When it comes to the misuse of EU funds, Brussels isn’t sure who’s in charge.
That’s what waste contractor Medcon & DB Technologies J.V. discovered when it tried to find out which part of the European Commission is responsible for enforcing the recommendations of its own anti-fraud unit regarding a failing waste-treatment plant in Cyprus, paid for by the EU.
The Cypriot-Canadian joint venture — which ran the publicly-owned plant until 2023 — received contradictory messages from Brussels as it tried to determine who is monitoring the use of EU funds by Cyprus, according to letters obtained by POLITICO.
The contractor has been accused by the Cypriot government of failing to meet the terms of its contract when operating the plant, and was one of the subjects of an investigation by the EU Anti-Fraud Office (OLAF) into the plant, which had cost the EU over €46 million.
Now involved in a legal battle with the state of Cyprus, the J.V. has been requesting the outcomes of that investigation to clear its name.
The contractor says the Cypriot government withheld information about the feasibility of the project, leading to the illegal burial of thousands of tons of untreated waste.
The government of Cyprus denies any wrongdoing and maintains that the company is to blame. But a recent investigation by POLITICO revealed that several ministries had been held responsible by an independent domestic inquiry.
OLAF, part of the European Commission, concluded its own investigation in 2021 and then sent a report to the directorate-general for regional development (DG REGIO), also part of the Commission. The latter had been in charge of liaising with Cyprus to get the project funded in 2015.
According to the letters, OLAF maintained that DG REGIO also has the authority to grant the company private access to the report.
But DG REGIO has denied this, arguing it’s up to member countries to correct fraud cases themselves — even when EU money is on the line.
The department “does not have the competence to adopt follow-up measures regarding the individuals or entities involved in OLAF’s investigations”, the letter states, because “tasks relating to budget implementation are delegated to Member States.”
That’s despite the fact that the Cypriot government is one of the parties involved in the fraud case in question.
Medcon & DB Technologies is now stuck in a Kafkaesque maze of European bureaucratic procedure, with little clarity over who in Brussels is handling fraud cases touching the EU budget when member countries’ governments are involved.
The situation “casts a dark cloud” over the “effectiveness of EU inter-institutional collaboration,” and calls into question the “will to follow through a completed investigation and apportion responsibility for fraud,” the company told POLITICO.
Asked how it looks at the misuse of EU funds, Balazs Ujvari, the European Commission spokesperson for budget, told POLITICO in an emailed statement that while EU Countries “are primarily responsible for the sound management of EU funds,” the Commission remains “the ultimate responsible for the execution of the EU budget.”
Regarding the Cohesion Fund — the cashbox that funded this project back in 2015 — he said the “first level of controls … is under the responsibility of the audit body of the spending Directorate General.”
OLAF would get involved “should any specific suspicions of fraud be identified” and the Commission “closely follows up” by either blocking payments or “clawing back expenditure if the fraud is confirmed,” Ujvari said.
On the specific case, Stefan de Keersmaecker, Commission spokesperson for Cohesion Policy and Reforms, confirmed the Commission was “in close contact with the Cypriot authorities who are actively working to resolve deficiencies identified with the project.”
Since the Cohesion fund is governed by a principle of shared management between Brussels and EU countries, “it is first up to the managing authority” in Cyprus “to correct any irregularities detected, and then, if necessary, the Commission,” he added.
The waste story
From 2017 to 2023, Medcon & DB Technologies was mandated to operate a waste treatment plant in Limassol, to sort, treat and recycle municipal waste and to burn some of the waste to make fuel.
One of the conditions for receiving EU funding was that the Cypriot government would find buyers for that fuel.
Soon after the plant was built, it became clear the incoming waste was too wet to make the kind of fuel demanded in the contract. Eventually, all the unsold fuel and most of the untreated municipal waste was buried.
The Cypriot government blames the contractor for flaws in its running of the plant.
An internal government inquiry concluded in February 2023, however, that the ministries in charge of the project knew — even before accepting the money from Brussels — that the plant would not be able to produce the fuel required.
Eventually, the government ordered that all the fuel and waste be dumped in a landfill, violating both the EU Landfill Directive and the Waste Framework Directive, POLITICO’s investigation showed.
When OLAF concluded its review, it told the company in a letter that a recommendation had been sent to the director general of regional development, to the effect that the funds “unduly paid” for the waste treatment plant be recovered. The letter did not specify how much or from whom.
Procedural confusion
In its letters to the company, OLAF said it won’t share the details of the investigation because “disclosure of the final report would undermine the protection of the purpose” of the investigation.
Under EU law, however, companies or individuals that are under investigation by OLAF are allowed to request private access to such documents to assist their legal defense.
Medcon & DB Technologies was told by OLAF to ask the Commission’s DG REGIO for this access, since the department is responsible for taking action to retrieve the money from Cyprus.
But according to DG REGIO’s letter, “the Directorate-General is not directly responsible for taking action against the final beneficiaries of the funds in question.”
Instead, EU countries must themselves take “all the necessary measures” to “protect the financial interests of the Union,” including “correcting irregularities and fraud,” the letter states.
The letter instructs the company to ask the Cyprus government official in charge of allocating the EU budget for the report, even though the Cyprus government is involved in the case.
This article has been updated to include the Commission’s comments on the specific case in Cyprus, received after initial publication.