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Ombudsman criticizes Commission following BlackRock contract inquiry

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European Ombudsman Emily O'Reilly (pictured) has asked the Commission to improve its guidelines for assessing bidders for contracts related to public policy after it awarded a study contract to BlackRock Investment Management in an area of financial and regulatory interest to the company.
O’Reilly also asked the Commission to consider strengthening the conflict of interest provisions in the Financial Regulation - the EU law governing how public procurement procedures financed by the EU budget are conducted.

She said that the applicable rules were not robust and clear enough to allow officials to find conflict of interest other than in a very narrow range of professional conflicts.

“An application by a company to carry out a study meant to feed into policy that will regulate that company’s business interests should have resulted in significantly more critical scrutiny by the Commission,” said the Ombudsman.

While the Ombudsman considered that the Commission could have done more to verify if the company should not be awarded the contract, due to a possible conflict of interest, she took the view that the underlying problem is with the current EU rules on public procurement. As such, she will bring the matter to the attention of the EU legislators.

“The risk of conflicts of interest when it comes to awarding contracts related to EU policy needs to be considered much more robustly both in EU law and among officials who take these decisions,” said O’Reilly.

“One cannot adopt a tick box approach to the awarding of certain contracts. Treating contract bidders equally is important, but not taking other critical factors appropriately into account when assessing bids does not ultimately serve the public interest.”

The Ombudsman’s proposals follow an inquiry into the Commission’s decision to award a contract to BlackRock to carry out a study on integrating environmental, social and governance objectives into EU banking rules. The Ombudsman received three complaints related to the Commission’s decision - two from MEPs and one from a civil society group.

The Ombudsman’s inquiry drew attention to the fact that BlackRock optimized its chances of getting the contract by making an exceptionally low financial offer, which could be perceived as an attempt to assert influence over an investment area of relevance to its clients.

O’Reilly added: “Questions should have been asked about motivation, pricing strategy and whether internal measures taken by the company to prevent conflicts of interest were really adequate.”

“The EU is set for unprecedented levels of spending and investment in the coming years with significant links to the private sector - citizens need to be sure that contracts involving EU funds are awarded only after a strong vetting process. The current rules fall short of providing this guarantee.”

Background

The Commission is developing tools and mechanisms to integrate environmental, societal and governance factors in the EU’s banking prudential framework. In July 2019, it put out a call to tenders for a study to outline the current situation and to identify challenges in dealing with this issue. It received nine offers and in March 2020 awarded the contract to BlackRock Investment Management, which was the only large investment manager in the pool of bidders.

When looking into the decision, the Ombudsman found that the Commission’s internal guidance on public procurement fell seriously short in providing enough clarity to commission staff on how to assess possible conflicts of interest.

The Ombudsman also found that the relevant definition in the Financial Regulation as to what constitutes a conflict of interest is too vague to be helpful in such a specific situation as the one with BlackRock. Due to this limitation in the Financial Regulation, the Ombudsman did not find maladministration on the part of the Commission in this instance. Instead she has suggested that the rules be strengthened and forwarded her decision in this inquiry to the Parliament and the Council - the EU legislators - for their consideration.

Read the Ombudsman’s Decision here.

Economy

EU approves €2.9 billion in state aid for battery project attracting €9 billion

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The Commission has approved, state aid of up to €2.9 billion in funding for an ‘Important Project of Common European Interest’ (IPCEI) to support research and innovation in the battery value chain. The twelve EU countries involved will provide public funding expected to unlock an additional €9 billion in private investments.

The project, called “European Battery Innovation” was jointly prepared and notified by Austria, Belgium, Croatia, Finland, France, Germany, Greece, Italy, Poland, Slovakia, Spain and Sweden.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “For those massive innovation challenges for the European economy, the risks can be too big for just one member state or one company to take alone. Today's project is an example of how competition policy works hand in hand with innovation and competitiveness. With significant support also comes responsibility: the public has to benefit from its investment, which is why companies receiving aid have to generate positive spillover effects across the EU.”

When Vestager was asked if companies from outside the EU, such as Tesla, could benefit from this funding she said that this was possible and showed that the EU was committed to open strategic autonomy and welcomes non-EU firms when they have the right projects.

The Vice-President for Foresight, Maroš Šefčovič, said: “The Commission has given its green light to a second important project of the common European interest in the field of batteries. Technology is vital for our transition to climate neutrality. The figures show what an enormous undertaking this is. It involves twelve member states from North, South, East and West, injecting up to €2.9 billion euros in state aid in support of 46 projects designed by 42 companies, which in turn will generate three times as much private investment. "

The project will cover the entire battery value chain: extraction of raw materials, design and manufacturing of battery cells, recycling and disposal. It is expected to contribute to the development of a whole set of new technological breakthroughs, including different cell chemistries and novel production processes, and other innovations in the battery value chain, in addition to what will be achieved thanks to the first battery IPCEI.

 

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EU urges AstraZeneca to speed up vaccine deliveries amid 'supply shock'

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The European Union has urged AstraZeneca to find ways to swiftly deliver vaccines after the company announced a large cut in supplies of its COVID-19 shot to the bloc, as news emerged the drugmaker also faced supply problems elsewhere, write and

In a sign of the EU’s frustration - after Pfizer also announced supply delays earlier in January - a senior EU official told Reuters the bloc would in the coming days require pharmaceutical companies to register COVID-19 vaccine exports.

AstraZeneca, which developed its shot with Oxford University, told the EU on Friday it could not meet agreed supply targets up to the end of March, with an EU official involved in the talks telling Reuters that meant a 60% cut to 31 million doses.

“We expect the company to find solutions and to exploit all possible flexibilities to deliver swiftly,” an EU Commission spokesman said, adding the head of the EU executive Ursula von der Leyen had a call earlier on Monday with AstraZeneca’s chief Pascal Soriot to remind him of the firm’s commitments.

A spokesman for AstraZeneca said Soriot told von der Leyen the company was doing everything it could to bring its vaccine to millions of Europeans as soon as possible.

News emerged on Monday that the company faces wider supply problems.

Australia’s Health Minister Greg Hunt told reporters AstraZeneca had advised the country it had experienced “a significant supply shock”, which would cut supplies in March below what was agreed. He did not provide figures.

Thailand’s Health Minister Anutin Charnvirakul said AstraZeneca would be supplying 150,000 doses instead of the 200,000 planned, and far less than the 1 million shots the country had initially requested.

AstraZeneca declined to comment on global supply issues.

The senior EU official said the bloc had a contractual right to check the company’s books to assess production and deliveries, a move that could imply the EU fears doses being diverted from Europe to other buyers outside the bloc.

AstraZeneca has received an upfront payment of 336 million euros ($409 million) from the EU, another official told Reuters when the 27-nation bloc sealed a supply deal with the company in August for at least 300 million doses - the first signed by the EU to secure COVID-19 shots..

Under advance purchase deals sealed during the pandemic, the EU makes down-payments to companies to secure doses, with the money expected to be mostly used to expand production capacity.

“Initial volumes will be lower than originally anticipated due to reduced yields at a manufacturing site within our European supply chain,” AstraZeneca said on Friday.

The site is a viral vectors factory in Belgium run by the drugmaker’s partner Novasep.

Viral vectors are produced in genetically modified living cells that have to be nurtured in bioreactors. The complex procedure requires fine-tuning of various inputs and variables to arrive at consistently high yields.

“The flimsy justification that there are difficulties in the EU supply chain but not elsewhere does not hold water, as it is of course no problem to get the vaccine from the UK to the continent,” said EU lawmaker Peter Liese, who is from the same party as German Chancellor Angela Merkel.

The EU called a meeting with AstraZeneca after Friday’s (22 January) announcement to seek further clarification. The meeting started at 1230 CET on Monday.

The EU official involved in the talks with AstraZeneca said expectations were not high for the meeting, in which the company will be asked to better explain the delays.

Earlier in January, Pfizer, which is currently the largest supplier of COVID-19 vaccines to the EU, announced delays of nearly a month to its shipments, but hours later revised this to say the delays would last only a week.

EU contracts with vaccine makers are confidential, but the EU official involved in the talks did not rule out penalties for AstraZeneca, given the large revision to its commitments. However, the source did not elaborate on what could trigger the penalties. “We are not there yet,” the official added.

“AstraZeneca has been contractually obligated to produce since as early as October and they are apparently delivering to other parts of the world, including the UK without delay,” Liese said.

AstraZeneca’s vaccine is expected to be approved for use in the EU on Jan. 29, with first deliveries expected from 15 February.

($1 = €0.8214)

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EU

Chemicals: EU protects wildlife from negative effects of lead in the environment

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On 25 January, the Commission took firm steps to ensure that wildlife is protected from the negative effects of lead in the environment, by restricting its use in gunshot in or around wetlands. Adopted under the framework of the EU's chemicals regulation, the measure will help to protect the environment by significantly reducing lead pollution while preventing the avoidable death by lead poisoning of around 1 million waterbirds every year. Lead is a highly toxic substance, which released to the environment contaminates both the soil and water.

Every year, 4,000 to 5,000 tonnes of lead are released into wetlands from lead gunshot.  There are affordable alternatives, for example steel gunshots, which currently cost about the same as lead gunshots. The measure adopted today will harmonise and enhance the effectiveness of national legislation limiting the use of lead gunshot in wetlands already in place in 24 member states.

It will start applying in two years' time. The restriction supports the goals of the Chemical Strategy for Sustainability and the Green Deal. It also supports the objectives of the Birds Directive, and is a first concrete deliverable under the new EU 2030 Biodiversity Strategy. More info here.

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