned with late payments.

Under the proposed scheme, Commission departments would have 60 days to process bills after which time interest would begin to accrue on the amount owed.

But there is a catch. The 60-day period refers to the length of time between the Commission's receipt of the bill and its authorisation of payment. “There could still be small delays while our bank sends out the cheques,” admitted one official.

The system also takes no account of the large number of companies who work 'on spec' for the Commission - carrying out tasks for the institution while awaiting a formal contract which can often take months to materialise. Although strictly against the rules, the practice is widespread, with potential contractors arguing they will lose out to rivals if they play by the book. However, the Commission insists its departments should not offer work in this way and says contractors only have themselves to blame if they accept such conditions.

The institution first put forward its plans for a 60-day maximum repayment period in a non-binding recommendation published in the EU's Official Journal in 1995.

On that occasion, Christos Papoutsis, the Commissioner for small and medium-sized enterprises, said the time-limit should apply to all public bodies in the EU.

Liikanen points to the Commission's complex internal procedures as a key reason for past delays. Many stages have to be gone through before bills are approved for payment and this often causes confusion over where responsibility lies.

The late payments initiative complements a wider series of budgetary and personnel reforms which Liikanen hopes will simplify these often arcane procedures.