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N. 13, Feb - Mar 2004
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 | IP & RTD: Articles
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The Consortium Agreement: from the model to the practice
Carmen Hormigo, Head of European Communities Unit
Mercedes Costi, Legal Advisor, European Communities Unit
International Affairs Department of the Scientific Research Committee (Consejo Superior de Investigaciones Científicas)
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Now that the FP6 has been in use for over a year and as negotiation of the actions financed under the first call for offers is about to close, it seems appropriate to analyse the development of the first Consortium Agreements (CA) from models to their practical application. Among others, the following trends deserve to be mentionned:
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Principle of contractual equality versus adhesion contracts
Negotiating agreements in large consortiums is unquestionably difficult and involves a considerable effort as regards human resources and materials, that generally falls to the coordinator or is delegated to participants. As such, it is logical that the central nucleus establishes the basis of the CA and negotiates it with the rest of the members. In this way, all can freely define their interests and reach consensus on a final document that reasonably reflects their positions.
Nontheless, there is a growing trend for using
non-negotiable documents
in which the participants declare their
unconditional adhesion
to an agreement which has already been entered into by certain partners, without the possibility of modifying any clauses, even where they are contrary to the community regulations regarding FP6. Failure to join can even endanger participation in the project.
It is important to pay adequate attention to such situations as they can easily harm the concept of a contracting party with equal rights and obligations, as clearly established in the Model Contract currently in force. If this option were to dominate, it would lead, invariably, to consortiums which
vary in type
according to each organisation's capacity to position itself either at a privileged level as a main contracting party or at a secondary level as a simple participant. The adhesion formula should be used exclusively for partners who join after the contract with the EC has been signed.
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Participatin in decision-making bodies
This question relates to the principle of contractual equality since the contracting parties can only make their rights and obligations effective if they can participate in decision-making, independently of their scientific contribution or financial share in the project.
This is the main trend, although other exceptions to the rule are increasingly appearing: some CA either do not establish a General Assembly or reduce its competencies to such an extent that its role is merely observerational, in contrast to the Executive Committees which act as the real decision-making bodies.
Although it is not desirable to introduce a general unanimity requirement due to the General Assembly's need to reach decisions (it would be easy to reach deadlock), it should be reserved for issues that could substantially affect the position and interests of the contracting parties. It is objectively reasonable for the General Assembly to adopt decisions such as terminating a project, a contract, a contracting party's participation, the entry of new partners or the substantial modification of the CA, unanimously.
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Distribution of the community contribution
Some CA set up a payment system based on
brackets
: community financing is alloted in thirds or halves according to the schedule for providing services that the contracting party must meet under the technical annexe of the EC contract.
This system, although it establishes a guarantee clause as regards possible breaches by a contracting party, also represents a greater financial and management burden, especially for the coordinator (who should carry out a series of transfers, sometimes of small quantities) or for those participants having high costs.
Furthermore, such clauses are unecessary given that practically all of the CA include a provision authorising the coordinator to hold back payments in the event that the contracting parties do not provide services by the established deadline.
In order to avoid such situations, it is advisable to agree on a
financial plan
to be updated annually, including a schedule of payment for every contracting party according to the tasks allocated in the Technical Annexe. Failing this, the CA should include clauses which are sufficiently flexible to allow every partner to meet their scientific and financial obligations.
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Management Costs
Following the first contractual negotiations, it has become clear that the 7% ceiling for the community contribution will not cover all management costs in consortiums having a large number of participants.
In some CA, the General Assembly or its main management body decides how to deal with this situation. In others, it is established that any shortfall must be met either by the partners who carry out management tasks (which does not seem appropriate seeing as these are carried out in the name of and on behalf of the whole consortium) or by all of the contracting parties in proportion to their budget allocations. Another trend is to set up reserve funds by deducting a percentage from contracting parties' payments.
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Audits
An increasing tendency can be observed of restricting auditing costs by setting a maximum quantity or by establishing that such costs will be fully met by each contracting party. In the latter case, and without going into the appropriateness of such agreements, a legal inconsistency with the EC contract could arise on two counts: considering such costs as 100% reimbursable, and the contracting parties' freedom to choose the auditor. Finally, this tendency creates inequalities which are difficult to overcome since contracting parties which have greater community financing will be better able to deal with this responsibility than those receiving only a small contribution.
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Conclusions
The above points aim to reflect the complexity that drawing up a CA can involve and the time and specialised knowledge necessary so that these and other trends do not represent an obstacle to participation in the FP6, in particular regarding SMEs and those organistions without the necessary legal resources to handle the situation.
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